The Character Share Discussion Threads

[mcartdon] 27/7/2017 00:27

I would agree but in 20 years, we have had no change 20% profit dividend and no interest in a takeover. the cash balance has been building over 7 years the directors have taken 3/4 of the profits or stored them. what for i fail to see, and am suspicious its an offer at a low price from a connected party with a big interest in the company with secondary rewards for directors

[dan_the_epic] 26/7/2017 21:21

The buybacks are limited by regulations about quantities vs. liquidity. They did some when liquidity allowed (2015), but that has tailed off again. I personally wouldn't say a near 4.5% rebased dividend is a low percentage return, though would agree that I wouldn't buy here if I solely was after a dividend (after accounting for the spread, it's not worth it).

I think growth kickstarts on from here. Look, I totally agree, and in that article admit that holding a large cash balance doesn't look great, but at the same time, I'm not going to penalise them for having a very cash generative model. There are a multitude of things they could do with that cash, and barring some bizarre decision, it's hard to see that it wouldn't enhance the share price.

A special dividend, a la Avesco, wouldn't be a bad idea. This valuation is crazy for the value on offer. Run any basic DCF on this and the intrinsic value here is hugely different to the current price. Reckon the first leg of that was realised in 2015, but expectations and metrics have rebased again and catalysts for a rerating are back in play. Time will tell. In reality, if any suitor did swoop on Character (and I'm definitely not saying that there is one), I'd have thought they'd have to play a pretty hefty premium on this (north of 40%).

[mcartdon] 26/7/2017 21:11

there really have been no buybacks for 5 years now that is a myth the number of shares has remained the same out of treasury, so no gain for ordinary shareholders they have just bought the free shares for directors etc.
the dividend has a low percentage return for the share price,
the cash is wasted where is it deposited (they have no bank income). and they dont borrow much. so they arnt saving on borrowing. they have not deposited it sensibly in euros or dollars? so where is it it funds the cycle of stock but no sign of that growing the buisness

[dan_the_epic] 26/7/2017 15:10

If that is the sole reason why this trades on a prospective forward E ex cash of less than 7x then I am more than happy to keep stocking up here.

Works out closer to 6x with salaries ex'd out

[mcartdon] 26/7/2017 12:11

The management seems to have gone to sleep for three years, but they still collect the pay and have an 18m buffer to make sure they keep getting it, how do they justify no return on 20m cash. rather than intermittent borrowing and 5% return on a performing asset. time they were taken over and the business managed properly.
thats why its so lowly rated.

[dan_the_epic] 26/7/2017 11:03

I've chucked a topic post on Stockopedia - someone feel free to link it here.

[rcturner2] 26/7/2017 08:57

100p in cash per share as well.

[dan_the_epic] 25/7/2017 22:45

A punt on this has got to be better than a punt on 90% of other stocks :P. Think this is one of those rare occasions where the market is just a bit slow to latch on. A bit like it, and I, was back at 200p. It pains me greatly to now be buying in at a price 150% higher, but on cold hard facts, I think this is only halfway through its journey. Take care

[texaspete2] 25/7/2017 22:39

Thanks for the feedback Dan, I'll reflect and work out whether to take a punt on this one

[dan_the_epic] 25/7/2017 22:22

Pete, to quote Panmure Gordon post H1, having them no doubt spoken to management:

"Highly confident that our FY17 forecasts will be achieved".

On that they comment that trading had picked up during the first 2 months of H2, and then those cost savings also coming through for H2. Exchange rate being closer to 1.3 also helps. Panmure comment "we make no changes to our still conservatively framed FY17, FY18 and FY19" forecasts and that FY17 was for 13.5m

End of the day, think this is a stock where, even if there is a 5% miss on the bottom line, which I seriously doubt, you just accumulate more. Any reasonable DCF here generates huge upside, as do any peer multiple comps (well over a 35% discount to peers). If this doesn't re-rate again in the mid-term then I will be absolutely astonished.

[dan_the_epic] 24/7/2017 12:22

I'm in here. Cheap as chips valuation, a stack of cash and earnings forecasts that look too low from 2018 onwards, Panmure Gordon admit they are conservative as such.

