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First half results were excellent given the continued weakness in consumer confidence and the challenging macroeconomic backdrop and is a tribute to the strength of the Group’s product portfolio and management team in successfully navigating these external events. We withdrew forecasts in April as a result of the tariff increases on imports from China into the US and until there is more clarity on the situation our forecasts will remain suspended. Nevertheless, we take significant comfort from the strong financial position of the Group which leaves it well placed to react swiftly as and when the current uncertainty ends.
Character Group plc
The Group continues to have a strong balance sheet with healthy cash balances (c.£16m) and we expect further inventory reduction to protect the cash on hand. The group is clearly facing uncertain times (due to tariffs), hence the cautious approach on pulling guidance but management remain confident that in a worst-case scenario, they can remain profitable. The group’s net assets of c.£39m nearly equates to the market cap and cash + inventory = £28m. Our forecasts are temporarily pulled and move to an under-review status until we get clarity on the US / Chinese tariffs and their consequential impact.
The Character Group has today released an update in which it states that the imposition of trade tariffs by the USA on imports from China has impacted the Board’s visibility to forecast sales to the USA in H2 of the current year ending August 2025. It has therefore decided to withdraw market guidance and we are also withdrawing our forecasts until the macroeconomic landscape becomes clearer.
The AGM statement released this morning confirms that in the four-months leading up to Christmas, trading conditions in the market have remained challenging. However, the Board still expects adjusted profits before tax to be in line with current market expectations. The Group continues to enjoy a strong financial position with significant net cash on the balance sheet and no bank debt.
Full year results were in line with our upwardly revised expectations with y-o-y EBITDA growth of 13%, adjusted PBT growth of 28% and EPS growth of 48%. We are now in a position to offer forecasts for the year to August 2025 and at this stage, given the continuing challenging market conditions our forecasts are understandably cautious. Consequently, we are projecting an outturn similar to FY24 with further net cash generation. With a solid balance sheet, a strong portfolio of products and an attractive yield, we continue to believe that the shares offer exceptional value.
The Character Group has delivered solid results in a tough market backdrop with sales up +0.7% yoy to £123m and adj. PBT up 28% yoy to £6.6m in FY’24. Total dividend of 19p implies a very healthy 7.2% yield, to go with a £2m share buyback (4.0% of market cap). Net cash position improved further to £13.2m (from £9.6m) thanks to strong FCF generation. The FY’25E product pipeline is well developed but continued tough trading environment leads to guidance for FY’25E sales and adj. PBT to be in line with FY’24. The shares trade on 9x forward PE while offering a high teens FCF yield. Our 506p TP puts the shares on a more reasonable 9% FCF yield. BUY
Character Group has traded encouragingly in the year ended August 2024, in spite of challenging market conditions. We upgraded our expectations for the year following a strong first half and in today’s update the Board confirmed that it expected to meet the revised market forecasts. The Group has a strong product portfolio and the balance sheet remains financially flexible with a healthy cash balance even after expending £2m on share buybacks in FY24. Full year results are expected in December at which stage we will offer forecasts for FY25.
Character Group traded satisfactorily in the first half, even though pressure on consumer expenditure continued to create challenging trading conditions. The Group was able to deliver a robust performance while enjoying a solid balance sheet and strong cash generation. Given the encouraging first half performance and the Group’s continued resilience, the Board expects that adjusted PBT will exceed market expectations. Consequently, we have increased our PBT forecast by 10% and continue to view the shares as offering good medium-term value.
Character Group (CCT) has issued a robust HY results statement, despite a tough market backdrop. PBT has increased to £2.1m from £0.5m, due to reduced costs, particularly within selling and distribution costs. We increase our FY24 PBT forecast to £6.6m (previously £6.0m). We retain our BUY recommendation, increasing our target price to 506p (previously 460p), in line with the increase in PBT forecast. Balance sheet: CCT continues to have a strong balance sheet, being in a net cash position, with substantial unutilised working capital facilities. The company is asset backed operating predominately from three freehold properties in the UK. We continue to believe the strength of this balance sheet will give CCT a competitive advantage vs peers. Product portfolio: There has been a positive reaction from CCT’s customers to the launch of its Spring/Summer product catalogue. Notable products include Terror Fried and Goo Jit Zu. We continue to believe that CCT should benefit from a strong and more diversified product offering, allowing CCT to maintain market share in domestic territories and increase international sales, particularly in the US. Other: Within the industry, overstocks are coming down which should benefit CCT. We also note that due to the issues in the Red Sea, operators are having to ship around the Cape of Good Hope. This adds a c.2-week delay compared to shipping via the Suez Canal. Forecasts: Whilst we make no changes to our FY24 revenue forecast, we increase our FY24 PBT forecast by 10% to £6.6m.
At its AGM scheduled for 11.00am today, the Group will state that the business continues to trade satisfactorily and financial results are expected to be in line with current market expectations. Although trading conditions in the current financial year to August 2024 remain challenging, the Group has a strong product offering which has been well received by the trade. Adverse trading conditions will at some stage revert to normality which we believe will allow strong historic growth to resume. In the meantime, the Group enjoys a solid balance sheet with net cash at end August 23 of £9.6m which is forecast to rise to £12m (62p per share) by the end of the financial year.
Character Group (CCT) has delivered a robust AGM trading update. Despite challenging trading conditions (consumer spend being impacted by the cost-of-living crisis), CCT has impressively maintained FY24 expectations (with sales and profitability improving from FY23). We retain our BUY recommendation and target price of 460p. Balance sheet: CCT continues to have a strong balance sheet, being in a net cash position. The company is asset backed operating predominately from three freehold properties in the UK. We continue to believe the strength of this balance sheet will give CCT a competitive advantage vs peers. Product portfolio: CCT is entering the Toy Fair season, both in London at Olympia and in Germany at Nurenberg. CCT should benefit from a strong product offering, with initial previews to domestic and international customers being promising. We note the top 5 brands for CCT e.g. Teenage Mutant Ninja Turtles, Goo Jit Zu etc had strong trading over Xmas. Chairman: As previously announced Richard King will step down as at the AGM. Whilst King is stepping down, he will remain as an Advisor to the company. King will be replaced by Carmel Warren, a non-executive director. Forecasts: Given FY24 revenue and profitability expectations are in line with current market expectations, we make no changes to our forecasts.
