Funtastic in sweet spot as it profits from leading brands

Toy and sweets business Funtastic has stitched together its second consecutive profit after a string of losses recently left the company on its knees, as a strategy to derive stronger earnings from its own brands and a global expansion starts to pay off.

Funtastic, which is controlled by the pub-and-pokies empire owned by the Mathieson family, on Monday declared a full-year profit of $13.96 million, an increase of $3.526 million or 17 per cent.

The bottom-line result for the 12 months to July 2013 included a gain of $3.27 million on the early settlement of deferred acquisition consideration relating to a deal to manufacture and distribute Lego products.

Excluding that one-off gain, earnings before interest, tax, depreciation and amortisation came in at $20.7 million, up from $20.2 million in the previous year and in line with lowered earnings guidance provided in July of a target of $20 million to $21 million.

Revenue for the period was down slightly to $166.55 million from $170.7 million.

The profit result builds on a profit of $10.4 million for 2011-12, and cements the continued turnaround of the toy and confectionary wholesaler as it exploits its leading brands such as Ben 10, Air Hogs, Pillow Pets and Power Rangers. It also owns movie distributor Madman Entertainment.

Its growing stable of in-house brands helped bolster margins, which rose from 41.9 per cent to 43.2 per cent for the year.

Chief executive Stewart Downs said the company was pleased with the latest financial result given the difficult retail trading conditions.

"Both our domestic businesses, Funtastic Australia and Madman Entertainment, have become solid and reliable contributors and we are excited by our fantastic brands' growth," he said.

He said Funtastic Brands was turning into a global manufacturer with its recent acquisition of the homemade drinks business Chill Factor complementing its existing portfolio of brands. Funtastic does not expect any difference in consumer sentiment but said changes to the business, would make it more stable and predictable.

Dividends were reinstated last year and on Monday the company declared a final dividend of 0.5¢ per share, on top of an interim dividend of 0.5¢ per share. Its shares closed 1¢ stronger at 15.5¢.