Last checked at 2 Dec 2010 07:00
Issued by Citigate Dewe Rogerson Ltd, Birmingham
Thursday, 2 December 2010
Preliminary Results
for the year ended 31 August 2010
"Character's key brands have performed strongly and the Group has entered the current financial year in a strong position to deliver further growth"
·; Key brands include:
ZhuZhu Pets®, Peppa Pig®, Doctor Who®, H. M. Armed Forces Collection™
Fireman Sam®, Postman Pat®, Let's Cook®, Scooby-Doo®
·; Group Sales up 24% to £85.23 million (2009:£68.62m)
·; Group Profit before Tax £7.55 million (2009: loss £2.17m)
·; Basic earnings per share 20.12 pence (2009: loss 4.09p)
·; Four-fold increase in full year dividend to 4.00p with final of 2.00p proposed
·; September 2010: appointed Master Toy Licensee in the UK and Eire for Bob the Builder®
"I am delighted to report a very strong performance for the business in the financial year under review and this trend is set to continue as we approach the end of one of the busiest times of the calendar year for the industry as a whole."
"By bringing new, innovative and exciting product to market, and building market share, we remain well positioned to further develop our business both at home and internationally."
"Currently, we are also working on a number of other exciting opportunities, including a new offering which will extend our current footprint within the industry. We are expecting to announce some of these in the New Year to coincide with the London Toy Fair. We are confident that these developments and initiatives will take the business to a new level once again."
Richard King, Executive Chairman
FULL STATEMENT ATTACHED
Enquiries: | |
Richard King, Executive Chairman | Fiona Tooley |
Kiran Shah, Group Finance Director & Joint MD | Keith Gabriel |
The Character Group plc | Citigate Dewe Rogerson |
Tel: +44 (0)208 329 3377 | Mobile: +44 (0)7785 703523 (FMT) |
Mobile: +44 (0)7956 278522 (KS) | Tel: +44 (0)121 362 4035 |
www.thecharacter.com | |
Ticker: AIM: CCT
| |
Russell Cook | |
Carl Holmes | |
Charles Stanley Securities | |
(Nominated Adviser) | |
Tel: +44 (0)207 149 6000 |
The Character Group plc
("Company" "Group" or "Character")
Preliminary Results for the year ended 31 August 2010
STATEMENT BY THE CHAIRMAN, RICHARD KING
Introduction
I am delighted to report a very strong performance for the business in the financial year under review and this trend is set to continue as we approach the end of one of the busiest times of the calendar year for the industry as a whole.
Also, as a Board, we are proud that our team has successfully created a strong portfolio of product which has been clearly met with confidence, enthusiasm and demand by both our customers and the consumer.
Our strategy of focusing on developing and refreshing a portfolio of lead brands remains key to our approach and the on-going future success of the business as a whole. By bringing new, innovative and exciting product to market, and building market share, we remain well positioned to further develop our business both at home and internationally.
Financials for the year ended 31 August 2010
The on-going success of our own brands and key distributed lines is reflected in both our revenue and profitability.
Group sales in the year amounted to £85.23 million, up 24.2% on 2009 sales of £68.62 million. International sales grew in line with UK sales.
Reflecting the significant improvement in trading for the Group as a result of a strong product offering, Group profit before tax amounted to £7.55 million against a loss of £2.17 million in 2009 (which included an exceptional cost of £1.06 million, relating to the bad debt suffered from the Woolworths Administration in 2009).
Basic earnings per share were 20.12 pence compared to a loss of 4.09 pence the year to August 2009.
In order to sustain the growth in sales in September and October 2010, stocks increased from £7.04 million at the August 2009 year-end to £9.32 million at end of the 2010 financial year.
Cash and cash equivalents at 31 August 2010 amounted to £16.4 million, against £11.4 million in the previous year. At the same time, short term borrowings have risen from £10.6 million to £16.9 million as at 31 August 2010, while trade creditors have also risen to £19.9 million (2009: £10.6 million) reflecting the increase in trading activity. The Group continues to retain solid banking relationships and has substantial headroom under working capital facilities available to it.
Dividend
As a result of a solid and satisfactory trading performance for the Group and given the confidence the Board has in its visibility and opportunities going forward, the Directors are recommending a final dividend of 2.00 pence per Ordinary share (2009: 1.00 pence); this, together with the interim dividend paid in March of 2.00 pence makes a total for the year of 4.00 pence (2009:1.00 pence), a four-fold increase. The dividend is covered 5.0 times by earnings in the year to August 2010.
