1st Nov 2007 07:02
Character Group PLC01 November 2007 Issued by Citigate Dewe Rogerson Ltd, BirminghamDate: Thursday, 1 November 2007 Embargoed: 7.00am The Character Group plc Preliminary Results for the twelve months ended 31 August 2007 Highlights • Continuing Business (Toys, Games and Gifts) 2007 2006Turnover £94.5m £69.5m +36%Operating profit £12.1m £6.9m +74%Earnings per share - basic 17.93p 8.36p +115% • Dividend Final dividend of 2.4 pence per share Total dividend for the year of 4.4 pence per share A 33% increase over 2006 (3.30 pence) Dividend covered four times by earnings • New Licences Secured include: Sarah Jane Adventures Dork Hunters from Outer Space Primeval Postman Pat • Key Core Brands: Doctor Who Scooby Doo Disney Princess Robotics (Dragonfly) Peppa Pig Games Gr8 (Art, Gear and Kit) Plush "Our growth to date in sales and profits reflects an outstanding performance forthe Group, especially as we continue to operate in a difficult period forretailers, both in the UK and across Europe." "The new financial year has started well, with our Christmas 2007 offeringalready having achieved a wider distribution base than for the previousChristmas. With the addition of new brands to our portfolio and the continuedgrowth we envisage to our existing brands, we are confident of achieving afurther satisfactory financial year in 2008." Richard King, Chairman FULL STATEMENT ATTACHED Enquiries:Richard King, Chairman Fiona Tooley, Director Kiran Shah, Group Finance Director & Joint MD Keith Gabriel, Senior Account Manager The Character Group plc Citigate Dewe Rogerson Tel: +44 (0) 20 8949 5898 Tel: +44 (0) 121 455 8370 Mobile: +44 (0) 7836 250150 (RK) Mobile: +44 (0) 7785 703523 (FMT) Mobile: +44 (0) 7956 278522 (KS) Mobile: +44 (0) 7770 788624 (KG)www.thecharacter.comwww.character-online.co.uk Richard ThompsonPhilip DaviesCharles Stanley SecuritiesNominated AdvisorTel: +44 (0) 20 7149 6000 -2- The Character Group plc Preliminary Results for the twelve months ended 31 August 2007 STATEMENT BY THE CHAIRMAN, RICHARD KING INTRODUCTIONI am delighted to report record pre-tax profits of £11.78 million for thefinancial year ended 31 August 2007, compared to £5.1 million for the previousyear. Since the disposal of our digital business in February 2006, we have been ableto concentrate virtually all our efforts on developing our toys and gamesportfolio. This, together with our strategy of acquiring new product licencesand designing and developing products in-house, has proven to be a major factorin the Group's growth. This creditable performance not only reflects this focus but shows that ourproducts continue to meet the market's needs and consumer demand. FINANCIALSThe 2006/7 financial year is our first financial year where we have been able tofocus fully on our continuing business following the sale of our digitalbusiness, although the comparative figures shown include revenue andcontribution from the historical digital operation. (Note 1 compares thecontinuing business). Turnover for Toys, Games and Gifts was £94.52 million against £69.55 millionlast year, an increase of approximately 36 per cent (2006: £95.53 million,including digital sales of £25.98 million). Operating profit for the continuing business increased by approximately 74% to£12.06 million (2006: £6.91 million). Profit before tax rose approximately 130% to £11.78 million (2006:£5.13million). Basic earnings per share in the period were 17.93 pence, up 115% from 8.36 penceachieved for the continuing business in the comparable period (2006: 5.80pence). Stocks at year end were £10.83 million (2006: £10.67 million, including digitalstocks). Cash at bank at the year end was £15.7 million, compared to £7.4 million at 31August 2006. REVIEW OF 2006/7Through the team effort of our senior management, we entered the year with adetermination to concentrate our efforts on developing the "brands" that we hadin the business, whilst at the same time ensuring that our products got thedistribution base they deserved. Our growth to date in sales and profits reflects an outstanding performance forthe Group, especially as we continue to operate in a difficult period forretailers, both in the UK and across Europe. Our Doctor Who product line-up performed exceptionally well once again. AsMaster Toy licensee, we celebrated another phenomenal year, with over 3 millionDoctor Who action figures projected to be sold through calendar year 2007compared to 1.7 million for the previous year. It is also satisfying to note that we experienced strong double digit growth inmany of our other brands, including Scooby Doo, Disney Princess, Peppa Pig, Gr8Art, Bindeez, Dragonfly (from our Robotic range) and Gloe Bears. Overall, the growth that we have achieved has enabled