Interim Results

Character Group PLC 24 April 2002 Issued by Citigate Dewe Rogerson, Birmingham Date: Wednesday, 24 April 2002 Embargoed: 7.00am The Character Group plc Interim Results for the six months ended 28 February 2002 • Restructuring programme and stronger product portfolio sees the Group returned to profitability and on track to maintain this positive trend • Substantial improvement in Group's product offering sees listings with major customers in UK much stronger • Successful products in the range include Starcastles, Buzz Lightyear, Stretch Armstrong and gifts and games relating to Harry Potter and Lord of the Rings. • New products being introduced include: • 'Clifford the Big Red Dog' • Range of cookware under BBCs 'Ready Steady Cook' brand • Pre-school toys based on the 'Wheels on The Bus' licensed animated series • Rumble Robots and associated ranges 'We have managed the business through the downsizing process and the Group is now in a much better position than in the corresponding period last year. 'We now have the opportunity to concentrate on a more focused range of business activities and to achieve further operational efficiencies from each business unit whilst at the same time looking to return to the historic patterns of sales growth. In order to achieve this, we have concentrated on introducing new ranges that will develop into brands that have longevity and the Directors believe that Clifford the Big Red Dog, Ready Steady Cook, Disney Princesses, Taiyo Radio Control and Scooby Doo are good examples in the Toy area, whilst Pin the Tail on the Donkey should prove to be an enduring Game. Cool-iCam, our own-developed brand for digital imaging is a further example of this strategy. 'Given the improvement in the Group's product ranges and strong customer listings combined with the benefit of reduced operational costs and improved margins, the Board remains optimistic that further positive progress will be made in this financial year and the 2002 calendar year as a whole.' Richard King, Chairman FULL STATEMENT ATTACHED Enquiries: Richard King, Chairman Kiran Shah, Finance Director Fiona Tooley, Director The Character Group plc Keith Gabriel, Account Executive Tel: 020 8949 5898 Citigate Dewe Rogerson Ltd Mobile: 07836 250150 (RK) Tel: 0121 455 8370 Mobile: 07956 278522 (KS) Mobile: 07785 703523 (FT) Mobile: 07958 985395 (KG) -2- The Character Group plc Interim Results for the six months ended 28 February 2002 STATEMENT BY THE CHAIRMAN, RICHARD KING On the 18th of January, I announced that Christmas trading was in general as per our expectations and that we were optimistic that we should show substantial improvements throughout the financial year. I am therefore very pleased to announce that the Group has returned to profitability and is on track to maintain this positive trend for the year as a whole. Results For the six months ended 28 February 2002, the Group made a profit before tax of £121,000 on sales of £29.6 million compared to a loss before tax of £1.94 million on sales of £36.6 million for the corresponding period last year. Earnings per share were 0.29 pence against a loss per share of 9.32 pence at the 2001 interim stage. It is not proposed to pay an interim dividend. In the 2001 Annual Report, I indicated that the full benefits from the cost savings implemented following last year's substantial restructuring programme had not yet been received. Therefore, I am pleased to report that in the first six months of this financial year, fixed costs have been cut by 13%, and stocks have been reduced by 34% from £7.1 million to £4.7 million. Interest has also been substantially reduced by 36%, to £364,000 and cash at bank at 28 February 2002 was approximately £2.3 million. In addition, the gross margin has been increased by 4 percentage points. Each of these factors has contributed to the turnaround in the Group's performance. Trading As a result of a substantial improvement in our product offering, our product listings with our major customers in the UK are much stronger this year. We are also making steady progress internationally by increasing both our product portfolio and customer base. We have a number of products within our portfolio which continue to be successful. These include gifts and games relating to the much-acclaimed Harry Potter and Lord of the Rings licenses and within our toy range, Starcastles, Buzz Lightyear and Stretch Armstrong are worthy of mention, with the latter now entering its 8th year in our range and for which we now have the rights for the first time to distribute this product to both the UK and Europe. The Group's ranges of toys and games were well received at this year's International Toy & Hobby Fair. Over the next few months we will be bringing to market a range of new and exciting toys which were reviewed at the Fair favourably and include 'Clifford the Big Red Dog' - based on the highly rated animated BBC TV series; a range of children's cookware under BBC's 'Ready Steady Cook' brand which features a popcorn maker, as well as a mini oven, ice cream maker and