Subject to approval by shareholders at the Annual General Meeting to be held on 19 January 2011, the final dividend will be paid on 28 January 2011 to shareholders on the Register as at 7 January 2011. The shares will be marked ex-dividend on 5 January 2011.
The Year under Review to August 2010
Character's key brands have performed strongly in the financial year to 2010, and we believe we have entered the current financial year in a strong position to deliver further growth.
Below is a review of our key brands:
ZhuZhu Pets® ZhuZhu Pets® has had a phenomenal year since its launch, and it is now the number one best-selling girls' collector brand in the UK. The brand has been enhanced with the introduction this year of Kung Zhu®, a boys' version, and both will see line extensions in 2011.
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Peppa Pig® Peppa Pig® is now firmly established as one of the top three brands within the sector, and a leading pre-school brand overall. The range has again performed well, and new line extensions should enhance the brand's performance in 2011.
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Doctor Who® This iconic brand has been refreshed and relaunched following the broadcast of the new series, which introduced a new Doctor. 2011 will see split scheduling, thus allowing broadcast in the all important Christmas quarter.
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H. M. Armed Forces Collection™ This collection has established itself as a top 5 boys' concept since its launch in 2009 and is performing exceptionally well. New vehicles and figures, including sound figures will be introduced in the near future.
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Fireman Sam® Fireman Sam® has far exceeded our initial expectations and has established itself as a top 3 brand within the pre-school sector. New animation and products have been commissioned for the near future and we expect further growth in 2011.
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Postman Pat® Postman Pat® remains one of our classic pre-school licenses and, with sales growing year on year, has firmly established itself as a perennial within our portfolio.
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Let's Cook® This range is the leading brand within the toy food category and has performed solidly during the year. Line extensions being implemented bode well for the future.
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Scooby-Doo® Scooby-Doo® has had a fantastic year with sales increasing in each of the markets particularly in Spain, Italy and the US. The line has been totally refreshed for 2011 and we expect substantial growth in a number of territories. |
The breadth of the product ranges has given the Group stability and at the same time given the customers confidence to enhance their support. The brands have longevity and should provide continued sales.
Our People
The Group average number of employees over the year was 156: 98 of these are based in the UK and the remaining 58 in Hong Kong and China (2009: 100 and 61 respectively). Once again, on behalf of the Board and all stakeholders, I would like to thank all our people for their hard work and commitment in what continues to be difficult and unprecedented times for everyone at home and around the globe.
In April 2010, Non-Executive Directors Alan Mackay and Ian Fenn stepped down from the Board and we thank them for their support and wise counsel over many years. The Board now consists of four Executive and two Non-Executive Directors and this is currently considered by the Board to be an appropriate balance for a company of Character's size and structure. We will however continue to review this position on a regular basis.
Outlook
What's ahead for 2011?
Next year promises to be a busy and exciting time for the Company both in terms of our own-developed brands and those we distribute and already we are seeing the 2011 Spring/Summer portfolio building on the success of 2010.
Recent developments include:-
·; Our appointment in September 2010 as Master Toy Licensee in the UK and Eire for 'Bob the Builder®', one of the most successful and popular pre-school brands. Under our multi-year agreement, we will be developing a complete range of new toy products and accessories based on 'Bob the Builder®'and his 'can do' crew. The range will be launched in line with the new computer generated TV series in Autumn 2011. We are confident that we will create innovative and exciting products that will add value for this iconic brand.
·; Once again we were delighted to be told in October that two of Character's products were in the Toy Retailers Association's (TRA) Christmas 2010 listings. These were Fireman Sam® Deluxe Fire Station and ZhuZhu Pets® Grooming Salon - this is the second year in succession that ZhuZhu Pets® has been in the Dream Dozen list. In addition, two further toys were represented in the TRA's list for best 'Boys Toys' with the Doctor Who®Sonic Screw Driver and the Kung Zhu Pets® BattleArena predicted to be hot choices this Christmas. Lullaby Peppa Pig™ is expected to be a favoured option for pre-school children; the recognition endorses our strategy of developing long-term brands that offer 'quality' and great 'play value'.
·; Another new range for domestic market distribution is 'Squinkies™',little collectable characters which come in a bubble and can be added to jewellery and other accessories.(for more information www.squinkies.com).
Currently, we are also working on a number of other exciting opportunities, including a new offering which will extend our current footprint within the industry. We are expecting to announce some of these in the New Year to coincide with the London Toy Fair at Olympia on 25 January 2011. We are confident that these developments and initiatives will take the business to a new level once again.
Trading
To date, we are very encouraged with the feedback from our customers to our 2011 product line up. Group sales in the first quarter of the current financial year are in line with management expectations and, with enthusiasm and demand coming from our key customers, we expect to deliver another solid performance next year.
