Character celebrates Christmas early

Toy maker Character is back to its old self. An awful first half of 2013 plunged the firm deep into the red, but profits are back to pre-slump levels, and trading in the run-up to Christmas has been better than expected. That's why the share price is up 11% to 247p, its highest since January 2000.

Profit before tax from continuing operations came from almost nothing last year to £7.1 million in the year ended 31 August 2014, the same as in 2013. And revenue jumped by 46% to £97.9 million, driven by sales of Peppa Pig toys, Minecraft, Doctor Who dolls and Fireman Sam characters.

That's impressive given a struggling retail sector plunged Character to a £1.9 million loss in the first half of 2013. This time round, overseas revenue surged by more than 40%, and after raising the final dividend by a fifth, the full-year payout jumps by 10% to 7.25p.

"This new financial year has started off well, with very pleasing sales at the consumer level which in the lead up to the crucial Christmas season is building ahead of our expectations, and we look forward to further growth in the current year," says executive chairman Richard King.

Analysts at Charles Stanley are chuffed. The broker has raised profit forecasts for 2015 by 25% to £10 million and upgraded the shares to buy with 300p price target. Yet, even at that price, Character shares would trade on just 8 times forward earnings. And the investment case is underpinned by an ongoing share buy-back scheme and prospective dividend yield of 3.2%.

While the shares do appear technically overbought, according to the relative strength index (RSI), the attractions of Character are clear. And that overboughtness may prove temporary, and a re-rating during 2015 would be no surprise.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.