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Churchill China value collapses to pounds 10 million

CHURCHILL CHINA, the old-established tableware makers, put out another profit warning yesterday, saying sales of hotelware to the catering trades, which generates two-thirds of the firm's profits, fell below forecasts in the third quarter.

The trend continued in the fourth quarter, the recovery predicted six months ago has failed to materialise and profits for the calendar year will be significantly below market forecasts, which had already been halved to just pounds 3m.

The company, which is based in Stoke-on-Trent, also warned that the final dividend may be cut and the shares promptly slumped from 117.5p to 87.5p. They were trading at almost 500p a year ago, since when the company has lost more than 80 per cent of its market value.

The company, which was founded in 1795, is now valued at less than pounds 10m, although it has virtually no gearing and net assets of pounds 25m, according to the chief executive Stephen Roper.

Sales and especially profits have been successively hit by the strength of sterling, and the Asia crisis, which wiped out sales in the Far East. Technical problems with new automatic platemaking machinery also affected the production quality.

The company spent pounds 20m over the last four years on automated plate-making, moulding and decorating machinery in an effort to cut costs and take production more up-market.

The technical problems are now seven eighths solved according to Mr Roper; new line management has been brought in and costs are now reducing, but improving quality controls and customer service alone cost pounds 750,000 in the second half of the year.

The strong pound continues to affect export markets, which take 35 per cent of hotelware and 65 per cent of tableware sales, and frustrated exports are depressing prices in the UK market.

Churchill intends to try and hold on to export sales in the hope of returning to profit when sterling weakens, but capital expenditure will be slashed from pounds 5m to pounds 1.5m-2m next year.