TIDMCHH
RNS Number : 6778A
Churchill China PLC
28 March 2017
For immediate release 28 March 2017
CHURCHILL CHINA plc
("Churchill China" or the "Company" or the "Group")
PRELIMINARY RESULTS
For the year ended 31 December 2016
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
preliminary results for the year ended 31 December 2016.
Key Highlights:
-- Group revenue up 9% to GBP51.1m (2015: GBP46.8m)
- Hospitality revenue growth 13% (2015: 8%)
-- Operating profit up 29% to GBP6.4m (2015: GBP5.0m)
-- Profit before tax up 30% to GBP6.5m (2015: GBP5.0m)
-- Basic earnings per share up 29% to 48.2p (2015: 37.3p)
-- Proposed final dividend up 16% to 14.8p (2015: 12.7p)
-- Cash generated from operations GBP6.7m (2015: GBP5.3m)
-- Good progress against key strategic objectives
Alan McWalter, Chairman of Churchill China, commented:
"2016 was a year of strong performance across our business. We
continue to believe that our strategy is well founded and that it
can continue to be successfully executed. We look forward to the
coming year with confidence."
For further information, please contact:
Churchill China plc Tel: 01782 577566
David O'Connor / David Taylor
Buchanan Tel: 020 7466 5000
Mark Court / Sophie Cowles
/ Jane Glover
N+1 Singer Tel: 0207 496 3000
Richard Lindley
This announcement contains information which, prior to its
disclosure, was considered inside information for the purposes of
Article 7 of Regulation (EU) No 596/2014 (MAR)
CHAIRMAN'S STATEMENT
Introduction
I am pleased to announce that our 2016 results again show a
strong performance across our business. The strategies we have
developed and implemented over several years continue to deliver
strong returns. We have prioritised market development in export,
product innovation and a shift towards added value ranges. All of
these, together with our traditional strengths of service and
efficiency, have combined to deliver substantial value. 2016 has
undoubtedly been a successful year and we have reached many of our
targets earlier than we expected. We intend to continue to build on
this success with further development and investment although this
is likely to be against a general backdrop of increased economic
uncertainty across a number of our markets.
Financial Review
Total revenues increased by 9% to GBP51.1m (2015: GBP46.8m) with
strong growth in Hospitality exports. More favourable exchange
rates contributed GBP1.6m to this improvement.
Gross margins have improved with much of our increased revenue
coming from sales of value added product. Margins on export
business also benefited from weaker sterling.
Operating profit increased by 29% to GBP6.4m (2015: GBP5.0m).
Operating margins improved to 12.5% (2015: 10.6%) due to our
continued focus on developing profitable business across all our
markets and careful management of our cost base. The positive
impact of favourable currency rates on operating profit was GBP0.9m
with the benefit to revenue partially offset by increased overhead
and buying costs denominated in foreign currency. We have continued
to invest in support of our strategic targets. Earnings before
interest, tax, depreciation and amortisation increased by 26% to
GBP8.1m (2015: GBP6.5m).
Profit before tax rose by 30% to GBP6.5m (2015: GBP5.0m), which
was largely a result of our improved operating performance. Our
share of the operating profit of our associate company also
increased.
Basic earnings per share improved by 29% to 48.2p (2015:
37.3p).
We have once again generated strong operating cash flows.
Operating cash generation was GBP6.7m (2015: GBP5.3m). Working
capital requirements were neutral despite an increase in inventory
to support higher sales and service levels. The cash spend on
capital projects increased to GBP2.5m (2015: GBP1.2m) with the
completion of new building projects and the expansion of capacity
in the manufacture of added value products. We expect capital spend
to rise again in 2017 as we continue to invest in capacity,
capability and efficiency. At the year end, net cash and deposit
balances had risen by GBP0.9m to GBP12.7m (2015: GBP11.8m).
The present value of the deficit in our defined benefit pension
scheme increased during the year by GBP4.8m to GBP8.7m as a result
of a fall in the discount rate on liabilities following substantial
reductions in gilt and bond yields. We have accelerated payments
into the scheme to provide more flexibility and security and
deficit reduction payments increased by GBP0.7m to GBP1.4m in the
year. The scheme was closed to future accrual in 2006.
