Character Regulatory News (CCT)

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"

"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

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

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 AUGUST 2015

CONSOLIDATED BALANCE SHEET

AS AT 31 AUGUST 2015

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 AUGUST 2015

Cash, cash equivalents and borrowings consist of:

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 AUGUST 2015

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.