ANNUAL REPORT 2023
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Over 225 years of...
INNOVATION, PASSION & EXPERTISE
Within the hospitality sector, the choice of tableware must meet the highest standards for
presentation, practicality and performance. Over 225 years of innovation, passion and
expertise make Churchill the natural partner for providing tabletop solutions.
The Churchill brand has achieved global recognition and is a reputable supplier of the
highest quality ceramics. Respected for service excellence, product quality, environmental
responsibilities and product innovation.
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Churchill China plc Annual Report for the year ended 31 December 2023
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Contents
Five Year Performance
Financial Highlights
Directors, Secretary and Advisers
Chairman’s Statement
Strategic Report
Directors' Report
Corporate Governance
Remuneration Report
Nomination Committee Report
Audit Committee Report
Independent Auditors’ Report to the Members of Churchill China plc
Consolidated Income Statement
for the year ended 31 December 2023
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2023
Consolidated Balance Sheet as at 31 December 2023
Company Balance Sheet as at 31 December 2023
Consolidated Statement of Changes in Equity
for the year ended 31 December 2023
Company Statement of Changes in Equity
for the year ended 31 December 2023
Consolidated Cash Flow Statement
for the year ended 31 December 2023
Reconciliation of Operating Profit to Net Cash Inflow
from Operating Activities
Notes to the Financial Statements
for the year ended 31 December 2023
Five Year Financial Record
02
04
05
06
10
25
29
31
38
39
40
44
45
46
47
48
49
50
51
52
74
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Churchill China plc Annual Report for the year ended 31 December 2023
Five Year Performance
Revenue (£m)
£82.3m £0.2m
*Operating Profit (£m)
£10.3m £1.2m
90
80
70
60
50
40
30
20
10
0
82.5
82.3
67.5
60.8
2019
2020
2021
2022
2023
90
80
70
60
50
40
30
20
10
0
82.5
82.3
67.5
60.8
36.4
2019
2020
2021
2022
2023
12
10
8
6
4
2
0
11.2
10.3
9.1
11.2
10.3
9.1
16.7
6.1
0.9
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
2.5
6.1
0.9
20
15
10
5
0
10.1
11.1
12.4
10.1
11.1
6.0
10.8
9.1
16.7
20
15
10
5
0
11.2
12.4
12
10
8
6
4
2
11.2
12
10
8
6
4
2
0
2.5
0.8
2019
2020
2021
2022
0
2023
2019
2020
2021
2022
2023
0.8
2019
2020
2021
2022
2023
10.8
9.1
2020
42%
36%
11%
11%
6.0
2021
••%
••%
••%
••%
UK
EU
North
America
ROW
2020
2021
42%
36%
11%
11%
2020
47%
53%
••%
••%
••%
••%
2021
ROW
••%
••%
UK
EU
North
America
Value Added Sales
Standard Sales
2020
2021
47%
53%
••%
••%
Value Added Sales
Standard Sales
0
20
40
60
80
100
0
20
40
60
80
100
82.5
82.3
82.5
82.3
11.2
10.3
9.1
11.2
10.3
9.1
16.7
90
80
70
60
50
40
30
20
10
0
67.5
60.8
67.5
60.8
36.4
36.4
90
80
70
60
50
40
30
20
10
0
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
12
10
8
6
4
2
0
6.1
6.1
10.1
11.1
12.4
0.9
0.9
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
2.5
2019
2020
2021
2022
2023
12
10
8
6
4
2
0
*Operating Margin (%)
12.4% 1.3%
*Profit before Income Tax (£m) £10.8m £1.7m
20
15
10
5
0
16.7
2.5
10.1
11.1
12.4
2019
2020
2021
2022
2023
12
10
8
6
4
2
0
* Excluding exceptional items.
Other Highlights
11.2
10.8
9.1
6.0
0.8
2019
2020
2021
2022
2023
12
10
8
6
4
2
0
• Adjusted basic EPS* increased to 70.2p (2022: 66.9p)
• Cash generated from operations £8.3m (2022: £4.9m) – significant levels of capital expenditure, focused on improving productivity and yields.
• Total cash and financial assets of £13.9m (2022: £14.7m)
2019
2020
2021
2022
2023
11.2
10.8
9.1
2020
2021
6.0
••%
••%
••%
••%
••%
••%
••%
••%
••%
••%
42%
36%
11%
11%
42%
36%
11%
11%
47%
53%
UK
EU
North
America
ROW
2020
2021
UK
EU
North
America
ROW
2020
2021
2020
Value Added Sales
Standard Sales
2021
47%
53%
••%
••%
Value Added Sales
Standard Sales
0
20
40
60
80
100
0
20
40
60
80
100
12
10
8
6
4
2
0
0.8
36.4
20
15
10
5
0
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Churchill China plc Annual Report for the year ended 31 December 2023
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“
The Company
continues to deliver
on its strategy of
delivering a quality,
differentiated product.”
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Churchill China plc Annual Report for the year ended 31 December 2023
Financial Highlights
for the year ended 31 December 2023
Revenue
Operating profit before exceptional items
Exceptional items
Operating profit
Net finance income / (cost)
Profit before exceptional items and income tax
Exceptional items
Profit before income tax
Dividends paid
Key ratios
Operating margin before exceptional items
Earnings before interest, tax, depreciation, amortisation and exceptional items (£000)
Earnings before interest, tax, depreciation and amortisation (£000)
Adjusted basic earnings per share*
Basic earnings per share
Interim dividend per share paid
Final dividend per share proposed
2023
£’000
82,339
10,252
-
10,252
536
10,788
-
10,788
3,519
12.4%
13,762
13,762
70.2p
70.2p
11.0p
25.0p
2022
£’000
82,528
9,142
547
9,689
(88)
9,054
547
9,601
3,062
11.1%
12,125
12,672
66.9p
71.7p
10.5p
21.0p
Operating margin before exceptional items is calculated as operating profit before exceptional items as a percentage of revenue.
*Adjusted basic earnings per share are calculated after deduction of the post-tax effect of exceptional items.
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Churchill China plc Annual Report for the year ended 31 December 2023
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Directors, Secretary and
Advisers
Executive Directors
D M O’Connor
J A Roper
M Cunningham
Non-Executive Directors
R G W Williams (Chairman) +
B M Hynes * •+
J M Moore *•+
C J Stephens * •+
M K Payne* •+
Company Secretary and Registered Office
M T Sinclair ACA
No.1, Marlborough Way
Tunstall
Stoke-on-Trent
Staffordshire
ST6 5NZ
* Member of the Audit Committee
• Member of the Remuneration Committee
+ Member of the Nomination Committee
Independent Auditors
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
One Chamberlain Square
Birmingham
B3 3AX
Bankers
Lloyds Bank plc
8th Floor
40 Spring Gardens
Manchester
M2 1EN
Solicitors
Addleshaw Goddard
One St Peter’s Square
Manchester
M2 3DE
Stockbrokers and Advisers
Investec Bank plc
30 Gresham St
London
EC2V 7QP
Registrars
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6ZX
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Churchill China plc Annual Report for the year ended 31 December 2023
Chairman’s
Statement
“
The Company continues to deliver on its strategy of delivering a quality, differentiated
product and with a service level unmatched in the industry. All this whilst generating
sustainable, growing returns for investors.”
Operational and commercial performance
I am pleased to report that the Company made good progress in the
year and delivered on the Board’s profit expectations. This was despite
tough macro-economic headwinds, which have significantly impacted
the hospitality, consumer and retail sectors. Whilst profit before tax at
£10.8m (2022: profit before tax and exceptional expenses £9.1m) has
grown by an impressive 18.7%, this has been achieved despite broadly
flat revenues compared with 2022. This impressive growth has come
through strong operating margins, driven by a focus during the year on
factory performance.
Our end customer, the hospitality market, has been undergoing major
upheaval, with significant input cost increases in labour, energy and
food, leading to a reduction in capital expenditure by the major pub
and restaurant groups. This has impacted rollouts of new installations of
tableware, but has also suppressed demand, particularly in H2 through
closures of outlets, including some at the higher end.
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Churchill China plc Annual Report for the year ended 31 December 2023
Chairman’s
Statement
Our excellent performance in 2023 however highlights the Company’s
strength in its core markets and the importance of our unique business
model which relies on repeat replenishment business driven by high
levels of customer service, which includes very short delivery times.
The Company has continued to further invest in this key strength of our
business throughout the year by building stock, in most cases allowing
same day dispatch.
farewell to David Taylor as CFO after over 30 years with the Company
and to my predecessor Alan McWalter. We have also welcomed Martin
Payne as Non-Executive Director, replacing Brendan Hynes who leaves
the Board at the AGM after 10 years on the Board. Martin will become
Senior Independent Director and Audit Committee Chair following this
results announcement. We have also welcomed Michael Cunningham as
our new CFO during 2023.
We have continued to make progress in returning our manufacturing
yields to approaching pre-pandemic levels and this has been a strong
contributor to the operating margin improvement. We invested heavily
in equipment for improved efficiency during the year and continuing this
productivity journey remains the focus. We aim to continue improving our
operations and advance towards our profitability targets during 2024.
Employees
Our employees at all levels have shown great commitment and skill to
achieve the results of 2023. We have needed considerable flexibility in
our operations as we adjusted to the varying levels of demand in the
year. We thank all employees for their dedication and continued loyalty
to Churchill China.
Dividend
We are pleased to propose a final dividend of 25.0p per share, giving a
total dividend of 36.0p per share for the year, a 14.3% increase on the
31.5p paid in relation to 2022. The final dividend will be payable on
17 June 2024 to shareholders on the register on 17 May 2024.
The dividend is in line with our policy of growing returns to shareholders
whilst ensuring that dividend payments are not risky or excessive, and
reflects our ongoing confidence in the progress of the business.
Growing the future
The Company strategy has always been to deliver sustainable and
steady growth in areas where we have a good market understanding
and the opportunity to build scale through innovation and differentiation
across our product range. The Company will continue its growth in
export, particularly in Europe which has become our largest market and
where we see significant opportunities for further sales expansion. We
also selectively review other markets for growth opportunities.
We intend to continue our £4m-£5m per annum capital expenditure
programme which is factory-focused on long term productivity and
process improvement, as well as energy efficiency and product
sustainability, placing the Company in the right place for the future.
Board changes
I joined the Board of Churchill China in 2022, and we announced our
succession activities in the Annual Report last year. These included
my assuming the role of Chairman at the 2023 AGM and also bidding
Environmental, Social and Governance (‘ESG’)
Our approach to ESG has moved forward substantially over the year.
The senior management focus outlined in last year’s report has allowed
the development of our broad strategy and the identification of short-,
medium- and long-term actions supporting our continued progress. As a
major energy user and large employer much of our work has focused on
the Environment and Social pillars, but we have also made good progress
in all our areas of focus.
In relation to our energy footprint, we have initiated a number of projects
which have given us a much clearer idea of how we may move towards
Net Zero over the longer term. These initiatives should deliver benefits that
will deliver steady progress towards our sustainability objectives.
Outlook
We have delivered an improvement in operating profit and margins
during the year despite flat revenues and strong headwinds particularly in
our hospitality markets. Volumes were down year on year, driven by softer
demand in the second half of 2023. We believe this trend will continue
into the first half of 2024 and the first quarter of 2024 has seen demand
as expected. We are confident that the continuous improvement in
our product range and market position, backed up by our ongoing
investment programme, has placed the Company in a strong position to
take advantage of a market recovering from current weakness, which
we expect to see in the second half of 2024.
Robin G.W. Williams
Chairman
9 April 2024
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Churchill China plc Annual Report for the year ended 31 December 2022
09
09
“ We have delivered
an improvement in
operating profit and
margins during the
year.”
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Churchill China plc Annual Report for the year ended 31 December 2023
Strategic
Report
The Directors present their Strategic Report for the Group for the year
ended 31 December 2023.
Principal activities
Churchill China is a UK based manufacturer of performance tableware
primarily supplying into the hospitality sector. Utilising a high-performance
vitreous body the Company leverages its technical advantages to
deliver superb value in use and value for money to its end users.
In addition to the supply of tableware the Group supplies the majority of
the UK pottery industry with materials for the manufacture of ceramics.
The Group utilises its extensive technical abilities to supply high quality
body materials, glaze and colour.
Business model
The Group supplies customers worldwide with a range of high-
performance tabletop products primarily ceramic tableware. Most of
these revenues come from our UK manufacturing facilities although we
do supplement these with some outsourced products.
We focus primarily on the hospitality sector which generates most of our
revenues. This focus is driven by the attractiveness of the sector, with
revenues seen as long term, recurring and, whilst vulnerable to short term
economic fluctuations, reasonably stable.
The market is highly fragmented and so our strategy of identifying strong,
in-territory distributors to work with, allows us to deliver to a wide range of
customers. From large chains through to small independent restaurants
we are perfectly placed to offer innovative product and design to give a
competitive, differentiated advantage to our customers.
The growth strategy for the Company is to focus on those areas currently
underserved by our competitors with regards to customer service. Our
ability to fulfil customer orders, in the vast majority of cases, in under 48
hours gives us a significant competitive advantage.
Culture and Values
As a Company with a long history, our values are well defined. Innovation,
cooperation, uncompromising customer service, trust and honesty are
the core values that drive our behaviours on a day-to-day basis.
Our decision making is based on taking decisions that are aligned with
adding long term value to our shareholders, whilst being mindful of our
responsibilities to our wider stakeholders.
The business culture is driven by the Executive leadership team and
hinges on openness and giving our colleagues the space to develop
and grow. While there are controls in place to protect the business,
colleagues are given the space to make decisions without fear of failure.
The average term of service of our staff is 11.1 years and we believe
this highlights our ability to create a good working environment for our
colleagues.
The Board believe that this approach allows our colleagues to become
the leaders of the future by developing their skills and abilities.
Finally, the Company engages on multiple levels with our customers,
engaging at an early stage of the design process to get the market view
of proposed products, and delivering on our promise of “performance
delivered”.
Business environment
Hospitality markets across the world have performed below expectations
in 2023. There have been well documented pressures on consumer
spending during the year, driven by high inflation and consequently
increased interest rate environment. Despite this our market position
has continued to develop and our research suggests that we have
continued to increase market share in a reduced overall market. The
summer period, particularly in the UK, was a lacklustre trading period.
Poor weather and the lack of specific cultural activities lead to a poor
trading environment for the hospitality sector although a stronger Q4 did
materialise.
Sales volumes during the year were down from 2022, however the
price increases implemented in 2022 fed through to deliver broadly flat
revenues for the year. The main weaknesses were in the UK and Rest of
the World, with Europe remaining in line with expectations.
Our Materials business, Furlong Mills, which produces ceramic bodies
from raw materials, has performed well in the year as both Churchill and
the wider ceramics industry increased stocks.
We have held prices during the year after 2022’s increases, utilising
improvements in energy pricing and efficiencies to compensate for
other input price inflation. Only a modest rise has been implemented in
2024 despite continuing input cost headwinds such as the £1.1m cost of
increased National Living Wage increment.
During the year we delivered over 500 additional SKU’s of new product,
taking our product portfolio to over 3500 SKU’s following 2 years of
reduced development activity post COVID and our intention is to
continue delivering more innovation, differentiation and growth in the
coming year.
Promoting the success of the Company
It is the duty of the Directors under s172 of the Companies Act 2006
to promote the long-term success of the Company to the benefit of
members as a whole and acting fairly with regard for the interests of
other stakeholders in the business.
Other stakeholders include employees, customers, suppliers, our pension
fund members, our local and the wider community, government, and
other regulatory bodies.
Further information on these areas may be found in the Environmental,
Social and Governance section on page 15 later in the Annual Report.
Churchill has been in existence since 1795 and always taken a long-
term approach to business, particularly in relation to investment and in
understanding the opportunities open to us and the risks to which we
are exposed. To operate a successful and sustainable business model
it is necessary to ensure that all the contributors to the success of the
business understand their place within it and feel that the Company
operates ethically and fairly in its dealings with them.
The Board has regard to the interests of all stakeholders in its discussions
and reaches balanced decisions with the sustainability of the business
uppermost in its considerations. Churchill maintains a financial model
that is aligned with this objective such that capital allocation decisions,
where possible, do not unfairly prioritise the interests of one group of
stakeholders over others. The Board is aware of the need to support
regular revenue and capital investment in the development of our
business, and we orientate our operations accordingly.
We aim to deliver well designed, performance products and outstanding
service at appropriate price levels to our customers. At the same time,
we acknowledge that to meet these levels of customer service we are
reliant upon good relationships with a well-motivated workforce and fair
and balanced relationships with a range of suppliers. We understand
that we have a responsibility to pay appropriate levels of taxation and
to support the future pensions of our scheme members. We consider our
dividend policy carefully in the light of the overall needs of the business
and the interests of other stakeholders. Our policy is formulated to ensure
that dividend payments are not excessive in relation to profits and do
not introduce excessive levels of risk in relation to the sustainability of the
business.
Churchill aims to manage its effect on our local community and the
environment. We have engaged with the community on an ongoing
basis through charitable and educational support. The business operates
several initiatives aimed at minimising our waste products, recycling
waste where possible and in the reduction of our energy usage and
carbon footprint. We have made several investments and process
changes to reduce our use of energy.
The business has regular contact with our workforce through both
formal and informal mechanisms. The scale of our business and our
open culture allows the Board and management to engage with our
employees on a day-to-day basis and employees are encouraged to
raise issues. We have a recognised trade union representing most of our
weekly paid employees and we meet regularly with their representatives.
However, we believe that other initiatives including on site briefings,
communication boards and regular news updates provide the most
important means of engaging with our workforce. We believe that our
workforce is engaged and motivated.
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“ We have invested
heavily in equipment
for improved efficiency
during the year.”
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Churchill China plc Annual Report for the year ended 31 December 2023
Strategic
Report
We meet with suppliers on a regular basis to provide information in
relation to our forward plans and review performance. As in other
elements of our business we enjoy long standing relationships with most
of our suppliers. On average we pay suppliers within 35 days (2022: 35
days) of invoice. We believe our suppliers regard Churchill as a good
customer.
The Board consults regularly with shareholders through formal meetings,
company visits and informal discussions.
Voting on resolutions at the 2023 Annual General Meeting was largely
positive with over 96% of votes cast being in favour of the resolutions put
to the meeting. The Board reviews voting carefully after each Annual
General Meeting.
Resources and relationships
Our key resources remain our employees and customers, our technical
and business skills, our long heritage of manufacturing and willingness to
embrace new methods to deliver an outstanding service.
One of the key elements of our sustainable market advantage is the
success of our innovation process. We have developed this process to
research and identify market trends and design new products to satisfy
these trends.
Churchill, along with other UK manufacturers, has a significant technical
advantage in the nature of the product we offer to our markets. Our
product offers significant benefits in terms of durability and overall
lifetime cost to users. This technical advantage has been developed over
many years and we hold significant intellectual property in our materials
and processes.
The Group operates from two sites in Stoke on Trent, England, a
leading centre for ceramic excellence worldwide. This gives us access
to key suppliers, technical support and experienced staff. Our main
manufacturing plant and logistics facilities have benefitted from
significant and regular long-term investment to improve our business’s
efficiency and effectiveness. We also operate from several smaller
locations and representative offices around the world.
Our employees also give us significant advantage. We believe we
recruit, retain, and develop high quality individuals at all levels within
the business who contribute towards the success and growth of the
Company and maintain our core values. We have maintained our
investment in training and development to provide more fulfilling
roles for our staff and improve the effectiveness and productivity of
our workforce. The recruitment difficulties and impact on efficiency
experienced during 2022 demonstrates the effectiveness of our core
employee base and we have continued to implement a number of
initiatives to both develop and reward our colleagues to the benefit of
both them and the business.
We have long standing relationships with our customers. Whilst many of
these are not contractual, we continue to supply the same customers
year after year with products that meet their requirements. Our
customers value our technical ability, our service and our commitment to
high quality design and innovation.
Churchill has long enjoyed a market leading reputation for service. Our
operational plans are geared towards meeting high levels of on time
delivery both in the UK and overseas. We hold extensive inventories to
meet these service requirements and have emphasised flexibility and
responsiveness within our manufacturing process.
Strategy
The Group’s objective is to generate long term benefits to all
stakeholders in the business by the efficient provision of value to
customers through excellence in design, quality and service.
We aim to increase value we provide to our stakeholders through steady
increments to sales and margins, through alignment of our cost base with
profit opportunities and a focus on cash generation.
Our long-term aim is to build our presence in markets offering sustainable
levels of revenue and profitability. For several years this has led us
towards development of our position in hospitality markets worldwide.
Innovation remains important to support our ambition to develop our
business. We have invested significant resource in new staff and flexible
technology to increase our capability in this area. It is a key strategic
aim to design products that meet our end users’ requirements in terms
of performance, shape and surface design. Our target markets require
products that are aesthetically appealing whilst also performing to
appropriate customer and technical standards.
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 technical performance and in the systems which support the
fulfilment of our contract with our customers. We invest to maintain the
performance of our products and to extend our capabilities.