However, the Board is mindful of the number of external macro factors which could, once again, slow global and UK economic recovery. The increases in raw material and freight costs are already feeding through and next year's programmed rise in UK VAT will add some pressure on margins in the short-term. There is no doubt that these challenges will prove tough across all businesses over the next few years but we have to work within these parameters in order to sustain a recovery for UK plc.
As a group, we will continue to focus on our core strategy - developing our key brands through strong innovative product introductions, enhanced marketing, promotional initiatives and pricing to sell well in the current difficult economic conditions. This will see the business exploit its current success by developing cost efficient, high quality, innovative and 'in-demand' product. Our aim is to trade through these difficult times, whilst enhancing our position in the market place.
The Board looks forward to updating shareholders on our trading performance at the time of our AGM in January.
Share Buy-Backs
Since June 2006, the Company has followed a policy of buying back its own shares in the market, whenever the Directors felt that the share price undervalued the Group and, when they considered it to be the best use of Group funds.
As at 31 August 2005, there were approximately 52.8 million ordinary shares of 5 pence each ("Ordinary Shares") in issue and today that number has been more than halved to approximately 24.57 million Ordinary Shares (excluding shares held in treasury). This has enabled significant enhancement in earnings per share. Had the buy-back not taken place, the basic earnings per share for the year under review would have been 11.7 pence compared to 20.12 pence. The implementation of the buy-back programme has been a great success and has: benefitted all those who wished to take the opportunity to liquidate some or all of their investment in the Company; made better use of cash generated by the Company's businesses than would otherwise have been the case; and, not least, been undertaken at times when the Board believed that the price of Ordinary Shares in the market undervalued the Company.
During the financial year ended 31 August 2010, the Company acquired a total of 8,619,000 Ordinary Shares for cancellation at an aggregate cost of approximately £10,564,000 (excluding stamp duty and dealing costs), the average cost being approximately 123 pence per Ordinary Share. Since the August year-end, the Company has purchased a further 1,893,000 Ordinary Shares in the market for cancellation at an aggregate cost of approximately £2,839,000 (excluding stamp duty and dealing costs), the average cost being 150 pence per Ordinary Share.
It remains part of the Group's overall strategy to continue to repurchase its shares when appropriate, thereby further enhancing shareholder value. Accordingly, the Board will be seeking a renewal of the authority to buy-back issued Ordinary Shares at its forthcoming Annual General Meeting, in January 2011.
Electronic Communications
The full Financial Statements, together with the notice convening the Company's 2011 Annual General Meeting, will be available for viewing and download on the Group's website, www.thecharacter.com by 20 December 2010.
The Board believes that utilising electronic communications delivers savings to the Company in terms of administration, printing and postage, reduces the effect on the environment through reduced consumption of paper and inks as well as speed up communications with the market and investors.
Shareholder promotional discount
Shareholders can view the Company's product portfolio on-line. In addition, we are pleased to offer our shareholders a 20% discount to the sales price of products purchased on-line (subject to availability) from www.character-online.co.uk.
To take advantage of this offer, shareholders should contact the Company Secretary at the Company's Office: 2nd Floor, 86-88 Coombe Road, New Malden, Surrey, KT3 4QS, +44 (0) 20 8329 3377 or, email: info@charactergroup.plc.uk and request to receive a dedicated code to use on-line when ordering from our range.
