Preliminary Results

RNS Number : 3361J

Character Group PLC

02 December 2008

 



Issued by Citigate Dewe Rogerson Ltd, Birmingham

Tuesday, 2 December 2008

The Character Group plc

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

2008 Preliminary Results for the year ended 31 August 2008

• Creditable performance in tough markets
  2008 performance adversely affected by significantly weaker than anticipated UK retail trading environment and an exceptional one-off major product recall and associated costs during H1

• Revenue £82.3 million against £95 million in 2007, EBITDA was £9.5 million against £14.5 million; profit before tax £5.14 million compared to £12.56 million and basic earnings per share of 12.03 pence achieved (2007: 19.20 pence)

• In light of overall deteriorating economic markets and lack of visibility, no final dividend proposed

• Development of product licences and portfolio continues to make very good progress:

• Major new licences awarded in the period including Hannah Montana and extension to this licence to cover certain High School Musical products

• Doctor Who range continues to do well with new products added to the range

• New for 2009:
      Postman Pat with product due to be in place at retail from January 2009;
       HM Armed Forces backed by the MOD representing the Royal Navy, RAF and Army and 
      scheduled to be launched on VE day;
      Cars-Piston Cup Race Game;    
      'Lets Cook range'

• The Group has maintained a strong and healthy balance sheet; is currently cash positive; has no bank borrowings, and has substantial unused working capital facilities available to it

'We believe as a Group, we have maintained or grown our market share and our intention is to continue to build on this position. We consider that it will be some time before there is a return to a more normal economy and we will ensure that we shall be well positioned to take advantage of further growth when the opportunity arises.'

Richard King, Chairman

FULL STATEMENT ATTACHED

Enquiries:
Richard King, Chairman	Fiona Tooley	Richard Thompson
Kiran Shah, Group Finance Director & Joint MD	Keith Gabriel	Philip Davies
The Character Group plc	Citigate Dewe Rogerson	Charles Stanley Securities
Mobile: [phone] (RK)	Tel: [phone]	(Nominated Adviser)
Mobile: [phone] (KS)	Mobile: [phone] (FMT)	Tel: [phone]
Tel: [phone]	Mobile: [phone] (KG)
www.thecharacter.com
Ticker: AIM: CCT

  -2-

STATEMENT BY THE CHAIRMAN, RICHARD KING

2008 financial year under review

We entered the 2008 financial year (ended 31 August) with confidence that we had developed a strong, innovative and exciting product portfolio, which met both the demands of our customers and the consumer. 

As we reported at the interim stage, the 2008 financial year began to present challenges outside of our control starting with a difficult trading environment at Christmas 2007 for most retailers and, concurrently, the early signs of a general deterioration of UK and Global economies. Additionally, the Group's progress was adversely affected by the Bindeez range recall, which cost the Group £1.9 million in one-off costs as well as £4.0 million in lost sales. It was very disappointing that, after a promising start to the second half, our sales declined markedly during the last quarter of the financial year as the general economy rapidly declined further.

Financials

The Group is reporting its results for the year ended 31 August 2008, expressed (for the first time) under International Financial Reporting Standards (IFRS) and prepared in accordance with Group policies.

Group sales amounted to £82.3 million, down 13.5% compared with 2007 (2007: £95.1 million), with EBITDA at £9.5 million (£14.54 million in 2007).

Operating profit for the same period was down 59% at £5.30 million (2007: £12.87 million), with profit before tax at £5.14 million, compared to £12.86 million, a reduction of 59%.

Gross margin was 35.8%, compared to 40.3% for the comparative period.

Basic earnings per share were 12.03 pence per share, compared to 19.20 pence in 2007.

Stocks at the year end at £9.8 million were £1 million lower (2007: £10.8 million).

Cash at Bank (excluding finance advances) at the interim stage (29 February 2008) totalled £10.2 million and by the year-end (31 August 2008) this stood at £17.8 million against £15.7 million at the August 2007 year-end.

The Group is currently cash positive, has no bank borrowings and has substantial un-drawn working capital facilities available to it.

