Toy company Character (CCT:AIM) has proved its ability to stay ahead of the curve when it comes to pre-schoolers’ favourite toys, with its recently-launched Teletubbies range helping to boost first half revenues by 12% to £65.2 million.
We revealed the £110 million cap, up 2% to 522.5p, had seen strong initial sales of its stuffed talking Teletubbies toys in March, when we added it as a SHARES Play of the Week ahead of what we expected to be strong interim results.
Character doesn’t disappoint, saying its Teletubbies range has already become a stand-out performer since hitting the shelves in January 2016. It’s on the cusp of launching a range of toys based on the 1970s action figure Stretch Armstrong, which is being developed into a US-based TV series by Netflix.
The double-digit sales growth has also been helped by continued demand for Peppa Pig as well as the group’s progress in international markets, which now comprise 24% of total revenue compared with 17% the previous year.
Even more impressive is the fact Character’s underlying pre-tax profit growth, up 23% to £8.6 million, exceeds its revenue growth. Panmure Gordon analyst Peter Smedley says this demonstrates Character’s attractive financial model ‘built for operating leverage and further characterised by a strong balance sheet’.
Character’s net cash stands at £14.5 million and it has no long-term debt.
The group has increased the interim dividend by 40% to 7p – far exceeding Panmure’s forecast of a 10% rise – which shows its confidence in accelerating sales and profits growth.
Panmure’s target price is 635p, implying 21.5% upside.