The Character Group

The Character Group, which was founded in 1991, is the largest independent UK based toy company.

The Character Group

Character design and manufacture toys and games, mainly under licence, and distribute them both in the UK and internationally. They also partner exclusively with international toy producers to distribute their products in the UK. I recently visited Character’s head office in New Malden, Surrey where I met with the joint managing directors Kiran Shah and Jonathan Diver to see their design operations and discuss Character’s business model and the toy industry.

Character’s core brands, which account for about 70% of Group Sales, include household names such as Peppa Pig, Teletubbies, Stretch Armstrong and Doctor Who. Peppa Pig, which has for a long time been a part of Character’s portfolio, is marking its 15th anniversary this year. However, its popularity is showing no signs of slowing down with Character having their largest ever range of Peppa Pig products for sale in 2019, the Chinese year of the pig.

In our meeting, Kiran and Jon explained that toy trends/crazes have become an increasingly large part of the toy market over the last five years. Character have capitalised on this trend, successfully adding new craze lines to their portfolio. Slow rising memory foam was the biggest toy trend of 2018 and Character’s Soft’n Slo Squishies was the market leading brand in this category. In fact, Soft’n Slo Squishies won the “Craze of the Year Category” at the recent annual Toy Industry Awards at the London Toy Fair. Character also won the “Supplier of the Year” award at the London Toy Fair demonstrating their excellent service to retailers.

The toy industry has not been without its challenges in recent times, particularly following the failure of Toys R Us, which led to the closure of its US and UK stores in 2018. Although this caused dislocation in the industry, Character coped admirably through this difficult period.

Reassuringly, Character recently announced strong trading performance for the second half of their 2018 financial year and healthy cash generation, leading to a 21% increase in the total dividend for the year. In addition, their January trading update highlighted the continuation of positive trading momentum. Another recent positive development has been the acquisition of a 55% stake in Danish distributor OVG-PROXY, providing a European base and a channel for growth in the Nordics.

Despite the uncertainty surrounding the eventual Brexit outcome and a slowing global economy, Character’s robust balance sheet and cash generative business model should help the company cope with any economic bumps in the road as and when they occur. This allied with a growing product portfolio together with the potential for future acquisitions and collaborations provides us with confidence in their growth prospects over the medium to long term.

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