2 December 2010
CONSOLIDATED INCOME STATEMENT |
for the year ended 31 August 2010
|
Note | Total 2010
£000's | Total 2009
£000's | |
Continuing operations | |||
Revenue | 85,228 | 68,622 | |
Cost of sales | (55,180) | (48,587) | |
Gross profit | 30,048 | 20,035 | |
Net operating expenses | |||
Selling and distribution costs | (7,458) | (8,999) | |
Administration expenses | (15,034) | (12,265) | |
Other operating income | 30 | 132 | |
Operating profit/(loss) before exceptional items | 1 | 7,586 | (1,097) |
Exceptional bad debt | - | (1,056) | |
Operating profit/(loss) | 7,586 | (2,153) | |
Net finance costs | 2 | (34) | (21) |
Profit/(loss) before taxation | 7,552 | (2,174) | |
Taxation | (1,365) | 532 | |
Profit/(loss) for the year attributable to equity holders of the parent | 6,187 | (1,642) | |
Earnings/(loss) per share (pence) | 4 | ||
Basic | 20.12p | (4.09p) | |
Fully diluted | 18.94p | (4.09p) | |
Dividend per share (pence) | 3 | 3.0p | - |
EBITDA (earnings before interest, tax, depreciation and amortisation) | 9,797 | 2,351 |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME |
Total 2010
£000's | Total 2009
£000's | |
Profit/(loss) for the year after tax | 6,187 | (1,642) |
Exchange differences on translation of foreign operations | (356) | (387) |
(Loss)/gains on cash flow hedges | (232) | 163 |
Income tax on cash flow hedges | 65 | (46) |
Total comprehensive income/(expense) for the year attributable to the equity holders of the parent | 5,664 | (1,912) |
CONSOLIDATED BALANCE SHEET |
as at 31 August 2010 |
2010
£000's | 2009
£000's | |
Non - current assets | ||
Intangible assets - product development | 1,123 | 823 |
Property, plant and equipment | 1,243 | 1,174 |
2,366 | 1,997 | |
Current assets | ||
Inventories | 9,323 | 7,043 |
Trade and other receivables | 15,786 | 13,352 |
Derivative financial instruments | 232 | 464 |
Cash and cash equivalents | 16,405 | 11,428 |
41,746 | 32,287 | |
Current liabilities | ||
Short term borrowings | (16,857) | (10,574) |
Trade and other payables | (19,903) | (10,599) |
Income tax | (481) | (386) |
Derivative financial instruments | (301) | (936) |
(37,542) | (22,495) | |
Net current assets | 4,204 | 9,792 |
Non-current liabilities | ||
Deferred tax | (114) | - |
Net assets | 6,456 | 11,789 |
Equity | ||
Share capital | 1,521 | 1,925 |
Shares held in treasury | (3,373) | (3,373) |
Investment in own shares | (908) | (908) |
Capital redemption reserve | 1,229 | 798 |
Share based payment reserve | 891 | 733 |
Share premium account | 12,928 | 12,587 |
Merger reserve | 651 | 651 |
Translation reserve | 2,075 | 1,866 |
Profit and loss account | (8,558) | (2,490) |
Total equity attributable to equity holders of the parent | 6,456 | 11,789 |
CONSOLIDATED CASH FLOW STATEMENT |
for the year ended 31 August 2010 |
12 months to 31 August 2010
£000's | 12 months to 31 August 2009
£000's | |
Cash flow from operating activities Profit/(loss) before taxation for the year | 7,552 | (2,174) |
Adjustments for: | ||
Depreciation of property, plant and equipment | 285 | 306 |
Amortisation of intangible assets | 1,926 | 4,198 |
(Profit) on disposal of property, plant and equipment | (18) | (8) |
Net interest expense | 34 | 21 |
Financial instruments fair value adjustments | (634) | 2,143 |
Share based payments | 158 | 199 |
(Increase)/decrease in inventories | (2,280) | 2,759 |
(Increase)/decrease in trade and other receivables | (2,435) | 5,790 |
Increase/(decrease) in trade and other creditors | 9,304 | (7,029) |
Cash generated from operations | 13,892 | 6,205 |
Net interest paid | (34) | (21) |
Income tax (paid)/refunded | (1,091) | 58 |
Net cash inflow from operating activities | 12,767 | 6,242 |
Cash flows from investing activities | ||
Payments for intangible assets | (2,226) | (2,606) |
Payments for property, plant and equipment | (372) | (182) |
Proceeds from disposal of property, plant and equipment | 37 | 17 |
Net cash outflow from investing activities | (2,561) | (2,771) |
Cash flows from financing activities | ||
Proceeds from issue of share capital | 326 | - |
Purchase of own shares for cancellation | (10,591) | (2,132) |
Purchase of treasury shares | - | (97) |
Recovery of listing expenses | 42 | - |
Dividends paid | (932) | - |
Net cash used in financing activities | (11,155) | (2,229) |
Net (decrease)/increase in cash and cash equivalents | (949) | 1,242 |
Cash, cash equivalents and borrowings at the beginning of the year | 854 | 3 |
Effects of exchange rate movements | (357) | (391) |
Cash, cash equivalents and borrowings at the end of the year | (452) | 854 |
Cash, cash equivalents and borrowings consist of:
Cash and cash equivalents | 16,405 | 11,428 |
