China plc
Annual Report
2009
Contents
Financial Highlights
Company Profile
Chairman's Statement
Financial Review
Operational Review
People
Prospects
Directors’ Report
Report of the Remuneration Committee
Corporate Governance
Independent Auditors Report
Consolidated Income Statement
Consolidated Statement of
Comprehensive Income
Balance Sheets
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement
Notes to the Consolidated Financial Statements
Five Year Record
Notice of Annual General Meeting
Page
1
3
4
6
8
12
13
14
24
32
34
36
37
38
40
41
43
77
78
Front: Sanderson 'Dandelion Clocks'
Inside Cover: Art de Cuisine 'Tilt Bowls'
Financial Highlights
Results
Revenue – continuing operations
Operating profit – continuing operations
Share of results of associate company
Net finance (cost)/income
Profit before income tax
Dividends paid
Key Ratios
Operating margin
Basic earnings per share
Adjusted basic earnings per share
Diluted earnings per share
Adjusted diluted earnings per share
Dividends paid per share
The adjusted EPS excludes exceptional items (see note 11). Exceptional items related to deferred taxation in 2008.
2009
£’000
2008
£’000
41,705
41,969
2,288
(18)
(201)
2,804
(71)
629
2,069
3,362
1,526
1,531
5.5%
14.3p
14.3p
14.2p
14.2p
14.0p
6.7%
13.8p
22.2p
13.7p
22.1p
14.0p
page
1
5 Year Performance
05
06
07
08
09
05
06
07
08
09
05
06
07
08
09
44.8
45.9
46.9
42.0
41.7
Revenue (£m)
0
10
20
30
40
50
2,561
3,082
4,044
3,362
2,069
0
1,000
2,000
3,000
4,000
5,000
Profit before profit on disposal of property,
plant and equipment, exceptional items,
recognition of deferred tax asset and
deferred tax (£000)
17.6
20.5
22.2
14.3
26.5
Adjusted basic
earnings per share (p)
0
5
10
15
20
25
30
page
2
Company Profile
Churchill China plc
Directors, secretary and advisers
EXECUTIVE DIRECTORS
INDEPENDENT AUDITORS
BANKERS
A D Roper
D J S Taylor
D M O’Connor
I T Hicks
NON EXECUTIVE
DIRECTORS
J N E Sparey *•
R S Kettel *•
J W Morgan *•
PricewaterhouseCoopers LLP
Lloyds Banking Group plc
Cornwall Court
41 Market Street
19 Cornwall Street
Longton
Birmingham
B3 2DT
Stoke-on-Trent
Staffordshire
ST3 1BN
SOLICITORS
REGISTRARS
Addleshaw Goddard
Equiniti
100 Barbirolli Square
Manchester
M2 3AB
COMPANY SECRETARY
AND REGISTERED
OFFICE
STOCKBROKERS
AND ADVISERS
D J S Taylor ACA
Brewin Dolphin Securities
Marlborough Pottery
34 Lisbon Street
Leeds
LS1 4LX
High Street
Tunstall
Stoke-on-Trent
Staffordshire
ST6 5NZ
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6ZX
* Member of audit committee
• Member of remuneration committee
Registered no: 2709505
page
3
Chairman's Statement
Introduction
“A solid performance... achieving key objectives”
I am pleased to report a solid performance for Churchill China
and very challenging operating conditions. In the circumstances,
in 2009, achieving the key objectives we set out at the beginning
we demonstrated the resilience of the Churchill business. Our
of the year. These included a sustained level of investment,
Group revenues were fl at against last year but pre-tax profi t of
reduction in stock levels, tight working capital management
£2.1m was lower largely due to the impact of reduced interest
and preservation of a strong balance sheet with good cash
received on our circa £7m cash balance. The second half showed
position. 2009 was an unpredictable year characterised by
a pronounced improvement in operating profi tability and this
global recession, uneven demand, a weakening UK currency
positive trend is continuing.
D i s n ey – Fr i e n d Fo reve r B re a k fa s t S e t
"A sustained level of
investment"
page
4
Art de Cuisine – Menu Bitesize
Right: Jamie Oliver 'Fluted Blue'
© Dan Jones 2010
page
5
Financial Review
“We have continued to target long term shareholder
return and are pleased that we have delivered a
compound return to shareholders in excess of 11%
per annum over the last five years.”
page
6
Above: Churchill Super Vitrified 'Profile'
Group revenues fell by 0.6% to £41.7m (2008: £42.0m) reflecting
£4.6m) as we completed our major new warehouse project and
lower demand in many of our export markets largely offset by
continued to invest selectively in our UK manufacturing base to
good sales levels in the UK in both hospitality and retail markets.
improve efficiency.
Group operating profit was £2.3m (2008: £2.8m) and our pre-tax
Pension Fund
profit was 39% lower at £2.1m (2008: £3.4m).
In common with most other UK companies the deficit on the
Overall margins were lower than the corresponding period in
Churchill China final salary scheme has widened from £2.1m
2008, reflecting a strategic decision to adjust output to reduce
to £7.7m attributable to an unusual combination of factors:
inventory levels in a period of lower demand. We recognised that
depressed economic conditions, the impact of quantitative easing
this would lead to a less than optimal manufacturing position in
on discount rates and increasing inflation expectations. Churchill
2009 but will give us increased operational flexibility in 2010.
increased its annual cash payments to £0.5m from £0.2m and
Last year our results benefited from £0.6m of net interest
should this be required. We view the 2009 outcome as anomalous
receipts. In 2009 this figure fell substantially to a net cost of
and expect the deficit to reduce during 2010 but the position will
can make further payments given our balance sheet strength
£0.2m, an adverse effect on profit before tax of £0.8m. Cash
be reviewed further later this year.
interest receipts were reduced at £0.1m (2008: £0.4m) as rates
remained low. Additionally, a significant notional charge of £0.3m
Dividend and Shareholder Return
(2008: credit £0.2m) arose from our pension fund as higher
discount rates in 2008 reversed. We currently expect this latter
We again delivered a respectable performance in a demanding
effect to be mitigated in 2010.
year and the Board decided to accelerate payment of the final
Adjusted earnings per share decreased by 36% to 14.3p (2008:
preserve net value to shareholders. The Directors recommend
22.2p) whilst basic earnings per share, including exceptional
no further dividend in respect of 2009 leaving the total paid for the
items, were 14.3p (2008: 13.8p).
year unchanged at 14.0p per share.
dividend of 9.2p per share (2008: 9.2p) from May to March to
We continued to show good cash generation from operations,
Churchill’s share price increased by 47% during 2009 which,
especially in the second half. Cash balances remain strong at
coupled with our maintained dividend, delivered strong returns to
£6.9m (2008: £7.7m) reflecting excellent management of working
shareholders. We have continued to target long term shareholder
capital, particularly inventories which were reduced from £8.5m
return and are pleased that we have delivered a compound return
in 2008 to £7.1m. We incurred capital expenditure of £2.4m (2008:
to shareholders in excess of 11% per annum over the last 5 years.
Disney – Hundred Acre Wood
Jamie Oliver – Cheeky Mugs
Cath Kidston – Gingham Gift Set
page
7
Operational Review
Hospitality
After a mixed performance in the first half of 2009, our hospitality
quality and coverage of our export sales staff and anticipate
business made a good recovery in the second half with sales up
some recovery in 2010.
6% on the second half of last year, leaving overall sales for the
full year down 2% at £24.6m (2008: £25.0m).
Demand strengthened noticeably in the last quarter of 2009 and
this has continued. We have focused on key distributor and end
Despite relatively weak demand from consumers eating out,
user relationships and this effort will be sustained in 2010.
our UK hospitality revenues were up slightly, as we worked hard
to gain market share and maintained our position as the clear
The net contribution to Group was down £0.4m at £3.3m as
market leader in the UK. The British consumer has become
margins were affected adversely by lower production efficiencies
more selective and price conscious when dining out and this has
arising from reduced volumes. Our hospitality product ranges
been reflected in substantial variations in activity in restaurants
deliver superior performance and Churchill is determined to
and pubs. There is firm evidence of promotional activity and it is
build upon its reputation for innovative new product development
pleasing to note that after a period of destocking there is now
and the ability to invest in fresh concepts whilst enjoying high
clear willingness by our end customers, both independents and
levels of recurring replacement revenues from regular hospitality
chains, to refurbish premises, refresh menus and create new
customers. The bulk of our sales are generated from Churchill
themes to attract consumers.
Supervit and Alchemy Fine China; the key features and benefits
of these UK manufactured ranges being unrivalled product
Export sales at £8.2m (2008: £8.7m) reflected a weaker
performance and service. We have introduced new stoneware
performance from Europe in general and Spain and Eire in
and porcelain ranges to enable our sales team to meet end user
particular, where we experienced difficult trading conditions.
demand for a different look or performance criteria. We are also
This was offset to some extent by a resilient North American
delighted to be working with Riedel on the distribution of their
performance and good activity levels in smaller export markets,
fine glassware to the upper end of the hotel and restaurant sector.
notably Russia and the Middle East. We have increased the
page
8
Churchill Super Vitrifi ed – Lotus
Alchemy – Ambience
Art de Cuisine – Menu Square
Right: Churchill Super Vitrified 'Bowl Collection'
“Our hospitality product ranges deliver superior
performance and Churchill is determined to build
upon its reputation for innovative new product
development.”
page
9
“We increased sales in both department stores and independent
retailers by almost 50% in 2009 through the provision of an
impressive array of branded and licensed new products.”
page
10
Above: Cath Kidston Mugs
Alex Clark - Alphabet
Ella Doran - Sweetie Love
Sanderson - Sweet Bay
Retail
Manufacturing, Sourcing
and Logistics
Sales to our retail customers were marginally higher at £17.1m
With the prevailing economic climate it was important to continue
(2008: £17.0m). This performance reflected good progress in our
to implement cost reduction and manufacturing initiatives but it
strategy to build sales in middle market accounts whilst managing
was challenging to optimise production levels. For the majority
the transition from volume channel business. We increased
of 2009, our UK factory was operating at well below optimum
sales in both department stores and independent retailers by
capacity and the manufacturing team were working under
almost 50% in 2009 through the provision of an impressive array
strict guidelines to ensure that working capital requirements
of branded and licensed new products. The Jamie Oliver, Cath
and inventory levels were not exceeded. These objectives were
Kidston, Disney, Alex Clark, Sanderson, Ella Doran and other
successfully realised.
licences are key to our success in both the middle market and
high volume sectors. We continue to invest in the development
Our new £4m distribution centre became fully operational in June
of our business to optimise our performance over the long term.
2009, ensuring all our UK operations are now consolidated on our
Sales to our promotional customers slowed in the second half
freehold site in Stoke-on-Trent, eliminating the requirement for
after a strong first half performance.
inter-site transport and extra warehousing which had incurred
The UK, North America and Australasia all performed well
costs in 2008.
but export sales to Europe were disappointing, reflecting weak
We remain committed to maintaining and improving our UK
consumer demand.
technical ceramic expertise whilst driving down costs. The next
stage of this plan is a significant investment in a new energy
The net contribution to Group was stable at £1.7m (2008: £1.7m)
efficient ‘once fire’ kiln with robotic product handling devices.
as margins were supported by growth in middle market business
The installation of this equipment will be completed in the middle
despite price pressure in volume channels. We continue to
of 2010. For our sourcing operations, we continue to support
invest in support of profitable opportunities across the market
our manufacturing partners (mainly in Asia) with direct support
and expect further progress in the distribution of our licensed
on ceramic quality, ethical standards, delivery and packaging
product ranges to the independent sector although this will be
matters from both from the UK and our Shanghai office.
offset by competitive pricing pressure in the volume sector.
page
11
People
I have commented before that Churchill is very fortunate to have
Rodney Kettel retires this year after eleven years as a non-
a dedicated workforce and a strong skill base. I believe that there
executive Director and before that for several years as Churchill’s
is an excellent team spirit and a tangible will to “get things done”
appointed auditor. Rodney’s contribution has been invaluable on
at Churchill. We are fortunate to not only have the capacity to
many dimensions and we wish him well for the future.
retain our existing skills and talent, but also the ability to attract
well-qualified graduates and more experienced senior staff to
the business and this team is key to our continuing success.
"A dedicated workforce
and a strong skill base"
page
12
Above: Churchill Super Vitrified X Squared
Above Right: Art de Cuisine Professional Bone China
Prospects
We have started the new year relatively well and have reason
Overall, Churchill is well positioned to respond to changes
to expect an improvement in our overall performance in 2010,
in the marketplace, however, the strength of our recovery will
particularly given recent evidence of enhanced demand in our
be influenced by continued economic improvement. We have
Hospitality business. Demand for our Hospitality products has
maintained our investment in the business in both revenue and
been firm and we are confident that our strategy of targeted new
capital terms for the long term benefit of shareholders and have
product development will deliver sales growth.
demonstrated the strength of the Churchill business through a
difficult period. We are confident in our ability to deliver future
In our Retail business, volume channel sales are well behind
growth.
the corresponding period in 2009 but we expect our increased
sales to independents and department stores will more than
Jonathan Sparey
compensate with improved returns over the year as a whole.
Chairman
24 March 2010
Alchemy – Energy Buffet
Jamie Oliver – Keeping it Simple
Churchill Super Vitrifi ed – Zen
"Churchill is well positioned"
page
13
Directors’ Report
for the year ended 31 December 2009
The Directors present their annual report and the audited consolidated financial statements of the Group for the year ended
31 December 2009.
Principal activities, operating and financial review
The Company is a public limited company listed on the Alternative Investment Market (AIM) and is incorporated and domiciled in the UK.
The registered office is disclosed at the front of these accounts and the Company number is 2709505.
The consolidated income statement for the year is set out on page 36.
The principal activity of the Group is the manufacture and sale of ceramic and related products for hospitality and household markets
around the world.
A review of the operations of the Group during the year and its future prospects are given in the Chairman’s Statement on page 4 and
Business Review section of this report on page 15.
Dividends
The Directors have paid the following dividends in respect of the years ended 31 December 2009 and 31 December 2008:
Ordinary dividend:
Final dividend 2008 9.2p (2007: 9.2p) per 10p ordinary share
Interim dividend 2009 4.8p (2008: 4.8p) per 10p ordinary share
2009
£’000
1,003
523
1,526
2008
£’000
1,007
524
1,531
The following dividend was declared in respect of 2009 and paid on 12 March 2010:
Ordinary dividend:
Second interim dividend 2009 9.2p (2008: £nil)
1,004
–
The Directors now recommend payment of the following dividend:
Ordinary dividend:
Final dividend 2009 nil (2008: 9.2p) per 10p ordinary share
Dividends on treasury shares held by the Company are waived.
–
1,003
Directors
The Directors of the Company who have served during the year and up to the date of signing of the financial statements are as follows:
J N E Sparey *
A D Roper
D J S Taylor
D M O’Connor
R S Kettel *
I T Hicks
J W Morgan*
* Non executive
page
14
The Directors retiring by rotation are D M O’Connor and I T Hicks who, being eligible, offer themselves for re-election. The unexpired
terms of the service contracts of D M O’Connor and I T Hicks are 12 months.
The biographical details of the Directors are as follows:
Jonathan Sparey, non executive Chairman, aged 52, is a senior partner in L.E.K. Consulting LLP, a leading international corporate
strategy firm. He was previously a Director of the merchant bank Samuel Montagu and Co. He joined the Board in 2000.
Andrew Roper, Chief Executive Officer, aged 61, has worked for the Company since 1973. He has responsibility for the development of
Group strategy and for operational performance and development. He was appointed to his present role in 2007 following on from his
role as Group Managing Director since 1998.
David Taylor, Finance Director and Company Secretary, Managing Director: Retail products, aged 50, has worked for the Group for 18
years. Following qualification as a Chartered Accountant with KPMG, he worked in a number of finance roles before joining Churchill in
1992. He was appointed to the Board in 1993.
Rodney Kettel, non executive Director, aged 66, was formerly a partner in PricewaterhouseCoopers, Chartered Accountants, Birmingham,
and has extensive experience in advising listed companies. He joined the Board in 1999.
David O’Connor, Managing Director: Hospitality products, aged 53, has worked for Churchill for 19 years in a number of production,
operations and marketing roles. He has extensive experience within the Ceramics industry and joined the Board in 1999.
Iain Hicks, Operations Director, aged 40, has worked for the Group in a variety of roles since joining Churchill in 1992. He has led the
development of the Group’s sourcing operation since it was established in 1999 and was appointed to the Board in 2006.
Jonathan Morgan, non executive Director, aged 52, is a Director of SVG Investment Managers Limited and has many years of experience
in investment management within growth small and medium sized companies. He was previously Managing Director of Prudential plc’s
Private Equity business in Europe and Asia Pacific. He joined the Board in 2007.
Business review
Business environment
We operate in many different geographic markets serving hospitality and retail customers with a range of tabletop products. Whilst our
principal exposure is to the UK market, where we generate over 65% of our gross revenue, we also enjoy significant sales to Europe and
North America which respectively account for 17% and 9% of our turnover. Almost without exception all of these markets are subject to
a high level of competitive pressure and our costs of operation require constant review and control.
There is a significant amount of competitive pressure within our markets. In our retail markets customers are able to choose from
a wide variety of alternative suppliers based both in the UK and overseas. There are relatively low costs of switching between certain
markets, particularly in volume distribution channels. In hospitality markets there are higher barriers to entry given the nature and
structure of the market which places a premium on service, quality and technical performance.