Sure it's not 200p anymore but great dividend and think this hits 750p within 18 months, and even that probably only puts it on a rating closER to other global toy peers.

end game here I see a takeover. Superb low capital intensity market dynamics, great margins and return on capital, and a reputation and distribution moat.

Honestly, very little not to like. Product cycles smoothening all the time and balance sheet provides clear optionality IMO.

[tratante] 20/6/2017 10:46

September, judging by last year, don't hold your breath. Pretty boring in the meantime.

[h1a3] 08/6/2017 11:52

All quiet on CCT. When do we expect a trading update?

[h1a3] 11/5/2017 16:16

Another big buy today, £1M +. Another serious investor or a top up?

[fido] 08/5/2017 18:43

Todays RNS shows us that its Otus Capital that has been doing the buying and have gone above 5%

[davebowler] 08/5/2017 16:52

From I.C.
High quality global journalism requires investment. Please share this


Buy: Character Group (CCT)

International sales were down, but importantly they remained flat in the UK — the company’s largest market, writes Julia Faurschou.

Sample the FT’s top stories for a week
You select the topic, we deliver the news.

Unfavourable currency movements and weak US sales took their toll on profits at Character Group during the first half. Shares in the maker of Little Live Pets and Teletubbies toys fell in early trading, but soon rebounded on the back of a good second-half outlook, suggesting that Peppa Pig and other core brands could bring home the bacon.

The group makes most of its purchases in US dollars, so weak sterling reflected on the income statement. The underlying gross profit margin fell by 170 basis points. Lacklustre sales in the US further hurt the top line, and overall gross profit fell 13 per cent to £19.2m. Still, cash generation remained good, and the net cash pile increased to £18.6m from £14.5m a year ago.

Cost-cutting measures are on the way, including more cost-effective packaging and pricing negotiations with suppliers, aimed specifically at compensating for sterling’s fall.

Analysts at Panmure Gordon expect adjusted profit before tax of £15.4m in the year to August 2017, giving earnings per share of 49.9p, rising to £16.4m and 53.6p in full-year 2018 (from £15.1m and 47.7p in full-year 2016).

The cash-generative nature of the business should see it through the currency squeeze. The shares are trading at a fairly average 10 times forward earnings, which does not do justice to the company’s growth prospects.

[h1a3] 02/5/2017 15:44

Hi Fido,
The Share price recently has been rather subdued and when I saw these buys, I wondered if it is CCT buying them? It will be good to know and if it CCT then we should hear soon.

[fido] 02/5/2017 15:01

2 100k buys at the same time first thing totaling a £1 million investment.
That is serious money into Character.

[simso] 01/5/2017 18:48

I have added to my holding here post the results. One question I would appreciate understanding better, if any longer term holders know the answer. I understand that CCT does not actually own the IP of key brands in UK like Teletubbies and Peppa Pig..but has a license to operate them. Is there a risk of losing the Licence to one of its key toys...or has the business acquired the right for many years ahead? Thanks.

[stoxx67] 27/4/2017 14:35

agree mcartdon

[mcartdon] 27/4/2017 12:42

If you look back historically they were turning over 100 m many years ago 1999,
the cycle of growth and collapse is going nowhere.this is the growth i refer to.

the dividend is 2.7% inflation is 2% and rising rapidly.
a real return is in order of 5-7% with dividend and share price.
over the last two years shareholders have received no share growth a low return on dividend with respect to earnings.

the shares are 98m less 18 m cash
80 m in prudential bond made 5-6% last year returned to owner.
why take the risk for 2.7% nullified by share stagnation

[darlocst] 27/4/2017 12:37

Panmure Gordon put out a bullish note this morning post results, this snippet re H2 was reassuring:

(2) our
conversations with management that current trading has picked up in the UK
(recalling that the UK represents 76% of group sales) in the first two months of
H2FY17, slightly ahead of the growth in the UK Toy market; (3) our conversations with
management suggest that the initial favourable reaction of UK retailer customers to
CCT’s 2017 product range including major range extensions for most of the top 10
cornerstone brands, is now translating into a high single digit/low double-digit
increase in product listings for the second half of calendar 2017 with many of CCT’s
major UK retailer customers