Character Group Net Income dropped on 17.8% and EBITDA Margin decreased slightly on 1.4 pp from 12.8% to 11.5%
04 Dec 2019 • About Character Group (
$CCT) • By InTwits
Character Group reported FY2019 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Character Group has low CAPEX intensity: 5 year average CAPEX/Revenue was 0.3%.
- In the last 5 years the company invested considerably less than D&A: £2m vs. £4m. In FY2019 this situation was still the same: CAPEX was 0 while D&A was 2
- The company has highly profitable business model: ROIC is 21.1%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Character Group's Revenue surged on 13.4%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.9 pp from 8.2% to 10.1% in FY2019.
Gross Margin showed almost no change in FY2019. During FY2015-FY2019 Gross Margin bottomed in FY2016 at 31.6% and was growing since that time. SG&A as a % of Revenue increased slightly on 1.4 pp from 23.7% to 25.1% in FY2019. During FY2015-FY2019 SG&A as a % of Revenue bottomed in FY2016 at 21.1% and was growing since that time. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in FY2019.
Net Income margin decreased on 2.5 pp from 9.0% to 6.6% in FY2019.
Investments (CAPEX, working capital and M&A)
In FY2019 Character Group had CAPEX/Revenue of 0.37%. The company's CAPEX/Revenue showed almost no change from FY2016 to FY2019. Average CAPEX/Revenue for the last three years was 0.30%. During the last 5 years CAPEX as a % of Revenue bottomed in FY2016 at 0.20% and was growing since that time.
Inventories as a % of Revenue increased on 3.4 pp from 10.3% to 13.6% in FY2019.
Character Group has spent £9m on M&A in FY2019 which accounts for 7.4% of revenue.
Return on investment
The company operates at high and attractive ROIC (21.1%) and ROE (23.8%). ROIC decreased on 2.3 pp from 23.5% to 21.1% in FY2019. ROE decreased on 9.0 pp from 32.8% to 23.8% in FY2019. ROIC followed a declining trend at -4.3 pp per annum in the last 5 years. ROE declined at -13.9 pp per annum in FY2015-FY2019.
Leverage (Debt)
Company's Net Debt / EBITDA is -0.5x and Debt / EBITDA is 1.6x. Debt surged on 17.9% while cash dropped on 13.4%.
Character Group has good short term financial stability: Interest coverage ratio (ICR) is 51.0x. Character Group has no short term refinancing risk: cash is higher than short term debt (141.8%).
Average interest expence charged on company's debt was 1.0% in FY2019.
Valuation and dividends
The company's trades at EV/EBITDA 5.1x and P/E 9.8x.
The company paid 63.3% of Net Income as dividends in FY2019.
Management team
Insider ownership is 23.4%. Insider ownership didn't change in 2019.
The company has 212 employees. The number of employees surged on 14.0%. Average revenue per employee in FY2019 was £568,000 and it decreased slightly on 0.55%.
Financial and operational results
FY ended 31 Aug 2019
Character Group ($CCT) key annual financial indicators| mln. £ | 2015 | 2016 | 2017 | 2018 | 2019 | 2019/2018 |
|---|
P&L
|
|---|
| Revenue | 99.1 | 121.0 | 115.3 | 106.2 | 120.4 | 13.4% |
| Gross Profit | 36.7 | 38.3 | 37.5 | 36.3 | 41.6 | 14.4% |
| SG&A | 25.1 | 25.6 | 24.6 | 25.2 | 30.2 | 19.8% |
| EBITDA | 14.0 | 15.9 | 16.1 | 13.6 | 13.8 | 1.3% |
| EBIT | | | | 11.7 | 11.7 | -0.3% |
| Interest expence | | | | 0.1 | 0.2 | 236.8% |
| Tax | | | | 2.1 | -2.3 | -207.8% |
| Net Income | 10.2 | 10.8 | 10.1 | 9.6 | 7.9 | -17.8% |
| Stock Based Compensation | | | | 0.1 | 0.2 | 206.5% |
Balance Sheet
|
|---|
| Cash | 25.8 | 28.6 | 28.8 | 34.6 | 30.0 | -13.4% |
| Inventory | | | | 10.9 | 16.4 | 50.6% |
| Short Term Debt | 21.2 | 21.6 | 17.2 | 19.1 | 21.2 | 11.0% |
| Long Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 1.3 | |
Cash flow
|
|---|
| Capex | 0.3 | 0.2 | 0.2 | 0.3 | 0.4 | 37.7% |
