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[December 2004]
Trading Update from Churchill China
In a recent trading update, the Board of Churchill China PLC (Stoke-on-Trent, Staffs, England) said that in the current financial year ending 31 December 2004 sales of products to hospitality continued to increase year on year. The substantial growth achieved in the first six months of the year were followed by a healthy second half performance. The Board said it expected the group's record of growth in this area to continue in 2005 and beyond.
Sales of products to retail markets continued to be difficult. With lower demand levels in Europe and the USA, fourth quarter sales are expected to be below earlier expectations.
Consequently, the Board expects the group profit before exceptional items and taxation for the year ending 31 December 2004 to be below market expectations but will still show growth from the equivalent figure in 2003.
In addition, the Board said it had decided to accelerate the transfer of UK production capacity to support increased sales of hospitality product, with a consequent reduction in the output levels of retail product. In excess of 75% of products sold to retail markets are already sourced from overseas suppliers and this will increase.
It had originally been anticipated that this change would have taken place in late 2005 or early 2006. Bringing this process forward will result in an exceptional charge against profits in the current year of approximately £800,000 of which the majority will be the non-cash write down of stocks associated with retail production. UK manufacturing resource will, in future, be fully concentrated on the more efficient production of hospitality lines and the cost of retail products will be further reduced as new sources of overseas supply are brought on line.
Further cost improvements are expected to be realised from 2005 onwards from site consolidation. The transfer of warehousing and dispatch operations from the existing Alexander site to the new distribution centre currently under construction at Churchill's principal site at Sandyford remains on schedule for completion by the third quarter of 2005. This will result in lower operating costs and will improve service levels to customers.
ENDS