Toymaker turns it around with surprise profit

Toy company Funtastic (ASX: FUN) has posted a surprising first-half profit and announced its first dividend since 2006.

The company’s acquisitions of Pillow Pets and of the license to manufacture and distribute Lego products in Australia, as well as international sales, contributed to the results. For the half, margins expanded to 40.5%, an improvement of nearly four percentage points, while net profits after tax rose 68% to $9.3 million, which included a $3.3 million Lego-related early settlement.

This promising first-half report signifies a burgeoning turnaround in fortunes for the company, which posted a $38 million loss for 2010/2011.

A “slushy” future?

In the press release accompanying results, Funtastic chief executive Stewart Downs teased an “incredible” new product “which we are launching in the second half which will ensure that the growth of our Brands business continues”.

This turns out to be the Chill Factor, a cup which turns beverages into icy, slushy drinks in 45 seconds. The Chill Factor is already available for purchase in the UK and U.S. and will launch in Australia this year.

As well as this emphasis on Funtastic’s development of innovative intellectual property, Downs also stressed that Funtastic Brands retail in 40 countries, limiting the company’s reliance on the Australian market, where retailers like Woolworths (ASX: WOW) and Wesfarmers (ASX: WES) can put their own chill factor — to coin a phrase — on suppliers.

Now about that dividend

Downs went on to say that Funtastic is “delighted to have got the company to the point where we are able to reward shareholders with the resumption of dividend payments.” This will include a fully franked 0.5 cent per share payout in May.

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