Short term borrowings | (16,857) | (10,574) |
(452) | 854 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY |
for the year ended 31 August 2010 |
Called up share capital £000's | Investment in own shares £000's | Treasury shares £000's | Capital redemption reserve £000's | Share premium account £000's | Merger reserve £000's | Share based payment £000's |
Translation reserve £000's | Profit and loss account £000's | Total £000's | |
The Group | ||||||||||
At 1 September 2008 | 2,275 | (908) | (3,277) | 448 | 12,587 | 651 | 534 | 501 | 2,920 | 15,731 |
Loss for the year after tax | - | - | - | - | - | - | - | - | (1,642) | (1,642) |
Exchange differences on translating foreign operations | - | - | - | - | - | - | - | 1,365 | (1,752) | (387) |
Net gain on cash flow hedged forward contract | - | - | - | - | - | - | - | - | 117 | 117 |
Total comprehensive income and expense for the year | - | - | - | - | - | - | - | 1,365 | (3,277) | (1,912) |
Share-based payment | - | - | - | - | - | - | 199 | - | - | 199 |
Shares cancelled | (350) | - | - | 350 | - | - | - | - | (2,132) | (2,132) |
Shares purchased | - | - | (96) | - | - | - | - | - | (1) | (97) |
At 1 September 2009 | 1,925 | (908) | (3,373) | 798 | 12,587 | 651 | 733 | 1,866 | (2,490) | 11,789 |
Profit for the year after tax | - | - | - | - | - | - | - | - | 6,187 | 6,187 |
Exchange differences on translating foreign operations | - | - | - | - | - | - | - | 209 | (565) | (356) |
Net gain on cash flow hedged contract | - | - | - | - | - | - | - | - | (167) | (167) |
Total comprehensive income and expense for the year | - | - | - | - | - | - | - | 209 | 5,455 | 5,664 |
Share-based payment | - | - | - | - | - | - | 158 | - | - | 158 |
Dividends | - | - | - | - | - | - | - | - | (932) | (932) |
Shares issued | 27 | - | - | - | 299 | - | - | - | - | 326 |
Shares cancelled | (431) | - | - | 431 | - | - | - | - | (10,591) | (10,591) |
Recovery of listing expenses | - | - | - | - | 42 | - | - | - | - | 42 |
At 31 August 2010 | 1,521 | (908) | (3,373) | 1,229 | 12,928 | 651 | 891 | 2,075 | (8,558) | 6,456 |
NOTES TO THE FINANCIAL STATEMENTS
1 OPERATING PROFIT/(loss)
12 months to 31 August 2010 £000's | 12 months to 31 August 2009 £000's | ||
Operating profit/(loss) is stated after charging: | |||
Exchange losses | 49 | 96 | |
Cost of inventories recognised as an expense (included in cost of sales) | 50,298 | 42,342 | |
Staff costs | 8,455 | 6,091 | |
Depreciation of tangible fixed assets | |||
- owned assets | 285 | 306 | |
Product development amortised | 1,926 | 4,198 | |
Operating leases - land and buildings | 698 | 760 | |
2 net finance costs
12 months to 31 August 2010 £000's | 12 months to 31 August 2009 £000's | |
Finance costs: | ||
On bank overdraft and similar charges | (121) | (103) |
Factor and invoice discounting advances | (56) | (125) |
(177) | (228) | |
Finance income: | ||
Bank interest | 143 | 207 |
Net finance costs | (34) | (21) |
3 DIVIDEND
12 months to 31 August 2010 £000's | 12 months to 31 August 2009 £000's | |
On equity shares: | ||
Final dividend paid for the year ended 31 August 2009 | ||
- 1.0 pence (2008: nil) per share | 342 | - |
Interim dividend paid for the year ended 31 August 2010 | ||
- 2.0 pence (2009: nil) per share | 590 | - |
932 | - |
The directors recommend a final dividend of 2.0 pence per share. If approved by shareholders, the final dividend will be paid on 28 January 2011 to shareholders on the register on 7 January 2011.
4 Earnings/(loss) per share
12 months to 31 August 2010 | 12 months to 31 August 2009 | |||||
Profit after taxation | Weighted average number of ordinary shares | Pence per share | (Loss) after taxation | Weighted average number of ordinary shares | Pence per share | |
Basic earnings/(loss) per share | 6,187,000 | 30,756,913 | 20.12 | (1,642,000) | 40,204,746 | (4.09) |
Impact of share options | - | 1,916,574 | (1.18) | - | 9,675 | - |
Diluted earnings per share*¹ | 6,187,000 | 32,673,487 | 18.94 | (1,642,000) | 40,214,421 | (4.09) |
*¹The weighted average number of shares used in the calculation of the diluted loss per share for the year ended 31 August 2009 is the same as that in respect of the basic loss per share calculation as the effect of exercising options would be to reduce the loss per share and is therefore not dilutive under the terms of IAS 33.
5. The Annual General Meeting will be held at the offices of Duane Morris, 2nd Floor, 10 Chiswell Street, London EC1Y 4UQ on 19 January 2011.
6. 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 2010 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.
A copy of this announcement can be viewed on the Company's website www.thecharacter.com.