LONDON, THURSDAY, 9 MAY 2024

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 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

The Character Group plc

(the "Company" or "Group" or Character")

Designers, developers and international distributor of toys, games and giftware

HALF-YEAR FINANCIAL REPORT

for the six months ended 29 February 2024

"We have been encouraged by the enthusiasm with which our product portfolio has been received by our customers.  The industry buzz around some of our new releases, such as Terror Fried, and new additions to our established lines, like Goo Jit Zu, is very encouraging too." 

"The Group has a strong portfolio of products, underpinned by a strong balance sheet, and has a net cash position with substantial unutilised working capital facilities in place.  On the back of our first half-year's performance and these signs of the Group's robust health, we anticipate profit before tax and highlighted items in respect of the full year to 31 August 2024 will exceed current market expectations.  The Board is comfortable that the Group is on course to meet its targets."  

The Character Group plc

(the "Company" or "Group" or "Character")

Designers, developers and international distributor of toys, games and giftware

HALF-YEAR FINANCIAL REPORT

for the six months ended 29 February 2024

INTRODUCTION

As indicated in our trading update in January 2024, we are pleased to report that the pre-tax profit (excluding highlighted items) for the six months ended 29 February 2024 has increased to £2.1m compared to the previous half year of £0.5m.  This increase in profit is despite the turnover remaining constant at £57.6m.

During the half-year, we have also managed to reduce the inventory levels by £6.4m to £11.7m (HY 2023: £18.1m).  Cash generated from operations amounted to £10.1m (HY 2023: cash utilisation £2.8m).  The cash balance at 29 February 2024, after paying dividends of £2.1m and financing share buy-backs during the period of £0.7m, totalled £12.9m (2023: £10.7m).

The Group continues to have a robust balance sheet with substantial unutilised working capital facilities.

GROUP TRADING

Revenue in the period at £57.6m was consistent with the comparable period last year (HY 2023: £57.9m; FY 2023: £122.6m).

The Group reported profit before tax and highlighted items of £2.1m (HY 2023: £0.5m; FY 2023: £5.2m), the increase in profit being mainly due to reduced selling and distribution costs.  This primarily related to the logistics costs associated with the Group's Scandinavian business being lower, as inventory was significantly reduced from last year, and increased influencer sales in our UK domestic market producing a lower advertising to sales ratio.

Earnings before interest, tax, depreciation and amortisation (EBITDA) were £3.7m (HY 2023 £2.7m; FY 2023: £8.9m).

Gross profit margin in the period improved slightly to 27.2%, compared to 26.9% in the same six month period in 2023 and 26.7% for the August 2023 financial year. 

Underlying basic earnings per share before highlighted items improved to 8.72p (HY 2023: 0.54p; FY 2023: 20.15p).  Diluted earnings per share, on the same basis, were 8.71p (HY 2023: 0.54p; FY 2023: 20.00p).

A significant proportion of the Group's purchases are made in US dollars.  The business is therefore exposed to foreign currency fluctuations and manages the associated risk through the purchase of forward exchange contracts and derivative financial instruments.  Under International Financial Reporting Standards (IFRS), at the end of each reporting period the Group is required to make an adjustment in its financial statements to incorporate a 'mark to market' valuation of such financial instruments.  The 'mark to market' adjustment for the financial period under review results in a profit of £0.2m.  This compares to a loss of £0.3m shown in the corresponding period in 2023 and a loss of £0.5m reported in the year ended 31 August 2023.  These 'mark to market' adjustments are non-cash items, calculated by reference to unpredictable and sometimes volatile currency spot rates at the respective balance sheet dates.  To present the results on a 'normal' basis, these 'mark to market' adjustments on FX derivative positions are excluded, although shown separately as 'highlighted items' to demonstrate the 'underlying' position.

