Interim Results
Character Group PLC
24 April 2007
Issued by Citigate Dewe Rogerson Ltd, Birmingham
Date: Tuesday, 24 April 2007
Embargoed: 7.00am
The Character Group plc
Interim Results for the six months ended 28 February 2007
Highlights
• Continuing Business (Toys, Games and Gifts)
6 months to 6 months to
28 February 2007 28 February 2006
£m £m
Turnover 56.0 40.7
Operating profit 6.6 3.7
--------------------------------------------------------------------------------
Earnings per share - basic 10.05p 5.69p
--------------------------------------------------------------------------------
• Dividend
Interim dividend of 2.0 pence per share, an increase of 21.2% over last year
(2006 1.65 pence). This dividend is covered approximately 5 times by earnings
• Cash at Bank on 28 February 2007 was £11.86 million (2006: £10.3 million).
This is after taking account of share buy-backs undertaken during
the period totalling £3.4 million
• New Licences Secured include:
The Master Licence for the Sarah Jane Adventures TV Series (as a spin-off from
the Doctor Who series)
Pan European Master Toy Contract for Dork Hunters from Outer Space
• New Products include:
Doctor Who Dalek Sec Hybrid Voice Changer Helmet
Spidersapien, a fusion of Spiderman 3 and our 2005 award winning Robosapien,
which is expected to be our lead line for our range of Spiderman 3 toys
• New Ranges include:
Bindeez
Movin' & Groovin' Flowers
This Is Me (a new range of soft body dolls)
Dragonfly
Roboquad (our new Robotic introductions)
• Toy of the Year accolade for Doctor Who Cyberman Helmet
'Taking into account the on-going strong demand for our continuing lines and our
new introductions, we are very excited about our prospects and expect to see
further exciting growth as we continue to build our existing brands and develop
new ones.'
Richard King, Chairman
FULL STATEMENT ATTACHED
Enquiries:
Richard King, Chairman Richard Thompson
Kiran Shah, Group Finance Director & Joint MD Fiona Tooley, Director Philip Davies
The Character Group plc Citigate Dewe Rogerson Charles Stanley Securities
Tel: +44 (0) 20 8949 5898 Tel: +44 (0) 121 455 8370 Tel: +44 (0) 20 7149 6000
Mobile: +44 (0) 7836 250150 (RK) Mobile: +44 (0) 7785 703523
Mobile: +44 (0) 7956 278522 (KS)
-2-
The Character Group plc
Interim Results for the six months ended 28 February 2007
STATEMENT BY THE CHAIRMAN, RICHARD KING
Introduction
As we indicated in our trading updates on 31 January and 23 March 2007, Group
sales and profitability have been substantially ahead of last year, exceeding
Management's original budgets and expectations for the period.
This very creditable performance has been achieved through increased exposure
and brand support by our major trade partners and we believe also reflects our
strategic focus in the on-going development of our own range of exciting,
innovative products which meet the market's needs and consumer demand.
Product Review
The Group is fortunate to have within its product portfolio its strongest range
of toys and games to date, and we are very encouraged by the demand at retail
for the Group's products.
We are very pleased to say that the trend of our recent strong trading has
continued with encouraging reactions to our new and existing ranges coming from
the trade in general and specifically from all our major customers.
Looking at the range, shareholders will be pleased to learn that Character has
been very successful in building brands such as Peppa Pig, Disney Princess,
Scooby Doo, GR8 Art, and the new launches of Dragonfly and Movin' & Groovin'
Flowers as well as the highly successful Dr Who product line which is probably
the hottest boys range for 2007.
Looking ahead, new to our offering under our Spiderman 3 licence, we have
developed Spidersapien, a fusion of Spiderman 3 and our 2005 award winning
Robosapien, which is expected to be our lead line for our range of Spiderman 3
toys.
Also, we believe the biggest Doctor Who toy this Christmas will be the Dalek Sec
Hybrid Voice Changer Helmet. Shareholders may have witnessed in last Saturday
evening's episode of Doctor Who, the Dalek Sec coming out of his iron shell and
the mutant inside taking on a human form, thus becoming a 'hybrid'.
The Dalek Sec Hybrid Voice Changer Helmet developed by Character is yet to be
released to retail but we expect it to be one of the most popular products in
the range which include the Cyberman Voice Changer which won 2006 Toy of the
Year Award and the Best Boys Toy Concept of the year award for Doctor Who. With
the Doctor Who Series 3 just released, we expect further growth in the brand and
our range in particular.
We are also to be undertaking another project with BBC Worldwide relating to the
television programme The Sarah Jane Adventures, which has developed as a
spin-off from the Doctor Who series and which we believe will be very successful
in its own right.