us to increase our UKmarket share by approximately 30%. During the year, we secured a number of new Master Toy licences, including: • Primeval An Impossible Pictures production for ITV, ProSieben and M6, is a science fiction drama, which has been renewed for a second series and Character will be producing an extensive line of exciting products that will include a Dragonfly Rex and Carnivorous Pterosaur. These will be available from this month and will be followed by a number of other action figures and creatures from series one and two in January 2008. • Dork Hunters From Outer Space The Pan-European licence covers all standard "master toy" products, such as basic plush; feature plush; action figures; toy vehicles and accessories; playsets; activity, arts & crafts; interactive toys; board-games; toy writing and school instruments and toy accessories, including lipstick and make-up. We envisage a full European roll-out in late summer 2008 and we see Dork Hunters from Outer Space as a strategic cornerstone for our extensive branding initiatives. • Postman Pat The range of products for the UK and Eire market include toys, playsets, plush and collectables. Character will begin developing new product lines for Postman Pat, with new product to coincide with the brand new TV series which airs on CBeebies and BBC Two in 2009. Character plans to produce a comprehensive range at a new scale to that previously seen in the market, including characters from the classic and new series. The range will be available in early 2009. Postman Pat is an iconic brand with an established heritage which has continually delighted pre-schoolers for over 25 years. We believe that this licence will become an important brand within our portfolio and a Top-5 pre-school property. Revenues from these new licenses will commence making a contribution in the 2008 /2009 financial years. PRODUCT QUALITYWe have, since the outset, taken quality control and quality assurance as a highpriority in our processes, whilst also continually improving our standards andprocedures. Following the recent problems which have been highlighted in the press, we havefurther reviewed these processes and have increased the testing of our products.We are pleased to confirm that none of our products have experienced the wellpublicised problems of one of our competitors. The Group will continue to focus on delivering toys and related products thatnot only meet the demand of the consumer but also have been manufactured orsourced to the highest standards, thereby adhering to the Group's and UK andinternational bodies' strict guidelines. DIVIDENDIn-line with our progressive dividend policy and to further underpin the Board'sconfidence in the Group's portfolio of product which has already been reflectedthrough this year's robust performance, the Directors are recommending anincreased final dividend of 2.4 pence per share, which together with the interimdividend of 2.0 pence makes a total dividend for the year of 4.4 pence pershare, a 33% increase (2006: 3.30 pence). Subject to approval by Shareholders at the Annual General Meeting to be held on16 January 2008, the final dividend will be paid on 25 January 2008 toShareholders on the Register as at 4 January 2008. The shares will goex-dividend on 2 January 2008. The total dividend is covered four times by earnings. SHARE BUY-BACKSAs we have clearly laid out to Shareholders, part of the Group's stated objectivesis to continue its focus on ways to further enhance shareholder value, both throughour on-going plans to implement a progressive dividend policy and monitoring theposition in the market with a view to continuing to buy-back shares for Treasuryand cancellation, when considered appropriate. The Directors believe that the Group has used its current Authority to buy-backshares in the market to great effect. and in the period under review, this alonehas resulted in an increase of 17.3% to the earnings per share. Over a two-year period, we have purchased approximately 9.15 million ordinaryshares of 5p each in the Company ("Ordinary Shares") at an average price of86 pence per share. The buy-back to date represents approximately 20.6% of thecurrent issued share capital of the Company (excluding shares held in Treasury).Following the cancellation of these Ordinary Shares, the Company has 44,452,937Ordinary Shares in issue (excluding 1,000,000 Ordinary Shares in the Company heldin Treasury). Share buy-backs have been used effectively to date and will continue to beconsidered as an effective tool for the future. In this regard, the Board hasthe ability to put in place a line of credit specifically for this purpose. At the forthcoming AGM, Shareholders will be asked to approve a resolution torenew the