REG - Character Group PLC - Preliminary Results - year ended 31 August 2016 <Origin Href="QuoteRef">CCT.L</Origin>

CharacterAnnouncement

01/12/2016 07:40

RNS Number : 6368Q
Character Group PLC
01 December 2016
Thursday, 1 December 2016 
The Character Group plc
("Character", "Group" or "Company")
Designers, developers and international distributor of toys, games and giftware
Preliminary results for the year ended 31 August 2016
"Strong organic growth underpins Character's continued position as the UK's leading independent toy company. Underlying pre-tax profit for the year is 12.5m up 22.5% on the previous year and current trading is commensurate with the Company achieving the Board's profit expectations for the current financial year."
Key Performance Indicators 
%
change
Full-year ended
31 August
2016
Full-year ended
31 August
2015
Revenue
+22.1%
121.0m
99.1m
Underlying operating profit*
+22.1%
12.7m
10.4m
Operating profit
+6.4%
13.3m
12.5m
Underlying pre-tax profit*
+22.5%
12.5m
10.2m
Pre-tax profit
+6.5%
13.1m
12.3m
Underlying basic earnings per share*
+22.7%
47.63p
38.83p
Underlying diluted earnings per share*
+23.5%
45.16p
36.57p
Basic earnings per share
+3.6%
50.30p
48.56p
Diluted earnings per share
+4.3%
47.70p
45.73p
Dividends per share for the year
+36.4%
15.0p
11.0p
Underlying EBITDA*
+27.0%
15.1m
11.9m
EBITDA
+12.9%
15.7m
13.9m
Net assets 
+50.7%
22.9m
15.2m
Net cash
+53.3%
6.9m
4.5m
*Excludes mark to market profit adjustments on FX 
derivative positions
0.6m
2.1m
 Profitable and cash generative business model
 Progressive dividend policy, final dividend up 33%, total for the year 15p, up 36% over 2015
 International sales up 50% 
 Top 10 performing brands account for 70% of revenue
 Peppa Pig continues to deliver a consistently high level of sales and remains our top selling brand
 Little Live Pets and Teletubbies (launched January 2016) complete our Top 3 
 Stretch Armstrong, has been launched successfully with initial sales exceeding expectation 
"Our strategic focus remains: "to seek out and develop exciting products which meet domestic and international market demand". Overall, current trading continues to be in-line with the Board's expectations, with pleasing levels of increasingly predictable contribution being generated from our established cornerstone brands. We are also very satisfied with the inroads that we continue to make in overseas markets as demonstrated by the improved level of international sales; and we fully expect such growth to be a prominent factor in delivering our strategic growth ambitions going forward."


Note:The Key Performance Indicators (KPI's) table shown at the top this Report provides the foregoing data on an underlying basis and, also by reference to Generally Accepted Accounting Practice (GAAP) as adopted and applied consistently by the Group.
Copies of this statement can be viewed at www.thecharacter.com. 
Product ranges can also be viewed at www.character-online.co.uk. 
Enquiries:
The Character Group plc
Kiran Shah, Joint Managing Director 
Jon Diver, Joint Managing Director 
Mark Dowding, Group Finance Director
Office: +44 (0) 208 329 3377
Mobile: +44 (0) 7956 278522 (KS)
Mobile: +44 (0) 7831 802219 (JD)
Mobile: +44 (0) 7967185269 (MD)
Email: info@charactergroup.plc.uk
FTSE sector: leisure: 
FTSE AIM All-share:symbol: CCT.L
Market cap: 95m
Panmure Gordon
(Nominated Adviser and Joint Broker)
Andrew Godber, Investment Banking
Tom Salvesen, Corporate Broking
Tel: +44 (0) 20 7886 2500

Allenby Capital Limited 
(Joint Broker)
Nick Athanas
Katrina Perez
Tel: +44 (0) 20 3328 5656



TooleyStreet Communications Limited 
(Investor and media relations)
Fiona Tooley
Tel: +44 (0) 7785 703523
Email: fiona@tooleystreet.com