Whilst total market size information is not easily available for our markets, we believe that there has generally been a reduction in the
overall size of our markets during the year. Adverse macro-economic conditions and general uncertainty have affected most of the
world’s developed economies. Growth rates have generally been negative and have been especially so in Southern European markets
where the Group derives a proportion of its total revenues. This limitation of demand appears to have relaxed somewhat towards the
end of 2009 in certain markets, but it is too early to assess whether this represents the start of a longer term recovery or a short term
benefit. Our forward planning process assumes that there will be no major return to growth in 2010 and we continue to manage our
business accordingly.
page
15
Directors’ Report
(continued)
The cost of imported product has remained generally stable although there has been some rise due to higher freight rates. Our UK
manufacturing operations remain subject to tight cost control to mitigate higher unit fixed costs on lower production levels. Labour
costs have risen during the year, but are expected to remain stable during 2010. Energy costs are generally at lower levels than at the
corresponding point last year.
We believe that to succeed as a business we must remain agile and anticipate and respond to these changes. Our business model
cannot remain static and we must constantly review our business and amend our operations where necessary.
Strategy
The Group’s strategy remains to generate improved shareholder returns through the provision of value to customers through excellence
in design, quality and service. We aim to increase long term Group profitability principally through steady increments to sales and
margins, but also in active control of our cost base. It is no longer sufficient simply to provide a value based offering, we must meet our
customers’ expectations in key areas in order to remain their preferred supplier.
Design
It is a key strategic aim to design products that meet our end users’ requirements both in terms of performance, shape and surface
design. Our target markets require product that is aesthetically appealing whilst also being functional and robust.
We offer a broad range of product satisfying a range of design styles, product types and price points. Product lifecycles in certain parts of
our business are shortening with the consequent requirement to reduce design and development lead times and increase flexibility. All
our product, whether made in our own factories or sourced from third party manufacturers, is researched and designed within Churchill
or in conjunction with experienced external designers and licensors. The ability to develop new products and ranges and to bring these
to market is an important part of our success.
We have invested significant resource in new staff and flexible technology to increase our capability in this area.
We review our performance in relation to the new product development process and in the performance of new products and ranges
after launch. We also try to ensure that we have a balanced design team that are given sufficient freedom to anticipate market trends
and requirements and to allow them to innovate successful new products.
Quality
Historically, as a manufacturer, we measured our quality in relation to the effectiveness of our factories. However, we understand that
quality must exist throughout our business process. Quality is reflected not only in the appearance of our product but in its design, its
performance in operation and in the systems which support the fulfilment of our contract with our customers.
In addition to the introduction of quality systems within manufacturing and operations, we have had to develop new working methods
with third party suppliers to ensure that the product that our customer receives is as they expect. This includes the identification and
review of potential suppliers, the periodic audit of established partners and the clarification of exact product specifications.
We also measure quality through the review of customer feedback and active involvement with our customers after we have sold product
to them.
Customer Service
Customer service remains a key element of our strategy. The fulfilment of customer expectations is critical to the maintenance of good
relationships. Most of our customers are repeat customers and as such we must ensure that they return to Churchill.
page
16
Customer Service (continued)
We have steadily developed our IT systems to forecast likely demand for products and to manage our stock holding to ensure that we meet
ambitious on time, in full, delivery targets. In addition, we have organised our production facilities to balance efficient production with
flexible manufacture to ensure that we can respond quickly to unexpected demand levels. We aim to invest regularly in new production
technology in order to meet changing demand levels and to develop our IT systems in this area. We continue to invest in customer service.
We assess our performance in this area principally by measurement of the degree to which we meet agreed order delivery schedules on
time and in full. These targets are monitored on a regular basis, along with customer feedback.
Future outlook
The Board believes that long term demand for hospitality products in developed markets will continue to increase as leisure related
spending recovers and grows. There has been a long term expansion in eating out in the UK and the Group intends to continue to expand
its leading UK position whilst investing in the development of export markets.
In the UK we believe that we will continue to reinforce our market leadership based on our programme of introducing new products
specifically targeted at meeting customer requirements. The opportunities overseas may be divided into markets where hospitality is well
established, but the Group has not yet achieved a reasonable market share and developmental markets where demand for hospitality
products is likely to grow as local or regional economies develop. It is therefore believed that there will be significant opportunities for
further and sustained growth in the medium and long term.
Retail markets have been generally difficult for several years driven by changes in the structure of distribution channels within
the marketplace and intense competitive pressure largely caused by overcapacity in the worldwide ceramics market. The Group’s
established strategy of developing sales to middle market distribution channels alongside sales to our volume channel customers will
be extended both in the UK and overseas. We plan to invest further in sales and market development. The Board also believes that the
plans enacted within the Retail division have placed Churchill in a position to benefit from these competitive pressures relative to other
suppliers to the market.
In the short term, economic uncertainty may affect the rate of growth of our core markets and this will be reflected in our approach to
these markets.
Principal risks and uncertainties
The Group’s operations are subject to a number of risks. The key business risks affecting the Group are set out below:
Market change
The Group operates in dynamic markets where there have been significant recent changes to economic conditions, the major distribution
channels within each market and the relative competitive position of suppliers to these markets. It is therefore important that the Group
continues to review the markets in which it currently operates and wishes to develop to ensure that it continues to meet customer needs
in an efficient and profitable manner.
The risk inherent in each market is offset by the relatively broad spread of our operations in geographic terms and by a widening
portfolio of products to serve different segments of these markets. We are also actively developing new geographic markets.
Currency exposure
The Group’s position as a worldwide provider of ceramic and related products means that our profitability will be subject to currency
fluctuations related to export sales. Our policy is generally to offer our customers the option to be invoiced in their local currency. Our
non sterling receipts are principally denominated in US dollars and euros. Against US dollar receipts we have a natural offset due to
our overseas sourcing operations where the cost of purchase from our third party suppliers is generally denominated in US dollars.
page
17
Directors’ Report
(continued)
Currency exposure (continued)
We review and control our transactional foreign currency exposure regularly and take appropriate action to manage net exposures using
simple option forward contracts. We do not as a matter of policy take longer term positions to cover economic foreign currency exposure
in this area, but review currency rate changes as part of our pricing policy.
Cost competitiveness
Our markets have been subject to significant cost movements in recent years. We have responded by augmenting our UK production
facilities with a wide range of third party suppliers who generally operate in lower cost environments. The spread of these suppliers
gives us the ability to switch elements of production to obtain the best balance of quality and price.
As a major user of energy within our production process we have an exposure to changes in availability and price of gas and electricity.
We have sought to control this risk through management of our overall energy consumption and through contractual arrangements to
ensure that we maintain adequate supplies of power at a cost which enables us to operate.
Customer and supplier creditworthiness
Whilst the Group maintains a strong balance sheet and credit position it operates in a market where both customers and suppliers
are exposed to credit and liquidity related problems. The Group manages this risk by trading, where possible, on secured terms and by
regularly reviewing the financial position of key business partners.
Product compliance
We are exposed to risk in relation to our products meeting accepted safety standards within the markets we serve. Each major geographic
market applies different standards and legal penalties may be considerable for non compliance.
We manage these risks principally through the monitoring of applicable standards, the testing of our product to ensure it meets these
standards and sale in accordance with local regulations. We also, where practical, maintain appropriate external insurance.
Key performance indicators
Sales and sales growth
The absolute levels of sales and sales growth are reviewed regularly through the year against previous year and target levels.
Sales 2009: £41.7m (2008: £42.0m).
Sales growth 2009: -1% (2008: -11%).
Overall sales levels have decreased marginally as a result of less favourable general economic conditions. Despite uncertain economic
conditions, our UK revenue grew by 3% over the year, reflecting our strong market position. Sales were significantly reduced in Europe,
particularly in Southern Europe.
Customer service and inventory
Customer service and inventory holding levels are reviewed on a regular basis as part of the operational management of the Group’s
business. The main aim of this measure is to ensure that the Group’s strong reputation for on time order fulfilment is maintained,
consistent with the efficient operation of production and sourcing activities and the optimisation of working capital.
Inventory 2009: £7.1m (2008: £8.5m).
page
18
Customer service and inventory (continued)
One of our key targets for 2009 was to reduce inventory holding level both to optimise cash and also to preserve operational flexibility
given an uncertain economic outlook. We have achieved our targets and inventory levels are at acceptable levels.
Operating profit and profit before taxation
The level of operating profit and significant factors affecting its delivery are reviewed and controlled on a regular basis.
Operating profit 2009: £2.3m (2008: £2.8m).
Operating profit before tax fell principally due to lower efficiencies within our manufacturing operations as we reduced output levels
to control inventory. Savings within our cost base offset some of the impact of these reduced efficiencies. Operating margins were
maintained at acceptable levels (5.5% (2008: 6.7%)).
The level of profit before tax is reviewed on a monthly basis against previous performance and target levels.
Profit before taxation 2009: £2.1m (2008: £3.4m).
The fall in profit before tax in 2009 arose as a result of two main reasons: due to reduced operating profits as discussed above and,
more significantly, due to lower interest receipts. Cash interest receipts fell £0.3m as average interest rates declined sharply. Notional
pension interest costs associated with our final salary pension fund rose considerably as discount and inflation rate assumptions
moved adversely. The credit of £0.2m enjoyed in 2008 reversed to a charge of £0.3m in 2009. Interest on pension scheme liabilities is a
non cash item.
Operating cash generation
The Group believes that over an extended time period it is important to generate cash at an operating level equivalent to declared
operating profit. This measure identifies the effectiveness of our control over working capital demands and ensures that cash is available
for further investment in the business, to meet taxation payments and to ensure that our shareholders receive an appropriate return.
Operating profit 2009: £2.3m (2008: £2.8m).
Operating cash generation 2009: £3.3m (2008: £2.5m).
Percentage of operating cash generation to operating profit 151% (2008: 89%).
Three year average percentage of operating cash generation for the last 3 years to operating profit 147% (2008: 165%).
Operating cash generation was above operating profit largely due to reduced inventory holding levels. This decrease reflects a targeted
plan to reduce inventory holding levels.
Employees
The Group recognises that well-trained, motivated and committed employees are critical to the current and future success of our
business. We aim to involve our workforce, through employee communication, team briefs and various internal forums to encourage
our employees to engage with the Company’s strategy and goals. We have worked hard to develop and foster an open and constructive
relationship with our employees and their trade union representation and meet with them regularly to discuss developments within the
business.
page
19
Directors’ Report
(continued)
Employees (continued)
Training and development at all levels within the business is actively promoted, from essential skills to professional qualifications. We
have worked extensively with our local further education college through Train to Gain with over 90% of our weekly paid employees
working to at least one vocational qualification. Our programme to offer essential skills within the working day has been of substantial
benefit to a number of the employees who took advantage of this opportunity. Our engineering and supervisory multi-skilling programmes
are core to us meeting future manufacturing challenges. In difficult economic times our focus on training demonstrates our long term
commitment to our workforce and this has helped overall morale and motivation.
Since 2002 we have run a graduate recruitment programme in the business; currently we have over 50 graduates who have been or who
are currently on the programme, representing 25% of our staff employees. From these graduates the core of our future management
team will develop.
We remain committed to Total Quality Management using Business Improvement Techniques to engage employees in the development
of new methods to improve quality, processes and performance.
The Company is fully committed to its equal opportunities employment policy offering equality in recruitment, training, career
development and promotion of all employees irrespective of gender, ethnic origin, age, nationality, marital status, religion, sexual
orientation or disability. If an employee were to become disabled during their employment every effort would be made to retain them
within the business and offer appropriate retraining.
Health and safety
The health and safety of our employees is central to our operations and we invest significant effort and resource to target continuous
improvement. Health and safety is a Board responsibility and receives constant management focus; the Board has access to
appropriately trained and skilled assistance to meet its obligations. Our approach to health and safety is embedded in our day-to-day
working practices. Our health and safety policy is documented and published and we aim to identify and to reduce health and safety risks
associated with our operations to the lowest practical levels.
We work to continually improve Health and Safety providing a safe and healthy working environment for all our employees and visitors.
NEBOSH, NVQs and internal training programmes are regularly offered to update safety skills.
Environment, social and community
The Group considers and manages the impact of its actions on the environment and wider social and community issues. We are anxious
that we take into account our economic, social and environmental impact locally, nationally and internationally.
The principal impact of the Group’s operations on the environment is in relation to the energy it consumes and the waste products
produced as part of its operations. Whilst the Company manufactures a product which may be reused many hundreds of times, a
significant amount of energy is consumed in its production. As a result of this we have invested over several years to reduce our
energy consumption and have replaced older systems and machinery with more modern energy efficient plant and procedures. We have
obtained accreditation under ISO 14001, the international standard for environmental efficient operations.
We run ongoing programmes to minimise energy usage and waste. We have instituted a programme to work with our customers both in
terms of the development of products that lower their energy consumption and also to reduce the amount of packaging associated with
our products.
We understand that we have an impact on our local community and consider the effect of our actions on our local area. Where possible
we work to reduce any adverse effects of our operations, consistent with the needs of other stakeholders within our business.
page
20
Research and development
The introduction of new and innovative products and designs remains a cornerstone of our future strategy. The Group’s aim is to
continue to identify future market trends and then to design and develop products that meet these needs. A significant effort is made
to develop our process technology to allow the introduction of more complex product designs. New product development is controlled
through regular meetings and the success of new launches is reviewed in the short term against individual targets and over the longer
term as a function of our strategy.
We have sought to develop our technical advantage and the Group is accredited by the United Kingdom Accreditation Service as an
approved testing laboratory under ISO 17025. This will enable us both to optimise our own trading position and to offer services to other
manufacturers.
Overseas branches
The Group’s principal operations are located within the United Kingdom; however, Churchill China plc also operates from a US-based
sales subsidiary and has a sourcing and support operation in China.
Insurance of Directors
The Group maintains insurance for the Directors in respect of their duties as Directors.
Financing
The Group currently has in place short term variable rate financing arrangements to provide finance for working capital requirements
should they be required.
Financial instruments
The Group uses its own cash resources and forward exchange contracts and foreign currency bank accounts to manage its exposure to
exchange rate risk caused by trading activities in currencies other than sterling.
The risk management policy adopted is to regularly review forward foreign currency cash flows, identifying the currency effect of
completed sale and purchase transactions, transactions which have been contracted for but not completed and an assessment of
expected likely forward cash flows. The net currency exposure arising from this review is then managed using forward option contracts.
Net currency exposures are generally covered between 3 and 6 months forward at any point in time. The Group does not trade in
financial instruments.
The Group has no material interest rate risk, the only interest rate exposure is in relation to returns on short term cash deposits and
borrowings.
Note 2 to the accounts includes financial risk considerations.
Land and buildings
The current value of land and buildings is in the opinion of the Directors in excess of the value included in these accounts. This has not
been quantified because independent valuations have not been undertaken.
page
21
Directors’ Report
(continued)
Substantial shareholdings
The Directors have been advised of the following individual interests, or group of interests, other than those dealt with in the summary
of Directors’ interests in the Report of the Remuneration Committee, held by persons acting together, which at 16 March 2010 exceeded
3% of the Company’s issued share capital:
Shareholder
New Landfinance Limited
S Baker
J A Roper
E S & S J Roper
M J & G Roper
Rensburg Sheppards Investment Management
Henderson Global Investors
Number of
ordinary shares
Percentage
1,730,000
1,000,000
1,000,000
897,265
681,880
632,935
440,000
15.8%
9.1%
9.1%
8.2%
6.2%
5.8%
4.0%
Share repurchase
During the year the Company repurchased nil (2008: 58,400) 10p ordinary shares at a total cost of £nil (2008: £160,000) in order to
improve overall shareholder return. 10,000 (2008: 13,000) shares were reissued in respect of employee share option schemes for a total
consideration of £21,000 (2008: £22,000). The maximum number of shares held by the Company during the year was 45,400 10p ordinary
shares. The Company retains a power, subject to the fulfilment of certain conditions and as approved at the 2009 Annual General
Meeting, for the further purchase of its own shares.
Suppliers
The Group agrees terms and conditions covering its business with its suppliers at the time of each transaction or in advance. In
normal circumstances payment is generally made in accordance with these terms, subject to suppliers meeting the agreed terms and
conditions.
The Group’s average creditor payment period at 31 December 2009 was 38 days (2008: 40 days). The Company has no trade creditors.
Political and charitable contributions
Contributions made by the Group during the year for political and charitable purposes were £nil (2008: £nil) and £4,000 (2008: £5,000)
respectively. In addition to the above, the Group regularly donates quantities of product to charitable causes. The estimated value of
these donations in 2009 was £9,000 (2008: £9,000). The Group’s policy in respect of charitable donations is to support local charities and
institutions, particularly in relation to education and sport.
page
22
Statement of Directors’ responsibilities in respect of the Annual Report and the
financial statements
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected
to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the
European Union, and the parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the
profit or loss of the Company and Group for that period. In preparing these financial statements, the Directors are required to:
l select suitable accounting policies and then apply them consistently;
l make judgements and accounting estimates that are reasonable and prudent;
l state whether IFRSs as adopted by the European Union and applicable UK Accounting Standards have been followed, subject to any
material departures disclosed and explained in the Group and parent Company financial statements respectively;
l prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in
business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions
and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial
statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group
and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Disclosure of information to auditors
In the case of each of the persons who are Directors at the date of this report, as far as each Director is aware, there is no relevant audit
information of which the Company’s auditors are unaware. Relevant information is defined as ‘information needed by the Company’s
auditors in connection with preparing their report’. Each Director has taken all the steps that he ought to have taken in his duty as a
Director in order to make himself aware of any relevant audit information and to establish that the Company’s auditors are aware of
that information.
Independent Auditors
The auditors, PricewaterhouseCoopers LLP, have indicated their willingness to continue in office and a resolution that they be
reappointed will be proposed at the Annual General Meeting.
