Preliminary results - year ended 31 August 2015

RNS Number : 4766H
Character Group PLC
01 December 2015
 



Tuesday, 1 December 2015

 

 

Designers, developers and international distributor of toys, games and giftware

 

The Character Group plc

("Company" "Group" or "Character")

 

Preliminary results for the year ended 31 August 2015

 

"Character continues to reinforce its position as one of the UK's leading toy companies"

 

Key highlights:

Ø Iconic and stable ranges continue to sell-through well  and  more importantly are adored by the consumer

Ø Cornerstone brands in the portfolio include: Peppa Pig, Minecraft, Fireman Sam, Teksta, Little Live Pets, Scooby Doo, Doctor Who, and our Activity ranges

Ø These will be joined in 2016 by Teletubbies

 

Key financials:

Year ended 31 August

% change


2015

2014


Ø Group revenue

£99.05m

£97.89m

+1.2%

Ø Group profit before income tax

£12.27m

£7.11m

+72.6%

Ø EBITDA

£13.93m

£9.78m

+42.4%

Ø Basic earnings per share

48.56p

27.66p

+75.6%

Ø Proposed dividend

- proposed final 

- total for the year

 

6.00p

11.00p

 

3.95p

7.25p

 

+51.9%

+51.7%

Ø Cash generated from operations

£18.25m

£8.46m

+115.7%

Ø Net cash

£4.53m

£(4.51)m


 

"The profit before tax in 2015 is ahead of results previously anticipated and we are pleased to report that current trading remains encouraging and in line with management expectations."

 

"Our new ranges coming to market over the next calendar year are very exciting and already receiving great reviews from both our customers and the trade media.  On this basis, we are confident that the cornerstone brands and the new season's ranges will deliver in terms of demand and sales at consumer level across both our UK and international markets.  At this stage we believe that our underlying performance should be able to deliver another year of solid progress."

 

"Our strong balance sheet and cash flow help us maintain our ability to continue leveraging our broad and, for the most part, proven product portfolio, which will enable us to remain one of the UK's leading toy companies."

 

Richard King, Executive Chairman

 

Full statement attached

 

FTSE sector:  leisure:

FTSE AIM All-share: symbol: CCT.L:

Market cap: £108m

 

Copies of this statement can be viewed at www.thecharacter.com. 

Product ranges can be viewed at www.character-online.co.uk

Product names in this financial report shown in italics represent copyright or registered trademarks.

 

 

Enquiries:

 



The Character Group plc

Richard King,  Executive Chairman

Kiran Shah, Group Finance Director & Joint MD

Mark Dowding, CFO

Office: +44 (0) 208 329 3377

Mobile: +44 (0) 7836 250150 (RK) 

Mobile: +44 (0) 7956 278522 (KS)

Email: info@charactergroup.plc.uk




Panmure Gordon (Nominated Adviser and Joint Broker)

Russell Cook, Investment Banking

Tom Salvesen, Corporate Broking

Tel: +44 (0) 20 7886 2500




Allenby Capital Limited (Joint Broker]

Nick Athanas

Katrina Perez

Tel: +44 (0) 20 3328 5656

TooleyStreet Communications Limited

(investor and media relations)

Fiona Tooley

Tel:  +44 (0) 7785 703523

Email: fiona@tooleystreet.com

 

 

Designers, developers and international distributor of toys, games and giftware

The Character Group plc

(the "Company" or "Group" or "Character")

Preliminary results for the year ended 31 August 2015

 

INTRODUCTION

It is exceptionally pleasing to be able to report a record profit before tax of £12.27 million, up 73%, compared to £7.11m for the previous year on revenues of £99.05 million (2014: £97.89m).  Our domestic market has traded ahead of expectations whilst international sales were hampered by currency and the generally difficult economic climate.  Going forward with a strengthened offering, we expect our international trade to return to its recent pattern of growth.  Our strong balance sheet and cash flow help us maintain our ability to continue leveraging our broad and, for the most part, proven product portfolio, which will enable us to remain one of the UK's leading toy companies.

 

OUR BRANDS AND NEW ADDITIONS

Our product line-up includes well established and longstanding ranges which are refreshed each year and enhanced by the introduction of new and innovative products as they become available.  Our most important brands during the year included Peppa Pig, Minecraft, Fireman Sam, Teksta, Little Live Pets, Scooby Doo, Doctor Who and our Activity ranges.

