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Churchill China delivers five star hospitality

The manufacturer and distributor of tabletop products is relaxed about the prospect of a no-deal Brexit
March 27, 2019

Churchill China (CHH) beat analyst forecasts with £8.8m in pre-tax profits, after a positive year that saw 10 per cent revenue growth in its hospitality arm. The manufacturer and distributor of tabletop products has been winding back its retail activities in favour of hospitality in the UK and overseas growth markets – 60 per cent of its sales are exports, around 37 per cent of which are generated from Europe. Management anticipates that a hard Brexit and World Trade Organisation tariffs would add an average 7 per cent duty to Churchill’s products, but that this would be offset by the weakening of sterling, so the tariff “shouldn’t be a problem for our customers”.

IC TIP: Hold at 1,398p

Churchill’s working capital requirements for the year rose to £1.5m from £0.2m in 2017, while an accompanying increase in receivables reflected higher sales, as well as the previous year being “a little on the low side”, according to finance director David Taylor. The company announced that it had become the majority shareholder in ceramic materials manufacturer Furlong Mills in February, adding 9.5 per cent in equity to take its holding to 55.6 per cent. Management cites improved performance from Furlong Mills among the reasons for its profit growth.

House broker N+1 Singer forecasts adjusted pre-tax profits of £10.1m and EPS of 72.3p for 2019, against prior year figures of £9.5m and 70.1p.

CHURCHILL CHINA (CHH)  
ORD PRICE:1,398pMARKET VALUE:£154m
TOUCH:1,370-1,425p12-MONTH HIGH:1,445pLOW: 799p
DIVIDEND YIELD:2.1%PE RATIO:21
NET ASSET VALUE:345pNET CASH:£17.4m
Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201444.54.331.216.1
201546.85.037.318.3
201651.16.548.221.1
201753.57.858.424.6
201857.58.865.629.0
% change+7+14+12+18
Ex-div:25 Apr   
Payment:24 May