Excluding FX mark-to-market adjustments, The Character Group (Character) delivered full year adjusted PBT slightly ahead of forecasts at £5.2m following a strong H2 recovery as intimated by the Board many months ago. While economic conditions remain challenging, a strong product portfolio which has been well received by the market, together with satisfactory trading encourages the Board to expect an improvement in sales and profitability for the current financial year. With an attractive yield, a comfortable net cash position and a strong product offering, we would expect the shares to demonstrate some recovery through 2024.
Character Group (CCT) has delivered FY results slightly ahead of expectations. Adjusted PBT was £5.2m vs PGe £5.0m. This performance, H2 weighted, has been driven by the roll out of an enlarged 2023 spring/summer merchandise portfolio. Whilst trading conditions remain tough (Christmas demand has been late and deal reliant), CCT expects to increase sales and profitability for FY24. We retain our BUY recommendation and target price of 460p. Balance sheet: CCT has a strong balance sheet, being in a net cash position of £9.6m. The company is asset backed operating predominately from three freehold properties in the UK. We continue to believe the strength of this balance sheet will give CCT a competitive advantage vs peers. Product portfolio: H2 FY23 benefited from the roll out of an enlarged merchandise product portfolio. These include new toy product releases and brand extensions for Goo Jit Zu, Chill Factor, Teenage Mutant Ninja Turtles, Fingerlings, Lankey Box and Aphmau. For products due to be released in 2024, customer reactions have so far been encouraging. Chairman: We note that Richard King is stepping down as , at the commencement of the 2024 AGM. Whilst King is stepping down, he will remain as an Advisor to the company. King will be replaced by Carmel Warren, who is currently a non-executive director. Forecasts: Given CCT expects to increase sales and profitability for FY24, we forecast revenue of c.£130m for FY24 vs c.£123m for FY23. We also forecast adjusted PBT of c.£6m for FY24 vs £5.2m for FY23.
The Character Group (Character) has released a year-end trading update affirming the exceptionally difficult market conditions to date but that as a result of a strong product portfolio, the second half has, as expected, resulted in a bounce-back leading to a significant improvement in profitability compared to H1. The Board’s view is that underlying profitability is expected to be in line with current market expectations. While not immune to the broader market difficulties, Character has the benefit of an experienced management team, a strong product portfolio, a solid balance sheet and a net cash position, consequently we consider the current share price to be attractive despite macro headwinds.
Character Group (CCT) has performed in line with previous expectations with a strong second half. This has meant that CCT expects to report FY underlying profitability in line with current market expectations. We believe this has been driven by the strength of the product portfolio. We retain our BUY recommendation and target price of 460p.
The Character Group (Character), in common with the rest of the industry, experienced tough trading conditions in the first half and as anticipated by the Board, revenues and profits were lower than the comparative period and indeed, lower than that reported by the Group for a number of years highlighting the exceptional market conditions. However, a strong product line and a continuing sell-through of inventory is expected to result in a bounce-back in H2 leading to a significant improvement in profitability compared to H1, in line with current market expectations. At current levels and assuming H1 represents the nadir of the challenging market conditions, the shares are attractive and offer a good yield of 5.4%.
Character Group (CCT) has continued to see challenging trading conditions across all of the group’s markets, revenues are down c.36% YoY. Despite this, CCT is expecting an improvement in profitability in H2, driven by a strong pipeline of new products. Supporting this confidence, CCT has declared an interim dividend of 8p per share. We retain our BUY recommendation and target price of 460p.
The Character Group (Character), which reported full year results in December, has issued a trading update ahead of its AGM being held today. In essence, the announcement states that in what is a challenging year for the industry, sales and profit before tax are expected to be marginally below current market expectations. We are therefore revising down our FY23 revenue and PBT expectations by 7% and 9% respectively. Given typically strong cash generation and a sound balance sheet our dividend forecast of 19p remains unchanged offering an attractive yield of 5.2% at the current temporarily reduced share price.
Character Group (CCT) has seen challenging trading conditions for the four months to 31 December 2022, with revenue down c.42% against the comparative period in 2021. Whilst a rebound is anticipated in H2, predominately driven by a strong pipeline of new products, sales and PBT for FY23 are expected to be below current market expectations. We retain our BUY recommendation, cutting our target price to 460p (previously 490p).
The Character Group (Character) reported full year results in line with our forecasts, albeit revenues were stronger than anticipated. Adjusted PBT was in line but impacted by increases in input costs and a stronger US dollar creating margin pressures. We make no changes to forecasts but anticipate FY23 being H2 weighted. The Company is expected to remain comfortably profitable, cash generative with a strong balance sheet and is committed to maintaining a progressive dividend policy.
Character Group (CCT) has delivered robust FY22 results, in line with previous expectations, despite headwinds from higher freight costs and the weakness of Sterling. Whilst trading in the first half of FY23 will be impacted by tough trading conditions, CCT should see growth in its international markets other than the US and margin improvement from H2 FY23, predominately through a strong pipeline of new products. We retain our BUY recommendation and target price of 490p, offering c.16% upside.
CCT is set to deliver FY22 results in line with expectations despite headwinds from higher freight costs and the weakness of Sterling. However, the further weakening of Sterling against the USD, and soft initial Christmas orders from its retail customers, lead us to reduce our FY23 PBT forecast significantly, from £11.3m to £5.5m. We retain our BUY recommendation, but our target price falls sharply, from 675p to 490p, implying 10% upside from the current share price.
The Character Group (Character) has published a year end trading update which anticipates FY2022 underlying profit before tax being broadly in line with current market expectations. However, with just one month of trading completed in the new financial year, economic challenges, weaker sterling and a tightening of consumer expenditure has led management to expect a lower outcome for the year. Thus, our earlier expectation of underlying PBT of £11.3m has now been amended to one of c.£5.5m, although this will be reviewed again following the interim results in December. The Company remains comfortably profitable, cash generative with a strong balance sheet and is committed to maintaining a progressive dividend policy.