Customer service remains a major part of our strategy and the fulfilment
of customer expectations is critical to the maintenance of good
relationships. Our production and logistics facilities have been designed
to balance efficiency and flexibility within manufacturing to ensure that
we can respond quickly to unexpected demand levels and to meet
ambitious on time, in full, delivery targets. We invest regularly in these
facilities to maintain a market leading position in customer service.
Business model
Our business model is designed to allow us to identify markets where we
may profitably grow our revenues on a sustainable long-term basis. We
research customer product requirements and distribution structures in new
markets and, if they offer profit opportunities, invest to generate revenue,
margin and ultimately a return for the business and our stakeholders.
We continue to expect short to medium term growth to be weighted
towards export markets and particularly Europe, where we have a
developing distribution structure.
Our target remains to deliver progressive increases in the proportion
of added value products within our business. We invest steadily in
increasing our production capability and in improving our ability to offer
added value to our customers. This involves investment in new product
development as well as capital expenditure on productive capacity. We
expect to continue to invest for the long term in our UK manufacturing
facilities.
As a major energy user, we have recognised and acknowledged the
importance to our future operations of reducing our energy consumption
substantially. We have commenced a long-term process to develop
several initiatives to meet forward energy targets. A number of these
initiatives are underway. We are pleased with the potential impact from
these actions but recognise that this is a long-term process requiring
continuing focus.
As our business develops, we need different skills and a core part of our
model is to train, develop and recruit staff to meet these requirements.
Performance
A more detailed report on our performance is contained in the Financial
Statement on page 74.
Operationally the business has performed well, driving efficiencies
into the production process, and improving underlying profitability.
This has been tempered by the prevailing market conditions and
macroeconomic headwinds.
Revenue levels have been maintained due to the actions taken by the
Company, with a focus on yield and efficiency improvement, and gross
margin levels have continued to improve as the business has resolved
many of its staffing issues. During the year the Company’s headcount of
full-time employees increased, however this disguises the fact that the
number of staff working in the factory, including agency staff, reduced
by 136. This has enabled the Company to operate at better efficiency
levels, particularly in the second half of the year.
The business has continued to make progress against its strategic targets
with further market share growth in Europe, albeit on a slightly contracted
market.
The main focus of the business in 2023 was to significantly improve the
level of customer service and return to historic levels of delivery. To this
end the Company increased stock to significantly higher levels and
reduced order books back to levels not seen since 2019.
The Company also made significant progress in reversing the slowdown
in new product development that occurred during the pandemic and
subsequent period. 2023 saw the introduction of our largest product
launch with over 500 SKU’s launched.
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This has continued our progress towards product differentiation within
our product range and has been backed up by further expansion of our
distribution network.
invested in additional stocks of raw materials. We have increased our
capital expenditure programme supporting our long-term business plan.
Whilst markets have been under pressure from rapidly increasing input
costs the evidence still points to a bright future for the eating out market.
End users are reporting strong sales levels, albeit on reduced margins,
and are forecasting easing pressures on cost inflation.
Our Materials business, Furlong Mills, has performed well during the year
with its revenue and profitability increasing as the UK ceramics industry
recovered. Raw material cost rises have largely been recovered from
customers. The business has also contributed strongly to the technical
development of our Hospitality product.
Overall cash and deposit balances have reduced marginally over the
year, due to the aforementioned stock build and our normal investment
in capital expenditure, although we continue to enjoy a strong cash
position. Working capital has increased as inventories grew, and we
The Group’s defined benefit pension scheme position continued to
improve during the year and the trustees have taken action to protect
this position by hedging for inflation and interest rates. The Group has
assessed the recoverability of the net asset arising from the scheme
surplus and considers that, based on the Trust Deed and Scheme rules,
the surplus would be recoverable on cessation of the scheme.
Environmental, Social and Governance (ESG)
Following the framework established in 2022 our ESG Committee,
comprised of Executive Directors and Senior Management, have
continued to develop our approach and further embed the ESG
objectives and actions into our business planning. The ESG Committee
and subcommittee working parties have continued to make good
progress against the areas identified.
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Strategic
Report
The ESG Committee has been focusing on the identification of the
longer-term pressures that will affect the business in both the medium
term through to 2030 and trying to identify potential longer-term issues
through to 2050. Whilst these timeframes naturally mean that there is a
significant level of uncertainty in any issues identified, this strategy aligns
with the Company’s long-term approach to business.
The Group’s total use of energy grew by 27% as production levels
increased, however as a result of the increases in volume the business
has been able to operate at more energy efficient levels. In addition,
we have seen some benefit from the progressive implementation of
the energy initiatives introduced in the year to improve efficiency and
extend generation.
We use a significant amount of energy in our processes, and this is an
area of strategic focus of the business. Substantial progress has been
made in identifying efficiency, recovery, and generation initiatives across
our operations. We have researched proven and emerging technologies
to assess how these can potentially combine to a path to Net Zero,
whilst maintaining the performance characteristics of the technically
differentiated and durable product that we manufacture. This process
has included the initiation of a number of research projects in relation to
our materials and processes, contribution to industry initiatives and use of
specialist advice from suppliers and other experts.
The business employs over 700 people across two manufacturing sites
who work predominantly in an industrial environment. Our Health and
Safety procedures and systems have continued to manage what is an
important area for the business. Of particular focus has been our Furlong
Mills site which we acquired in 2019 and we are pleased that for the first
time, after a significant effort to improve, we have had no accidents
across the business at all levels.
Our Governance procedures have been subject to ongoing review and
particularly in supporting the demonstrable independence of our Non-
Executive Directors under the QCA Code. Whilst we do not believe there
has been any significant risk to shareholders, we have acted to increase
the number of independent Non-Executive Directors on our Board,
making one appointment in February 2023 and a further appointment
in January 2024. In addition, following the publishing of the new QCA
code in late 2023, the Board have decided to early adopt one of the
changes and begin placing all Directors up for annual election. We have
continued to develop and implement the Board succession planning
process and this will remain under constant review.
During 2023 the Board carried out an internal evaluation of its
effectiveness. No significant issues were highlighted and again the Board
will continue with this process.
The Company continues to operate a business model which is focused
on long term sustainable success, delivering returns to all stakeholders.
We will continue to develop and evolve our ESG agenda and over
time, will translate our goals and objectives into a published reporting
framework, with benchmarks, key performance indicators and our
progress against them. The following tables identify and update our goals
and actions to achieve them.
Energy and Carbon Reporting
As a business we have recognised the effect of our operations on
the environment and the importance of managing and reducing this
impact. We understand that we use significant amounts of energy as it is
central to the manufacture of our product.
However, we are also clear that we make ceramic tableware that is
highly durable and may be safely re-used many thousands of times.
Further details in relation to other aspects of our environmental
performance may be found later in the Annual Report commencing on
page 15.
We have a dedicated process aimed at reducing our use of energy. This
process has several points of focus, and it is an important part of both our
strategic planning and operational management.
The following information is produced in accordance with the
Streamlined Energy and Carbon Reporting requirements.
Tonnes of CO2
Scope 1 Direct
Scope 2 Indirect
Total
2023
Base
2023
REGO
2022
Base
2022
REGO
13,496
13,496
13,728
13,728
3,031
659
3,012
632
16,527
14,155
16,740
14,360
Intensity Metric: Scope 1 & 2 per
metric tonne of raw material input
Total UK energy Consumption
(MWh)
0.57
0.49
0.55
0.48
88,930
88,930
90,651
90,651
Total energy consumed during 2023 contains 179,000 KwH of energy
generated through solar arrays at our Marlborough site, to which no CO2
emissions are attributable. We expect this level of generation to increase
substantially during 2024.
The above information reflects data from the business’ UK facilities and
vehicles which represent substantially all the Group’s operations.
* REGO (Renewable Energy Guarantees of Origin, or green tariff) data above adjusts
CO2 figures for the effect of the move of the Group’s sites to the use of electricity
from renewable sources with effect from October 2021 for the Sandyford site and
October 2022 for the Furlong site.
Financial Review
Revenues during the year were broadly flat at £82.3m (2022: £82.5m).
Revenues were held due to price increases which flowed through from
2022, however sales volumes were down by 12%. Volume reduction was
seen across all markets with the Rest of the World, down 25%, and UK,
down 17%. Pleasantly Europe continued to show a robust performance.
Revenue (£m)
Ceramics
External Materials
sales
Total
UK
Export
Total
2023
74.2
8.1
82.3
34.0
48.3
82.3
2022
75.3
7.2
82.5
33.2
49.3
82.5
Change
-1.5%
12.5%
-0.2%
2.4%
-2.0%
-0.2%
As previously reported the gross margins in the Company have
continued to improve during the period. Year on year the Company
has significantly reduced its reliance on agency staffing in the factory,
preferring to transition the best of these into the permanent cohort with
the attendant improvements in productivity, efficiency, and production
yields this delivers. As a result, overall staffing in the factory has reduced
by 136 with the impact of this visible in the operating margin.
Profit before tax rose by £1.2m to £10.8m driven by this factory
improvement and in addition yields have returned to pre-pandemic
levels in areas of the factory, albeit with slightly more variability than
previously observed.
Adjusted basic earnings per share before exceptional income was 70.2p
(2022: 66.9p).
Reported profit after exceptional items but before income tax was
£10.8m (2022: £9.6m).
Basic earnings per share, after exceptional items, was 70.2p (2022: 71.7p),
this reduction in EPS was driven by higher corporation tax rates as well as
timing differences on completion of capital expenditure during the year.
The Company has, unusually, had a year of cash outflow. This has been
driven by significant capital expenditure of £5.3m (2022: £4.7m) which
has been primarily focused on improving productivity and yields in the
factory rather than increasing capacity. We also focused on increasing
our stock holdings in our UK, European and North American fulfilment
centres by £6.0m in order to increase customer service levels in market.
Stock in Furlong Mills was decreased by £1.4m as we ran down supplies
of a previously stockpiled material, this stock is now being run down
to normal levels. A payment of dividends totalling £3.5m and pension
contributions of £1.8m (2022: £1.8m) also contributed to the level of
outflows.
Following the three-year actuarial valuation of the Company pension
scheme, the fund is expected to show a surplus of assets over liabilities.
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Dividend
We are pleased to propose a final dividend of 25.0p per share, giving
a total dividend of 36.0p per share for the year, a 14% increase on the
31.5p paid in relation to 2022. This dividend will be payable on 17 June
2024 to shareholders on the register on 17 May 2024. The dividend is in
line with our policy of growing returns to shareholders and reflects our
ongoing confidence in the progress of the business.
Business
The business has performed well during the year, meeting its internal
targets on yield improvements. This has brought the underlying
performance of the business back towards pre-pandemic levels.
The first half of the year was framed by continuing issues around the
previously communicated staffing issues, however these started to in
ease in Q3 and by year end the Company had made significant inroads
to the reduction of agency staff in the business.
Demand in Q3 was weak with both the UK and Europe showing low
order volumes. Q4 did however follow the usual trends and significantly
outperformed Q3, even if still at a lower level than 2022.
Ceramics
Hospitality sales were flat for the year, highlighting the difficult market
that our customers are operating in. Profitability was however much
improved as production levels enabled a build back to expected
levels of stock. As a result, customer service levels have returned to
pre-pandemic status, with over 90 % of orders completed within two
days, including shipments fulfilled from our European and US distribution
centres.
We continue with our growth strategy of targeting export markets where
we have low existing market share, and which have the most opportunity
for expansion. Despite a slowdown in Q3 the Company is confident that
market share has been expanded in a tightening environment, leaving
us perfectly placed to take advantage when volumes return.
The year saw a continuation of the price pressures that impacted
profitability in 2022. An across the board pay award of 10% was
applied in April to counter the inflation pressures affecting many of
our colleagues. In addition, due to a risk-off strategy of hedging for 12
months forward, that the Company continues to apply, it was only in
the second half of the year that the Company started to see a positive
impact from reducing energy input costs.
Added value sales continued to be a major part of the Company’s
revenue, however whilst replacement sales have continued at previous
levels the number of installations has decreased as customers have
delayed investments due to interest rates and a marked focus on debt
reduction within the bigger groups. Much of the preparatory work
has been done on many of these projects and again the Company is
confident of securing many of these once the economic environment
improves.
Retail sales continue to be an area of minimal focus and amounted to
1.7% of sales (2022: 2.9%)
Materials
Furlong Mills continues to perform strongly with sales of £14.7m (2022:
£13.5m) an increase of 8.8% over 2022. During the year the focus at
Furlong has been the improvement of operations, particularly in the
area of Health and Safety, which has been an area of focus since the
acquisition. In the year the Company has had zero accidents showing a
massive improvement from the pre-acquisition period.
Operations
As previously noted, 2023 has shown a marked improvement in
production, with yields at key stages in our process returning to levels
approaching. Production levels have been much improved on 2022
allowing significant increases in stock holding.
The numbers of temporary staff within the business has reduced steadily
and the skills and capability of our core workforce has improved
progressively as experience levels increase and our training programme
delivers returns. Capital expenditure of £5.4m has primarily focussed on
delivery of productivity projects, a long-term focus of the business going
forward.
During the year the Company commissioned 4,500 solar panels,
delivering circa 1 MW of energy. During August 2023 this project
delivered all the energy for the site and delivered feed-in tariffs for a 5
day period.
The Company continues to take a risk off approach to energy hedging.
The Company assessment is that with future energy prices already below
forecasts and showing savings against 2023 the opportunity for upside
is minimal whilst downside risk, given the current geopolitical situation,
is significantly higher. We have therefore hedged at significant levels
through to Q2 2025 to lock in this position.
Environmental, Social and Governance (‘ESG’)
ESG remains an important part of the culture of Churchill China. As a high
energy use Company and one of the largest employers in the Stoke-on-
Trent area we are aware of our responsibilities to the wider community
and have made this a part of our DNA.
The Company’s strategy is to, where possible, ensure that doing the
right thing works for both ESG and for the bottom line. As a result, the
Company’s ESG strategy is focused on reducing the reliance on fossil
fuels by using renewable sources of energy production along with new
technology to reduce the actual usage of energy. These actions are only
taken where there is a clear fit with the Company’s investment strategy
and where returns are clearly defined. During the year the Company
finalised the installation of 4,000 solar panels at the factory which will
deliver up to 25% of the site’s electricity requirement during peak months.
Our approach to ESG has moved forward substantially over the year.
The senior management focus outlined in last year’s report has allowed
the development of our broad strategy and the identification of short-,
medium- and long-term actions supporting our forward progress. As a
major energy user and large employer much of our work has focused
on the Environment and Social pillars, but we have made progress in all
areas of our focus.
In relation to our energy footprint, we have initiated a number of projects
which have given us a much clearer idea of how we may move towards
Net Zero over the longer term. These initiatives should deliver benefits
that will deliver steady progress towards our sustainability objectives. Our
approach is based on a combination of improved energy efficiency in
the manufacture of our product and increased sustainable generation.
Importantly we believe that significant improvements can be made
through the reformulation of the materials we use and changes in
our production processes to allow manufacture using substantially
less energy input. We are working on a number of research and
development projects in this area utilising our own technical staff,
external experts and suppliers.
We have also implemented a number of initiatives in relation to our
workforce and our engagement with our local community. We have
always prioritised training and development of our workforce and
we have continued to invest in this area. Future plans emphasise the
improvement of our employee’s working environment.
We believe that our Governance procedures remain appropriate for
a business of our scale and structure but, in common with other areas
of our business, they must follow a process of continuous improvement.
A substantial amount of work has been carried out in relation to the
development and implementation of a succession plan for the Board
and senior management, a summary of this is set out on pages 16 and 17.
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Churchill China plc Annual Report for the year ended 31 December 2023
Strategic
Report
Principal risks and uncertainties
The Group’s operations are subject to a number of risks, which
are formally reviewed by the Board in a regular and systematic
manner. The risks are identified and assessed on the basis of the
likelihood of occurrence and the severity of the impact on the
Group’s business model and strategy. The Group then implement
processes and controls to appropriately manage and mitigate
these risks. The principal business risks currently affecting the Group
are set out below:
1.
Identify
5.
Review
2.
Scale
4.
Mitigate
3.
Document
Risk
Market and Business
Environment Change
Risk
Change Risk Description
=
The Group operates in dynamic markets where there have been significant recent changes to trading and
economic conditions, distribution channels within each market and product requirements in these markets.
The Group actively manages its market exposure and profitability, but risks losing revenue if we do not
anticipate and respond to market trends and risks.
People
Manufacturing and
Supply Chain
=
=
The risk inherent in each market is offset by regular review of market conditions and forecasts, 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 actively developing new geographic markets and introducing
new product ranges. As we enter new markets this introduces new risks to the Group although it does also
diversify our overall market exposure and reliance on existing products.
The Company also evaluates its pricing strategy on a regular basis to ensure that, whilst maximising returns,
the Company does not impact its competitive position in the marketplace.
The Company mitigates these pricing risks through detailed market mapping, competitor reviews and
regular order level reviews.
Our business depends upon the skills and knowledge of a number of people at all levels within our
operation and within supplier companies. Certain of these skills and experience may only be acquired
through extensive training and experience and it is possible that they may not be available through
the recruitment of new employees in the future. We aim to limit this risk through the establishment of
appropriate manpower and succession planning, identifying training, development and recruitment needs.
As a substantial employer and manufacturer we need to comply with extensive Health and Safety
requirements. We limit the risks associated with Health and Safety through the application of appropriate
systems, regular review at Board, management and operational levels, training and investment in risk
mitigation.
Over 85% of our revenues are of products manufactured in our UK facilities. Whilst this provides a high
quality and effective source of products it exposes us to risk in the case of the potential loss of availability of
part or all of our facilities for an extended period. Additionally we may be exposed to risk through the loss
of a key supplier or material. This risk is controlled through our risk review process, management procedures,
appropriate investment and ultimately insurance arrangements.
We have augmented our UK production facilities with a range of third party suppliers. The use of these
suppliers exposes us to risks in relation to interruption to supply and changes in cost structures arising from
economic or regulatory change. We manage this risk by diversifying our sources.
As a major user of energy within our production process we have an exposure to changes in availability
and price of gas and electricity. Energy price hedging strategies may expose us to counterparty risk.
Progressive legislation in relation to energy usage and carbon footprint reduction may also affect our
operations.
We have developed a forward energy strategy to reduce our overall carbon intensity in the medium term.
We seek to control and mitigate this risk through management of our overall energy consumption, small
scale investment in sustainable energy generation and energy recovery systems.
We also assess the impact of new technologies in our manufacturing process. Where new developments
have the potential to impact on either our commercial position or cost competitiveness we develop
appropriate plans to respond to these changes.
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Risk
Environmental Risk
Risk
Change Risk Description
The rapidly changing regulatory environment creates a level of uncertainty and risk. At present there are
expectations that there will be a level of equivalency between EU and UK legislation which should protect
the Company within our largest market, however there is the potential for the introduction of levies to
negatively impact the Company’s ability to generate revenue.
At present there remains little revenue risk to the business however the Company is assessing alternative
solutions.
We mitigate these risks, where controllable, through management review and action.
Manufacturing Capital
Equipment
=
The Company has historically made excellent use of assets and has a purchasing and maintenance
process that has ensured that much of the Company’s capital equipment is well maintained and delivers
value well past its expected life.
This leaves the Company open to the risk of ageing capital equipment, reliant on single suppliers which
may impact the production process.
The Company mitigates this risk by allocating a significant portion of free cash flow to the continued
purchase and replacement of key equipment and also by ensuring that the skills necessary for the
maintenance of this equipment is brought in house to minimise reliance on external suppliers.
Cyber Security
=
Our business uses information technology to manage our operations and deliver value. We continue to
take appropriate steps to secure our systems from failure or malicious action.
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Churchill China plc Annual Report for the year ended 31 December 2023
Strategic
Report
Non-Financial and Sustainability Information Statement
The Company is required to make the recommended disclosures by sections 414CA and 414CB of the Companies Act. The Companies (Strategic
Report) (Climate-related Financial Disclosure) Regulations 2022 amend these sections of the Companies Act 2006, placing requirements on the Group
to incorporate Climate disclosures in the annual report.
Governance Framework
Churchill China plc Board
Meets 12 times per year to consider:
• Group Strategy
• Group risk register {including climate change risk)
Inform
• Stakeholder interests
• Approves budgets
• Major capital expenditure decisions
• Oversees ESG governance {due to size of Company this is
a full Board function)
Inform
Report
Audit Committee
Meets 3-4 times per year:
• Risk management process
•
Internal controls
• Financial statements
• Selection of auditors
Remuneration Committee
Meets 3-4 times per year:
• Alignment of bonus/LTIP criteria with ESG goals and KPl’s
• Analysis of remuneration packages to align with
stakeholders aims
Nomination Committee
Meets 3-4 times per year:
• To ensure a broad range of skills and experience are
available for ESG activities
Overall responsibility for the Company’s ESG strategy lies with the CEO. Responsibility for ESG reporting lies with the Company Secretary and the wider
finance team. The operations Board meets 12 times per year and reviews the long-term risks and challenges to the business over a 5 and 25 year
period, including climate risk and ESG strategy.
