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Character Group – lower interims… but recovery underway?

By Steve Moore | Thursday 26 April 2018

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

With its shares down from 540p reached in September, Character Group (CCT) has announced results for its half year ended 28th February 2018 including “the directors remain optimistic that the business will see a return to its previous growth pattern during the second half of this financial year and this will be fully reflected and significantly strengthen the trading results for the financial year ending 31 August 2019". The shares have responded currently slightly further lower to 470p…

This is on the back of the half-year results from this designer, developer and international distributor of toys, games and giftware showing a pre-tax profit of £4.5 million on revenue, 18% lower than in the corresponding prior year period, of £50.5 million, generating earnings per share 38% lower at 17.0p. Particularly helped by a net £3.2 million working capital inflow, after £2.8 million of income tax and £2.1 million of dividends paid, net cash increased by £2.7 million to £14.3 million (currently equating to 68p per share) - and the dividend per share is to be increased by 22% to 11p.

However, current assets over liabilities were £2.4 million lower at £18.1 million, with noted “adverse foreign currency exchange movements in the period and the world-wide restructuring of Toys R Us, which had a direct, adverse impact on all our major international markets”.

It is though also stated “the calendar year has started very encouragingly, with the established brands and new ranges selling through extremely well at retail… the board remains confident in the group's ability to further profitably expand its presence both domestically and internationally in the years to come”.

There thus looks reason for optimism here – making a small purchase for the recovery understandable. However, I await further evidence of recovery before I'd be comfortable with more than a small, speculative buy.

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