Oxford Biomedica : Investing for the long term Analysts - Dr Julie Simmonds +44 (0)207 886 2743 & Dr Mike Mitchell +44 (0)207 886 2761 Oxford Biomedica is differentiated within the viral vector CDMO field - small enough for innovation, but large enough for full commercialisation, with experience in both. We believe this positions it well within the growing gene therapy field, and against its CDMO peers, and although the shares are seeing near-term headwinds we believe now is a good entry point. There is the potential for significant upside as OXB begins to make headway in AAV, benefits from the increased commercial presence in the US and investment in new manufacturing technologies opens up wider opportunities. We reiterate our BUY but taking into account market conditions reduce our 12-month TP to 857p (previously 1514p), with significantly more value in the long term. Please see our full report published this morning or contact your Panmure Gordon representative for further details. Read More... MJ Hudson : Trading update Analyst - Robert Plant +44 (0)20 7886 2784 The company has issued an unscheduled, but positive, trading update saying that after a strong third quarter (January to March) it is trading ahead of expectations. FY22 adjusted EBITDA is expected to be “at least £8.3m” which is 7% ahead of our current forecast of £7.8m. We have increased our FY22/3/4 adjusted EBITDA forecasts from £7.8/9.4/10.1m by 7/12/10% to 8.3/10.5/11.2m. We have increased our FY22/3/4 adjusted EPS forecasts from 2.3/2.8/2.9p by 7/8/10% to 2.5/3.1/3.2p. Our DCF-based target price rises by 7% from 70p to 75p. The company had last reported H122 results on 12 April. Read More... Anexo : FY21 results meeting feedback Analyst - Robert Plant +44 (0)20 7886 2784 The tone of the webcast was upbeat and we focus on the further expansion into the higher returning motorcycle market, the continued exit of competitors from the market and the opportunities in Housing Disrepair. Read More... Swedish Match : Cigar Time Analyst - Rae Maile +44 (0)20 7886 2860 The confirmation of an offer at SEK106 from Philip Morris more than justifies a big cigar for the management and Board on a bid finally, and fully, delivered. An exit multiple of 24x current year estimated earnings and 19x estimated EV:EBITDA is eye-watering considering that three quarters of current profits come from areas where growth is either limited or “non-core” for the new owner being in Scandinavian snus, US moist snuff, US chewing tobacco and Lights. It makes Imperial Brands (BUY) look ever cheaper. Read More... Hargreaves Lansdown : Weak Net New Business, Cash to the Rescue Analysts - Phil Dobbin +44 (0)20 7886 2776 & Rae Maile +44 (0)20 7886 2860 The company has today reported AUA for the four-month period to end April. Net flow in the period is reported at £2.5bn compared to consensus £3.1bn and our more optimistic £4bn, down 45% YoY. Total AUA is reported at £132.3bn compared to consensus £138.1bn. Market moves reduced AUA by a hefty £11.4bn in the period, albeit HL Funds performed well. Revenue for the period is reported at £196.5m in line with consensus and the company reiterates FY2022 guidance while raising revenue margin on cash for FY22 to 30-35bps (compared to our 23bps). To us this looks a pretty indifferent update, but this is now more than discounted in recent share price performance. Read More... Secure Income REIT : Offer for Secure Income REIT by LXi REIT Analyst - Miranda Cockburn +44 (0)20 7886 2778 A second M&A deal in the UK REIT sector in a week but again it should come as no surprise given previous commentary about merger discussions between the parties. The transaction is being undertaken on a straightforward NTA basis which given SIR was trading at a discount of 13% to the updated NTA (which is up 12% on December) last night and LXi a discount of just 1%, will benefit SIR shareholders (shares up 9% this morning). The transaction also provides Prestbury (the investment adviser to SIR) with a neat exit, it being acquired for £40m by LXi REIT Advisors (so no termination costs for shareholders). Although we will miss the Prestbury management team, Nick and Sandy are staying on as NEDs of LXi and the Prestbury team will be instrumental in the strategy going forward. In our view this is a sensible transaction for SIR shareholders from both a financial and strategic point of view. Management has been finding it increasingly tough to secure large scale suitable acquisitions and the combined entity will offer a more liquid REIT (and a move from AIM), owning a substantial long-leased, index-linked portfolio of £3.9bn and a WAULT of c.26 years with improved sector and tenant diversification. In addition, given cost savings from reduced management fees, the transaction will be earnings accretive and capital will likely be cheaper and more accessible for the combined group suggesting improved acquisition growth potential. Read More... Character Group : Strong revenue growth offsets expected margin headwinds Analyst - Matthew Webb +44 (0)20 7886 2756 Given the numerous headwinds, including higher sourcing and freight costs, the recent sharp decline in Sterling against the USD, and (most importantly) the mix shift towards (lower margin) international sales, it is not surprising that CCT’s margin is coming under some pressure. However, this is being fully offset by very strong revenue growth, of 22% in H122. We increase our FY22 and FY23 revenue forecasts by 10% and 13% respectively, leave our PBT forecasts unchanged, and increase our EPS forecasts significantly to reflect the completion of the February tender offer. The business has strong momentum, driven in particular by the international success of the Goo Jit Zu range. We retain our Buy recommendation and 675p target price. Read More... Grainger : H1 2022 results – improving market conditions Analyst - Miranda Cockburn +44 (0)20 7886 2778 Improving market conditions have resulted in occupancy of 98% and like-for-like rental growth of 3.5% together with a swift lease up of newly completed developments (two over the period). Grainger has a further three assets due to be delivered in the remainder of 2022 and with new acquisitions its secured pipeline totals 4,001 homes. 12 of its 16 secured pipeline schemes have fixed price contracts and it notes that 96% of its debt is hedged giving it protection against inflation and interest rate rises. The shares have held up relatively well this year down just 11% versus the wider sector down 17%. At 281p they are trading at an 8% discount versus the reported NTA which looks good value but we continue to struggle to see the catalyst near term for an immediate positive rerating and retain our Hold rating. Read More...
CCT GRI OXB SIR SWMA MJR HRGLF 9QZ
The Character Group (Character) reported a 22% year-on-year (yoy) increase in sales and an improvement in profits in the first half to February 2022, despite the ongoing impact of Covid in China (where most of the group’s manufacturing is conducted) and supply chain issues. Investment in finished goods has significantly increased to ensure product availability in H2 but the Group still generated operating cash, ending the period with net cash of £21.5m after a £13.6m share buyback.
