RNS Number:4728K
Character Group PLC
29 April 2003
Issued by Citigate Dewe Rogerson, Birmingham
Date: Tuesday 29 April 2003
Embargoed 7.00am
The Character Group plc
Interim Results for the six months ended 28 February 2003
*35% increase in sales to #40 million
*Profit before tax up from #121,000 to #4.1 million
*Earnings per share increase from 0.29 pence to 8.95 pence
*Strong performance by the Toy and Games Division representing 63% of
Group sales
*Digital products investment starting to achieve significant returns with
sales up by 60% and accounting for 25% of Group sales
*Dividend restored - interim 1.0 pence
"We believe that this substantially improved trading performance reflects the
strength and quality of our product portfolio, our continued strong
relationships with our major customers at the retail level in the UK and the
development of our new and existing relationships internationally."
"I am pleased to say that the buoyant trading has continued into the second
half. Character's portfolio continues to strengthen with a number of new and
exciting innovative products being added for the 2003 season which should ensure
that the Group has its best ever listings for Christmas and I look forward to
updating shareholders at the year-end."
Richard King, Chairman
FULL STATEMENT ATTACHED
Enquiries:
Richard King, Chairman
Kiran Shah, Group Finance Fiona Tooley, Director Mark Connelly
Director
The Character Group plc Citigate Dewe Rogerson Collins Stewart
Tel: 0207 282 8000 (today) Tel: 020 7282 8000 (today) Tel: 020 7523
8350
Tel: 020 8949 5898 (thereafter) Tel: 0121 455 8370
(thereafter)
Mobile: 07836 250150 (RK) Mobile: 07785 703523
07956 278522 (KS)
-2-
The Character Group plc
Interim Results for the six months ended 28 February 2003
Statement by the Chairman, Richard King
I am very pleased to announce that the Group has performed extremely well in the
first six months of the current financial year, both in terms of sales and
profitability.
At our AGM in January 2003, we informed shareholders that sales for the four
months to December were 28% ahead of the comparable period last year, with
Christmas sales being at the higher end of our expectations. This strong
performance continued into January and February 2003.
We believe that this substantially improved trading performance reflects the
strength and quality of our product portfolio, our continued strong
relationships with our major customers at the retail level in the UK and the
development of our new and existing relationships internationally.
Our new introductions to the ranges across the businesses have been well
received by our customers at the recent trade fairs in the UK, Europe, the Far
East and North America, which gives us a sound base to continue our growth.
Results
Sales in the six month period were #40.0 million compared to #29.6 million in
2002. The 35% increase reflects an improved performance by all our businesses
and in particular, that of toys and digital products. Profit before tax in the
same period was #4.1 million against #121,000 for the comparative period in
2002.
Earnings per share improved significantly from 0.29 pence in 2002 to 8.95 pence.
Stock levels are up on the year-end at #6.2 million (#5.0 million at 31 August
2002). However these levels reflect the increase in sales volumes; the need by
the Group to be able to supply its customers on a reduced lead time, reflecting
the on-going trend in the retail market for shorter, more efficient stocking and
delivery schedule requirement together with the higher level of work-in-progress
which relates mainly to the advanced purchase of components required to satisfy
the growth in digital camera sales. We believe our stocks are well balanced and
we have made adequate stock provisions within this period.
Cash at bank increased by #1.0 million to #4.35 million in the first six months
and net interest payable decreased by 30% to #254,000. The Group continues to
have unused bank facilities of #3.65 million. The Balance Sheet remains in good
shape with shareholders' funds more than doubling from #2.50 million at 31
August 2002, to #5.86 million at 28 February 2003.
Dividend
At the Group's AGM in January, I stated that, subject to the Group continuing to
see an improvement in its trading position, we would seek to re-establish
dividend payments by recommending a final dividend in respect of the year ending
31 August 2003.
In light of our very satisfactory trading performance in the first six months of
the current year and to underline our confidence that this trend will continue,
the Board has declared an interim dividend of 1.0 pence per share. This dividend
will be paid on 25 July 2003 to shareholders on the Register as at 20 June 2003.
continued...
-3-
The recommendation of a final dividend will be considered by the Board in light
of the financial outcome for the full year.
