24th Apr 2007 07:02
Character Group PLC24 April 2007 Issued by Citigate Dewe Rogerson Ltd, BirminghamDate: 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 £mTurnover 56.0 40.7Operating 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 ournew introductions, we are very excited about our prospects and expect to seefurther exciting growth as we continue to build our existing brands and developnew ones." Richard King, Chairman FULL STATEMENT ATTACHED Enquiries:Richard King, Chairman Richard ThompsonKiran Shah, Group Finance Director & Joint MD Fiona Tooley, Director Philip DaviesThe Character Group plc Citigate Dewe Rogerson Charles Stanley SecuritiesTel: +44 (0) 20 8949 5898 Tel: +44 (0) 121 455 8370 Tel: +44 (0) 20 7149 6000Mobile: +44 (0) 7836 250150 (RK) Mobile: +44 (0) 7785 703523Mobile: +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 IntroductionAs we indicated in our trading updates on 31 January and 23 March 2007, Groupsales and profitability have been substantially ahead of last year, exceedingManagement's original budgets and expectations for the period. This very creditable performance has been achieved through increased exposureand brand support by our major trade partners and we believe also reflects ourstrategic focus in the on-going development of our own range of exciting,innovative products which meet the market's needs and consumer demand. Product ReviewThe Group is fortunate to have within its product portfolio its strongest rangeof toys and games to date, and we are very encouraged by the demand at retailfor the Group's products. We are very pleased to say that the trend of our recent strong trading hascontinued with encouraging reactions to our new and existing ranges coming fromthe trade in general and specifically from all our major customers. Looking at the range, shareholders will be pleased to learn that Character hasbeen 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 probablythe hottest boys range for 2007. Looking ahead, new to our offering under our Spiderman 3 licence, we havedeveloped Spidersapien, a fusion of Spiderman 3 and our 2005 award winningRobosapien, which is expected to be our lead line for our range of Spiderman 3toys. Also, we believe the biggest Doctor Who toy this Christmas will be the Dalek SecHybrid Voice Changer Helmet. Shareholders may have witnessed in last Saturdayevening's episode of Doctor Who, the Dalek Sec coming out of his iron shell andthe mutant inside taking on a human form, thus becoming a 'hybrid'. The Dalek Sec Hybrid Voice Changer Helmet developed by Character is yet to bereleased to retail but we expect it to be one of the most popular products inthe range which include the Cyberman Voice Changer which won 2006 Toy of theYear Award and the Best Boys Toy Concept of the year award for Doctor Who. Withthe Doctor Who Series 3 just released, we expect further growth in the brand andour range in particular. We are also to be undertaking another project with BBC Worldwide relating to thetelevision programme The Sarah Jane Adventures, which has developed as aspin-off from the Doctor Who series and which we believe will be very successfulin its own right. Taking into account the on-going strong demand for our continuing lines and ournew introductions, we are very excited about our prospects and expect to seefurther exciting growth as we continue to build our existing brands and developnew ones. continued... -3- FinancialsBased on continuing activities, in the six months ended 28 February 2007,turnover increased 37.6% to £56.03 million from £40.72 million, whilst operatingprofits, 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 inthe comparable six months in 2006. Cash at bank on 28 February 2007 was £11.86 million (2006: £10.3 million). Thisis after taking account of share buy-backs undertaken during the period of £3.4million 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 millionat last year-end of 31 August 2006; this clearly reflects the very successfulAutumn/Winter trading period for the Group. DividendIn light of these strong results and to further underpin the Board's confidencein the Group's portfolio of product and the anticipated outcome for theremainder of the year, the Directors have declared an interim dividend of 2.0pence per share, an increase of 21.2% over last year (2006 1.65 pence). Thisdividend is covered approximately 5 times by earnings. The interim dividend will be paid on 25 May 2007, to Shareholders on theRegister as at 4 May 2007. The ex-dividend date is 2 May 2007. Share Buy-BacksDuring the six months under review, the Group purchased 3,470,322 ordinaryshares in the Company at an aggregate price of £3.4 million and an average priceof 97.2 pence. This represents approximately 7.24% of the issued share capitalof the Company as at 1 September 2006 (excluding shares held in treasury). As at1 September 2006, 1,125,000 ordinary shares in the Company were held intreasury. 