H1 to be lower than prior year; CCT confident in meeting FY17 market expectations.
Companies: Character Group plc
Character Group shares have taken an 8% hit this morning in early trading after a mixed Trading Update. To disclose, I hold shares in this company.
After the positive update in the FY results, published a month ago, Management has today confirmed that H1 2017 results would be lower than last year:
"...we expect the results for the first half to be lower than those reported in the comparative period last year. In the four months to December 2016, sales were marginally lower than the same period last year and as expected UK gross margin was adversely affected by the devaluation of sterling."
The above quote highlights the impact is coming from marginally lower sales combined with margin impact from the sterling move.
On the flip side, Management does make clear it is confident it will meet the market expectations for the full year.
Furthermore, in a report from broker Panmure Gordon this morning, analyst Peter Smedley, reiterates his confidence in the company, highlighting:
"We recall from last year’s AGM trading update that the first four months performance also trailed quite meaningfully our full year FY16 sales forecast, only for CCT to deliver against and, indeed, beat that target, whilst also meeting the then prevailing market expectations for FY16 PBT"
Character Group screens well on the Joel Greenblatt Magic Formula showing it has a good combination of attractive earnings yield and return on equity, based on reported numbers. It is currently trading on about 10x reported earnings.
Shares are off 8.2% this morning after recovering from an initial 13% drop.