Dividend surprise from Churchill China

In 2012, retail operating profits recovered from £1m to £1.42m even though sales fell again from £13.1m to £12m. In contrast, the hospitality division had a tough time as additional sales, marketing and new product launch costs were not offset by the anticipated rise in turnover; indeed, they hardly moved and profits fell by over £550,000 to £4.16m on revenues of £29.4m. Part of the problem was a weak euro as Churchill invoices in local currencies. However, a £367,000 fall in the depreciation and amortisation charge meant total operating profits edged up 4 per cent to £2.83m.

The company does not expect the removal of the Climate Change Levy to reduce costs much - unlike Portmeirion. But management is concerned by the imposition last November of EU anti-dumping duty surcharges on mugs imported from China. Since October, that duty has cost Churchill £400,000, which was partly offset by price increases.

So 2013's results are likely to result in higher hospitality sales (including the new Bamboo range) but lower retail revenues. As a result, broker N+1 Singer expects flat turnover and adjusted pre-tax profits of £2.9m, giving EPS of 20.6p. But the dividend edges up to 14.6p.