By order of the Board
D J S Taylor
Company Secretary
24 March 2010
page
23
Report of the Remuneration Committee
for the year ended 31 December 2009
Remuneration policy
This section of the Report of the Remuneration Committee is not audited.
The terms of Reference for the Remuneration Committee are listed below:
l To determine, on behalf of the Board and the shareholders, the Company’s broad policy for executive reward and the entire individual
remuneration including terms of service for each of the executive Directors (and as appropriate other nominated Senior Executives).
In doing so, to give the executive Directors appropriate encouragement to enhance Company performance and ensure that they are
fairly but reasonably rewarded for their individual responsibilities, abilities and contribution.
l To report and account directly to the shareholders, on behalf of the Board, for their decisions.
l
The Remuneration Committee issued a policy statement which is endorsed by the Board. In determining its policy the Committee has
given full consideration to Section B of the best practices provisions annexed to the Listing Rules of the London Stock Exchange. The
two elements of this statement are:
l Total rewards to executive Directors are intended to provide a comprehensive benefit package which both attracts and motivates
individuals of calibre and experience to achieve continuous improvement in shareholder benefits (whilst at all times maintaining the
highest levels of integrity). Reflecting individual responsibilities, abilities, expertise and preferences, a balance is sought between
guaranteed income through salary and pension with incentives aligned to measurable criteria to cover both short and longer term
periods.
l Total rewards will be set with acknowledgement of comparable rewards in industry-related public companies and those of similar
scale and also with sensitivity to subordinate staff within the Company with whom the packages will as far as possible be consistent
and fair.
The Remuneration Committee has the power to consider the Group’s performance on environmental, social and governance issues
when setting the remuneration of executive Directors.
The Remuneration Committee is composed of J W Morgan, who acts as Chairman, J N E Sparey and R S Kettel, all of whom are non
executive Directors.
During the year the following provided advice which materially assisted the Remuneration Committee: A D Roper (Chief Executive
Officer) and A M Basnett (HR Director, Churchill China (UK) Limited).
page
24
Directors’ emoluments
This section of the Report of the Remuneration Committee is audited. Emoluments of the Directors were as follows:
Performance
bonuses
£
Salary
£
Compensation
Aggregate
for loss
of office emoluments
£
£
Benefits
in kind
£
Aggregate
emoluments
including
pensions
£
Pensions
(see below)
£
2009
Executive
A D Roper
D J S Taylor
D M O’Connor
I T Hicks
Non executive
J N E Sparey
R S Kettel
J W Morgan
2008
Executive
A D Roper
D J S Taylor
D M O’Connor
R N Grundy
I T Hicks
Non executive
J N E Sparey
R S Kettel
J W Morgan
199,667
164,000
169,000
118,000
58,000
36,000
36,000
20,000
20,000
20,000
10,000
–
–
–
993
15,318
14,121
8,258
–
–
–
780,667
70,000
38,690
–
–
–
–
–
–
–
–
220,660
199,318
203,121
136,258
58,000
36,000
36,000
–
11,480
11,830
8,260
–
–
220,660
210,798
214,951
144,518
58,000
36,000
36,000
889,357
31,570
920,927
232,833
161,334
161,334
52,000
116,667
57,000
35,332
35,334
13,500
10,000
10,000
–
8,000
–
–
–
940
14,099
17,634
6,592
9,682
–
–
–
–
–
–
120,000
–
–
–
–
247,273
185,433
188,968
178,592
134,349
57,000
35,332
35,334
–
11,293
11,293
3,640
8,167
–
–
–
247,273
196,726
200,261
182,232
142,516
57,000
35,332
35,334
851,834
41,500
48,947
120,000
1,062,281
34,393
1,096,674
There were no contracts of significance during or at the end of the financial year in which a Director of the Company was materially
interested.
Performance bonuses for executive Directors are earned on a basis combining increases in Group profitability and the achievement of
defined personal performance objectives.
Benefits in kind include the provision of car benefits, fuel benefits and medical insurance. No Director waived emoluments in respect of
the years ended 31 December 2009 and 2008.
Pension costs represent contributions as defined by the London Stock Exchange guidance and are contributions made by the Group to
defined contribution schemes. For additional information in respect of Directors’ pensions refer to the ‘Pensions’ section below.
R N Grundy’s remuneration in 2008 is to the date of his resignation (28 April 2008).
page
25
Report of the Remuneration Committee
(continued)
Share options
This section of the Report of the Remuneration Committee is audited. Details of share options granted under the Executive and
Unapproved Executive schemes are as follows:
Number
of options
Number
of options
Date of 31 December 31 December
2009
2008
grant
D J S Taylor
Unapproved Executive scheme
Executive scheme
Unapproved Executive scheme
Unapproved Executive scheme
Unapproved Executive scheme
D M O’Connor
Unapproved Executive scheme
Executive scheme
Unapproved Executive scheme
I T Hicks
Approved Executive scheme
Unapproved Executive scheme
13.04.00
05.12.00
05.12.00
19.04.02
30.04.04
19.04.02
30.04.04
30.04.04
30.04.04
30.04.04
7,500
2,000
20,500
15,000
10,000
55,000
10,000
4,000
6,000
20,000
6,000
4,000
7,500
2,000
20,500
15,000
10,000
55,000
10,000
4,000
6,000
20,000
6,000
4,000
10,000
10,000
Exercise
price
pence
Date
from which
exercisable
118.5
151
151
171
208
Apr 2003
Dec 2003
Dec 2003
Apr 2005
Apr 2007
Expiry
date
Apr 2010
Dec 2010
Dec 2010
Apr 2012
Apr 2014
171
208
208
Apr 2005
Apr 2007
Apr 2007
Apr 2012
Apr 2014
Apr 2014
208
208
Apr 2007
Apr 2007
Apr 2014
Apr 2014
No share options were granted to or exercised by Directors during the year.
Share options are granted to Directors in accordance with the terms of reference of the Remuneration Committee (see page 24) to
provide encouragement to enhance Group performance in the long term and having regard to each employee’s responsibilities, ability
and contribution. The grant of options is made at market value at the date of grant at no cost to the employee.
The above options are only exercisable subject to the satisfaction of performance criteria in relation to sustained improvement in
the financial performance of the Group. In the case of the above options the Remuneration Committee considers that a sustained
improvement in the financial performance of the Group represents an increase in the adjusted basic earnings per ordinary share of the
Group of at least 6% above the increase in the Retail Price Index over the 3 year period from the beginning of the financial year in which
the option was granted.
page
26
Phantom Share Scheme
This section of the Report of the Remuneration Committee is audited.
Details of share options granted under the Phantom Share Scheme are as follows:
Number of
Number of
phantom
phantom
shares
shares
Date of 31 December 31 December
2009
2008
grant
19.12.07
19.12.07
12.05.08
19.12.07
19.12.07
12.05.08
19.12.07
19.12.07
12.05.08
15,000
15,000
10,000
15,000
15,000
10,000
15,000
15,000
10,000
15,000
15,000
10,000
15,000
15,000
10,000
15,000
15,000
10,000
Base value
pence
Cap value
pence
300
300
284
300
300
284
300
300
284
550
700
684
550
700
684
550
700
684
Date
from which
exercisable
Dec 2010
Dec 2011
May 2012
Dec 2010
Dec 2011
May 2012
Dec 2010
Dec 2011
May 2012
Expiry
date
Dec 2012
Dec 2012
May 2013
Dec 2012
Dec 2012
May 2013
Dec 2012
Dec 2012
May 2013
D J S Taylor
D M O’Connor
I T Hicks
The above options are only exercisable subject to the satisfaction of performance criteria in relation to a sustained improvement in
the financial performance of the Group. In the case of the above options the Remuneration Committee consider that a sustained
improvement in the financial performance of the Group represents an increase in the adjusted basic earnings per ordinary share of the
Group of at least 2% per annum above the Retail Price Index over the period from the beginning of the financial year in which the option
was granted.
The market price of the Company’s shares at the end of the financial year was 275p (2008: 187.5p). The range of prices for the year to
31 December 2009 was 155p to 299.75p (2008: 307.5p to 180p) per ordinary share.
Gains made by Directors on share options
This section of the Report of the Remuneration Committee is audited.
No gains were made by Directors on the exercise of share options during the year or during 2008.
page
27
Report of the Remuneration Committee
(continued)
Pensions
This section of the Report of the Remuneration Committee is audited.
The method of provision of pension benefits to Directors changed during 2006. Up to 31 March 2006 benefits were provided through a
defined benefit scheme, the Churchill Group Retirement Benefit Scheme. On 31 March 2006 the accrual of future benefits under this
scheme ceased and future pension provision was made under a Group Personal Pension arrangement. The disclosures below reflect
this change.
Pension benefits earned by Directors under the defined benefit scheme were as follows:
A D Roper
D J S Taylor
D M O’Connor
I T Hicks
The disclosure above is in accordance with London Stock Exchange guidance.
Change in
benefit over
the year
(excl. inflation)
£
–
–
–
–
–
Accrued
benefit
£
106,908
27,689
27,198
16,457
178,252
Capital
value of
increase
£
–
–
–
–
–
Increase in
benefit over
Transfer
value at
Transfer
Change in
value at transfer value
the year 31 December 31 December less Directors’
2008 contributions
£
2009
£
(incl. inflation)
£
£
A D Roper
D J S Taylor
D M O’Connor
I T Hicks
–
–
–
–
–
1,776,247
394,136
302,042
116,154
1,516,024
276,678
210,443
69,906
260,223
117,458
91,599
46,248
2,588,579
2,073,051
515,528
The disclosure above is in accordance with the guidance in the Companies Act 2006.
The accrued benefit above is the amount of pension that would be paid each year on retirement based on service to 31 December 2009
or the date of retirement if earlier.
All transfer values have been calculated on the basis of actuarial advice in accordance with Actuarial Guidance Note GN11. The transfer
values of the accrued entitlement represent the value of assets that the pension scheme would need to transfer to another pension
provider on transferring the scheme’s liability in respect of the Directors’ pension benefits that they earned in respect of qualifying
services. They do not represent the sums payable to the individual Directors.
page
28
Pensions (continued)
The transfer value above discloses the current value of the increase in accrued benefits that the Director has earned in the period,
whereas the change in his transfer value discloses the absolute increase or decrease in his transfer value and includes the change in
value of accrued benefits that results from market volatility affecting the transfer value at the beginning of the period, as well as the
additional value earned in the year.
All scheme members have the opportunity to pay Additional Voluntary Contributions. Neither the contributions nor the resulting benefits
are included in the above table.
All executive Directors are deferred members of the Churchill Retirement Benefit Scheme. The pension benefit of A D Roper is funded
to allow retirement based on accrued service to 31 March 2006 on attaining the age of 60 years. A D Roper did not contribute to the
scheme. The pension benefit of D J S Taylor is funded to allow retirement between the ages of 60 and 65 with a pension based on accrued
service to 31 March 2006. The pension benefits of D M O’Connor and I T Hicks are funded to allow retirement at 65 with a pension based
on accrued service to 31 March 2006.
D J S Taylor, D M O’Connor and I T Hicks are members of the Churchill China 2006 Group Personal Pension Plan. Contributions paid by
the Group in respect of this scheme were at a rate of 7% of pensionable salary. Only basic salary is pensionable. Contributions made by
the Group were as follows:
D J S Taylor
D M O’Connor
R N Grundy (until resignation)
I T Hicks
2009
£
11,480
11,830
–
8,260
31,570
2008
£
11,293
11,293
3,640
8,167
34,393
Directors’ service contracts
This section of the Report of the Remuneration Committee is not audited.
Executive Directors are not appointed on contracts for a fixed duration. All executive Directors have contracts of service which can be
terminated with a notice period of 12 months from the Company or 6 months from the Director. A D Roper’s service contract was signed
on 10 September 2009, D J S Taylor’s on 6 October 2009, D M O’Connor’s on 21 March 2000 and I T Hicks’ on 14 September 2009.
Non executive Directors are appointed on fixed term contracts of 2 years duration. Fixed term contracts for non executive Directors
were signed on the following dates: J N E Sparey and J W Morgan 19 May 2009. R S Kettel has indicated that he will retire after the 2010
Annual General Meeting.
There are no defined contractual payments in the event of termination of a Directors’ service contract.
page
29
Report of the Remuneration Committee
(continued)
Directors’ interests
This section of the Report of the Remuneration Committee is not audited.
The interests of the Directors and their immediate families and family trusts at 31 December 2009 in the 10p ordinary shares of the
Company were as follows:
A D Roper
D J S Taylor
R S Kettel
D M O’Connor
J N E Sparey
I T Hicks
J W Morgan
2009
2008
864,930
13,500
15,000
5,599
43,100
2,500
28,000
864,930
13,500
25,000
5,599
38,100
2,500
28,000
972,629
977,629
A D Roper’s non-beneficial shareholdings included above at 31 December 2009 were 202,500 (2008: 202,500) 10p ordinary shares, as
trustee of various trusts established for the benefit of his children.
A D Roper’s interest in the 10p ordinary shares of the Company at 31 December 2009 represented 7.9% (2008: 7.9%) of the Company’s
issued share capital.
There has been no change in the interests set out above between 31 December 2009 and 24 March 2010.
page
30
Performance graph
This section of the Report of the Remuneration Committee is not audited.
180
160
140
120
100
80
60
40
20
0
2004
2005
2006
2007
2008
2009
Churchill
AIM
FTSE Fledgling
(Source: Brewin Dolphin)
Over the 5 year period against which the total shareholder return from the Group is being assessed, performance has been substantially
above that generated by the AIM index and slightly above that shown by the FTSE Fledgling index. Total returns in the year have been
supported by the general rise in Company valuations and our overall 5 year return has remained positive at an average compound rate
of over 11%. Over the five year period total shareholder return from the Company has been 69%, whilst that achieved by the AIM index
as a whole was -31% and the FTSE Fledgling 48%. In the year to 31 December 2009 the overall return from the Company was 56%, the
AIM index achieved a 68% return and the FTSE Fledgling index 79%.
In the opinion of the Directors the above indices are the most appropriate indices against which to measure the total shareholder return
of Churchill China plc as they are constituted of businesses of similar size to the Group.
On behalf of the Board
J W Morgan
Chairman of the Remuneration Committee
24 March 2010
page
31
Corporate Governance
This statement is unaudited.
As a Company quoted on the Alternative Investment Market of the London Stock Exchange, the Company is not required to comply
with the Principles of Good Governance and Code of Best Practice (“the Combined Code”), however the Board supports the standards
required by the Combined Code and seeks to comply with the principles of the Code as far as practically possible.
The Board of Directors
The Board is currently composed of 4 executive and 3 non executive Directors and meets at least 11 times per year. It is felt that the
current composition and operation of the Board is adequate to ensure a balance of power and authority. The non executive members of
the Board take an active and influential part in Board procedures and a senior independent non executive Director, R S Kettel, has been
formally appointed.
The Combined Code recommends that the Boards of listed companies include at least 3 independent non executive Directors. J N E
Sparey, R S Kettel and J W Morgan are all considered to be independent.
In addition to a formal agenda covering financial control, management and business development, there is appropriate debate addressing
areas outside the regular agenda to ensure that all Directors are able to take an informed view of the progress of the business. The
nature of the organisational structure of the Group allows executive Directors to maintain a close involvement in all aspects of the
Group’s operations. A schedule of matters reserved for Board decision is maintained and a procedure exists to allow Directors access
to independent professional advice if required.
The following table shows the attendance of Directors at Board meetings through the year.
A D Roper
D J S Taylor
R S Kettel
D M O’Connor
J N E Sparey
I T Hicks
J W Morgan
Meetings
held
Meetings
attended
12
12
12
12
12
12
12
11
12
12
11
12
12
12
The Directors consider that the Board of Directors include key management for all areas of the business and that there are no other key
management which require disclosure.
There are 2 principal sub-committees of the Board.
The Audit Committee, which is wholly composed of non executive Directors, meets at least twice per year to receive reports from executive
management and external auditors and is normally attended by the Finance Director. The Audit Committee is chaired by R S Kettel.
The Remuneration Committee is wholly composed of non executive Directors and is normally attended by the Chief Executive Officer
who takes no part in discussions on his own remuneration. The Remuneration Committee is chaired by J W Morgan.
Terms of reference for both Committees and a remuneration policy statement have been agreed by the Board.
The Company does not have a Nomination Committee as new Board appointments are discussed by the Board as a whole, rather than
by delegation to a Committee.
page
32
Internal control
The Board of Directors has overall responsibility for the Group’s system of internal control and is responsible for reviewing its
effectiveness. This system is designed to manage rather than eliminate the risk of failure to achieve business objectives and provides
reasonable, but not absolute, assurance against material misstatement or loss.
The Board has established a system for ongoing review of risk assessment and management procedures to ensure that the controls on which
it places reliance are operating satisfactorily and that new risks to which the business becomes exposed through its activities are recognised
and appropriate controls implemented. These procedures have been in operation throughout the year and in the period to the date of this report.
The risks to which the Group is exposed are formally reviewed by the Board twice a year. More regular reviews of individual risk areas
are carried out and the results reported to the Board. Operational responsibility for each of the main risk areas has been clearly
identified and are allocated to either Directors of the Company or of the Company’s principal operating subsidiary Churchill China (UK)
Limited, under the supervision of the Board as a whole. Individual managers and employees are also aware, where appropriate, of their
responsibilities in both identifying and controlling risk.
The Company’s systems in relation to risk assessment and control seek to ensure that as part of the normal process of business
management material risks are identified and brought to the attention of the Board. Directors review risk as part of a regular programme
of meetings covering both general business processes and specific risk areas. A system of reporting is in place to provide control
information on key risk areas within reports submitted to the Board and reviewed. In addition to this Directors and managers are aware
of their responsibility to monitor both changes in business activity and changes to the economic legislative environment in which the
Company operates. Potential new risk areas have been identified and control procedures documented.
