Churchill China appears to be in a state of managed decline. Growth prospects are scarce, and core markets are showing signs of weakness.
The performance ceramic manufacturer serving hospitality markets worldwide has posted a 5.2% decline in revenue for the first half of 2025, highlighting the ongoing challenges facing the industry.
The AIM-listed company reported revenue of £38.5 million for the six months ending June 30, down from £40.6 million in the same period last year. Operating profit took a more significant hit, falling 37.8% to £2.8 million.
Shares were flat at the time of writing on Wednesday but are down 38% year-to-date.
Earnings per share dropped to 21.0p from 32.8p in the previous year, while the interim dividend was cut by 39.1% to 7.0 pence per share. The company’s net cash position also weakened, falling to £5.6 million from £7.8 million a year earlier.
Mixed Regional Performance
The company experienced strong performance in the USA and UK hospitality markets. However, these gains were offset by weaker conditions in Europe, Rest of World markets, and the materials business segment.
The UK was Churchill’s largest market in 2024, but a slowdown in demand meant the ‘Rest of Europe’ segment accounted for the highest revenue in H1 2025. The US is still a small proportion of revenue for the firm, but one would hope that it can build a great foothold to prop up sales.
Churchill said they maintained a stable market share despite operating in a contracting market. But this doesn’t make the stock investable.
Management is taking proactive steps to navigate the downturn and has invested in automation to counter rising labour costs, positioning the business for when market conditions improve. The company reduced stock levels by £0.9 million during the period, contributing to improved cash generation.
“Global hospitality markets remain depressed by weak consumer sentiment and rising employment costs. We believe we are maintaining share in key territories, and in the UK and USA we have performed better than the market,” said Robin Williams, Chairman of Churchill China.
“Our focus internally is on reducing our cost base without damaging core skills and on employing capital spend to bring down cost of production and enable new product launches at competitive price points.”