Dividend and shareholder return
The Board is recommending a 16% increase in the final dividend
to 14.8p per share (2015: 12.7p), giving a total of 21.1p for the
year (2015: 18.3p). We are pleased that the growth in profitability
and continued strong cash generation in the year has allowed us to
again raise the dividend at an above average rate. If approved, the
final dividend will be paid on 24 May 2017 to shareholders on the
register on 28 April 2017, with the ex-dividend date being 27 April
2017.
Total shareholder returns have again been good, reflecting both
dividend growth and our improved share price performance. Overall
returns were 22% (2015: 33%) during the year.
Business
Revenues have increased across our business with strong progress
in Hospitality more than offsetting a further planned contraction
in Retail activity. Exports now represent 49% of Group sales.
Total sales to our Hospitality customers increased by GBP5.2m
(13%) and reached a new record of GBP44.0m (2015: GBP38.8m).
Contribution to Group operating profits rose by 29% to GBP9.2m from
GBP7.2m.
The exceptional performance in export markets reported in the
first half of 2016 was matched by further growth in the second
half. Overall export sales grew by 31%. Whilst there has
undoubtedly been some additional benefit from currency this year
our progress over the medium term has been good, with export sales
increasing by a compound annual rate in excess of 20% over a three
year period. This progress has been driven by a combination of
extending our distribution networks, investment in sales resource
and a strong pipeline of new product introductions. Growth has been
strongest in Europe, the region where we first prioritised export
development and where we have benefited from Anti-Dumping Duties on
imports from China, but has also been good in North America and the
Rest of the World.
As we expected, progress in the UK has been more difficult to
sustain as hospitality market growth has slowed. The rate of
opening of new hospitality outlets has reduced and there is less
clarity in relation to future growth prospects. We have retained
our market leading position and continue to benefit from long term
replacement sales.
The strength of our established relationships with end users,
distributors and agents in the UK and worldwide continues to be of
great value to the business.
Retail has continued to perform at a satisfactory level in line
with our expectations and established strategy. Revenues reduced
from GBP8.0m to GBP7.1m reflecting lower licensed sales and an
increase in UK manufactured product. Higher margins on manufactured
ranges have offset lower profitability on product sourced in US
dollars. Contribution to Group profit was again maintained at
GBP0.9m.
The core of our strategy has been to progressively move the mix
of product we offer away from price competitive areas towards
higher value added ranges offering profit opportunities to our
customers as well as to Churchill. These products retain our
existing technical performance benefits, but also increasingly
deliver a differentiated range to customers. This has required a
long term investment in both design and process innovation as well
as in our people and operations. The rate of progress of new
product sales across our markets has exceeded our expectations,
with our hand-crafted Stonecast range becoming our most successful
product in the three years since its launch. We have a forward
programme of new product development targeted at continuing this
process of change and re-positioning.
Operations
Our manufacturing and logistics operations have performed well
against demanding targets. The record level of hospitality revenue
and the changing mix of production has required significant
development and effort to deliver. We have made progress in
refining our long term objectives and clearly aligning our
fulfilment functions with the strategic aims of the business. Our
ability to bring innovative new products from inception and through
manufacture to market has been fundamental to the delivery of this
year's performance. Our UK manufacturing operations will remain a
key driver and facilitator of our strategy.
A number of important manufacturing projects, including the
completion of additional production space, the improvement of
process flow and the installation of additional capacity, have been
delivered on time and on budget. In 2016 capital expenditure on
manufacturing and operations was GBP2.3m (2015: GBP1.1m). We have
also strengthened our team in this area during the year both
through the development of our workforce and selective recruitment.
We expect to make further progress and investment during 2017.
People
The Company continues to benefit from the effort and commitment
of our workforce. In an industry reliant on craft, skill, knowledge
and experience we greatly appreciate the substantial advantage that
our people bring to us.