The Board and the Audit Committee have reviewed the effectiveness of the system of internal control during the year.
Internal audit
The Company does not employ an internal audit department and does not believe that, given the size and structure of the business, the
geographic proximity of its major operations and the close control effected by the involvement of executive Directors in the day to day
running of the business, such a department would provide an effective means of gaining significant improvements in internal control.
The requirement for an internal audit function is reviewed annually.
Internal financial control
The Board of Directors has overall responsibility for the Group’s systems of internal financial control which it exercises through an organisational
structure with authorisation, monitoring and reporting procedures which are appropriate to the needs of the business. These systems have been
designed to give the Board reasonable, but not absolute, assurance against material misstatement or loss. The principal features of the Group’s
system of internal financial control are: the maintenance of a control environment in which the need for the highest standards of behaviour
and integrity are communicated to employees; the use of a detailed reporting system covering performance against comprehensive financial
and other key operating indicators. The Board and the Audit Committee have reviewed the operation and effectiveness of the system of internal
financial control during the year. The Board have responded to this review with management and work to address the areas identified.
Going concern
The Board confirms that having made enquiries, the Directors have a reasonable expectation that the Group and the Company have
adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going
concern basis in preparing financial statements.
By order of the Board
D J S Taylor
Company Secretary
24 March 2010
page
33
Independent Auditors’ Report to the
Members of Churchill China plc
We have audited the Group and parent Company financial statements (the ‘‘financial statements’’) of Churchill China plc for the year
ended 31 December 2009 which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income,
the Consolidated Balance Sheet, the Company Balance Sheet, the Consolidated Statement of Changes in Equity, the Consolidated Cash
Flow Statement, the Reconciliation of Operating Profit to Net Cash Inflow from Continuing Activities and the related notes. The financial
reporting framework that has been applied in the preparation of the Group financial statements is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has been applied
in the preparation of the parent Company financial statements is applicable law and United Kingdom Accounting Standards (United
Kingdom Generally Accepted Accounting Practice).
Respective responsibilities of Directors and auditors
As explained more fully in the Directors’ Responsibilities Statement set out on page 23, the Directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial statements
in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with
the Auditing Practices Board’s Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3
of part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for
any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the Group’s and parent Company’s circumstances and have been
consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the
overall presentation of the financial statements.
Opinion
In our opinion:
l
l
l
l
l
the Group financial statements give a true and fair view of the state of the Group’s affairs as at 31 December 2009 and of its profit
and cash flows for the year then ended;
the parent Company financial statements give a true and fair view of the state of the parent Company’s affairs as at 31 December
2009;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
the parent financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting
Practice; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
page
34
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are prepared is
consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
l adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received
from branches not visited by us; or
the parent Company financial statements are not in agreement with the accounting records and returns; or
l
l certain disclosures of Directors’ remuneration specified by law are not made; or
l we have not received all the information and explanations we require for our audit.
Mike Robinson (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Birmingham
24 March 2010
page
35
Consolidated Income Statement
for the year ended 31 December 2009
Before
exceptional Exceptional
Total
2009
£’000
item
2008
£’000
item
2008
£’000
Notes
Revenue
Operating profit
Share of results of associate company
Finance income
Finance costs
Profit before income tax
Income tax expense
Profit for the year
Attributable to equity holders of the Company
Earnings per ordinary share
Diluted earnings per share
4
5
15
8
8
10
11
11
Total
2008
£’000
41,969
2,804
(71)
658
(29)
3,362
(1,857)
41,705
41,969
2,804
(71)
658
(29)
3,362
(938)
2,288
(18)
119
(320)
2,069
(513)
1,556
–
–
–
–
–
–
(919)
2,424
(919)
1,505
1,556
2,424
(919)
1,505
14.3p
14.2p
13.8p
13.7p
All of the above figures relate to continuing operations.
The notes on pages 43 to 76 are an integral part of these consolidated financial statements.
The Company has elected to take the exemption under section 408 of the Companies Act 2006 to not present the parent Company profit and
loss account. The loss of the parent Company for the year was £23,000 (2008: profit of £24,000).
page
36
Consolidated Statement of
Comprehensive Income
for the year ended 31 December 2009
Net of tax:
Actuarial loss on defined benefit obligations (note 23)
Currency translation differences
Other
Net loss recognised directly in equity
Profit for the year
Total comprehensive (expense)/income for the year
Attributable to:
Equity holders of the Company
2009
£’000
(4,136)
(14)
2
(4,148)
1,556
(2,592)
2008
£’000
(1,022)
43
–
(979)
1,505
526
(2,592)
526
Amounts in the statement above are disclosed net of tax. The income tax relating to each component of other comprehensive income is
disclosed in note 10.
The Company has no recognised gains and losses other than those included in its profit and loss account and therefore no separate Statement
of Total Recognised Gains and Losses has been presented.
page
37
Consolidated Balance Sheet
as at 31 December 2009
Assets
Non current assets
Property, plant and equipment
Intangible assets
Investment in associate
Deferred income tax assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Assets held for sale
Total assets
Liabilities
Current liabilities
Trade and other payables
Current income tax liabilities
Non current liabilities
Deferred income tax liabilities
Retirement benefit obligations
Total liabilities
Net assets
Shareholders’ equity
Issued share capital
Share premium account
Treasury shares
Other reserves
Retained earnings
Total equity
Notes
2009
£’000
2008
£’000
13
14
15
22
18
19
20
21
14,299
498
725
2,163
17,685
7,142
9,031
6,882
23,055
662
23,717
41,402
(6,907)
(574)
(7,481)
22
23
(1,676)
(7,709)
13,889
397
743
586
15,615
8,477
8,631
7,738
24,846
–
24,846
40,461
(7,466)
(689)
(8,155)
(1,640)
(2,055)
(16,866)
(11,850)
24,536
28,611
1,095
2,332
(117)
1,234
19,992
24,536
1,095
2,332
(138)
1,236
24,086
28,611
24
24
25
26
27
The notes on pages 43 to 76 are an integral part of these consolidated financial statements.
The financial statements on pages 36 to 76 were approved by the Board of Directors on 24 March 2010 and were signed on its behalf by:
A D Roper
Director
D J S Taylor
Director
Company number 2709505
page
38
Company Balance Sheet
as at 31 December 2009
Fixed assets
Investment in associate
Investments in subsidiaries
Current assets
Debtors: amounts falling due after more than one year
Debtors: amounts falling due within one year
Cash at bank and in hand
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Net assets
Capital and reserves
Called up share capital
Share premium account
Treasury shares
Other reserves
Profit and loss account
Total shareholders’ funds
Notes
15
16
19
19
21
24
24
25
26
27
2009
£’000
355
2,195
2,550
8,500
290
517
9,307
(26)
2008
£’000
355
2,195
2,550
10,181
137
495
10,813
(26)
9,281
10,787
11,831
11,831
1,095
2,332
(117)
69
8,452
13,337
13,337
1,095
2,332
(138)
47
10,001
11,831
13,337
The notes on pages 43 to 76 are an integral part of these consolidated financial statements.
The financial statements on pages 36 to 76 were approved by the Board of Directors on 24 March 2010 and were signed on its behalf by:
A D Roper
Director
D J S Taylor
Director
page
39
Consolidated Statement of Changes in Equity
for the year ended 31 December 2009
Balance at 1 January 2008
Comprehensive Income:
Profit for the year
Other comprehensive income:
Depreciation transfer – gross
Depreciation transfer – tax
Actuarial losses – net of tax
Currency translation
Total comprehensive income
Transactions with owners
Dividends relating to 2007 and 2008
Share based payment
Treasury shares
Total transactions with owners
Balance at 1 January 2009
Comprehensive Income:
Profit for the year
Other comprehensive income:
Depreciation transfer – gross
Depreciation transfer – tax
Actuarial losses – net of tax
Currency translation
Total comprehensive income
Transactions with owners
Dividends relating to 2008 and 2009
Share based payment
Treasury shares
Total transactions with owners
Retained
earnings
Share
Share
Treasury
Other
capital
premium
shares
reserves
£’000
£’000
£’000
£’000
£’000
Total
£’000
25,124
1,095
2,332
1,505
12
(2)
(1,022)
–
493
(1,531)
–
–
(1,531)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(138)
(138)
1,180
29,731
–
1,505
(12)
2
–
43
33
–
23
–
23
–
–
(1,022)
43
526
(1,531)
23
(138)
(1,646)
24,086
1,095
2,332
(138)
1,236
28,611
1,556
12
–
(4,136)
–
(2,568)
(1,526)
–
–
(1,526)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
21
21
1,556
–
2
(4,136)
(14)
(2,592)
(1,526)
22
21
(1,483)
(12)
2
(14)
(24)
–
22
–
22
Balance at 31 December 2009
19,992
1,095
2,332
(117)
1,234
24,536
page
40
Consolidated Cash Flow Statement
for the year ended 31 December 2009
Cash flow from operating activities
Cash generated from operations (see note page 42)
Interest received*
Interest paid
Income tax paid
Net cash generated from operating activities
Investing activities
Purchases of property, plant and equipment
Proceeds on disposal of property, plant and equipment
Purchases of intangible assets
Net cash used in investing activities
Financing activities
Issue of ordinary shares
Purchase of treasury shares
Dividends paid
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Exchange (losses)/gains on cash and cash equivalents
Cash and cash equivalents at the end of the year
2009
£’000
3,439
119
–
(559)
2,999
(2,196)
42
(194)
2008
£’000
2,502
444
(29)
(483)
2,434
(4,199)
107
(382)
(2,348)
(4,474)
21
–
(1,526)
22
(160)
(1,531)
(1,505)
(1,669)
(854)
(3,709)
7,738
(2)
6,882
11,440
7
7,738
* Conventionally interest received is included under the heading ‘Investing activities’; however, the Directors believe that as the Group holds
cash in support of operating activities it should be disclosed as part of cash generated from operating activities.
page
41
Reconciliation of Operating Profit to
Net Cash Inflow from Operating Activities
Continuing operating activities
Operating profit
Adjustments for:
Depreciation and amortisation
Profit on disposal of property, plant and equipment
Charge for share based payments
Difference between pension service cost and contributions (see note 23)
Changes in working capital:
Inventory
Trade and other receivables
Trade and other payables
Net cash inflow from operations
2009
£’000
2,288
1,396
(14)
22
(410)
1,335
(415)
(763)
3,439
2008
£’000
2,804
1,070
(35)
23
(240)
(1,817)
1,021
(324)
2,502
page
42
Notes to the Financial Statements
for the year ended 31 December 2009
1 Summary of significant accounting policies
The consolidated financial statements of Churchill China plc have been prepared in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRSs as adopted by the EU), IFRIC Interpretations and the Companies Act 2006 applicable
to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention,
as modified by the revaluation of land and buildings, available-for-sale financial assets, and financial assets and financial liabilities
(including derivative instruments) at fair value through profit or loss.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree
of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are
disclosed in note 3.
(a) New and amended standards adopted by the Group
The Group has adopted the following new and amended IFRSs as of 1 January 2009:
IFRS 7 ‘Financial instruments – Disclosures’ (amendment) – effective 1 January 2009. The amendment requires enhanced disclosures
about fair value measurement and liquidity risk.
IAS 1 (revised). ‘Presentation of financial statements’ – effective 1 January 2009. The revised standard prohibits the presentation of items
of income and expenses (that is, ‘non-owner changes in equity’) in the statement of changes in equity, requiring ‘non-owner changes in
equity’ to be presented separately from owner changes in equity in a statement of comprehensive income. As a result, the Group presents
in the consolidated statement of changes in equity all owner changes in equity, whereas all non-owner changes in equity are presented
in the consolidated statement of comprehensive income. Comparative information has been re-presented so that it also is in conformity
with the revised standard. As the change in accounting policy only impacts presentation aspects, there is no impact on earnings per share.
IFRS 2 (amendment), ‘Share-based payment’ (effective 1 January 2009) deals with vesting conditions and cancellations. It clarifies that
vesting conditions are service conditions and performance conditions only. The Group and Company has adopted IFRS 2 (amendment)
from 1 January 2009. The amendment does not have a material impact on the Group or Company’s financial statements.
In respect of borrowing costs relating to qualifying assets for which the commencement date for capitalisation is on or after 1 January
2009, the Group capitalises borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part
of the cost of that asset. The Group previously recognised all borrowing costs as an expense immediately. This change in accounting policy
was due to the adoption of IAS 23, ‘Borrowing costs’ (2007). The amendment does not have a material impact on the Group or Company’s
financial statements.
IFRS 8 ‘Operating segments’ (effective 1 January 2009). The standard requires a ‘management approach’ under which segment information
is presented on the same basis as that used for internal reporting purposes. The implementation of the standard has not altered the
reported segments presented.
(b) Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group.
The following standards and amendments to existing standards have been published and are mandatory for the Group’s accounting
periods beginning on or after 1 January 2010 or later periods, but the Group has not early adopted them:
IFRIC 17, ‘Distribution of non-cash assets to owners’ (effective on or after 1 July 2009). The interpretation was published in November
2008. The Group and Company will apply IFRIC 17 from 1 January 2010. It is not expected to have a material impact on the Group or
Company’s financial statements.
page
43
Notes to the Financial Statements
for the year ended 31 December 2009
1 Summary of significant accounting policies (continued)
(b) Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group.
(continued)
IAS 27 (revised), ‘Consolidated and separate financial statements’, (effective from 1 July 2009). The revised standard requires the effects of
all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer
result in goodwill or gains and losses. The Group will apply IAS 27 (revised) prospectively to transactions with non-controlling interests
from 1 January 2010. It is not expected to have a material impact on the Group or Company’s financial statements.
IFRS 3 (revised), ‘Business combinations’ (effective from 1 July 2009). The revised standard continues to apply the acquisition method to
business combinations, with some significant changes. The Group will apply IFRS 3 (revised) prospectively to all business combinations
from 1 January 2010.
IAS 38 (amendment), ‘Intangible Assets’. The amendment is part of the IASB’s annual improvements project published in April 2009 and
the Group and Company will apply IAS 38 (amendment) from the date IFRS 3 (revised) is adopted. The amendment will not result in a
material impact on the Group or Company’s financial statements.
IFRS 5 (amendment), ‘Non current assets held for sale and discontinued operations’. The amendment is part of the IASB’s annual
improvements project published in April 2009. The amendment provides clarification that IFRS 5 specifies the disclosures required in
respect of non-current assets (or disposal Groups) classified as held for sale or discontinued operations. It is not expected to have a
material impact on the Group or Company’s financial statements.
IAS 1 (amendment), ‘Presentation of financial statements’. The amendment is part of the IASB’s annual improvements project published
in April 2009. The amendment provides clarification that the potential settlement of a liability by the issue of equity is not relevant to its
classification as current or non current. The Group and Company will apply IAS 1 (amendment) from 1 January 2010. It is not expected to
have a material impact on the Group or Company’s financial statements.
IFRS 2 (amendments), ‘Group cash-settled share-based payment transactions’ (effective from 1 January 2010). In addition to incorporating
IFRIC 8, ‘Scope of IFRS 2’, and IFRIC 11, ‘IFRS 2 – Group and treasury share transactions’, the amendments expand on the guidance in
IFRIC 11 to address the classification of Group arrangements that were not covered by that interpretation. The new guidance is not
expected to have a material impact on the Group or Company’s financial statements.
Basis of consolidation
The consolidated financial statements of Churchill China plc include the results of the Company, its subsidiaries and associated companies.
The financial statements of each undertaking in the Group are prepared to the balance sheet date under UK GAAP. Subsidiaries and
associates accounting policies are amended, where necessary, to ensure consistency with the accounting policies adopted by the Group.
Intra-group transactions are eliminated on consolidation.
(a) Subsidiaries
Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a
shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or
convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date
on which control is transferred to the Group. They are de-consolidated from the date that control ceases.
page
44
1 Summary of significant accounting policies (continued)
(a) Subsidiaries (continued)
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is
measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus
costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess
of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost
of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income
statement.
Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated.
(b) Associates
Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of
between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are
initially recognised at cost. The Group’s investment in associates includes goodwill identified on acquisition, net of any accumulated
impairment loss.
The Group’s share of its associates’ post-acquisition profits or losses is recognised in the income statement and its share of post-
acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the
carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate,
including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made
payments on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the
associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Dilution in gains and losses arising in investments in associates are recognised in the income statement.
Segment reporting
Operating segments are reported in a way consistent with the internal reporting provided to the chief operating decision maker. The chief
operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments has been
identified as Andrew Roper, Chief Executive Officer. Income and expenditure arising directly from a business segment are identified to that
segment. Income and expenditure arising from central operations which relate to the Group as a whole or cannot reasonably be allocated
between segments are classified as unallocated.
Revenue
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods provided
in the normal course of business, net of discounts, rebates and sales related taxes. Sales of goods are recognised when goods have been
delivered and title in those goods has passed. Rebates are recognised at their anticipated level as soon as any liability is expected to arise
and are deducted from gross revenue.
Interest income is recognised on a time basis by reference to the principal outstanding and at the effective interest rate applicable.
Dividend income is recognised when the Group’s right to receive payment has been established.
page
45
Notes to the Financial Statements
for the year ended 31 December 2009
1 Summary of significant accounting policies (continued)
Leases
Management review new leases and classify them as operating or finance leases in accordance with the balance of risk and reward
between lessee and the lessor. Lease payments made under operating leases are charged to income on a straight line basis over the term
of the lease.
