Toy distributor, Funtastic (FUN) has taken its accumulated losses for the past 18 months to more than $60 million after yesterday reporting a net loss of $28 million for the six months to January 31.
The company, in which Lachlan Murdoch and Gerry Harvey are shareholders, is once again not paying a dividend because of its weak trading and lack of profits.
Funtastic shares traded around 2.1c yesterday, down 8.7%. That’s an all time low for the stock whose value has halved this year.
FUN 1Y – Funtastic provides little joy for shareholders
The company reported a net loss of $28.5 million for the January 31 half, compared with a loss of $29 million for the first half of 2013-14, and $35 million for the 2013-14 financial year.
Earnings before interest, tax, depreciation and amortisation amounted to a loss of $4.2 million, against a profit of $1.7 million a year earlier.
Funtastic told the market in January that it was expecting a weak result with a fall in revenue and a trading loss.
Revenue fell 18% to $50.4 million, from $61.28 million.
Directors said yesterday that since the divestment of Madman, "the company has aligned its structure in order to continue its strategic direction of having more of our own or owned manufactured brands that are distributed on a global basis”.
Revenue from continuing operations reduced by 18% for the six months ended 31 January 2015 in comparison with the prior corresponding period driven by reduced international sales and some Australian retailer’s inventory levels being relatively high at the commencement of the financial year.
Directors said the fall in revenue has impacted gross profit margins which had also been hit by the discounting involved in clearing excess inventory, and lower proportion of International sales.
For continued operations the Group generated a loss before interest, tax depreciation and amortisation (EBITDA) excluding impairment for the period of $4.2m compared with a profit of $1.7m in the prior corresponding period.
"Following a challenging first half a more conservative assessment of the medium term performance of the company has been done as it continues to transition into a global company. As a result the company has re-assessed the carrying value of the Group using a value-in-use methodology which has resulted in an impairment charge of $11.1m.
"Interest costs were significantly down on the same period last year as a result of the lower level of debt which was reduced from the proceeds from the sale of Madman.
"Due to the current losses, tax benefits previously brought to account were required to be reversed. The company currently has tax losses of $66.9m of which $5.8m has been recognised and carried on the balance sheet at the period end.
Looking to the remainder of the year, directors said the "benefits of the initiatives that have been implemented over the past few months will have a positive impact in the second half of FY 15 and into FY16,” directors said.
Directors also said that the company "has reestablished its banking facilities through to July 2016 with its primary lenders, The National Bank of Australia (NAB)". The revised facilities provide adequate funding and appropriate facilities following the divestment of Madman to support the strategic direction of global expansion of our own manufactured brands. New covenants have been established that are more aligned with the revised outlook of the business.”