Given the numerous headwinds, including higher sourcing and freight costs, the recent sharp decline in Sterling against the USD, and (most importantly) the mix shift towards (lower margin) international sales, it is not surprising that CCT’s margin is coming under some pressure. However, this is being fully offset by very strong revenue growth, of 22% in H122. We increase our FY22 and FY23 revenue forecasts by 10% and 13% respectively, leave our PBT forecasts unchanged, and increase our EPS forecasts significantly to reflect the completion of the February tender offer. The business has strong momentum, driven in particular by the international success of the Goo Jit Zu range. We retain our Buy recommendation and 675p target price.
The strong sales growth and positive outlook contained in today’s trading statement, combined with the expected tender offer, gives us confidence to increase our target price to 675p (8% upside). The tender offer should create value for shareholders who are currently deriving little or no benefit from the company’s significant net cash position. We retain our BUY recommendation.
Ahead of the AGM of The Character Group (Character) to be held later today, the Board has provided an update to shareholders which concludes that assuming market trading conditions do not worsen further it expects the Group to achieve current consensus market expectations for the year ending August 2022. Consequently we are maintaining our forecasts for both FY2022 and FY2023.
CCT’s FY21 results were in line with our expectations. More importantly, current trading is strong, leaving CCT well-placed for a successful Christmas. CCT is meeting “buoyant” demand, despite the ongoing severe logistical challenges, and is confident that it can continue to do so. We increase our FY22 PBT forecast slightly to £11.3m (previously £11.0m) and our FY22 DPS forecast to 17p (previously 15.5p). We expect the market to see this statement as reassuring following the cautious September trading update.
The Character Group (Character) reported results slightly ahead of our expectations despite having to deal with the unprecedented supply chain challenges that impacted manufacturers and distributors of goods globally. Notwithstanding these headwinds, Character not only returned underlying EBITDA 72% ahead of 2020 but also ahead of the pre-COVID 2019 outturn. Despite continued pressure on margins, the high quality of Character’s earnings coupled with an exceptionally strong balance sheet (net cash £35.9m) leaves the Group well placed to achieve our 2022 and 2023 forecasts.
CCT is facing logistical challenges along its supply chain which are both adding to costs and causing fulfilment issues. The rest of the toy industry (and indeed most importers) will be facing similar problems. However, strong demand, combined with an industry-wide shortage of product, is allowing CCT to sell at better prices without the need to clear stocks, thus mitigating the cost increases. We downgrade our PBT forecasts for FY21 and FY22 by 8% and 12% respectively. We retain our BUY recommendation and 605p target price.
The Character Group (Character) has informed the market that while sales and trading remain very strong, the logistical challenges facing many companies in terms of ongoing delays at ports, shipping and container shortages and a rise in freight rates, mean that underlying profits for the year to August 2021 will be slightly lower than market consensus. We have therefore reduced our 2021 PBT forecast by 8% from £12m to £11m. Cash forecasts remain unchanged and on the assumption that this is a challenging but temporary phenomenon, our fair value of 650p on the shares is unchanged.
The Character Group’s (Character) interim results were remarkable in that the Group produced very strong results in a period of significant disruption. The right products at the right price and in the right categories all served to distinguish the Group in the first half. As trading begins to return to some sense of normality during H2 we anticipate trading to improve further and have raised forecasts accordingly. Selling on a significant discount to the US “giants” and with significant cash resources, we consider quite simply that Character is fundamentally undervalued and set a fair value of 650p on the shares.
The Character Group’s (Character) AGM statement confirms the strong start to the year noted in its preliminary results. Revenues in the first four months were ahead by more than 30% and management expects that profitability for the first half to February 2021 will be significantly higher than in the same period last year. While there are more challenges facing the Company in the second half, assuming these do not worsen the Board believes the Group will achieve current market expectations. Our forecasts for FY2021 were raised significantly in December and we are encouraged that despite the temporarily deteriorating macros, current market expectations are still valid. When some normality returns to the market Character will be exceptionally well positioned with a strong balance sheet and a product range in strong demand.
Prelims show the Group reporting underlying EBITDA of £8.2m and PBT of £5m, in line with our forecasts and following unprecedented challenges of COVID-19 on the supply chain early in the financial year and on high street lockdowns in the latter. Despite these headwinds the Group remained profitable across the year generating exceptionally strong operating cash flow of £17.6m (FY19: £7.8m) and a year-end net cash position of £19.1m (FY19: £6.5m). These results reflected a good level of demand across the Group’s diverse toy range, with turnover in the USA increasing and the outlook for the current year is looking extremely positive with a strong Q1 performance. Consequently, we are upgrading our 2021 EBITDA by 34% to £13m, PBT by 50% to £10.5m and EPS by 51% to 37.6p and expect the shares to move ahead.
Today’s year end trading update from The Character Group (Character) highlights the Company’s resilience and innovation in a challenging international environment with the Group working closely with customers and distributors to maintain trading at satisfactory levels. Indications remain that the second half to August 2020 will produce a profit at least equivalent to H1’s adjusted £2.5m before tax. The Group also has the benefit of a strong balance sheet with significant cash balances and no debt except the usual working capital facilities, much of which remains unused. We are pleased to be able to reintroduce forecasts that were suspended in March due to the uncertainty surrounding the COVID pandemic.
Having had to negotiate a stock overhang in its Scandinavian markets, a depressed UK toy sector, weaker Sterling and the uncertainty engendered by Brexit, it was perhaps inevitable that interim results from The Character Group (Character) were going to be negatively impacted. However, despite these challenges the Group managed to achieve profitability in the period and more importantly significantly increased its net cash balances over the level reported at its year end. The second half will present further headwinds due to Covid-19 disruptions, but management still anticipates achieving a profit in H2 and for the year. We consider the Group to be well positioned to resume normal trading when conditions allow.
Character Group has issued a trading update stating that while its supply side operations in the Far East have now been broadly restored following temporary disruption from COVID-19 issues, the demand side of the business is being deeply impacted by the closure of stores, shops and warehousing & distribution centres. The board is now anticipating a significant drop in H2 FY2020 revenues compared to expectations. However, given the lack of visibility on both trading activity and the eventual impact of COVID-19 on the business, which is second half weighted, we are temporarily suspending forecasts until further clarity is given – probably with the interim results scheduled for end May 2020.