CEO and Executive Leadership Team
Inform
Report
Operations
Various meetings are held on a monthly basis covering energy management, employee engagement and retention and other stakeholder issues/
concerns. These issues are raised directly with the Executive team and are escalated through the regular Executive meetings and through the normal
operational reporting lines.
Governance
Describe the Board’s oversight of climate-related risks and opportunities
Whilst the CEO has day to day responsibilities for ESG and climate-related risks and opportunities the Board has final oversight. These risks are discussed
at strategy meetings, held annually, and at monthly board meetings. Due to the size and composition of the board it was decided not to create a
standalone ESG committee but rather to retain the oversight and monitoring of the Company’s ESG performance within the full board.
The board receives reports from the executive leadership team regarding the general ESG landscape and specific issues that may impact the
Company. The Company has developed a suite of KPIs for review at operational board level, on ESG performance and updates the board on these at
regular intervals. These are being rolled out to Audit, Nomination and Remuneration Committees for inclusion in their duties.
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Churchill China plc Annual Report for the year ended 31 December 2023
19
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Churchill China plc Annual Report for the year ended 31 December 2023
Strategic
Report
During 2023 the Company had several priorities which were addressed as follows:
Priorities for 2023
As a major energy user the Company was focused on reducing
its reliance on fossil fuels and researching future methods of
production to reduce its reliance on, in particular, gas.
During the year the Company has delivered 4,500 solar panels which at
peak times can supply circa 25% of the factory’s electricity requirements. The
Company has also started researching the use of electrical pre-heating for glaze
lines, replacing the previous gas solution.
Development of the ESG framework within the Company,
particularly focusing on climate-related risks and the
development of internal reporting.
Priorities for 2024
The Company has developed a dashboard for operational reporting of ESG
issues and has started to collate data to be communicated.
To develop a 2030 ESG strategy and to closely monitor the
effectiveness of the ESG governance framework.
The Board will ensure that the executive team deliver a clear ESG strategy for
2030 and will review on a regular basis the current governance framework,
including reviewing the necessity for an ESG Committee.
To continue the analysis of different energy sources within the
factory with a view to reducing the non-renewable requirements
of the factory.
The Board will review the implementation of the electric pre-heat trial and
identify other areas of the factory that might benefit from the use of renewable
energy sources.
To continue the development of KPIs for inclusion in 2024’s
Annual Report.
The Board will direct the executive team to ensure robust reporting of the KPIs
already identified and to review that these are adequate and appropriate.
Describe management’s role in assessing and managing climate related risks and opportunities
The Chief Executive Officer has responsibility for managing climate related risks within the organisation. He is assisted in this by the Executive Leadership
Team (ELT) and between them they implement the Group’s climate strategy.
Addressing Climate
Change
Future Manufacturing
Materials
Focus
Carbon
Water
Exec Sponsor
Responsibility
Chief Executive Officer
Energy Steering Committee – operational, corporate and
subject matter experts
Chief Executive Officer
Operations Director
Non- Carbon Emissions
Chief Executive Officer
Technical Director
New Product Development Sales & Marketing Director
Technical Director, Materials Operations Manager
Doing Business Responsibly
(Governance)
NFSIS
CFO & Company Secretary NFSIS group chaired by the CFO and attended by subject
matter experts.
The table below highlights our plans for the coming year and how we plan to address them.
Priorities
Planned Actions
The Company will continue to develop it’s 2030 ESG strategy
through engagement at all levels of the organisation with
a view to making climate related risk a core pillar of the
Company’s culture
To continue process already started at operational board level, of identifying the
risks to the business from climate change and to identify initiatives to mitigate
these risks.
Climate related risk analysis training
Deliver risk analysis training to key personnel on risk identification and mitigation.
Strategy
Describe the climate related risks and opportunities the organisation has identified over the short medium and long term
In order to assess the Company’s strategy, we have considered the Representative Concentration Pathways (RCPs) as determined by the
Intergovernmental Panel on Climate Change (IPCC). We have considered the Company’s strategy in line with RCP 2.6 (2.0oC) and RCP 8.5 (4.3oC).
Scenario
Scenario
Description
Description
RCP2.6 (2.0oC)
RCP4.5 (2.4oC)
RCP8.5 (4.3oC)
The RCP2.6 scenario is the pathway that the IPCC believes is likely to limit global warming to sub 2.0oC. Under this pathway
global CO2 concentrations would be expected to remain constant in the early part of this century and then reduce, actually
transitioning to negative by 2100.
The RCP4.5 pathway is less optimistic, modelling a slowly declining level of CO2 concentrations after a gradual increase in the
first half of the century this would lead to a global increase in temperature of 2.4oC.
This is the IPCC’s worst-case scenario and would lead to a global increase of 4.3oC, equivalent to an 8.5 watt warming effect
per square metre of earth surface across the planet.
We carried out a strategic review of risks and opportunities to the business with added focus on the impact of climate change both on physical
outcomes for the Company but also through the lens of likely societal impacts. These risks and opportunities were classified under various groupings,
Policy and Legal Risk, Technology Risk, Physical Risk, Reputational Risk, Continuity Risk, Business Opportunity. The operational board then carried out an
exercise to scale the risks over the short term by assessing the Company’s current risk / capability, an assessment of the Company’s required capability
in 2030 and the gap from current state. Finally, an assessment was made against what capability may be required in 2050 and how far from this
capability the Company is.
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This process allowed us to rank the options in order of material impact and probability. The Company will continue this journey by using internal and
external stakeholders to further assess the options. These impact assessments will then be fed into the existing planning in order to assess their financial
impact on the business particularly with respect to revenue and EBITDA of the Group. These financial assessments will be carried out under the
assumptions of RCP2.6 and RCP8.5, giving a best- and worst-case scenario.
This assessment of the financial impact of our material risks and opportunities will constitute a large part of our climate related activities during the
coming year. Currently no assumptions or estimates have been made regarding the financial impacts.
Summary of our material risks and opportunities
Climate related risks
and opportunities
Potential financial
impacts
Potential Materiality
Strategic response and mitigation
Increased costs
Short term: Low
Med term: Med
Long term: High
Focus on reduction of carbon emissions
and increasing renewables as the grid
allows
Potential for increased
revenue through material
innovation and recycling.
Short term: Low
Med term: Med
Research into recycling of materials
and repurposing
Category
Policy and
Legal
Policy and
Legal
Technology
Risk:
As an intensive energy
user there is a risk that
should the regulatory
environment change
there may be an increase
of costs in carbon
allowances / lack of
availability.
Opportunity:
A change to the
regulatory environment
leading to a zero-
waste manufacturing
requirement.
Risk:
Customers moving to a
lower carbon solution
Lower demand and
revenue.
Technology
Risk:
Lack of customer appetite
to pay for low carbon
solutions
Lower demand and
revenue
Technology
Risk:
Lack of competitive
solution to decarbonise
the production process.
Unsustainable cost
increases
Technology
Physical Risk
Opportunity:
Materials research to
deliver a lower embedded
carbon product to meet
market expectations and
reduce input costs.
Risk:
Increased precipitation
leading to potential
flooding and damage to
manufacturing facility.
Costs of repair and
reduced production
capacity
Reputational
Risk
Risk:
Inability to economically
transition to lower carbon
technologies leading to
reputational damage.
Reduced revenue from
lower demand
Long term: Med
Short term: Low
Med term: Low
Long term: Low
Short term: Med
Med term: Med
Long term: Low
Short term: Low
Med term: Med
Long term: Low
Continued investment in low carbon
materials and processes
Continued focus on factory efficiency
to counteract cost pressures
Continued research into low carbon
manufacturing and materials
Medium term:
Long term:
Short term: Low
Med term: Low
Long term: Low
Short term:
Med term:
Long term:
Current facility is on elevated land with
good drainage, any future facilities will
be sourced with this in mind.
Strategic focus on achieving the
transition
Increased EBITDA through
reduction in costs
Short term:
Opportunity to develop low
embedded carbon materials
Short term is classed as falling within our 2030 ESG strategy window, 2030-2040 as medium term and 2040-2050 as long term.
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Churchill China plc Annual Report for the year ended 31 December 2023
Strategic
Report
Describe the actual and potential impacts on the organisation’s business model and strategy of risks and opportunities
Transitional Risk Impacts
The Company expects that there will be a low impact in the short term on its business model and strategy but that this impact will increase in the
medium to long term. The expectation is that, taking account of the current direction of travel, there will be increases in legislation and regulation and
that this may be accompanied by customer preference for more sustainable products.
Physical Impacts
There is an expectation of an increase in extreme weather events worldwide. In the UK this is expected to manifest itself in the form of increased
precipitation and temperature increases. The risk associated with increased precipitation is assessed as low given the siting of our current facility
and risk to production will be a criterion in any future new facilities. The risk associated with increased temperature is considered low, however there
remains a need to monitor the wellbeing of the workforce in what is already a warm environment.
Priorities for 2024
How we will meet these
Improve and refine our impact assessment, looking in more detail at the
impacts of climate related risk with a specific focus on the physical risks.
All material risks will be reviewed and assessed during the year and will
include a review of financial impact
The financial impact on the organisation’s business plan will be refined
and integrated into the planning cycle under the 3 IPCC pathways.
This planning improvement will dovetail with a planned upgrade to the
Company’s planning processes
Risk Management
Describe the Company’s process for identifying and assessing climate related risk and opportunities
Climate change is a key risk for Churchill, the key process for identifying organisational risk is through cross-functional work groups as part of our annual
review and update of our organisational risk registers.
Climate and ESG risks are separately identified and reviewed and given the same priority as other operational risks.
Priorities for 2024
How we will meet these
Further integrate the climate related and ESG risk identification process
into the wider operational risk process.
By including the discussion of these risks within our cross-functional groups
discussing Company risk.
Describe the organisation’s processes for managing climate related risks and opportunities
Following identification of the risks each risk is assessed in line with its materiality and financial impact after considering existing controls. Each risk is
then assigned an owner so that each one receives the appropriate level of attention within the organisation. Progress of these is then monitored on a
regular basis.
Describe how processes for identifying, assessing and managing climate related risks and opportunities are integrated into the Company’s overall risk
management process
Operational risks are considered twice per year at operational board level and annually by the plc Board as part of the Risk Register review. Risk
reviews are a top down and bottom up process.
Priorities for 2024
How we will meet these
Risk review processes to be further refined to deliver more detailed
and refined climate related risks.
The organisation will consider the creation of a climate specific risk register
and associated processes for the management of these risks.
Metrics and Targets
Disclose the metrics used by the organisation to assess climate related risks and opportunities in line with its strategy and risk
management process
The Company currently uses the metrics contained in the Streamlined Energy and Carbon Reporting Disclosure (SECR) on pages 14 and 15 to assess its
impact on climate related risks and opportunities.
As a major user of energy the Company also assesses the reduction in energy on a year-on-year basis to identify progress on ESG goals.
The Company publicly reports our Scope 1 and Scope 2 emissions and the carbon intensity per tonne of raw material consumed within our SECR on
pages 14 and 15. These have been calculated in accordance with the Greenhouse Gas (GHG) reporting methodology. The risks associated with the
Company’s emissions are discussed on page 14 and 15 in our Material risks section and also within our Principal risks and uncertainties.
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Churchill China plc Annual Report for the year ended 31 December 2023
23
Describe the targets used by the Company to manage climate-related risks and opportunities and performance against targets
The Company has a number of metrics that it has identified to manage climate related risks:
Environment
Metric
Target
Reduce Scope 1 & 2 GHG emissions
2024 – Identify target reduction level
2024 – Full review of on-site energy generation
Quantify Scope 3 GHG emissions
2025 – Measure Scope 3 emissions
Water
2024 – Set Water reduction strategy
Expected Reporting Metrics
The following metrics are a work in progress and the Company is committed to developing its systems to allow for these to be presented:
Subject
Measure
Target
GHG Emissions
Scope 1 & 2
GHG Emissions
Scope 3
Reduction in tonnes of carbon
25% reduction in output by 2030
Reduction in tonnes of carbon
Target to be set in 2025 when quantified
GHG Emissions Scopes 1, 2 & 3 Reduction in tonnes of carbon
100% reduction by 2050
Water usage
Reduction in litres of water used
10% reduction in mains water by 2030
Waste management
Reduction in tonnes sent to landfill
Zero waste to landfill by 2040
The Company expects to monitor and assess its performance in meeting these targets through the use of KPIs. These KPIs will be introduced at the start
of 2025, once the base data is available for 2024 and will be set taking into account the current business operations and future Company strategy.
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Churchill China plc Annual Report for the year ended 31 December 2023
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
2023
£m
21.9
2022
£m
15.9
Inventory holding levels increased. Stock volumes of finished goods to
improve customer service levels increased in line with our operational
plans. Inventory valuation was also affected by increased material and
energy costs.
Future outlook
The business expects to recommence its growth journey in 2024 as
consumer confidence and the wider economy return to more stable
conditions. Whilst there is still some uncertainty in the expectations for the
coming year, the Board are confident that the business is well positioned
to take advantage of an upturn in the market. The business has retained
quality staff and reduced reliance on agency employees, we have
improved efficiencies and yields and continue this journey on a daily basis.
We have reduced our exposure to currency and energy fluctuations for a
protracted period of time and where possible reduced risk.
We continue to experience good demand for our products, reflecting
the success of our development strategy and the overall strength of
market demand. Ordering volumes are returning to a more normal
level and order books are consistent with pre-pandemic levels. Higher
manufacturing output has allowed us to improve customer service
levels. We will continue to target improvements in efficiency and have a
number of capital projects targeted in this area.
The Board believes that hospitality markets will continue to grow and that
the Company has the ability and product offering necessary to expand,
particularly in our export markets where our underlying market share is
still very low. Our product range and its development reflect long term
investment in innovation. Our improved market position is supported
by a clear and consistent set of objectives and initiatives. Our financial
position allows us to maintain a high level of investment in our operations
giving us the ability to improve our capacity, our productivity and our
efficiency.
The Company remains focused on delivering a high quality,
differentiated performing product and through this, consistent, profitable
and sustainable growth.
By order of the Board
D M O’Connor
CEO
9 April 2024
Strategic
Report
Key performance indicators
Revenue and revenue growth
The absolute levels of revenue and revenue growth are reviewed
regularly by business and geographic destination through the year
against comparative, target and strategic expectations.
Revenue
Group
Ceramics
Sale of external materials*
UK
Export
2023
£m
82.3
74.2
8.1
34.0
48.3
2022
£m
82.5
75.3
7.2
33.2
49.3
Growth
%
-0.2%
-1.5%
12.5%
2.4%
-2.0%
* Revenue from Materials is shown following the elimination of intra group trading as
shown in Note 2 to the financial statements.
The level of operating profit and significant factors affecting its delivery
are reviewed and controlled on a regular basis.
Operating profit before
exceptional items
Operating margin before
exceptional items
Profit before exceptional items
and income tax
Exceptional items
Profit before income tax
2023
£m
10.3
2022
£m
Growth
%
9.2
11.9%
12.4%
11.1%
10.8
-
10.8
9.1
0.5
9.6
18.7%
12.5%
Group operating profit before exceptional items rose significantly to
£10.3m (2022: £9.2m). As previously disclosed this improvement has come
from significant improvements in yields and an improvement in energy
pricing in H2, the resulting operating margin has therefore improved to
12.4% (2022: 11.1%).
The level of profit before corporation tax is reviewed on a monthly basis
against previous performance and target levels.
Profit before corporation tax rose substantially reflecting increases in
operating profit.
Exceptional items, where they are recognised, are reviewed as part of
the regular assessment of profit performance.
Net assets at the year end were £10.1m (2022: £10.3m)
Operating cash generation
The Group believes that over an extended time period it is important
to generate cash at an operating level at least 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 cash generation
Percentage of operating profit
before exceptional items
Percentage of operating profit
before exceptional items (3 year
average)
2023
£m
8.7
2022
£m
4.9
Growth
%
77.6%
84%
53%
95%
107%
Operating cash generation was impacted by several factors, primarily
the increase in inventory. Employer contribution payments in respect of
pension deficit amortisation remained at £1.8m per annum (2022: £1.8m).
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25
Directors’
Report
The Directors present their Annual Report and the audited consolidated
financial statements of the Group for the year ended 31 December 2023.
The biographical details of the Directors are as follows:
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 the Annual Report and
the Company number is 02709505.
The consolidated income statement for the year is set out on page 44.
A review of the operations and future prospects of the Group is given
in the Chairman’s Statement on page 6 and in the Strategic Report on
page 10.
The principal activity of the Group is the manufacture and sale of
ceramic and related products for hospitality and household markets
around the world.
Dividends
The Company has paid the following dividends in respect of the years
ended 31 December 2023 and 31 December 2022:
Ordinary dividend:
Final dividend 2022 21.0p (2021: 17.3p)
per 10p ordinary share
Interim dividend 2023 11.0p (2022: 10.5p)
per 10p ordinary share
2023
£’000
2,309
1,210
3,519
2022
£’000
1,907
1,155
3,062
The Directors now recommend payment of the following dividend:
Ordinary dividend:
Final dividend 2023 25.0p (2022: 21.0p)
per 10p ordinary share
2,749
2,310
Dividends on treasury shares held by the Company are waived.
The Company recognises that dividend income is important to
shareholders and aims to pay a sustainable and progressive dividend
linked to the medium and long-term performance of the business,
consistent with the maintenance of appropriate levels of dividend
cover and allowing the Company to meet other demands on its cash
generation.
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:
R G W Williams* (Chairman)
A J McWalter* (resigned 8 June 2023)
D M O’Connor
D J S Taylor (resigned 12 April 2023)
J A Roper
B M Hynes*
J M Moore*
C J Stephens* (appointed 15 February 2023)
M Cunningham (appointed 8 June 2023)
M K Payne* (appointed 16 January 2024)
* Non-Executive
The Quoted Companies Alliance (QCA) has issued new governance
guidance in 2023 for periods starting after April 2024; the Board has,
however, decided to adopt the guidance on annual election of all
Directors on an annual basis early. B M Hynes has indicated that he will
be resigning from the Board as at the AGM and will therefore not be
seeking re-election. All other Directors will offer themselves for election /
re-election. As at the date of the Director’s Report the unexpired terms of
the service contract of R G W Williams 1 years 5 months and C J Stephens
1 years 9 months, J A Roper 2 years 1 months, M Cunningham 2 years 1
month and M K Payne 2 years 9 months.
David O’Connor, Chief Executive Officer has worked for Churchill
for 32 years in a number of production, operations, marketing and
senior management roles. He has extensive experience within the
ceramics industry and joined the Board in 1999. He has an MBA and is
an alumnus of the Harvard Business School Advanced Management
Program. David has worked in a number of roles within the UK ceramics
industry, initially within production management and has developed an
extensive knowledge of logistics, product sourcing and marketing. He
was appointed Chief Executive Officer in August 2014, having previously
served as Chief Operating Officer since 2010. He has responsibility for the
development of Group strategy and for operational performance.
Michael Cunningham, Finance Director joined the Churchill Board in
2023. Michael has previously worked extensively in the automotive sector
in dealer groups, tier 1 suppliers and for a large number of years within
the VW Group under both the MAN and Bentley brands. An engineering
graduate from Queens University Belfast, Michael qualified as a
Chartered Certified Accountant whilst working for Readymix Concrete.
Michael also holds an MBA from The European School of Management
and Technology in Berlin.
James Roper, Sales and Marketing Director joined Churchill in 2001.
James has worked in a number of sales and marketing roles across
Churchill’s business and has extensive experience in the development
of the Group’s strategy particularly in relation to product innovation and
distribution channel management. He has an MBA from Manchester
Business School and is an alumnus of the Harvard Business School
Advanced Management Program. He was appointed to the Board
in 2015.
Robin Williams, Non-Executive Chairman. Robin joined the Board of
Churchill China plc in October 2022. He is an engineering graduate and
qualified chartered accountant with over 30 years’ experience with listed
companies, initially as an adviser and then as a CEO and co-founder of
Britton Group plc and then as an Executive director of Hepworth plc, the
building materials business. He is currently Independent Non-Executive
Chairman of Keystone Law Group plc and a Non-Executive Director of
Headlam plc and of The Manufacturing Technology Centre Ltd, a private
company.
Brendan Hynes, Non-Executive Director and Senior Independent Director,
is an experienced Non-Executive Director. He was Chief Executive Officer
of Nichols plc from 2007 to 2013 having previously been Finance Director.
He has extensive experience of strategy development, business and
financial management in public companies. Brendan is a Fellow of the
Chartered Institute of Management Accountants and has an MBA from
Manchester Business School. He joined the Board in 2013.
Mark Moore, Non-Executive Director. Mark joined the business during
2021 and has extensive Board level general management and
manufacturing experience within a range of industries. He has previously
worked within Morgan Advanced Materials plc and Essentra plc. He is a
Chartered Engineer and holds degrees from the University of Bristol and
Loughborough University.
Caroline Stephens, Non-Executive Director. Caroline joined the Board
in February 2023. She was a senior executive at Johnson & Johnson for
over 25 years in multiple leadership roles including UK Marketing Director.
