Toys business bemoans tough markets ahead of important Christmas trading

Oldham-based toys firm the Character Group reported better annual revenues, although pre-tax profits slipped back slightly due to weakness in the market and the weakness of Sterling.

In its annual results to August 31 announcement today, it revealed sales of £120.4m, up from £106.2m, while pre-tax profits of £11.1m compared with £11.6m last year.

Net cash levels stood at £6.5m, down from £15.6m a year ago.

The board has recommended an 8.3% increase in the dividend per share, from 23p to 26p.

During the year the board said Character retained its market share with the overall business performing well, despite tough and challenging markets

The group range will be strengthened further by some exciting new products that will be launched at The London Toy Fair in January 2020 and through to the Spring/early Summer 2020.

In-house developed lines based on licensed-in brands such as Peppa Pig, Teletubbies, Scooby-Doo, Doctor Who and Stretch all feature for 2020, while the portfolio features exciting branded product lines produced by overseas toy companies, which Character distributes on an exclusive basis in its domestic territories, including Pokémon, Little Live Pets, Shimmer and Sparkle, Mashems and Treasure X.

New third-party lines are in negotiation and will be added to the portfolio in 2020.

A collaboration with Moose Toys involves production of an imaginative new range of collectable characters under the Goo Jit Zu brand

Character anticipates achieving significant sales and distribution in more than 30 global territories by the end of the current year and further developments for the Goo Jit Zu branded range include a series of Marvel collectable characters, for which the group has secured a European and Middle Eastern licence from Disney.

Additional new licence have been signed with Entertainment One to produce a range of wooden Peppa Pig toys and products.

This multi-territory licence deal, which includes Europe and Australia, will run through to December 2022. The current Peppa Pig licence is extended until June 30, 2021.

Character said the year under review was challenging for the group.

The principal factors in this were the failure of the Scandinavian toy market to recover fully from the demise of Top Toy, formerly the largest toy retailer in that market, the continued decline of the UK toy market, believed by the board to be as much as 15% over the past two years, and the weakness of Sterling.

These factors, together with the well-publicised effects of Brexit on the entire UK retail market, have had a negative impact on the group as a whole.

Although this was somewhat disappointing and led to a downward revision in market expectations for the year under review and for the current financial year, the group’s market share in the UK did not materially change in the period.

Looking ahead, the group said the challenging trading in prospect for Christmas 2019 will affect the first half of its current financial year.

“By contrast, the prospects for the second half look positive. Goo Jit Zu, Goo Jit Zu Marvel and the new Peppa Pig wooden range will feature increasingly in sales in the current year and sales will be further bolstered with the launch of the exciting new concepts and products that we are bringing to market in 2020.

“As well as positively impacting domestic sales, we anticipate that our international sales penetration for these lines in the second half of the current financial year and beyond will be significant and enable the group to further increase its sales growth beyond its domestic markets.”

It said the strength of the group’s portfolio of brands and products that Character is taking into 2020 greatly underpins its confidence that it will achieve market expectations for the current financial year.

The board will further update shareholders on the Christmas trading period and prospects at the group’s AGM on January 17, 2020.