| Dividends | | | | 4.0 | 5.0 | 25.0% |
| Acquisitions | | | | | 8.9 | |
Ratios
|
|---|
| Revenue growth | 1.2% | 22.1% | -4.7% | -7.9% | 13.4% | |
| EBITDA growth | 42.7% | 13.5% | 1.1% | -15.2% | 1.3% | |
|
|---|
| Gross Margin | 37.0% | 31.6% | 32.6% | 34.2% | 34.5% | 0.3% |
| EBITDA Margin | 14.1% | 13.1% | 13.9% | 12.8% | 11.5% | -1.4% |
| EBIT Margin | | | | 11.0% | 9.7% | -1.3% |
| SG&A, % of revenue | 25.3% | 21.1% | 21.3% | 23.7% | 25.1% | 1.4% |
| SBC, % of revenue | | | | 0.1% | 0.2% | 0.1% |
| Net Income Margin | 10.3% | 8.9% | 8.7% | 9.0% | 6.6% | -2.5% |
| CAPEX, % of revenue | 0.4% | 0.2% | 0.2% | 0.3% | 0.4% | 0.1% |
|
|---|
| ROIC | 37.3% | 33.7% | 29.9% | 23.5% | 21.1% | -2.3% |
| ROE | 81.3% | 56.5% | 40.4% | 32.8% | 23.8% | -9.0% |
| Net Debt/EBITDA | -0.3x | -0.4x | -0.7x | -1.1x | -0.5x | 0.6x |
| Interest expence / Average debt | | | | 0.4% | 1.0% | 0.6% |
People
|
|---|
| Insider ownership | | | | 23.4% | 23.4% | 0.0% |
| Employees | | | | 186 | 212 | 14.0% |
| Revenue/Employee, th. £ | | | | 571 | 568 | -0.5% |
Peers in Leisure Goods
Below you can find Character Group benchmarking vs. other companies in Leisure Goods industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Konami Corp ($KNM) | 0.3% | 14.6% | -8.0% | 4.2% | |
| Lg Electronics Inc ($39IB) | -4.3% | -2.0% | 10.9% | -0.1% | |
| Lightwaverf ($LWRF) | -30.9% | -31.3% | 110.1% | -7.2% | |
| Hornby ($HRN) | 12.8% | -4.1% | -15.0% | -24.8% | |
| |
|---|
| Median (4 companies) | 5.0% | -3.1% | -6.1% | -3.6% | |
|---|
| Character Group ($CCT) | | 22.1% | -4.7% | -7.9% | 13.4% |
Top companies by Gross margin, %
| Top | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Konami Corp ($KNM) | 32.8% | 35.0% | 38.6% | 40.6% | |
| Hornby ($HRN) | 46.7% | 39.0% | 38.3% | 38.6% | |
| Lightwaverf ($LWRF) | | 32.5% | 35.5% | 29.3% | |
| Lg Electronics Inc ($39IB) | 22.8% | 24.8% | 23.9% | 24.6% | |
| |
|---|
| Median (4 companies) | 29.4% | 29.3% | 32.5% | 34.0% | |
|---|
| Character Group ($CCT) | 37.0% | 31.6% | 32.6% | 34.2% | 34.5% |
Top companies by EBITDA margin, %
| Top | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Konami Corp ($KNM) | 16.5% | 21.5% | 22.9% | 24.1% | |
| Lg Electronics Inc ($39IB) | 5.5% | 5.6% | 6.9% | 7.7% | |
| Hornby ($HRN) | 7.4% | -17.3% | -11.9% | -16.4% | |
| Lightwaverf ($LWRF) | | -43.8% | -15.2% | -65.8% | |
| |
|---|
| Median (4 companies) | 7.4% | -6.6% | -2.5% | -4.4% | |
|---|
| Character Group ($CCT) | 14.1% | 13.1% | 13.9% | 12.8% | 11.5% |
Top companies by CAPEX/Revenue, %
| Top | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Konami Corp ($KNM) | 11.8% | 7.6% | 6.5% | 7.4% | |
| Lg Electronics Inc ($39IB) | 3.1% | 3.6% | 4.2% | 5.2% | |
| Hornby ($HRN) | 7.0% | 5.8% | 3.7% | 4.6% | |
| Lightwaverf ($LWRF) | | 0.3% | 0.9% | 2.1% | |
| |
|---|
| Median (4 companies) | 3.1% | 3.3% | 3.8% | 4.9% | |
|---|
| Character Group ($CCT) | 0.4% | 0.2% | 0.2% | 0.3% | 0.4% |
Top companies by ROIC, %
| Top | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Konami Corp ($KNM) | 6.6% | 10.4% | 15.0% | 17.5% | |
| Lg Electronics Inc ($39IB) | 5.8% | 6.5% | 11.3% | 11.0% | |
| Hornby ($HRN) | 0.5% | -36.6% | -28.0% | -32.5% | |
| Lightwaverf ($LWRF) | | -71.4% | -63.2% | -85.2% | |
| |
|---|
| Median (4 companies) | 6.6% | -14.0% | -8.3% | -10.8% | |
|---|
| Character Group ($CCT) | 37.3% | 33.7% | 29.9% | 23.5% | 21.1% |
Top companies by Net Debt / EBITDA
| Top | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Lg Electronics Inc ($39IB) | 2.0x | 1.8x | 1.4x | 1.4x | |
| Konami Corp ($KNM) | -0.6x | -1.4x | -2.0x | -2.2x | |
| |
|---|
| Median (2 companies) | 1.7x | 0.6x | -0.9x | -0.4x | |
|---|
| Character Group ($CCT) | -0.3x | -0.4x | -0.7x | -1.1x | -0.5x |
