Tandem Group Share News (TND)

(Sharecast News) - Sports, leisure and mobility equipment company Tandem Group updated the market on its trading for 2019 on Monday, reiterating that revenue in the first half of the year was up around 27% as a result of strong performance from both licensed and own-brand properties.
The AIM-traded firm said that, although the rate of growth in the second half of the year ended 31 December did not match the "exceptional levels" achieved in the first half, it was still close to 15% ahead of the same period in the prior year.

It said the sustained periods of wet weather across many parts of the country in the late autumn period, as well as macro uncertainties, hindered its progress from earlier in the year.

"However, overall it was a strong year for the group," the board said.

"Despite a third year in a row of decline in the toy industry with reported outdoor toy sales declining by almost 10%, group revenue for the full year ended 31 December increased by nearly 20% to ?38.8m.

"Group profit before tax is expected to be well ahead of the prior year."

Tandem said revenue from the toys business was "considerably ahead" of the prior year, explaining that in licensed wheeled toy categories, 'L.O.L Surprise!' delivered another "excellent" result.

It added that the impact of the new Disney contract was also significant with 'Frozen II', 'Spider-Man', 'Disney Princess' and 'Toy Story' all making contributions described as "important".

In other licences, 'Peppa Pig', 'Paw Patrol' and 'Batman' remained "strong".

"In own brand portfolios, we continued to develop our U-Move scooter range which delivered revenue growth of 85%.

"Ben Sayers finished the year over 20% ahead of the prior year which was encouraging.

"Most other brands including Hedstrom, Wired, Kickmaster and Stunted were in line or slightly ahead of the prior year."

Tandem said feedback from the London Toy Fair to its new MV Sports & Leisure ranges, where it showcased all of its products for 2020 and a new range of lithium electric scooters, was "excellent".

Overall total revenue from the bicycle businesses was down in 2019 compared to 2018, although revenue from its Squish bicycle range sold to independent bicycle dealers grew 33% in the year.

Claud Butler revenue was similar to the prior year, although Dawes was reportedly behind.

"There was partly a substitution effect of consumers switching from traditional Dawes kids bikes to lightweight Squish but this was at a higher average selling price.

"It was a more challenging year for our corporate bicycles range which, although positively contributed to profitability, was behind the prior year."

Despite a strong first quarter, revenue in the company's direct-to-consumer business, Expressco Direct, was slightly behind the previous year.

The board said a combination of garden and outdoor leisure products performing behind expectation and the increasingly competitive online retail environment, which impacted on margins and slowed down the previous progress that had been made.

"Notwithstanding this, there was significant growth in mobility and home electrical products and the successful introduction of a Christmas range."

Group operating expenses increased around 11% in the year as a result of the growth in revenue and increased marketing costs in relation to new licences.

Tandem said it made continued efforts to streamline operating costs where possible.

"As a result of the strong trading performance it was a year of further cash generation which helped to strengthen the balance sheet position further."

Looking at the current year, Tandem said 2020 had started "more slowly", reporting that although it sold to national retailers strongly in 2019, it was aware that some of its major customers had carried stock forward into the current year, which would impact on their ability to re-buy.

"We are, however, confident that we have secured all of the major wheeled toy licences and have identified new product opportunities with own brands which we continue to develop."

The board said it expected to continue the growth of its Squish lightweight children's bicycles range as it looked to take greater market share.

In its online business, it said it was still focusing on existing ranges, while not losing the ability to be "opportunistic" and take advantage of new products that it identified.

The company said it remained very aware of the ongoing channel shift to online sales.

"The coronavirus outbreak in the Far East appears to be a significant threat," the board said.

"A number of factories have not returned to work after Chinese New Year.

"The restriction on travel imposed by the Chinese authorities is hindering the movement of raw materials and labour throughout China."

That, the board said, had already delayed the production of orders and made it difficult for its quality assurance and quality control inspections to take place.

"Further, the welfare of our staff is paramount and we will not put them at undue risk of infection until we have greater clarity of the situation."

At 1354 GMT, shares in Tandem Group were down 0.39% at 204.2p.