Character Group has issued an AGM statement highlighting the continuing weakness in the UK toy market and the effect this has had on its trading, particularly over the important Christmas period which will inevitably have an adverse impact on the Group’s first half to 29 February 2020. Although we continue to anticipate a substantial rebound in the second half of the financial year, management is of the view that Group PBT for the year will now be lower than consensus at around £10m compared to our forecast of £11.6m. Consequently, we are reducing our PBT forecast for FY2020 by 14% to £10m putting the shares at 335p on a still undemanding PER of 9.0x, falling to 8.5x in FY2021. The Group remains well funded, is cash generative and dividend forecasts are unchanged, thus offering a very attractive, covered, yield. Given the expected strength of H2 trading and a further carry-over into 2021 we retain fair value at 470p.
The Character Group plc* (CCT.L, 360p/£80.2m) | Blackbird plc* (BIRD.L, 15p/£42.8m) |Gfinity plc* (GFIN.L, 3.90p/£18.5m)
CCT BIRD GFIN
FY19 proved to be challenging, as flagged in September’s pre-close, for the UK’s largest independent toy manufacturer. The collapse of Top Toy, historically the largest customer of OVG-Proxy where CCT has a 75% holding, has cast a long shadow over the Scandinavian toy market; sterling’s weakness against the dollar has impacted gross margins; and the UK domestic toy market has remained weak. This weakness is likely to continue through this Xmas before picking up in H2. In this situation, the strength of CCT’s portfolio of ‘ever-green’ brands and new products and management’s considerable experience is crucial. CCT continued to grow on an organic basis and take market share and remains well funded and offers an attractive income stream. FY20 forecasts remain largely unchanged and we introduce FY21 forecasts that assume a return to higher growth. Fair value moves to 470p from 430p/share.
ECSC Group plc* (ECSC.L, 72.5p/£6.6m) Interims: Managed Serivces boosts margins; positive start to H2 (11.09.19) | The Character Group plc* (CCT.L, 360p/£77m) Pre-close update: Scandinavia disappoints (13.09.19) | MTI Wireless Edge Ltd* (MWE.L, 29.5p/£25.8m) Contract win: Scope for growth (16.09.19)
CCT MWE E3C
Disappointing pre-close update for the year ended 31 August with PBT performance expected to be below the lower end of market expectations (ACLe: £124.6m in revenue and £13.5m adj. PBT). The main cause of the miss relates to the failure of the Scandinavian retail market to fully recover from the liquidation in January of Top Toy, historically the largest customer of OVG-Proxy where CCT has a 75% stake. This will result in Proxy making a loss for FY19. CCT has also suffered from the weakening of sterling against the dollar that has impacted gross margins in H2 and this is likely to continue in FY20. On the plus side, the current Peppa Pig licence has been extended by Entertainment One for a further six months to June 2021. Forecasts FY19 and FY20 reduced and we now expect adj. PBT to be essentially flat over the forecast period. We move our fair value to 430p/share (550p/share), equivalent to a 10x PER for FY19 and FY20. Management has committed to the final dividend suggesting an 7.6% FY19 yield.
The Character Group plc* (CCT.L, 575p/£121.2m) Interims: Positive outlook (10.05.19) | Gfinity plc* (GFIN.L, 4.5p/£16.4m) Contract win: Successful revenue diversification (08.05.19) | Audioboom plc* (BOOM.L, 2.125p/£27.4m) Distribution agreement: More podcasts added to the roster (08.05.19)
CCT GFIN BOOM
Solid H1 performance from The Character Group (CCT.L), the largest independent UKbased toy company, with good sell-through during Xmas 2018 against a difficult retail backdrop and the company has started 2019 with stocks well under control and a positive outlook. H1 FY19 included an initial contribution from OVG-PROXY. UK sales saw further growth whilst international sales, excluding the US, remained steady. CCT’s US business has yet to recover from the disruption caused by the failure of Toys R Us (TRU). Organic revenue growth was 4.2% as CCT continues to benefit from its balanced portfolio that combines a spine of core brands (Peppa Pig, Little Live Pets, and Stretch) and trend lines e.g. Soft ‘n Slo Squishies, Cra.Z.Slimy and MightyBeanz. CCT continues to add to its portfolio with own-developed, in-house ranges and via collaboration and distribution agreements, e.g. Goo Jitsu and Stretch variants. Forecasts unchanged but we increase our fair value to 640p from 596p, equivalent to a FY20 PER of 11.6x and 4.8% yield. The CCT investment case remains underpinned by the balance sheet with net cash of £19.8m and £33.5m of net assets.
(The) Character Group plc* (CCT.L, 515p/£109.1m) Prelims: Return to growth in H2 (29.11.18) | Gfinity plc* (GFIN.L, 8.6p/£31.2m) Prelims: Heavy investment bearing fruit (27.11.18) | Mirada* (MIRA.L, 0.75p/£6.9m) Partnership agreement: Increased sales and marketing reach (27.11.18)
CCT GFIN MIRA
H2 saw a return to the previous growth pattern at The Character Group (CCT.L), the UK’s leading independent toy company, as flagged in September’s trading update. FY18 revenue of £106.2m (ACLe: £106.7m) represented a 7.9% decline on FY17 but there was a 3.6% increase H2 over H2 and a 10.4% increase on a sequential basis - CCT’s domestic business delivered record sales. Underlying PBT was £11.6m (ACLe: £11.1m; FY17; £13.4m). H2 represents a creditable performance compared with CCT’s larger competitors – e.g. Hasbro’s revenue fell 12% and Mattel by 8% in Q3 – as the industry suffered from the fall out of the liquidation of Toys R Us and the generally difficult retail backdrop. As previously argued, we believe CCT is benefiting from the strength of its portfolio. CCT has seen good demand for its key product ranges throughout the year (Peppa Pig, Little Live Pets, Teletubbies and Stretch) complemented by its impulse purchase trend or ‘craze’ lines e.g. Soft ‘n Slo Squishies, Cakepop Cuties and Cra.Z.Slimy. FY19 has started in line with expectation and the outlook is positive for the upcoming Xmas season. FY19 forecasts and 596p fair value, equivalent to a FY19 PER of 11.6x and representing a 20% upside, remain unchanged. CCT remains well capitalised and offers a 5.5% yield.