Company's authority to repurchase Ordinary Shares in the Company, upto 25% of its issued share capital (excluding Ordinary Shares held in Treasury). If this Resolution is once again approved by Shareholders, the Directors willcontinue to monitor the market position and will, if appropriate, make furtherpurchases of the Company's own Ordinary Shares over the next financial year. PEOPLEOn behalf of the Board and all our Shareholders, I would like to welcome all newstaff who joined the Group during the year. It is also an appropriate time to recognise the hard work and dedication ofeveryone within the Group, without whom, we would not have been able to produceanother successful set of results; on behalf of the Board and Shareholders Ithank all our employees. CURRENT TRADINGThe Group is fortunate to have within its product portfolio a strong, innovativeand appealing range of toys, gifts and games. We are greatly encouraged by thecontinued growth of our brands, the reaction by the consumer to our Christmasranges, and the reception by the trade, to our new ranges for 2008. We have established ourselves as a major supplier in the UK and we believe weare well positioned to capitalise further on this position, whilst continuing todevelop our international sales. Additionally, the Group, has an all-time record three toys featured on the ToyRetailers Association (TRA) annual 'Dream Toys' list announced last month, anincrease of 50% over last year. The list is the only official prediction of Christmas 2007 best-sellers. In the'Dream Dozen', Character has the following toys tipped for overall success: • Doctor Who Dalek Sec Hybrid Voice Changer Mask• Flytech Dragonfly• Gr8 Art Bindeez Super Deluxe Studio Centre Out of five categories revealed by the TRA, twelve Character Options toys andgames were featured, namely: • Boys: Dr Who Dalek Sec Hybrid Voice Changer Mask Dr Who Figures Assortment Stretch Power Ranger• Pre-school: Peppa Pig Campervan Playset• Games: Splashy the Whale Game• Hip 'n Kool: Flytech Dragonfly• Creative: Gr8 Art Bindeez Super Deluxe Studio Gr8 Scrapheap Welder This recognition gives us confidence that the increase in market share that weenjoyed last year and which we have continued to experience since the start ofthe new financial year is likely to be maintained through the importantChristmas period. PROSPECTSThe new financial year has started well, with our Christmas 2007 offeringalready having achieved a wider distribution base than for the previousChristmas. With the addition of new brands to our portfolio and the continuedgrowth we envisage to our existing brands, we are confident of achieving afurther satisfactory financial year in 2008. The Character Group plc CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31 August 2007 note Total Total 2007 2006 £'000 (restated) £'000 Turnover - continuing 1a 94,523 69,546 - discontinued 1a - 25,986--------------------------------------------------------------------------------- 94,523 95,532Cost of sales 1b (57,051) (66,543)---------------------------------------------------------------------------------Gross profit 1b 37,472 28,989Net operating expenses 1bSelling and distribution costs (10,098) (11,737)Administration expenses (15,466) (13,894)Other operating income 151 261-------------------------------------------------------------------------------- Operating profit/(loss) - continuing 1b 12,059 6,912 - discontinued 1b - (3,293)--------------------------------------------------------------------------------Operating profit 1b, 2 12,059 3,619Exceptional item - discontinued activity 2 ------------------ Gain before goodwill write-back - 4,053 Goodwill charge - (1,897) ------------------ 2,156--------------------------------------------------------------------------------Profit on ordinary activities before interest 12,059 5,775Interest 3 (282) (644)--------------------------------------------------------------------------------Profit on ordinary activities before taxation 11,777 5,131Taxation 4 (3,653) (2,139)--------------------------------------------------------------------------------Profit on ordinary activities after taxation 8,124 2,992================================================================================Earnings/(loss) per share 6- Basic - continuing 17.93p 8.36p - discontinued - (2.56)p-------------------------------------------------------------------------------- 17.93p 5.80p--------------------------------------------------------------------------------- Fully diluted - continuing 17.39p 8.32p - discontinued - (2.55)p-------------------------------------------------------------------------------- 17.39p 5.77p--------------------------------------------------------------------------------Dividend per share 5 