Current Trading

We have now entered the all important 2008 Christmas period at a time when consumer confidence is at its lowest level for years and when retailers are having difficulty making projected sales, other than at greatly reduced prices. Suppliers are encountering difficulties in making their sales, whilst enduring the results of severe cost inflation and adverse currency movements. In addition, it is proving more difficult to assess the financial condition of customers, as the events leading to the recent Woolworths plc administration have demonstrated. This is likely to have an impact on the ability for customers to meet the criteria of the trade indemnity insurers to facilitate debt insurance cover for suppliers such as Character Group in the coming year.

continued…

  -3-

Against this backdrop, the Directors would like to highlight some positive aspects about the Group in these difficult times. Character:

• is likely to either maintain or increase its market share;

• has maintained a strong and healthy balance sheet; and

• is un-geared and has substantial unused working capital facilities.

At the current time, just ahead of the close of the 2008 Christmas trading period, and against severe and rapidly changing economic influences, it is too early to make meaningful forecasts for both the financial and calendar years 2009.

However, whilst recognising that 2009 will provide many difficult challenges, the Board strongly believes that the Group has and will continue to:- 

• successfully develop its own product line leaving it well positioned within the market-place to build on its position;

• maintain the financial strength and wherewithal to see the business through the current economic difficulties; and

• be ready to take advantage of its market position as more normal times return.

Share Buy-Backs

During the year, the Group purchased 2,842,379 ordinary shares in the Company at an aggregate price of £2.6 million and an average price of 92.4 pence per share. 

Excluding those ordinary shares held in Treasury, this equates to 6.8% of the Group's current issued ordinary share capital. As at 1 December 2008, The Character Group had 41,477,481 ordinary shares in issue, excluding 4,019,456 ordinary shares held in Treasury (31 December 2007: 43,544,578 ordinary shares excluding 1,947,359 ordinary shares held in Treasury).

At the forthcoming Annual General Meeting, Shareholders will be asked to approve a resolution to renew the Company's authority to repurchase, up to 35% of its issued ordinary share capital (excluding ordinary shares held in Treasury). If this resolution is approved, the Directors will continue to monitor the market position and will, if considered appropriate, make further purchases of the Group's ordinary shares.

Dividend

An interim dividend of 2.2 pence was paid to all shareholders in July 2008. Whilst Character has a strong balance sheet and cash flow, the Directors believe that in view of the current uncertainties in the market, it would be prudent to preserve the Group's financial strength and therefore, they will not be proposing a final dividend for the year ended 31 August 2008. 

Management and People

On behalf of the Board and all stakeholders, I thank the Group's management and employees for their hard work, loyalty and commitment to the Group, especially during these turbulent and unsettled times.

Product Portfolio and Licenses

Although the environment is proving tough, on a positive note, in terms of the development of our product licences and portfolio, the Group has made and continues to make very good progress.

continued…

  -4-

We successfully secured a number of new licenses and developed new and exciting additional products into our portfolio. This has included:

• Hannah Montana™

At the end of January 2008, the Group was awarded a major new licence by Disney and this licence has been extended to cover certain High School Musical products. The range has been a huge success. The Secret Diary Pillow exceeded all expectations and with the introduction of the audio electronic range in 2009 and the launch of the Hannah Montana movie, further growth is expected. 

• Peppa Pig™

Character has had the master toy licence since 2005 and has developed the range in-house. Peppa has seen massive growth in 2008 due to new products such as Spaceship and Classroom Playset and is now firmly established in the Top 3 pre-school categories. NPD data shows Peppa Pig as one of the Top 10 brands in the toy industry. 2009 will see the introduction of an exciting new fantasy world of Princess Peppa to bring a new theme to the brand.

• Scooby Doo™

Character's evergreen brand Scooby Doo continues to be a success. One of the highlights of the current 2008 range is Hide and Seek Scooby Doo. The initial sales of our new products recently introduced to the market give us confidence that this license will continue to grow, especially in Europe.

• Doctor Who™

Character is the master toy licensee for Doctor Who. This range is completely developed in-house and is still one of the major boys' toys concepts for 2008. We shall develop further product for introduction with the new series scheduled for 2010. 