ECSC Group plc* (ECSC.L, 95p/£8.6m) Interims: Further market share gains (11.09.18) | The Character Group plc* (CCT.L, 529p/£111.8m) Pre-close trading update: Record UK sales (14.09.18) | Forbidden Technologies plc* (FBT.L, 5.25p/£15.5m) Interim results: Revenue growth and positive outlook (12.09.18) | Tern plc* (TERN.L, 18.6p/£44m) Interims and further loan to Device Authority (14.09.18) | Mirada plc* (MIRA.L, 0.9p/£2.0m) Placing and loan conversion strengthens balance sheet (17.09.18)
CCT BIRD TERN MIRA E3C
The Character Group plc* (CCT.L, 477p/£101m) Interims: The right stuff (25.04.18) | Access Intelligence plc* (ACC.L, 4.25p/£20.7m) Placing: Vuelio - Platform for profitable growth (25.04.18)
Character Group plc Pulsar Group PLC
Interim results from The Character Group (CCT.L), the UK’s leading independent toy company, reflect a good performance against a tough retail backdrop that has seen its larger rivals (including Hasbro, Mattel and Lego) suffer. This reflects the success of Character’s strategy of offering price-competitive products that are not aligned to any particular film franchise coupled with a number of ‘ever-green’ brands (including Peppa Pig, Little Live Pets, Scooby Doo and Stretch Armstrong). Character is also riding the wave of lower priced ‘craze’ products successfully with four of its new Spring lines – Soft and Slo memory foam toys, Cake Pop Cuties, Cra-z-Slimy and Mine It – all doing well. 2018 has started well domestically and, given the higher gross margins available on domestic sales, we upgrade FY18 EPS forecasts by 13.8% to 43.6p and FY19 by 11.2% to 50.5p. CCT continues to enjoy a strong balance sheet that provides scope for share repurchases and a progressive dividend policy. We maintain a fair value of 580p/share, equivalent to a FY18 PER of 13.3x and 4.0% yield.
The Character Group plc* (CCT.L, 449p/£94.9m) London Toy Fair: Awards won (24.01.18) | Eagle Eye Solutions Group plc (EYE.L, 212p/£54.0m) H1 pre-close: Much to do in H2 (23.01.18) | Frontier Smart Technologies plc (FST.L, 176p/£71.5m) FY pre-close: Good growth but modest expectations for FY18 (25.01.18)
CCT EYE FST
The Character Group plc* (CCT.L, 437p/£92.5m) Trading update: FY18 starts on track (19.01.18) | Gfinity plc* (GFIN.L, 24p/£52.4m)ARES joins Elite Series (19.01.18) | Tekcapital plc* (TEK.L, 22.5p/£9.6m) Lucyd achieves minimum funding (22.01.18) | CloudCall plc (CALL.L, 173p/£39.1m) Trading update: FY in line with upgraded expectations (18.01.18)
CCT GFIN TEK CALL
Character Group Flash : Looking forward to Christmas
Today’s pre-AGM trading update confirms that FY18 continues in line with management expectation and fits with October’s update and December’s prelims. Trading in the first four months, including the crucial Christmas period, saw growth in domestic sales whilst international was down, impacted by several factors including the financing travails of Toys R Us in North America. As a result, H1 FY18 overall is expected to be down on H1 FY17 but H2 will return to growth and this will continue in FY19.
The Character Group plc (CCT.L, 445p/£94.1m) Note published: Product strength in the face of retail challenge (19.12.17) | Gfinity (GFIN.L, 23.5p/£51.3m) Final Elite team announced (21.12.17) | Mirada plc (MIRA.L, 0.75p/£1.0m) Note published: Diversification ongoing; balance sheet stretched (21.12.17)
The Character Group (CCT.L), the UK's leading independent toy company, enters 2018 with what management believes is its strongest ever product line up with a balance between its ‘ever-green’ brands (including Peppa Pig, Little Live Pets, Scooby Doo and Stretch Armstrong) and new products, some developed in-house. On top of this, there is considerable potential from Pokémon, scheduled for launch next summer. This portfolio strength combined with management’s considerable expertise are key as Character Group contends with a difficult retail environment, typified by the Chapter 11 of Toys R US in North America and proposed store closures in the UK. As a result, management expects revenue will drop in H1 before returning to growth in H2. We believe that CCT is better placed to weather the retail storm than its larger rivals (Hasbro, Mattel and Lego) as it offers price competitive products and its products are not aligned to any particular film franchises. It also has a strong balance sheet with substantial unutilised working capital facilities. Forecasts and fair value of 580p per share, equivalent to a FY18 PER of 13.9x and 4.0x yield remain unchanged. (David Johnson)
Character Group Flash : Trading well through the storm
The Character Group plc (CCT.L, 404p/£85.4m) Trading update: Toys R Us casts a long shadow (11.10.17) | CAP-XX plc (CPX.L, 12.3p/£36.7m) Finals: Buoyant outlook (09.10.17) | Osirium Technologies plc (OSI.L, 159p/£16.5m) Contract renewals: Reassuring proof points (09.10.17) | 1Spatial plc (SPA.L, 3.55p/£25.3m) Interims: Signs of improvement (10.10.17)
CCT CPX SPA O6T
An already difficult trading backdrop in recent weeks, materially exacerbated by Toys “R” Us (accounting for c8% of CCT’s total sales) falling into Chapter 11 bankruptcy protection on September 18th, has caused our FY18 PBT expectations to fall by 28% to £10.5m (£14.5m), with a base knock-on effect to our FY19 PBT forecasts which are reduced by 19% to £12.5m (£15.5m). The deleverage effect of lower sales with little cost mitigation that can be implemented in the short-term gives rise to the pressure on profitability. Looking ahead, our model assumes that FY19 PBT sees a return to profit growth, reflecting CCT’s recently significantly boosted growth opportunities. With tougher market conditions having persisted and indeed worsened into the key-for-profits October-December period, CCT is taking a highly prudent view on the difficult environment likely to continue from now until the end of the first half of calendar year 2018. We are therefore also lowering our TP to 550p.