FINANCIAL POSITION, WORKING CAPITAL & CASH FLOW

The Group's net assets at 29 February 2024 were £38.7m (HY 2023: £37.1m; FY 2023: £39.4m).  During the period, the Group generated cash from operations of £10.1m (HY 2023: £2.8m cash utilisation; FY 2023: £0.1m cash generated).  The Group's inventory stood at £11.7m (HY 2023: 18.1m; FY 2023; £18.0m). 

The Group has no long-term debt.  Net interest charges on the use of working capital facilities during the period were negligible (HY 2023: £0.1m; FY 2023: £0.1m).  After dividend payments and financing of share buybacks, the Group had cash and cash equivalents of £12.9m (HY 2023: £10.7m; FY 2023: £9.6m) at the end of the half-year period.  In addition, the Group has unutilised headroom of over £50.0m under its banking and other finance facilities.

DIVIDEND

The Board remains committed to maintaining the dividend.  The Directors are, therefore, declaring an interim dividend of 8.0p per share (HY 2023: 8.0p; final dividend 2023: 11.0p). 

The interim dividend will be paid on 26 July 2024 to shareholders on the register as at the close of business on 12 July 2024.  The shares will be marked ex-dividend on 11 July 2024.

SHARE BUYBACK PROGRAMME

Shareholders passed a resolution at the 2024 Annual General Meeting authorising the Company to effect share buybacks (including by way of tender offers) of up to 2,890,000 issued ordinary shares of 5p each in the Company ("Ordinary Shares"). 

On 6 February 2024, the Company announced a £1.0 million share buyback programme as part of its strategy to reduce the Company's share capital.  Given the success in buying back 365,770 Ordinary Shares in just six weeks, the Board resolved to extend the buyback by up to a further £1.0 million on 3 April 2024. The Company has successfully bought back a total of 500,888 Ordinary Shares at a total cost (excluding dealing costs) of £1.34 million, leaving an unutilised capacity under the authority granted at the 2024 AGM of 2,389,112 Ordinary Shares.  The weighted average price paid per share is £2.67.

The Company will continue to make regulatory announcements in respect of its repurchases of Ordinary Shares, as required by UK MAR and the AIM Rules.

TOTAL VOTING RIGHTS (TVR)

As at today's date, the Company's issued share capital consists of 20,965,041 Ordinary Shares.  The Company holds 2,100,159 Ordinary Shares in treasury which do not carry voting rights and, accordingly, the total number of voting rights in Character is 18,864,882.  The figure of 18,864,882 may be used by shareholders as the denominator for the calculations by which they will determine, under the FCA's Disclosure Guidance and Transparency Rules, if they are required to notify their interest, or change to their interest in the Company.

OUR PEOPLE

We can never say enough about the unwavering commitment and dedication from our personnel around the globe.  Through both good and challenging times, they have maintained their enthusiasm, focus and 'can do' attitude in tackling all obstacles encountered in recent years.  Their single-minded determination is shared from the warehouse floor through to the boardroom, with each taking inspiration from the selfless example of others in the quest to restore the business to profitable growth.  We thank each and every one of them for their support and belief in the Group's strategy and their diligence in implementing it.

OUTLOOK

Following the launch of the Group's spring/summer catalogue, we have been encouraged by the enthusiasm with which our product portfolio has been received by our customers.  The industry buzz around some of our new releases, such as Terror Fried, and new additions to our established lines, like Goo Jit Zu, is very encouraging too.  We anticipate that the strength of our offering will allow us to at least maintain our market share in our domestic territories and increase international sales, particularly in the US.

The Group has a strong portfolio of products, underpinned by a strong balance sheet, and has a net cash position with substantial unutilised working capital facilities in place.  On the back of our first half-year's performance and these signs of the Group's robust health, we anticipate profit before tax and highlighted items in respect of the full year to 31 August 2024 will exceed current market expectations.  The Board is comfortable that the Group is on course to meet its targets.  

The Company looks forward to updating shareholders on its progress in due course.

9 May 2024