New for 2009:

• Postman Pat™

As master toy licensee and to complement the new BBC show, Character will release a full range of toys in the market from January 2009. Postman Pat is a modern British Classic which has been around for 27 years and, with the brand revamped and 26 new episodes and BBC commitment until 2012, it looks set to build on its heritage.

• 'Let's Cook range'™ 

Following on the success of the Cup Cake Maker, which was selected as one of the Top 12 Dream Toys 2008 and exceeded all expectations, Character will be launching new additions to the 'Let's Cook range'.

• Cars-Piston Cup Race Game™

Character has continued to build on its big brand games with the debut of 'Cars- Piston Cup Race Game'. One of Character's Top 3 licensed games, the range is based on the animated Disney Pixar movie. 

• HM Armed Forces™

HM Armed Forces is Character's biggest launch planned to date in terms of product development, investment and marketing support. Backed by The Ministry of Defence, HM Armed Forces plans to fill a void within the boys' military action figure market. The range will be launched next year on VE day (8 May 2009) and will include figures, vehicles and accessories, together with novelty and role-play items within the three forces: Royal Navy, Royal Air Force and Army.

continued…

  -5-

Prospects

The Directors recognise that the Group's business is dependant upon both internal and external influences and we acknowledge that we can do little to influence the latter but we can influence the former.

In that regard, we are focusing on our: 

•    product development - to ensure that our products are well received by customers and consumers;

•    marketing - to create the demand;

•     manufacturing - to ensure that we are producing good quality and, above all, safe products.

whilst at the same time, ensuring that we do all the above both efficiently and cost-effectively.

We believe as a Group, we have maintained or grown our market share and our intention is to continue to build on this position. We consider that it will be some time before there is a return to a more normal economy and we will ensure that we shall be well positioned to take advantage of further growth when the opportunity arises.

2 December 2008

-6-

UNAUDITED FINANCIAL INFORMATION

CONSOLIDATED INCOME STATEMENT

for the year ended 31 August 2008

	Note	Total 2008 £000's	Total 2007 £000's
Continuing operations
Revenue		82,272	95,076
Cost of sales		(52,800)	(56,714)
Gross profit		29,472	38,362
Net operating expenses
Selling and distribution costs		(9,977)	(10,143)
Administration expenses		(14,365)	(15,508)
Other operating income		167	149
Operating profit		5,297	12,860
Net finance costs		(154)	(285)
Profit before taxation		5,143	12,575
Taxation		4	(3,877)
Profit for the year attributable to equity holders of the Parent		5,147	8,698
Earnings per share (pence)	6
Basic		12.03p	19.20p
Fully diluted		11.70p	18.62p
Dividend per share		2.2p	4.4p
EBITDA (earnings before interest, tax, depreciation and amortisation)		9,529	14,541

  -7-

CONSOLIDATED BALANCE SHEET

as at 31 August 2008

	2008 £000's	2007 £000's
Non - current assets
Intangible assets - product development	2,415	1,409
Property, plant and equipment	1,303	1,494
	3,718	2,903
Current assets
Inventories	9,802	10,831
Trade and other receivables	19,142	21,303
Derivative financial instruments	1,507	-
Income tax recoverable	20
Cash and cash equivalents	17,785	15,658
	48,256	47,792
Current liabilities
Short term borrowings	(17,782)	(13,512)
Trade and other payables	(17,627)	(18,794)
Derivative financial instruments	-	(452)
Income tax payable	-	(3,187)
	(35,409)	(35,945)
Net current assets	12,847	11,847
Non-current liabilities
Deferred tax	(834)	(280)
Net assets	15,731	14,470
Equity
Share capital	2,275	2,273
Shares held in treasury	(3,277)	(676)
Investment in own shares	(908)	(908)
Capital redemption reserve	448	448
Share based payment reserve	534	315
Share premium account	12,587	12,568
Merger reserve	651	651
Translation reserve	501	(725)
Profit and loss account	2,920	524
Total equity	15,731	14,470