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 priceof 123.5 pence per share. The Directors continue to focus on ways to enhance shareholder value furtherthrough our on-going plans to implement a progressive dividend policy, whilst atthe same time monitoring the position in the market with a view to continuing tobuy-back shares for treasury and cancellation, when considered appropriate. As at 20 April 2007, the Group had 45,619,837 ordinary shares in issue excluding979,322 ordinary shares held in treasury, compared with the position as at 28February 2006 when there were 52,830,909 shares in issue and no shares held intreasury. Update relating to the Discontinued Digital Products DivisionIn our trading update to Shareholders on 23 March 2007, we made reference to twomatters that remained unresolved following the sale of the Group's Digitalbusiness 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 inDelaware, USA and served process on Petters in March 2007. Petters has failed tofile a defence within the prescribed time and WWL has now filed a motion fordefault in those proceedings. In relation to our claim against Flextronics Sales & Marketing (A-P) Limited, weare in discussions which we hope will lead to a satisfactory conclusion. Although we do not believe that either of these matters will have any materialimpact on the on-going business of the Group, which continues to go fromstrength to strength, our intention is vigorously to pursue them through theappropriate channels. Current Trading and ProspectsThe Group expects demand to remain strong for both its continuing ranges and newintroductions. Taking this into account, coupled with the strength of ourproduct portfolio, the Board is confident that the business shall continue toachieve 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 95,532Cost of sales (33,692) (49,735) (66,543)-------------------------------------------------------------------------------------Gross profit 22,334 16,834 28,989 Net operating expenses Selling anddistribution costs (7,262) (7,477) (11,737) Administrationexpenses (8,501) (8,468) (13,894) Other operatingincome 18 204 261-------------------------------------------------------------------------------------Operatingprofit/(loss) - continuing 6,589 3,667 6,912 - discontinued - (2,574) (3,293)-------------------------------------------------------------------------------------Operating profit 6,589 1,093 3,619 Exceptional item - discontinuedactivity -------------------------------------- Gain before goodwill write back - 4,300 4,053 Goodwill charge - (1,897) (1,897) ---------------------------------------- - 2,403 2,156-------------------------------------------------------------------------------------Profit on ordinaryactivities before interest 6,589 3,496 5,775Interest (293) (538) (644)-------------------------------------------------------------------------------------Profit on ordinaryactivities before taxation 6,296 2,958 5,131Taxation 2 (1,675) (308) (2,139)-------------------------------------------------------------------------------------Profit on ordinaryactivities after taxation 4,621 2,650 2,992-------------------------------------------------------------------------------------Earnings/(loss) per share 5Basic - 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 £'000Profit for thefinancial period 4,621 2,650 2,992 Currency translationdifferences on foreignnet investment 8 122 18--------------------------------------------------------------------------------Total recognised gainsand losses relating tothe 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 £'000Fixed assetsIntangible assets 300 624 400Tangible assets 1,534 1,553 1,609Investments 2 2 2------------------------------------------------------------------------------- 1,836 2,179 2,011-------------------------------------------------------------------------------Current assetsStocks 5,404 8,667 10,671 --------------------------------------------Trade debtorssubject to financearrangements 4,766 5,223 11,813 Factor advances (4,264) (3,685) (6,275) -------------------------------------------- 502 1,538 5,538Trade and otherdebtors 4,852 8,155 9,474 Cash at bank and inhand 11,860 10,298 7,369------------------------------------------------------------------------------- 22,618 28,658 33,052-------------------------------------------------------------------------------Creditors: amountsfalling due withinone year (10,980) (15,675) (23,324)-------------------------------------------------------------------------------Net current assets 11,638 12,983 9,728-------------------------------------------------------------------------------Total assets lesscurrent liabilities 13,474 15,162 11,739-------------------------------------------------------------------------------Net assets 13,474 