 

As previously stated, Character Options Limited ('Character Options'), our UK trading subsidiary, has been appointed the global master toy partner for Teletubbies, a former firm favourite with children and parents alike.  Our new line of toy products featuring these characters will be launched and marketed in early 2016.  The launch of the new Teletubbies TV series on CBBC last month has generated great interest to date in the UK which is expected to continue to grow.  We are also especially excited by the reaction from overseas customers and the potential growth opportunities that this licence, together with our other evergreen product line-up, affords us.

 

KEY PERFORMANCE INDICATORS FOR THE YEAR ENDED 31 AUGUST 2015

As stated above, net profit before tax on continuing operations was £12.27 million (2014: £7.11m).  Group revenue in the year was £99.05 million compared to £97.89m for the last financial year. 

 

Gross profit increased from £29.14m in 2014 to £36.66 million in the 2015 financial year, with gross profit margins increasing to 37% (2014: 29.8%).

 

A significant proportion of the Group's purchases are made in US dollars.  The Group is therefore exposed to foreign currency fluctuations and manages the associated risk through the purchase of forward exchange contracts and derivative financial instruments.  Under International Financial Reporting Standards (IFRS), at the end of each reporting period the Group is required to make an adjustment in its financial statements to incorporate a 'mark to market' valuation of such financial instruments.  This has resulted in a related credit to the income statement of £2.05 million (2014: charge of £1.93 m).  The profit before tax of £12.27 million is stated after crediting £2.05 million in relation to this 'mark to market' valuation and is a contributory factor behind the increase in gross profit margin in the current financial year.  This credit is a non-cash item in these financial statements.

 

Inventories remained broadly constant at £8.97 million compared to £8.85m at the end of the previous financial year.  Cash and cash equivalents at 31 August 2015 were £25.78 million (2014: £17.70m).  At the same date, short-term borrowings were reduced to £21.25 million (2014: £22.22m).  The Company has no long term borrowings.  Net current assets increased to £8.05 million (2014: £3.58m).  The Group maintains substantial headroom within its working capital facilities.

 

Basic earnings per share for the year under review were 48.56 pence compared to 27.66p in the year ended 31 August 2014.

 

DIVIDEND

Following on from the very good result for the year, the Board is recommending an increased final dividend of 6.00 pence per share.  Payment of the final dividend is subject to approval by shareholders at the Annual General Meeting ("AGM") on 22 January 2016.

This, together with the interim dividend of 5.00 pence per share paid on 26 June 2015, would make a total of 11.00 pence per share, an increase of 51.72%.  This is covered 4.4 times by annual earnings.

The final dividend will be paid on 29 January 2016 to shareholders on the Register as at the close of business on 8 January 2016; the shares will be marked ex-dividend on 7 January 2016.

 

SHARE BUY-BACK PROGRAMME

It remains part of the Group's overall strategy to continue to repurchase the Company's own shares when appropriate.  As previously indicated, the Directors could also be prepared to participate in any future share buy-back programme the Company proposes.

 

It is recognised however that the conditions of the authority granted at the last AGM do not follow current 'Best Practice'.  As a consequence, the Board has decided that the proposal regarding the renewal to be put forward this year will follow best practice for smaller companies in that the total authority will be for a maximum of 15% of the issued capital and the price at which purchases may be made will be limited to a maximum of 10% above market price.  The Directors would apply this best practice on pricing should they decide to make any share buy-backs prior to the 2016 AGM.

In the period under review, the Company acquired a total of 2,336,330 ordinary shares in the Company at an aggregate cost of £6.07 million (excluding stamp duty and dealing costs), with the average cost being £2.60 per ordinary share (2014: 2,148,002 ordinary shares at an aggregate cost of £3,928,336 and an average cost of £1.83 per ordinary share). 

 

As at today's date, the Company has 21,608,490 ordinary shares in issue (excluding shares held in treasury).  The Company holds 3,269,456 ordinary shares in treasury, representing approximately 15.14% of the issued voting share capital; these treasury shares do not carry voting or dividend rights. 

 

PEOPLE

The Board takes this opportunity to thank colleagues around the business for their continuous hard work, dedication and loyalty, which underpins both the high level customer relationships and the Group's overall performance. 