  -8-

CONSOLIDATED CASH FLOW STATEMENT

for the year ended 31 August 2008

	12 months to 31 August 2008 £'000	12 months to 31 August 2007 £'000
Cash flow from operating activities Profit before taxation for the year	5,143	12,575
Adjustments for:
Depreciation of property, plant and equipment	378	375
Amortisation of intangible assets	3,854	1,306
(Profit) on disposal of investments	-	(1)
(Profit)/loss on disposal of property, plant and equipment	(5)	-
Interest expense	154	285
Financial instruments fair value adjustments	(1,659)	295
Share based payments	219	247
Decrease/(increase) in inventories	1,029	(160)
Decrease/(increase) in trade and other receivables	2,161	(512)
(Decrease)/increase in trade and other creditors	(1,167)	1,063
Cash generated from operations	10,107	15,473
Interest paid	(154)	(285)
Income tax paid	(2,329)	(1,068)
Net cash inflow from operating activities	7,624	14,120
Cash flows from investing activities
Payments for intangible assets - product development	(4,860)	(1,867)
Payments for property, plant and equipment	(243)	(288)
Proceeds from disposal of investments	-	3
Proceeds from disposal of property, plant and equipment	62	19
Proceeds of disposal of discontinued activity	-	496
Net cash outflow from investing activities	(5,041)	(1,637)
Cash flows from financing activities
Proceeds from issue of share capital	21	225
Repurchase of own shares	-	(5,352)
Sale of treasury shares	-	952
Purchase of treasury shares	(2,627)	(518)
Dividends paid	(1,959)	(1,625)
Net cash used in financing activities	(4,565)	(6,318)
Net (decrease)/increase in cash and cash equivalents	(1,982)	6,165
Cash, cash equivalents and borrowings at the beginning of the year	2,146	(3,943)
Effects of exchange rate movements	(161)	(76)
Cash, cash equivalents and borrowings at the end of the year	3	2,146

Cash, cash equivalents and borrowings consist of:

Cash and cash equivalents	17,785	15,658
Short term borrowings	(17,782)	(13,512)
	3	2,146

-9-

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Called up share capital £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
The Group
1 September 2006	2,452	(665)	243	11,917	651	68	-	(1,831)
Share based payment						247
Profit after tax								8,698
Dividends								(1,625)
Shares Issued	25			200
Sale of treasury shares		502		451
Shares purchased	(204)	(513)	205					(5,357)
Translation Reserve							(725)	639
1 September 2007	2,273	(676)	448	12,568	651	315	(725)	524
Share-based payment						219
Translation reserve							1,226	(983)
Profit after tax								5,147
Net gain on hedged  forward contract								217
Dividends								(1,959)
Shares issued	2			19
Shares purchased		(2,601)						(26)
31 August 2008	2,275	(3,277)	448	12,587	651	534	501	2,920

-10-

NOTES TO THE FINANCIAL INFORMATION

1.    FIRST-TIME ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)

The Group's financial statements for the year ended 31 August 2008 are the first annual financial statements that comply with IFRS as adopted by the European Union, and to which IFRS 1 'First-time adoption of International Financial Reporting Standards' has been applied. The Group's date of transition is 1 September 2006. The comparative figures have been prepared on the same basis and are therefore restated for the impact of IFRS from those previously reported under United Kingdom Generally Accepted Accounting Practice (UK GAAP).

2.    TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS

The Group's financial statements were prepared in accordance with UK GAAP until 31 August 2007. The Group's financial statements for the year ended 31 August 2008 are the first annual financial statements that comply with IFRS as adopted by the European Union, and to which IFRS 1 'First-time adoption of International Financial Reporting Standards' has been applied.

The Group is required to establish its IFRS accounting policies for the year ended 31 August 2008 and apply these retrospectively to determine its IFRS balance sheet at the transition date of 1 September 2006 and the comparative information for the year ended 31 August 2007.

In preparing the consolidated financial statements, the Group has elected to take advantage of provisions within IFRS 1, which offer certain exemptions from applying IFRS to the opening IFRS balance sheet at 1 September 2006 as follows:

IFRS 3 Business Combinations

Following the adoption of IFRS goodwill remains written off to reserves and no adjustment would be made on subsequent disposal. For acquisitions completed on or after 1 September 2006, and goodwill carried in the balance sheet from this date goodwill is tested annually for impairment and carried at cost less accumulated impairment losses.

