Character takes hit in first half

Firm reports loss in first six months of the year due in part to Woolworths? administration.
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Group sales in the six-month period, ended February 28th, amounted to £37.8 million, down 22 per cent compared with the same period in 2008 of £48.6 million.

The operating loss was £3.74 million compared to a profit of £3.4 million for the period in 2008. This included a loss of £1.06 million for the debt suffered due to Woolworths going into administration.

Basic loss per share was 8.44 pence per share compared to earnings of 5.51 pence at 2008 half-year point and 12.03 pence at the financial year-ended August 2008.

Cash and cash equivalents amounted to £3.8 million, against £5.4 million year-on-year. The group currently has no borrowings and has unused finance facilities available totalling approximately £5.65 million.

Richard King, chairman commented: “The group has had its share of difficulties which, as anticipated, resulted in a trading loss for the first half of this financial year.

“However, I am pleased to note that, despite the unprecedented economic turmoil, the group is beginning to benefit from its cost control programme and new product ranges coming on stream, both of which provide an improved trading platform.

"Overall, we have renewed confidence for the medium term even though the outlook will remain challenging.”

Summing up trading to date, King continued that the six-month period has already been one of two halves.

The first four months saw the failure of Woolworths, one of Character's key customers and a major toy retailer.

Margins were also adversely impacted by the need for placement of excess stocks to ensure that the Groups cash flow remained in good shape. This situation was further exacerbated by a low consumer confidence in the winter trading period

The impact of adverse currency movements and the higher costs of goods and services out of the Far East also impacted the first four months.

In the last two months of the first half of the current financial year, January and February, Character reported a marked improvement in trading with solid revenues meeting expectations.

The firm has managed to re-align its promotional spend to the revised sales levels and maintained these costs within budget.

Throughout these months, the company also saw a stabilisation of margins, the fluctuations in currency movements normalising and benefits from its cost base reduction programme.

For the future, the group is predicting that subject to a return to a more normal marketplace, acceptable margin levels should be maintained during the second half with a range of product development including the licensed HM Forces range.

King continued: “Whilst we anticipate trading profitably during the remainder of the financial year, we do not expect to recover the losses of the first half, in full."

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