15,162 11,739-------------------------------------------------------------------------------Capital and reservesCalled up sharecapital 2,329 2,642 2,452 Shares held intreasury (635) - (665) Investment in ownshares (908) (908) (908) Capital redemptionreserve 385 40 243 Share premiumaccount 12,517 11,821 11,917 Share based paymentreserve 192 - 68 Merger reserve 651 651 651Profit and lossaccount 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 £'000Cash flow from operatingactivities 6 8,150 4,101 5,995-----------------------------------------------------------------------------------Returns on investment andservicing of financeInterest paid (net) (293) (538) (644)-----------------------------------------------------------------------------------Net cash outflow forreturns on investments andservicing of finance (293) (538) (644)-----------------------------------------------------------------------------------Taxation (240) (458) (228)-----------------------------------------------------------------------------------Capital expenditure and financialinvestmentPayments to acquiretangible fixed assets (132) (658) (876) Sale of tangible fixedassets 19 432 397-----------------------------------------------------------------------------------Net cash outflow forcapital expenditure andfinancial investment (113) (226) (479)-----------------------------------------------------------------------------------Acquisitions and disposalsSale of business -exceptional item - 4,143 3,178-----------------------------------------------------------------------------------Equity dividend paid (733) (473) (1,258)-----------------------------------------------------------------------------------Cash inflow before use ofliquid resources andfinancing 6,771 6,549 6,564-----------------------------------------------------------------------------------Shares held in treasury(including expenses) (472) - (672) Disposal of shares held intreasury (net) 952 - - Issue of new shares 169 1 110 Purchase of own shares (2,929) - (2,381)-----------------------------------------------------------------------------------Net cash (outflow)/inflowfrom financing (2,280) 1 (2,943)-----------------------------------------------------------------------------------Increase in cash in theperiod 7 4,491 6,550 3,621-----------------------------------------------------------------------------------Decrease in net debt in theperiod 8 4,491 6,550 3,621----------------------------------------------------------------------------------- -8- The Character Group plc NOTES TO THE FINANCIAL INFORMATION 1 BASIS OF PREPARATIONThe financial information for the six months ended 28 February 2007 has not beenaudited, nor has the financial information for the six months ended 28 February2006. However, the interim report includes a review report signed by theauditors. The comparative figures for the year ended 31 August 2006 do notconstitute the company's statutory accounts for that year, but have beenextracted from the statutory accounts filed with the Registrar of Companies, andwhich carried an unqualified audit report. The report has been prepared inaccordance with applicable accounting standards on a consistent basis using theaccounting policies that will be applied in the 2007 Annual Report. This has ledto the adoption of FRS 20 Share Based Payment, as described below. FRS20: 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. A prior year adjustment has been made to the financialinformation 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 £'000Charge for share basedpayment 124 - 68------------------------------------------------------------------------------- The Group has taken advantage of the transitional provisions of FRS 20 inrespect of the fair value of equity settled awards so as to apply FRS 20 only tothose equity settled awards granted after 7 November 2002 that had not vestedbefore 1 September 2006. 2 TAXATIONThe tax charge for the half year is estimated on the basis of the anticipatedtax rates applying for the full year. continued... -9- 3 PROFIT AND LOSS ACCOUNT £'000At 1 September 2006 as previously reported (1,951)Share based payment (68)-------------------------------------------------------------------------------At 1 September 2006 restated (2,019)Exchange difference 8Profit after tax for the period 4,621Dividends (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 FRS20 as follows: 6 months 12 months ended ended 28 February 2006 31 August 2006 (unaudited) £'000 £'000At 31 August 2006 as previously reported 2,650 3,060Share Based Payment - (68)--------------------------------------------------------------------------------Profit and loss account restated 2,650 2,992-------------------------------------------------------------------------------- 4 DIVIDENDSThe interim dividend declared for the six months ended 28 February 2007 is 2.00pence per ordinary share and is expected to be paid on 25 May 2007 to thoseshareholders on the register at the close of business on 4 May 2007. Thisdividend was declared after 28 February 2007 and the liability of £906,000 hasnot been recognised in the interim results in accordance with FRS21. The interim dividend paid for the six months ended 28 February 2006 was 1.65pence per ordinary share and the final dividend paid for the year ended 31August 2006 was 1.65 pence per ordinary share, making a total of 3.3 pence perordinary share. continued... -10- 5 EARNINGS PER SHAREEarnings per share have been calculated in accordance with FRS 22 Earnings pershare. 