Operating profit and exceptional items
Operating profit is stated both before and after the effect of exceptional items but before the Group’s share of results in associate
companies, impairment of investment in associate companies, finance income and costs and taxation.
The Group has adopted a columnar income statement format which seeks to highlight significant items within the Group results for the
period. Such items are considered by the Directors to be exceptional in size and nature rather than being representative of the underlying
trading of the Group, and may include such items as restructuring costs, material impairments of non current assets, material profits and
losses on the disposal of property, plant and equipment, material increases or reductions in pension scheme costs and material increases
or decreases in taxation costs as a result of changes in legislation. The Directors apply judgement in assessing the particular items, which
by virtue of their size and nature are separately disclosed in the income statement and notes to the financial statements as “Exceptional
items”. The Directors believe that the separate disclosure of these items is relevant in understanding the Group’s financial performance.
Dividends
Dividends to the Company’s shareholders are recognised as a liability in the Group’s financial statements in the period in which the
dividends are paid, following approval by the Company’s shareholders.
Interest received/paid
Interest received and paid is treated in the cash flow statement as a cash flow from operating activities as this reflects the nature of the
Group’s business.
Retirement benefit costs
The Group operates a defined benefit pension scheme and defined contribution pension schemes.
The defined benefit scheme is valued every 3 years by a professionally qualified independent Actuary. In intervening years, the Actuary
reviews the continuing appropriateness of the valuation. Scheme liabilities are measured using the projected unit method and the
amount recognised in the balance sheet is the present value of these liabilities at the balance sheet date. The discount rate used to
calculate the present value of liabilities is the interest rate attaching to high quantity corporate bonds. The assets of the scheme are
held separately from those of the Group and are measured at fair value. The accrual of further benefits under the scheme ceased on
31 March 2006.
The regular service cost of providing retirement benefits to employees during the year, together with the cost of any benefits relating to
past service and any benefits arising from curtailments, is charged or credited to operating profit in the year. These costs are included
within staff costs.
A net credit or cost representing the expected return on the market value of the assets of the scheme during the year less a charge
representing the expected increase in the present value of the liabilities in the scheme arising from the liabilities of the scheme being one
year closer to payment is included within finance income or cost. The difference between the market value of assets and the present value
of accrued pension liabilities is shown as an asset or liability in the balance sheet.
Actuarial gains and losses are recognised in the statement of comprehensive income and expense in the year, together with differences
arising from changes in actuarial assumptions.
page
46
1 Summary of significant accounting policies (continued)
Retirement benefit costs (continued)
Costs associated with defined contribution schemes represent contributions payable by the Group during the year and are charged to the
income statement as incurred.
Share based payments
Where share options have been issued to employees, the fair value of options at the date of grant is charged to the profit and loss account
over the period over which the options are expected to vest. The number of ordinary shares expected to vest at each balance sheet date
are adjusted to reflect non market vesting conditions such that the total charge recognised over the vesting period reflects the number of
options that ultimately vest. Market vesting conditions are reflected within the fair value of the options granted. If the terms and conditions
attaching to options are amended before the options vest any change in the fair value of the options is charged to the profit and loss
account over the remaining period to the vesting date.
National insurance contributions payable by the Company in relation to unapproved share option schemes are provided for on the
difference between the share price at the balance sheet date and the exercise price of the option where the share price is higher than the
exercise price.
Foreign currencies
The individual financial statements of each Group company are presented in the currency of the primary economic environment in which
the Company operates (its functional currency). For the purpose of the consolidated financial statements, the results of each entity
are expressed in sterling, which is the functional currency of the Group and is the presentation currency for the consolidated financial
statements.
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year
end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Non
monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated
at exchange rates prevailing on the balance sheet date. Income and expense items are translated at average exchange rates for the
period. Exchange differences arising, if any, are dealt with through reserves.
In order to manage its exposure to certain foreign exchange risks, the Group enters into forward currency contracts (see “Derivative
financial instruments” below).
Derivative financial instruments
The Group’s operations expose it to the financial risks of changes in exchange rates. The Group uses forward currency contracts to mitigate
this exposure. The Group does not use derivative financial instruments for speculative purposes. Changes in the fair value of derivative
financial instruments are recognised immediately in the income statement as soon as they arise. Contracts are initially recognised at fair
value. Gains and losses on all derivatives held at fair value outstanding at a balance sheet date are recognised in the income statement.
Hedge accounting is not considered to be appropriate to the above currency risk management techniques and has not been applied.
Taxation
Income tax expense represents the sum of the current tax and deferred tax.
Current tax is based on the taxable profit for the year. The Group’s liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the balance sheet date.
page
47
Notes to the Financial Statements
for the year ended 31 December 2009
1 Summary of significant accounting policies (continued)
Taxation (continued)
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the consolidated financial statements. However, deferred income tax is not accounted for,
if it arises from the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the
transaction there is no effect on either accounting or taxable profit or loss. The Group’s liability for deferred tax is calculated using tax
rates that have been enacted or substantively enacted by the balance sheet date or are expected to apply when the related deferred
income tax asset is realised or deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the
temporary differences can be utilised.
Deferred tax assets and liabilities may be set off against each other provided there is a legal right to do so and it is managements’ intention
to do so.
Property, plant and equipment
Property, plant and equipment is shown at cost, net of depreciation, as adjusted for the revaluation of certain land and buildings.
Depreciation is calculated so as to write off the cost, less any provision for impairment, of plant, property and equipment, less their
estimated residual values over the expected useful economic lives of the assets concerned. The principal annual rates used for this
purpose are:
Freehold buildings
Plant
Motor vehicles
Fixtures and fittings
%
2 on cost or valuation
10–25 on cost
25 on reducing net book value
25–33 on cost
Freehold land is not depreciated.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying
amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable
amounts.
Intangible assets
Intangible assets, which comprise computer software, are shown at cost net of amortisation. Amortisation is calculated so as to write off
the cost, less any provision for impairment, of intangible assets, less their estimated residual values over the expected useful economic
lives of the assets concerned. The principal annual rate used for this purpose is:
Computer software
%
33 on cost
The Company has no goodwill.
Impairment of non financial assets
At each reporting date the Directors assess whether there is any indication that an asset may be impaired. If any such indicator exists the
Group tests for impairment by estimating the recoverable amount of the asset. If the recoverable amount is less than the carrying value
of an asset an impairment loss is required. In addition to this, assets with indefinite lives are tested for impairment at least annually. The
recoverable amount is measured as the higher of net realisable value or value in use.
page
48
1 Summary of significant accounting policies (continued)
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined on a first in first out basis and includes, where
appropriate, direct materials, direct labour, overheads incurred in bringing inventories to their present location and condition and
transport and handling costs. Net realisable value is the estimated selling cost less all further costs to sale. Provision is made where
necessary for obsolete, slow moving and defective inventories.
Available for sale financial assets
Available for sale financial assets are non derivatives that are either designated in this category or not classified to any of the other
financial asset categories. They are included in non current assets unless the Directors intend to dispose of the investment within 12
months of the balance sheet date.
At each reporting date the Directors assess whether there is an indication an asset may be impaired. If any such indicator exists the Group
tests for impairment by estimating the recoverable amount of the asset. If the recoverable amount is less than the carrying value of an
asset an impairment loss is required. In addition to this, assets with indefinite lives are tested for impairment at least annually.
Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method,
less provision for impairment. A provision for impairment is established where there is objective evidence that the Group will not be able
to collect all amounts due according to the original terms of the receivables. The amount of the provision is the difference between the
asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Trade
receivables are as defined under IAS 39.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held on call with banks, other short-term highly liquid investments with
original maturities of 3 months or less, and bank overdrafts. Cash and cash equivalents are as defined under IAS 39.
Non current assets held for sale
Non current assets are classified as being held for sale when their value is expected to be recovered through disposal rather than
continuing usage within the business and when the future sale is considered to be highly probable. Management must be committed to
sale which should be expected to be completed to qualify for recognition as a completed sale within 1 year from the date of classification.
Non current assets are measured at the lower of carrying value and fair value less disposal costs, and are no longer depreciated.
Provisions
Provisions are recognised when (i) the Group has a present legal or constructive obligation as a result of past events, (ii) it is probable that
an outflow of resources will be required to settle the obligation and (iii) the amount has been reliably estimated. The Directors estimate
the amount of provisions required to settle any obligation at the balance sheet date. Provisions are discounted to their present value where
the effect would be material.
Parent Company significant accounting policies
The Company financial statements are prepared under UK GAAP. The financial statements have been prepared under the historical
cost convention in accordance with the Companies Act 2006 and applicable accounting standards in the United Kingdom. The principal
accounting policies applied in the preparation of the Company financial statements are set out below. These policies have been consistently
applied to all the years presented, unless otherwise stated.
page
49
Notes to the Financial Statements
for the year ended 31 December 2009
1 Summary of significant accounting policies (continued)
Investments
Fixed asset investments, comprising investments in subsidiary and associated companies, are stated at cost less any provisions for
impairment. Where an event has occurred that gives rise to doubt about the recovery of the carrying value an impairment assessment
is made. The impairment is calculated by comparing the investments carrying value to the recoverable amount as required by FRS 11
‘Impairment of fixed assets and goodwill’.
Other
Policies in relation to dividends and share based payments are the same as the Group accounting policies.
2 Financial risk management
Financial risk factors
The Group’s activities expose it to a variety of financial risks; market risk (including currency risk, fair value interest rate risk, cash flow
interest rate risk), credit risk, price risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability
of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. The Group uses derivative
financial instruments to manage certain risk exposures.
Financial risk management is carried out by the finance department under policies approved by the Board of Directors.
(a) Market risk
(i) Currency risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily in relation
to the US dollar and Euro. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net
investments in foreign operations.
The Group’s treasury risk management policy is to secure all of the contractually certain cash flows (mainly export sales and the purchase
of inventory) in each major currency. Contractual certainty is considered to be where the Group has received a firm sales order or placed
a firm purchase order.
At 31 December 2009, if sterling had weakened/strengthened by 5% against the US dollar with all other variables held constant, post tax
profit for the year would have been £9,000 (2008: £46,000) lower/higher, mainly as a result of foreign exchange gains/losses on translation
of US dollar denominated trade payables and cash balances. Equity would have been a further £9,000 (2008: £8,000) higher/lower mainly
as a result of differences in the translation of US dollar investments in subsidiary undertakings. If sterling had weakened/strengthened by
5% against the Euro with all other variables held constant, post tax profit for the year would have been £157,000 (2008: £195,000) higher/
lower, mainly as a result of foreign exchange gains/losses on translation of Euro denominated trade receivables and cash balances. There
would have been no substantial other changes in Equity.
(ii) Cash flow and fair value interest rate risk
The Group holds significant interest bearing assets and its finance income and operating cash flows are linked to changes in market
interest rates. The Group has no significant short or long-term borrowings.
The Group identifies cash balances in excess of short and medium-term working capital requirements (see liquidity risk) and invests these
balances in short and medium-term money market deposits.
At 31 December 2009, had the rates achieved been 0.1% higher/lower with all other variables held constant then post tax profit for the year
would have been £5,000 (2008: £9,000) higher/lower. Other components of equity would have been unchanged.
page
50
2 Financial risk management (continued)
(b) Credit risk
Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents and credit exposures including outstanding
trade receivables and committed transactions. For banks with which the Group places balances on deposit, only independently rated
parties with a minimum rating of ‘A’ are accepted.
Cash and cash equivalents are as follows:
Lloyds Banking Group plc
National Westminster Bank plc
Other
Credit
rating
AA-
AA-
Min A
2009
£’000
6,427
25
430
6,882
2008
£’000
740
6,613
385
7,738
Risk attached to the receipt of UK trade receivables is largely controlled through the assessment of the credit quality of each customer,
taking into account its financial position, past experience and third party credit information. Risks attaching to export trade receivables are
controlled through the use of export credit insurance and confirmed letters of credit. Where these cannot be obtained the credit control
department assesses the credit quality of the customer, taking into account its financial position, past experience and other factors.
The Group manages its debt position and considers it is in a position of having limited credit risk (see note 19).
(c) Price risk
As explained in the Directors’ report, the Group results are affected by changes in market prices. The risk attached to this is managed by
close relationships with suppliers and ongoing product development.
(d) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and available funding through committed credit facilities. Liquidity
risk is managed on a Group basis with expected cash flows being monitored against current cash and cash equivalents and committed
borrowing facilities.
The Group has no long-term borrowing and funds its operations from its own cash reserves and the Directors do not consider there to be
significant liquidity risk. All liabilities are generally due within 3 months.
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, to provide finance for
the long-term development of the business and to generate returns for shareholders and benefits for other stakeholders in the business.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to
shareholders, issue new shares or sell assets to reduce debt.
The Group currently has no debt.
Fair value estimation
The carrying value less impairment provision of trade and other receivables and trade and other payables are assumed to approximate
their fair values.
page
51
Notes to the Financial Statements
for the year ended 31 December 2009
3 Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal
the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
amount of assets and liabilities are discussed below.
(a) Net realisable value of excess inventories:
The Group identifies inventory where it is believed that the quantity held is in excess of that which may be realised at normal price levels.
The realisable value of this inventory is assessed taking into account the estimated sales price less further costs of sale. If the estimated
net realisable value of excess inventories were to be 10% higher or lower than management’s estimates the value of this provision would
change by £342,000 (2008: £306,000).
(b) Pension benefits:
The present value of the pension obligations depend on a number of factors that are determined on an actuarial basis using a number of
assumptions. The assumptions used in determining the net cost or income for pensions include the discount rate. Any changes in these
assumptions will impact the carrying amount of pension obligations.
The Group determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the
present value of estimated future cash outflows expected to be required to settle the pension obligations. In determining the appropriate
discount rate the Group considers the interest rates of high quality corporate bonds that are denominated in the currency in which the
benefits will be paid, and that have terms to maturity approximating the terms of the related pension liability.
Other key assumptions for pension obligations are based in part on current market conditions. Additional information is disclosed in note
23.
(c) Recognition of deferred tax assets
The Group reassesses each year whether it is appropriate to recognise the deferred tax assets in the financial statements based upon the
likelihood that the assets can be recovered. The assessment is based on the expected reversal of temporary timing differences.
4 Segmental analysis
Management has determined the operating segments are based on the reports reviewed by the Chief Operating Decision Maker and the
Strategic Steering Committee of the Board that are used to make strategic decisions. The Board considers the business primarily based
on the market and product groups, but also from a geographic perspective. Geographically, management considers the performance in
relation to the UK, rest of Europe, North America and Rest of the World.
The reportable operating product segments derive their revenue primarily from the sale of ceramic products to the Retail and Hospitality
sectors.
The Board assesses the performance of the operating segments based on the measure of operating profit, as analysed in the management
accounts. This measurement basis excludes the effects of non-recurring expenditure from the operating segments such as restructuring
costs and goodwill impairments when the impairment is the result of an isolated, non-recurring event. The measure also excludes the
effects of equity-settled share-based payments and unrealised gains/losses on financial instruments. Interest income and expenditure
are not allocated to segments, as this type of activity is driven by the central treasury function, which manages the cash position of the
Group. Since the Strategic Steering Committee reviews operating profit, the results of discontinued operations are not included in the
measure of operating profit.
page
52
4 Segmental analysis (continued)
(a) Primary reporting format – business segments
The business is managed in 2 main business segments – hospitality and retail.
Revenue from external customers
24,554
17,151
–
41,705
31 December 2009
Hospitality
£’000
Retail Unallocated
£’000
£’000
Group
£’000
Contribution to Group overheads excluding depreciation
Depreciation
Operating profit
Share of results of associated Company
Finance income
Finance cost
Profit before income tax
4,183
(894)
1,911
(185)
(2,410)
(317)
3,289
1,726
(2,727)
3,684
(1,396)
2,288
(18)
119
(320)
2,069
31 December 2008
Hospitality
£’000
Retail Unallocated
£’000
£’000
Group
£’000
Revenue from external customers
24,952
17,017
–
41,969
Contribution to Group overheads excluding depreciation
Depreciation
Operating profit
Share of results of associated Company
Finance income
Finance cost
Profit before income tax
4,318
(650)
1,948
(239)
(2,392)
(181)
3,668
1,709
(2,573)
3,874
(1,070)
2,804
(71)
658
(29)
3,362
The ‘Unallocated’ Group overheads principally comprise costs associated with the centralised functions of the parent Company Board,
finance and administration and information technology.
There are no material inter-segment revenues (2008: £nil). Any inter-segment revenues are carried out on an arms length basis.
Revenue from external parties is measured in a manner consistent with the consolidated income statement.
Segment assets consist primarily of property, plant and equipment, inventories, trade and other receivables. Unallocated assets comprise
intangible assets, investment in associates, available-for-sale financial assets, deferred taxation and cash and cash equivalents.
Segment liabilities comprise trade and other payables. Unallocated liabilities comprise items such as trade and other payables, current
taxation, deferred taxation and retirement benefit obligations.
page
53
Notes to the Financial Statements
for the year ended 31 December 2009
4 Segmental analysis (continued)
(a) Primary reporting format – business segments (continued)
Capital expenditure comprises additions to property, plant and equipment (note 13) and intangible assets (note 14).