CCT published its FY17 pre-close trading update after the close last night stating that, on the back of a solid finish to FY17, “underlying pre-tax profits…are expected to meet current market expectations”. The reassuring statement on trading and CCT’s strong financial position served as a useful context to highlight CCT’s assessment of the implications of the rapidly unfolding situation of Toys “R” Us (accounting for c8% of CCT’s total sales) which filed for Chapter 11 bankruptcy protection late Monday evening. CCT reasonably concludes that it does “not currently have reliable visibility on the important 2017 Christmas trading period and its effect” on FY18. We believe that the $3bn debtor-in-possession financing afforded to Toys "R" Us on Monday should eliminate collections risk for its toy suppliers. However, we recognise that CCT’s exposure is mainly to Toys “R” Us UK (which is not included in the bankruptcy protection) such that if credit insurance was completely withdrawn, then CCT would likely redirect uninsured Toys “R” Us-bound orders to other toy market retail operators. Such a scenario could potentially have an impact on our unchanged FY18 £14.5m PBT estimate, although we note our FY19 £15.5m PBT forecast has been convincingly further underpinned recently by a significant strengthening of CCT’s toy portfolio (e.g. Teletubbies’ licence extension, new Pokemon distributorship).
FY17 (August) underlying PBT is expected to be in line with forecasts but the outlook for FY18 is more mixed for the UK’s leading independent toy company. The consumer market remains challenging in general and there are specific problems at Toys R Us, a significant customer, that has filed for Chapter 11 voluntary bankruptcy protection in the US with similar protection expected for Canada – the company’s other operations are not part of the proceedings. The North American subsidiaries represent a small proportion of CCT revenue (<3%) but in aggregate Toys R Us accounts for c. 8% of group revenue. Toys R Us has said that it will continue to operate as usual as it looks to renegotiate its $4.9bn debt. That said, credit insurers have reduced available limits since reports of a potential Chapter 11 first emerged last week and suppliers have become more cautious, looking to place stock with other retailers in the run up to the crucial Xmas selling period. This is likely to impact pricing and gross margins. Although the situation is uncertain and it is still very early in CCT’s FY18, we believe it is prudent to reduce our FY18 and FY19 revenue and PBT forecasts. We reduce our fair value to 680p (from 700p), equivalent to a FY18 PER of 12.4x and 3.4% yield.
Audioboom plc (BOOM.L, 2.075p/£19.3m) Q3 Update - Continued substantial growth | The Character Group plc (CCT.L, 532p/£112.6m) Pokemon broadens portfolio | CentralNic plc (CNIC.L, 68p/£64.7m) Interims: Building recurring revenue streams | MTI Wireless Edge plc (MWE.L, 31.75p/£17.0m) Distribution agreement broadens Mottech's reach
CCT TIG MWE BOOM
CCT has today announced an extension of its license for Teletubbies for an additional 3 years. Whilst we make no changes to forecasts, we view this development as good for sentiment as it; (1) demonstrates the confidence that DHX Brands –the Teletubbies IP holder– has in CCT’s ongoing ability to develop and commercialise the Teletubbies toy product portfolio; (2) highlights the longstanding nature of CCT’s partnerships with key IP owners (e.g. the brand license for Peppa Pig –CCT’s strongest performing brand in terms of sales– has been held since 2004); and (3) attests to CCT’s particularly strong presence in the pre-school (children aged 3-4) segment of the toy industry, particularly in the UK (where CCT is the number 1 player ahead of Mattel, Lego and Hasbro), and increasingly so on a global basis. We maintain our BUY.
Quiz—Sch 1 from the omni-channel and international own brand in the women's value fast fashion sector. Offer TBA. Expected late July. Last year Quiz posted sales of £87.4m while pre-tax profits grew by 17pc to £5.7m | Arena Events Group -provider of temporary physical structures, seating, ice rinks, furniture and interiors. Raising £60m. Mkt cap £63m. Expected on the Chef’s birthday. 25th July. | Altus Strategies—African focused natural resource Company. Offer TBC. Expected Mid July. | Harvey Nash Group— Provider of professional recruitment and offshore solutions moving to AIM from Main. No capital to be raised. Mkt Cap c. £57.8m. | Greencoat Renewables - Schedule 1. Targeting a portfolio of operating renewable electricity generation assets, initially investing in wind generation assets in Ireland. Offer TBC. Due Mid July. | I3 Energy –Schedule 1 Update. Independent oil and gas company with assets and operations in the UK. Offer TBC, Mid July admission. | Verditek— Sch 1 update. The Company's subsidiaries will be involved in advanced solar photovoltaic, filtration and absorption technologies specialising in providing environmental services. Issue price 10p. Admission late June | Hipgnosis Songs Fund investment company offering pure-play exposure to Songs and associated musical intellectual property rights. Prospectus yet to be published. | Impact Trust—Exposure to a diversified portfolio of funds providing SMEs across developing economies with the growth capital they need to have a positive impact on the lives of the world's poorer populations. Raising up to $150m at $1.00 | Residential Secure Income - social housing REIT raising up to £300m Admission due c.12 July. | Curzon Energy—Report on Proactive Investors of intended LSE float this year with acquisition of coal bed methane assets in Oregon. Looking to raise £3m plus. | NLB Group—financial and banking institution based in Slovenia, with a network of 356 branches. Seeking Ljubliana Stock Exchange listing with GDRs on the LSE. Expected mid June. | Kuwait Energy— has not been able to complete its initial public offering as announced in its Intention To Float of 3 May 2017. However, in light of positive feedback from potential investors, the Company remains committed to obtaining a London listing and continues to explore its options. | Supermarket Income REIT– Up to £200m raise to acquire a diversified portfolio of supermarket real estate assets in the UK, providing long-term RPI-linked income. Due 21 July.
CCT IOF BOD CNMI PPIX CRV DX/ IVO O6T
As flagged, CCT’s has delivered an underlying H1FY17 PBT of £7.1m (-17% y/y) against the combined backdrop of a very tough comparative period (H1FY16 was CCT’s best-ever half-year) and difficult UK context. The standout feature is that net cash has strengthened considerably to £18.6m from £14.6m in H1FY16, supporting a c.29% increase in the interim dividend. This reminds us of one of CCT’s key investment attractions; the highly attractive financial model with low capital intensity provides the capacity for significant cash generation, in turn supporting a progressive dividend policy and the continuation of the multi-year share buyback programme. We make no changes to our still conservatively framed FY17, FY18 and FY19 PBT forecasts of £13.5m, £14.5m and £15.5m respectively. We note the range of cost mitigation plans already implemented in H2FY17 which provides added assurance to forecasts and de-risks the remaining four months of H2FY17. We nevertheless shave our sales estimates by 5%, 4% and 4% respectively to reflect the H1FY17 sales out-turn. We maintain our BUY and TP of 635p.
