H1 profits rise 32% for Churchill China as it warns of tough H2 comparables

CERAMIC and hospitality products manufacturer, Churchill China, has warned that its rate of growth in the second half of the year is expected to moderate as it battles against tough comparables.

Nevertheless, the Stoke-on-Trent business has said it is confident it will still deliver full year results in line with expectations.

The prediction came in the firm’s interim results, which show revenue up 6% in the first half to £20.9m (2013: £19.7m) and pre-tax profit rose 32% to £1.4m (2013: £1.1m). Earnings per share improved by 32% to 10.0p (2013: 7.8p).

It has proposed an interim dividend of 5.1p (2013: 4.9p).

In outlook, the AIM-listed company said: “We expect our rate of growth to moderate in the second half against more difficult comparatives from the excellent trading at the end of 2013. The board remains confident that we will deliver a strong performance for the year as a whole in line with our expectations.”

Alan McWalter, chairman of Churchill China, said the strong trading and growth seen in 2013 had continued into the first half of 2014. Revenue and operating profit increased substantially, driven by continued market strength and strategies of excellence in design, quality and service.

“We are benefitting from the long term programme of investment into key areas of our business and have delivered well against our targets. Our Hospitality business, the focus of our strategic plans, again reported record revenues,” he said.

Total sales to Hospitality customers increased by £1.8m (12%) to £16.8m (2013: £15m), a record for the period, and followed on from a very strong finish to last year. The division’s contribution to group operating profits rose to £2.7m from £2m.

McWalter said the firm had also made further progress on its strategic plans and had been pleased to see continued growth in Europe, where sales increased by more than 20% despite some impact from stronger sterling. This was supported by a good performance in the UK with revenue improving by 7% on the comparative period.

This was said to reflect further expansion of the eating out market, particularly in the pub and restaurant sector, where the business benefitted from a major refurbishment project.

“We believe the rate of growth in revenue will moderate somewhat against stronger comparatives in the second half year, but we remain confident that we can continue to develop our Hospitality business steadily based on the platform we have established,” said McWalter.

“Our new product launches have been well received and we continue to research, design and introduce successful new ranges.  Our product meets the performance needs of hospitality professionals.”

Retail sales had been predicted to decline and fell by £0.6m to £4.1m (2013: £4.7m) as it transferred resources, particularly manufacturing capacity, to Hospitality. UK and European markets were said to continue being affected by increased duties on product imported from China.

The group continues to develop sales under its own ‘Queens’ and ‘Churchill’ brands, which it believes will provide a more stable long term position.

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