Latterly, Caroline has been a consultant, adviser and director with roles
including joining the Board of Tristel plc, an AIM listed infection control
business as a Non-Executive Director, and the EMEA Board of CI&T, a
global digital solutions specialist.
Martin Payne, Non-Executive Director. Martin joined the Board in January
2024. Martin finished his executive career as CEO of Genuit Group
plc a role he held after previously serving as CFO. He has extensive
ceramics industry experience as Financial Director of Johnsons Tiles and
as Group CFO of Norcros plc. Since 2021 Martin has been Chair of the
Audit Committee at Stelrad plc. Martin is a Chartered Management
Accountant and has over 30 years’ experience in manufacturing
industries.
Taxation
The majority of the Group’s operations and the profits derived from them
are subject to taxation in the United Kingdom.
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Churchill China plc Annual Report for the year ended 31 December 2023
Directors’
Report
Environmental, Social and Governance
This year’s Annual Report contains more detailed information on
the business’ Environmental, Social and Governance policies and
performance in accordance with developing reporting practice. This
information is shown on page 15 within the Strategic Report. The following
information is given in addition to these disclosures.
We remain fully committed to equal opportunities employment policy
offering equality in recruitment, training and career development
irrespective of gender, ethnic origin, age, marital status, religion, sexual
orientation or disability. We actively work with employees who suffer ill-
health during their employment with us to rehabilitate them back into the
workforce wherever possible.
Ethical standards and trading
The Group expect high ethical standards to be met in all areas of its
operation and from all its employees and recognises the role of the Board
in defining and meeting these standards. We have a published ethical
code and supporting policies covering bribery and corruption, modern
slavery and whistle-blowing.
Churchill sources materials and products from a range of local, national
and international suppliers. We have an ethical trading policy and take
steps, including factory visits and audits, to ensure that our standards
are implemented within our supply chain and that local legislation and
regulations are complied with.
Churchill has developed a formal brand framework which highlights the
values which we believe embody our business. Many of these values
reflect our commitment to our stakeholders. This brand framework is used
daily within our business to guide our operations.
Employees
The Company recognise that well trained, engaged and motivated
employees are central to the current and future success of our business.
We involve our workforce through open communication including
briefings and communication boards to encourage engagement with
the strategy and goals of the business. The financial performance and
forward plans of the business are shared on a bi-annual basis in order to
build an awareness amongst employees of the financial and economic
factors that may affect the performance of the Group. We work closely
with the union representing our employee’s interest to develop a
relationship that will benefit our employees and meet our business needs.
Our employee training and development programme is an important
part of our operations and we have further invested in reviewing and
identifying development needs and opportunities. We have continued
to work with further educational colleges and training organisations
to provide functional and vocational training for employees and our
manufacturing and engineering based apprenticeship scheme targets
the development of ceramic and other skills within our team. Our long-
term commitment to the training and development of all our employees
helps morale, motivation and labour retention. We remain committed
to our graduate training programme helping local graduates into our
industry. We also take an active role in supporting both the local ceramic
industry and wider initiative within the hospitality sector and support a
number of training programmes.
Disabled people applying for roles within the business are given full
and fair consideration in relation to job vacancies. Employees who
are disabled, or who become disabled during their employment enjoy
the same career prospects and access to training and development
programmes as other employees.
Our Continuous Improvement programme involves employees at all
levels from across our Company and has proved valuable in unlocking
the potential of our workforce. Each employee has access to training
to develop their technical skills and their overall capabilities. This
programme also helps to communicate important business issues to
our workforce and helps to align their efforts with the overall business
strategy. This initiative has been developed into a ‘Train the Trainer’
programme where employees are taught training skills such that they
can pass their expertise on to less experienced staff.
The Board has clearly considered the interests of employees in relation
to key decisions during the year. Important decisions are taken within a
framework giving appropriate reference to the long-term sustainability of
the business, the delivery of steady growth, investment and job security.
We operate a Profit Improvement Bonus scheme where employees with
one year’s service share in a bonus scheme linked to Group profitability.
This scheme recognises our employee’s efforts, encourages performance
in line with value creation and allows them to share in the Group’s
success. In addition, in the period from December 2022 to March 2023
we have introduced a one-off scheme where all employees receive
a payment totalling £400 to help them deal with the increased cost of
energy and other cost of living challenges.
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. We have a
published Health and Safety policy.
Our approach to Health and Safety is embedded in our working
practices. We aim to identify and to reduce health and safety risks
associated with our operations to the lowest practical levels. Training
programmes are regularly undertaken to update safety skills for all our
employees. Considerable progress has been made in the engagement
of our workforce in relation to health and safety matters during the year.
Environment
The Group considers and manages the impact of its actions on the
environment and wider social and community issues. Churchill is aware
that it has many stakeholders, including its customers, employees,
suppliers and neighbours alongside our shareholders. We seek to operate
over the long term in a sustainable manner which recognises the needs
of all of these groups.
The principal impacts of the Group’s operations on the environment are
in relation to the energy we consume, and the waste products produced
as part of our operations.
Whilst the Company manufactures a product which may be re-used
many thousands of times, a significant amount of energy is consumed in
its production. We have made progressive improvements in developing
our energy management processes at both strategic and operational
levels over many years. We are focused on investing in research to
provide long term solutions to reduce our energy footprint and in
improving the efficiency of our manufacturing processes. We have
replaced older systems and machinery with more modern energy
efficient processes. Additional details are given in our Strategic Report.
We have increased our focus on managing and minimising the
production of waste from our processes. We have instituted a
programme of continuous improvement in relation to waste reduction
and recycling of waste products.
Where possible we source our materials and services locally. A strong
support industry is important to the long-term future of the Group.
Community
We understand that we have an impact on our local community and
consider the effect of our actions on our local area. We work to reduce
any adverse effects of our operations, consistent with the needs of
other stakeholders within our business. We actively engage within our
community through contact with our neighbours and local schools and
particularly through local charity initiatives. We encourage and support
our employees to become involved in community and charitable work.
We run a number of events each year in support of charitable causes.
Research and Development
The introduction of new and innovative products, materials and process
technologies 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. We have maintained our
investment in the development of new products across the year to take
advantage of new market opportunities. A significant effort is made to
develop our materials and process technologies to allow the introduction
of more complex product designs and to improve energy usage. 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.
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Churchill China plc Annual Report for the year ended 31 December 2023
27
Insurance for Directors
The Group maintains liability insurance for the Directors in respect of their
duties as Directors.
Financing
The Group currently utilises equity and retained earnings to finance its
operations in relation to short-, medium- and long-term requirements.
The Group has historically enjoyed a good record of operating cash
generation and forward investment and other cash requirements have
been financed from this source.
During the year the Group generated £8.5m of cash flow from
operations, paid corporate taxation of £0.4m and invested £5.3m in
capital projects. Dividends of £3.5m were paid during the year. Net
cash and deposits before lease liabilities at the 31 December 2023 were
£13.9m (2022: £19.0m).
The Group reviews and maintains adequate levels of liquidity to meet
short term operating commitments as part of its day-to-day treasury
management. Longer term liquidity and cash requirements are reviewed
as part of the Group’s budgetary and strategic planning processes.
If additional financing is needed in the short term the Group has access
to short term variable rate financing arrangements totalling £2.5m on
an unsecured basis to provide finance for working capital requirements,
should they be required. Additionally, forward capital expenditure
may be supported using alternative sources of finance including lease
purchase.
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 the preparation of the financial statements.
The Board has considered alternative scenarios in relation to the
impact higher levels of inflation, increasing energy costs and other
potential impacts on the business environment. This review has included
consideration of the impact of reductions in revenue, periods of effect,
alternative operational responses and cost reduction plans, the high
level of cash and deposits held by the Group and additional available
financing.
These reviews indicate that it is reasonable for the business to expect to
continue in operational existence for at least the next twelve months.
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 financial statements. This has
not been quantified because independent valuations have not been
undertaken.
Overseas operations
The Group operates trading subsidiaries in the United States of America
and Spain.
The Group currently has no net debt and holds substantial levels of
unpledged assets including freehold property. These assets form an
alternative source of secured medium- or long-term funding if this is
required. Larger long term funding requirements may be met from debt
and equity sources if necessary. There are no covenants in place relating
to the Group’s banking arrangements.
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 Remuneration Report, held by persons acting
together, which at 6 April 2024 exceeded 3% of the Company’s issued
share capital:
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. A proportion of net
currency exposures are generally covered up to twelve 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 1 to the financial statements includes financial management risk
considerations.
Shareholder
Rathbone plc
Charles Stanley Group
Invesco
Mrs S Roper
Cannacord Genuity Group inc
Phoenix Asset Management Partners
Close Brothers Group
E S & S J Roper
A D & P H Roper
Number of
ordinary shares
Percentage
1,832,379
16.66%
886,117
863,594
751,600
647,288
597,127
525,582
352,765
340,430
8.06%
7.85%
6.83%
5.89%
5.43%
4.78%
3.21%
3.19%
Political contributions
The Group made no political contributions (2022: £nil) during the year.
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Churchill China plc Annual Report for the year ended 31 December 2023
Directors’
Report
Statement of Directors’ responsibilities in
respect of the financial statements
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulation.
The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Group’s and Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the group and company and enable them to ensure
that the financial statements comply with the Companies Act 2006.
Company law requires the Directors to prepare financial statements for
each financial year. Under that law the Directors have prepared the
group financial statements in accordance with UK adopted international
accounting standards and the company financial statements in
accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising FRS 101
“Reduced Disclosure Framework”, and applicable law).
Under company law, 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 Company and of the profit or loss of the Group
for that period. In preparing the financial statements, the Directors are
required to:
• select suitable accounting policies and then apply them consistently;
• state whether applicable UK adopted international accounting
standards have been followed for the Group financial statements
and United Kingdom Accounting Standards, comprising FRS 101
have been followed for the Company financial statements, subject
to any material departures disclosed and explained in the financial
statements;
• make judgements and accounting estimates that are reasonable
and prudent; and
• prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the Group and Company will
continue in business.
The Directors are also responsible for safeguarding the assets of the
Group and Company 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.
Directors’ confirmations
In the case of each Director in office at the date the directors’ report is
approved:
• so far as the Director is aware, there is no relevant audit information of
which the Group’s and Company’s auditors are unaware; and
•
they have taken all the steps that they ought to have taken as a
director in order to make themselves aware of any relevant audit
information and to establish that the Group’s and 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 re-
appointed will be proposed at the Annual General Meeting.
By order of the Board
D M O’Connor
CEO
9 April 2024
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Churchill China plc Annual Report for the year ended 31 December 2023
29
Corporate
Governance
This statement is not audited.
The Company is quoted on the Alternative Investment Market of the
London Stock Exchange and uses the Quoted Companies Alliances
‘Corporate Governance’ (‘the Code’) as a benchmark to define and
review its governance procedures. The Company complies with the
Code.
and experience to lead and manage the business and to ensure a
balance of power and authority. A review of the effectiveness of the
Board is carried out on a regular basis with the most recent being in 2023.
The Non-Executive members of the Board take an active and influential
part in Board procedures. A senior Non-Executive Director, B M Hynes,
has been appointed, and, on the announcement of these results, will be
replaced in this role by M K Payne.
The Code establishes ten principles of Corporate Governance grouped
into three areas; the encouragement to deliver sustainable growth, the
responsibility to maintain a dynamic management framework and an
aim to build trust with shareholders and other stakeholders.
The Board acknowledges its role in defining and promoting the culture of
the business. This culture is defined within the Company’s brand values.
It encourages all our employees, including Board members, to bring
innovation, commitment and integrity to their roles.
The Board supports the aims of the Code and seeks to exceed rather
than simply meet the requirements it sets out. Many of the requirements
of the Code are addressed through this Annual Report and further
information may be found on the Investor pages of the Company’s
website, www.churchill1795.com.
The Board of Directors
The Board is currently composed of three Executive and five Non-
Executive Directors and meets at least eleven times per year. The Board is
led by the Chairman, Robin Williams. It is felt that the current composition
and operation of the Board is adequate to provide the necessary skills
The Code recommends that the Boards of quoted companies include
at least two independent Non-Executive Directors. The Board has fully
reviewed the independence of Non-Executive Directors and four Board
members, J M Moore, R G W Williams, C J Stephens and M K Payne are
considered to be independent under the terms of the Code. B M Hynes
is no longer classed as independent under the terms of the Code, due
to his having served 10 years on the Board. The Board believes that
despite this lack of formal independence under the Code, B M Hynes has
retained a high degree of objectivity and that his experience has been
and continues to be of, significant benefit to the interests of shareholders
as Board composition evolves.
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Churchill China plc Annual Report for the year ended 31 December 2023
Corporate
Governance
As noted in the Chairman’s Statement, B M Hynes will step down as
Chair of the Audit Committee on announcement of these results to be
succeeded by M K Payne, and from the Board in June 2024.
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.
Meetings
held
Meetings
attended
D J S Taylor
D M O’Connor
C Stephens
A J McWalter
B M Hynes
J A Roper
M Cunningham
J M Moore
R G W Williams
4
12
11
6
12
12
7
12
12
4
12
11
6
12
12
7
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 three sub-committees of the Board.
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 M Moore.
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 has been chaired by B M Hynes.
The Nomination Committee, which is wholly composed of Non-
Executive Directors, meets at least twice per year to discuss forward
Board succession. A formal process has been established to deal with
succession planning across the business. The Committee also considers
the training and development needs of Directors. The Nomination
Committee is chaired by R G W Williams.
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 those 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 on a regular basis. Individual reviews of 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, risk is assessed
as part of the strategic process. 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 economical 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 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.
Terms of reference for all three Committees and a Remuneration Policy
statement have been agreed by the Board.
By order of the Board
Shareholder engagement
The Company has a wide range of shareholders including major
financial institutions and private investors. Regular contact is made with
shareholders through presentations, direct contact and most importantly
both formally and informally at the Company’s Annual General Meeting.
M Cunningham, Finance Director is the main point of contact for
shareholders, but all Directors are encouraged to meet with investors. The
Board considers feedback received from shareholders carefully.
D M O’Connor
CEO
9 April 2024
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Churchill China plc Annual Report for the year ended 31 December 2023
31
Remuneration Report
For the year ended 31 December 2023
This section of the accounts is unaudited
Annual Statement
The role of the Remuneration Committee is to determine and
recommend to the Board the Remuneration Policy and to set Executive
Director remuneration. The Committee also adopts a wider oversight role
with respect to the broader company leadership team’s remuneration
but does not set this. In setting executive pay, the Committee considers
various factors, including, wider workforce remuneration, structure and
alignment of reward to performance, both personal and Company, with
the aim of improving long term Company success.
The key areas of focus for the year were:
Review of remuneration outcomes – assessing the progress of equity
and variable remuneration elements to ensure that the current policies
and remuneration levels are achieving the desired outcomes for all
stakeholders.
Base salary levels – a review was carried out and an increase awarded
of 8%, below that awarded to the majority of the wider workforce. The
size of increase was determined through inflationary pressures prevalent
during the period.
Target setting – appropriate targets were set for variable remuneration,
both LTIP awards where grant size and performance criteria were set
in 2023 and 2024 bonus targets. In addition to target setting the level
of new grants of LTIPs was assessed by the committee. As last year the
Committee assessed targets that were in line with continued growth from
pre-Covid levels.
Succession – the Committee considered matters relating to the ongoing
Board succession plans.
The Company adopts a long term approach to the development of
its business emphasising steady growth and the management of risk.
The Remuneration Policy seeks to reflect this and to balance fixed and
variable pay components accordingly. The design of variable pay
does not encourage short term decision making and the Remuneration
Committee believes that there is an appropriate balance between
annual profit bonus targets, medium term development objectives and
the promotion of longer term growth.
In each case the Committee was conscious of the need to clearly align
Executive Directors’ remuneration packages with shareholders interests
and with consideration of wider workforce remuneration.
Details of the outcome of this work are set out below and later in the
Annual Report on Remuneration.
The Remuneration Committee has considered overall performance in
the year to 31 December 2023 and is satisfied that the outcome of the
remuneration policy in 2023 is consistent with both the results delivered
in year and progress against longer term targets and other metrics.
Profit before exceptional items and taxation increased by more than
15% despite a number of challenges to our operations. The business has
also made good progress against strategic targets in a number of areas
including operational strategy and our longer term energy position.
Whilst as an AIM listed Company we are not required to satisfy the
Directors Remuneration Report (‘DRR’) guidelines we continue to provide
information on certain requirements of the Regulations to reflect good
practice where this is in the interests of shareholders and where the cost
and benefit of supplying this information is appropriate.
The Remuneration Committee is composed of J M Moore, who acts
as Chair, B M Hynes and C J Stephens. M K Payne was appointed to
the remuneration committee on 16 January 2024. All members of the
Committee are Non-Executive Directors. D M O’Connor (Chief Executive
Officer) attended Remuneration Committee meetings but withdrew from
any meeting where his remuneration was discussed. The Remuneration
Committee has received advice from FIT Remuneration Consultants LLP
during the year. The total fees paid to FIT Remuneration Consultants were
£5,030.
Directors’ Remuneration Policy
This section sets out the Company’s Directors’ Remuneration policy. The
Policy is determined by the Remuneration Committee of the Company
and is subject to regular and detailed review in relation to market
practice and alignment with the Group’s strategy. This policy has applied
from the date of the 2020 Annual General Meeting.
The Remuneration Committee also reserves the right to make any
remuneration payments and payments for loss of office notwithstanding
that they are not in line with the Policy set out below where the terms of
the payment were agreed:
• before the Policy came into effect or
• at a time when the relevant individual was not a Director of the
Company and, in the opinion of the Remuneration Committee, the
payment was not in consideration for the individual becoming a
director of the Company.
For these purposes “payments” includes the Remuneration Committee
satisfying awards of variable remuneration and, in relation to an award
over shares, the terms of the payment are “agreed” at the time the
award is granted. For the avoidance of doubt, the Remuneration
Committee’s discretion includes discretion to determine, in accordance
with the rules of the LTIP, the extent to which awards under that plan
may vest in the event of a change of control or in a “good leaver”
circumstance.
The Remuneration Committee may make minor changes to this Policy,
provided they do not materially advantage Directors, to aid in its
operation or implementation.
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Churchill China plc Annual Report for the year ended 31 December 2023
Remuneration Report
For the year ended 31 December 2023
Future policy table
Executive Directors
The table below describes each of the elements of the remuneration package for the Executive Directors.
This policy has applied June 2023
Purpose and link to
strategy
Basic pay
Core element of fixed
remuneration to help
recruit and retain
employees of the
appropriate calibre and
experience
Annual Bonus
Rewards the achievement
of annual financial and
strategic business targets
as well as the delivery of
personal objectives.
Clawback and malus
applies in a number of
circumstances to enable
the Company to mitigate
risk
Benefits
Provide a market
competitive benefits
package to help recruit
and retain employees of
the appropriate calibre
and experience
Operation
Maximum potential value
Performance metrics
There is no prescribed maximum
annual increase. However,
consideration is normally given to
the average change in salary for the
workforce as a whole.
The Remuneration Committee
considers any salary increases above
the workforce average carefully.
The Remuneration Committee
may award salary increases above
the workforce average in certain
circumstances including, but not
limited to:
• A Director assuming additional
responsibilities
• Significant improvement in
individual performance
• Significant change in the size or
scope of a Directors’ role.
• Where salary is initially set below
market levels for a newly appointed
Director to allow for progress in
their role
Executive Directors are entitled to earn
up to 100% of basic pay as a bonus.
Not applicable, although
overall performance of
the individual and the
Company is considered by
the Remuneration Committee
when setting and reviewing
salaries.
The bonus plan is based on the
achievement of challenging
performance targets. The
financial measures which
account for the majority of the
bonus will generally include a
measure of profitability and/or
cash generation. Other targets
may include the achievement
of strategic objectives and
specific personal objectives.
Basic pay for Executive Directors
is normally reviewed annually (but
may be reviewed more frequently if
required).
Consideration is given to the following
when determining basic pay levels:
• Market conditions including
typical pay levels for comparator
companies taking into account the
relative scale and complexity of the
role and business
• Scale and scope of the role,
experience and performance of
the individual
• Average change in salary for the
workforce as a whole
• The annual pay review is
conducted on 1 April each year.
Bonus payments are made in cash
following the completion of the audit
for the year in which bonuses are
earned.
The Remuneration Committee may
adjust the bonus pay-out should the
formulaic outcome be considered
not to reflect underlying business
performance.
The Remuneration Committee has
the right to operate both clawback
and malus provisions in respect of
bonus scheme awards in relation
to circumstances of material
misstatement of results, serious
misconduct or reputational damage
and corporate failure which may have
occurred at any time before claw
back is operated.
Bonus payments are non-pensionable.
Executive Directors are entitled to
receive benefits including healthcare
benefits and a fully expensed
company car (or cash allowance)
where it is deemed necessary to their
role.
Set at a level which the Remuneration
Committee considers to be
appropriately positioned taking into
account the scale and scope of
the role and market conditions in
comparator companies.
Not applicable.
Executive Directors are entitled to
receive repayment of costs deemed
necessary for them to perform their
duties.
Other benefits may be provided based
on individual circumstances including,
but not limited to, housing or relocation
expenses.