Segment assets and liabilities at 31 December 2009 and capital expenditure for the year ended on that date are as follows:
Retail Unallocated
£’000
£’000
Hospitality
£’000
Segment assets and liabilities at 31 December 2008 and capital expenditure for the year ended on that date are as follows:
Retail Unallocated
£’000
£’000
Hospitality
£’000
Group
£’000
33,535
7,142
725
Group
£’000
31,241
8,477
743
14,642
4,481
–
7,234
2,661
–
11,659
–
725
19,123
9,895
12,384
41,402
3,225
1,455
12,186
16,866
794
1,531
273
2,598
14,321
5,069
–
6,893
3,408
–
10,027
–
743
19,390
10,301
10,770
40,461
3,283
2,479
6,087
11,849
3,636
190
755
4,581
Assets excluding inventories
Inventories
Investment in associates
Total assets
Total liabilities
Capital expenditure
Assets excluding inventories
Inventories
Investment in associates
Total assets
Total liabilities
Capital expenditure
Any sales between segments are carried out on an arms length basis. Revenue from external parties is measured in a manner consistent
with the income statement.
(b) Secondary reporting format – geographical segments
The Group’s 2 business segments operate in 4 main geographical segments, even though they are managed on a worldwide basis.
Geographical segment – Revenue
United Kingdom
Rest of Europe
North America
Other
2009
£’000
28,453
6,973
3,628
2,651
41,705
2008
£’000
27,538
8,236
3,165
3,030
41,969
The total assets of the business are allocated as follows:
United Kingdom £40,489,000 (2008: £39,781,000), Rest of Europe £31,000 (2008: £64,000), North America £852,000 (2008: £564,000), Other
£30,000 (2008: £52,000).
Capital expenditure was made as follows:
United Kingdom £2,596,000 (2008: £4,580,000), Other £2,000 (2008: £1,000).
page
54
5 Expenses by nature
Changes in inventories of finished goods and work in progress
Raw materials used
Purchase of goods for resale
Employee benefit expense (note 7)
Other external charges
Depreciation and amortisation charges
Profit on disposal of property, plant and equipment
Foreign exchange gains
Total
2009
£’000
1,358
2,113
9,766
14,258
10,691
1,396
(14)
(151)
Total
2008
£’000
(1,810)
2,325
11,402
15,817
11,048
1,070
(35)
(652)
Total cost of sales distribution costs and administrative expenses
39,417
39,165
Exceptional items
Please refer to note 10 for disclosures relating to the exceptional taxation provision made in 2008.
6 Average number of people employed
The average monthly number of persons (including executive Directors) employed by the Group during the year was:
By activity
Production
Sales and administration
The Company had no employees (2008: none).
2009
Number
2008
Number
278
232
510
372
227
599
page
55
Notes to the Financial Statements
for the year ended 31 December 2009
7 Employee benefit expense
Staff costs (for the employees shown in note 6)
Wages and salaries
Social security costs
Defined contribution pension cost (see note 23)
Other pension costs (see note 23)
Share options granted to directors and employees (see note 24)
2009
£’000
12,605
1,080
404
147
22
14,258
2008
£’000
13,972
1,200
459
163
23
15,817
Directors’ emoluments
The statutory disclosures for Directors’ emoluments, being the aggregate emoluments, the aggregate amount of gains made by Directors
on the exercise of share options and the amount of money receivable by Directors under long-term incentive plans in respect of qualifying
services have been included within the Remuneration Report. In addition statutory disclosures in respect of the number of Directors to
whom retirement benefits are accruing is disclosed.
Company
The Company did not make any payments to employees (2008: nil).
8 Finance income and costs
Interest income on cash and cash equivalents
Interest on pension scheme (note 23)
Finance income
Interest on pension scheme (note 23)
Other interest
Finance costs
Net finance (cost)/income
9 Auditors’ remuneration
Amounts paid to the Group’s auditors were as follows:
Audit services – audit of subsidiaries
Audit services – audit of parent and consolidated financial statements (Company £1,500, 2008: £1,500)
Non-audit services – taxation advice
page
56
2009
£’000
2008
£’000
119
–
119
(320)
–
(320)
(201)
2009
£’000
63
7
26
96
444
214
658
–
(29)
(29)
629
2008
£’000
69
7
34
110
10 Income tax expense
Group
Current tax – current year
– adjustment in respect of prior periods
Deferred tax (note 21)
Origination and reversal of temporary differences
Income tax expense before exceptional item
Origination of temporary differences – exceptional
Income tax expense
2009
£’000
589
(145)
444
69
513
–
513
2008
£’000
789
(109)
680
258
938
919
1,857
In 2008, the UK tax regime in relation to Industrial Buildings Allowances (IBAs) was changed following the enactment of certain provisions
contained in the Finance Act 2008. As a result IBAs are now being phased out in the period to 2011. The Group provided £919,000 in 2008
for the deferred tax liability arising from this change and the charge was treated as exceptional. There was no cash outflow in relation to
this change in that year.
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable
to profit of the consolidated entities as follows:
Profit before income tax
Tax calculated at domestic tax rates applicable to profits in the respective countries
Expenses not deductible for tax purposes
Adjustment in respect of prior periods
Deferred tax on withdrawal of IBAs (see above)
Other
Tax charge
The weighted average applicable tax rate was 28% (2008: 28.5%).
2009
£’000
2,069
579
17
(145)
–
62
513
2008
£’000
3,362
959
20
(109)
919
68
1,857
During the year a credit of £1,608,000 (2008: £397,000) in relation to deferred tax arising from actuarial gains and losses on the Group’s
defined benefit pension obligation and a credit of £2,000 (2008: £nil) in relation to the reversal of deferred taxation on the revaluation of
land and buildings were adjusted directly within equity.
page
57
Notes to the Financial Statements
for the year ended 31 December 2009
11 Earnings per ordinary share
The basic earnings per ordinary share is based on the profit after income tax and on 10,904,065 (2008: 10,923,038) ordinary shares, being
the weighted average number of ordinary shares in issue during the year.
The adjusted basic earnings per ordinary share is based on the profit after income tax and adjusted to take into account exceptional items.
The Directors believe that adjusted earnings per share more closely reflects the underlying performance of the Group.
Basic earnings per share (based on earnings £1,556,000 (2008: £1,505,000))
Adjustment – exceptional item:
Deferred taxation – Industrial Buildings Allowances (£nil (2008: £919,000)) (note 10)
Adjusted basic earnings per share
2009
Pence per
share
2008
Pence per
share
14.3
–
14.3
13.8
8.4
22.2
Diluted earnings per ordinary share is based on the profit after income tax and on 10,934,139 (2008: 10,965,990) ordinary shares, being the
weighted average number of ordinary shares in issue during the year of 10,904,065 (2008: 10,923,038) increased by 30,074 (2008: 42,952)
shares, being the weighted average number of ordinary shares which would have been issued if the outstanding options to acquire shares
in the Group had been exercised at the average share price during the year. Adjusted diluted adjusted earnings per ordinary share is based
on the profit after income tax and adjusted to take into account exceptional items.
Diluted earnings per share (based on earnings £1,556,000 (2008: £1,505,000))
Adjustment – exceptional item:
Deferred taxation – Industrial Buildings Allowances (£nil (2008: £919,000)) (note 10)
Adjusted diluted earnings per share
12 Dividends
The dividends paid in the year were as follows:
Ordinary
Final 2008 9.2p per 10p ordinary share (Final 2007: 9.2p)
Interim 2009 4.8p per 10p ordinary share paid (Interim 2008: 4.8p)
2009
Pence per
share
2008
Pence per
share
14.2
–
14.2
2009
£’000
1,003
523
1,526
13.7
8.4
22.1
2008
£’000
1,007
524
1,531
A dividend of 9.2p per share in respect of the year to 31 December 2009 amounting to £1,004,000 was declared on 17 February 2010 and
paid on 12 March 2010. The Directors do not recommend the payment of any further dividend in respect of 2009 and a motion confirming
this will be proposed at the Annual General Meeting.
page
58
13 Property, plant and equipment
The Company has no property, plant and equipment (2008: none). Details of those relating to the Group are as follows:
Group
At 1 January 2008
Cost
Accumulated depreciation
Net book amount
Year ended 31 December 2008
Opening net book amount
Additions
Disposals
Depreciation charge
Closing net book amount
At 31 December 2008
Cost
Accumulated depreciation
Net book amount
Year ended 31 December 2009
Opening net book amount
Additions
Disposals
Transfer to current assets
Depreciation charge
Closing net book amount
At 31 December 2009
Cost
Accumulated depreciation
Net book amount
Freehold
land and
buildings
£’000
Plant
£’000
Motor
vehicles
£’000
Fixtures
and
fittings
£’000
Total
£’000
9,436
(1,573)
14,523
(12,370)
7,863
2,153
7,863
2,067
–
(143)
2,153
1,478
–
(573)
9,787
3,058
11,503
(1,716)
14,696
(11,638)
9,787
3,058
9,787
707
–
(662)
(172)
3,058
1,325
–
–
(761)
9,660
3,622
11,104
(1,444)
15,864
(12,242)
9,660
3,622
880
(347)
533
533
300
(72)
(177)
584
956
(372)
584
584
70
(29)
–
(145)
480
958
(478)
480
2,185
(1,921)
27,024
(16,211)
264
10,813
264
354
–
(158)
10,813
4,199
(72)
(1,051)
460
13,889
1,946
(1,486)
29,101
(15,212)
460
13,889
460
286
–
–
(209)
13,889
2,388
(29)
(662)
(1,287)
537
14,299
2,231
(1,694)
30,157
(15,858)
537
14,299
page
59
Notes to the Financial Statements
for the year ended 31 December 2009
14 Intangible assets
The Company has no intangible fixed assets (2008: none). Details of these relating to the Group are as follows:
Group
At 1 January 2008
Cost
Accumulated amortisation
Net book amount
Year ended 31 December 2008
Opening net book amount
Additions
Amortisation charge
Closing net book amount
At 31 December 2008
Cost
Accumulated amortisation
Net book amount
Year ended 31 December 2009
Opening net book amount
Additions
Amortisation charge
Closing net book amount
At 31 December 2009
Cost
Accumulated amortisation
Net book amount
page
60
Computer
software
£’000
196
(162)
34
34
382
(19)
397
578
(181)
397
397
210
(109)
498
788
(290)
498
15 Investment in associate
Cost
At 1 January
Share of loss
At 31 December
Impairment
At 1 January
Impairment of investment in associate
At 31 December
Net book value
Closing net book amount
Group
2009
£’000
1,467
(591)
876
724
(573)
151
725
Group
2008
£’000
Company
2009
£’000
Company
2008
£’000
1,487
(20)
1,467
673
51
724
743
355
–
355
–
–
–
355
–
355
–
–
–
355
355
The investment in associate represents a holding of 34.4% of the issued £1 ordinary shares of Furlong Mills Limited, a company registered
in England, whose principal activity is that of a potters miller.
Share of associate’s assets
Share of associate’s liabilities
Share of associate’s net assets
2009
£’000
1,260
(336)
924
2008
£’000
1,932
(417)
1,515
The total revenue of Furlong Mills Limited for its year ended 31 December 2009 was £5,343,000 (2008: £5,928,000) and loss before tax was
£1,717,000 including an exceptional loss of £1,650,000 (2008: loss £124,000). During the year the Group purchased raw materials to a value
of £1,437,000 (2008: £1,672,000) from Furlong Mills Limited.
The Group has historically carried its investment in Furlong Mills Limited at a net amount after an impairment reflecting the Board’s view
of the recoverable amount of the investment. In the year to 31 December 2009 Furlong Mills Limited has performed an impairment review
of its property, plant and equipment and has reduced the carrying value of these assets in its company balance sheet. The Group has
consequently released an equivalent amount reflecting its share of this impairment.
The difference between the carrying value of the Group’s interest in associate and the share of associate’s net assets reflects the remaining
impairment charged in the Group’s accounts and adjustments in relation to accounting policies.
In the Group’s consolidated financial statements the investment is accounted for on the equity basis. Within the Company’s accounts the
investment is shown at historic cost.
page
61
Notes to the Financial Statements
for the year ended 31 December 2009
16 Investment in subsidiaries
Company
Cost or valuation
At 1 January and 31 December 2009
Impairment
At 1 January 2008
Impairment during the year
At 31 December 2009
Net book value
At 31 December 2009
2009
£’000
2,627
432
–
432
2008
£’000
2,627
424
8
432
2,195
2,195
The impairment in 2008 reduced the carrying value of the Company’s investment in a number of dormant subsidiaries, to match the
underlying net asset value of the subsidiaries concerned.
Interests in Group undertakings
Interests in Group undertakings comprise the cost of investments in subsidiary undertakings. The principal operating subsidiaries of the
Group are as follows:
Name of Company
Proportion of
nominal
value
of issued
held shares held
Description
of shares
Country of
incorporation
Principal activity
Churchill China (UK) Limited
England and Wales
Ordinary
Churchill Ceramics (UK) Limited
England and Wales
Ordinary
Churchill China, Inc
USA
Ordinary
100% Manufacture and sale of
ceramic and related
products
100% Provision of management
and property services
within the Group
Sale of ceramic and
related products
100%
Dormant companies within the Group are not included in the above analysis.
page
62
17 Available for sale financial assets
Fair value/Cost
At 1 January and 31 December 2009
Impairment
At 1 January and 31 December 2009
Fair value/Net book value
At 1 January and 31 December 2009
Company
Group
Available
for sale
financial
Other
assets investments
£’000
£’000
–
–
–
43
43
–
The above represents 35.9% (2008: 35.9%) of the issued ordinary share capital of Shraff Management Limited, a company registered in
England and Wales. The Directors do not consider that the investment in Shraff Management Limited should be accounted for as an
associate as Churchill China plc is not in a position to and does not exercise significant influence over Shraff Management Limited, taking
into account other large third party shareholdings.
18 Inventories
The Company has no inventory (2008: none). Details of inventory relating to the Group are as follows:
Raw materials
Work in progress
Finished goods
2009
£’000
56
396
6,690
7,142
2008
£’000
33
530
7,914
8,477
The Directors do not consider there is a material difference between the carrying value and replacement cost of inventories.
The cost of inventories recognised as an expense and included in the income statements amounted to £23,872,000 (2008: £24,622,000).
page
63
Notes to the Financial Statements
for the year ended 31 December 2009
19 Trade and other receivables
Trade receivables
Less: provision for impairment of trade receivables
Trade receivables – net
Other
Prepayments
Receivables from related parties (note 29)
Less non current portion: loans to related parties
Current portion
Group
Company
2009
£’000
8,717
(147)
8,570
152
309
–
9,031
–
9,031
2008
£’000
8,559
(108)
8,451
5
175
–
8,631
–
8,631
2009
£’000
–
–
–
150
–
8,640
8,790
8,500
290
2008
£’000
–
–
–
–
–
10,318
10,318
10,181
137
All non current receivables are due within 5 years from the balance sheet date.
The Group operates a credit risk management policy. Risk attached to the receipt of UK trade receivables is largely controlled through
the assessment of the credit quality of each customer, taking into account its financial position, past experience and third party credit
information. Risks attaching to export trade receivables are controlled through the use of export credit insurance and confirmed letters of
credit. Where these cannot be obtained the credit control department assesses the credit quality of the customer, taking into account its
financial position, past experience and other factors.
Trade receivables that are less than 3 months past due and not covered by insurance arrangements are not considered impaired unless
there is specific evidence to the contrary.
As of 31 December 2009, trade receivables of £7,758,000 (2008: £7,570,000) were fully performing.
As of 31 December 2009, trade receivables of £599,000 (2008: £867,000) were past due but not impaired. The ageing of these receivables
is as follows:
2009
£’000
548
46
5
599
2008
£’000
795
53
19
867
Up to 3 months
3 to 6 months
Over 6 months
page
64
19 Trade and other receivables (continued)
As of 31 December 2009 trade receivables with a gross value of £360,000 (2008: £122,000) were impaired and provided for. The amount
of provision for 31 December 2009 was £147,000 (2008: £108,000). The individually impaired receivables relate to customers which are in
unexpectedly difficult economic conditions. It was assessed that a portion of the receivables is expected to be recovered. The ageing of
these receivables is as follows:
Up to 3 months
3 to 6 months
Over 6 months
The Directors consider that the carrying value of trade and other receivables is approximate to their fair value.
Movements on the Group provision for impairment of trade receivables are as follows:
At 1 January
Provision for receivables impairment
Receivables written off during the year as uncollectible
At 31 December
2009
£’000
308
33
19
360
2009
£’000
108
147
(108)
147
2008
£’000
107
–
15
122
2008
£’000
9
108
(9)
108
The creation and release of provision for impaired receivables have been included in ‘other external charges’ in the income statement
(note 5). Amounts charged to the allowance account are generally written off, when there is no expectation of recovering additional cash.
The other classes are within trade and other receivables do not contain impaired assets.
The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies:
Pounds
Euros
US dollar
2009
£’000
6,965
726
1,340
9,031
2008
£’000
6,258
763
1,610
8,631
page
65
Notes to the Financial Statements
for the year ended 31 December 2009
19 Trade and other receivables (continued)
During the year the Group had gains of £151,000 (2008: £652,000) on forward option contracts that have been recognised in the Income
Statement and as at 31 December held forward exchange contracts for the sale of Euro of £444,000 (2008: £1,298,000) and the sale of US
dollars of £484,000 (2008: £696,000). These contracts are held at their fair value with a gain of £7,000 (2008: loss of £149,000) recognised
in relation to the contracts outstanding at the year end.
Company
As of 31 December 2009, Company receivables of £8,790,000 (2008: £10,318,000) were fully performing.
The carrying amounts of the Company’s receivables are denominated in the following currencies:
Pounds
US dollar
20 Assets held for sale
Land and buildings
2009
£’000
8,758
32
8,790
2009
£’000
662
2008
£’000
10,289
29
10,318
2008
£’000
–
The above amount represents the carrying value of certain land and buildings in Stoke on Trent, held as an asset for sale. The assets
are held within unallocated assets in the segmental analysis (see note 4). The assets will be sold upon agreement of an appropriate
contractual offer.