other kitchen products; a range of pre-school toys based on the ' Wheels on the Bus' licensed animated series which is to be televised later this year; the successful Rumble Robots introduced last year has been developed into three associated ranges (Rumble Wars, Rumble Invasions and Rumble Cars); a range of Disney Pop Dolls, and interactive accessories for the Disney Princess Dolls; Norton the Bear which walks, talks and interacts, and Baby Amore lifelike dolls. In addition, we are shortly introducing a range of boys toys relating to Cubix which is featured in a cartoon series currently being aired on Cartoon Network and scheduled to be introduced by the BBC later in the year. Lastly, Scooby Doo is starring in a Warner Bros feature film to be released this year. Notable new games for which we have high hopes include Pin the Tail on the Donkey, an electro-mechanical action game, and Harry Potter's Wizard Class, which allows the child to perform amazing wizardry feats. continued... -3- Cool-iCam, our own-branded and developed digital camera now has 20 models in the range from low-end mass market to megapixel cameras and audio products which include a truly mobile karaoke machine. We believe that further improvement from this business can be achieved as the Cool-iCam brand is further established internationally. Outlook We have managed the business through the downsizing process and the Group is now in a much better position than in the corresponding period last year. We now have the opportunity to concentrate on a more focused range of business activities and to achieve further operational efficiencies from each business unit whilst at the same time looking to return to the historic patterns of sales growth. In order to achieve this, we have concentrated on introducing new ranges that will develop into brands that have longevity and the Directors believe that Clifford the Big Red Dog, Ready Steady Cook, Disney Princesses, Taiyo Radio Control and Scooby Doo are good examples in the Toy area, whilst Pin the Tail on the Donkey should prove to be an enduring Game. Cool-iCam, our own-developed brand for digital imaging is a further example of this strategy. Given the improvement in the Group's product ranges and strong customer listings combined with the benefit of reduced operational costs and improved margins, the Board remains optimistic that further positive progress will be made in this financial year and the 2002 calendar year as a whole. Richard King Chairman 23 April 2002 -4- The Character Group plc Interim Results CONSOLIDATED PROFIT AND LOSS ACCOUNT Note 6 months to 6 months to 12 months to 28 February 2002 28 February 2001 31 August 2001 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Turnover 29,632 36,648 58,887 Cost of sales (19,915) (26,152) (42,809) Gross profit 9,717 10,496 16,078 Net operating expenses Selling and distribution costs (3,773) (5,597) (7,356) Administration expenses (5,626) (6,462) (13,171) Other operating income 167 200 440 Operating profit/(loss) 485 (1,363) (4,009) Interest receivable 13 32 70 Interest payable (377) (604) (936) Profit/(loss) on ordinary activities before taxation 121 (1,935) (4,875) Taxation 2 - (194) (878) Profit/(loss) on ordinary activities after taxation 121 (2,129) (5,753) Earnings/(loss) per share - basic 3 0.29p (9.32p) (23.89p) Earnings/(loss) per share - fully diluted 3 0.29p (9.32p) (23.89p) -5- The Character Group plc Interim Results CONSOLIDATED BALANCE SHEET Note Group as at Group as at Group as at 28 February 2002 28 February 2001 31 August 2001 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Fixed assets Intangible assets 798 1,703 818 Tangible assets 1,879 2,268 2,012 Investments 53 153 53 2,730 4,124 2,883 Current assets Stocks 4,657 7,052 7,785 Trade debtors subject to finance arrangements 3,703 5,017 5,957 Factor advances (2,965) (3,890) (4,432) 738 1,127 1,525 Trade and other debtors 5,297 4,959 5,894 Cash at bank and in hand 2,321 475 1,638 13,013 13,613 16,842 Creditors: amounts falling due within one year (9,667) (15,146) (13,953) Net current assets/(liabilities) 3,346 (1,533) 2,889 Total assets less current liabilities 6,076 2,591 5,772 Creditors: amounts falling due after more than one year Convertible loan note (4,600) - (4,600) Other creditors - (27) (5) (4,600) (27) (4,605) Provision for liabilities and charges Investment in Joint Venture: Share of gross assets - 91 - Share of gross liabilities (10) (282) (13) Net assets 1,466 2,373 1,154 Capital and reserves Called up share capital 2,064 1,156 2,064 Shares to be issued 908 1,808 908 Capital redemption reserve 15 15 15 Share premium 7,843 5,473 7,843 Merger reserve 651 651 651 Profit and loss account 4 (10,015) (6,730) (10,327) Equity shareholders' funds 1,466 2,373 1,154 -6- The Character Group plc Interim Results CONSOLIDATED CASH FLOW STATEMENT Note 6 months to 6 months to 12 months to 28 February 2002 28 February 2001 31 August 2001 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Cash flow from operating activities 5 1,806 (1,832) (6,488) Returns on investment and servicing