Toy company Character (CCT:AIM) says it’s on track to deliver another year of solid growth following strong sales over the Christmas period.
Sales in September to January are up 6% year-on-year, an impressive performance given the strong 28% growth it netted in the year to 31 August 2015.
The news sends shares in the £99.5 million cap up 5.5% to 505p.
Character says the performance of its cornerstone brands, which include Peppa Pig, Fireman Sam and Little Live Pets, is very encouraging while early reaction to its new Teletubbies range of toys is ‘enthusiastic’.
‘We fully expect our underlying performance to deliver another year of solid progress and, we remain on track to meet current market expectations for the year ending 31 August 2016,’ the company says.
Character’s performance is being supported by the strong UK toy industry, with sales up 4.7% in 2015, according to NPD.
Despite the stock rising by 49% in the last 12 months Character trades on an attractive price to earnings ratio of 11.1. Panmure Gordon analyst Peter Smedley says this doesn’t reflect the momentum and pipeline of opportunities in the business.
‘We also highlight that toy industry stocks generally outperform other stocks in times of economic difficulty and/or stock market uncertainty as we believe investors are attracted to the stability of the toy industry (e.g. parents typically reduce spending on themselves before they do on their children), its strong cash flow characteristics, and high dividend yields,’ he says.
Panmure’s target price is 635p, implying 25.7% upside.