Taking into account the on-going strong demand for our continuing lines and our
new introductions, we are very excited about our prospects and expect to see
further exciting growth as we continue to build our existing brands and develop
new ones.
continued...
-3-
Financials
Based on continuing activities, in the six months ended 28 February 2007,
turnover increased 37.6% to £56.03 million from £40.72 million, whilst operating
profits, on the same basis, were up approximately 80% from £3.67 million to
£6.59 million.
The Group's profit before tax increased from £2.96 million to £6.3 million.
Basic earnings per share in the period were 10.05 pence, against 5.04 pence in
the comparable six months in 2006.
Cash at bank on 28 February 2007 was £11.86 million (2006: £10.3 million). This
is after taking account of share buy-backs undertaken during the period of £3.4
million and £0.95 million proceeds from sale of treasury shares.
Stocks at the six-month period end were £5.4 million compared to £10.7 million
at last year-end of 31 August 2006; this clearly reflects the very successful
Autumn/Winter trading period for the Group.
Dividend
In light of these strong results and to further underpin the Board's confidence
in the Group's portfolio of product and the anticipated outcome for the
remainder of the year, the Directors have declared an interim dividend of 2.0
pence per share, an increase of 21.2% over last year (2006 1.65 pence). This
dividend is covered approximately 5 times by earnings.
The interim dividend will be paid on 25 May 2007, to Shareholders on the
Register as at 4 May 2007. The ex-dividend date is 2 May 2007.
Share Buy-Backs
During the six months under review, the Group purchased 3,470,322 ordinary
shares in the Company at an aggregate price of £3.4 million and an average price
of 97.2 pence. This represents approximately 7.24% of the issued share capital
of the Company as at 1 September 2006 (excluding shares held in treasury). As at
1 September 2006, 1,125,000 ordinary shares in the Company were held in
treasury. Of the shares purchased by the Company in the period under review,
754,322 were purchased to be held in treasury and the balance for cancellation.
In the period, 775,000 shares were sold by the Company from treasury at a price
of 123.5 pence per share.
The Directors continue to focus on ways to enhance shareholder value further
through our on-going plans to implement a progressive dividend policy, whilst at
the same time monitoring the position in the market with a view to continuing to
buy-back shares for treasury and cancellation, when considered appropriate.
As at 20 April 2007, the Group had 45,619,837 ordinary shares in issue excluding
979,322 ordinary shares held in treasury, compared with the position as at 28
February 2006 when there were 52,830,909 shares in issue and no shares held in
treasury.
Update relating to the Discontinued Digital Products Division
In our trading update to Shareholders on 23 March 2007, we made reference to two
matters that remained unresolved following the sale of the Group's Digital
business in February 2006.
continued...
-4-
With regard to the action against Petters Consumer Electronics LLC ('Petters'),
our subsidiary World Wide Licenses Limited ('WWL') issued proceedings in
Delaware, USA and served process on Petters in March 2007. Petters has failed to
file a defence within the prescribed time and WWL has now filed a motion for
default in those proceedings.
In relation to our claim against Flextronics Sales & Marketing (A-P) Limited, we
are in discussions which we hope will lead to a satisfactory conclusion.
Although we do not believe that either of these matters will have any material
impact on the on-going business of the Group, which continues to go from
strength to strength, our intention is vigorously to pursue them through the
appropriate channels.
Current Trading and Prospects
The Group expects demand to remain strong for both its continuing ranges and new
introductions. Taking this into account, coupled with the strength of our
product portfolio, the Board is confident that the business shall continue to
achieve further sustainable growth for the foreseeable future.