4.4p 3.3p================================================================================Continuing businessEBITDA (earnings before interest, tax, depreciation and amortisation) 12,834 7,456 ================================================================================ The Character Group plc CONSOLIDATED BALANCE SHEET as at 31 August 2007 2007 2006 £'000 (restated) £'000Fixed assetsIntangible assets - 400Tangible assets 1,494 1,609Investments - 2-------------------------------------------------------------------------------- 1,494 2,011 Current assetsStocks 10,831 10,671 ------------------------Trade debtors subject to finance arrangements 18,249 11,813Finance advances (8,784) (6,275) ------------------------ 9,465 5,538 Debtors - including non-financed trade debtors 3,054 9,474Cash at bank and in hand 15,658 7,369-------------------------------------------------------------------------------- 39,008 33,052 Creditors: amounts falling due within one year (26,685) (23,324)--------------------------------------------------------------------------------Net current assets 12,323 9,728--------------------------------------------------------------------------------Total assets less current liabilities 13,817 11,739--------------------------------------------------------------------------------Net assets 13,817 11,739================================================================================Capital and reservesCalled up share capital 2,273 2,452Shares held in Treasury (676) (665)Investment in own shares (908) (908)Capital redemption reserve 448 243Share payment reserve 315 68Share premium account 12,568 11,917Merger reserve 651 651Profit and loss account (854) (2,019)--------------------------------------------------------------------------------Shareholders' funds 13,817 11,739================================================================================ The Character Group plc CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 August 2007 Note 2007 2006 £'000 £'000 Cash inflow from operating activities 7 15,702 5,995--------------------------------------------------------------------------------Returns on investment and servicing of financeInterest received 45 76Interest paid (327) (720)--------------------------------------------------------------------------------Net cash outflow for returns on investment andservicing of finance (282) (644)--------------------------------------------------------------------------------Taxation (1,043) (228)--------------------------------------------------------------------------------Capital expenditure and financial investmentPayments to acquire tangible fixed assets (288) (876)Sale of Investment 3 -Sale of tangible fixed assets 19 397--------------------------------------------------------------------------------Net cash outflow for capital expenditure andfinancial (266) (479)investment--------------------------------------------------------------------------------Equity dividends paid (1,625) (1,258)--------------------------------------------------------------------------------Acquisition and disposalSale of business 496 3,178--------------------------------------------------------------------------------Cash inflow before financing 12,982 6,564--------------------------------------------------------------------------------Shares held in Treasury 434 (672)Issue of new shares 225 110Purchase of own shares (5,352) (2,381)--------------------------------------------------------------------------------Net cash (outflow) from financing (4,693) (2,943)Increase in cash in the year 8,289 3,621--------------------------------------------------------------------------------Increase in net funds in the year 8 8,289 3,621================================================================================ The Character Group plc NOTES TO THE ACCOUNTS 1. Turnovera) Turnover represents the amount derived from the provision of goods andservices which arise from the Group's ordinary activities, stated net of valueadded tax. An analysis of turnover by geographical market is given below: Continuing Discontinued Total Continuing Discontinued Total 31 August 31 August 31 August 31 August 31 August 31 August 2007 2007 2007 2006 2006 2006 £'000 £'000 £'000 £'000 £'000 £'000 UnitedKingdom: Group 85,796 - 85,796 61,222 216 61,438 Rest of theworld: Group 8,727 - 8,727 8,324 25,770 34,094------------------------------------------------------------------------------------------Total Group 94,523 - 94,523 69,546 25,986 95,532========================================================================================== b) Operating profit/(loss)Turnover 94,523 - 94,523 69,546 25,986 95,532Cost of sales (57,051) - (57,051) (40,625) (25,918) (66,543)------------------------------------------------------------------------------------------Gross