IAS 21 The Effects of Changes in Foreign Exchange Rates

Under IAS 21 the exchange differences arising on the translation of the results and net assets of overseas operations must be held as a separate component of equity. On a subsequent disposal of an overseas operation, the cumulative amount of exchange differences previously recognised directly in equity for that operation are to be transferred to the income statement as part of the profit or loss on disposal. The Group has made use of the exemption allowing cumulative translation differences to be set to zero as at the transition date of 1 September 2006.

IFRS 2 Share Based Payment

The Group has taken advantage of the transitional provisions of IFRS 2 in respect of equity settled awards and has applied IFRS 2 only to equity settled awards granted after 7 November 2002 and that had not vested before 1 September 2006. This is in line with the treatment adopted with FRS 20 in the 2007 financial statements under UK GAAP.

continued…

  -11-

EXPLANATION OF TRANSITION TO IFRS

(a)    IAS 38 - Product Development

IAS 38 requires the Group to capitalise product development costs when the future technical feasibility and future economic benefit can be demonstrated. As at 1 September 2006 the Group had capitalised product development costs of £448,000.

The corresponding capitalised amount at 31 August 2007 was £1,409,000.

(b)    IAS 32 - Financial Instruments - Disclosure and Presentation & IAS 39 Financial Instruments Recognition and Measurement

The adoption of these standards requires the Group to recognise the fair value of its derivative financial instruments, namely, forward foreign currency contracts and call options. The fair value loss recognised at 1 September 2006 was £157,000. The corresponding loss recognised at 31 August 2007 was £452,000.

Under UK GAAP finance advances were offset against trade debtors in a linked presentation on the face of the balance sheet. Under IFRS there is no equivalent of the linked presentation. Cash advances under this arrangement are now shown as finance advances under short term borrowing. Finance advances at 1 September 2006 were £6,275,000 and £8,784,000 at 31 August 2007.

Import loans were previously classified as trade payables. These are short term interest bearing trade finance instruments and have been reclassified as short term borrowings. Amount reclassified at 1 September 2006 is £3,687,000 and £4,728,000 at 31 August 2007.

(c)    IAS 21 - The Effects of Changes in Foreign Exchange Rates

IAS 21 requires income and cash flows of foreign subsidiaries to be reported using average rates of exchange that existed during the accounting year rather than the closing rates at the end of the accounting year. Retranslating the income from subsidiaries on this basis has resulted in additional net income recognised at 31 August 2007 of £109,000.

From 1 September 2006, foreign exchange differences arising from the translation of foreign operations are recorded in a separate reserve. Under the provisions of IFRS 1 the historic translation differences on foreign subsidiaries have been set to zero at 1 September 2006. The loss on translation at 31 August 2007 was £725,000.

(d)    IAS 19 - Employee Benefits

IAS 19 requires the Group to recognise in full liabilities in relation to employee benefits.

As at 1 September 2006, the Group had recognised an additional £22,000 of liabilities for holiday pay.

The corresponding liability was £24,000 at 31 August 2007.

(e)    IAS 12 - Income Taxes

IAS 12 requires deferred tax to be calculated based on temporary differences between the carrying amount of assets and liabilities and their respective tax bases.

The adjustments to assets and liabilities described above also give rise to certain taxable and deductible differences for which an adjustment to deferred tax assets is required. The net taxable difference resulting from the above was £269,000 at 1 September 2006 and £933,000 at 31 August 2007. This has led to the recognition of an additional deferred tax liability of £81,000 at 1 September 2006 and £280,000 at 31 August 2007.

