Here’s a UK exporter, engaged in what might be termed a heritage industry, with a focus on ‘value add’, which is growing market share and building margins, often as not through internally funded production innovation. What’s more, Churchill China (CHH) is relaxed about a possible move on to the World Trade Organisation tariff regime.
The group places great importance on building commercial relationships on an incremental basis, which is probably inevitable given it's selling into the global hospitality industry. Indeed, management emphasised the steady, deliberate steps the ceramic maker is taking to establish a presence in Asia’s growth markets. Finding the most effective distribution channels isn’t achievable overnight, but it does seem to generate repeat business, as evidenced by the half-year returns.
Churchill drove the top line by 6 per cent at constant currencies, while boosting operating profit 22 per cent to £3.3m on a 160 basis point hike in the underlying margin. Exports now account for nearly two-thirds of group revenue, sales of which were up 16 per cent in the period under review. Operating cash flow came in at £1.7m, against £1.1m a year earlier, and the probability is that year-end net cash will be in advance of the 2017 level.
Broker N+1 Singer expects adjusted pre-tax profit of £8.5m for the year-end, giving EPS of 62.6p, rising to £9.2m and 67.8p in 2019.
| CHURCHILL CHINA (CHH) | ||||
| ORD PRICE: | 1,012p | MARKET VALUE: | £111m | |
| TOUCH: | 984-1,040p | 12-MONTH HIGH: | 1,240p | LOW: 799p |
| DIVIDEND YIELD: | 2.6% | PE RATIO: | 16 | |
| NET ASSET VALUE: | 315p | NET CASH: | £9.23m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 25.8 | 2.66 | 19.6 | 7.40 |
| 2018 | 27.2 | 3.30 | 24.4 | 8.70 |
| % change | +6 | +24 | +24 | +18 |
| Ex-div: | 13 Sep | |||
| Payment: | 5 Oct |