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v5
Purpose and link to
strategy
Pensions
Provide market
competitive post-
employment benefits
to help recruit and
retain employees of the
appropriate calibre and
experience
Churchill China plc Annual Report for the year ended 31 December 2023
33
Operation
Maximum potential value
Performance metrics
Up to 10% of basic pay under the
defined contribution scheme.
Not applicable.
Executive Directors are entitled to
membership of Company pension
schemes in operation from time to
time.
The Company currently operates a
defined contribution scheme.
The Company previously operated
a defined benefit scheme, which
was closed for future accrual in 2006.
One Executive Director is a deferred
member of this scheme.
Executive Directors may choose to
receive a salary supplement in lieu of
pensions up to the value of the normal
contribution level at no extra cost to
the Company.
Bonus and other benefits received
by Executive Directors do not count
towards pensionable pay.
Challenging performance
targets are set each year
reflecting the business priorities
that underpin longer term
Group strategy.
At least 50% of the LTIP award
will normally vest based on
adjusted Basic Earnings Per
Share performance targets.
Long term incentive
schemes
Incentivises employees
to achieve a higher and
sustained level of return to
shareholders over a longer
period of time
Supports retention and
promotes share ownership
Clawback and malus
applies in a number of
circumstances to enable
the Company to mitigate
risk
The Company operates an LTIP
approved by shareholders on
22 June 2022.
Executive Directors may normally be
granted LTIP awards up to 100% of
salary each year.
For threshold performance, 25% of the
award vests.
For on-target performance, 40% of the
award vests.
For maximum performance, 100% of
the award vests.
Straight line vesting applies between
threshold, target and maximum
vesting.
In exceptional circumstances, such as
recruitment where it may be necessary
to grant a buy-out award, Executive
Directors may be granted LTIP awards
of up to 150% of salary each year.
LTIP awards are made on an annual
basis typically in the form of nil or
nominal cost options with vesting
dependent on the achievement of
performance conditions, normally
over a three year period. Vested
LTIP options must be exercised within
ten years of the date of grant. Once
exercised the net shares remaining
after the payment of associated tax
charges must be retained for a further
two years.
The Remuneration Committee has
the right to operate both clawback
and malus provisions in respect of
LTIP awards in relation to material
misstatement of results, serious
misconduct or reputational damage
and corporate failure which may have
occurred at any time before claw
back is operated.
LTIP payments are non-pensionable.
There were no significant changes to Remuneration Policy during the year.
Non-Executive Directors
The table below sets out an overview of the remuneration of Non-Executive Directors.
Purpose and link to strategy
Operation
Chairman and
Non-Executive Director fees
Fees for Non-Executive Directors are normally reviewed annually (but may be reviewed more frequently
if required).
Provide an appropriate reward
to help recruit and retain
Non-Executive Directors of
the appropriate calibre and
experience
Consideration is given to the following when determining fee levels:
• Market conditions including typical fee levels for comparator companies
• A Non-Executive Director’s role and responsibilities
• Non-Executive Directors do not participate in any incentive scheme.
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Churchill China plc Annual Report for the year ended 31 December 2023
Remuneration Report
For the year ended 31 December 2023
Explanation of performance metrics chosen
The annual bonus is assessed against financial, strategic and personal performance conditions, as determined by the Remuneration Committee. This
incentivises Executive Directors to focus on delivering the strategic and financial goals of the Company, wider Company performance and bespoke
individual objectives for each Executive Director. We believe that this encourages behaviour that facilitates the future development of the business.
The LTIP is assessed against longer term financial performance conditions, including adjusted earnings per share, to provide a robust measurement of
the Company’s financial performance over the longer term and ability to deliver a higher and sustained level of return to shareholders.
The Remuneration Committee retains the discretion to adjust the performance conditions and targets where it considers it appropriate to do so.
Pay policy for other employees
The Company values its wider workforce and aims to provide a remuneration package that is market competitive, complies with any statutory
requirements and is applied fairly and consistently across the wider employee population. Where remuneration is not determined by statutory
regulation, the key principles of the compensation philosophy are as follows:
• We remunerate people in a manner that allows for stability of the business and the opportunity for sustainable long term growth
• We seek to remunerate fairly and consistently for each role with due regard to market conditions, internal consistency and the Company’s ability
to pay
Total reward for Executive Directors will be set with sensitivity to subordinate staff within the Group with whom the packages will, as far as possible, be
consistent and fair.
The Company takes into account the following when setting the Remuneration Policy for Executive Directors:
• Salary increases for the wider workforce
• Company-wide benefit (including pension) offerings
• Overall spend and participation levels in the annual bonus and LTIP
Statement of consideration of shareholder views
The Remuneration Committee considers a pro-active and transparent dialogue with its shareholders to be important. The Remuneration Committee
will consult with major shareholders when it proposes to make any major changes to the remuneration policy for Directors.
Annual Report on Remuneration
This section of the Remuneration Report is audited. Emoluments of the Directors were as follows:
2023
Executive
D J S Taylor
D M O’Connor
M Cunningham*1
J A Roper
Non-Executive
A J McWalter*2
B M Hynes
J M Moore
C Stephens
R G W Williams
2022
Executive
D J S Taylor
D M O’Connor
J A Roper
Non-Executive
A J McWalter
B M Hynes
J M Moore
R G W Williams*3
Salary
£
Pension
£
Benefits
£
Pay in lieu
of pension
£
Annual bonus
£
Total
remuneration
£
412,945
329,626
124,667
255,675
38,558
51,050
51,050
46,960
74,951
–
–
5,000
–
–
1,680
980
875
–
–
–
–
–
7,012
29,436
6,154
21,243
42,460
194,480
118,460
152,125
–
–
–
–
–
–
–
–
–
–
462,417
555,222
255,261
429,918
38,558
51,050
51,050
46,960
74,951
1,385,482
5,000
3,535
63,845
507,525
1,965,387
236,299
306,667
252,890
84,767
47,300
47,300
12,069
1,010,553
582
582
727
–
–
–
–
20,639
26,810
14,557
160,480
208,466
161,698
–
–
–
–
–
–
–
–
418,000
542,525
429,872
84,767
47,300
47,300
12,069
1,891
62,006
530,644
1,990,163
M Cunningham*1 From date of appointment 1 June 2023
A J McWalter*2 Until date of resignation 6 June 2023
R G W Williams*3 From date of appointment 11 October 2022
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Churchill China plc Annual Report for the year ended 31 December 2023
35
This section of the Remuneration Report is not audited
All Directors received an increase in base salary of 8.0% during the year, slightly below the base rise given to the majority of other staff.
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.
Pension costs above represent contributions made by the Group to defined contribution schemes or payments in lieu of such contributions.
Performance bonuses
Performance bonuses were awarded given the achievement of growth in Operating Profit before exceptional items substantially above target levels
and also in relation to the achievement of personal objectives.
During 2023 Executive Directors were able to earn a maximum of 100% of salary as a performance bonus. Of this figure 14% of salary was payable for
achievement of threshold profit levels, 28% for on target performance, 56% for maximum profit objectives and 76% for the achievement of super-
maximum profit objectives. A further 24% of salary could be earned against specified personal objectives. Straight line vesting applied between
threshold, target and maximum performance levels.
In 2023 threshold profit bonus levels were payable on the achievement of an operating profit before exceptional items of £9,975,000, on target profit
levels were payable on the achievement of operating profits before exceptional items of £10,500,000, maximum target profit levels were operating
profits before exceptional items of £11,500,000 and super-maximum target profit levels were operating profits before exceptional items of £12,100,000.
Profit based awards during the year were of 37% of base salary and personal objectives represented a maximum of 24% of base salary.
Reflecting performance against the financial and personal objectives, the bonus payouts for 2023 are 59%, 59.5% and 61% of salary for D M O’Connor,
J A Roper and M Cunningham
The operation of the annual performance bonus scheme for 2024 has been amended to reflect increased performance targets taking into
consideration the interests of shareholders.
Compensation for loss of office
As part of the Company’s succession planning process the Company agreed with D J S Taylor that he would leave his position as Finance Director on
12 April 2023 and a settlement agreement to this effect was signed on 12 December 2022. Under this settlement agreement D J S Taylor received a sum
of £331,000. The total sum to be paid includes pay in lieu of a notice period of twelve months as provided in his service contract and is included in the
salary figure within the emoluments table.
Long Term Incentive Plan
This section of the Remuneration Report is audited.
Details of share options granted under the Long Term Incentive Plan are as follows. Each option has an exercise price of 10p per ordinary share.
D J S Taylor
2021 grant
2022 grant
D M O’Connor
2021 grant
2022 grant
2023 grant
M Cunningham
2023 grant
J A Roper
2021 grant
2022 grant
2023 grant
Number of
options
31 December
2022
Options
granted
Options
lapsed
Number of
options
31 December
2023
Date from
which
exercisable
Expiry
date
13,538
16,918
17,586
21,977
–
–
13,641
17,046
–
–
–
–
–
24,425
14,545
–
–
18,945
(13,538)
–
June 2024
June 2031
–
16,918
June 2025
June 2032
(17,586)
–
June 2024
June 2031
–
–
–
21,977
24,425
June 2025
June 2032
June 2026
June 2033
14,545
June 2026
June 2033
(13,641)
–
June 2024
June 2031
–
–
17,046
18,945
June 2025
June 2032
June 2026
June 2033
Exercise of the above options is subject to the achievement of performance conditions as specified by the Remuneration Committee and they are
also subject to clawback and malus provisions which may be enacted in certain circumstances. The above number of options represent the amount
that will vest based on the achievement of maximum performance targets. A lower percentage of the above options will vest given the achievement
of lower than maximum performance. At target performance levels 40% of the above options would be expected to vest. Below threshold
performance no options will vest.
Notional pension fund interest has been excluded from both the base and target EPS levels.
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Churchill China plc Annual Report for the year ended 31 December 2023
Remuneration Report
For the year ended 31 December 2023
Share price movements during the year
The market price of the Company’s shares at the end of the financial year was 1,450p (2022: 1,175p). The range of prices for the year to 31 December
2023 was 1,085p to 1,640p (2022: 1,070p to 1,772.5p) per ordinary share.
Pensions
This section of the Remuneration Report is audited.
D J S Taylor, D M O’Connor and J A Roper were not active members of a Company pension scheme during the year. M Cunningham was an active
member for part of his employment in the year. Directors are allowed to exchange pension benefits for additional salary. Pension contributions and
payments in lieu of contributions made by the Group were as shown on page 34 and were at an equivalent rate of 10% of basic salary for D J S Taylor
and D M O’Connor, 7% for J A Roper and 5% for M Cunningham.
All scheme members have the opportunity to pay Additional Voluntary Contributions. Neither the contributions nor the resulting benefits are included in
the above table.
D J S Taylor and D M O’Connor are deferred members of the Churchill Retirement Benefit 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 benefit of D M O’Connor is funded
to allow retirement at 65 with a pension based on accrued service to 31 March 2006.
Directors’ service contracts
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 twelve months from the Company or six months from the Director.
Non-Executive Directors are generally initially appointed on fixed term contracts for a period of three years before moving to renewal every twelve
month but may normally be terminated with a notice period of three months.
There are no defined contractual payments in the event of termination of a Directors’ service contract other than the specified notice period.
Executive
M Cunningham
D M O’Connor
J A Roper
Non-Executive
B M Hynes
J M Moore
R G W Williams
C J Stephens
M K Payne
Date of signature
1 June 2023
15 May 2012
3 November 2015
12 April 2022
25 January 2021
29 September 2022
1 February 2023
16 January 2024
Unexpired term at
31 December 2023
12 months
12 months
12 months
3 months
1 month
1 year 10 months
2 years 11 months
Not applicable*
* M K Payne’s service contract was signed on 16 January 2024
Directors’ interests
This section of the Remuneration Report is audited.
The interests of the Directors and their immediate families and family trusts at 31 December 2023 in the 10p ordinary shares of the Company were as
follows:
D M O’Connor
B M Hynes
J A Roper
J M Moore
M Cunningham
R G W Williams
A J McWalter
D J S Taylor
2023
23,655
4,000
994,035
270
2,033
1,000
-
-
2022
23,655
4,000
994,035
270
-
-
6,000
43,555
1,024,993
1,071,515
J A Roper’s interest in the 10p ordinary shares of the Company at 31 December 2023 represented 9.0% (2022: 9.0%) of the Company’s issued
share capital.
There has been no change in the interests set out above between 31 December 2023 and 9 April 2024.
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Churchill China plc Annual Report for the year ended 31 December 2023
37
Director shareholding requirements
Directors are expected to hold shares in the Company in order to align their interests with those of shareholders. In the longer-term Executive Directors
are encouraged to hold the equivalent of 100% of annual base salary as shares in the Company and it is expected that this target level will be
achieved by the retention of shares vesting under the Long-Term Incentive Plan after the payment of associated tax.
Shareholder consultation
The Remuneration Committee will consult with major shareholders in relation to its operation and particularly in relation to any major changes in the
Remuneration Policy. During the year, with the exception of the standard resolution at the Annual General Meeting, the Remuneration Committee did
not believe there was any requirement to make any approach to shareholders on remuneration issues. No significant comments have been received
from shareholders in relation to remuneration matters.
At the 2022 Annual General Meeting, the standard resolution in relation to the approval of the Report of the Remuneration Committee contained in
the Annual Report for 2022 was passed. 99.9% of votes were cast in favour of the resolution, 0.1% against, with abstentions of 0.0%.
Total Shareholder Return – rebased to 100
180.00
160.00
140.00
120.00
100.00
80.00
60.00
40.00
20.00
0.00
2018
2019
2020
2021
2022
2023
Churchill China
FTSE AIM All Share
(Source: Investec Bank plc)
Over a five year period the Group’s total return to shareholders has remained above that generated by the AIM All Share index. Total returns from the
Company in the year have increased as a result of a rise in our share price. The Group has also increased dividend payments to shareholders during
the year.
Our overall five year return has risen to an average compound rate of 10.53% (AIM: -1.0%). Over the five year period total shareholder return from the
Group has been 65% whilst that achieved by the AIM index as a whole was -5%. In the year to 31 December 2023 the overall return from the Group
was 26.4%, (AIM: -6.4%).
In the opinion of the Directors the above index is the most appropriate against which to measure the total shareholder return of Churchill China plc.
FTSE
Over the same period the Chief Executive Officer’s remuneration has been as follows:
Single figure of remuneration (£’000)
Bonus payout (of base salary)
LTIP vesting (of maximum)
Profit before exceptional items and income tax (£’000)
Share price at 31 December
2018
617
70%
100%
9,388
940p
2019
810
70%
100%
11,176
1,820p
2020
293
0%
0%
848
2021
605
99%
0%
5,963
1,340p
1,762.5p
2022
543
68%
0%
9,054
1,175p
Churchill
2023
557
60%
0%
10,843
1,450p
300
250
200
150
On behalf of the Board
100
J M Moore
50
Chair of the Remuneration Committee
9 April 2023
0
2010y
2011y
2012y
2013y
2014y
2015y
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38
Churchill China plc Annual Report for the year ended 31 December 2023
Nomination Committee Report
For the year ended 31 December 2023
Annual Statement
During the year the Company has continued its succession activities. As previously communicated, Alan McWalter retired from the Board and
Nomination Committee and was replaced by Robin Williams. David Taylor resigned from the Board and the role of CFO was assumed by Michael
Cunningham. Caroline Stephens joined the Board as an Independent Non-Executive Director.
The Nomination Committee has considered a number of matters during the year including:
• Consideration of the current and future structure, size and composition of the Board, including assessment of its skills, knowledge and experience.
Levels of diversity and independence within the Board have been clear areas of focus;
• Further development and implementation of a formal succession plan covering the Company’s Board and the Board of its principal subsidiary
Churchill China (UK) Limited;
• The recruitment of a further experienced independent Non-Executive Director, Martin Payne, who joined the Board in January 2024.
The Board recognises the need for independence within its Non-Executive Directors and has a Board with four independent members. Alongside this
desire to maintain an appropriate level of independence the Board also recognises the benefit that experience and knowledge of the business and its
values bring to the Company. Our succession planning and nomination processes will always attempt to balance these two objectives.
The Nomination Committee operates under Terms of Reference agreed by the Board.
R G W Williams
Chair of the Nomination Committee
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Churchill China plc Annual Report for the year ended 31 December 2023
39
Audit Committee Report
For the year ended 31 December 2023
Dear Shareholders
I am pleased to present our Audit Committee (AC) Report for 2023 and my final one as Chair of the Committee.
I begin this report by welcoming Martin Payne who joined the Company on 16 January 2024 and who has joined the AC and will replace me as Chair
following the preliminary results announcement on the 10th April 2024.
The AC’s primary role is to assist the Board in its oversight of the financial controls of the business and in the assessment of the risk management
framework of the operation. In addition, the Committee is responsible for assessing the independence, quality and objectivity of the external Auditor
and in assessing the appropriateness of the fees being charged, ensuring value for money for the shareholders.
Our programme over the year focused on matters that involve a level of judgement to the ongoing results and performance of Churchill. We review
areas that have levels of estimation and where there is increasing stakeholder scrutiny.
Topics addressed in 2023 included a review of standard costing models and their impact on stock levels and an in-depth full balance sheet review
following the start of the new CFO; a review of the new TCFD reporting included in this Annual Report.
The Audit Committee has considered a number of matters since the beginning of 2023 including:
• Review of the annual and interim financial results and the Annual Report;
• Consideration of the Report of the External Auditors, PricewaterhouseCoopers LLP, to the Audit Committee;
• Agreement of the Audit Plan of the External Auditors for the year to 31 December 2023 including the scope of work to be carried out;
• Review of the independence, effectiveness and level of fees to be paid to the External Auditors;
• Consideration of the Company’s Risk Review process and the changes in risk arising from changes in the business environment with particular
reference to financial performance, new and emerging risks, cybersecurity, business continuity and financial resilience
Financial reporting and significant financial issues
The Audit Committee assesses whether suitable accounting policies have been adopted, whether management have made appropriate estimates
and judgements and reviews reports prepared by management in relation to major judgements.
Stock valuation has been reviewed in depth to ensure that the balance sheet accurately reflects the value being held. This is particularly critical as the
Company has been deliberately increasing its stock holding position in order to improve customer service levels.
The Audit Committee has considered the position of the Group’s Defined Benefit Pension Scheme and believes that it is appropriate to recognise the
surplus of £7.9m as calculate under IAS 19 as an asset within the Financial Statements.
Auditors
The Board, on the recommendation of the Audit Committee, has appointed PwC to complete the audit. The company carried a retendering process
in 2022 and is satisfied as to the independence, quality and value offered by PwC.
Internal audit
The Company does not use an internal audit department and currently 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.
B M Hynes
Chair of the Audit Committee
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40
Churchill China plc Annual Report for the year ended 31 December 2023
Independent auditors’ report
to the members of Churchill China plc
Report on the audit of the financial statements
Opinion
In our opinion:
• Churchill China plc’s group financial statements and company financial statements (the “financial statements”) give a true and fair view of the
state of the group’s and of the company’s affairs as at 31 December 2023 and of the group’s profit and the group’s cash flows for the year then
ended;
•
•
the group financial statements have been properly prepared in accordance with UK-adopted international accounting standards as applied in
accordance with the provisions of the Companies Act 2006;
the company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Framework”, and applicable law); and
•
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report, which comprise: the consolidated and company balance sheets
as at 31 December 2023; the consolidated income statement and consolidated statement of comprehensive income, the consolidated cash flow
statement and the reconciliation of operating profit to net cash inflow from operating activities, and the consolidated and company statements
of changes in equity for the year then ended; and the notes to the financial statements, which include a description of the significant accounting
policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under
ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the
UK, which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have fulfilled our other ethical responsibilities in accordance with
these requirements.
Our audit approach
Overview
Audit scope
• We conducted a full scope audit of Churchill China (UK) Limited and Churchill China plc, as well as targeted procedures
on specific balances in Furlong Mills Limited, which collectively accounts for 99% of consolidated revenue, 100% of profit
before income tax and 96% of total assets.
• The consolidation adjustments included within the consolidated results of the group have been audited to overall group
Key audit matters
•
Inventory valuation (group)
performance materiality.
• Valuation of defined benefit pension liability (group)
• Valuation of the investments in subsidiaries (parent)
Materiality
• Overall group materiality: £539,000 (2022: £480,000) based on 5% of profit before tax (2022: 5% of profit before tax).
• Overall company materiality: £102,000 (2022: £103,000) based on 1% of total assets.
• Performance materiality: £404,000 (2022: £360,000) (group) and £77,000 (2022: 77,000) (company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial statements
of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors,
including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the
engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit
of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
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The valuation of the investments in subsidiaries and valuation of pension liabilities are new key audit matters this year. Otherwise, the key audit matters
below are consistent with last year.
Churchill China plc Annual Report for the year ended 31 December 2023
41
Key audit matter
Inventory valuation (group)
Refer to the summary of significant accounting policies and critical
accounting estimates and judgements in note 1 to the accounts, and note
14 (Inventories).