Training and development have been prioritised at all levels
across our business and we have committed further resource to
building the capability of our workforce. The business' objectives
increasingly require our employees to operate with autonomy and new
skills. Our Masterclass process, which identifies opportunities to
improve our quality and output, is working well beyond our original
expectations and has identified several incremental improvements to
our operations.
We have supplemented the development of our staff with targeted
recruitment where there are opportunities to accelerate our rate of
progress. Important long term appointments have been made in sales,
marketing and in operations during the year.
We have previously noted the retirement of Jonathan Morgan after
nine years of service as a Non Executive Director and the
recruitment of Angela Bromfield to the Board, again in a Non
Executive role. Once more we thank Jonathan for his contribution
and welcome Angela.
Prospects
2016 was a year of strong performance across our business. The
progress we made during the year was faster than we originally
expected with profit growth ahead of long term average levels. We
continue to believe that our strategy is well founded and that it
can continue to be successfully executed.
Our markets continue to develop and a number of initiatives are
in place which we expect to consolidate progress made to date and
to provide further opportunities for future profitable growth. Our
strategy of innovation, our focus on value added products and the
competitive advantage brought by our established position remain
important. We expect to continue to expand export revenues, but are
more cautious in relation to prospects for the UK.
We have clear long term strategic goals in relation to design,
quality and service. These encourage us to continue to invest
steadily and progressively to deliver long term value to our
customers, our employees and also to our shareholders. We look
forward to the coming year with confidence.
Alan McWalter
Chairman
27 March 2017
Churchill
China plc
Consolidated Income Statement
for the year ended 31 December
2016
Audited Audited
Year to Year to
31 December 31 December
2016 2015
GBP000 GBP000
Note
Revenue 51,102 46,829
============ ============
Operating
profit 1 6,398 4,959
Share of results of associate
company 157 135
Finance income 2 80 82
Finance costs 2 (120) (162)
------------ ------------
Profit before
income tax 6,515 5,014
Income tax
expense 3 (1,230) (928)
------------ ------------
Profit for
the year 5,285 4,086
============ ============
Pence Pence
per per
share share
Basic earnings per ordinary
share 4 48.2 37.3
Diluted basic earnings
per ordinary share 4 47.8 36.9
All the above figures relate
to continuing operations
Churchill
China plc
Consolidated Statement of Comprehensive
Income
for the year ended 31 December
2016
Audited Audited
Year
Year to to
31 December 31 December
2016 2015
GBP000 GBP000
Other comprehensive (expense)
/ income
Items that will not be reclassified
to profit or loss:
Actuarial (loss) / gain on
retirement benefit obligations (5,188) 104
Items that may be reclassified subsequently
to profit or loss:
Impact of change in UK tax
rate on deferred tax on 12 24
revaluation
reserve
Currency translation
differences 60 16
------------ ------------
Other comprehensive (expense)
/ income (5,116) 144
Profit for
the year 5,285 4,086
Total comprehensive income for
the period 169 4,230
============ ============
Attributable
to:
Equity holders
of the Company 169 4,230
============ ============
All the above figures relate
to continuing operations
Churchill China
plc
Consolidated
Balance Sheets
as at 31 December
2016
Audited Audited
31 December 31 December
2016 2015
GBP000 GBP000
Assets
Non Current
assets
Property, plant
and equipment 14,897 14,046
Intangible assets 89 59
Investment in
associates 1,388 1,231
Deferred income
tax assets 1,658 848
18,032 16,184
Current assets
Inventories 9,102 8,360
Trade and other
receivables 9,479 8,648
Other financial
assets 3,005 2,500
Cash and cash
equivalents 9,734 9,307
------------ ------------
31,320 28,815
------------ ------------
Total assets 49,352 44,999
============ ============
Liabilities
Current liabilities
