Churchill China Regulatory News (CHH)

CHURCHILL CHINA plc

("Churchill China" or the "Company" or the "Group")

INTERIM RESULTS

For the six months ended 30 June 2015

Churchill China plc (AIM: CHH), the manufacturer and global distributor of performance ceramic and related products to hospitality and retail markets, is pleased to announce its interim results for the six months ended 30 June 2015.

Key Highlights:

· Group revenue up 3% to £21.4m (2014: £20.9m)

- Hospitality revenue growth 6%

· Operating profit up 12% to £1.6m (2014: £1.4m)

· Profit before tax up 12% to £1.6m (2014: £1.4m)

· Basic earnings per share up 14% to 11.4p (2014: 10.0p)

· Interim dividend up 10% to 5.6p (2014: 5.1p)

· Cash and deposit balances of £8.7m (June 2014: £8.5m)

Alan McWalter, Chairman of Churchill China, commented:

Churchill has continued to perform well and I am pleased to report a good performance in the first six months of the year. We have delivered further growth against strong comparative figures and the Hospitality business has again achieved a record performance.

We are confident that the continued growth of our markets and the strength of our position within them will enable us to meet our expectations for the full year.

For further information, please contact:

Our interim results will be available today on the Company's website: www.churchill1795.com. Copies of the Interim Report will be sent to shareholders in due course.

CHAIRMAN'S STATEMENT

Introduction

Churchill has continued to perform well and I am pleased to report a good performance in the first six months of the year. We have delivered further growth against strong comparative figures and the Hospitality business has again achieved a record performance. This progress has been achieved from our target markets and from new product ranges, in line with the strategy we have developed. We have also continued to invest in the long term future of our business through market development and new manufacturing capacity.

Financial Review

Total revenues increased by 3% to £21.4m (2014: £20.9m).

Gross margins have remained comparable to the first half of 2014 with the adverse effect of the strengthening of sterling against the euro being offset by increased operating efficiencies. On a constant currency basis revenue would have been £0.5m higher had exchange rates remained at 2014 levels. Operating profit was impacted by £0.3m on the same basis. We have retained tight control of overheads.

Operating profit increased by 12% to £1.6m (2014: £1.4m). Operating margins improved to 7.2% (2014: 6.6%).

Earnings before interest, tax, depreciation and amortisation increased by 4% to £2.3m (2014: £2.2m).

Profit before tax rose by 12% to £1.6m (2014: £1.4m), largely arising from the improved operating performance.

Earnings per share improved by 14% to 11.4p (2014: 10.0p).

Operating cash inflow was lower than in previous years, largely as a result of increased working capital requirements. Following the strong demand experienced in the second half of 2014, we rebuilt inventory levels to support our service promise. Operating cash generation was £0.4m (2014: £2.7m). At the end of the period, net cash and deposit balances were £8.7m (June 2014: £8.5m).

We continue to invest in our core business. Capital investment was £0.6m (2014: £1.1m) with this further expenditure mainly focussed on our manufacturing unit in Stoke on Trent. This spend delivers additional capacity to produce added value products and will be followed by further investment in the UK over the remainder of 2015 and 2016.

Dividend

The Board is declaring a 0.5p increase in the interim dividend to 5.6p per share (2014: 5.1p). This increase reflects our policy of linking dividends to increased profitability whilst maintaining appropriate levels of dividend cover. The interim dividend will be paid on 1 October 2015 to shareholders on the register on 11 September 2015.

Markets

Hospitality

Total sales to our Hospitality customers increased by £1.0m (6%). Contribution to Group operating profits rose by 6% to £2.9m from £2.7m.

We continue to make steady progress in the UK where we enjoy a leading position in a growing market. We have delivered a good performance against strong comparative figures that included a significant benefit from an installation contract in the first half of last year. This performance reflects the progress achieved in a number of market segments.