The information contained within this announcement 
is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014.
Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.
The Character Group plc
Designers, developers and international distributor of toys, games and giftware
Preliminary results for the year ended 31 August 2016
INTRODUCTION
The Board is delighted to report another excellent year of trading for the business resulting in the Group achieving an increase in revenue to 121.0m up 22.1% over the comparative 2015 period; underlying profit before tax for FY 2016 was 12.5m, this compares with underlying profit before tax of 10.2m in the same period last year. Our expanding core of product groups, marketed at "value for money" price points contributed positively to our overall performance, in both the UK and International markets. In-line with our growth strategy revenue from International customers, which is generated in US Dollars, grew to 31.7m, an increase of 50.3% when compared to FY 2015 and this will continue to provide a natural currency hedge against a currently weakened Sterling.
OUR BRANDS
Our top performing brands which include Peppa Pig, Little Live Pets, Teletubbies, Minecraft, Scooby Doo, and Mashems continue to show resilience and remain ever popular with the consumer and our customers alike. Peppa remains our lead brand; we have also witnessed strong demand across several new categories and ranges including the iconic Teletubbies, re-launched at the start of this calendar year. Other notable successes in this reporting period include Little Live Pets, and a character based squidgy collectible range called Mashems. Recently the Little Live Pets range has been widened to include Snuggles My Dream Puppy; this product has been named by the Toy Retailer's Association as one of the Top 12 Dream Toys for 2016; we will also see further additions to this important toy range in 2017.
As we highlighted at the interim stage in April, we added a number of new licenses to our portfolio including the iconic Stretch Armstrong; subsequently we launched products on a global basis including in the USA. To date we have been very encouraged by this range's early performance, and with a planned widening of the Stretch product portfolio for calendar year 2017, we are very excited by the prospect of the brand's potential to contribute significantly to future profitability. 
Our strong product offering, continued demand for our market leading brands combined with the Company's continually strengthening financial position, underpin our status within the industry as the UK's leading independent toy company.
OPERATIONAL PERFORMANCE
The Group's portfolio continues to be derived from, both our own-developed in-house ranges, including those produced 'under licence', and others sourced through exclusive distribution agreements. We have worked hard to successfully develop strength and depth across our brands and long term trusted relationships across a wide spectrum of customers and suppliers globally.
Revenue in the year ended 31 August 2016 was up 22.1% to 121.0m, against 99.1m in the comparable 2015 period. Total revenue generated in the UK market was 89.3m (FY 2015 78.0m); in International markets total revenue was 31.7m (FY 2015 21.1m).
Underlying gross profit margin in the year being reported amounted to 31.2%, compared to 34.9% for the 2015 financial year. Underlying margins remained consistent overall and reflect the fact that the Group's growing international sales make up a higher proportion of its total revenue. On an absolute basis, underlying gross profit was 37.7m for the financial year compared to 34.6m for FY 2015.
The Group is reporting an underlying profit before tax in the period under review of 12.5m, up 22.5% (FY2015 10.2m). Underlying earnings before interest, tax, depreciation and amortisation were 15.1m, up 27% on the comparative period (FY 2015 11.9m.)
Underlying basic earnings per share amounted to 47.63p, an increase of 22.7% (FY2015 38.83p). Underlying diluted earnings per share, on the same basis, was 45.16p, up 23.5% (FY2015: 36.57p).
A significant proportion of the Group's purchases are made in US dollars; it is therefore exposed to foreign currency fluctuations and manages the associated risk through the purchase of forward exchange contracts and derivative financial instruments. Under International Financial Reporting Standards (IFRS), at the end of each reporting period the Group is required to make an adjustment in its financial statements to incorporate a "mark to market" valuation of such financial instruments. The "mark to market" adjustment for this financial period results in an additional profit of 0.6m being reported. This compares to an additional profit of 2.1m reported in the year to 31 August 2015. These "mark to market" adjustments are non-cash items calculated by reference to unpredictable and sometimes volatile currency spot rates at the various balance sheet dates. In order to highlight profitability on a normal basis these adjustments have been deducted to arrive at the "underlying" profit measures presented in this report.
The Key Performance Indicators (KPI's) table shown at the front of this report provides the foregoing data on an underlying basis and also by reference to Generally Accepted Accounting Practice (GAAP) as adopted and applied consistently by the Group.
DIVIDENDS