 

It was with great sadness that, in July 2015 we announced the untimely passing of our longstanding Non-Executive Director, Lord (Mark) Birdwood.  He joined us in 1995 and he was regarded a friend and a respected and valuable member of the Character Board.  Over the last 20 years we have been able to access his knowledge and commercial skills which assisted in Character's overall development.

 

AWARDS

It is highly gratifying for everyone at Character to once again be recognised by those we respect and also compete within our market sector.  We also acknowledge that a considerable part of our success is down to the partnerships which the Character team have forged with our suppliers over many years.

Character Options, was recognised by the industry and its peers, scooping the coveted "Toy Supplier of the Year" at the Toy Industry Awards last January.  Added to this was a triple celebration as it also received product awards for ranges in three categories: Gaming Toy - Minecraft developed by Jazzwares: Interactive Toy - Little Live Pets developed by Moose Enterprise and a joint winner in the "Craze of the Year" category for the Cra-Z-loom Bracelet Maker, (loom bands) developed by CRA-Z-ART (from the Shimmer 'n Sparkle collection).  Additionally, we received prestigious supplier serviceability awards from both Argos and Tesco - all memorable achievements.

 

CURRENT TRADING & OUTLOOK

Our strategic focus remains unchanged, that is "to seek out and develop exciting products which meet domestic and international market demand".  Our portfolio will continue to be derived from both our own-developed in-house ranges, including those produced 'under licence', and others sourced through exclusive distribution agreements.  

 

The Character Group is very fortunate at this time to have both strength and depth across its brands.  Our diverse product portfolio which we market at "great price points" and "value for money" is expected to continue providing a solid platform for ongoing growth.  Our management teams remain optimistic about the prospects of the Group as a whole and we are looking forward to unveiling our ranges for the new season at the London Toy Fair at Olympia in January 2016.

 

The profit before tax in 2015 is ahead of results previously anticipated and we are pleased to report that current trading remains encouraging and in line with management expectations. 

 

Our new ranges coming to market over the next calendar year are very exciting and already receiving great reviews from both our customers and the trade media.  On this basis, we are confident that the cornerstone brands and the new season's ranges will deliver in terms of demand and sales at consumer level across both our UK and international markets. 

 

At this stage we believe that our underlying performance should be able to deliver another year of solid progress.  We look forward to updating shareholders further on our progress at the time of our AGM in January.

 

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 AUGUST 2015

 

 

Note

Total

2015

£000's

 

Total

2014

£000's

Continuing operations





Revenue


99,054

97,889

Cost of sales


(62,399)

(68,752)

Gross profit


36,655

29,137

Net operating expenses




Selling and distribution costs


(7,310)

(7,389)

Administration expenses


(17,753)

(15,273)

Other operating income


892

984

Operating profit

1

12,484

7,459

Finance income


14

8

Finance costs


(230)

(360)

Profit before income tax


12,268

7,107

Taxation


(2,029)

(1,162)

Profit for the year attributable to equity holders of the parent


10,239

5,945





Earnings per share

 




Basic

3

48.56p

27.66p

Fully diluted

3

45.73p

25.18p





Dividend per share (pence)

2

8.95p

6.60p





EBITDA (earnings before interest, tax, depreciation and amortisation)


13,934

9,784





 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 AUGUST 2015

 

 

 


Total

2015

£000's

 

Total

2014

£000's

Profit for the year after tax



10,239

5,945

Items that will not be reclassified subsequently to profit and loss

Income tax relating to items that will not be reclassified subsequently to profit and loss


1,256

-



1,256

-

Items that may be reclassified subsequently to profit and loss




Exchange differences on translation of foreign operations


(251)

(80)

Income tax on exchange differences


24

17



(227)

(63)

Total comprehensive income for the year attributable to the equity holders of the parent


11,268

5,882

 

CONSOLIDATED BALANCE SHEET

AS AT 31 AUGUST 2015

 


2015

 

£000's

 

2014

 

£000's

Non - current assets



Intangible assets - product development

837

238

Investment property

1,911

1,976

Property, plant and equipment

3,551

3,623

Deferred tax assets

1,058

571


7,357

6,408

Current assets


Inventories

8,965

8,854

Trade and other receivables

15,535

23,417

Current income tax receivable

22

16

Derivative financial instruments

234

144

Cash and cash equivalents

25,781

17,702


50,537

50,133

Current liabilities


Short term borrowings

(21,246)