Trade and other
payables (10,310) (8,721)
Current income
tax liabilities (852) (580)
------------ ------------
Total current
liabilities (11,162) (9,301)
------------ ------------
Non current
liabilities
Deferred income
tax liabilities (834) (936)
Retirement benefit
obligations (8,731) (3,837)
Total non current
liabilities (9,565) (4,773)
------------ ------------
Total liabilities (20,727) (14,074)
============ ============
Net assets 28,625 30,925
============ ============
Equity attributable to owners
of the Company
Issued share
capital 1,103 1,101
Share premium
account 2,348 2,348
Treasury shares (575) (144)
Other reserves 1,544 1,439
Retained earnings 24,205 26,181
------------ ------------
28,625 30,925
============ ============
Churchill China
plc
Consolidated Statement of
Changes in Equity
as at 31 December
2016
Retained Share Share Treasury Other
earnings capital premium shares reserves Total
account
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 January
2015 23,654 1,096 2,348 (224) 1,532 28,406
--------- -------- -------- --------- --------- --------
Comprehensive
income
Profit for the
period 4,086 - - - - 4,086
Other comprehensive
income - - - - - -
Depreciation
transfer - gross 12 - - - (12) -
Depreciation
transfer - tax (2) - - - 2 -
Deferred tax -
change in rate - - - - 24 24
Actuarial gains
- net 104 - - - - 104
Currency translation - - - - 16 16
Total comprehensive
income 4,200 - - - 30 4,230
--------- -------- -------- --------- --------- --------
Transactions
with owners
Dividends (1,816) - - - - (1,816)
Proceeds of
share issue - 5 - 5 - 10
Share based
payment 250 - - - (123) 127
Deferred tax
- share based
payment 102 - - - - 102
Treasury shares (209) - - 75 - (134)
Total transactions
with owners (1,673) 5 - 80 (123) (1,711)
--------- -------- -------- --------- --------- --------
Balance at 31
December 2015 26,181 1,101 2,348 (144) 1,439 30,925
Comprehensive
income
Profit for the
period 5,285 - - - - 5,285
Other comprehensive
income
Depreciation
transfer - gross 12 - - - (12) -
Depreciation
transfer - tax (2) - - - 2 -
Deferred tax
- change in rate - - - 12 12
Actuarial losses
- net (5,188) - - - - (5,188)
Currency translation - - - - 60 60
Total comprehensive
income 107 - - - 62 169
--------- -------- -------- --------- --------- --------
Transactions
with owners
Dividends (2,085) - - - - (2,085)
Proceeds of
share issue - 2 - 2 - 4
Share based
payment 117 - - - 43 160
Deferred tax
- share based
payment 27 - - - - 27
Treasury shares (142) - - (433) - (575)
Total transactions
with owners (2,083) 2 - (431) 43 (2,469)
--------- -------- -------- --------- --------- --------
Balance at 31
December 2016 24,205 1,103 2,348 (575) 1,544 28,625
========= ======== ======== ========= ========= ========
Churchill
China plc
Consolidated Cash
Flow Statement
for the year ended 31 December
2016
Audited Audited
Year to Year to
31 December 31 December
2016 2015
GBP000 GBP000
Cash flows from
operating activities
Cash generated from
operations (note
5) 6,744 5,316
Interest received 80 82
Interest
paid (1) (1)
Income tax
paid (813) (922)
Net cash generated from operating
activities 6,010 4,475
------------ ------------
Cash flows from
investing activities
Purchases of property, plant
and equipment (2,436) (1,214)
Proceeds on disposal of property,
plant and equipment 93 52
Purchases of intangible
assets (81) (27)
Net cash used in
investing activities (2,424) (1,189)
------------ ------------
Cash flows from
financing activities
Issue of ordinary
shares 4 10
Purchase of treasury
shares (575) (134)
Dividends
paid (2,085) (1,816)
Sale of other financial
assets 2,500 1,500
Purchase of other
financial assets (3,005) (2,500)
Net cash used in
financing activities (3,161) (2,940)
------------ ------------
Net increase in cash and cash
equivalents 425 346
Cash and cash equivalents at
the beginning of the year 9,307 8,961
Exchange gains on cash and
cash equivalents 2 -
Cash and cash equivalents at
the end of the year 9,734 9,307
------------ ------------
1. Segmental
analysis
for the year ended
31 December 2016
Hospitality Retail Unallocated Group
GBP000 GBP000 GBP000 GBP000
Revenue 43,961 7,141 - 51,102
------------ ------- ------------ --------
Contribution to group overheads
