Toy manufacturer facing financial strain due to Trump tariffs, leads to cut in dividend for Peppa Pig line.
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Character Group, makers of Teletubbies toys and the largest range of Peppa Pig products, has slashed its interim dividend due to uncertainties surrounding US tariffs, which have impacted sales across all key territories. The British toymaker was forced to withdraw full-year profit guidance last month following Trump’s tariff announcements.
The company, based in New Malden, primarily relies on the UK and Scandinavia as its key markets but saw US sales account for roughly 20% of its turnover last year. They mainly outsource production operations to China to maintain competitive pricing.
Sales for Character Group saw a 8% decrease in the six months to 28 February, landing at £53million, mostly due to tough trading conditions leading up to and during the crucial Christmas period. Despite the revenue dip, the group managed to boost gross margins, delivering a first-half profit before tax of £2.1million - roughly in line with the same time last year.
Despite a recent 90-day reduction in tariffs between the US and China, offering hope for a negotiated resolution, Character Group remains uncertain about the direction of tariffs. They stated, "The uncertainty flowing from the imposition of these tariffs has been felt in other parts of the world as customers have become increasingly cautious and are not committing to orders to our expectations. This is impacting sales in all our key territories."
The board remains optimistic that the group will remain profitable for the current financial year as a whole but is cautious about predicting short-term trading at this stage. The group has a strong balance sheet, with no long-term debt, cash and cash equivalents of £16million, and unutilized headroom of over £50m under its banking and other finance facilities.
Character Group shares fell 5% to 242p in early trading. Since the start of 2025, they have dropped by 11.7%. The group's performance in maintaining profits and cash flow during the first half year reflects the strength, depth, and quality of their current portfolio of products. Overall, despite the harsh trading conditions, the group's performance is a testament to the management's ability to understand market trends and produce appealing products that children love.
Tariffs and global trade disruptions are behind half of all profit warnings issued by UK-listed firms, illustrating the profound impact of tariffs and supply chain uncertainties on businesses across various sectors. Toymakers like Character Group face supply chain disruptions, order cancellations, financial strain, job risks, and sales impacts due to the tariffs, primarily because the majority of toys sold in the US come from China. However, the future holds potential advocacy for tariff exemptions or reductions, supply chain diversification, cost increases being passed to consumers, and impact on strategic decisions for UK toymakers like Character Group.
Character Group encountered difficulties in its investing endeavors, primarily due to uncertainties in the banking sector caused by US tariffs. These tariffs, while impacting sales across all key territories, particularly the US, have forced the company to reconsider its business strategies.
Despite the challenges, Character Group's strong balance sheet and financial resources, including cash equivalents of £16million and unutilized headroom of over £50m under its banking and other finance facilities, suggest the organization's ability to weather financial storms and maintain profitability, even in the face of tariff-related uncertainties.
