Unfavourable currency movements and weak US sales took their toll on profits at Character Group (CCT) during the first half. Shares in the maker of Little Live Pets and Teletubbies toys fell in early trading, but soon rebounded on the back of a good second-half outlook, suggesting that Peppa Pig and other core brands could bring home the bacon.
The group makes most of its purchases in US dollars, so weak sterling reflected on the income statement. The underlying gross profit margin fell by 170 basis points. Lacklustre sales in the US further hurt the top line, and overall gross profit fell 13 per cent to £19.2m. Still, cash generation remained good, and the net cash pile increased to £18.6m from £14.5m a year ago.
Cost-cutting measures are on the way, including more cost-effective packaging and pricing negotiations with suppliers, aimed specifically at compensating for sterling's fall. Fans and shareholders alike can look forward to new products, including a deluxe playhouse for Peppa Pig and a Little Live Babies launch.
Analysts at Panmure Gordon expect adjusted profit before tax of £15.4m in the year to August 2017, giving EPS of 49.9p, rising to £16.4m and 53.6p in FY2018 (from £15.1m and 47.7p in FY2016).
| CHARACTER GROUP (CCT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 488p | MARKET VALUE: | £103m | |
| TOUCH: | 480-495p | 12-MONTH HIGH: | 572p | LOW: 420p |
| DIVIDEND YIELD: | 3.5% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 119p | NET CASH: | £18.6m | |
| Half-year to 28 Feb | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2016 | 65.2 | 8.74 | 32.9 | 7.0 |
| 2017 | 61.5 | 6.51 | 25.2 | 9.0 |
| % change | -6 | -25 | -23 | +29 |
Ex-div: 6 Jul Payment: 28 Jul | ||||
