Half-year Results

HALF-YEAR FINANCIAL REPORT

for the six months ended 29 February 2024

"We have been encouraged by the enthusiasm with which our product portfolio has been received by our customers. The industry buzz around some of our new releases, such as Terror Fried, and new additions to our established lines, like Goo Jit Zu, is very encouraging too."

"The Group has a strong portfolio of products, underpinned by a strong balance sheet, and has a net cash position with substantial unutilised working capital facilities in place. On the back of our first half-year's performance and these signs of the Group's robust health, we anticipate profit before tax and highlighted items in respect of the full year to 31 August 2024 will exceed current market expectations. The Board is comfortable that the Group is on course to meet its targets."

FTSE sector : leisure: FTSE AIM All-share: symbol : CCT: Market cap : £52.16m Copies of this statement can be viewed at www.thecharacter.com . Product ranges can also be viewed at www.character-online.co.uk .

As indicated in our trading update in January 2024, we are pleased to report that the pre-tax profit (excluding highlighted items) for the six months ended 29 February 2024 has increased to £2.1m compared to the previous half year of £0.5m. This increase in profit is despite the turnover remaining constant at £57.6m.

During the half-year, we have also managed to reduce the inventory levels by £6.4m to £11.7m (HY 2023: £18.1m). Cash generated from operations amounted to £10.1m (HY 2023: cash utilisation £2.8m). The cash balance at 29 February 2024, after paying dividends of £2.1m and financing share buy-backs during the period of £0.7m, totalled £12.9m (2023: £10.7m).

The Group continues to have a robust balance sheet with substantial unutilised working capital facilities.

GROUP TRADING

Revenue in the period at £57.6m was consistent with the comparable period last year (HY 2023: £57.9m; FY 2023: £122.6m).

The Group reported profit before tax and highlighted items of £2.1m (HY 2023: £0.5m; FY 2023: £5.2m), the increase in profit being mainly due to reduced selling and distribution costs. This primarily related to the logistics costs associated with the Group's Scandinavian business being lower, as inventory was significantly reduced from last year, and increased influencer sales in our UK domestic market producing a lower advertising to sales ratio.

Earnings before interest, tax, depreciation and amortisation (EBITDA) were £3.7m (HY 2023 £2.7m; FY 2023: £8.9m).

Gross profit margin in the period improved slightly to 27.2%, compared to 26.9% in the same six month period in 2023 and 26.7% for the August 2023 financial year.

Underlying basic earnings per share before highlighted items improved to 8.72p (HY 2023: 0.54p; FY 2023: 20.15p). Diluted earnings per share, on the same basis, were 8.71p (HY 2023: 0.54p; FY 2023: 20.00p).

A significant proportion of the Group's purchases are made in US dollars. The business is therefore exposed to foreign currency fluctuations and manages the associated risk through the purchase of forward exchange contracts and derivative financial instruments. Under International Financial Reporting Standards (IFRS), at the end of each reporting period the Group is required to make an adjustment in its financial statements to incorporate a 'mark to market' valuation of such financial instruments. The 'mark to market' adjustment for the financial period under review results in a profit of £0.2m. This compares to a loss of £0.3m shown in the corresponding period in 2023 and a loss of £0.5m reported in the year ended 31 August 2023. These 'mark to market' adjustments are non-cash items, calculated by reference to unpredictable and sometimes volatile currency spot rates at the respective balance sheet dates. To present the results on a 'normal' basis, these 'mark to market' adjustments on FX derivative positions are excluded, although shown separately as 'highlighted items' to demonstrate the 'underlying' position.

FINANCIAL POSITION, WORKING CAPITAL & CASH FLOW

The Group's net assets at 29 February 2024 were £38.7m (HY 2023: £37.1m; FY 2023: £39.4m). During the period, the Group generated cash from operations of £10.1m (HY 2023: £2.8m cash utilisation; FY 2023: £0.1m cash generated). The Group's inventory stood at £11.7m (HY 2023: 18.1m; FY 2023; £18.0m).

The Group has no long-term debt. Net interest charges on the use of working capital facilities during the period were negligible (HY 2023: £0.1m; FY 2023: £0.1m). After dividend payments and financing of share buybacks, the Group had cash and cash equivalents of £12.9m (HY 2023: £10.7m; FY 2023: £9.6m) at the end of the half-year period. In addition, the Group has unutilised headroom of over £50.0m under its banking and other finance facilities.

DIVIDEND

The Board remains committed to maintaining the dividend. The Directors are, therefore, declaring an interim dividend of 8.0p per share (HY 2023: 8.0p; final dividend 2023: 11.0p).

The interim dividend will be paid on 26 July 2024 to shareholders on the register as at the close of business on 12 July 2024. The shares will be marked ex-dividend on 11 July 2024.

SHARE BUYBACK PROGRAMME

Shareholders passed a resolution at the 2024 Annual General Meeting authorising the Company to effect share buybacks (including by way of tender offers) of up to 2,890,000 issued ordinary shares of 5p each in the Company ("Ordinary Shares").