-5-
The Character Group plc
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Notes 6 months to 6 months to 12 months to
28 February 28 February 31 August
2007 2006 2006
(unaudited) (unaudited) (audited)
restated
(note 1)
£'000 £'000 £'000
Turnover - continuing 56,026 40,718 69,546
- discontinued - 25,851 25,986
-------------------------------------------------------------------------------------
56,026 66,569 95,532
Cost of sales (33,692) (49,735) (66,543)
-------------------------------------------------------------------------------------
Gross profit 22,334 16,834 28,989
Net operating expenses
Selling and
distribution costs (7,262) (7,477) (11,737)
Administration
expenses (8,501) (8,468) (13,894)
Other operating
income 18 204 261
-------------------------------------------------------------------------------------
Operating
profit/(loss) - continuing 6,589 3,667 6,912
- discontinued - (2,574) (3,293)
-------------------------------------------------------------------------------------
Operating profit 6,589 1,093 3,619
Exceptional item - discontinued
activity --------------------------------------
Gain before goodwill write back - 4,300 4,053
Goodwill charge - (1,897) (1,897)
----------------------------------------
- 2,403 2,156
-------------------------------------------------------------------------------------
Profit on ordinary
activities before interest 6,589 3,496 5,775
Interest (293) (538) (644)
-------------------------------------------------------------------------------------
Profit on ordinary
activities before taxation 6,296 2,958 5,131
Taxation 2 (1,675) (308) (2,139)
-------------------------------------------------------------------------------------
Profit on ordinary
activities after taxation 4,621 2,650 2,992
-------------------------------------------------------------------------------------
Earnings/(loss) per share 5
Basic - continuing 10.05p 5.69p 8.49p
- discontinued - (0.65p) (2.56p)
-------------------------------------------------------------------------------------
10.05p 5.04p 5.93p
-------------------------------------------------------------------------------------
- fully diluted 9.81p 5.02p 5.77p
-------------------------------------------------------------------------------------
Dividend per share 2.00p 1.65p 3.3p
-------------------------------------------------------------------------------------
EBITDA 6,873 3,888 7,456
(earnings before interest, tax,
depreciation and amortisation)
-------------------------------------------------------------------------------------
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
6 months to 6 months to 12 months to
28 February 28 February 31 August
2007 2006 2006
(unaudited) (unaudited) (audited)
restated
£'000 £'000 £'000
Profit for the
financial period 4,621 2,650 2,992
Currency translation
differences on foreign
net investment 8 122 18
--------------------------------------------------------------------------------
Total recognised gains
and losses relating to
the financial period 4,629 2,772 3,010
--------------------------------------------------------------------------------
-6-
The Character Group plc
CONSOLIDATED BALANCE SHEET
Note 6 months to 6 months to 12 months to
28 February 28 February 31 August
2007 2006 2006
(unaudited) (unaudited) (audited)
£'000 £'000 restated
£'000
Fixed assets
Intangible assets 300 624 400
Tangible assets 1,534 1,553 1,609
Investments 2 2 2
-------------------------------------------------------------------------------
1,836 2,179 2,011
-------------------------------------------------------------------------------
Current assets
Stocks 5,404 8,667 10,671
--------------------------------------------
Trade debtors
subject to finance
arrangements 4,766 5,223 11,813
Factor advances (4,264) (3,685) (6,275)
--------------------------------------------
502 1,538 5,538
Trade and other
debtors 4,852 8,155 9,474
Cash at bank and in
hand 11,860 10,298 7,369
-------------------------------------------------------------------------------
22,618 28,658 33,052
-------------------------------------------------------------------------------
Creditors: amounts
falling due within
one year (10,980) (15,675) (23,324)
-------------------------------------------------------------------------------
Net current assets 11,638 12,983 9,728
-------------------------------------------------------------------------------
Total assets less
current liabilities 13,474 15,162 11,739
-------------------------------------------------------------------------------
Net assets 13,474 15,162 11,739
-------------------------------------------------------------------------------
Capital and reserves
Called up share
capital 2,329 2,642 2,452
Shares held in
treasury (635) - (665)
Investment in own
shares (908) (908) (908)
Capital redemption
reserve 385 40 243
Share premium
account 12,517 11,821 11,917
Share based payment
reserve 192 - 68
Merger reserve 651 651 651
Profit and loss
account 3 (1,057) 916 (2,019)
-------------------------------------------------------------------------------
Equity shareholders'
funds 13,474 15,162 11,739
-------------------------------------------------------------------------------
-7-
The Character Group plc
CONSOLIDATED CASH FLOW STATEMENT
Notes 6 months to 6 months to 12 months to
28 February 28 February 31 August
2007 2006 2006
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Cash flow from operating
activities 6 8,150 4,101 5,995
-----------------------------------------------------------------------------------
Returns on investment and
servicing of finance
Interest paid (net) (293) (538) (644)
-----------------------------------------------------------------------------------
Net cash outflow for
returns on investments and
servicing of finance (293) (538) (644)
-----------------------------------------------------------------------------------