We have invested significantly in sales and market development which has allowed us to achieve further growth in export markets. In the first half of the year, Europe produced a strong performance with sales 9% ahead of 2014, despite the considerable headwind from the weaker euro. Underlying sales growth in constant currency terms in Europe was over 20%. Other export markets also benefitted from additional focus and resource and recorded double digit revenue growth overall. These markets remain at an early stage of development for us, but we are pleased with the progress we have made and the opportunities we have generated.

Much of our success in export markets can be attributed to a strong programme of new product development. The hand crafted Stonecast range has performed particularly well in the first half year as we have added additional colours to the existing product range.

Retail

Results from our Retail business again reflected the prioritisation of resources towards Hospitality. Revenue declined by £0.5m to £3.6m, in line with our expectations. The effect on profitability of this reduction was again largely mitigated by cost reductions. Contribution to Group profit fell marginally to £0.2m (2014: £0.2m).

Our Retail operation is performing in line with our strategic objectives and has been repositioned in its markets. We remain clear that it provides a valuable contribution to the Group's overall future performance.

Operations

Manufacturing and logistics operations have continued to deliver well against high expectations. The strong trading at the end of 2014 and consequent impact on inventory levels has necessitated higher output levels across our operations to maintain the high service levels required by the Hospitality market. At the same time we have continued to introduce new products and have commissioned two major capital projects increasing our UK capacity in key areas. We have reached the half year well positioned to meet the expected seasonal increase in demand in the second half year.

People

We continue to invest in the development of our workforce at all levels. Increased skills and wider flexibility amongst our staff remain important components of our strategy.

As announced in July 2015, we are pleased to welcome James Roper to the Board as Sales and Marketing Director. James' appointment reflects the increased focus we have given to market and product development in recent years and we expect that his knowledge and experience will bring further balance to the Board.

Prospects

Our business continued to perform well in the first half of 2015. Despite the forecast impact of stronger sterling and other external factors, we have delivered an increase in profitability, built upon the growth and resilience of our Hospitality business.

We are pleased with the platform that the work carried out in the first six months of the year gives us for future development in the short and medium term. We continue to meet a number of milestones in relation to the evolution and implementation of our strategy. These include further sales and market development, new product introductions and investment in our manufacturing operations

We are confident that the continued growth of our markets and the strength of our position within them will enable us to meet our expectations for the full year.

Alan McWalter

Chairman

27 August 2015

Churchill China plc

Consolidated Income Statement

For the six months ended 30 June 2015

All the above figures relate to continuing operations

Churchill China plc

Consolidated Statement of Comprehensive Income

for the six months ended 30 June 2015

All the above figures relate to continuing operations

Churchill China plc

Consolidated Balance Sheet

as at 30 June 2015

Churchill China plc

Consolidated Statement of Changes in Equity

as at 30 June 2015

Churchill China plc

Consolidated Cash Flow Statement

for the six months ended 30 June 2015

1. Segmental analysis

For the six months ended 30 June 2015

2. Finance income and costs

The interest cost arising on 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 after taxation of £1,240,000 (June 2014: £1,092,000, December 2014: £3,416,000) and on 10,914,230 (June 2014: 10,945,755, December 2014: 10,934,908) ordinary shares, being the weighted average number of ordinary shares in issue during the period.

Diluted basic earnings per ordinary share is based on the profit after taxation of £1,240,000 (June 2014: £1,092,000, December 2014: £3,416,000) and on 11,021,343 (June 2014: 11,116,239, December 2014: 11,105,668) ordinary shares, being the weighted average number of ordinary shares in issue during the period of 10,914,230 (June 2014: 10,945,755, December 2014 10,934,908) increased by 107,113 (June 2014: 170,484, December 2014: 170,760) 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 flow from operating activities

6. Basis of preparation and accounting policies

The interim financial information for the period to 30 June 2015 has not been audited or reviewed and does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006. The Company's statutory accounts for the year ended 31 December 2014, 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 same accounting policies, presentation and methods of computation are followed in the interim financial statements as were applied in the Group's last audited financial statements.