On 6 February 2024, the Company announced a £1.0 million share buyback programme as part of its strategy to reduce the Company's share capital. Given the success in buying back 365,770 Ordinary Shares in just six weeks, the Board resolved to extend the buyback by up to a further £1.0 million on 3 April 2024. The Company has successfully bought back a total of 500,888 Ordinary Shares at a total cost (excluding dealing costs) of £1.34 million, leaving an unutilised capacity under the authority granted at the 2024 AGM of 2,389,112 Ordinary Shares. The weighted average price paid per share is £2.67.

The Company will continue to make regulatory announcements in respect of its repurchases of Ordinary Shares, as required by UK MAR and the AIM Rules.

TOTAL VOTING RIGHTS (TVR)

As at today's date, the Company's issued share capital consists of 20,965,041 Ordinary Shares. The Company holds 2,100,159 Ordinary Shares in treasury which do not carry voting rights and, accordingly, the total number of voting rights in Character is 18,864,882. The figure of 18,864,882 may be used by shareholders as the denominator for the calculations by which they will determine, under the FCA's Disclosure Guidance and Transparency Rules, if they are required to notify their interest, or change to their interest in the Company.

OUR PEOPLE

We can never say enough about the unwavering commitment and dedication from our personnel around the globe. Through both good and challenging times, they have maintained their enthusiasm, focus and 'can do' attitude in tackling all obstacles encountered in recent years. Their single-minded determination is shared from the warehouse floor through to the boardroom, with each taking inspiration from the selfless example of others in the quest to restore the business to profitable growth. We thank each and every one of them for their support and belief in the Group's strategy and their diligence in implementing it.

OUTLOOK

Following the launch of the Group's spring/summer catalogue, we have been encouraged by the enthusiasm with which our product portfolio has been received by our customers. The industry buzz around some of our new releases, such as Terror Fried, and new additions to our established lines, like Goo Jit Zu, is very encouraging too. We anticipate that the strength of our offering will allow us to at least maintain our market share in our domestic territories and increase international sales, particularly in the US.

The Group has a strong portfolio of products, underpinned by a strong balance sheet, and has a net cash position with substantial unutilised working capital facilities in place. On the back of our first half-year's performance and these signs of the Group's robust health, we anticipate profit before tax and highlighted items in respect of the full year to 31 August 2024 will exceed current market expectations. The Board is comfortable that the Group is on course to meet its targets.

The Company looks forward to updating shareholders on its progress in due course.

The Character Group plc Consolidated Income Statement six months ended 29 February 2024

*highlighted items comprise material items that are disclosed separately by virtue of their size or incidence and because they are considered relevant to an understanding of the overall performance of the Company.

The Character Group plc

Consolidated Income Statement

six months ended 29 February 2024

The Character Group plc Consolidated Balance Sheet at 29 February 2024

The Character Group plc Consolidated Statement of Cash Flows six months ended 29 February 2024

The financial information set out in this Half-Year Financial Report for the six months ended 29 February 2024 has been prepared under International Financial Reporting Standards (IFRS) as adopted by the European Union and in accordance with the accounting policies which will be adopted in presenting the Group's Annual Report and Financial Statements for the year ending 31 August 2024. These are consistent with the accounting policies used in the financial statements for the year ended 31 August 2023 as described in those annual financial statements. As permitted, this Half-Year Financial Report has been prepared in accordance with the AIM rules and not in accordance with IAS 34 'Interim Financial Reporting'. The consolidated financial statements are prepared under the historical cost convention, as modified by the revaluation of certain financial instruments and share based payments at fair value. These Half-Year Financial Statements and the financial information do not constitute full statutory accounts within the meaning of section 434 of the Companies Act 2006 and are unaudited. These unaudited Half-Year Financial statements were approved by the Board of Directors on 8 May 2024. The information for the year ended 31 August 2023 is based on the consolidated financial statements for that year on which the Group's auditor's report was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The Directors acknowledge the Financial Reporting Council's 'Guidance on the going concern basis of accounting and reporting on solvency and liquidity risks' issued in April 2016. In assessing the Group and Company's ability to continue as a going concern, the Board reviews and approves the annual budget and updated forecasts, including forecasts of cash flows, borrowing requirements and headroom. The Board reviews the Group's sources of available funds and the level of headroom available against its committed borrowing facilities. The Group's financial forecasts, taking into account possible sensitivities in trading performance indicate that the Group will be able to operate within the level of its committed borrowing facilities for the foreseeable future. The banks remain supportive of the Group. The Directors have a reasonable expectation that the Group and Company have adequate resources to continue their operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis of accounting in preparing the Interim report.

On equity shares:

Final dividend paid for the year ended 31 August 2023

Basic earnings/(loss) per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares during the period. Diluted earnings/(loss) per share is calculated by adjusting the weighted average number of ordinary shares in issue on the assumption of conversion of all dilutive potential ordinary shares. The Group has one (2023: 1) category of dilutive potential ordinary shares, being share options granted where the exercise price is less than average price of the Company's ordinary shares during this period. An adjusted earnings per share has also been calculated as, in the opinion of the Directors, this will allow shareholders to gain a clearer understanding of the trading performance of the Group. The calculations are based on the following:

*1 The potential ordinary shares on exercise of share options are excluded from the number of weighted average shares due to their anti-dilutive effect.

Earnings/(loss) per share

The Half-Year Financial Report for the six months ended 29 February 2024 will shortly be available for viewing and download on the Group's website: www.thecharacter.com .