21 Trade and other payables
Trade payables
Amounts due to related parties
Social security and other taxes
Accrued expenses
Group
Company
2009
£’000
1,985
24
753
4,145
6,907
2008
£’000
3,432
45
578
3,411
7,466
2009
£’000
2008
£’000
–
13
12
1
26
–
13
10
3
26
All the above liabilities mature within 12 months from 31 December 2009.
Note 19 shows the losses/gains on forward option contracts that have been recognised in the income statement. As at 31 December 2009
the Group held forward exchange contracts for the purchase of US dollars of £nil (2008: £nil). These contracts are held at their fair value
with a gain of £nil (2008: £nil) recognised in relation to the contracts outstanding at the year end.
page
66
22 Deferred income tax
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current
tax liabilities and when the deferred income taxes relate to the same fiscal authority. The offset amounts are as follows:
Group
Deferred tax assets:
– Deferred tax asset to be recovered after more than 12 months
– Deferred tax asset to be recovered within 12 months
Deferred tax liabilities:
– Deferred tax liabilities to be recovered after more than 12 months
– Deferred tax liabilities to be recovered within 12 months
Deferred tax assets/(liabilities) (net)
The gross movement on the deferred income tax account is as follows:
At 1 January
Income statement charge (note 10)
Tax credited directly to equity (note 27)
At 31 December
2009
£’000
2,062
101
2,163
(1,652)
(24)
(1,676)
487
2009
£’000
(1,054)
(69)
1,610
487
2008
£’000
576
10
586
(1,637)
(3)
(1,640)
(1,054)
2008
£’000
(274)
(1,177)
397
(1,054)
The movement in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances
within the same tax jurisdiction, is as follows:
Deferred tax liabilities
At 1 January 2008
Charged to the income statement
At 31 December 2008
Charged to the income statement
Credited directly to equity
At 31 December 2009
Accelerated
tax
Land and
buildings
depreciation revaluation
£’000
£’000
239
1,050
1,289
38
–
353
(2)
351
–
(2)
Total
£’000
592
1,048
1,640
38
(2)
1,327
349
1,676
page
67
Notes to the Financial Statements
for the year ended 31 December 2009
22 Deferred income tax (continued)
Deferred tax assets
At 1 January 2008
Charged to the income statement
Credited directly to equity
At 31 December 2008
Charged to the income statement
Credited directly to equity
At 31 December 2009
The deferred income tax credited to equity during the past year is as follows:
Fair value reserves in shareholders’ equity:
Tax on actuarial loss on retirement benefits scheme
Tax on difference between depreciation on buildings on an actual and historical cost basis
Retirement
benefit
obligation
£’000
(307)
128
(397)
(576)
25
(1,608)
Other
£’000
(11)
1
–
(10)
6
–
Total
£’000
(318)
129
(397)
(586)
31
(1,608)
(2,159)
(4)
(2,163)
2009
£’000
(1,608)
(2)
(1,610)
2008
£’000
(397)
–
(397)
Deferred income tax of £2,000 (2008: £2,000) was transferred from other reserves (note 26) to retained earnings (note 27). This represents
deferred tax on the difference between the actual depreciation on buildings and the equivalent depreciation based on the historical cost
of buildings.
Deferred income tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit through
the future taxable profits is probable. The Group has not recognised deferred income tax assets of £1,511,000 (2008: £1,511,000) in respect of
capital losses amounting to £5,395,000 (2008: £5,395,000) that can be carried forward against future capital gains.
23 Retirement benefit obligations
Balance sheet obligations
Pension benefits
Income statement charge/(credit)
Pension benefits
Finance cost/(income)
2009
£’000
7,709
551
320
2008
£’000
2,055
622
(214)
The Group operates 3 principal pension schemes; a funded pension scheme, the Churchill Group Retirement Benefit Scheme, providing
benefits based on final pensionable salary which was closed to new entrants in 1999 and to which the accrual of future benefits ceased on
31 March 2006, the Churchill China 1999 Pension Scheme and the Churchill China 2006 Group Personal Pension Plan. Both of the latter
schemes are defined contribution schemes providing benefits based on contributions paid.
page
68
23 Retirement benefit obligations (continued)
The assets of the schemes are held separately from those of the Group. The total pension cost for the Group was £551,000 (2008: £622,000.
Of this cost £nil (2008: £nil), related to the Churchill Group Retirement Benefit Scheme, £158,000 (2008: £180,000) was in respect of the
Churchill China 1999 Pension Scheme and £246,000 (2008: £274,000) was in respect of the Churchill China 2006 Group Personal Pension
Scheme. The balance of cost was incurred in respect of overseas and other pension arrangements. At the year end amounts due to
pension funds in respect of Company contributions were £57,000 (2008: £20,000).
No contributions have been made to the Churchill Group Retirement Benefit Scheme in relation to current service since the date of
cessation of the future accrual of benefits on 31 March 2006. Prior to that date the Group paid contributions to the scheme at a rate
of 13.6% of pensionable salary. In addition a contribution of £410,000 (2008: £240,000) was made in respect of the amortisation of past
service liabilities. The forward funding rate of the scheme was agreed with the scheme Trustees and Actuary following the completion of
the 31 May 2008 triennial actuarial valuation in March 2009. The Group expects to make payments of £495,000 per annum in respect of
the amortisation of past service deficits.
The amounts recognised in the balance sheet are determined as follows:
Present value of funded obligations
Fair value of plan assets
Liability in balance sheet
The movement in the present value of defined benefit obligation over the year is as follows:
At 1 January
Interest cost
Actuarial losses/(gains)
Benefits paid
At 31 December
The movement in the fair value of plan assets over the year is as follows:
At 1 January
Expected return on plan assets
Actuarial gains/(losses)
Employer contributions
Benefits paid
At 31 December
2009
£’000
2008
£’000
34,550
(26,841)
25,275
(23,220)
7,709
2,055
2009
£’000
25,275
1,668
8,433
(826)
2008
£’000
29,209
1,694
(5,044)
(584)
34,550
25,275
2009
£’000
23,220
1,348
2,689
410
(826)
2008
£’000
28,119
1,908
(6,463)
240
(584)
26,841
23,220
page
69
Notes to the Financial Statements
for the year ended 31 December 2009
23 Retirement benefit obligations (continued)
Plan assets are comprised as follows:
Equity investments
Debt investments
Other
2009
£’000
17,783
4,986
4,072
26,841
66%
19%
15%
2008
£’000
12,545
4,756
5,919
23,220
54%
20%
26%
The expected return on plan assets is determined by considering the expected returns on the assets underlying the current investment
policy. Expected yields on fixed interest investments are based on gross redemption yields at the balance sheet date. Expected returns on
equity and property investments reflect long-term real rates of return experienced in the respective markets.
The amounts recognised in the income statement are as follows:
Interest cost
Expected return on plan assets
Net cost/(credit) recognised in finance cost/(income)
2009
£’000
1,668
(1,348)
320
2008
£’000
1,694
(1,908)
(214)
The actual return on plan assets was a gain of £4,037,000 (2008: loss £4,555,000).
A history of experience gains and losses, since the adoption of IAS 19 ‘Employee Benefits’, as at 31 December would have been as follows:
Difference between the expected and actual return on scheme assets:
Amount
Percentage of scheme assets
Experience gains and losses on scheme liabilities:
Amount
Percentage of present value of scheme liabilities
Total amount recognised in consolidated statement of
comprehensive income (SOCIE):
Amount
Percentage of present value of scheme liabilities
2009
£’000
2,689
10%
2008
£’000
(6,463)
28%
(414)
1%
372
1%
2007
£’000
2006
£’000
(200)
1%
(192)
1%
839
3%
310
1%
(5,744)
17%
1,419
6%
2,379
8%
1,110
4%
The position prior to 2006 has not been disclosed as no IFRS comparatives exist for this period.
page
70
23 Retirement benefit obligations (continued)
The principal actuarial assumptions used were as follows:
Pension benefits
Discount rate
Inflation rate
Expected return on plan assets
Rate of increase of pensions in payment
Rate of increase of deferred pensions
2009
% per
annum
2008
% per
annum
5.7%
3.5%
6.8%
3.5%
3.5%
6.6%
2.9%
6.0%
2.9%
2.9%
Assumptions regarding future mortality rates are set based on advice in accordance with published statistics and experience.
The average life expectancy in years of a pensioner retiring at age 65 at the balance sheet date is as follows:
Male
Female
2009
Number
2008
Number
20.9
24.1
20.7
24.0
The average life expectancy in years of a pensioner retiring at age 65, 20 years after the balance sheet date, is as follows:
2009
Number
2008
Number
Male
Female
Sensitivity
22.7
26.1
22.6
26.0
A sensitivity analysis has been carried out on effect of varying certain assumptions within the calculation of retirement benefit obligations.
The effect of a 0.25% increase in the discount rate to 5.95% would be to reduce scheme liabilities by £1,721,000 (5.0%).
The effect of a 0.25% decrease in the discount rate to 5.45% would be to increase scheme liabilities by £1,840,000 (5.3%).
The effect of a 0.25% increase in inflation to 3.75% would increase scheme liabilities by £1,358,000 (3.9%).
The effect of a 0.25% decrease in inflation to 3.25% would decrease scheme liabilities by £1,271,000 (3.7%).
The effect of a 1 year increase to life expectancy would increase scheme liabilities by £893,000 (2.6%). The effect of a 1 year reduction in
life expectancy would be to reduce scheme liabilities by £928,000 (2.7%).
page
71
Notes to the Financial Statements
for the year ended 31 December 2009
24 Issued share capital and premium
Group and Company
At 1 January 2008
Employee share option schemes
At 31 December 2008
Employee share option schemes
At 31 December 2009
Number
of shares
000
Ordinary
shares
£’000
Share
premium
£’000
10,948
–
10,948
–
1,095
–
1,095
–
10,948
1,095
2,332
–
2,332
–
2,332
The total authorised number of ordinary shares is 14,300,000 (2008: 14,300,000) with a par value of 10p (2008: 10p) per share. All issued
shares are fully paid.
Share option schemes
The Executive share option scheme was introduced in October 1994 and a complementary unapproved Executive share option scheme
was approved by shareholders in October 1996. Options under these schemes are granted with a fixed exercise price equal to the market
price of the shares at the date of issue. Options are normally only exercisable after 3 years from the date of grant and expire 10 years from
the date of grant. Options granted will be exercisable given satisfaction of the requirement that adjusted earnings per ordinary share will
increase by at least 6% above the increase in the Retail Price Index over the 3 year period from the beginning of the financial year in which
the option was granted. Payment of the exercise price of options exercised is received in cash. A charge to the profit and loss account has
been made to reflect the fair value of options granted since 7 November 2002. Options have been valued using the Black-Scholes option
pricing model. No performance conditions were used in the fair value calculations.
The fair value per option granted and the assumptions used in the calculation were as follows:
Grant date
30 April 2004
Share price at grant date
Exercise price
Number of employees
Shares under option (20,000 lapsed, 10,000 exercised)
Vesting period (years)
Expected volatility
Option life (years)
Expected life (years)
Risk free rate
Expected dividends expressed as a dividend yield
Fair value per option
208p
208p
12
110,000
3
25%
10
5
4.8%
5.2%
24p
page
72
24 Issued share capital and premium (continued)
The following options exercisable over ordinary shares were outstanding at 31 December 2009:
Number of shares
The Executive share option scheme
The unapproved Executive
share option scheme
2009
2008
Exercise
price
Date from which
exercisable
Expiry date
2,000
37,000
2,000
47,000
151p
208p
December 2003
April 2007
December 2010
April 2014
12,500
21,500
40,000
43,000
12,500
21,500
40,000
43,000
118.5p
151p
171p
208p
156,000
166,000
April 2003
December 2003
April 2005
April 2007
April 2010
December 2010
April 2012
April 2014
Expected volatility is based on historical volatility over the last three years. The expected life is the average expected period to exercise.
The risk free rate of return is the yield on zero coupon UK government bonds of a term consistent with the assumed option life. A
reconciliation of option movements for the year to 31 December 2009 is set out below.
2009
2009
Weighted
average
exercise
price
Number
‘000
166,000
–
(10,000)
156,000
184.3p
–
208.0p
182.8p
2008
Number
‘000
189,000
(10,000)
(13,000)
2008
Weighted
average
exercise
price
184.6p
208.0p
171.0p
166,000
184.3p
156,000
182.8p
166,000
184.3p
Outstanding at 1 January
Forfeited/lapsed
Exercised
Outstanding at 31 December
Exercisable at 31 December
There were no share options granted during the year (2008: £nil).
2009
2009
Weighted
average
exercise
price
118.5p
163.6p
208.0p
Number
‘000
12,500
63,500
80,000
100p –149p
150p –199p
200p –250p
2009
2009
Weighted Weighted
average
average
remaining
remaining
life
life
(expected) (contractual)
Weighted
average
exercise
price
0.0
0.0
0.0
0.3
1.9
4.3
118.5p
163.6p
208.0p
2008
Weighted
average
remaining
life
2008
Weighted
average
remaining
life
(expected) (contractual)
0.0
0.0
0.3
1.3
2.9
5.3
Number
‘000
12,500
63,500
90,000
2008
2008
The weighted average share price for options exercised in the period was 208.0p (2008: 171.0p). The total charge during the year for
employee share based payment plans was £22,000 (2008: £23,000), all of which related to equity-settled share based payment transactions.
page
73
Notes to the Financial Statements
for the year ended 31 December 2009
25 Treasury shares
Group and Company
As at 1 January 2009
Purchase of own shares
Re-issue of shares
As at 31 December 2009
£’000
138
–
(21)
117
During the year the Group repurchased nil (2008: 58,400) 10p ordinary shares and re-issued 10,000 (2008: 13,000) of these under employee
share option schemes. The Group currently holds 35,400 shares in Treasury.
26 Other reserves
Group
Balance at 1 January 2008
Depreciation transfer – gross
Depreciation transfer – tax
Share based payment charge
Currency translation
Balance at 31 December 2008
Depreciation transfer – gross
Depreciation transfer – tax
Share based payment charge
Currency translation
Balance at 31 December 2009
Land and
buildings
revaluation
£’000
Currency
translation
£’000
Share
based
payment
£’000
Other
reserves
£’000
910
(12)
2
–
–
900
(12)
2
–
–
890
(7)
–
–
–
43
36
–
–
–
(14)
22
24
–
–
23
–
47
–
–
22
–
69
Total
£’000
1,180
(12)
2
23
43
1,236
(12)
2
22
(14)
253
–
–
–
–
253
–
–
–
–
253
1,234
The land and buildings revaluation reserve is the reserve created under UK GAAP where the land and buildings were revalued in 1992. On
adoption of IFRS the Group took the exemption conferred by IFRS 1 to treat this revalued amount as deemed cost on transition because
it approximated to fair value at that time. The release between the revaluation reserve and the profit and loss reserve is the release to
distributable reserves of the additional depreciation on revaluation.
Other than the revaluation reserve, there are no restrictions on the distribution of the reserves.
Company
Other reserves of £69,000 (2008: £47,000) represent provision for share based payment as shown in the above table.
page
74
27 Retained earnings
At 1 January 2008
Profit for the year
Dividends paid in 2008
Depreciation transfer on land and buildings net of tax
Actuarial losses net of tax
At 31 December 2008
At 1 January 2009
Profit/(loss) for the year
Dividends paid in 2009
Depreciation transfer on land and buildings net of tax
Actuarial losses net of tax
At 31 December 2009
Group
£’000
Company
£’000
25,124
1,505
(1,531)
10
(1,022)
11,519
13
(1,531)
–
–
24,086
10,001
24,086
1,556
(1,526)
12
(4,136)
10,001
(23)
(1,526)
–
–
19,992
8,452
28 Commitments
Capital commitments
Capital expenditure contracted for at the balance sheet date but not yet incurred is as follows:
Property, plant and equipment
Intangible assets: Computer software
Operating lease commitments
Group
Company
2009
£’000
696
33
729
2008
£’000
1,632
220
1,852
2009
£’000
2008
£’000
–
–
–
–
–
–
The Group has financial commitments in respect of non cancellable operating leases of plant and machinery for which the payments
extend over a number of years as follows:
Payments under operating leases charged against income during the year
Future aggregate minimum commitments under non cancellable operating leases:
No later than 1 year
Later than one year and no later than 5 years
Group
Company
2009
£’000
2008
£’000
2009
£’000
2008
£’000
31
4
3
50
17
11
–
–
–
–
–
–
page
75
Notes to the Financial Statements
for the year ended 31 December 2009
29 Related party transactions
Details of related party transactions for the Group are shown in the Directors’ Report, Report of the Remuneration Committee and in the
Notes to the financial statements appropriate to the type of transaction being dealt with.
The Directors do not consider the Company to have an ultimate controlling party.
