Churchill China Regulatory News (CHH)

CHURCHILL CHINA plc

(LSE : CHH)

INTERIM RESULTS

For the six months ended 30 June 2011

Churchill China plc, ("Churchill" or the "Company") the manufacturer and global distributor of ceramic tableware and household products to hospitality and retail markets, is pleased to announce its interim results for the six months ended 30 June 2011.

Key Points:

Ø Group revenue for the six months to 30 June 2011 was £19.2m (2010: £20.2m).

Ø Profit before tax up 10% at £0.7m (2010: £0.6m)

Ø Basic earnings per share up 12% to 4.7p (2010: 4.2p)

Ø Operating cash generation was £1.6m (2010: £0.6m)

Ø Cash balances of £4.0m (June 2010: £5.7m)

Ø Interim dividend of 4.8p (2010: 4.8p)

Ø Strong performance in UK Hospitality

Ø Repositioning of Retail business continues

On prospects Jonathan Sparey, Chairman said: "Our performance is robust and we are on track to deliver the Board's revenue and profit objectives for the full year."

For further information, please contact:

CHAIRMAN'S STATEMENT

Introduction

I am pleased to report an improvement in Group profitability for the first half of the year. This performance reflected the continued strength of our Hospitality business where profitability was ahead of the first half of 2010 on sales which were slightly lower than the comparable period. We experienced sustained demand across all of our market segments in the UK. Our Retail business generated a small increase in operating profit as we continue to reposition our activity to more attractive market segments. Group profit before tax increased by 10% to £0.7m reflecting the improving performance. 

Financial Review

Group revenue for the six months to 30 June 2011 was £19.2m, down 5% against the first half of last year (2010: £20.2m) reflecting a reduction in supermarket revenues from our Retail business. 

Group operating profit increased to £0.7m (2010: £0.6m). Our manufacturing operations benefited from a more stable level of output and increased efficiencies. Additional investment in sales and marketing activity in our Hospitality business was largely offset by savings within Retail operations as we refocused our operations. 

Pre-tax profit increased by 10% to £0.7m (2010: £0.6m) largely due to this improved operating performance. Interest charges and our share of profit from our associate were stable compared to last year.

Earnings per share increased by 12% to 4.7p (2010: 4.2p).

Operating cash generation was strong at £1.6m (2010: £0.6m), despite an expansion in inventory levels to service increased Hospitality business in the second half of the year. This was achieved from tight control of receivables. Overall cash balances reduced to £4.0m (June 2010: £5.7m) given slightly higher levels of capital expenditure and payment of the final dividend for 2010 of £1.0m (2010: £1.0m).

Dividend

The Board is recommending a maintained interim dividend of 4.8p per share (2010: 4.8p per share) which will be paid on 6 October 2011 to shareholders on the register on 9 September 2011.

Hospitality

Sales to our Hospitality customers were 1% lower at £12.9m (2010: £13.1m) and matched the strong performance in the first half of 2010. This performance reflects the underlying strength of the business as it was delivered despite the absence of significant new installation projects. 

Sales in the UK, where we are market leader, were up by over 5% but this encouraging performance was limited by export revenues which were 12% down on the comparable period of last year. Our Hospitality business created an operating profit of £1.8m (2010: £1.8m).

Our hotel, restaurant, contract catering and pub customers are all operating in an environment of considerable economic uncertainty. Several new product ranges have been launched and extended in the last few months, targeting specific dining out trends including "Asian", "Just Desserts", "Rustics" and "Deli" and these propositions have been well received. Our penetration of accounts in the exclusive five star market continues to grow, supported by the extension of the "Ambience" product range in both white and sophisticated patterns. 

This new product development and innovation is underpinned by a sustained investment programme and an increase in dedicated sales and marketing resources to our target markets. Although this investment activity has a short term impact on profitability, it is an integral part of our strategy and will drive future growth in shareholder returns.

Retail

Sales to our Retail customers at £6.3m (2010: £7.1m) declined by 11% as we continued to withdraw from unattractive, low margin business. These adjustments to sales mix, coupled with a reduction in cost levels, resulted in a small improvement in operating profit despite the lower revenues. 

Our Retail strategy is to concentrate on the sale of branded and licensed ranges at margins that are sustainable and we continue to focus our sales effort on the middle market where we are performing well. Our new product launches have been very well received at recent trade fairs by key department stores and independent sector customers. We are taking advantage of opportunities in a rapidly evolving market place embracing tourism and leisure related outlets, farm shops, garden centres and web based retailers as well as more conventional outlets.

Prospects

Despite the heightened level of economic uncertainty in the UK and international markets, our performance is robust and we are on track to deliver the Board's revenue and profit objectives for the full year. Within our Hospitality business profitability is always heavily weighted to the second half of the year and this year's performance will be boosted by the completion of an important contract. We are working closely with key distributors to develop our market leading position in the UK whilst increasing investment in sales and marketing resources and new product development targeted at key export markets.

Our strategy for the Retail business is only partially implemented as we withdraw from low margin sales and improve the quality of our offerings to mid-market customers. The response from key customers to our new Autumn/Winter ranges has been very positive.

I am confident that Churchill will deliver enhanced profitability in 2011 in line with market expectations. 

Jonathan Sparey

Chairman

24 August 2011

Churchill China plc

Consolidated Income Statement

For the six months ended 30 June 2011

All the above figures relate to continuing operations

Consolidated Statement of Comprehensive Income

for the six months ended 30 June 2011

Churchill China plc

Consolidated Balance Sheets

as at 30 June 2011

Churchill China plc

Consolidated Statement of Changes in Equity

As at 30 June 2011

Churchill China plc

Consolidated Cash Flow Statement

for the six months ended 30 June 2011

1. Segmental analysis

For the six months ended 30 June 2011

2. Finance income and costs

The interest cost arising from pension schemes is a non cash item.

3. Income tax expense

4. Earnings per ordinary share

Basic earnings per ordinary share is based on the profit on ordinary activities after taxation and on 10,925,976 (2010: 10,935,017) ordinary shares, being the weighted average number of ordinary shares in issue during the year.

Diluted basic earnings per ordinary share is based on the profit on ordinary activities after taxation and on 10,960,993 (2010:10,965,940) ordinary shares, being the weighted average number of ordinary shares in issue during the year of 10,925,976 (2010: 10,935,017) increased by 35,017 (2010: 30,923) shares, being the weighted average number of ordinary shares which would have been issued if the outstanding options to acquire shares in the Group had been exercised at the average price during the period.

5. Reconciliation of operating profit to net cash inflow from continuing activities

6. Basis of preparation and accounting policies

The interim financial information for the period to 30 June 2011 has not been audited or reviewed and does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The Company's statutory accounts for the year ended 31 December 2010, prepared in accordance with accounting standards adopted for use in the European Union (International Financial Reporting Standards - IFRS), have been delivered to the Registrar of Companies; the report of the auditors on these accounts was unqualified and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

The interim financial statements have been prepared in accordance with IFRS as adopted by the European Union, IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS, under the historical cost convention as modified by the revaluation of land and buildings, available for sale financial assets, and financial assets and liabilities (including derivative instruments) at fair value through the profit and loss account. The interim financial information has been prepared using the same accounting policies, presentation and methods of computation as were applied in the Group's last audited financial statements.