LONDON (ShareCast) - (Sharecast News) - Sports, leisure and mobility equipment company Tandem Group updated the market on its trading on Monday, reiterating that the first half of 2018 was characterised by poor weather, large overstocks with a certain retailer, destocking among other customers, and the ongoing impact of the demise of Toys R Us.
The AIM-traded firm said that as a result, revenue was almost 30% behind the same period in 2017.

However, in the second half, it said it experienced revenue growth of nearly 6% as it recovered from the poor start to the year, despite a "difficult" economic backdrop and a number of negative indicators both in the macro economy and specific to its sectors.

For example, the UK outdoor toy market was reported to have declined by 17% in 2018.

Although there was a reduction in revenue of approximately 12% to £32.5m for the year ended 31 December, Tandem said its profit before tax was expected to be only marginally behind the prior year.

Revenue from the toys business was behind the prior year, but much less so than the reported overall market decline, the board claimed.

The recovery in revenue gathered greater momentum as the year progressed.

In licensed wheeled toy categories, the company's 'L.O.L Surprise!' licence was said to have been the standout performer during the year, and among other licences, Paw Patrol, Batman, Peppa Pig and Disney Princess made a "solid" contribution.

In Tandem's own brands, Hedstrom continued to perform ahead of the prior year, and its new brand, 'U-Move', performed strongly.

Following a challenging year in 2017 for Ben Sayers, the company said revenue recovered in 2018 and was 15% ahead of the previous year.

For the first time in many years, MV Sports & Leisure exhibited at the Nuremberg Toy Fair at the end of January this year, with positive feedback reported following the show.

The board said that was in addition to the "excellent response" from its recent exhibition at the London Toy Fair.

"We were delighted with the progress and growth in turnover in Independent Bicycle Dealers of our Squish bicycle brand," Tandem's directors said in their statement.

"Sales continued to be more challenging for the Dawes and Claud Butler brands.

"Falcon, Townsend and Elswick brands made a healthy contribution to revenue from our national account customers."

Total revenue from the bicycle businesses saw a further reduction for the year, although the second half of the year was only slightly behind 2017.

The company's bicycle operations maintained profitability during the year.

Revenue in its Expressco business reduced during the year, which Tandem said was primarily due to a changing buying pattern from one customer in the early part of the year.

However, the second half performed "strongly", with a double-digit increase in revenue.

Overall profitability for this business for the year increased, with growth said to have been enhanced from newly-introduced outdoor products combined with its new 'At Home Comforts' indoor ranges.

"Whilst we continue to strive for sales from our own websites we cannot ignore the potential from third party sites and therefore continued to take advantage of these sales platforms also.

"We continued our drive to improve our gross margin by improving supplier buying prices in the businesses for a number of our products."

More than 600 new products were introduced across the group during the year, which Tandem said also helped to improve gross margin.

Those included products for all the new licenced properties, an entirely new range of IBD bicycles, and nearly 200 products launched in its direct-to-consumer business.

"Following a programme of discounting older models of bicycles in 2017, we were able to improve gross margin in 2018 with the launch of our new range."

Group operating expenses reduced by nearly 6% in the year, with the directors saying they were "acutely aware" of the need to control costs during a period of reduced revenue.

"We continued to manage our working capital position carefully whilst generating cash and paying down debt.

"Following on from the exceptionally low levels at the end of the year in 2017, stock also remained well under control in 2018."

Looking at the current year, Tandem said it had started "very strongly", primarily driven by the MV Sports & Leisure business where the forward order book was "considerably ahead" of the same time last year.

"We have secured additional business with several national retailers and expect to increase revenue, based on current listings, with a number of others.

"We are pleased to announce that we have now signed the agreement with The Walt Disney Company to extend our portfolio of licenses for 2019 and beyond," the Tandem board added.

It said that would significantly expand its range to incorporate their major properties, including Disney and Marvel.

That would now encompass "highly successful" entertainment and consumer product franchises such as Frozen, Toy Story, Spider-Man, Lion King, Disney Princess and Avengers.

"Our lightweight children's bicycles range, Squish, saw strong double digit revenue growth in the early part of 2019.

"We expect this to continue as we implement our marketing plans to develop brand recognition further."

The number of new products developed for 2019 in Tandem's direct-to-consumer business was also said to be "significant", with the company both fully redesigning and extending its gazebo range with higher specification components and fabrics, and developing new products in outdoor, leisure, home, mobility and Christmas categories.

"We are optimistic about the outlook for 2019," the board said.

"Whilst we are mindful of macro-economic uncertainties, we expect to achieve significant turnover growth and we continue to be extremely confident in our ability to deliver profitability to our shareholders."

Tandem said it would announce its annual results for the year ended 31 December in April.

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