continued…

-12-

RECONCILIATION OF CONSOLIDATED BALANCE SHEET AS AT 1 SEPTEMBER 2006

	UK GAAP £'000	Product development IAS 38 note (a) £'000	Financial instruments IAS 21 note (b) £'000	Foreign exchange rates IAS 21 note (c) £'000	Employee benefits IAS 19 note (d) £'000	Deferred tax IAS 12 note (e) £'000	Finance advances and trade finance IAS 32 & IAS 39 note (b) £'000	IFRS £'000
Assets
Non current assets
Goodwill	400	-	-	-	-	-	-	400
Other intangible assets  - product development	-	448	-	-	-	-	-	448
Property, plant and  equipment	1,609	-	-	-	-	-	-	1,609
Investments	2							2
	2,011	448	-	-	-	-	-	2,459
Current assets
Inventories	10,671	-	-	-	-	-	-	10,671
Trade and other  receivables	15,012	-	-	-	-	-	6,275	21,287
Derivative financial  instruments	-	-	-	-	-	-	-	-
Cash and cash  equivalents	7,369	-	-	-	-	-	-	7,369
	33,052	-	-	-	-	-	6,275	39,327
Current liabilities
Loans	(1,350)	-	-	-	-	-	-	(1,350)
Short term borrowings  - finance advances	-						(9,962)	(9,962)
Trade and other  payables	(21,396)	-	-	-	(22)	-	3,687	(17,731)
Derivative financial  instruments	-	-	(157)	-	-	-	-	(157)
Income tax payable	(407)	-	-	-	-	-	-	(407)
	(23,153)	-	(157)	-	(22)	-	(6,275)	(29,607)
Net current assets	9,899	-	(157)	-	(22)	-	-	9,720
Non-current liabilities
Deferred tax	(171)	-	-	-	-	(81)	-	(252)
Net assets	11,739	448	(157)	-	(22)	(81)	-	11,927
Equity
Called up share capital	2,452							2,452
Shares held in treasury	(665)							(665)
Investment in own  shares	(908)							(908)
Capital redemption  reserve	243							243
Share based payment  reserve	68							68
Share premium account	11,917							11,917
Merger reserve	651							651
Translation reserve	-							-
Profit and loss account	(2,019)	448	(157)	-	(22)	(81)	-	(1,831)
Total equity	11,739	448	(157)	-	(22)	(81)	-	11,927

continued…

  -13-

RECONCILIATION OF CONSOLIDATED BALANCE SHEET AS AT 31 AUGUST 2007

	UK GAAP £'000	Product development IAS 38 note (a) £'000	Financial instruments IAS 21 note (b) £'000	Foreign exchange rates IAS 21 note (c) £'000	Employee benefits IAS 19 note (d) £'000	Deferred tax IAS 12 note (e) £'000	Finance advances and trade finance IAS 32 & IAS 39 note (b) £'000	IFRS £'000
Assets
Non current assets
Other intangible assets  - product development	-	1,409	-	-	-	-	-	1,409
Property, plant and  equipment	1,494	-	-	-	-	-	-	1,494
Investments	-					-	-	-
	1,494	1,409	-	-	-	-	-	2,903
Current assets
Inventories	10,831	-	-	-	-	-	-	10,831
Trade and other  receivables	12,519	-	-	-	-	-	8,784	21,303
Derivative financial  instruments	-	-	-	-	-	-	-	-
Cash and cash  equivalents	15,658	-	-	-	-	-	-	15,658
	39,008	-	-	-	-	-	8,784	47,792
Current liabilities
Loans	-	-	-	-	-	-	-	-
Short term borrowings  - finance advances	-						(13,512)	(13,512)
Trade and other  payables	(23,498)	-	-	-	(24)	-	4,728	(18,794)
Derivative financial  instruments	-	-	(452)	-	-	-	-	(452)
Income tax payable	(3,187)	-	-	-	-	-	-	(3,187)
	(26,685)	-	(452)	-	(24)	-	(8,784)	(35,945)
Net current assets	12,323	-	(452)	-	(24)	-	-	11,847
Non-current liabilities
Deferred tax	-	-	-	-	-	(280)	-	(280)
Net assets	13,817	1,409	(452)	-	(24)	(280)	-	14,470
Equity
Called up share capital	2,273							2,273
Shares held in treasury	(676)							(676)
Investment in own  shares	(908)							(908)
Capital redemption  reserve	448							448
Share based payment reserve	315							315
Share premium account	12,568							12,568
Merger reserve	651							651
Translation reserve	-			(725)				(725)
Profit and loss account	(854)	1,409	(452)	725	(24)	(280)	-	524
Total equity	13,817	1,409	(452)	-	(24)	(280)	-	14,470

