LONDON (ShareCast) - (Sharecast News) - Churchill China announced a significant drop in half-year profits on Wednesday, citing difficult trading conditions in the global hospitality sector.
The AIM-traded manufacturer of performance ceramic products reported that cost-saving measures and investments had only partially offset the impact of lower volumes and rising costs in the six months ended 30 June.

For the first half, the company posted a revenue of £38.5m, a 5.2% decrease from the £40.6m reported in the same period last year.

Profit before tax and exceptional items saw a more substantial decline, falling 35.4% to £3.1m.

In response to lower earnings, the interim dividend per share was cut by 39.1% to 7p.

Churchill's net cash and deposits also decreased to £5.6m.

The Stoke-on-Trent-based firm noted a mixed geographic performance, with strong results in its UK and US hospitality markets contrasting with weaker sales in Europe and the rest of world grographies.

Management said that while lower sales and production volumes impacted profitability, the company has maintained a stable market share and protected margins through an increased mix of added-value product sales.

The company said it was also making focused investments in automation to mitigate rising labour costs.

"Global hospitality markets remain depressed by weak consumer sentiment and rising employment costs," said chairman Robin Williams.

"We believe we are maintaining share in key territories, and in the UK and US we have performed better than the market.

"Our focus internally is on reducing our cost base without damaging core skills and on employing capital spend to bring down cost of production and enable new product launches at competitive price points."

Looking ahead, while acknowledging the period's performance was below initial expectations, the board said it believed that the company was performing well within the current difficult environment.

Churchill China said it expected its markets to recover in the medium term, adding that it saw no change to the long-term potential of the business, highlighting its well-invested position and a high percentage of revenue from replacement orders.

At 0838 BST, shares in Churchill China were flat at 430p.

Reporting by Josh White for Sharecast.com.

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