Inventory represents a significant asset on the group’s balance sheet and
is carried at the lower of cost and net realisable value (“NRV”). The group’s
accounting policy is to determine a provision based upon obsolete,
slow moving or defective inventories, taking into account historical sales
volumes, agreed stock levels and expected scrap values. There is a risk that
the provision is materially misstated given the quantum and inherent levels
of estimation uncertainty in its determination.
Valuation of defined benefit pension liability (group)
Refer to the summary of significant accounting policies in note 1 to the
accounts and note 20 (Retirement benefit asset).
The valuation of pension plan liabilities requires estimation in determining
appropriate assumptions such as salary increases, mortality rates, discount
rates and inflation levels. Movement in these assumptions can have a
material impact on the determination of the liability. Management uses
external actuaries to assist in determining these assumptions, and this is
considered to be the significant audit risk.
Valuation of the investments in subsidiaries (parent)
Refer to the summary of significant accounting policies in note 1 to the
accounts, and note 13 (Investments in subsidiaries ).
Subsidiary 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 101. This balance remains the
largest single balance in the Company’s accounts and so has been the
principal focus of our audit effort.
How our audit addressed the key audit matter
For a sample of inventory lines, we tested the inputs to the provision
calculation, including historical sales data, agreed stock levels, scrap
values and the cost of the item, agreeing the respective inputs to
supporting information.
We tested the integrity of the provision calculation model to assess
whether it was mathematically accurate.
In order to assess the level of inventory provision held at year end, we
have performed several lookback assessments and other analytical
procedures which include considering; the inventory SKU’s where total
contribution in the year was negative, any damaged stock that has
had to be written down and any SKUs which have not been sold for
a period of time and hence would be classified as clearance stock.
For the raw material provision we challenged management on the
provision with reference to prices achieved on actual sales made in
the year and subsequent to the year end, and estimated future selling
prices.
We found the final accounting for inventory valuation provisions to
be materially appropriate and consistent with the audit evidence
obtained.
We used our actuarial experts to assess whether the assumptions used
in the calculation of the defined benefit liability were reasonable and
in line with accounting standards. We assessed the reasonableness of
those assumptions by comparing to our own independently determined
benchmarks considering the potential impact if these assumptions are
to be changed within a reasonable range.
We ensured the sensitivity analysis disclosed in the financial statements
was consistent with the actuarial report.
We found that the final assumptions utilised were reasonable and within
our expected ranges and supported by available evidence.
We evaluated whether there were any indicators of an impairment
trigger in relation to the parent company’s investments balance, with
specific consideration given to the following:
•
the trading results of the subsidiaries, forecasts results and market
capitalisation of the Group;
• any significant changes with an adverse impact in relation to the
market in which the subsidiaries operates, noting that there were no
such changes.
We consider management’s conclusion that there are no indicators of
impairment to be appropriate.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole,
taking into account the structure of the group and the company, the accounting processes and controls, and the industry in which they operate.
The group financial statements are predominantly a consolidation of three UK statutory entities, comprising the group’s main trading entity, Churchill
China (UK) Limited, the Churchill China plc company and Furlong Mills Limited. In establishing the overall approach to the group audit strategy, we
concluded that Churchill China (UK) Limited and Churchill China plc are full scope components. Where balances in out of scope components, such as
Furlong Mills Limited, are in excess of group performance materiality and contribute a significant proportion of a certain financial statement line item,
these balances have also been subject to audit procedures. For the two full scope components, we have allocated materiality to these components
and designed our audit testing for each financial statement line item based on the size and nature of the transactions and balances for that line item
and our assessment of the risk of material misstatement. We used our professional judgement to determine the nature and extent of testing required
over each line item in the company financial statements.
The impact of climate risk on our audit
As part of our audit we made enquiries of management to understand the extent of the potential impact of climate risk on the group’s and
company’s financial statements, and we remained alert when performing our audit procedures for any indicators of the impact of climate risk. Our
procedures did not identify any material impact as a result of climate risk on the group’s and company’s financial statements.
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42
Churchill China plc Annual Report for the year ended 31 December 2023
Independent auditors’ report
to the members of Churchill China plc
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with
qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial
statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements – group
Financial statements – company
Overall materiality
£539,000 (2022: £480,000).
£102,000 (2022: £103,000).
How we determined it
5% of profit before tax (2022: 5% of profit before tax)
1% of total assets
Rationale for
benchmark applied
Profit before tax (PBT) is the primary measure used by the
shareholders in assessing the performance of the group and is a
generally accepted auditing benchmark.
The Company is not a profit oriented entity and is a
holding company. As such it is considered that total
assets is the most appropriate basis upon which to
determine materiality and this is a generally accepted
auditing benchmark.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of materiality
allocated across components was between £102,000 and £512,000.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature
and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance
materiality was 75% (2022: 75%) of overall materiality, amounting to £404,000 (2022: £360,000) for the group financial statements and £77,000 (2022:
77,000) for the company financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and aggregation risk and
the effectiveness of controls - and concluded that an amount at the upper end of our normal range was appropriate.
We agreed with those charged with governance that we would report to them misstatements identified during our audit above £26000 (group audit)
(2022: £24,000) and £4,000 (company audit) (2022: £5,000) as well as misstatements below those amounts that, in our view, warranted reporting for
qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group’s and the company’s ability to continue to adopt the going concern basis of accounting
included:
• Evaluating management’s detailed cash flow forecasts and liquidity headroom under both a base case and downside scenarios;
• Testing that the cash flows are consistent with board approved forecasts;
• Assessing management’s track record of forecasting accuracy;
• Testing the integrity of management’s cash flow models; and
• Assessing whether any mitigating actions are within the control of management.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the group’s and the company’s ability to continue as a going concern for a period of at least twelve
months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the
financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the group’s and the company’s ability
to continue as a going concern.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon. The
directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we
do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially
misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether
there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report
based on these responsibilities.
With respect to the Strategic report and Directors’ report, we also considered whether the disclosures required by the UK Companies Act 2006 have
been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as described
below.
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Churchill China plc Annual Report for the year ended 31 December 2023
43
Strategic report and Directors’ report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Directors’ report for the year
ended 31 December 2023 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the group and company and their environment obtained in the course of the audit, we did not identify
any material misstatements in the Strategic report and Directors’ report.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the statement of directors’ responsibilities in respect of the financial statements, the directors are responsible for the
preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The
directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to
liquidate the group or the company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether
due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we identified that the principal risks of non-compliance with laws and regulations related to
Companies Act 2006 and taxation legislation, and we considered the extent to which non-compliance might have a material effect on the financial
statements. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of
override of controls), and determined that the principal risks were related to posting inappropriate journal entries that increase profit and management
bias in accounting estimates. Audit procedures performed by the engagement team included:
• Discussions with management, including consideration of known or suspected instances of non-compliance with laws and regulations and fraud;
• Reviewing minutes of meetings of those charged with governance;
• Made enquiries as to whether there was any correspondence with legal advisors;
• Challenging assumptions and judgements made by management in their significant accounting estimates; and
• Testing of journals posted to revenue and expenses that have unusual account combinations.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws
and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However,
it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target particular items
for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the population
from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
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.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not obtained all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches not
visited by us; or
• certain disclosures of directors’ remuneration specified by law are not made; or
•
the company financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Sarah Phillips (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Birmingham
9 April 2024
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Churchill China plc Annual Report for the year ended 31 December 2023
Consolidated Income Statement
for the year ended 31 December 2023
Revenue
Operating profit before exceptional items
Exceptional items
Operating profit
Finance income
Finance costs
Profit before exceptional items and income tax
Exceptional items
Profit before income tax
Income tax expense
Profit for the year
Basic earnings per ordinary share
Adjusted basic earnings per ordinary share
All of the above figures relate to continuing operations.
The notes on pages 52 to 73 are an integral part of these consolidated financial statements.
Note
2
3
3
6
6
3
8
9
9
2023
£’000
82,339
10,252
–
10,252
611
(75)
10,788
–
10,788
(3,071)
7,717
70.2p
70.2p
2022
£’000
82,528
9,142
547
9,689
60
(148)
9,054
547
9,601
(1,706)
7,895
71.7p
66.9p
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Churchill China plc Annual Report for the year ended 31 December 2023
45
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2023
Other comprehensive (expense)/income
Items that will not be reclassified to profit and loss:
Remeasurements of post-employment benefit obligations net of tax
Items that may be reclassified subsequently to profit and loss:
Currency translation differences
Other comprehensive (expense)/income for the year
Profit for the year
Total comprehensive income for the year
Note
2023
£’000
2022
£’000
19
(900)
9,332
(25)
(925)
7,717
6,792
58
9,390
7,895
17,285
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 8.
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46
Churchill China plc Annual Report for the year ended 31 December 2023
Consolidated Balance Sheet
as at 31 December 2023
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Deferred income tax assets
Retirement benefit assets
Current assets
Inventories
Trade and other receivables
Other financial assets
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Trade and other payables
Non-current liabilities
Lease liabilities
Deferred income tax liabilities
Non-current liabilities
Total liabilities
Net assets
Equity attributable to owners of the Company
Issued share capital
Share premium account
Treasury shares
Other reserves
Retained earnings
Total equity
Note
2023
£’000
2022
£’000
11
12
19
20
14
15
16
17
18
19
21
21
22
25,085
23,039
663
82
7,855
33,685
21,896
11,036
–
13,933
46,865
80,550
(14,355)
(14,355)
(677)
(5,577)
(6,254)
(20,609)
59,941
1,103
2,348
(431)
1,363
55,558
59,941
849
132
6,924
30,944
15,889
14,380
5,057
9,604
44,930
75,874
(14,291)
(14,291)
(477)
(4,458)
(4,935)
(19,226)
56,648
1,103
2,348
(431)
1,344
52,284
56,648
The notes on pages 52 to 73 are an integral part of these consolidated financial statements. The financial statements on pages 44 to 73 were approved
by the Board of Directors on 9th April 2024 and were signed on its behalf by:
D M O’Connor
Director
M Cunningham
Director
Company number 02709505
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Churchill China plc Annual Report for the year ended 31 December 2023
47
Company Balance Sheet
as at 31 December 2023
Fixed assets
Intangible assets
Investments in subsidiaries
Current assets
Trade and other receivables: non-current
Trade and other receivables: current
Deferred income tax assets
Cash at bank and in hand
Creditors: amounts falling due within one year
Trade and other payables
Net current assets
Total assets less current liabilities
Net assets
Equity attributable to owners of the Company
Issued share capital
Share premium account
Treasury shares
Other reserves
Retained earnings
Total equity
Note
12
13
15
15
19
17
21
21
22
2023
£’000
531
7,008
7,539
2022
£’000
735
7,008
7,743
1,951
1,970
307
–
362
393
33
187
2,620
2,583
(71)
2,549
10,088
10,088
1,103
2,348
(431)
198
6,870
10,088
(50)
2,533
10,276
10,276
1,103
2,348
(431)
145
7,111
10,276
The notes on pages 52 to 73 are an integral part of these financial statements.
The financial statements on pages 44 to 73 were approved by the Board of Directors on 9th April 2024 and were signed on its behalf by:
D M O’Connor
Director
M Cunningham
Director
The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the Company profit and loss account.
The profit of the Company for the year was £3,311,000 (2022: £3,343,000).
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48
Churchill China plc Annual Report for the year ended 31 December 2023
Consolidated Statement of Changes in Equity
for the year ended 31 December 2023
Retained
earnings
£’000
Issued share
capital
£’000
Note
Share
premium
account
£’000
Treasury
shares
£’000
Other
reserves
£’000
Total
equity
£’000
38,117
1,103
2,348
(80)
1,195
42,683
Balance at 1 January 2022
Comprehensive income/(expense):
Profit for the year
Other comprehensive income/(expense):
Depreciation transfer – gross
Depreciation transfer – tax
Remeasurement of post-employment
benefit obligations – net of tax
Currency translation
Total comprehensive income
Transactions with owners
Transactions with owners
Dividends relating to 2022
Treasury Shares
Share based payment
Deferred tax – share based payment
Total transactions with owners
Balance at 31 December 2022
Comprehensive income/(expense):
Profit for the year
Other comprehensive income/(expense):
Depreciation transfer – gross
Depreciation transfer – tax
Remeasurement of post-employment
benefit obligations – net of tax
Currency translation
Total comprehensive income
Transactions with owners
Dividends relating to 2023
Share based payment
Deferred tax – share based payments
Total transactions with owners
Balance at 31 December 2023
7,895
12
(3)
9,332
–
17,236
(3,062)
–
–
(7)
(3,069)
52,284
7,717
12
(3)
(900)
–
6,826
(3,519)
–
(33)
(3,552)
55,558
10
22
21
19
10
21
19
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,103
2,348
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(351)
–
–
(351)
(431)
–
–
–
–
–
–
–
–
–
–
–
7,895
(12)
3
–
58
49
–
–
100
–
100
1,344
–
–
9,332
58
17,285
(3,062)
(351)
100
(7)
(3,320)
56,648
–
7,717
(12)
3
–
(25)
(34)
–
53
–
53
–
–
(900)
(25)
6,792
(3,519)
53
(33)
(3,499)
59,941
1,103
2,348
(431)
1,363
Other Reserves
Included within other reserves are the revaluation, currency reserve and share based payment reserves.
30824
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Churchill China plc Annual Report for the year ended 31 December 2023
49
Company Statement of Changes in Equity
for the year ended 31 December 2023
Balance at 1 January 2022
Comprehensive Income:
Profit for the year
Total comprehensive income
Transactions with owners
Dividends relating to 2022
Treasury shares
Share based payment
Deferred tax – share based payment
Total transactions with owners
Balance at 31 December 2022
Comprehensive income:
Profit for the year
Total comprehensive income
Transactions with owners
Dividends relating to 2023
Share based payment
Deferred tax – share based payments
Total transactions with owners
Balance at 31 December 2023
Retained
earnings
£’000
Issued share
capital
£’000
Note
Share
premium
account
£’000
Treasury
shares
£’000
Other
reserves
£’000
Total
equity
£’000
6,837
1,103
2,348
(80)
45
10,253
10
22
21
19
10
21
19
3,343
3,343
(3,062)
–
–
(7)
(3,069)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(351)
–
–
(351)
7,111
1,103
2,348
(431)
3,311
3,311
(3,519)
–
(33)
(3,552)
6,870
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,103
2,348
(431)
–
–
–
–
100
–
100
145
–
–
–
53
–
53
198
3,343
3,343
(3,062)
(351)
100
(7)
(3,320)
10,276
3,311
3,311
(3,519)
53
(33)
(3,499)
10,088
Other Reserves
Included within other reserves are the revaluation, currency and share based payment reserves.
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50
Churchill China plc Annual Report for the year ended 31 December 2023
Consolidated Cash Flow Statement
for the year ended 31 December 2023
Cash flows from operating activities
Cash generated from operations (see page 51)
Interest received
Interest paid
Income tax paid
Net cash generated from operating activities
Cash flows from investing activities
Purchases of property, plant and equipment
Proceeds on disposal of property, plant and equipment
Purchases of intangible assets
Repayment/(payment) of other financial assets
Net cash used in investing activities
Cash flows from financing activities
Dividends paid
Principal elements of leases
Purchase of treasury shares
Net cash generated from/(used in) in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Exchange loss/(gain) on cash and cash equivalents
Cash and cash equivalents at the end of the year
2023
£’000
8,321
229
(75)
–
8,475
2022
£’000
4,939
60
(35)
(991)
3,973
(5,334)
(4,618)
54
(73)
5,057
(296)
(3,519)
(330)
–
(3,849)
4,330
9,604
(1)
13,933
15
(86)
(1,052)
(5,741)
(3,062)
(263)
(351)
(3,676)
(5,444)
15,046
2
9,604
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Churchill China plc Annual Report for the year ended 31 December 2023
51
Reconciliation of Operating Profit to Net Cash
Inflow from Operating Activities
for the year ended 31 December 2023
Continuing operating activities
Operating profit after exceptional items
Adjustments for:
Depreciation and amortisation
Gain on disposal of property, plant and equipment
Charge for share based payments
Defined benefit pension cash contribution (see note 20)
Changes in working capital:
Inventory
Trade and other receivables
Trade and other payables
Net cash inflow from operations
2023
£’000
2022
£’000
10,252
9,689
3,510
(16)
53
2,983
(4)
100
(1,750)
(1,750)
(6,007)
2,346
(67)
8,321
(5,403)
(3,067)
2,391
4,939
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52
Churchill China plc Annual Report for the year ended 31 December 2023
Notes to the Financial Statements
for the year ended 31 December 2023
1. Summary of significant accounting policies
Churchill China plc is a public company limited by shares that is incorporated and domiciled in the United Kingdom. The address of its registered
office is No.1 Marlborough Way, Tunstall, Stoke-on-Trent, Staffordshire, ST6 5NZ, England. The Company’s ordinary shares are publicly traded on
AIM and it is not under the control of any single shareholder.
Group significant accounting policies
Basis of Preparation
The financial statements of Churchill China plc have been prepared in accordance with UK-adopted International Accounting Standards and
with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards.
The consolidated financial statements have been prepared under the historical cost convention, financial assets and financial liabilities
(including derivative instruments) at fair value through profit or loss and defined benefit pension plan measured at fair value.
The preparation of financial statements in conformity with IFRS requires the use of certain key sources of estimation uncertainty. 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 1.
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have
been consistently applied to all the years presented, unless otherwise stated.
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 the preparation of the financial statements.
The Board has considered alternative scenarios in relation to the effect of loss of revenues and input cost rises. This review has included
consideration of the impact of different levels of reduction in revenue, different periods of effect, alternative operational responses and cost
reduction plans, the high level of cash and deposits held by the Group and additional available financing.
These reviews indicate that it is reasonable for the business to expect to continue in operational existence for at least the next twelve months.
New standards and interpretations not yet adopted
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.
Basis of consolidation
The consolidated financial statements of Churchill China plc include the results of the Company and its subsidiaries.
The financial statements of each undertaking in the Group are prepared to the balance sheet date under FRS 101. Subsidiary accounting
policies are amended, where necessary, to ensure consistency with the Group accounting policies under IFRS.
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.
The acquisition method of accounting is used to account for the purchase 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. Acquisition-related costs
are expensed as incurred. 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.
Segment reporting
Segmental information is 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 the Board of Churchill China plc. Income arising directly from a business segment is identified to that segment. Transactions between
reportable segments are at arms length.
Revenue
The Group manufactures and sells a range of ceramic tableware and raw materials to the ceramics industry. Revenue and a corresponding
receivable are recognised when title and control of the products has transferred, since at this point in time the consideration is unconditional
because only the passage of time is required before payment is due. Sales of ceramic tableware are made on an ex works basis, with revenue
being recognised at the point of despatch. Sales of raw materials are made on a delivered basis, with revenue recognised following delivery to
the relevant customer site.
Products are often sold with retrospective volume discounts based on aggregate sales over a 12 month period. Revenue from these sales is
recognised based on the price specified in the contract, net of the estimated volume discounts percentage contractually agreed. Actual
experience is used to estimate and provide for the discounts, using the expected value method, and revenue is only recognised to the extent
that it is highly probable that a significant reversal will not occur. No significant element of financing is deemed present, because the sales are
made with a standard credit term, consistent with market practice. The Group’s obligation to replace faulty products under the quality and
edge chip warranty terms is recognised in other creditors.
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Churchill China plc Annual Report for the year ended 31 December 2023
53
1. Summary of significant accounting policies continued
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 Company’s right to receive payment has been established.
Leases
New leases are reviewed and classified in accordance with IFRS 16 based on their length and value. Right of use assets are recognised within
Property, Plant and Equipment. Current lease liabilities are recognised in trade and other payables and non-current lease liabilities are presented
on a separate line on the balance sheet as there are no other non-current trade and other payables.
Operating profit and exceptional items
Operating profit is stated both before and after the effect of exceptional items but before the Group’s finance income and costs and taxation.
The Group has adopted an 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, non-trading related income, material impairments of non-current assets, material profits and
losses on the disposal of assets, material increases or reductions in pension scheme charges 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 three 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 quality corporate bonds. The assets of the scheme are held separately from those
of the Group and are measured at fair value. The net obligation/asset presented in the balance sheet is calculated on an actuarial basis at the
reporting date. An asset position is recognised where the assets of scheme exceed the present value of the liabilities, if in accordance with the
scheme rules and accounting standards, the Group believes any surplus recognised would be recoverable. 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 interest income or cost on defined benefit plans is included within finance income or cost, based on the discount rate on the net post-
employment obligation measured at the beginning of the year. 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.
Remeasurements of post-employment benefit obligations are recognised in the statement of comprehensive income in the year, together with
differences arising from changes in actuarial assumptions.
Costs associated with defined contribution schemes represent contributions payable by the Group during the year and are charged to the
income statement as they fall due.
Share based payments
Where equity settled share options have been issued to employees, the fair value of options at the date of grant is charged to the Income
Statement 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 Income Statement 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 presentation 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 accounted for in other comprehensive income.
30824
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54
Churchill China plc Annual Report for the year ended 31 December 2023
Notes to the Financial Statements
continued
1. Summary of significant accounting policies continued
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.