Taxation (240) (458) (228)
-----------------------------------------------------------------------------------
Capital expenditure and financial
investment
Payments to acquire
tangible fixed assets (132) (658) (876)
Sale of tangible fixed
assets 19 432 397
-----------------------------------------------------------------------------------
Net cash outflow for
capital expenditure and
financial investment (113) (226) (479)
-----------------------------------------------------------------------------------
Acquisitions and disposals
Sale of business -
exceptional item - 4,143 3,178
-----------------------------------------------------------------------------------
Equity dividend paid (733) (473) (1,258)
-----------------------------------------------------------------------------------
Cash inflow before use of
liquid resources and
financing 6,771 6,549 6,564
-----------------------------------------------------------------------------------
Shares held in treasury
(including expenses) (472) - (672)
Disposal of shares held in
treasury (net) 952 - -
Issue of new shares 169 1 110
Purchase of own shares (2,929) - (2,381)
-----------------------------------------------------------------------------------
Net cash (outflow)/inflow
from financing (2,280) 1 (2,943)
-----------------------------------------------------------------------------------
Increase in cash in the
period 7 4,491 6,550 3,621
-----------------------------------------------------------------------------------
Decrease in net debt in the
period 8 4,491 6,550 3,621
-----------------------------------------------------------------------------------
-8-
The Character Group plc
NOTES TO THE FINANCIAL INFORMATION
1 BASIS OF PREPARATION
The financial information for the six months ended 28 February 2007 has not been
audited, nor has the financial information for the six months ended 28 February
2006. However, the interim report includes a review report signed by the
auditors. The comparative figures for the year ended 31 August 2006 do not
constitute the company's statutory accounts for that year, but have been
extracted from the statutory accounts filed with the Registrar of Companies, and
which carried an unqualified audit report. The report has been prepared in
accordance with applicable accounting standards on a consistent basis using the
accounting policies that will be applied in the 2007 Annual Report. This has led
to the adoption of FRS 20 Share Based Payment, as described below.
FRS20: Share Based Payment
During the period the Group adopted FRS 20 'Share Based Payment' which applies
to AIM listed companies for accounting periods commencing on or after 1 January
2006.
The fair value of employee share option plans is measured at the date of grant
of the option using a binomial valuation model taking into account the terms and
conditions under which the option was granted. The fair value determined is
expensed on a straight line basis over the vesting period based upon the Group's
estimate of the number of shares that will vest. The charge in respect of the
share based payments is matched by an equal and opposite adjustment to profit
and loss reserves, thereby having no net impact on the Group's closing reserves.
The adoption of FRS 20 has resulted in a change in accounting policy for share
based payments. A prior year adjustment has been made to the financial
information for the year ended 31 August 2006 as detailed below:
6 months 6 months 12 months
ended ended ended
28 February 2007 28 February 2006 31 August 2006
(unaudited) (unaudited)
£'000 £'000 £'000
Charge for share based
payment 124 - 68
-------------------------------------------------------------------------------
The Group has taken advantage of the transitional provisions of FRS 20 in
respect of the fair value of equity settled awards so as to apply FRS 20 only to
those equity settled awards granted after 7 November 2002 that had not vested
before 1 September 2006.
2 TAXATION
The tax charge for the half year is estimated on the basis of the anticipated
tax rates applying for the full year.
continued...
-9-
3 PROFIT AND LOSS ACCOUNT
£'000
At 1 September 2006 as previously reported (1,951)
Share based payment (68)
-------------------------------------------------------------------------------
At 1 September 2006 restated (2,019)
Exchange difference 8
Profit after tax for the period 4,621
Dividends (733)
Shares cancelled and capitalised (2,934)
-------------------------------------------------------------------------------
At 28 February 2007 (1,057)
-------------------------------------------------------------------------------
The profit and loss account for prior periods is restated in accordance with FRS
20 as follows:
6 months 12 months
ended ended
28 February 2006 31 August 2006
(unaudited)
£'000 £'000
At 31 August 2006 as previously reported 2,650 3,060
Share Based Payment - (68)
--------------------------------------------------------------------------------
Profit and loss account restated 2,650 2,992
--------------------------------------------------------------------------------
4 DIVIDENDS
The interim dividend declared for the six months ended 28 February 2007 is 2.00
pence per ordinary share and is expected to be paid on 25 May 2007 to those
shareholders on the register at the close of business on 4 May 2007. This
dividend was declared after 28 February 2007 and the liability of £906,000 has
not been recognised in the interim results in accordance with FRS21.
The interim dividend paid for the six months ended 28 February 2006 was 1.65
pence per ordinary share and the final dividend paid for the year ended 31
August 2006 was 1.65 pence per ordinary share, making a total of 3.3 pence per
ordinary share.
continued...
-10-
5 EARNINGS PER SHARE
Earnings per share have been calculated in accordance with FRS 22 Earnings per
share.
