Trading Statement

09/07/2002

In the light of current and forecast trading conditions the Board of Churchill China plc have concluded that there will be a material shortfall against market expectations in respect of profit before taxation and exceptional items for the year to 31 December 2002 due to underperformance in the Dining In division.

The Board envisaged a slow down in sales volumes within the Dining In division in the first half year but this has been compounded by reduced demand, particularly in Europe and promotional markets. Sales of volume dinnerware are likely to remain under pressure for the year as a whole. This has masked good sales performance in target sections of the business, namely premium dinnerwaree, James Sadler collectables and licensed products. Management action to reposition this business is being accelerated and further initiatives are now being addressed. The benefits of efficiency improvements arising from actions implemented in the early part of 2002 will be realised over the next six months.

The Group's Dining Out division continues to perform robustly with sales and margins in line with last year. We have continued to win market share in the UK based on our reputation for service and innovation. Growth in the full year and thereafter will be underpinned by recent investment in successful new product launches and increases in sales and marketing resource, particularly in export markets.

It is expected that overall Group profit before taxation and exceptional items for the year to 31 December 2002 will be substantially lower than last year. The Group remains profitable and continues to generate cash at an operating level. The Board remains confident that the reduction in current year profitability will not affect the Group's longer term prospects and as such its ability to maintain its dividend policy.