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 accumulated 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 and machinery
Motor vehicles
Fixtures and fittings
%
2 on cost
10–25 on cost
25 on reducing net book value
25–33 on cost
Freehold land and assets in the course of construction is not depreciated.
Right of use assets are depreciated on a straight line basis over the remaining life of the lease in accordance with IFRS 16.
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 amount.
Intangible assets
Intangible assets, which comprise computer software, are shown at cost net of accumulated 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
Trademarks acquired
Neither the Group nor the Company holds any goodwill.
%
33 on cost
10–20 on cost
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. Non financial assets other than goodwill that have suffered an impairment are
reviewed for possible reversal of the impairment at each reporting date.
30824
2 May 2024 5:46 pm
v5
1. Summary of significant accounting policies continued
Churchill China plc Annual Report for the year ended 31 December 2023
55
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.
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 large proportion of the Group’s outstanding Trade Receivables are covered by credit insurance, however where this
is not in place the Group applies the IFRS 9 expected credit loss model when reviewing the provision against Trade Receivables. Industry and
sector information is reviewed to ensure any factors that would affect the future ability of these receivables to be collected is recognised.
Other financial assets
Other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are
included in current assets, except for maturities greater than twelve months after the end of the reporting period. These are classified as non
current assets.
The Group routinely invests in deposit accounts whereby between 32 and 95 days notice is required to withdraw the cash. The Group do not
consider these items to be short-term highly liquid investments that are readily convertible into cash and consequently these are presented as an
other financial asset, rather than cash and cash equivalent within the financial statements.
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 three months or less, and bank overdrafts. Cash and cash equivalents are as defined under IAS 7.
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.
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. Details of the year end receivables in their respective currency can be found in note 15.
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) and to review likely forward exposures 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 2023, if Sterling had weakened by 5% against the US dollar with all other variables held constant, post tax profit for the year
would have been £303,000 (2022: £254,000) higher, mainly as a result of foreign exchange gains on translation of US dollar denominated trade
receivables, payables and cash balances. Equity would have been a further £25,000 (2022: £26,000) higher mainly as a result of differences
in the translation of US dollar investments in subsidiary undertakings. If Sterling had weakened by 5% against the Euro with all other variables
held constant, post tax profit for the year would have been £937,000 (2022: £942,000) higher, mainly as a result of foreign exchange gains 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 2023, had the interest rates achieved been 5% higher with all other variables held constant then post tax profit for the year
would have been £9,000 (2022: £3,000 higher). Other components of equity would have been unchanged.
30824
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Churchill China plc Annual Report for the year ended 31 December 2023
Notes to the Financial Statements
continued
1. Summary of significant accounting policies continued
(b) Credit risk
Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents, other financial assets and credit exposures including
outstanding trade receivables and committed transactions.
Cash and cash equivalents are as follows:
A1/A+ institutions
Other financial assets are as follows:
Santander UK plc
HSBC Bank plc
2023
£’000
13,933
2023
£’000
–
–
–
2022
£’000
9,604
2022
£’000
3,036
2,021
5,057
Credit rating
A1
A1
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 debtor position and considers it is in a position of having limited credit risk (see note 15).
(c) Price risk
As explained in the Strategic 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 with the exception of lease liabilities for which the maturity profile is set out
in note 23.
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 of trade and other receivables and trade and other payables are assumed to approximate their fair values.
Key sources of estimation uncertainty
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 (estimate):
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 net realisable value of
excess inventories were to be 10% higher than management’s estimates the value of this provision would reduce by £358,000 (2022: £265,000). If
the net realisable value of excess inventories were to be 10% lower than management’s estimates the value of this provision would increase by
£379,000 (2022: £265,000).
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1. Summary of significant accounting policies continued
Churchill China plc Annual Report for the year ended 31 December 2023
57
(b) Pension benefits assumptions (estimate):
The present value depends on several factors on an actuarial basis using a number of assumptions. The assumptions used in determining the net
cost of 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 20.
(c) Pension surplus (judgement):
The retirement benefit asset/obligations recognised on the balance sheet represents the surplus or deficit in the Group’s defined benefit pension
scheme calculated on an IAS19 basis at the end of the reporting period. The Group has assessed the recoverability of any net asset arising from
a surplus position as applicable under IFRIC 14. The Group considers that based on the Trust Deed and Scheme rules, that any surplus would be
recoverable on cessation of the scheme.
It is not considered that any items meet the definition of a key source of estimation uncertainty for the Company.
Parent Company significant accounting policies
Basis of preparation
The Company financial statements are prepared in accordance with The Companies Act 2006 as applicable to companies using Financial
Reporting Standard 101 ‘Reduced Disclosure Framework’. The financial statements have been prepared under the historical cost convention.
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.
Disclosure exemptions
The Company has adopted the disclosure exemptions covering the following standards as permissible by Financial Reporting Standard 101
‘Reduced Disclosure Framework’:
(a) The requirements of paragraphs 45(b) and 46 to 52 of IFRS 2 Share-based Payment
(b) The requirements of IFRS 3 Business Combinations
(c) The requirements of paragraph 33(c) of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
(d) The requirements of IFRS 7 Financial Instruments: Disclosures
(e) The requirements of paragraphs 91 to 99 of IFRS 13 Fair Value Measurement
(f) The requirement in paragraph 38 of IAS 1 Presentation of Financial Statements to present comparative information
(g) The requirements of IAS 7 Statement of Cash Flows.
(h) The requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.
(i) The requirements of paragraphs 17 and 18A of IAS 24 Related Party Disclosures.
(j) The requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or more members of a
group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member
Fixed asset investments
Fixed asset investments, comprising investments in subsidiary and associated companies, are stated as follows:
Subsidiary 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 101.
Other
Policies in relation to dividends and share based payments are the same as the Group accounting policies.
There are no significant estimates or judgements relating to the Parent Company.
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Churchill China plc Annual Report for the year ended 31 December 2023
Notes to the Financial Statements
continued
2. Segmental analysis
The Group reports to the Chief Operating Decision Maker, the Board, on two distinct segments of revenue. The Group’s reportable segments
are as follows; Ceramics, the sale of ceramic tableware and complementary items and; Materials, the sale of materials for the production of
ceramics, predominantly to the tableware industry.
Market segment – Revenue
Ceramics
Materials
Intra Group revenue
Group Revenue
Geographical segment – Revenue
United Kingdom
Rest of Europe
USA
Rest of the World
The profits of the business are allocated as follows:
Operating profit before exceptional items
Ceramics
Materials
Exceptional items
Ceramics
Materials
Operating profit after exceptional items
Ceramics
Materials
Unallocated items
Finance Income
Finance costs
Profit before income tax
2023
£’000
74,159
14,687
88,846
(6,507)
82,339
2023
£’000
34,004
32,949
8,399
6,987
82,339
2023
£’000
9,106
1,146
10,252
2023
£’000
–
–
–
2023
£’000
9,106
1,146
10,252
2023
£’000
611
(75)
10,788
2022
£’000
75,335
13,500
88,835
(6,307)
82,528
2022
£’000
33,244
31,888
8,715
8,681
82,528
2022
£’000
7,932
1,210
9,142
2022
£’000
484
63
547
2022
£’000
8,416
1,273
9,689
2022
£’000
60
(148)
9,601
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Churchill China plc Annual Report for the year ended 31 December 2023
59
2. Segmental analysis continued
Segmental Assets
Ceramics
Materials
Segmental Liabilities
Ceramics
Materials
Capital expenditure on tangible and intangibles assets was made as follows:
Ceramics £5,013,000 (2022: £4,178,000), Materials £394,000 (2022: £662,000).
3. Operating profit
(Income)/Expenses by nature
Changes in inventories of finished goods and work in progress
Raw materials used
Purchase of goods for resale
Employee benefit expense – before exceptional costs (note 5)
Other external charges – before exceptional costs
Depreciation and amortisation charges
Profit on disposal of property, plant and equipment
Foreign exchange (gain)/loss
Other external income – exceptional
Employee benefit expense – exceptional
Other external charges – exceptional
Profit on disposal – exceptional
2023
£’000
71,491
9,059
80,550
2023
£’000
18,305
2,304
20,609
2022
£’000
66,469
9,405
75,874
2022
£’000
15,625
3,601
19,226
2023
£’000
2022
£’000
(6,464)
(3,144)
9,580
4,375
31,155
30,001
3,510
(16)
(54)
–
–
–
–
7,445
5,274
27,533
33,264
2,983
(4)
35
(550)
415
59
(471)
Total cost of sales, distribution costs and administrative expenses
72,087
72,839
During the prior year, the Company received £471,000 as a payment in relation to the voluntary winding up of a ceramic industry trade body of
which the Company was a member. Due to the size and nature of this income, the receipt was treated as an exceptional profit on disposal.
Exceptional income of £550,000 was recognised during 2022 relating to COVID-19 Rate Relief credits received from Stoke-on-Trent City Council
for the reduced activity during 2020 due to the impact of COVID-19 on the Group’s core market. Related to this receipt, the Group recognised
exceptional costs totalling £415,000, to support all of our employees with the increased cost of living. Other external exceptional costs in the year
are legal fees relating to employment advice.
There are no items classified as exceptional income or costs in the current year.
4. 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 and warehousing
Sales and administration
The Company had no employees other than Directors (2022: none).
2023
Number
2022
Number
619
217
836
590
212
802
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Churchill China plc Annual Report for the year ended 31 December 2023
Notes to the Financial Statements
continued
5. Employee benefit expense
Staff costs (for the employees shown in note 4)
Wages and salaries
Social security costs
Defined contribution pension cost (see note 20)
Other pension costs (see note 20)
Share options granted to directors and employees (see note 21)
Employee benefit expense – exceptional (note 3)
2023
£’000
27,332
2,865
876
29
53
31,155
–
31,155
2022
£’000
23,885
2,517
867
164
100
27,533
415
27,948
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 (page 31). In addition statutory disclosures in respect of the number of Directors to whom
retirement benefits are accruing is disclosed. There are no ‘non-directors’ that are considered to be key management personnel.
Company
The Company did not make any payments to employees (2022: nil). Directors’ emoluments disclosed within the Remuneration Report include
fees for services provided for the Company.
6. Finance income and costs
Interest income on cash and cash equivalents
Interest on defined benefit schemes
Finance income
Interest on defined benefit schemes (note 20)
Interest on lease liabilities
Other interest
Finance costs
Net finance income/(costs)
7. Auditors’ remuneration
During the year, the Group obtained the following services from the Company’s Auditors:
Fees payable to the Company’s Auditors for the audit of the Company and consolidated
financial statements (Company £6,000, 2022: £6,000)
Total fees payable to the Group’s auditors
8.
Income tax expense
Group
Current tax – current year
Current tax – current year exceptional
– adjustment in respect of prior periods
Current tax
Deferred tax (note 19)
Current year
Current year – adjustment in respect of prior periods
Deferred tax
Income tax expense
30824
2 May 2024 5:46 pm
v5
2023
£’000
229
382
611
–
(64)
(11)
(75)
536
2023
£’000
290
290
2023
£’000
1,507
–
128
1,635
1,144
292
1,436
3,071
2022
£’000
60
–
60
(113)
(35)
–
(148)
(88)
2022
£’000
259
259
2022
£’000
764
14
(147)
631
1,075
–
1,075
1,706
Churchill China plc Annual Report for the year ended 31 December 2023
61
8.
Income tax expense continued
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 entitles 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
Other
Tax charge
2023
£’000
10,788
2,535
89
420
27
3,071
2022
£’000
9,601
1,824
53
(147)
(24)
1,706
The weighted average tax rate for the year was 23.5% (2022:19%). Following the announcement of the UK Government’s intention to increase
Corporation Tax rates from 19% to 25% with effect from 2023, deferred tax balances were provided for at 25% in the year ending December 2022
and as such there is no impact of change in rate in the current year.
During the year a charge of £553,000 (2022: £3,111,000) in relation to deferred tax arising from actuarial gains and losses on the Group’s defined
benefit pension obligation and a debit of £32,000 (2022: £7,000) in relation to deferred taxation on share based payments were adjusted directly
within equity.
9. Earnings per ordinary share
Basic earnings per ordinary share is based on the profit after income tax and on 10,997,835 (2022: 11,009,068) ordinary shares, being the weighted
average number of ordinary shares in issue during the year. Adjusted basic earnings per share is calculated after adjusting for the post tax effect
of exceptional items (see Note 3).
Basic earnings per share (Based on earnings £7,717,000 (2022: £7,895,000))
Less: Exceptional Items: £nil (2022: £532,000)
Adjusted basic earnings per share (based on adjusted earnings £7,717,000 (2022: £7,363,000))
10. Dividends
The dividends paid in the year were as follows:
Group and Company
Ordinary
Final dividend 2022 21.0p (2022: 17.3p) per 10p ordinary share
Interim 2023 11.0p (2022: 10.5p) per 10p ordinary share paid
The Directors now recommend payment of the following dividend:
Ordinary dividend:
2023
Pence per
share
2022
Pence per
share
70.2
–
70.2
2023
£’000
2,309
1,210
3,519
71.7
(4.8)
66.9
2022
£’000
1,907
1,155
3,062
Final dividend 2023 25.0p (2022: 21.0p) per 10p ordinary share
2,749
2,310
Dividends on treasury shares held by the Company are waived.
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Churchill China plc Annual Report for the year ended 31 December 2023
Notes to the Financial Statements
continued
11. Property, plant and equipment
The Company has no property, plant and equipment (2022: none). Details of property, plant and equipment relating to the Group are as follows:
Freehold
land and
buildings
£’000
Plant
and
Machinery
£’000
Motor
vehicles
£’000
Fixtures and
fittings
£’000
Group
At 1 January 2022
Cost
Accumulated depreciation
Net book amount
Year ended 31 December 2022
Opening net book amount
Additions
Disposals
Depreciation charge
Closing net book amount
At 31 December 2022
Cost
Accumulated depreciation
Net book amount
Year ended 31 December 2023
Opening net book amount
Additions
Disposals
Depreciation charge
Closing net book amount
At 31 December 2023
Cost
Accumulated depreciation
Net book amount
18,512
(6,531)
11,981
11,981
415
–
(368)
12,028
18,927
(6,899)
12,028
12,028
465
–
(423)
12,070
19,063
(6,993)
12,070
36,984
(28,587)
8,397
8,397
4,081
(6)
(2,051)
10,421
40,996
(30,575)
10,421
10,421
4,535
–
(2,556)
12,400
45,362
(32,962)
12,400
Total
£’000
58,762
(37,741)
21,021
21,021
4,749
(12)
(2,719)
23,039
63,403
(40,364)
23,039
23,039
5,334
(37)
(3,251)
25,085
68,040
(42,955)
25,085
2,593
(2,255)
338
338
81
–
(185)
234
2,674
(2,440)
234
234
112
–
(132)
214
2,786
(2,572)
214
673
(368)
305
305
172
(6)
(115)
356
806
(450)
356
356
222
(37)
(140)
401
829
(428)
401
341
232
Net book value of Right-of-Use-assets included within Property, Plant and Equipment
At 31 December 2023
At 31 December 2022
Note
23
23
487
310
100
152
46
–
974
694
Included within Property, Plant and Equipment is £1,242,000 classified as Plant and Machinery (2022: £966,000 classified in Land and Buildings)
which meet the classification of Assets In the Course of Construction.
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12. Intangible assets
The Company holds intangible assets with a cost of £1,500,000 (2022: £1,500,000) and a net book value of £531,000 (2022: £735,000) relation to
Dudson trademarks. These are the only intangible assets the Company holds and it is the only individually material intangible asset to the group.
The remaining weighted average amortisation period of the Dudson trademark is 4.8 years (2022: 4.2 years).
Details of intangible assets relating to the Group are as follows:
Group
At 31 December 2021
Cost
Accumulated amortisation
Net book amount
Year ended 31 December 2022
Opening net book amount
Additions
Amortisation charge
Closing net book amount
At 31 December 2022
Cost
Accumulated amortisation
Net book amount
Year ended 31 December 2023
Opening net book amount
Additions
Amortisation charge
Closing net book amount
At 31 December 2023
Cost
Accumulated amortisation
Net book amount
13. Investments in subsidiaries
Company
Cost
At 1 January
Addition – Incorporation of subsidiary
At 31 December
Impairment
At 1 January and 31 December
Net book value
At 1 January
Addition – Incorporation of subsidiary
At 31 December
Computer
software
£’000
Trademarks
£’000
1,260
(1,177)
83
83
91
(60)
114
1,351
(1,237)
114
114
73
(55)
132
1,424
(1,292)
132
1,500
(561)
939
939
–
(204)
735
1,500
(765)
735
735
–
(204)
531
1,500
(969)
531
2023
£’000
7,440
–
7,440
Total
£’000
2,760
(1,738)
1,022
1,022
91
(264)
849
2,851
(2,002)
849
849
73
(259)
663
2,924
(2,261)
663
2022
£’000
7,431
9
7,440
(432)
(432)
7,008
–
7,008
6,999
9
7,008
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Churchill China plc Annual Report for the year ended 31 December 2023
Notes to the Financial Statements
continued
13. Investments in subsidiaries continued
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
Country of incorporation
Description of
shares held
Proportion of nominal
value of issued shares
held and voting rights
Principal activity
Churchill China (UK) Limited*
England and Wales
Ordinary
100%
Furlong Mills Ltd*
England and Wales
Ordinary
100%
Churchill China, Inc**
Churchill Ceramica Iberia,
S.L.***
USA
Spain
Churchill China RM S.R.L.****
Romania
Ordinary
Ordinary
Ordinary
Churchill Housewares Limited* England and Wales
Ordinary
Churchill Ceramics (UK) Ltd.*
England and Wales
Ordinary
James Broadhurst & Sons Ltd.* England and Wales
Ordinary
Churchill Tableware Limited*
England and Wales
Ordinary
England and Wales
Ordinary
100%
100%
100%
100%
100%
100%
100%
100%
Churchill Fine Bone China
Holdings* Limited
Churchill Fine Bone China
Limited*
Elizabethan Fine Bone China
Limited*
England and Wales
Ordinary
100%
England and Wales
Ordinary
100%
Manufacture and sale of ceramic and
related products
Manufacture and sales of raw material for
the ceramics industry
Sale of ceramic and related products
Provision of sales and management services
within the Group.
Provision of management services.
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
The Directors believe the carrying value of subsidiaries is supported by their recoverable amounts. All subsidiaries are directly held with exception
of Churchill Tableware Limited, Churchill Fine Bone China Limited and Elizabethan Fine Bone China Limited.
The consolidated financial statements include the results of each of the subsidiaries listed in the table above. Churchill China (UK) Limited and
Furlong Mills Ltd have taken an exemption from audit for the year ended 31 December 2023 by virtue of s479A of the Companies Act 2006. In
order to allow these subsidiaries to take the audit exemption, Churchill China plc has provided a guarantee to these subsidiaries, in accordance
with s479C of the Companies Act 2006. This guarantees that Churchill China plc will support these subsidiaries in full going forward, will not recall
any loans and will provide financial support should it be required.
* Registered address: No.1, Marlborough Way, Tunstall, Stoke on Trent, ST6 5NZ, United Kingdom
** Registered address: 2043, Corporate Lane, Suite 115, Naperville, Illinois 60563. USA
*** Registered address: Ortega y Gasset, 22-24, Planta 3ª 28006 Madrid
****Registered address: 32 Dorobanti Way, 1st District, Bucharest, Romania
14. Inventories
The Company has no inventory (2022: none). Details of inventory relating to the Group are as follows:
Raw materials
Work in progress
Finished goods
2023
£’000
3,176
3,183
15,537
21,896
2022
£’000
3,633
1,303
10,953
15,889
The Directors do not consider there is a material difference between the carrying value and replacement cost of inventories. The potential
impact of changes in the net realisable value of inventories is shown in note 1.
The cost of inventories recognised as an expense and included in the income statements amounted to £50,094,000 (2022: £50,471,000). The
movement in impairment provisions against the value of inventory in relation to slow moving and obsolete items during the year was a decrease
for the Group of £156,000 (2022: increase of £129,000).
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Churchill China plc Annual Report for the year ended 31 December 2023
65
15. Trade and other receivables
Trade receivables
Less: provision for impairment of trade receivables
Trade receivables – net
Prepayments and other debtors
Corporation tax
Receivables from group undertakings
Less non-current portion: loans to group undertakings
Current portion
Group
Company
2023
£’000
10,712
(219)
10,493
543
–
–
11,036
–
11,036
2022
£’000
12,954
(326)
12,628
1,162
590
–
14,380
–
14,380
2023
£’000
2022
£’000
–
–
–
–
–
2,258
2,258
(1,951)
307
–
–
–
–
–
2,363
2,363
(1,970)
393
All non current receivables are due within five years from the balance sheet date, are not interest bearing and are unsecured.
Derivative financial instruments represent the fair value of gains on foreign exchange contracts.
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 three 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 2023, trade receivables of £7,223,000 (2022: £9,562,000) were fully performing.