of finance Interest paid (net) (363) (569) (858) Interest element of finance lease rental payments (1) (3) (8) Net cash outflow for returns on investments and servicing of finance (364) (572) (866) Taxation (413) (146) 474 Capital expenditure and financial investment Payments to acquire tangible fixed assets (234) (147) (355) Sale of tangible fixed assets 23 31 45 Net cash outflow for capital expenditure and financial investment (211) (116) (310) Cash inflow/(outflow) before use of liquid resources and financing 818 (2,666) (7,190) Management of liquid resources: Financing Issue of ordinary share capital - - 3,278 Issue of convertible loan note - - 4,600 Capital element of finance lease rentals (41) (27) (49) Short term bank loan (94) (353) (259) Net cash (outflow)/inflow from financing (135) (380) 7,570 Increase/(decrease) in cash in the period 7 683 (3,046) 380 Decrease/(increase) in net debt in the period 7 818 (2,666) 688 -7- The Character Group plc Interim Results NOTES TO THE ACCOUNTS 1. Basis of Preparation The financial information for the six months ended 28 February 2002 has not been audited, nor has the financial information for the six months ended 28 February 2001. However, the interim report includes a review report signed by the auditors. The comparative figures for the year ended 31 August 2001 do not constitute the company's statutory accounts for that year, but have been extracted from the statutory accounts filed with the Registrar of Companies, and which carried an unqualified audit report. The report has been prepared in accordance with the applicable accounting standards on a consistent basis using the accounting policies set out in the 2001 annual report. 2. Taxation The tax charge for the half year is estimated on the basis of the anticipated tax rates applying for the full year. 3. Earnings per Share Earnings per share have been calculated in accordance with FRS14 earnings per share. The calculations are based on the following: 6 months to 6 months to 12 months to 28 February 2002 28 February 2001 31 August 2001 Profit/(loss) for the period after taxation £121,000 (£2,129,000) (£5,753,000) Basic weighted average share capital (number of shares) 41,287,909 22,834,663 24,079,063 Dilutive shares - share options - - - Diluted weighted average share capital 41,287,909 22,834,663 24,079,063 4. Profit and Loss Account £'000 At 1 September 2001 (10,327) Profit retained for the six months 121 Exchange difference 191 At 28 February 2002 (10,015) continued... -8- 5. Reconciliation of operating loss to net cash inflow/(outflow) from operating activities 6 months to 6 months to 12 months to 28 February 2002 28 February 2001 31 August 2001 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Operating profit/(loss) 485 (1,363) (4,009) Depreciation, impairment and amortisation 366 364 766 Provision in respect of own shares - - 100 Loss on disposal of tangible fixed assets 2 20 52 Decrease in stocks 3,128 4,478 3,745 Decrease/(increase) in debtors 1,385 3,820 (1,398) Decrease in creditors (3,751) (9,328) (5,948) Exchange differences 191 177 204 Net cash inflow/(outflow) from operating activities 1,806 (1,832) (6,488) 6. Reconciliation of net cash flow to movement in net debt 6 months to 6 months to 12 months to 28 February 2002 28 February 2001 31 August 2001 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Increase/(decrease) in cash in the period 683 (3,046) 380 Cash inflow from movement in debt and 135 380 308 lease financing Movement in net debt resulting from cash flows 818 (2,666) 688 Net debt at 1 September 2001 1,503 815 815 Net debt at 28 February 2002 2,321 (1,851) 1,503 continued... -9- 7. Analysis of net debt Cash at bank Bank Short term Lease Total and in hand overdraft bank loan finance £'000 £'000 £'000 £'000 £'000 1 September 2000 1,258 - (353) (90) 815 Cash flow (782) (2,264) 353 27 (2,666) 28 February 2001 476 (2,264) - (63) (1,851) Cash flow 1,162 2,264 (94) 22 3,354 31 August 2001 1,638 - (94) (41) 1,503 Cash flow 683 - 94 41 818 28 February 2002 2,321 - - - 2,321 -10- Independent Review Report to the Character Group PLC Introduction We have been instructed by the Company to review the financial information for the six months ended 28 February 2002 which comprises the consolidated profit and loss account, the consolidated balance sheet, the consolidated cash flow statement and the notes to the accounts. We have read the other information contained in the Interim Report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' Responsibilities The Interim Report, including the financial information contained herein, is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Interim Report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review Work Performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Review Conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 28 February 2002. Baker Tilly Chartered Accountants Chelmsford 23 April 2002 This information is provided by RNS The company news service from the London Stock Exchange

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