Character Group PLC Trading Update (2018M)
September 13 2019 - 2:00AM
UK Regulatory
TIDMCCT
RNS Number : 2018M
Character Group PLC
13 September 2019
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
Friday, 13 September 2019
The Character Group plc
("Character", "Group" or the "Company")
Designers, developers and international distributor of toys,
games and giftware
Trading Update
The Board of The Character Group plc (AIM: CCT) (the "Board")
provides the following update to shareholders on Group trading
ahead of the publication of the Company's results for the year
ended 31 August 2019.
The second half of the financial year just ended has seen
several factors negatively impacting our business. The most
significant factor has been the failure of the retail market in
Scandinavia to fully absorb the sales vacuum caused by the
liquidation in January this year of Top Toy, OVG-Proxy ApS's
("Proxy") largest customer until its demise. This loss of sales has
resulted in losses being sustained by Proxy in the year to 31
August 2019 and this has had a negative impact on the Group's
results as a whole. This setback is considered by the Board and the
Proxy management to be attributable to the delayed recovery in
retail in Scandinavia. The Board continues to support the Group's
strategy to achieve growth through this niche territory, which will
allow continued access to EU markets post-Brexit.
In addition, the continued uncertainty over Brexit has led to a
weakening of Sterling in foreign exchange markets, particularly
against the US Dollar, and this has been a factor for Character's
domestic business, given that a significant proportion of the
Group's purchases for UK distribution is made in US Dollars. As a
result, this has put considerable pressure on our margins and
negatively impacted the Group's results for the second half of the
year ended 31 August 2019 and will likely continue to be a factor
in the current year.
Through a combination of these factors, the profit before tax
for the Group for the year ended 31 August 2019 is likely to be in
the range of GBP11.0m - GBP11.5m., slightly under the lower end of
current market expectations.
Since the announcement by the Company on 3 June 2019, which gave
details of the proposed financial support to be extended by the
Group to Proxy, the configuration of that support has been revised.
A newly-incorporated, wholly-owned, Danish subsidiary of Character
(Character Denmark ApS ("CDA")) has acquired all of Proxy's
inventory and forward purchasing commitments, thereby eliminating
Proxy's overdraft. CDA has agreed to provide inventory to Proxy as
it receives orders from its customers. This will enable the Group
more directly to apply the resources and support of its well-oiled
sourcing and purchasing teams to Proxy's sales efforts. Whilst this
reconfiguration of financial facilities has led to a reduction in
the Group's cash-flow in the year to 31 August 2019, the Board
believes that Proxy will return to profitable trading in the
current financial year.
Shareholders will have noted the recent announcement by Hasbro,
Inc. of its intended takeover of Entertainment One Limited
("eOne"), the Peppa Pig brand owner. To date, there has been no
dialogue between the Company and Hasbro as to its future intentions
for Peppa Pig and, although it is unlikely that a definitive
position in that regard will be known for some time, discussions
have taken place with eOne and it has been agreed that the Group's
current Peppa Pig licence (due to expire on 31 December 2020) will
be extended for an additional six months to expire on 30 June 2021.
This assures the Group of a continued contribution to sales from
its Peppa Pig product lines for two further financial years.
It remains a fundamental part of the Group's strategy to
continue to develop, discover and exploit exciting new product
concepts/lines, whether as new in-house brands, new licencing
opportunities or exclusive distribution rights for third party
products, and to regularly refresh the product offerings for our
enduring brands. In this regard, we have launched Goo Jit Zu, a new
in-house product line/brand developed in collaboration with an
overseas toy company, and the reception in the market amongst our
customers and global distributors has been very enthusiastic. We
are currently focused on capturing new licence opportunities for
this range. There are also a number of other projects in
development and negotiation at this time and we look forward to
updating shareholders with details of these as they come to
fruition.
The Board remains confident in the Group's continued profitable
performance and balance sheet strength and, therefore, will be
recommending to shareholders that the final dividend for the year
is maintained.
Character expects to release its preliminary results for the
year ended 31 August 2019 in the first week of December 2019.
ENQUIRIES
The Character Group plc
Jon Diver, Joint Managing Director
Kiran Shah, Joint Managing Director
Office: +44 (0) 208 329 3377
Mobile: +44 (0) 7831 802219 (JD)
Mobile: +44 (0) 7956 278522 (KS)
Email: info@charactergroup.plc.uk
Panmure Gordon (Nominated Adviser and Joint Broker)
Atholl Tweedie, Investment Banking
James Stearns, Corporate Broking
Tel: +44 (0) 20 7886 2500
Allenby Capital Limited (Joint Broker)
Nick Athanas
Tel: +44 (0) 20 3328 5656
TooleyStreet Communications Limited (Investor and
media relations)
Fiona Tooley
Tel: +44 (0) 7785 703523
Email: fiona@tooleystreet.com
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END
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