(22,217)

Trade and other payables

(19,015)

(20,545)

Income tax

(1,862)

(1,463)

Derivative financial instruments

(363)

(2,324)


(42,486)

(46,549)

Net current assets

8,051

3,584

Non-current liabilities


Deferred tax

(167)

(48)

Net assets

15,241

9,944

Equity


Called up share capital

1,244

1,266

Shares held in treasury

(3,373)

(3,373)

Investment in own shares

-

(908)

Capital redemption reserve

1,704

1,587

Share-based payment reserve

2,631

2,487

Share premium account

14,642

13,808

Merger reserve

651

651

Translation reserve

1,374

1,508

Profit and loss account

(3,632)

(7,082)

Total equity attributable to equity holders of the parent

15,241

9,944

 

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 AUGUST 2015

 


12 months ended

31 August 2015

£000's

12 months ended

31 August 2014

£000's

Cash flow from operating activities

Profit before taxation for the year

12,268

7,107

Adjustments for:



Depreciation of property, plant and equipment

425

413

Depreciation of investment property

65

66

Amortisation of intangible assets

960

1,846

(Profit) on disposal of property, plant and equipment

(14)

(16)

Interest expense

216

352

Financial instruments fair value adjustments

(2,051)

1,932

 Share-based payments

144

126

(Increase) in inventories

(111)

(2,676)

Decrease / (Increase) in trade and other receivables

7,882

(4,695)

 (Decrease) / Increase in trade and other creditors

(1,530)

4,004

Cash generated from operations

18,254

8,459

Interest paid

(216)

(352)

Income tax (paid)/received

(725)

185

Net cash inflow from operating activities

17,313

8,292

Cash flows from investing activities



 Payments for intangible assets

(1,559)

(1,336)

Payments for property, plant and equipment

(349)

(361)

Proceeds from disposal of property, plant and equipment

14

17

Net cash outflow from investing activities

(1,894)

(1,680)

Cash flows from financing activities



Proceeds from disposal of investment in own shares

908

-

Proceeds from the issue of share capital

929

153

Purchase of own shares for cancellation

(6,088)

(3,955)

Dividends paid

(1,864)

(1,392)

Net cash used in financing activities

(6,115)

(5,194)

Net increase in cash and cash equivalents

9,304

1,418

Cash, cash equivalents and borrowings at the beginning of the year

(4,515)

(6,018)

Effects of exchange rate movements

(254)

85

Cash, cash equivalents and borrowings at the end of the year

4,535

(4,515)

 

Cash, cash equivalents and borrowings consist of:

 

Cash and cash equivalents

25,781

17,702

Short term borrowings

(21,246)

(22,217)

Cash, cash equivalents and borrowings at the end of the year

4,535

(4,515)

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 AUGUST 2015

 

 

 

Called up share capital

£000's

Investment in own shares

£000's

Shares held in treasury

£000's

Capital

redemption

reserve

£000's

Share premium account

£000's

Merger reserve

£000's

Share based payment reserve

£000's

 

Translation reserve

£000's

Profit

and loss account

£000's

Total

£000's

The Group











At 1 September 2013

1,353

(908)

(3,373)

1,480

13,675

651

2,361

1,346

(7,617)

8,968

Profit for the year after tax

-

-

-

-

-

-

-

-

5,945

5,945

Net exchange differences on translation of foreign operations

-

-

-

-

-

-

-

162

(63)

99

Total comprehensive income for the year 

-

-

-

-

-

-

-

162

5,882

6,044

Share-based payment

-

-

-

-

-

-

126

-

-

126

Dividends

-

-

-

-

-

-

-

-

(1,392)

(1,392)

Shares issued

20

-

-

-

133

-

-

-

-

153

Shares cancelled

(107)

-


107

-

-

-

-

(3,955)

(3,955)

At 1 September 2014

1,266

(908)

(3,373)

1,587

13,808

651

2,487

1,508

(7,082)

9,944

Profit for the year after tax

-

-

-

-

-

-

-


10,239

10,239

Net exchange differences on translation of foreign operations

-

-

-

-

-

-

-

(134)

(93)

(227)

Income tax relating to items that will not be reclassified  subsequently to profit and loss

-

-

-

-

-

-

-

-

1,256

1,256

Total comprehensive income for the year 

-

-

-

-

-

-

-

(134)

