Half Yearly Report -period to February 2013

RNS Number : 8113D

Character Group PLC

02 May 2013

 

Date: Thursday, 2 May 2013

Immediate Release

The Character Group plc

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

Half-Yearly Financial Report for the six months ended 28 February 2013

Brand images shown on pdf http://www.rns-pdf.londonstockexchange.com/rns/8113D_-2013-5-1.pdf Full Statement attached Ticker: AIM: CCT.L www.thecharacter.com	v Trading performance impacted by the tough retail environment and consumer confidence v Despite slow markets, solid performance from own-developed brands, particularly in international markets v New season products include: Teksta, The Zelfs , Flying Heroes, Chill Factor, and Lite-Brix, (an exciting addition to our Character Building range) v Revenue £30.59 million (2012: £44.25m) -International sales (excluding Eire) up to 25% v Gross profit £8.24 million (2012: £16.48m) v EBITDA £0.47 million (2012: £8.03m) v Loss before tax £1.91 million (2012: Profit £5.57m) v Earnings per share - loss of 6.59 pence (2012: earnings 19.34p) v Half-year dividend 3.30p (2012: 3.30p) "UK retail trading remains difficult; however, we are encouraged by the acceptance from the trade of our new product introductions coming on stream throughout the remainder of both this financial and calendar year.  The release and addition of these new and exciting product lines to our portfolio will also help to maintain Character as one of the UK's leading toy companies." "We remain comfortable that forecasted sales are currently on track for the calendar year as a whole.  This should not only re-establish the profit margin but also underpin the overall Group's performance and lead us to achieve current market expectations for the financial year ending 31 August 2013." Richard King, Executive Chairman

Enquiries:
Richard King, Executive Chairman	Fiona Tooley	Russell Cook or Carl Holmes
Kiran Shah, Group Finance Director & Joint MD	TooleyStreet Communications	Charles Stanley Securities(Nominated Adviser)
The Character Group plc	Mobile: [phone]	Tel: [phone]
Office: [phone] Mobile: [phone] (RK) or  Mobile: [phone] (KS)	Tel: [phone]

Copies of this Report can be obtained from the Company's Head Office: 2nd Floor, 86/88 Coombe Road, New Malden, Surrey KT3 4QS, and are also available to download at www.thecharacter.com.

CHAIRMAN’S LETTER

 

Overview/Introduction

As predicted at the AGM in January, Group trading results to the end of February are disappointing, albeit marginally ahead of our initial expectations.  Whilst UK trading remained difficult, international sales, excluding Eire, grew by 25% during this period.

Overall, it is pleasing to note that our major brands have performed relatively well and that we remain on track to benefit from a major lift in sales, together with a return to profit, in both the second half of this financial year as well as this calendar year as a whole.  Trading in both periods should provide a solid base for further growth in the following financial year.

Financials

Revenue in the period was £30.59 million against £44.25 million in the comparable 2012 period (year ended August 2012: £74.9m).  Gross profit in the period being reported amounted to £8.24 million compared to £16.49 million in 2012, after having taken into account stock write-downs due to a higher level of clearance sales.

Although sales were reduced, working capital has once again been effectively managed, with the cost base and inventory levels operated under tight control.  After taking into account administration and selling costs, the Group is reporting an operating loss for the half-year period of £1.63 million against a profit of £5.80 million in the comparable period in 2012 and £7.46 million at the end of the August 2012.  Loss before taxation at the half way stage was £1.91 million (2012: profit £5.57m).

Inventories at 28 February 2013 stood at £5.83 million (2012: HY £6.61m) and at the August 2012 year end £7.36m (2011 year end: £11.56 million).  We do not anticipate any further exceptional stock write-down provisions during the second half.

Basic loss per share equated to 6.59 pence, compared to earnings per share of 19.34 pence for the previous half-year period and 25.58 pence for the year ended August 2012.

