The market valuation of Churchill China (CHH) is down by a third over the past 12 months, a reflection of its reliance on the commercial health of the hospitality industry, which has been severely compromised by the enforced lockdowns.
Ceramics revenues were up by a third in the first two months of the year, partly due to the incorporation of the brand, intellectual property, and some plant of one of its erstwhile chief rivals, Stoke-on-Trent-based Dudson Ltd, which collapsed into administration in April 2019. But the potter was abruptly forced to pause manufacturing activities during March and much of April.
Management anticipates that Churchill will achieve an operating level of roughly 70 per cent of 2019 volumes later in August, but the disruption to the hospitality industry fed through to a half-year operating loss of £0.4m against a profit of £4.4m in HY2019.
The good news is that net finances improved since the start of the year, partly due to reduced working capital requirements, but we are likely to witness a net outflow through the second half as inventory and receivables start to build.
Investec forecasts adjusted pre-tax profits of £1.5m, rising to £5.6m in 2021.
| CHURCHILL CHINA (CHH) | ||||
| ORD PRICE: | 1,050p | MARKET VALUE: | £115m | |
| TOUCH: | 1,000-1,080p | 12-MONTH HIGH: | 2,060p | LOW: 605p |
| DIVIDEND YIELD: | nil | PE RATIO: | 22 | |
| NET ASSET VALUE: | 376p | NET CASH: | £16.3m | |
| Half-year to 30 June | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2019 | 31.9 | 4.30 | 31.3 | 10.3 |
| 2020 | 18.9 | -0.38 | -2.90 | nil |
| % change | -41 | - | - | - |
| Ex-div: | - | |||
| Payment: | - |