Review
Toy and Games Division
A strong performance was achieved by our Toy and Games Division with sales
accounting for 63% of Group turnover. In particular, our expanded Ready Steady
Cook range of working kitchen products continues to be popular at retail, which
together with several new additions to the product portfolio including Mighty
Beanz, Tricky Putty and the recently launched Stink Blasters have underpinned
this Division's success. Shareholders should look out for our launch of Neopets
at Hamleys on 24th May. Based on the highly successful Neopet web site, where
only Yahoo, MSN and eBay achieve more page views, this range of toys provides
the Group with an opportunity for significant sales.
A creditable performance was also achieved within the Games business in the
first half, which is traditionally its strongest period, with Lord of the Rings
licensed products performing well. Whilst the development and sales of our own
products continue to progress both in the UK and USA, we are also looking at a
number of additional opportunities to extend the sales & marketing of our own
developed and branded products to other international territories. This follows
the successful UK launch of Electronic Pin the Tail on the Donkey, which is to
be marketed and distributed by Mattel in the USA. Other own branded products
include Hungry Huey, Slapz, Quiztec and a new range of three dimensional
licensed chess sets.
Digital Products Division
I am very pleased to report that our investment over the last two years in the
development of the Group's digital products through our Hong Kong subsidiary,
World Wide Licenses ('WWL'), has started to achieve significant returns. Whilst
digital product sales as a percentage of Group sales increased from 22% to 25%
over the comparable period last year, in real terms they grew by 60%.
Our own developed and branded Cool-iCam digital cameras and OEM brands accounted
for 45% of the digital sales. Our exclusive international license agreement with
Polaroid will see us introduce 20 new products during 2003. Following the
successful European launch of the Polaroid products in late January 2003, I am
pleased to report that sales in February and March have exceeded budget.
The range and quality of the digital products have been accepted well by
distributors, retailers and the trade press. We expect to see further
improvement in this Division's performance during 2003.
Gift Division
Although sales to Christmas were slightly below budget, we achieved a
satisfactory result for the six month period. Our new introductions for 2003,
which were unveiled at The Spring Fair earlier this year and included licensed
products relating to Newton's Law, Snailsbury Tales and SpongeBob Squarepants
were well received by the trade.
SARS
As part of the Group's risk management strategy, particular attention is
currently being focused on the Hong Kong and China aspects of the Group's
business in light of the SARS alert. Contingency plans have been drawn up to
cover the possibility of a temporary closure of the Hong Kong Office. The SARS
position will be monitored closely on a day to day basis and no UK staff will be
going to Hong Kong for the time being.
Whilst it is too early to predict precisely the ramifications that SARS will
have on Group trading, the restriction on the travel of key personnel is likely
to cause some delay in both our and certain of our suppliers development
programmes which could result in slower than anticipated introductions of new
product ranges. Consequently, this may result in some slow down in our growth
in the second half of this financial year but it is expected to have no more
than a negligible effect on the calendar year as a whole.
continued...
-4-
Higgs Report
The recommendations made in the Report of the Committee chaired by Derek Higgs
on "The Role and Effectiveness of Non-Executive Directors" have been considered
by the Board. It is the unanimous view of the Directors that many of the
recommendations are inappropriate for the Company given the current size of the
Group and the considerable costs associated with their full implementation. The
full extent and nature of the implementation of their recommendations has still
yet to be made known. The Directors will continue to monitor the position and,
once the Report's recommendations have been implemented by the UK Listing
Authority or by Parliament, an assessment of the extent to which compliance by
the Company with those measures is required, or would otherwise be in the best
interests of the shareholders as a whole, will be made and appropriate action
taken.
Change to Director's Shareholding
I wish to advise shareholders that it is my intention to gift 500,000 shares in
the Company to my son, Jordan King. Following this transfer of shares from my
personal portfolio, I will continue to retain a beneficial interest in 7,155,428
ordinary shares in the Company, representing approximately 17.3% of the
Company's current issued share capital.
Offer talks
Following press speculation, on 11 March 2003, the Company announced, that the
Board had received an informal approach from a US Toy Company. As stated at that
time, these discussions were at a very early stage and the Directors considered
that it was unlikely that a formal offer would be forthcoming. The Board also
considered that any offer would have to fully reflect the Group's prospects. I
can confirm that no formal offer has been made to the Company or its advisers
and the Board has now formally discontinued those discussions.