11,402

11,268

Disposal of Investment in own shares

-

908

-

-

-

-

-

-

-

908

Share-based payment

-

-

-

-

-

-

144

-

-

144

Dividends

-

-

-

-

-

-

-

-

(1,864)

(1,864)

Shares issued

95

-

-

-

834

-

-

-

-

929

Shares cancelled

(117)

-

-

117

-

-

-

-

(6,088)

(6,088)

At 31 August 2015

1,244

-

(3,373)

1,704

14,642

651

2,631

1,374

(3,632)

15,241

 

Capital and Reserves

·      Called up share capital represents the nominal value of equity shares allotted, called up and fully paid

·      Share premium represents the excess of the fair value of consideration received for the equity shares, net of expenses of the share issue over the nominal value of the equity shares

·      Capital redemption reserve represents the buyback and cancellation of shares at nominal value

·      Merger reserve represents the premium arising on shares issued as consideration for the acquisition of subsidiaries and which qualified for merger relief

·      Share-based payment reserve represents the amounts recognised in profit and loss in respect of share based payments

·      Translation reserve represents the cumulative foreign exchange differences on the translation of the net assets of the Group's foreign operations to the presentation currency of the parent

·      Profit and loss account represents retained profit and losses


 

tHE CHARACTER GROUP PLC

NOTEs TO THE PRELIMINARY RESULTS

 

1.

EXPENSES BY NATURE





12 months ended

31 August 2015

£000's

12 months ended

31 August 2014

£000's

Operating profit is stated after charging/(crediting):



Cost of sales



Changes in inventories of finished goods and works in progress

58,666

59,824

Amortisation of capitalised product development costs

960

1,846

(Credit)/charge financial instruments fair value adjustments

(2,051)

1,932

Inventories write down charge/(credit)

449

(273)

Net operating expenses



Exchange losses

77

41

Staff costs

11,208

8,716

Depreciation of tangible fixed assets



- owned assets

425

413

Depreciation of investment property

65

66

(Profit) on disposal of property, plant and equipment

(14)

(16)

Operating leases - land and buildings

272

253

Auditor remuneration

74

78

 

 

2.

DIVIDEND


 

12 months ended

31 August 2015

£000's

12 months ended

31 August 2014

£000's

On equity shares:



Final dividend paid for the year ended 31 August 2014



- 3.95 pence (2013: 3.3 pence) per share

838

693

Interim dividend paid for the year ended 31 August 2015



- 5.00 pence (2014: 3.3 pence) per share

1,026

699


1,864

1,392

 

                      The Directors recommend a final dividend of 6.00 pence per share (2014: 3.95 pence) amounting to £1,297,000 (2014: 
                      £838,000). 
If approved by shareholders, the final dividend will be paid on 29 January 2016 to shareholders on the Register on 
                      8 January 2016.

 

3

 

Earnings per share

The earnings used in the calculation of basic and diluted earnings per share are as follows:

 


 

Year ended

31 August 2015

Profit after taxation

£

Year ended

31 August 2014

Profit after taxation

£

Profit for the year used in the calculation of basic and diluted earnings per share

10,239,000

5,945,000

 

The weighted average number of ordinary shares used for the calculation of basic and diluted earnings per share are as follows:

 


 

Year ended

31 August 2015

Year ended

31 August 2014

Weighted average number of ordinary shares used in the calculation of basic earnings per share

21,085,023

21,492,265

Weighted average number of share options

1,305,141

2,116,022

Weighted average number of ordinary shares used in the calculation of diluted earnings per share

22,390,164

23,608,287

 

4.

ANNUAL GENERAL MEETING


The Annual General Meeting will be held at the offices of Duane Morris LLP, 2nd Floor, 10 Chiswell Street, London EC1Y 4UQ on Friday, 22 January 2016 at 11.00 am.



5.

ANNUAL REPORT AND ACCOUNTS


The Preliminary announcement does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006.  The Annual Report and accounts for the year ended 31 August 2015 and the comparatives under IFRS have yet to be reported on by the auditors and have not yet been filed with the Registrar of Companies.



6.

ELECTRONIC COMMUNICATIONS


The full Financial Statements for the year ended 31 August 2015, together with the Notice convening the Company's 2016 Annual General Meeting, will be available for viewing and download on the Group's website, www.character.com by 18 December 2015.

 

 

 


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