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Character Group – full-year trading update, purchase for recovery still understandable?

By Steve Moore | Friday 14 September 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.

In April with shares in toys, games and giftware group Character (CCT) down at 470p, I concluded that there looked reason for optimism, making a small purchase for the recovery understandable but that I awaited further evidence of recovery before I'd be comfortable with more than a small, speculative buy. Today a “Trading Update”

This includes “with Character's UK domestic business delivering record sales, the trading results for the financial year ended 31 August 2018 will comfortably reach market expectations” and “we continue to witness positive listings and strong demand from our customers for our core ranges and new introductions. As a business, we feel confident of the prospects for the autumn/winter trading period, which includes the all-important Christmas season”.

The shares have currently responded 36p higher on the day to 536p. A broker to the company, Allenby, was forecasting earnings per share of 43.6p for the year, rising to just over 50p next year. At the half-year, cash (net) was £14.3 million (equating to circa 67p per current share) and current assets over total liabilities £18.1 million.

These suggest the current valuation still far from demanding. However, I note adjusted earnings per share were more than 52p in the prior year and more than 47p in the year before that. As such, and with the full results detail scheduled for 29th November, presently still a small, speculative buy.

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