Sticky retail sales in Britain, Europe and the US forced Churchill China to make a profit warning at its annual meeting in May and yesterday it reported that its pre-tax score for the first half of this year fell to £ 605,000 from £1.3 million a year earlier.
The house broker Williams de Broe is still forecasting £2.5 million for the full year, which would be a slight improvement on 2004, while in the first six months sales dipped by less than six per cent to £22.3 million.
The interim dividend stays unchanged at 3.7p helping the AIM-listed shares to recover 21/2p to 1761/2p, where they yield 6.2 per cent.
The first-half setback was confined to Churchill's retail sales, now supplied entirely from China and Colombia.
Demand from hotels and restaurants for its hospitality products was no better than flat in most markets, but sales still rose b y £ 2 0 0 , 0 0 0 t o £12.5 million, driven by the "Alchemy" vitreous enamel range, whose sales jumped by 65 per cent.
These hospitality ranges are all made at Churchill's newly automated works in Stoke, where it has also spent £1.9 million on a new warehouse facility.
Another drain on cash was a £1.5 million build-up of retail stocks caused by cancelled orders.
Churchill has set up a Shanghai office to supply international customers direct from China where possible.
Chairman Stephen Roper said: "Cost reductions in the second half of the year together with stronger profit and cash generation enable the board to feel confident of meeting expectations for the full year."