Company
Details of related party transactions involving the Company were as follows:
Associates
Dividends received from Furlong Mills Limited
Subsidiaries
Management charge to Churchill China, Inc
Interest received from Churchill China, Inc
Interest received from Churchill China (UK) Limited
Loans repaid – Churchill China (UK) Limited
Loans outstanding as at the year end (mainly Churchill China (UK) Limited
2009
£’000
–
6
–
5
1,686
8,640
2008
£’000
–
7
1
18
1,684
10,318
30 Financial instruments by category
The accounting policies for financial instruments have been applied to the line items in the accounts. All financial assets and liabilities
including cash and cash equivalents are classified as loans and receivables, with the exception of financial assets identified for sale, in
both 2009 and 2008, as disclosed in note 17.
page
76
Five Year Financial Record
Turnover
Operating profit before exceptional items
Share of results of associate net of impairment
Finance income/(cost)
Profit on ordinary activities before profit on disposal of fixed asset
and exceptional items
Exceptional items
Profit on disposal of property
Profit before taxation
Income tax expense
Income tax expense – exceptional
Profit after taxation
Dividends
Net assets employed
Ratios
2005
UK GAAP
£’000
44,835
2,696
(21)
(114)
2,561
–
269
2,830
(152)
–
2006
IFRS
£’000
45,930
2,795
(7)
294
3,082
784
1,876
5,742
(1,631)
–
2007
IFRS
£’000
46,930
3,230
120
694
4,044
–
798
4,842
(1,147)
–
2,678
4,111
3,695
1,505
(1,194)
(1,217)
(1,375)
(1,531)
22,446
25,653
29,731
28,612
2008
IFRS
£’000
41,969
2,804
(71)
629
2009
IFRS
£’000
41,705
2,288
(18)
(201)
3,362
2,069
–
–
3,362
(938)
(919)
–
–
2,069
(513)
–
1,556
(1,526)
24,536
5.5%
14.3
14.3
Operating margin before exceptional items
Basic earnings per share (p)
Adjusted basic earnings per share (p)
6.0%
24.7
17.6
6.1%
37.7
20.5
6.9%
33.8
26.5
6.7%
13.8
22.2
The adjusted basic earnings per share is based on the profit on ordinary activities after taxation and adjusted to take into account exceptional
items, profit on disposal of fixed assets and the recognition of related deferred tax assets. The above figures for the year ending 31 December
2006 have been adjusted to reflect the introduction of International Financial Reporting Standards.
page
77
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting of Churchill China plc will be held at Marlborough Pottery, High Street, Sandyford,
Tunstall, Stoke-on-Trent on Wednesday 19 May 2010 at 11.30 am for the following purposes:
Ordinary Business
To consider and, if thought fit, to pass the following resolutions which will be proposed as ordinary resolutions:
1.
That the reports of the Directors and the Auditors and the Financial Statements for the year ended 31 December 2009 be received.
2.
That no further dividend be payable in respect of the year ended 31 December 2009.
3.
That David O’Connor be re-elected as a Director.
4.
That Iain Hicks be re-elected as a Director.
5.
That the Auditors, PricewaterhouseCoopers LLP, be re-appointed and that the Directors be authorised to fix their remuneration for the
year ending 31 December 2010.
6.
That the Directors’ Remuneration Report for the year ended 31 December 2009 be approved.
Special Business
To consider and, if thought fit, to pass the following resolutions which will be proposed as special resolutions:
7.
That:
(a)
the Directors be and they are hereby empowered under Section 570 of the Companies Act 2006 (“the Act”) to allot equity securities
(as defined in Section 560 of the Act) for cash under the authority conferred by a resolution dated 21 May 2008, as if Section 561 of
the Act did not apply to such allotment, provided that this power shall be limited to:-
(i) the allotment of equity securities in connection with an offer of equity securities to:
(1) ordinary shareholders in proportion ( as nearly as may be) to their existing holdings; and
(2) holders of other equity securities, if this is required by the rights of those securities, or, if the Directors consider it
necessary as permitted by the rights of those securities, but subject to such exclusions and other arrangements as the
Directors may consider necessary or desirable to deal with fractional entitlements, record dates, treasury shares or any
legal, practical or regulatory problems under the laws of any territory (including the requirements of any regulatory body or
stock exchange) or any other matter; and
(ii)
the allotment of equity securities (otherwise than as mentioned in sub-paragraph (a) of this resolution) up to an aggregate
nominal amount of £109,579;
(b)
this power shall cease to have effect when the authority given by the resolution dated 21 May 2008 is revoked or expires but
during this period the Company may make an offer or agreement which would or might require equity securities to be
allotted after this authority expires and the Directors may allot equity securities in pursuance of that offer or agreement
notwithstanding that the authority has expired;
(c)
this power applies in relation to a sale of shares which is an allotment of equity securities by virtue of Section 560(2)(b) of the Act
as if the words “under the authority conferred by a resolution dated 21 May 2008” were omitted from the introductory wording to
this resolution.
page
78
8.
That the Company be generally and unconditionally authorised for the purposes of Sections 693 and 701 of the Act to make market
purchases (within the meaning of Section 693(4) of the Act) of ordinary shares of 10p each in the capital of the Company (“Ordinary
Shares”) on such terms and in such manner as the Directors of the Company may from time to time determine, provided that:
(a)
the maximum aggregate number of Ordinary Shares hereby authorised to be purchased is 1,095,797;
(b)
the minimum price which may be paid for an Ordinary Share, exclusive of all expenses, shall be 10p;
(c)
the maximum price which may be paid for an Ordinary Share, exclusive of all expenses, cannot be more than an amount equal to
the higher of:
(i) 5 per cent above the average of the middle market quotations for an Ordinary Share as derived from the Alternative Investment
Market section of the London Stock Exchange Daily Official List for the five business days immediately preceding the date on
which such Ordinary Share is purchased; and
(ii) the price stipulated by Article 5(1) of Commission Regulation (EC) No 2273/2003 (the Buy-back and Stabilisation Regulation);
(d) unless previously renewed, varied or revoked, the authority hereby conferred shall expire at the conclusion of the Company’s next
Annual General Meeting or 18 August 2011, whichever is the earlier; and
(e)
the Company may prior to the expiry of the authority hereby conferred make a contract or contracts to purchase Ordinary Shares
under such authority which will or may be executed wholly or partly after the expiry of such authority.
9.
That the amended Articles of Association produced to the meeting and initialled by the Chairman of the meeting for the purpose of
identification be adopted as the Articles of Association of the Company in substitution for, and to the exclusion of, the existing Articles of
Association.
10. That a general meeting other than an annual general meeting may be called on not less than 14 clear days’ notice.
By Order of the Board
D J S Taylor
Company Secretary
Dated 21 April 2010
Registered Office
Marlborough Pottery
High Street
Tunstall
Stoke-on-Trent
ST6 5NZ
Registered Number 2709505
The Directors of the Company consider that all the proposals to be considered at the Annual General Meeting are in the best interests of
the Company and its members as a whole and are most likely to promote the success of the Company for the benefit of its members as a
whole. The Directors unanimously recommend that you vote in favour of all the proposed resolutions.
page
79
Notes
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
Members are entitled to appoint a proxy to exercise all or any of their rights to attend and to speak and vote on their behalf at the meeting. A shareholder
may appoint more than one proxy in relation to the AGM provided that each proxy is appointed to exercise the rights attached to a different share or shares
held by that shareholder. A proxy need not be a shareholder of the Company. A form of proxy which may be used to make such appointment and give proxy
instructions accompanies this notice. Instructions for use are shown on the form. If you do not have a form of proxy and believe that you should have one, or
if you require additional forms, please contact our registrars, Equiniti, on 0871 384 2287. Calls to this number from a BT landline cost 8p per minute; other
providers’ costs may vary. If calling from overseas, please call +44 (0)121 415 7047. Lines are open 8.30am – 5pm, Monday – Friday. To appoint more than
one proxy, you may photocopy the proxy form .
To be valid, any form of proxy or other instrument appointing a proxy must be received by post or (during normal business hours only) by hand at the offices
of the Company’s registrars, Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA, no later than 11.30 am on 17 May 2010. If you
return more than one proxy appointment, that received last by the Registrar before the latest time for the receipt of proxies will take precedence. You are
advised to read the terms and conditions of use carefully.
The return of a completed form of proxy will not prevent a shareholder attending the AGM and voting in person if he/she wishes to do so.
Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all of its powers as a member
provided that they do not do so in relation to the same shares.
Any person to whom this notice is sent who is a person nominated under Section 146 of the Act to enjoy information rights (a “Nominated Person”) may,
under an agreement between him/her and the shareholder by whom he/she was nominated, have a right to be appointed (or to have someone else
appointed) as a proxy for the AGM. If a Nominated Person has no such proxy appointment or does not wish to exercise it, he/she may, under any such
agreement, have a right to give instructions to the shareholder as to the exercise of voting rights.
The statement of the rights of shareholders in relation to the appointment of proxies in notes 1 and 2 above does not apply to Nominated Persons. The
rights described in these paragraphs can only be exercised by shareholders of the Company.
To be entitled to attend and vote at the AGM ( and for the purpose of the determination by the Company of the votes they may cast), shareholders must
be registered in the Register of Members of the Company at 11.30 am on 17 May 2010 (or, in the event of any adjournment, on the date which is two days
before the time of the adjourned meeting). Changes to the Register after the relevant deadline shall be disregarded in determining the rights of any person
to attend and vote at the meeting. There are no other procedures or requirements for entitled shareholders to comply with in order to attend and vote at the
AGM. Voting at the meeting will be conducted by way of a show of hands, unless a poll is correctly called for.
As at 21 April 2010 ( being the last practicable date prior to publication of this Notice), the Company’s issued share capital consists of 10,957,976 ordinary
shares, carrying one vote each. Therefore, the total voting rights in the Company as at 21 April 2010 are 10,957,976.
Under Section 527 of the Act, members meeting the threshold requirements set out in that Section have the right to require the Company to publish on a
website a statement setting out any matter relating to: (i) the audit of the Company’s accounts (including the auditor’s report and the conduct of the audit)
that are to be laid before the AGM; or (ii) any circumstance connected with an auditor of the Company ceasing to hold office since the previous meeting at
which annual accounts and reports were laid in accordance with Section 437 of the Act. The Company may not require the shareholders requesting any
such website publication to pay its expenses in complying with Sections 527 or 528 of the Act. Where the Company is required to place a statement on a
website under Section 527 of the Act, it must forward the statement to the Company’s auditor not later than the time when it makes the statement available
on the website. The business which may be dealt with at the AGM includes any statement that the Company has been required under Section 527 of the Act
to publish on a website.
Pursuant to Section 319A of the Act, the Company must cause to be answered at the AGM any question relating to the business being dealt with at the AGM
which is put by a member attending the meeting, except in certain circumstances, including if it is undesirable in the interests of the Company or the good
order of the meeting that the question be answered or if to do so would involve the disclosure of confidential information.
Except as provided above, members who wish to communicate with the Company in relation to the AGM should do so using the following means: (1) by
writing to the Company Secretary at the Registered Office address; or (2) by writing to the Registrars, Equiniti Limited, Aspect House, Spencer Road,
Lancing, West Sussex, BN99 6DA. No other methods of communication will be accepted. In particular, you may not use any electronic address provided
either in this Notice or in any related documents for any purposes other than expressly stated.
12.
A copy of this Notice, and other information required by Section 311A of the Act, can be found at www.churchillchina.plc.uk .
13.
Copies of the Directors’ Service Contracts, Non-executive Directors’ letter of appointment and the proposed and current Articles of Association will be
available for inspection at the Company’s Registered Office address on weekdays (Saturdays and public holidays excepted) during business hours from the
date of this Notice until the conclusion of the AGM.
page
80
Explanatory Notes on the Resolutions
The notes on the following pages give an explanation of certain of the proposed resolutions.
1.
2.
Resolution 2: payment of the final dividend for the year ended 31 December 2009 of 9.2p per share was accelerated from its normal payment date in May to
March 2010 to preserve net value to shareholders. The total dividend paid in respect of the year ended 31 December 2009 was 14.0p per share (2008: 14.0p).
Resolutions 3 and 4: in accordance with the Company’s Articles of Association at every AGM a certain number of Directors must retire by rotation. Messrs.
O’Connor and Hicks are retiring by rotation and resolutions 3 and 4 seek approval for their re-election as Executive Directors. Biographical details for the
Directors are set out on page 15 of the Report and Accounts.
Each of the Directors has had a formal performance evaluation and the Board believes that each of them continues to be effective and demonstrates
commitment to the role.
3.
Under Section 570 of the Act, when new shares are allotted or treasury shares are sold for cash, they must first be offered to existing shareholders pro rata
to their holdings. This special resolution empowers the Directors to:
(a)
allot shares of the Company in connection with a rights issue, scrip dividend or other similar issue; and
(b)
otherwise allot shares of the Company, or sell treasury shares for cash, up to an aggregate nominal value of £ 109,579 (representing in accordance
with institutional investor guidelines, approximately 10% of the share capital in issue as at 21 April 2010) ( being the last practicable date prior to the
publication of this Notice) as if the pre-emption rights of Section 570 did not apply.
Except in relation to the Company’s employee share schemes, the Directors have no immediate plans to make use of this power. In line with best practice,
the Company confirms that it has not issued more than 7.5% of its issued share capital on a non-pro rata basis over the last 3 years.
This power shall cease to have effect when the authority given by the resolution dated 21 May 2008 is revoked or expires.
4.
Resolution 8 renews the Directors’ current authority to make limited market purchases of the Company’s ordinary shares. The power is limited to a
maximum aggregate number of 1,095,797 ordinary shares (representing approximately 10 per cent of the issued share capital excluding treasury shares as
at 21 April 2010 (being the last practicable date prior to publication of this Notice) and details the minimum and maximum prices that can be paid, exclusive
of expenses. Any purchases of ordinary shares would be made by means of market purchase through the London Stock Exchange.
The Directors undertake that the authority conferred by this resolution, if approved, will only be used if to do so would result in an increase in earnings per
share and be in the best interests of shareholders generally.
Current legislation allows companies to hold shares acquired by way of market purchase in treasury, rather than having to cancel them. The Directors
may use the authority to purchase shares and hold them in treasury ( and subsequently sell or transfer them out of treasury as permitted in accordance
with legislation) rather than cancel them, subject to institutional guidelines applicable at the time. Shares will only be purchased if to do so would result
in an increase in earnings per share and is in the best interests of shareholders generally. The Board has previously indicated its intention to continue to
return surplus cash to shareholders via on-market purchase of its own shares where it is not required to finance the organic expansion of the business,
acquisitions and dividend payments.
The authority conferred by this resolution will expire 18 months from the date of this resolution or, if earlier, at the conclusion of the next AGM.
5.
6.
Resolution 9 is a resolution to adopt new Articles of Association, (“the New Articles”). The principal changes to be introduced are summarised in the
Appendix to this notice. Other changes, which are of a minor, technical or clarifying nature have not been noted in the Appendix. The Articles are available
for inspection as stated in note 13 above.
Resolution 10 is required under the Shareholders’ Rights Regulations in order to preserve the ability of the Company to call general meetings on 14 days’
notice, with shareholders’ approval. The approval will be effective until the 2011 Annual General Meeting when it is intended that a similar resolution will be
proposed. The Company will also need to meet the requirements for electronic voting under the Regulations before it can call a general meeting on 14 days’
notice.
page
81
Appendix
EXPLANATORY NOTES OF DIFFERENCES BETWEEN THE CURRENT ARTICLES AND THE NEW ARTICLES
The principal changes being proposed in the New Articles are summarised below. Other changes, which are of a minor, technical or clarifying nature, have not
been noted.
1.
2.
Articles which duplicate statutory provisions
Provisions in the Current Articles which replicate provisions contained in the Companies Act 2006 (CA 2006) have, in the main, be removed in the New
Articles. This is in line with the approach advocated by the Government – to the effect that statutory provisions should not be duplicated in a company’s
constitution.
Voting by proxies on a show of hands
The Companies (Shareholders’ Rights) Regulations 2009 (Shareholder Regulations) have amended the CA 2006 so that it now provides that each proxy
appointed by a member has one vote on a show of hands unless the proxy is appointed by more than one member in which case the proxy has one vote for
and one vote against if the proxy has been instructed by one or more members to vote for the resolution and by one or more members to vote against the
resolution. The New Articles have been amended to reflect these changes.
3.
Directors’ Fees
The limit on the total aggregate amount of fees which the Company may pay to directors has been increased from £100,000 per annum to £200,000 per
annum. These fees are distinct from any salary or remuneration paid to executive directors and mainly capture fees payable to non-executive directors. The
responsibilities and time commitments of the non-executive directors have increased significantly since the current limit was last set and fees paid to non-
executive Directors are increasing in recognition of their greater role and responsibility.
4.
Vacation of office by directors
The Current Articles specify the circumstances in which a director must vacate office. The New Articles update these provisions to include that a director
must vacate office where (i) he holds office for a fixed term and that term expires and (ii) he ceases to be an employee of a group company (and is not
employed by any other group company) unless the board resolves otherwise.
5.
Chairman’s casting vote
The New Articles remove the provision giving the chairman a casting vote in the event of an equality of votes as this is no longer permitted under the
CA 2006.
6.
Adjournments
Under the CA 2006 as amended by the Shareholder Regulations, general meetings adjourned for lack of quorum must be held at least 10 clear days after
the original meeting. The Current Articles have been changed to reflect this requirement.
Arrangements at general meetings
The New Articles contain provisions which permit the chairman to make necessary arrangements if the meeting place specified for a general meeting
is not adequate to accommodate all persons entitled and wishing to attend. The New Articles also include provisions for the board to make appropriate
arrangements to ensure the security of a general meeting.
Borrowing powers
A number of presentational and descriptive amendments have been made to the borrowing power provisions in the New Articles.
Communications provisions
The New Articles contain updated communications provisions so as to make them more consistent with the “company communication provisions” in the
CA 2006.
7.
8.
9.
10.
CREST
The New Articles contain a number of new provisions designed to maximise the Company’s ability to use electronic systems for dealing in shares
through CREST.
11.
General
Generally, the opportunity has been taken to include clearer language in the New Articles and, in some areas, to conform the language of the New Articles
with that used in the model articles for public companies produced by the Department for Business, Enterprise and Regulatory Reform.
page
82
Shareholder Notes
page
83
Shareholder Notes
page
84
Churchill China plc
Marlborough Pottery, High Street, Tunstall, Stoke-on-Trent, ST6 5NZ
www.churchillchina.com
©Churchill China plc 2010