Share buy-backs

During the first six months, the Company continued its share buy-back programme and re-purchased 411,500 ordinary shares of 5 pence each ("Ordinary Shares") at a cost of approximately £0.51 million (2012: £2.33 million), excluding stamp duty and dealing costs.  As at today's date, the Company's issued share capital is 22,599,078 Ordinary Shares (excluding 4,019,456 Ordinary Shares held in treasury).

The Company has an unutilised capacity to buy-back up to a further 5,648,000 Ordinary Shares under the authority granted to it at the Annual General Meeting on 29 January 2013.  As previously indicated, the Directors could be prepared to participate in any future share buy-back programme the Company proposes.

Dividend

The Company will pay a maintained interim dividend of 3.30 pence per share (2012: 3.30 pence).  This will be paid on 26 July 2013 to shareholders on the Register as at the close of business on 5 July 2013.  The shares will be marked ex-dividend on 3 July 2013.

People

On behalf of the Board and stakeholders, once again, I would like to take this opportunity to acknowledge the hard work and commitment of all of our employees, both in the Far East and the UK, who despite the market forces continue to work together to enhance the Group's reputation with both our suppliers and customers.

CHAIRMAN'S LETTER                          CONTINUED

Product Portfolio and this season's new lines

Our strategy remains to seek out and develop exciting products which meet domestic and international market demand.  These products will come from either our own portfolio, which has been developed in-house, or those produced under licence or sourced through distribution agreements.

Looking at the key products in Character's portfolio: within the UK, Pre-school ranges remain very popular, with Peppa Pig, Fireman Sam, Postman Pat, Scooby Doo and Doctor Who continuing to play an important role. We are at last beginning to gain real sales traction in our overseas trading with Peppa Pig, Fireman Sam, Doctor Who, Character Building, Scooby Doo, Let's Cook and Construct-a Bugz all contributing.

The unveiling of our new season's product ranges to our UK and international customer base at the 2013 International Toy Fairs in London and the Far East went well and we have been greatly encouraged by the reception and feedback to our total portfolio, across the various categories.  We are especially pleased with the level of support for both our existing and new products for the remainder of 2013 which will see the introduction of Teksta, The Zelfs, Flying Heroes, Chill Factor, and Lite-Brix (an exciting addition to our Character Building range).

Outlook and current trading

UK retail trading remains difficult; however, we are encouraged by the acceptance from the trade of our new product introductions coming on stream throughout the remainder of both this financial and calendar year.  The release and addition of these new and exciting product lines to our portfolio will also help to maintain Character as one of the UK's leading toy companies.

We remain comfortable that forecasted sales are currently on track for the calendar year as a whole.  This should not only re-establish the profit margin but also underpin the overall Group's performance and lead us to achieve current market expectations for the financial year ending 31 August 2013.

Richard King

Chairman

1 May 2013

Note: Product names shown in italics represent copyright or registered trademarks.

              CONSOLIDATED INCOME STATEMENT

			Notes	6 months to 28 February 2013 (unaudited) £'000			6 months to 29 February 2012 (unaudited) £'000		12 months to 31 August 2012 (audited) £'000
Continuing operations
Revenue					30,595		44,254		74,947
Cost of sales					(22,354	)	(27,767	)	(50,486	)
Gross profit					8,241		16,487		24,461
Net operating expenses
Selling and distribution costs					(4,063	)	(3,444	)	(4,820	)
Administration expenses					(6,324	)	(7,569	)	(12,920	)
Other operating income					514		322		741
Operating (loss)/profit					(1,632	)	5,796		7,462
Finance income					-		1		1
Finance costs					(273	)	(228	)	(380	)
(Loss)/profit before taxation					(1,905	)	5,569		7,083
Taxation					435		(1,176	)	(1,333	)
(Loss)/profit for the period attributable to equity holders of the parent					(1,470	)	4,393		5,750
(Loss)/earnings per share (pence)
Basic			4		(6.59p	)	19.34p		25.58p
Fully diluted			4		(6.59p	)	17.37p		22.99p
Dividend per share (pence)			3	-	3.3p		3.0p		6.3p
EBITDA (earnings before interest, tax, depreciation and                   amortisation)					466		8,032		11,272

              CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	Notes	6 months to 28 February 2013 (unaudited) £'000	6 months to 29 February 2012 (unaudited) £'000	12 months to 31 August 2012 (audited) £'000
(Loss)/profit for the period after tax		(1,470)	4,393	5,750
Net exchange differences on translation of foreign operations  recognised in equity		(44)	(74)	(105)
Reclassification of currency translation reserves on discontinued operations		525	-	-
Total comprehensive (loss)/income for the period attributable to equity holders of the parent		(989)	4,319	5,645

              CONSOLIDATED BALANCE SHEET

	Note	at 28 February 2013 (unaudited) £'000		at 29 February 2012 (unaudited) £'000		at 31 August 2012 (audited) £'000
Non - current assets
Intangible assets - product development		705		1,159		1,335
Investment property		2,074		2,139		2,107
Property, plant and equipment		3,762		3,939		3,870
Deferred tax assets		484		29		210
		7,025		7,266		7,522
Current assets
Inventories		5,832		6,614		7,356
Trade and other receivables		7,999		7,726		17,105
Current income tax receivable		639		-		222
Derivative financial instruments		272		156		445
Cash and cash equivalents		3,340		4,270		5,908
		18,082		18,766		31,036
Current liabilities
Short term borrowings		(9,619	)	(7,272	)	(13,804	)
Trade and other payables		(7,395	)	(8,131	)	(13,389	)
Income tax payable		(60	)	(1,085	)	(740	)
Derivative financial instruments		(153	)	(236	)	(235	)
		(17,227	)	(16,724	)	(28,168	)
Net current assets		855		2,042		2,868
Non - current liabilities  Deferred tax		(189	)	(114	)	(409	)
Net assets		7,691		9,194		9,981
Equity
Share capital		1,331		1,323		1,331
Shares held in treasury		(3,373	)	(3,373	)	(3,373	)
Investment in own shares		(908	)	(908	)	(908	)
Capital redemption reserve		1,480		1,452		1,459
Share based payment reserve		2,139		1,627		1,892
Share premium account		13,540		13,218		13,332
Merger reserve		651		651		651
Translation reserve		1,335		1,901		1,880
Profit and loss account		(8,504	)	(6,697	)	(6,283	)
Total equity		7,691		9,194		9,981

              CONSOLIDATED STATEMENT OF CASH FLOWS

	Notes	6 months to 28 February 2013 (unaudited) £'000		6 months to 29 February 2012 (unaudited) £'000		12 months to 31 August 2012 (audited) £'000
Cash flow from operating activities (Loss)/profit before taxation for the period		(1,905	)	5,569		7,083
Adjustments for:
Depreciation of property, plant and equipment		207		199		413
Depreciation of investment property		33		33		65
Amortisation of intangible assets		1,858		2,004		3,332
(Profit) on disposal of property, plant and equipment		(6	)	-		(4	)
Interest expense		273		227		379
Financial instruments fair value adjustments		91		(1,163	)	(1,453	)
Share based payments		247		277		542
Decrease in inventories		1,524		4,949		4,207
Decrease in trade and other receivables		9,106		9,380		1
Decrease in trade and other creditors		(5,994	)	(12,398	)	(7,140	)
Cash generated from operations		5,434		9,077		7,425
Interest paid		(273	)	(227	)	(379	)
Income tax paid		(1,156	)	(2,102	)	(2,709	)
Net cash inflow from operating activities		4,005		6,748		4,337
Cash flows from investing activities
Payments for intangible assets		(1,227	)	(1,532	)	(3,037	)
Payments for property, plant and equipment		(102	)	(291	)	(433	)
Proceeds from disposal of property, plant and equipment		-		-		4
Proceeds from disposal of assets		12		-		-
Net cash outflow from investing activities		(1,317	)	(1,823	)	(3,466	)
Cash flows from financing activities
Proceeds from issue of share capital		229		60		189
Purchase of own shares for cancellation		(518	)	(2,349	)	(2,542	)
Dividends paid		(734	)	(679	)	(1,419	)
Net cash used in financing activities		(1,023	)	(2,968	)	(3,772	)
Net increase/(decrease) in cash and cash equivalents		1,665		1,957		(2,901	)
Cash, cash equivalents at the beginning of the period		(7,896	)	(4,868	)	(4,868	)
Effects of exchange rate movements		(48	)	(91	)	(127	)
Cash, cash equivalents and borrowing at the end of the period		(6,279	)	(3,002	)	(7,896	)