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 10.05Impact 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 2006Basic 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 2006Basic 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 OPERATINGACTIVITIES 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 andamortisation 284 392 774 Share Based Payment 124 - 68 (Profit)/Loss ondisposal of tangiblefixed assets (3) 161 168 Decrease/(increase) instocks 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 fromoperating activities 8,150 4,101 5,995------------------------------------------------------------------------------- RECONCILIATION OF EXCEPTIONAL PROFIT TO NET CASH INFLOWFROM 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 2,156Write back of goodwillpreviously written off - 1,897 1,897(Increase) in debtor - (1,027) (948)Increase in creditors - 870 73--------------------------------------------------------------------------------Net cash inflow fromexceptional 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 theperiod 4,491 6,550 3,621 Net debt at 1 September2006 7,369 3,748 3,748-------------------------------------------------------------------------------Net debt at 28 February2007 11,860 10,298 7,369------------------------------------------------------------------------------- 8 ANALYSIS OF NET DEBT Cash at bank and in hand £'0001 September 2005 3,748Cash flow 6,550-------------------------------------------------------------------------------28 February 2006 10,298Cash flow (2,929)-------------------------------------------------------------------------------31 August 2006 7,369Cash flow 4,491-------------------------------------------------------------------------------28 February 2006 11,860------------------------------------------------------------------------------- 9 A copy of the interim results will be posted to shareholders. Further copieswill be available from the Company's Office: 2nd Floor, 86-88 Coombe Road, NewMalden, Surrey, KT3 4QS or [email protected] [email protected] and will be posted on the Company's website atwww.thecharacter.com. -12- INDEPENDENT REVIEW REPORT IntroductionWe have been instructed by the company to review the financial information forthe six months ended 28 February 2007, which comprises the consolidated profitand loss account, the consolidated statement of recognised gains and losses, theconsolidated balance sheet, the consolidated cash flow statement and the notesto the accounts. We have read the other information contained in the interimreport and considered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report, including the conclusion, has been prepared for and only for theCompany for the purposes of its interim report. We do not, therefore, inproducing this report, accept or assume responsibility for any other purpose orto any other person to whom this report is shown or into whose hands it may comesave where expressly agreed by our prior consent in writing. Directors' ResponsibilitiesThe interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The AIM Rulesrequire that the accounting policies and presentation applied to the interimfigures should be consistent with those that will be adopted in the annualaccounts having regard to the accounting standards applicable to such annualaccounts, except where any changes, and the reasons for them, are disclosed. Review Work PerformedWe conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of management and applying analyticalprocedures to the financial information and underlying financial data and basedthereon, assessing whether the accounting policies and presentation have beenconsistently applied unless otherwise disclosed. A review excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with International Standards on Auditing (UK and Ireland) andtherefore provides a lower level of assurance than an audit. Accordingly, we donot express an audit opinion on the financial information. Review ConclusionOn the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 28 February 2007. HLB Vantis Audit plcChartered AccountantsLondon23 April 2007 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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