Prospects
I am pleased to say that the buoyant trading has continued into the second half.
Character's portfolio continues to strengthen with a number of new and
exciting innovative products being added for the 2003 season which should ensure
that the Group has its best ever listings for Christmas and I look forward to
updating shareholders at the year-end.
-5-
The Character Group plc
Interim results for the six months ended 28 February 2003
Consolidated Profit and Loss Account
Note 6 months to 6 months to 12 months
to
28 February 28 February 31 August
2003 2002 2002
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
Turnover 40,031 29,632 58,939
Cost of sales (24,215) (19,915) (38,933)
Gross profit 15,816 9,717 20,006
Net operating expenses
Selling and distribution (5,518) (3,773) (7,119)
costs
Administration expenses (5,987) (5,626) (11,218)
Other operating income 51 167 408
Operating profit 4,362 485 2,077
Interest payable (net) (254) (364) (562)
Profit on ordinary activities 4,108 121 1,515
before taxation
Taxation 2 (437) - (262)
Profit on ordinary activities 3,671 121 1,253
after taxation
Dividend (410) - -
Retained profit 3,261 121 1,253
Earnings per share
- basic 3 8.95p 0.29p 3.06p
- fully diluted 3 6.76p 0.29p 2.52p
Dividend per share 1.00p - -
EBITDA (earnings before 4,815 851 2,782
interest, tax,
depreciation and amortisation)
-6-
The Character Group plc
Interim results for the six months ended 28 February 2003
Consolidated Balance Sheet
Note Group as at Group as at Group as
at
28 February 28 February 31 August
2003 2002 2002
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
Fixed assets
Intangible assets 1,000 798 773
Tangible assets 1,949 1,879 1,844
Investments 136 53 74
3,085 2,730 2,691
Current assets
Stocks 6,195 4,657 4,982
Trade debtors subject to 8,549 3,703 7,946
finance arrangements
Factor advances (3,077) (2,965) (6,580)
5,472 738 1,366
Trade and other debtors 4,137 5,297 10,117
Cash at bank and in hand 4,347 2,321 3,284
20,151 13,013 19,749
Creditors amounts falling due (12,778) (9,667) (15,374)
within one year
Net current assets 7,373 3,346 4,375
Total assets less current 10,458 6,076 7,066
liabilities
Creditors: amounts falling due
after more than
one year
Convertible loan note (4,600) (4,600) (4,600)
Other creditors - - (1)
(4,600) (4,600) (4,601)
Provision for liabilities and
charges
Investment in Joint Venture:
Share of gross assets - - -
Share of gross liabilities - (10) -
Net assets 5,858 1,466 2,465
Capital and reserves
Called up share capital 2,064 2,064 2,064
Shares to be issued 8 1,190 908 908
Capital redemption reserve 15 15 15
Share premium 7,843 7,843 7,843
Merger reserve 651 651 651
Profit and loss account 4 (5,905) (10,015) (9,016)
Equity shareholders' funds 5,858 1,466 2,465
-7-
The Character Group plc
Interim results for the six months ended 28 February 2003
Consolidated Cash flow Statement
Note 6 months to 6 months to 12 months
to
28 February 28 February 31 August
2003 2002 2002
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
Cash flow from operating 5 1,890 1,806 3,064
activities
Returns on investment and
servicing of
finance
Interest paid (net) (250) (363) (558)
Interest element of finance
lease rental
payments (4) (1) (4)
Net cash outflow for returns
on investments
and servicing of finance (254) (364) (562)
Taxation (59) (413) (155)
Capital expenditure and
financial
investment
Payments to acquire tangible (512) (234) (770)
fixed assets
Sale of tangible fixed 2 23 200
assets
Net cash outflow for capital
expenditure
and financial investment (510) (211) (570)
Cash inflow before use of
liquid resources and
financing 1,067 818 1,777
Management of liquid
resources:
Financing
Capital element of finance (4) (41) (37)
lease rentals
Short term bank loan - (94) (94)
Net cash outflow from (4) (135) (131)
financing
Increase in cash in the 7 1,063 683 1,646
period
Decrease in net debt in the 7 1,067 818 1,777
period
-8-
The Character Group plc
Interim results for the six months ended 28 February 2003
Notes to the Accounts
1. Basis of Preparation
The financial information for the six months ended 28 February 2003 has not been
audited, nor has the financial information for the six months ended 28 February
2002. However, the interim report includes a review report signed by the
auditors. The comparative figures for the year ended 31 August 2002 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 the applicable accounting standards on a consistent basis using
the accounting policies set out in the 2002 annual report.
