Funtastic swings to steep HY loss

Chairman Bernie Brookes expects a net profit within 12 months for the retailer he compares to a “stomped on flower bed”.

Australian toy retailer Funtastic has swung to a steep interim net loss, amid cratering retail spending and as the company works to restructure its business.

Funtastic’s bottom line plunged by 129 per cent to a loss of $4.2m in the six months to January 31, from a net profit of $14.3m in the previous corresponding period.

While the retailer attributed much of the first half losses to the ongoing corporate restructuring, its earnings before interest, taxation, depreciation and amortisation (EBITDA) sank by 125.25 per cent to a $3.5m loss, from $14.8m in the same period last year.

The results came eight months after the appointment of former Myer chief executive Bernie Brookes as chairman.

Speaking to The Australian, Mr Brookes said the “distressed” company had gone through a period of rationalisation, which included redundancies and exiting unprofitable categories.

“I compare it to a stomped on flower bed: some of the flowers will grow back strongly, some weakly and some not at all. We’ve repositioned to be a smaller, streamlined business, which will hopefully start showing profits in the next 12 months,” Mr Brookes said.

However, Funtastic’s interim revenue increased slightly, by 2.2 per cent to $16.4m.

In its half yearly report, the company said Jaszac Investments — the its largest shareholder — had provided a $12m loan. In February, the company foreshadowed the soft result, highlighting the need to secure a $6m loan after worse than expected Christmas spending.

Despite the loss, the Melbourne-based company said it was well positioned to see through the coronavirus pandemic.

“While the virus will undoubtedly have an impact on the sales of our customers, it is still too early to quantify this effect on the group,” the half-yearly report said.

“The directors believe that the group will be able to achieve the improved results and deliver the strategic initiatives and are satisfied that the group will continue as a going concern.”

On February 27, the company announced it would exit the toy distribution and apparel distributions, increasing its focus on “product ranges offering growth potential”.

“As a result of these changes, overheads and trading losses will be reduced and the company will be better able to focus resources into existing product portfolios, develop new categories and setting the business up for future growth,” the company said.

Wednesday’s result comes after a difficult period for Funtastic. The company spent three months without a permanent CEO before the appointment of chief executive David Jackson in April 2019. In 2017, the company lost a bid to be delisted from the ASX.

A former retail powerhouse, Funtastic once boasted market capitalisation in the hundreds of millions and a share price that hovered around $30.

At midday, Funtastic’s securities were trading at 1 cent per share — a new low for the company – giving it a market capitalisation of $2.9m.