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.

LONDON, FRIDAY, 16 MAY 2025

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 28 February 2025

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 28 February 2025

The Group's performance in maintaining profits and cash flow in the first half year period reflects the strength, depth and quality of our current portfolio of products.

Although Group revenue in the first half of the current financial year was c. 8% lower than 2024 at £53.0m (HY 2024 £57.6m), gross margins improved by 2.1 basis points to 29.3%, delivering pre-tax profits (before highlighted items) in line with those reported at the halfway point in 2024. The Group has continued to generate cashflow in the period and, as at 28 February 2025, had net cash balances of £16m (2024: £12.9m) and no long-term debt.

Overall, despite the harsh trading conditions experienced in the lead up to and through the all-important Christmas period, the Group's performance is testimony to the management's ability to read the market and produce and distribute products that capture the imagination of, and enable quality play by, the children that ultimately determine the success or failure of toy products.

GROUP TRADING

Revenue in the period at £53.0m was down against the comparable period last year (HY 2024: £57.6m; FY 2024: £123.4m).

Despite the reduction in HY1 sales, the Group is reporting a profit before tax and highlighted items of £2.1m (HY 2024: £2.1m; FY 2024: £6.6m), which is comparable to its performance in the first half 2024.

Earnings before interest, tax, depreciation and amortisation (EBITDA) were £3.7m (HY 2024 £3.7m; FY 2024: £10.1m).

Gross profit margin in the first half improved to 29.3%, compared to 27.2% in the same 2024 period and 26.5% for the 2024 financial year.

Underlying basic earnings per share before highlighted items were 8.59p (HY 2024: 8.72p; FY 2024: 29.76p). Diluted earnings per share, on the same basis, were 8.59p (HY 2023: 8.71p; FY 2024: 29.72p).

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 £1.1m. This compares to a profit of £0.2m shown in the corresponding period in 2024 and a loss of £0.97m reported in the year to 31 August 2024. 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 28 February 2025 were £38.7m (HY 2024: £38.7m; FY 2024: £38.6m). The Group generated cash from operations of £6.7m (HY 2024: £10.1m ; FY 2024: £14.9m ).

Inventories at the same date stood at £12.7m (HY 2024: £11.7m; FY 2024; £20.1m).

The Group has no long-term debt. At the end of the first half, net interest income was £0.1m (HY 2024: negligible; FY 2024: £0.1m). After making dividend payments of £2.05m and financing share buybacks of £0.86m, the Group had cash and cash equivalents of £16.0m at 28 February 2025 (HY 2024: £12.9m; FY 2024: £13.2m). In addition, the Group had unutilised headroom of over £50m under its banking and other finance facilities.

DIVIDEND

Taking account of the current uncertainty, the Board is declaring a reduced dividend at this interim stage of 3.0p per share (HY 2024: 8.0p; final dividend 2024: 11.0p). The dividend is covered approximately 2.86 times by underlying earnings per share.

The interim dividend will be paid on 25 July 2025 to shareholders on the register as at the close of business on 11 July 2025. The shares will be marked ex-dividend on 24 July 2025.

SHARE BUYBACK PROGRAMME

Shareholders passed a resolution at the 2025 Annual General Meeting authorising the Company to effect share buybacks (including by way of tender offers) of up to 2,815,000 issued ordinary shares of 5p each in the Company ("Ordinary Shares").  The Company announced a £2.0 million share buyback programme on 29 October 2024.  The Company has successfully bought back a total of 530,899 Ordinary Shares at a total cost (including dealing costs) of £1,376,529, leaving an unutilised capacity under the buyback programme of £623,471. The programme will end on 30 May 2025 or sooner if the total buying back under the scheme reaches £2.0 million (inclusive of the associated dealing costs). If the target of £2.0 million has not been reached by 30 May 2025, it is the Board's intention to seek to agree an extension to the programme with Panmure Liberum, the Company's broker who is conducting the programme on its behalf.  If agreed, details of any such extension will be announced on or about 30 May 2025.

TOTAL VOTING RIGHTS (TVR)

As at today's date, the Company's issued share capital consists of 20,226,558 Ordinary Shares. The Company holds 1,983,059 Ordinary Shares in treasury which do not carry voting rights and, accordingly, the total number of voting rights in Character is 18,243,499. The figure of 18,243,499 may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest, or change to their interest, in the Company under the FCA's Disclosure Guidance and Transparency Rules.

OUR PEOPLE

Once again on behalf of all stakeholders, the Board wants to thank everyone in the business for their unwavering focus, dedication and commitment all of which plays an important part in delivering the Group's goals despite turbulent trading conditions.

As announced on 28 January 2025, Hamun Shah was promoted to the position of Group Finance Director in succession to Kiran Shah, who continues in the role as Joint Managing Director.  The Board continues in its efforts to recruit a further independent, non-executive director, following the retirement of Clive Crouch at the 2025 AGM, and will update shareholders on the results of its search in due course. 

OUTLOOK

In the year ended 31 August 2024, sales to the USA amounted to c. 20% of Group revenue, with substantially all of the Group's products sold in the USA being manufactured in China. The significant increase in tariffs on imports to the USA from China immediately put the contribution derived from these sales in the second half of the year at risk as shipments were put on hold.  As announced in the Company's trading update on 11 April 2025, the Company has withdrawn its market guidance for the year ending 31 August 2025 given the uncertain impact on the Group of a volatile and evolving trade policy landscape. The 90-day reduction in tariffs between the USA and China announced on 11 May 2025 gives hope for a negotiated resolution, although this remains uncertain at this time. The uncertainty flowing from the imposition of these tariffs has been felt in other parts of the world as customers have become increasingly cautious and are not committing to orders to our expectations. This is impacting sales in all our key territories.  Despite this, the Board remains confident that the Group will be profitable in the current financial year as a whole, although it is too early to forecast short to medium term trading at this juncture.

The Group continues to have a strong balance sheet with healthy cash balances and, with the strength of its portfolio of products, the Directors are confident that the business can continue to ride out this current storm and emerge in good shape.

16 May 2025