2. Taxation
The tax charge for the half year is estimated on the basis of the anticipated
tax rates applying for the full year.
3. Earnings per Share
Earnings per share have been calculated in accordance with FRS14 Earnings per
share. The calculations are based on the following:
6 months to 28 February 2003
Profit Weighted average Pence per
after share
Taxation number or
ordinary
# shares
Basic earnings per share 3,671,000 41,002,909 8.95
Impact of shares to be - 2,505,263 (0.52)
issued
Impact of share options - 480,158 (0.09)
Impact of convertible loan 80,500 11,500,000 (1.58)
note
----------- ------------ -----------
Diluted earnings per share 3,751,500 55,488,330 6.76
----------- ------------ -----------
6 months to 28 February 2002
Basic earnings per share 121,000 41,287,909 0.29
----------- ------------ -----------
Diluted earnings per share 121,000 41,287,909 0.29
----------- ------------ -----------
12 months to 31 August 2002
Basic earnings per share 1,253,000 41,002,909 3.06
Impact of shares to be - 3,632,000 (0.25)
issued
Impact of convertible loan 161,000 11,500,000 (0.29)
note
----------- ------------ -----------
Diluted earnings per share 1,414,000 56,134,909 2.52
----------- ------------ -----------
4. Profit and Loss Account
#'000
At 1 September 2002 (9,016)
Profit retained for the six months 3,261
Exchange difference (150)
At 28 February 2003 (5,905)
continued...
-9-
5. Reconciliation of Operating Profit to Net Cash Inflow from Operating
Activities
6 months to 6 months to 12 months to
28 February 28 February 31 August
2003 2002 2002
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
Operating profit 4,362 485 2,077
Depreciation, impairment and
amortisation 453 366 705
Provision in respect of own (62) - (21)
shares
Loss on disposal of tangible
fixed assets 2 2 78
(Increase)/decrease in stocks (1,212) 3,128 2,803
Decrease/(increase) in 1,523 1,385 (3,632)
debtors
(Decrease)/increase in (3,026) (3,751) 1,518
creditors
Exchange differences (150) 191 (464)
Net cash inflow from
operating
activities 1,890 1,806 3,064
6. Reconciliation of Net Cash Flow to Movement in Net Debt
6 months to 6 months to 12 months
to
28 February 28 February 31 August
2003 2002 2002
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
Increase in cash in the period 1,063 683 1,646
Cash inflow from movement in debt and 4 135 131
lease financing
Movement in net debt resulting from
cash flows
1,067 818 1,777
Net debt at 1 September 2002 3,280 1,503 1,503
Net debt at 28 February 2003 4,347 2,321 3,280
7. Analysis of Net Debt
Cash at bank Lease Short term Total
and in hand finance bank loan #'000
#'000 #'000 #'000
1 September 2001 1,638 (41) (94) 1,503
Cash flow 683 41 94 818
28 February 2002 2,321 - - 2,321
Cash flow 963 (4) - 959
31 August 2002 3,284 (4) - 3,280
Cash flow 1,063 4 - 1,067
28 February 2003 4,347 - - 4,347
8. Shares to be Issued
At 28 February 2002 and 31 August 2002 908
Adjustment in relation to an acquisition in 2000 282
At 28 February 2003 1,190
The increase in the shares to be issued relates to the acquisition of the trade
of the Really Useful Games Company Limited. The consideration can be satisfied
in whole or in part at the Company's option by the issue of new ordinary shares.
-10-
Independent Review Report to The Character Group plc
Introduction
We have been instructed by the company to review the financial information for
the six months ended 28 February 2003 which comprises the consolidated profit
and loss account, 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.
Directors' responsibilities
The interim report, including the financial information contained herein, is the
responsibility of, and has been approved by the directors. The directors are
responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding 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 group 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 United Kingdom Auditing Standards 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 2003.
Baker Tilly
Chartered Accountants
Chelmsford
28 April 2003
This information is provided by RNS
The company news service from the London Stock Exchange
END
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