As expected, toy wholesaler Funtastic (FUN) has produced a loss and omitted an interim dividend after yet another stumble.
The company paid dividends last year, will skip its interim, but expects to resume payouts with the final later this year as directors forecast a strong rise in second half earnings.
In a surprise update in early March, the company warned that following approaches to buy its Madman film distribution operation, due diligence had revealed the business was over-valued in Funtastic’s books.
As well the company revealed that it was being forced to give up margin to keep sales growing, meaning growing pressure on profitability.
The company, which has Lachlan Murdoch and Gerry Harvey as shareholders, reported a bottom line loss of $25.88 million for the January half year.
The wholesaler, which sells CHILLFACTOR slushy makers, Leapfrog toys and Power Rangers action figures, wrote down the value of its Madman Entertainment film distribution unit by $24.16 million after receiving offers for the business that were well below book value of $52 million.
As a result of the weakening sales and margins, earnings before interest tax depreciation and amortisation from continuing operations plunged 83% to $1.69 million after a drop in sales of key agency brands such as Ben 10 and Power Rangers, while costs rose, fuelled in part by the weaker Australian dollar and the cost of offshore expansionary moves.
The bottom line loss, of more than $25 million which was tipped in the early March update, compared with a net profit of $9.3 million in the first half of 2012-13.
FUN 1Y – Not so fantastic Funtastic
Chief executive and major shareholder Stewart Downs said in a statement yesterday the first half result was disappointing for the Australian and Madman operations, but Fantastic’s company-owned brands, including CHILLFACTOR, performed well.
He said the company expected second-half earnings to improve, driven by CHILLFACTOR sales in the US and new domestic lines of business.
Mr Downs forecasted full-year EBITDA between $19 million and $23 million, which will still be down sharply from the $23.9 million in 2012 – 13.
Funtastic expects the sale of Madman to be completed before the end of July and the proceeds would be used to reduce debt.
Funtastic, which paid dividends last year for the first time since 2006, was expected to resume dividend payments when it announces full-year results.
The company’s shares ended steady on 13c yesterday in a generally stronger market at the end of the March quarter.