The Board is recommending an increased final dividend of 8 pence per share. This reflects our continued confidence in the Company's ability to generate sustainable cash flow and evidences the delivery of the progressive dividend policy. 
This, together with the interim dividend of 7 pence per share paid in July 2016 makes a total dividend of 15 pence per share, an increase of 36.4% (FY2015 11p). The 2016 dividend is covered 3.4 times by annual earnings.
Subject to approval by shareholders at the Annual General Meeting ("AGM") on 20 January 2017, the final dividend will be paid on 27 January 2017 to Members on the Register as at the close of business on 6 January 2017; the shares will be marked ex-dividend on 5 January 2017.
FINANCIAL POSITION, WORKING CAPITAL & CASH FLOW
The Group's capital base has been further strengthened in the period, with net assets at 31 August 2016 totalling 22.9m an increase of 50.7% on the position at 31 August 2015.
Inventories at 31 August 2016 were 10.3m (FY2015 9.0m); this increase reflects the required level of stock to meet the high demand for our products and ensure the on-going efficiency of our UK operation; since year end a significant proportion of this stock has been sold through to customers and our current levels are lean but sufficient to meet current orders and anticipated demand for product early in the New Year.
During the financial year under review the Group generated cash from operations of 10.8m (FY 2015 18.3m). The decrease is a temporary reflection of the Group's investment in an increased level of trade debt and inventory; since the year end these investments have been realised and converted into cash.
The Group has no long term debt. Interest charges on the use of working capital facilities during the period were 0.2m (FY 2015 0.2m).
At the end of the financial year, after making payments for dividends and share buy-backs (referenced in this Report), the Group had net cash on the balance sheet of 6.9m a 53.3% improvement on the position at the end of the 2015 comparative period.
SHARE BUY-BACK PROGRAMME
During the 2016 financial year, the Company acquired a total of 258,936 ordinary shares in the Company at an aggregate cost of approximately 1.2m (excluding stamp duty and dealing costs), with the average cost being approximately 4.78 per ordinary share (FY2015: 2,336,330 ordinary shares were acquired and cancelled at an aggregate cost of approximately 6.1m and an average cost of approximately 2.60p per ordinary share). 
The Company currently has an unutilised authority to buy-back up to a further 2,791,298 ordinary shares. It remains part of our overall strategy to continue to repurchase the Company's own shares when appropriate under its current share buy-back programme and, as previously indicated, the Directors could also be prepared to participate in any future share buy-back programme the Company proposes.
As at today's date, the Company has 21,139,152 ordinary shares in issue excluding shares held in treasury. The Company holds 3,269,456 ordinary shares in treasury, representing approximately 15.47 percent of the share capital excluding these treasury shares, which do not carry voting or dividend rights. The figure of 21,139,152 may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest, or change to their notified interest, in the Company under the Disclosure and Transparency Rules.
OUR PEOPLE
As shareholders are aware over the last year we have further strengthened the operational management team and the PLC Board, in order to help deliver the Group's strategic objectives. We are pleased to report that these transformational changes have been successful and our teams are well placed to navigate the Group through the challenges that lie ahead.
In total the business employs 194 people across its locations in the UK and Asia. Once again, the Board would like to take the opportunity, on behalf of all stakeholders, to thank every one of its colleagues around the business for their continuous hard work, dedication and loyalty, which underpins the strength in all of the Group's external relationships and its continued capability to perform overall.
OUTLOOK 
As we highlighted in our September 2016 trading update, the increasing strength of the US Dollar against Pound Sterling, our reporting currency, particularly post-Brexit, has the potential to cause an increase in our cost of sales, notably the factory cost of production and freight charges. We are pleased to report that a number of initiatives have been put in place, designed to mitigate the effects of such cost increases. In addition to these cost saving measures the expansion of our international business, which generates revenue and profit in US Dollars is enabling the Group to successfully maintain current gross profit margin levels comparable with those achieved pre-Brexit. 
Our strategic focus remains: "to seek out and develop exciting products which meet domestic and international market demand". Overall, current trading continues to be in-line with the Board's expectations, with pleasing levels of increasingly predictable contribution being generated from our established cornerstone brands. We are also very satisfied with the inroads that we continue to make in overseas markets as demonstrated by the improved level of international sales; and we fully expect such growth to be a prominent factor in delivering our growth ambitions going forward. 
The Board look forward to further updating shareholders on the 2016 Christmas trading period and future prospects at the time of the forthcoming AGM in January 2017. 


CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 AUGUST 2016


Note
Total
2016

000's
Total
2015
000's
Continuing operations




Revenue

1
120,967
99,054
Cost of sales

(82,694)
(62,399)
Gross profit


38,273
36,655
Net operating expenses




Selling and distribution costs


(7,128)
(7,310)
Administration expenses


(18,447)
(17,753)
Other operating income

602
892
Operating profit

2
13,300
12,484
Finance income


47
14
Finance costs


(215)
(230)
Profit before income tax


13,132
12,268
Taxation 


(2,345)
(2,029)
Profit for the year attributable to equity holders of the parent

10,787
10,239




Earnings per share (pence)



Basic

3
50.30p
48.56p
Fully diluted

3
47.70p
45.73p





Dividend per share (pence)

4
13.0p
8.95p





EBITDA (earnings before interest, tax, depreciation and amortisation)


15,689
13,934
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 AUGUST 2016



Total
2016

000's
Total
2015
000's
Profit for the year after tax


10,787
10,239
Items that will not be reclassified subsequently to profit and loss




Current tax credit relating to exercised share options


421
582
Deferred tax relating to share options


(414)
674


7
1,256
Items that may be reclassified subsequently to profit and loss



Exchange differences on translation of foreign operations

(820)
(251)
Income tax on exchange differences

144
24


(676)
(227)
Total comprehensive income for the year attributable to the equity
holders of the parent


10,118
11,268
CONSOLIDATED BALANCE SHEET
AS AT 31 AUGUST 2016



2016
000's
2015
000's
Non - current assets




Intangible assets - product development


1,117
837
Investment property


1,845
1,911
Property, plant and equipment


3,357
3,551
Deferred tax assets


474
1,058



6,793
7,357
Current assets




Inventories

10,303
8,965
Trade and other receivables


25,082
15,535
Current income tax receivable 


-
22
Derivative financial instruments


533
234
Cash and cash equivalents

28,560
25,781



64,478
50,537
Current liabilities




Short term borrowings 


(21,647)
(21,246)
Trade and other payables

(25,418)
(19,015)
Income tax

(1,099)
(1,862)
Derivative financial instruments


(89)
(363)



(48,253)
(42,486)
Net current assets


16,225
8,051
Non-current liabilities




Deferred tax


(99)
(167)
Net assets


22,919
15,241
Equity




Called up share capital


1,235
1,244
Shares held in treasury


(2,743)
(3,373)
Capital redemption reserve


1,717
1,704
Share based payment reserve


2,778
2,631
Share premium account


15,450
14,642
Merger reserve


651
651
Translation reserve


1,274
1,374
Profit and loss account


2,557
(3,632)
Total equity attributable to equity holders of the parent


22,919
15,241

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 AUGUST 2016


 12 months to
31 August 2016
 000's
 12 months to
31 August 2015
 000's
Cash flow from operating activities
Profit before taxation for the year

13,132
12,268
Adjustments for:



Depreciation of property, plant and equipment

441
425
Depreciation of investment property

65
65
Amortisation of intangible assets

1,925
960
(Profit) on disposal of property, plant and equipment

(1)
(14)
Interest expense

168
216
Financial instruments fair value adjustments

(573)
(2,051)
Share based payments

147
144
(Increase) in inventories

(1,338)
(111)
(Increase) / Decrease in trade and other receivables

(9,547)
7,882
Increase / (Decrease) in trade and other creditors

6,403
(1,530)
Cash generated from operations

10,822
18,254
Interest paid

(168)
(216)
Income tax paid

(2,419)
(725)
Net cash inflow from operating activities

8,235
17,313
Cash flows from investing activities



Payments for intangible assets

(2,205)
(1,559)
Payments for property, plant and equipment

(247)
(349)
Proceeds from disposal of property, plant and equipment

14
14
Net cash outflow from investing activities

(2,438)
(1,894)
Cash flows from financing activities



Proceeds from disposal of investment in own shares

-
908
Proceeds from issue of share capital

1,442
929
Purchase of own shares for cancellation

(1,244)
(6,088)
Dividends paid

(2,785)
(1,864)
Net cash used in financing activities

(2,587)
(6,115)
Net increase in cash and cash equivalents

3,210
9,304
Cash, cash equivalents and borrowings at the beginning of the year

4,535
(4,515)
Effects of exchange rate movements

(832)
(254)
Cash, cash equivalents and borrowings at the end of the year

6,913
4,535
Cash, cash equivalents and borrowings consist of:
Cash and cash equivalents

28,560
25,781
Short term borrowings

(21,647)
(21,246)
Cash, cash equivalents and borrowings at the end of the year

6,913
4,535

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 AUGUST 2016

Called up share capital
000's
Investment in own shares
000's
Shares held in treasury
000's
Capital
redemption
reserve
000's
Share premium account
000's
Merger reserve
000's
Share based payment reserve
000's
Translation reserve
000's
Profit 
and loss account
000's
Total
000's
The Group










At 1 September 2014
1,266
(908)
(3,373)
1,587
13,808
651
2,487
1,508
(7,082)
9,944
Profit for the year after tax
-
-
-
-
-
-
-
-
10,239
10,239
Net Exchange differences on translation of foreign operations
-
-
-
-
-
-
-
(134)
(93)
(227)
Deferred tax credit relating to share options
-
-
-
-
-
-
-
-
674
674
Current tax credit relating to 
exercised share options
-
-
-
-
-
-
-
-
582
582
Total comprehensive income for the year
-
-
-
-
-
-
-
(134)
11,402
11,268
Disposal of Investment in own shares
-
908
-
-
-
-
-
-
-
908
Share-based payment
-
-
-
-
-
-
144
-
-
144
Dividends
-
-
-
-
-
-
-
-
(1,864)
(1,864)
Shares issued
95
-
-
-
834
-
-
-
-
929
Shares cancelled
(117)
-
-
117
-
-
-
-
(6,088)
(6,088)
At 31 August 2015
1,244
-
(3,373)
1,704
14,642
651
2,631
1,374
(3,632)
15,241
Profit for the year after tax
-
-
-
-
-
-
-
-
10,787
10,787
Net Exchange differences on translation of foreign operations
-
-
-
-
-
-
-
(100)
(576)
(676)
Deferred tax credit relating to share options
-
-
-
-
-
-
-
-
(414)
(414)
Current tax relating to 
exercised share options
-
-
-
-
-
-
-
-
421
421
Total comprehensive income for the year
-
-
-
-
-
-
-
(100)
10,218
10,118
Share-based payment
-
-
-
-
-
-
147
-
-
147
Dividends
-
-
-
-
-
-
-
-
(2,785)
(2,785)
Shares issued
4
-
630
-
808
-
-
-
-
1,442
Shares cancelled
(13)
-
-
13
-
-
-
-
(1,244)
(1,244)
At 31 August 2016
1,235
-
(2,743)
1,717
15,450
651
2,778
1,274
2,557
22,919
Capital and Reserves
 Called up share capital represents the nominal value of equity shares allotted, called up and fully paid
 Share premium represents the excess of the fair value of consideration received for the equity shares, net of expenses of the share issue over the nominal value of the equity shares
 Capital redemption reserve represents the buyback and cancellation of shares at nominal value
 Merger reserve represents the premium arising on shares issued as consideration for the acquisition of subsidiaries and which qualified for merger relief
 Share based payment reserve represents the amounts recognised in profit and loss in respect of share based payments
 Translation reserve represents the cumulative foreign exchange differences on the translation of the net assets of the
 Group's foreign operations to the presentation currency of the parent
 Profit and loss account represents retained profit and losseS
THE CHARACTER GROUP PLC
NOTES TO THE PRELIMINARY RESULTS
1.
GEOGRAPHICAL DESTINATION OF REVENUE