As of 31 December 2023, trade receivables with a gross value of £1,926,000 (2022: £2,693,000) were impaired and provided for. The amount
of provision for 31 December 2023 was £219,000 (2022: £326,000). 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
(Decrease)/increase in provision for receivables impairment
Written back during the year
At 31 December
2023
£’000
1,894
25
7
2022
£’000
2,682
10
1
1,926
2,693
2023
£’000
326
(107)
–
219
2022
£’000
196
109
21
326
The creation and release of provision for impaired receivables have been included in ‘other external charges’ in the income statement (note 3).
Amounts charged to the allowance account are generally written off, when there is no expectation of recovering additional cash.
The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies:
Pounds
Euros
US Dollars
Canadian Dollars
2023
£’000
6,897
3,113
1,026
–
2022
£’000
9,677
3,759
934
10
11,036
14,380
During the year, the Group realised gains of £56,000 (2022: £58,000) on settled forward option contracts that have been recognised in the
Income Statement and as at 31 December 2023 held foreign currency exchange contracts for the sale of Euros of £9,786,000 (2022: £6,575,000)
and the sale of US dollars of £3,068,000 (2022: £2,882,000). These contracts are held at their fair value with a loss of £63,000 (2022: £148,000)
recognised in relation to the contracts outstanding at the year end.
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Churchill China plc Annual Report for the year ended 31 December 2023
Notes to the Financial Statements
continued
15 Trade and other receivables continued
Company
As of 31 December 2023, all Company trade receivables were fully performing. Amounts receivable are repayable in accordance with agreed
terms. No interest is chargeable.
The carrying amounts of the Company’s receivables are denominated in the following currencies:
Pounds
US dollar
2023
£’000
2,112
146
2,258
2022
£’000
2,217
146
2,363
We have assessed amounts receivable from Group undertakings in accordance with the expected credit loss model prescribed by IFRS 9. The
provision for impairment against these balances is considered to be immaterial.
16. Other financial assets
Other financial assets
Group
Company
2023
£’000
–
2022
£’000
5,057
2023
£’000
–
2022
£’000
–
Other financial assets represent term deposits made with banks not classified as cash and cash equivalents with maturities of less than one year
as at the balance sheet date. The deposits are not impaired. Further detail of other financial assets is given within Note 1.
17. Trade and other payables
Trade payables
Social security and other taxes
Accrued expenses
Lease liabilities
Corporation Tax
Payable to group companies
Note
18
Group
Company
2023
£’000
2,658
1,120
9,572
336
669
–
2022
£’000
4,422
855
8,761
253
–
–
14,355
14,291
2023
£’000
2022
£’000
–
–
58
–
–
13
71
–
–
37
–
–
13
50
All the above liabilities mature within twelve months from the year end.
18. Lease liabilities
Lease liabilities – current
Lease liabilities – non current
Further analysis relating to the lease liabilities acquired is included in Note 23.
Group
2023
£’000
336
677
1,013
2022
£’000
253
477
730
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Churchill China plc Annual Report for the year ended 31 December 2023
67
19. 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 liability
The net movement on the deferred income tax account is as follows:
At 1 January
Income statement charge (note 8)
Tax credits relating to components of comprehensive income
Tax (charged)/credited directly to equity
At 31 December
2023
£’000
4
78
82
(4,019)
(1,558)
(5,577)
(5,495)
2023
£’000
(4,326)
(1,151)
(50)
32
(5,495)
2022
£’000
46
86
132
(3,936)
(522)
(4,458)
(4,326)
2022
£’000
(133)
(1,075)
–
(3,118)
(4,326)
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 2022
Charged/(credited) to the income statement
Reclassification from assets
At 31 December 2022
Charged/(credited) to the income statement
Tax credits relating to components of comprehensive
income
At 31 December 2023
Deferred tax assets
At 1 January 2022
Charged to the income statement
Tax charges relating to components of comprehensive income
Charged directly to equity
Reclassification to liabilities
At 31 December 2022
Charged to the income statement
Tax charges relating to components of comprehensive income
At 31 December 2023
Accelerated
tax
depreciation
£’000
Land and
building
revaluation
£’000
Retirement
Benefit
£’000
1,671
756
–
2,427
889
–
3,316
274
(3)
–
271
3
–
268
–
–
1,731
1,731
533
(300)
1,964
Retirement
benefit
obligation
£’000
1,789
(409)
(3,111)
–
1,731
–
–
–
–
Other
£’000
30
(1)
–
29
–
–
29
Other
£’000
53
86
–
(7)
–
132
(18)
(32)
82
Total
£’000
1,975
752
1,731
4,458
1,419
(300)
5,577
Total
£’000
1,842
(323)
(3,111)
(7)
1,731
132
(18)
(32)
82
The deferred tax asset relates wholly to the defined benefit pension scheme. The deferred tax asset will be recognised as the defined benefit
pension scheme unwinds.
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Churchill China plc Annual Report for the year ended 31 December 2023
Notes to the Financial Statements
continued
19. Deferred income tax continued
The deferred income tax charged/(credited) to equity during the past year is as follows:
Fair value reserves in shareholders’ equity for both Group and Company:
Tax on share based payments
2023
£’000
(32)
(32)
2022
£’000
7
7
Deferred income tax of £3,000 (2022: £3,000) was transferred from other reserves to retained earnings. 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 £1,147,000 (2022: £1,155,000) in respect of capital
losses amounting to £4,587,000 (2022: £4,621,000) that can be carried forward against future capital gains.
Company
Deferred tax assets of £nil are recognised relating to short-term timing differences (2022: £33,000). The net charge to the Income Statement and
Statement of Comprehensive Income was £nil (2022: £25,000).
20. Retirement benefit asset
Balance sheet asset/(obligations)
Pension benefits
Income statement charge
Pension benefits
Finance costs
2023
£’000
2022
£’000
7,855
6,924
902
(382)
1,031
113
The Group has operated four principal pension schemes during the year. The cost of these schemes is as follows;
Scheme
Churchill Group Retirement Benefit
Scheme
2023
–
2022
Nature
–
Final salary defined benefit plan. Closed to new entrants in 1999 and
to which the accrual of future benefits ceased in 2006
Churchill China 2019 Pension Scheme
£836,000
£830,000
Defined contribution (Master Trust)
Furlong Mills Ltd. Pension Plan
Furlong Mills Ltd. section of the Now
Pension scheme
£7,000
£30,000
£8,000
£29,000
Defined contribution plan
Defined contribution auto enrolment scheme
The assets of the schemes are held separately from those of the Group. The total pension cost for the Group was £902,000 (2022: £1,031,000). 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 £13,000 (2022: £211,000).
No contributions have been made to the Churchill Group Retirement Benefit Scheme (‘the RBS’) in relation to current service since the date
of cessation of the future accrual of benefits on 31 March 2006. A contribution of £1,750,000 (2022: £1,750,000) was made in respect of the
amortisation of past service liabilities during the year.
The Board of Trustees of the Churchill RBS are responsible for the administration and governance of the Scheme. The forward funding rate of
the Scheme was agreed with the Scheme Trustees and Actuary following the completion of the 31 May 2020 triennial actuarial valuation in
November 2022. The Group has agreed to make payments of £1,750,000 per annum in respect of the amortisation of past service deficits for
three years to October 2024 and £1,284,000 per annum until May 2028 in respect of the amortisation of past service deficits.
Any deficit in the RBS is a liability of the Group as Scheme employer and the deficit amortisation payments aimed at removing this deficit may
vary dependant on changes in the assumptions underlying the calculation of liabilities and actual experience. The Group takes into account
the level of present and future payments into the RBS along with capital expenditure and other investments, when considering the allocation of
available cash flow and setting dividend policy.
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Churchill China plc Annual Report for the year ended 31 December 2023
69
20. Retirement benefit asset continued
The amounts recognised in the balance sheet are determined as follows:
Present value of funded obligations
Fair value of plan assets
Asset/(liability) in balance sheet
2023
£’000
2022
£’000
(40,040)
(39,700)
47,895
7,855
46,624
6,924
The preliminary actuarial valuation of the Scheme as at 31 May 2023 was completed by a qualified independent actuary (Mercer) and the
results of this have been updated on an approximate basis to 31 December 2023. The funding level of the RBS has improved substantially during
the year as a result of an increase in discount rates applied to scheme liabilities following higher general interest rates. The scheme’s investment
strategy has been adjusted to reflect revised market conditions. The Company is reviewing the forward position in relation to future scheme
funding.
The movement in the present value of defined benefit obligation over the year is as follows:
At 1 January
Interest cost
Experience gains on liabilities
Re-measurements from change in demographic assumptions
Re-measurements from change in financial assumptions
Benefits paid
At 31 December
2023
£’000
39,700
1,891
(533)
441
1,467
(2,225)
40,741
2022
£’000
61,007
1,086
3,652
(47)
(24,667)
(1,331)
39,700
Included within net scheme liabilities is a liability of £701,000 (2022: £712,000) offset by a matching insurance policy asset of £701,000 (2022:
£712,000) in respect of annuitised member benefits.
The movement in the fair value of plan assets over the year is as follows:
At 1 January
Expected return on plan assets
Re-measurement of return on plan assets excluding amounts included in interest expense
2023
£’000
46,624
2,273
174
1,750
(2,225)
48,596
2022
£’000
53,851
973
(8,619)
1,750
(1,331)
46,624
27%
5%
3%
59%
7%
2023
2022
£’000
–
–
12,746
34,295
854
47,895
0%
0%
26%
72%
2%
£’000
12,358
2,270
1,316
27,523
3,157
46,624
Employer contributions
Benefits paid
At 31 December
Plan assets are comprised as follows:
Equity investment funds
Absolute return funds
Other investment funds
Debt investments
Cash and cash equivalents
The expected return on plan assets under IAS 19 (revised) is calculated at the same rate used to discount scheme liabilities. Nil% (2022: 0.2%) of
plan assets are quoted.
The amounts recognised in the income statement are as follows:
Interest cost on defined benefit plans
The actual return on plan assets was a loss of £1,746,000 (2022: £7,646,000).
2023
£’000
(382)
2022
£’000
113
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70
Churchill China plc Annual Report for the year ended 31 December 2023
Notes to the Financial Statements
continued
20. Retirement benefit asset continued
Remeasurement gains of £701,000 (2022: £12,443,000) gross of tax were recognised in the Statement of Other Comprehensive Income during the
year. The cumulative amount of actuarial losses recognised in the Statement of Other Comprehensive Income is £9,938,000 (2022: £9,237,000).
The principal actuarial assumptions used were as follows:
Pension benefits
Discount rate
Inflation rate – RPI
– CPI
Duration used to set discount rates
Rate of increase of pensions in payment
Rate of increase of deferred pensions
Post retirement mortality assumptions
2023
% per annum
2022
% per annum
4.8%
3.1%
2.7%
4.9%
3.2%
2.8%
14.00 years
15.00 years
2.6%
2.7%
2.6%
2.8%
111% (males) and 107% females
of the standard tables S3PMA/
S3PFA_M, Year of birth, no age
rating projected using CMI_2022
converging to 1.25% p.a.
120% of the standard
tables S3PMA/S3PFA_M,
Year of birth, no age rating
projected using CMI_2021
converging to 1.25% p.a.
The average life expectancy in years of a pensioner retiring at age 65 at the balance sheet date is as follows:
Male
Female
2023
Years
20.7
22.8
The average life expectancy in years of a pensioner retiring at age 65, 20 years after the balance sheet date, is as follows:
Male
Female
2023
Years
21.9
24.3
2022
Years
20.8
22.6
2022
Years
22.1
24.1
Risks
Through its defined benefit pension plan, the Group is exposed to a number of risks, the most significant of which are detailed below:
Asset volatility
The plan liabilities are calculated using a discount rate set with reference to corporate bond yields; if plan assets underperform this yield, this will
create a deficit. The plan holds a significant proportion of equities, which are expected to outperform corporate bonds in the long-term while
providing volatility and risk in the short term.
The Group believes that due to the long-term nature of the plan liabilities and the strength of the supporting group, a level of continuing equity
investment is an appropriate element of the Group’s long-term strategy to manage the plans efficiently. The Trustees investment aim is to meet
pension liabilities as they fall due.
Changes in bond yields which impact discount rate
A decrease in corporate bond yields will decrease the discount rate, which in turn will increase plan liabilities, although this will be partially offset
by an increase in the value of the plan’s bond holdings.
Inflation risk
The Group’s pension obligations are linked to inflation, and higher inflation will lead to higher liabilities (although, in most cases, caps on the level
of inflationary increases are in place to protect the plan against extreme inflation). The majority of the plan’s assets are either unaffected by
(fixed interest bonds) or loosely correlated with (equities) inflation, meaning that an increase in inflation will also increase the deficit.
Life expectancy
The plan’s obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the plans’
liabilities. This is particularly significant where inflationary increases result in higher sensitivity to changes in life expectancy.
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Churchill China plc Annual Report for the year ended 31 December 2023
71
20. Retirement benefit asset continued
Sensitivity
A sensitivity analysis has been carried out on effect of varying certain assumptions within the calculation of retirement benefit obligations.
The effect of a 50 basis point decrease in the discount rate to 4.3% would be to increase scheme liabilities by £2,730,000 (6.9%).
The effect of a 25 basis point increase in CPI inflation to 2.95% would increase scheme liabilities by £839,000 (2.1%).
The effect of a 1 year increase to life expectancy would increase scheme liabilities by £1,120,000 (2.8%).
The amount of net deficit on retirement benefit schemes is also dependant on the valuation and investment performance of scheme assets.
21. Called up share capital and share premium account
Group and Company
At 1 January 2023 and 31 December 2023
Number
of shares
‘000
11,030
Ordinary
shares
£’000
1,103
Share
premium
£’000
2,348
The total authorised number of ordinary shares is 14,300,000 (2022: 14,300,000) with a par value of 10p (2022: 10p) per share. All issued shares are
fully paid.
Share option schemes
The Long Term Incentive Plan was introduced in May 2012. Options under this scheme are equity settled and are granted with a fixed exercise
price at a discount to the market price of the share at the date of issue. Options vest after three years from the date of grant and expire ten
years from the date of grant. Options granted will be exercisable on a pro rata basis based on performance against threshold, target and
maximum performance levels. Performance targets are set at the date of each grant by the Remuneration Committee. Payment of the exercise
price of options is received in cash. A charge to the Income Statement has been made to reflect the fair value of options granted. Options have
been valued using the Black-Scholes option pricing model. No market based 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:
Long term incentive plan
Grant date
Share price at grant date
Exercise price
Number of employees
Shares under option
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
21 June
2023
1,375p
28 June
2022
1,415p
10p
11
94,011
3
39.3%
10
3
4.4%
2.2%
10p
11
84,056
3
39.2%
10
3
1.7%
1.7%
1,245p
1,302p
The following options exercisable over ordinary shares were outstanding at 31 December 2023 under the Long Term Incentive Plan:
Number of shares
June 2021 Grant
June 2022 Grant
June 2023 Grant
2023
–
84,056
94,011
2022
44,765
84,056
–
178,067
128,821
Exercise
price
Date from
which
exercisable
Expiry date
10p
10p
10p
June 2024
June 2031
June 2025
June 2032
June 2026
June 2033
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 2023 is set out below.
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72
Churchill China plc Annual Report for the year ended 31 December 2023
Notes to the Financial Statements
continued
21. Called up share capital and share premium account continued
Outstanding at 1 January
Granted
Lapsed
Outstanding at 31 December
Exercisable at 31 December
2023
Number
‘000
128,821
94,011
(44,765)
178,067
–
2023
Weighted
average
exercise
price
10.0p
10.0p
10.0p
10.0p
–
2022
Number
‘000
44,765
84,056
–
128,821
–
2022
Weighted
average
exercise
price
10.0p
10.0p
10.0p
10.0p
–
There were 94,011 share options granted during the year (2022: 84,056).
2023
2023
2023
2023
2022
2022
2022
2022
Weighted
average
exercise price
0–50p
10p
Weighted
average
remaining life
(expected)
Weighted
average
remaining life
(contractual)
Weighted
average
exercise price
2.0
9.0
10p
Number
‘000
178,067
Weighted
average
remaining life
(expected)
Weighted
average
remaining
life
(contractual)
2.2
9.2
Number
‘000
128,821
The weighted average price for options exercised in the year was nil (2022: nil). The total charge during the year for employee share based
payment plans was £53,000 (2022: £100,000) before tax, which related to equity settled share based payment transactions.
22. Treasury shares
Group and Company
As at 1 January
Purchase of own shares
As at 31 December
2023
£’000
431
–
431
2022
£’000
80
351
431
During the year the Group repurchased nil (2022: 25,000) 10p ordinary shares at a market price of £14.00 per share and reissued nil (2022: nil)
under employee share option schemes. The Group currently holds 32,337 (2022: 32,337) shares in Treasury.
23. Leases
The Group has recognised assets and financial commitments in respect of non cancellable leases for Buildings, Plant and Machinery and Motor
Vehicles as below:
Right of Use Assets – Net Book Value
Land and Buildings
Plant & Equipment
Motor Vehicles
Total
The Group has recognised amounts in the Income Statement for Right of Use Assets included within Fixed Assets
Depreciation charge on Right of Use Assets
Land and Buildings
Plant & Equipment
Motor Vehicles
Total
2023
£’000
487
146
341
974
2023
£’000
139
81
114
334
2022
£’000
310
152
232
694
2022
£’000
87
92
72
251
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Churchill China plc Annual Report for the year ended 31 December 2023
73
23. Leases continued
Lease Liability
Opening at 1 January 2022
Additions
Payments
Interest
At 31 December 2022
Opening at 1 January 2023
Additions
Payments
Interest
At 31 December 2023
Land and
Buildings
£’000
Plant &
Equipment
£’000
Motor
Vehicles
£’000
69
333
(108)
23
317
317
318
(171)
45
509
206
79
(115)
9
179
179
73
(103)
9
158
134
172
(75)
3
234
234
223
(120)
10
347
The maturity of lease liabilities is as follows. The amounts disclosed in the table are the contractual undiscounted cash flows.
Within 1 year
Between 1 and 5 years
Total
The total cash outflow for leases in the year was £395,000 (2022: £298,000).
24. Capital commitments
Capital expenditure contracted for at the balance sheet date but not yet incurred is as follows:
2023
£’000
387
762
1,149
Total
£’000
409
584
(298)
35
730
730
614
(394)
64
1,014
2022
£’000
285
537
822
Property, plant and equipment
25. Related party transactions
Group
Company
2023
£’000
1,179
1,179
2022
£’000
507
507
2023
£’000
–
–
2022
£’000
–
–
All subsidiaries within the Group are wholly owned and therefore the Group has taken the exemption from disclosing the related party
transactions.
26. Financial instruments by category
The accounting policies for financial instruments have been applied to the line items in the financial statements. All financial assets including
cash and cash equivalents, other financial assets and trade and related party receivables are classified as amortised cost, with the exception of
derivative financial instruments classified as fair value through profit and loss, in both 2023 and 2022, as disclosed in note 15. Derivative financial
instruments disclosed in note 15 are classified as level 2 in the fair value hierarchy given this is the fair value of financial instrument not traded in
an active market and is determined using valuation techniques which maximise the use of observable market data and rely as little as possible
on entity-specific estimates. All significant inputs required to fair value an instrument are observable and therefore the instrument is included in
level 2.
All amounts shown in notes 17 and 18 are financial liabilities measured at amortised cost.
The carrying value and fair value of all financial instruments is considered to be materially consistent.
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74
Churchill China plc Annual Report for the year ended 31 December 2023
Five-Year Financial Record
(unaudited)
Revenue
Operating profit before exceptional item
Exceptional items
Operating profit
Share of results of associate net of impairment
Net Finance (costs)/income
Profit before exceptional item and income tax
Exceptional items
Profit before income tax
Income tax (expense)/credit
Profit for the year
Dividends paid
Net assets employed
Ratios
Operating margin before exceptional items
Earnings before exceptional items, interest, tax, depreciation and
amortisation (£000)
Basic earnings per share (p)
Adjusted basic earnings per share (p)
2019
£’000
67,502
11,242
117
11,359
(22)
(44)
11,176
117
11,293
(2,136)
9,157
3,356
41,841
16.7%
13,594
82.6
81.7
2020
£’000
36,362
922
(757)
165
-
(74)
848
(757)
91
22
113
-
37,141
2.5%
3,508
1.0
6.5
2021
£’000
60,839
6,122
-
6,122
-
(159)
5,963
-
5,963
(1,797)
4,166
739
42,683
2022
£’000
82,528
9,142
547
9,689
-
(88)
9,054
547
9,601
(1,706)
7,895
3,062
56,648
2023
£’000
82,339
10,252
-
10,252
-
536
10,788
-
10,788
(3,071)
7,717
3,519
59,941
10.1%
11.1%
12.5%
8,960
37.8
37.8
12,125
13,762
71.7
66.9
70.2
70.2
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Churchill China plc Annual Report for the year ended 31 December 2023
75
The production of this report supports the work of the Woodland Trust, the UK’s
leading woodland conservation charity. Each tree planted will grow into a vital
carbon store, helping to reduce environmental impact as well as creating natural
havens for wildlife and people.
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