Cash, cash equivalents and borrowings consist of:

Cash and cash equivalents		3,340		4,270		5,908
Short term borrowings		(9,619	)	(7,272	)	(13,804	)
		(6,279	)	(3,002	)	(7,896	)

             CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Called up share capital £000	Investment in own shares £000	Treasury Shares £000	Capital redemption reserve £000	Share premium account £000	Merger reserve £000	Share Based Payment £000	Translation reserve £000	Profit and loss account £000	Total £000
Balance as at 1 September 2011 (unaudited)	1,390	(908)	(3,373)	1,380	13,163	651	1,350	1,934	(8,021)	7,566
Profit for the period	-	-	-	-	-	-	-	-	4,393	4,393
Translation reserve movement	-	-	-	-	-	-	-	(33)	(41)	(74)
Total comprehensive income/(expense) for the period	-	-	-	-	-	-	-	(33)	4,352	4,319
Transactions with owners
Dividend paid	-	-	-	-	-	-	-	-	(679)	(679)
Share based payment	-	-	-	-	-	-	277	-	-	277
Shares issued	5	-	-	-	55	-	-	-	-	60
Shares cancelled	(72)	-	-	72	-	-	-	-	(2,349)	(2,349)
Six months ended 29 February 2012	1,323	(908)	(3,373)	1,452	13,218	651	1,627	1,901	(6,697)	9,194
Balance as at 1 September 2011 (audited)	1,390	(908)	(3,373)	1,380	13,163	651	1,350	1,934	(8,021)	7,566
Profit for the year after tax	-	-	-	-	-	-	-	-	5,750	5,750
Net exchange differences on translating foreign operations	-	-	-	-	-	-	-	(54)	(51)	(105)
Total comprehensive income/(expense) for the year	-	-	-	-	-	-	-	(54)	5,699	5,645
Transactions with owners
Dividends	-	-	-	-	-	-	-	-	(1,419)	(1,419)
Share based payment	-	-	-	-	-	-	542	-	-	542
Shares issued	20	-	-	-	169	-	-	-	-	189
Shares cancelled	(79)	-	-	79	-	-	-	-	(2,542)	(2,542)
Year ended 31 August 2012	1,331	(908)	(3,373)	1,459	13,332	651	1,892	1,880	(6,283)	9,981
Balance as at 1 September 2012 (unaudited)	1,331	(908)	(3,373)	1,459	13,332	651	1,892	1,880	(6,283)	9,981
Loss for the period	-	-	-	-	-	-	-	-	(1,470)	(1,470)
Reclassification of translation reserves	-	-	-	-	-	-	-	(525)	525	-
Translation reserve movement	-	-	-	-	-	-	-	(20)	(24)	(44)
Total comprehensive expense for the period	-	-	-	-	-	-	-	(545)	(969)	(1,514)
Transactions with owners
Dividend paid	-	-	-	-	-	-	-	-	(734)	(734)
Share based payment	-	-	-	-	-	-	247	-	-	247
Shares issued	21	-	-	-	208	-	-	-	-	229
Shares cancelled	(21)	-	-	21	-	-	-	-	(518)	(518)
Six months ended 28 February 2013	1,331	(908)	(3,373)	1,480	13,540	651	2,139	1,335	(8,504)	7,691

