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Character Group warns on full-year profits

The toy distributor expects its financial performance for the full year to be significantly below market expectations following the Toys R Us bankruptcy
October 12, 2017

Management at Character (CCT) now have some visibility on what sort of impact the Toys R Us bankruptcy will have on the toy distributor, and it’s not good. Financial performance in the year to August 2018 is expected to be significantly below current market expectations due to more conservative purchasing by international customers, in addition to the bankruptcy of its third-largest customer. Analysts at Stifel slashed estimates for full-year underlying pre-tax profit to £10.5m from £14.5m previously, but expect a return to profit growth the following year.

IC TIP: Hold at 388p

Joint managing director Kiran Shah said all markets that the company trades in, including the UK, had taken a more cautious approach and the group was not getting as much repeat business as it had previously. But he is more optimistic for the latter half of 2018, when a number of new products that have been developed in-house will hit the market. These include recently announced extensions to deals with Teletubbies and Peppa Pig and the Pokémon contract win. Mr Shah added that management would consider a share buyback, although no firm plans are in place, and will continue to increase the dividend.