The calculations are based on the following:
6 months to 28 February 2007
Profit Weighted Pence
after taxation average per share
£ number of
ordinary
shares
Basic earnings per share 4,620,545 45,980,878 10.05
Impact of share options - 1,140,385 (0.24)
--------------------------------------------------------------------------------
Diluted earnings per share 4,620,545 47,121,263 9.81
--------------------------------------------------------------------------------
6 months to 28 February 2006
Basic earnings per share 2,650,000 52,543,290 5.04
--------------------------------------------------------------------------------
Impact of share options - 206,512 (0.02)
--------------------------------------------------------------------------------
Diluted earnings per share 2,650,000 52,749,802 5.02
--------------------------------------------------------------------------------
12 months to 31 August 2006
Basic earnings per share 2,992,000 51,629,312 5.80
--------------------------------------------------------------------------------
Impact of share options - 221,975 (0.03)
--------------------------------------------------------------------------------
Diluted earnings per share 2,992,000 51,851,287 5.77
--------------------------------------------------------------------------------
6 RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
6 months to 6 months to 12 months to
28 February 2007 28 February 2006 31 August 2006
(unaudited) (unaudited) (audited)
£'000 £'000 restated
£'000
Operating profit 6,589 1,093 3,619
Depreciation,
impairment and
amortisation 284 392 774
Share Based Payment 124 - 68
(Profit)/Loss on
disposal of tangible
fixed assets (3) 161 168
Decrease/(increase) in
stocks 5,267 1,143 (861)
Decrease in debtors 8,137 15,260 8,411
(Decrease) in creditors (12,256) (14,070) (6,225)
Exchange differences 8 122 41
-------------------------------------------------------------------------------
Net cash inflow from
operating activities 8,150 4,101 5,995
-------------------------------------------------------------------------------
RECONCILIATION OF EXCEPTIONAL PROFIT TO NET CASH INFLOW
FROM EXCEPTIONAL ITEM
6 months to 6 months to 12 months to
28 February 2007 28 February 2006 31 August 2006
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Exceptional profit - 2,403 2,156
Write back of goodwill
previously written off - 1,897 1,897
(Increase) in debtor - (1,027) (948)
Increase in creditors - 870 73
--------------------------------------------------------------------------------
Net cash inflow from
exceptional item - 4,143 3,178
--------------------------------------------------------------------------------
continued...
-11-
7 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
6 months to 6 months to 12 months to
28 February 2007 28 February 2006 31 August 2006
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Increase in cash in the
period 4,491 6,550 3,621
Net debt at 1 September
2006 7,369 3,748 3,748
-------------------------------------------------------------------------------
Net debt at 28 February
2007 11,860 10,298 7,369
-------------------------------------------------------------------------------
8 ANALYSIS OF NET DEBT
Cash at bank
and in hand
£'000
1 September 2005 3,748
Cash flow 6,550
-------------------------------------------------------------------------------
28 February 2006 10,298
Cash flow (2,929)
-------------------------------------------------------------------------------
31 August 2006 7,369
Cash flow 4,491
-------------------------------------------------------------------------------
28 February 2006 11,860
-------------------------------------------------------------------------------
9 A copy of the interim results will be posted to shareholders. Further copies
will be available from the Company's Office: 2nd Floor, 86-88 Coombe Road, New
Malden, Surrey, KT3 4QS or info@charactergroup.plc.uk or
character@citigatedr.co.uk and will be posted on the Company's website at
www.thecharacter.com.
-12-
INDEPENDENT REVIEW REPORT
Introduction
We have been instructed by the company to review the financial information for
the six months ended 28 February 2007, which comprises the consolidated profit
and loss account, the consolidated statement of recognised gains and losses, the
consolidated balance sheet, the consolidated cash flow statement and the notes
to the accounts. We have read the other information contained in the interim
report and considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
This report, including the conclusion, has been prepared for and only for the
Company for the purposes of its interim report. We do not, therefore, in
producing this report, accept or assume responsibility for any other purpose or
to any other person to whom this report is shown or into whose hands it may come
save where expressly agreed by our prior consent in writing.
Directors' Responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The AIM Rules
require that the accounting policies and presentation applied to the interim
figures should be consistent with those that will be adopted in the annual
accounts having regard to the accounting standards applicable to such annual
accounts, except where any changes, and the reasons for them, are disclosed.
Review Work Performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of management and applying analytical
procedures to the financial information and underlying financial data and based
thereon, assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review excludes audit
procedures such as tests of controls and verification of assets, liabilities and
transactions. It is substantially less in scope than an audit performed in
accordance with International Standards on Auditing (UK and Ireland) and
therefore provides a lower level of assurance than an audit. Accordingly, we do
not express an audit opinion on the financial information.
Review Conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 28 February 2007.
HLB Vantis Audit plc
Chartered Accountants
London
23 April 2007
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