 

NOTES TO THE FINANCIAL STATEMENTS

1   BASIS OF PREPARATION

The financial information set out in this interim statement has been prepared under International Financial Reporting Standards (IFRS) as adopted by the European Union and in accordance with the accounting policies which will be adopted in presenting the Group's annual report and financial statements for the year ending 31 August 2013. These are consistent with the accounting policies used in the financial statements for the year ended 31 August 2012 as described in those annual financial statements.

As permitted, this interim report has been prepared in accordance with the AIM rules and not in accordance with IAS 34 'Interim Financial Reporting'.

The consolidated financial statements are prepared under the historical cost convention, as modified by the revaluation of certain financial instruments and share based payments at fair value.

These interim financial statements and the financial information for the six months ended 28 February 2013 do not constitute full statutory accounts within the meaning of section 434 of the Companies Act 2006 and are unaudited. These unaudited interim financial statements were approved by the Board of Directors on 1 May 2013.

The information for the year ended 31 August 2012 is based on the consolidated financial statements for that year on which the Group's auditor's report was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

2   GOING CONCERN

The Directors consider that the Group has adequate resources to continue operating for the foreseeable future and therefore continue to adopt the going concern basis in preparing the financial statements.

3   DIVIDENDS

	For the six months ended 28 February 2013 (unaudited) £000	For the six months ended 29 February 2012 (unaudited) £000	For the year ended 31 August 2012 (audited) £000
Final dividend for year ended 31 August 2012 - 3.3 pence per share	734	679	680
Interim	-	-	739
	734	679	1,419

4   EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares during the period.

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue on the assumption of conversion of all dilutive potential ordinary shares.  The Group has only one category of dilutive potential ordinary shares, being share options granted where the exercise price is less than average price of the company's ordinary shares during this period.

The calculations are based on the following:

	For the six months ended 28 February 2013 (unaudited) £000	For the six months ended 29 February 2012 (unaudited) £000	For the year ended 31 August 2012 (audited) £000
(Loss)/profit attributable to equity shareholders of the parent	(1,470)	4,393	5,750
Weighted average number of shares
In issue during the year - basic	22,302,695	22,719,993	22,478,751
Dilutive potential ordinary shares	2,064,248	2,563,476	2,532,881
Weighted average number of ordinary shares for diluted earnings per share *1	22,302,695	25,283,469	25,011,632

Basic (loss)/earnings per share (pence)	(6.59)	19.34	25.58
Diluted (loss)/earnings per share (pence)	(6.59)	17.37	22.99

 

^*1 The weighted average number of shares used in the calculation of the diluted loss per share for the six months ended 28 February 2013 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.

             INDEPENDENT REVIEW REPORT TO THE CHARACTER GROUP PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 28 February 2013, which comprises the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Balance Sheet, the Consolidated Statement of Cash Flows, the Consolidated Statement of Changes in Equity and related notes 1 to 4. We have read the other information contained in the half-yearly financial report which comprises only the Chairman's letter and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with guidance contained in ISRE 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our review work has been undertaken so that we might state to the company those matters we are required to state to them in a review report and for no other purposes.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM rules of the London Stock Exchange which requires that the accounting policies and presentation applied to the financial information in the half-yearly financial report are consistent with those which will be adopted in the annual accounts having regard to the accounting standards applicable for such accounts.

As disclosed in Note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with the AIM rules of the London Stock Exchange.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Review conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly report for the six months ended 28 February 2013 is not prepared, in all material respects, in accordance with the AIM rules of the London Stock Exchange.

MHA MacIntyre Hudson

Statutory Auditors and Chartered Accountants

New Bridge Street House

30-34 New Bridge Street

London

EC4V 6BJ

1 May 2013

 

 

END

 

 

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