Back in January, i released a preview of my thoughts on the results.
The concise portion was what i wrote below.
Concise Version
2023 Revenue Fall Compared to 2022 is likely, with any growth in profits to come from margin expansion / revenue growth in Plush Stuffed Toy.
Revenue from Top Customer in 2022 will fall in 2023. For 2023 revenue, Japan and China should see revenue growth while US it should see revenue decrease compared to 2022.
I am still optimistic that we will see profit growth for FY 2023 compared to FY 2022.
Safe to say. Everything is correct.
What I like about the results
1) Since everything i mentioned is correct, then there is nothing to point out. But something incredible would be......its increase in cash position.
The company started 2023 with 761 million HKD cash and current liabilities of 1126 million HKD.
At 30 June 2023, it has 845 million HKD cash and current liabilities of 1003 million HKD.
At 31 December 2023, it has 1390 million HKD Cash and current liabilities of 896 million HKD.
This to me is some remarkable cash generation year.
2) Adaptability of its production. With its top customer in 2022 cutting its orders and resulting in a revenue fall of close to 1 billion hkd or 50%....Dream was able to claw back in some ways and tap on Customer A and C which contributed a gain of close to 400 million.
As a whole, revenue still fell by around 900 million or around 15%. This was kind of expected looking at the export data as well as how the toy companies have done in 2023 amidst a bad retail environment of overstocking etc.
3) Margins.
A question on the minds of many will be whether the margins are a fluke in 1H 2023. After all with plush stuffed toys 30.17% margin , many might think that it is a one-off. While margins in 2H 2023 did not improve, it still is remarkable at 28% as it is the highest 2H margins.
The 17% margin for its plastic figures is also laudable considering revenue for 2H is one of the lowest since Covid Started.
Interestingly enough, utilisation rate for 2023 is 84% with lower labour cost compared to 2022 which has higher revenue, higher labour cost but utilisation rate of only 80%.
So that is some food for thought.
Overall, 26.83% Gross Margin for 2H 2023 is the highest since 2018, and also i believe the highest in its history.
How about 2024 then?
Well at current stage, we are only about 3 months in. From whatever data that i have seen across the board, it is relatively mixed. Which means i am pretty sure there is no positive profit alert coming for now.
Funko's revenue guidance for 2024 is actually similar to 2023. Therefore, it is rather unlikely that we will see any revenue growth from that end. Even if there is, it might not be significant.
Theme Park Demand ? . I guess we have to see the guidance given from Oriental Land in April before making a more informed decision.
Export Data for Jan and Feb seems muted, lower than 2023 by around 20% . Though to be fair, 2H 2023 Japan Export compared to 1H 2023 was 40% increase but revenue is only 9% for Dream. Therefore the indicator's accuracy leaves much to be questioned.
For Industrial Index of Production (Manufacture of games and toys) 2024's first 2 months is about 4.5% higher.
There is also Customer C, which increased its revenue contribution by 30%....
It really is still early days i feel.
K-Pop Pictures Spamming Time.
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