12 months ended
31 August 2016
000's
12 months ended
31 August 2015
000's
United Kingdom




89,313
77,988
Rest of the world




31,654
21,066
Total Group




120,967
99,054
2.
EXPENSES BY NATURE



12 months to
31 August 2016
000's
12 months to
31 August 2015
000's
Operating profit is stated after charging/(crediting):



Cost of inventories recognised as an expense (included in the 
cost of sales)


75,790
58,666
Amortisation of capitalised product development costs


1,925
960
(Credit) financial instruments fair value adjustments


(573)
(2,051)
Inventories write down (credit)/charge


(728)
449
Exchange losses


155
77
Staff costs


11,476
11,208
Depreciation of tangible fixed assets



- owned assets

441 
425
Depreciation of investment property

65 
65
(Profit) on disposal of property, plant and equipment

(1) 
(14)
Operating leases - land and buildings

313 
272
Auditor remuneration

75 
74
3.
EARNINGS PER SHARE
The earnings used in the calculation of basic and diluted earnings per share are as follows: 

12 months to 
31 August 2016
Profit after taxation
12 months to 
31 August 2015
Profit after taxation
Profit for the year used in the calculation of basic and diluted earnings per share 
10,787,000
10,239,000
The weighted average number of ordinary shares used for the calculation of basic and diluted earnings per share are as follows:

12 months to 
31 August 2016
12 months 
31 August 2015
Weighted average number of ordinary shares used in the calculation of basic earnings per share
21,445,576
21,085,023
Weighted average number of share options
1,170,529
1,305,141
Weighted average number of ordinary shares used in the calculation of diluted earnings per share
22,616,105
22,390,164

4.
DIVIDENDS

12 months ended
31 August 2016
000's
12 months ended
31 August 2015
000's
On equity shares:


Final dividend paid for the year ended 31 August 2015


- 6.00 pence (2014: 3.95 pence) per share
1,285
838
Interim dividend paid for the year ended 31 August 2016


- 7.00 pence (2015: 5.00 pence) per share
1,500
1,026
 13.00 pence (2015: 8.95 pence) per share
2,785
1,864
The Directors recommend a final dividend of 8.00 pence per share (2015: 6.00 pence) amounting to 1,691,000 
(2015: 1,297,000). If approved by shareholders, the final dividend will be paid on 27 January 2017 to shareholders on the Register on 6 January 2017.
5. 
ANNUAL GENERAL MEETING
The Annual General Meeting will be held at the offices of Duane Morris LLP, 2nd Floor, 10 Chiswell Street, London EC1Y 4UQ on Friday, 20 January 2017 at 11.00 am.

6. 
ANNUAL REPORT AND ACCOUNTS
The Preliminary announcement does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006. The Annual Report and accounts for the year ended 31 August 2016 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.

7.
ELECTRONIC COMMUNICATIONS
The full Financial Statements for the year ended 31 August 2016, together with the Notice convening the Company's 2017 Annual General Meeting, will be available for viewing and download on the Group's website, www.character.com by 23 December 2016.


This information is provided by RNS
The company news service from the London Stock Exchange
  END
FR GBBDDCUGBGLB