Churchill China confident it will meet expectations as H1 revenue rises

Pottery manufacturer Churchill China’s revenues increased in the first half of the year as it remains confident that it will meet expectations for the full financial year.

Revenues increased by 12% for the six months ended 30 June to £24m, or 10% at constant exchange rates, when compared to the same period last year. Exports increased by over 30% and overseas sales now represent over half of its business.

The Stoke-on-Trent based company’s gross margins improved due to increased revenues, an improved mix of products and favourable exchange rates. The exchange rate added £500,000 to the firm´s top-line, principally from a strong euro, but the effect on operating profit was £100,000 as currency hedges were revalued because of weakness in sterling towards the end of June.

Sales to hospitality customers increased by 15% to £20.5m. However, revenue declined by £100,000 to £3.5m in the retail segment.

Operating profit rose by 30% to £2m and operating margins improved by 1.2% to 8.4%.

Earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 18% to £2.8m and profit before tax rose by 29% to £2.0m. Earnings per share were boosted by 30% to 14.8p.

Operating cash generation stood at £1.6m, versus £400,000 for the comparable period of 2015.

In the first half of the year, the AIM-listed company rebuilt inventory levels to support the seasonally stronger second half of the year. At 30 June net cash and deposit balances was £9.6m, compared to £8.7m in 2015.

The company said it had continued to invest to add capacity for higher value products for the hospitality business. Capital investment increased to £1.6m from £600,000. During the period, the company added a 28,000 square feet extension to the factory and aims to continue to add capacity in the rest of the year and in 2017.

Chairman Alan McWalter, said: "Churchill has delivered a strong performance in the first half of the year and the board remains confident that our strategies remain appropriate for the future progress of the business. Our hospitality business has once more reported record revenues. We are confident that we will meet our expectations for the full year."

The interim dividend was increased by 12.5% to 3.3p per share.

Shares in Churchill China rose 4.72% to 832.50p at 1132 BST.