continued…

  -14-

RECONCILIATION OF INCOME STATEMENT FOR THE FINANCIAL YEAR ENDED 31 AUGUST 2007

	UK GAAP £'000	Product development IAS 38 note (a) £'000	Financial instruments IAS 21 note (b) £'000	Foreign exchange rates IAS 21 note (c) £'000	Employee benefits IAS 19 note (d) £'000	IFRS £'000
Continuing operations
Revenue	94,523	-	-	553	-	95,076
Cost of sales	(57,051)	961	(295)	(329)	-	(56,714)
Gross profit	37,472	961	(295)	224	-	38,362
Net operating expenses
Selling and distribution costs	(10,098)	-	-	(45)	-	(10,143)
Administration expenses	(15,466)	-	-	(40)	(2)	(15,508)
Other operating income	151	-	-	(2)	-	149
Operating profit	12,059	961	(295)	137	(2)	12,860
Finance costs	(431)	-	-	(3)	-	(434)
Finance income	149	-	-	-	-	149
Profit before taxation	11,777	961	(295)	134	(2)	12,575
Taxation	(3,653)	-	-	(25)	-	(3,678)
Deferred tax IAS 12 note (e)	-	(288)	89	-	-	(199)
Profit for the year	8,124	673	(206)	109	(2)	8,698

GEOGRAPHICAL DESTINATION OF REVENUE

	31 August 2008 £000's	31 August 2007 £000's
United Kingdom	72,028	86,176
Rest of the world	10,244	8,900
Total Group	82,272	95,076

3.    OPERATING PROFIT

	12 months to 31 August 2008 £000's	12 months to 31 August 2007 £000's
Operating profit is stated after charging:
Exchange losses	69	32
Staff costs	6,952	7,632
Depreciation of tangible fixed assets - owned assets	378	377
Goodwill amortisation	-	400
Research and development amortised	3,854	907
Operating leases - land and buildings	324	171

continued…

  -15-

4.    NET FINANCE COSTS

	12 months to 31 August 2008 £000's	12 months to 31 August 2007 £000's
Finance costs:
On bank overdraft and similar charges	(177)	(177)
Factor and invoice discounting advances	(109)	(201)
Other	-	(56)
	(286)	(434)
Finance income:
Bank interest	132	149
Net finance costs	(154)	(285)

5.    DIVIDEND

	12 months to 31 August 2008 £000's	12 months to 31 August 2007 £000's
On equity shares:
Final dividend paid for the year ended 31 August 2007
- 2.4 pence (2006: 1.65 pence) per share	1,039	733
Interim dividend paid for the year ended 31 August 2008
- 2.2 pence (2007: 2.00 pence) per share	920	892
	1,959	1,625

6.    Earnings per share

	12 months to 31 August 2008			12 months to 31 August 2007 (Restated)
	Profit after taxation	Weighted average number of ordinary shares	Pence per share	Profit after taxation	Weighted average number of ordinary shares	Pence per share
Basic earnings per share	5,147,000	42,777,074	12.03	8,698,000	45,298,688	19.20
Impact of share options	-	1,231,151	(0.33)	-	1,408,453	(0.58)
Diluted earnings per share	5,147,000	44,008,225	11.70	8,698,000	46,707,141	18.62

Certain share options granted in May 2008 are not dilutive and are therefore excluded from the weighted average number of ordinary shares for the purpose of diluted earnings per share. The weighted average number of potential ordinary shares excluded is 526,844 (2007: nil).

7.    The Annual General Meeting will be held at the offices of Citigate Dewe Rogerson Ltd, 3 London Wall Buildings, London Wall, London, EC2M 5SY on 21 January 2009.

8.    The Report & Accounts will be posted to shareholders in due course. Further copies will be available from the Company's Office: 2^nd Floor, 86-88 Coombe Road, New Malden, Surrey, KT3 4QS or [e-mail] or [e-mail] and will be posted on the Company's website at www.thecharacter.com.

9.    The preliminary announcement does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. The annual report and accounts for the year ended 31 August 2008 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.

 

END

 

 

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