excluding depreciation and
amortisation 10,630 986 (3,502) 8,114
Depreciation and
amortisation (1,408) (113) (195) (1,716)
------------ ------- ------------ --------
Operating
profit 9,222 873 (3,697) 6,398
Share of results
of associate company 157
Finance income 80
Finance costs (120)
--------
Profit before
income tax 6,515
Income tax
expense (1,230)
--------
Profit for
the period 5,285
--------
12 months to 31
December 2015
Revenue 38,859 7,970 - 46,829
------------ ------- ------------ --------
Contribution to group overheads
excluding depreciation and
amortisation 8,182 1,121 (2,849) 6,454
Depreciation and
amortisation (1,033) (225) (237) (1,495)
------------ ------- ------------ --------
Operating
profit 7,149 896 (3,086) 4,959
Share of results
of associate company 135
Finance income 82
Finance costs (162)
--------
Profit before
income tax 5,014
Income tax
expense (928)
--------
Profit for
the period 4,086
--------
2. Finance income
and costs
Audited Audited
Year
Year to to
31 December 31 December
2016 2015
GBP000 GBP000
Finance income
Interest income on cash and
cash equivalents 80 82
Finance income 80 82
------------ ------------
Finance cost
Interest on pension
scheme (119) (161)
Other interest (1) (1)
Finance costs (120) (162)
------------ ------------
The interest cost arising from pension
schemes is a non cash item.
3. Income
tax expense
Audited Audited
Year
Year to to
31 December 31 December
2016 2015
GBP000 GBP000
Current taxation 1,086 803
Deferred taxation 144 125
Income tax
expense 1,230 928
------------ ------------
4. Earnings per ordinary share
Basic earnings per ordinary share is based on the profit on
ordinary activities after income tax of GBP5,285,000 (2015:
GBP4,086,000) and on 10,972,257 (2015: 10,956,828) 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 income tax of GBP5,285,000 (2015:
GBP4,086,000) and on 11,067,101 (2015: 11,064,046) ordinary shares,
being the weighted average number of ordinary shares in issue
during the year of 10,972,257 (2015:10,956,828) increased by 94,844
(2014:107,218) 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
Audited Audited
Year
Year to to
31 December 31 December
2016 2015
GBP000 GBP000
Cash flows from operating
activities
Operating profit 6,398 4,959
Adjustments for
Depreciation 1,716 1,495
(Profit) / loss on disposal
of property, plant and equipment (8) 4
Charge for share
based payment 160 128
Defined benefit pension cash
contribution (1,430) (758)
Changes in working
capital
Inventory (742) (86)
Trade and other
receivables (750) (371)
Trade and other
payables 1,400 (55)
Net cash inflow from
operations 6,744 5,316
------------ ------------
6. Dividend
The final dividend, which has not been provided for, has been
calculated on 10,955,172 (2015: 10,986,230) ordinary shares, being
those in issue at 31 December 2016 qualifying for dividend and at a
rate of 14.8p (2015: 12.7p) per 10p ordinary share. The dividend
will be paid on 24 May 2017 to shareholders on the register at 28
April 2017, subject to approval at the Company's Annual General
Meeting.
The total dividend paid and proposed in respect of the year is
21.1p (2015: 18.3p).
7. Basis of preparation and accounting policies
The financial information included in the preliminary
announcement for year to 31 December 2016 has been audited and an
unqualified audit report has been issued.
The preliminary financial statements represent extracts from
those audited accounts but do not constitute statutory accounts
within the meaning of Section 434 of the Companies Act 2006.
The Group's 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 preliminary financial
statements as were applied in the Group's financial statements for
the year ended 31 December 2015.
Statutory accounts for the year ended 31 December 2015 have been
delivered to the Registrar of Companies. Statutory accounts for the
year ended 31 December 2016 will be delivered to the Registrar of
Companies after the Company's Annual General Meeting and will also
be available on the Company's website (www.churchill1795.com) on or
around 24 April 2017 and will be sent to shareholders on the same
date.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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