Pottery maker Churchill confident on full year target following strong H1

STOKE-on-Trent pottery manufacturer Churchill China gas said it remains on course to meet full year expectations following a strong half year from its Hospitality division.

For the six months to June 30, 2015, total sales to the firm’s Hospitality customers increased by £1m (6%) and its contribution to group operating profits rose by 6% to £2.9m (2014: £2.7m).

The performance represented the company’s stronger focus on its Hospitality business as against the Retail division. Churchill said the higher priority given to Hospitality had resulted in a decline of £0.5m within its Retail arm to £3.6m The company said this was in line with expectations.

Overall, total group revenues increased by 3% in H1 to £21.4m (2014: £20.9m). The firm said gross margins had remained comparable to H1 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.
 
Operating profit increased by 12% to £1.6m (2014: £1.4m) and 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), and pre-tax profit rose by 12% to £1.6m (2014: £1.4m), largely due to the improved operating performance.
 
Earnings per share improved by 14% to 11.4p (2014: 10.0p) and the board has recommended a 0.5p increase in half dividend to 5.6p per share (2014: 5.1p).
 
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 the company said it had rebuilt inventory levels to support demand. 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).
 
Capital investment during the period was £0.6m (2014: £1.1m) with the focus mainly on the firm’s manufacturing unit in Stoke on Trent. The company said the investment had delivered extra capacity and would lead to the manufacture of added value products. Further investment is scheduled in the UK over the remainder of 2015 and 2016.

Alan McWalter, chairman of Churchill China, said: “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.”