CCT has released another encouraging trading update, giving reassurance that FY17 consensus expectations remain firmly intact. We particularly note management commentary that the “cash position continues to strengthen considerably”, further adding to the £6.9m of net cash at FY16. This reminds us of one of CCT’s key investment attractions; the highly attractive financial model with low capital intensity provides the capacity for significant cash generation as profits continue to grow, in turn supporting a progressive dividend policy and the continuation of the multi-year share buyback programme. We maintain our BUY.
Consistent with the FY16 trading update/pre-close on September 14, today’s FY16 results are in line with our and consensus underlying PBT expectations of £12.5m (+22.5% YoY). The total FY16 dividend is up 36%, covered 3.4x, whilst net cash is £6.9m (+53%). FY16 represented another good year of execution, and FY17 has started well. The company's business mix is now more diverse across geographies (International accounted for 26% of total sales vs 21% in FY15) and we see CCT’s increasing diversity in retail distribution as both a further risk-mitigation and opportunity driver. We make no changes to our FY17 and FY18 PBT forecasts of £13.5m and £14.5m (albeit, we make some changes to the constituent parts) and introduce a FY19 PBT of £15.5m. We maintain our BUY and TP of 635p.
Today’s FY16 (y/e August) trading update reassures that CCT expects to deliver FY16 results “that will meet market expectations” driven by the broad-based performance of its key brands and product ranges. We therefore feel confident that our forecasted FY16 PBT of £12.5m will be achieved. We are also comforted by detailed commentary on; (1) the further strengthening of CCT’s diverse, ever-green brand portfolio which augurs well for FY17/FY18’s outlook for sales; and (2) CCT’s approach to managing currency risk and consequent mitigation efforts, given this is a key current investment theme in the stockmarket. CCT’s shares have underperformed markedly over the past three months (c.-15% relative to the broader stockmarket) which we attribute to the paucity of financial calendar events/newsflow on CCT at a time of particularly heightened investor appetite for company-specific news since the Brexit vote on June 23. We think today’s trading update should therefore reassure and prompt CCT’s shares to bounce to reflect CCT’s underlying fundamental positive trajectory. We reiterate our BUY.
H1FY16 results delivers three key better-than-expected investment positives; (1) underlying profit growth (+ 23%) exceeded sales growth (+ 12%), thereby demonstrating CCT’s highly attractive financial model built for operating leverage and further characterised by a strong balance sheet (net cash; £14.5m) and strong cash flow generation capabilities (CFO; £14.8m); (2) dividend increase of 40% to 7p (vs. PG est. +10%) underscores management’s confidence and visibility that CCT is well-positioned to accelerate sales and profits growth; (3) Teletubbies (for which CCT has the global master rights) is already a “standout performer” suggesting a much better-than-expected launch. Summary: No changes to FY16-FY18 PBT est., but the incrementally positive tone of the outlook statement, together with the accelerating broad-based momentum across CCT’s top 10 brands, product categories and geographies, suggests excellent scope for upgrades. We have even higher conviction in our BUY.
H1FY16 results delivers three key better-than-expected investment positives; (1) underlying profit growth (+ 23%) exceeded sales growth (+ 12%), thereby demonstrating CCT’s highly attractive financial model built for operating leverage and further characterised by a strong balance sheet (net cash; £14.5m) and strong cash flow generation capabilities (CFO; £14.8m); (2) dividend increase of 40% to 7p (vs. PG est. +10%) underscores management’s confidence and visibility that CCT is well-positioned to accelerate sales and profits growth; (3) Teletubbies (for which CCT has the global master rights) is already a “stand-out performer” suggesting a much better-than-expected launch. Summary: No changes to FY16-FY18 PBT est., but the incrementally positive tone of the outlook statement, together with the accelerating broad-based momentum across CCT’s top 10 brands, product categories and geographies, suggests excellent scope for upgrades. We have even higher conviction in our BUY.
We continue with Character Group (CCT) on the Conviction List 2016 as our key small cap BUY recommendation in the UK retail/consumer sector. CCT’s H1FY16 results are to be published on April 27th.
Today's AGM trading update shows that sales in FY16 so far (September to January) are up 6% over the same period last year. This is impressive given the strong comparative (+28% in FY15). CCT states that it remains “on track to meet current market expectations for the year ending 31 August 2016.” The sales performance is broad-based and we are particularly encouraged by management's tone around the very initial sell-out at UK retail of Teletubbies-related product (which we continue to view as a game-changer for CCT). We therefore reiterate our BUY.
CCT has delivered another positive profits surprise with a record FY15 PBT of £12.27m, c.12% ahead of our expectations [PBT £11m], albeit boosted by a £2.05m IFRS-driven positive non-cash impact relating to CCT's FX exposure principally to the strengthening US$. We also highlight the FY15 dividend is up 51.7%, covered 4.4x. We raise our FY16 and FY17 PBT estimates by 9% and 8% respectively. The global re-launch of the Teletubbies toy collection could well be a game-changer for CCT in FY16 and beyond, consequently driving significant upgrades to our FY17 estimates in particular if, as we anticipate, the company continues to execute well on its plans. Despite substantial share price outperformance [+146% rel. to FTSE All Share over the past 12 months], we highlight, as further share price drivers, the combination of (1) CCT's continued outperformance in the UK, thereby outpacing the growing [+5% YTD in 2015] UK toy retail market, one of the few real pockets of strength across the UK retail sector; (2) mounting expectations for Teletubbies which we think CCT is well positioned to meet and possibly exceed; and (3) CCT's potential and ability to produce further positive earnings surprises. This combination gives us the confidence to raise our Target Price by 9% to 635p [representing 26% upside potential], thereby maintaining our Buy recommendation.
Today's brief FY15 pre-close trading update reassures that “the Board fully expects to deliver a year end result in line with market expectations”. CCT increasingly deserves a mid-teens digit P/E multiple to reflect (1) our confidence in strong execution remains high, (2) market share gains, and (3) a financial model built for operating leverage which drives prospects for attractive and accelerating sales and earnings growth, underpinned by a self-funded, on-going multi-year share buyback programme (£41m spent in 10 years to reduce CCT's share capital base by c.61%). To reflect the continuing strong momentum on multiple levels, we increase our Target Price by 7% to 580p (from 540p), and retain our Buy.