profit 37,472 - 37,472 28,921 68 28,989------------------------------------------------------------------------------------------Selling anddistribution (10,098) - (10,098) (9,749) (1,988) (11,737)costs Administrativeexpenses (15,466) - (15,466) (12,464) (1,430) (13,894) Other operatingincome 151 - 151 204 57 261------------------------------------------------------------------------------------------Operatingprofit/(loss) 12,059 - 12,059 6,912 (3,293) 3,619========================================================================================== The Group's digital activities during the 12 months ended 31 August 2006 areclassed as discontinued. The directors consider that the disclosure of furtherdisaggregated information would be seriously prejudicial to the commercialinterests of the Group. Share Based PaymentDuring the period the Group adopted FRS 20 'Share Based Payment' which appliesto AIM listed companies for accounting periods commencing on or after 1 January2006. The fair value of employee share option plans is measured at the date of grantof the option using a binomial valuation model taking into account the terms andconditions under which the option was granted. The fair value determined isexpensed on a straight line basis over the vesting period based upon the Group'sestimate of the number of shares that will vest. The charge in respect of theshare based payments is matched by an equal and opposite adjustment to profitand 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 sharebased payments. The financial information for the year ended 31 August 2006 hasbeen restated and a prior year adjustment has been made as detailed below: 12 months 12 months ended ended 31 August 2007 31 August 2006 £'000 £'000 Charge for share based payment 247 68================================================================================ 2. Operating Profit 12 months to 12 months to 31 August 2007 31 August 2006 £'000 £'000 Operating profit is stated after charging:Staff costs 7,358 7,231 Principal Auditors' remuneration - Statutory audit services 44 48 - Financial reporting advisory services 10 10 - Tax compliance services - 10 - Tax advisory services - 5 - Further assurance services - 35 Other Auditors' remuneration - Statutory audit services 29 25 - Tax compliance services 6 5 - Tax advisory 4 ---------------------------------------------------------------------------------Total fees payable to auditors 93 138================================================================================Operating leases - land and buildings 171 180================================================================================Research and development costs - 1,274================================================================================Depreciation of tangible fixed assets- owned assets 375 528--------------------------------------------------------------------------------Goodwill amortisation 400 246================================================================================ 2006: Exceptional ItemThe exceptional gain of £2,156,000 is stated after charging goodwill previouslywritten-off of £1,897,000 and associated costs on the termination of the digitaloperation amounting to £4,384,000. The goodwill charge is an accounting entryrequired by FRS 10, Goodwill and intangible assets, and a corresponding amounthas been credited to profit and loss reserves. 3. Interest 12 months to 12 months to 31 August 2007 31 August 2006 £'000 £'000 Total interest receivable 149 76 Total interest payable:On bank overdraft and similar charges (174) (511)Finance advances (201) (197)Other (56) (12)-------------------------------------------------------------------------------- (282) (644)================================================================================ 4. Taxation 12 months to 12 months to 31 August 2007 31 August 2006 £'000 £'000UK Corporation TaxTax on profit for the period 2,969 - Adjustments to tax charge in respect ofprevious periods (19) ---------------------------------------------------------------------------------Total UK corporation tax 2,950 ---------------------------------------------------------------------------------Foreign TaxTax on profit for the period 815 510 Adjustments to tax charge in respect ofprevious periods 59 (28)--------------------------------------------------------------------------------Total foreign tax 874 482--------------------------------------------------------------------------------Total current tax 3,824 482--------------------------------------------------------------------------------Deferred TaxTax losses utilised - 1,731 Origination and reversal of timingdifferences (171) (74)--------------------------------------------------------------------------------Total deferred tax (171) 1,657--------------------------------------------------------------------------------Tax on profit on ordinary activities 3,653 2,139================================================================================ 5. Dividend 12 months to 12 months to 31 August 2007 31 August 2006 £'000 £'000On equity shares:Final dividend paid for year ended 31 August2006 - 1.65 pence 733 473per share (2005: 0.9 pence) Interim dividend paid for the year ended 31August 2007 - 2.00 pence 892 785per share (2006: 1.65 pence)-------------------------------------------------------------------------------- 1,625 1,258================================================================================Proposed final dividend for the year ended31 August 2007 of 1,060 7912.4 pence per share (2006: 1.65 pence)================================================================================ 6. Earnings per Share 12 months to 31 August 2007 12 months to 31 August 2006 (Restated) Profit after Weighted Pence per Profit after Weighted Pence per taxation average share taxation average share number of number of ordinary ordinary shares sharesBasic earningsper share 8,124,000 45,298,688 17.93 2,992,000 51,629,312 5.80 Impact ofshare optionschemes - 1,408,453 (0.54) - 221,975 (0.03)-----------------------------------------------------------------------------------------Dilutedearnings pershare 8,124,000 46,707,141 17.39 2,992,000 51,851,287 5.77========================================================================================= 7. Reconciliation of Operating Profit to Net Cash Inflow from OperatingActivities 12 months to 12 months to 31 August 2007 31 August 2006 £'000 (restated) £'000 Operating profit 12,059 3,619Depreciation, impairment and amortisation 775 774Profit on sale of Investment (1) -Loss on disposal of fixed assets - 168Share based payment 247 68(Increase) in stocks (160) (861)Decrease in debtors 2,493 8,411Decrease/(increase) in creditors 257 (6,225)Exchange movement 32 41--------------------------------------------------------------------------------Net cash inflow from operating activities 15,702 5,995================================================================================ Reconciliation of Exceptional Profit to Net Cash Inflow from ExceptionalActivities 12 months to 12 months to 31 August 2007 31 August 2006 £'000 £'000 Exceptional profit - 2,156 Write-back of goodwill previously writtenoff - 1,897 Decrease/(increase) in debtor 496 (948) Increase in creditors - 73--------------------------------------------------------------------------------Net cash inflow from exceptional activities 496 3,178================================================================================ There was no cash flow relating to taxation in respect of the exceptional items. 8. Reconciliation of Net Cash Flow to Movement in Net Funds 12 months to 12 months to 31 August 2007 31 August 2006 £'000 £'000 Increase in cash in the period 8,289 3,621 Cash inflow from movement in debt and lease - -financing--------------------------------------------------------------------------------Movement in net funds resulting from cashflows 8,289 3,621 Net funds at 1 September 2006 7,369 3,748--------------------------------------------------------------------------------Net funds at 31 August 2007 15,658 7,369================================================================================ 9. Analysis of Net Funds Cash at bank Total and in hand £'000 £'000 1 September 2005 3,748 3,748Cash flow 3,621 3,621--------------------------------------------------------------------------------31 August 2006 7,369 7,369Cash flow 8,289 8,289--------------------------------------------------------------------------------31 August 2007 15,658 15,658================================================================================ 10. The Annual General Meeting will be held at the offices of Citigate DeweRogerson Ltd, 3 London Wall Buildings, London Wall, London, EC2M 5SY on 16January 2008. 11. The Report & Accounts will be posted to shareholders. Furthercopies will be available from the Company's Office: 2nd Floor, 86-88 CoombeRoad, New Malden, Surrey, KT3 4QS or [email protected] [email protected] and will be posted on the Company's website atwww.thecharacter.com. 12. The preliminary announcement does not constitute statutory accounts withinthe meaning of Section 240 of the Companies Act 1985. The annual report andaccounts for the year ended 31 August 2007 have yet to be reported on by theauditors and have not yet been filed with the Registrar of Companies. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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