Character Group – I’ve doubled my holding

I have bought more Character Group (LSE:CCT) shares at a price of £2.52 for my Warren Buffett-style portfolio.  It specialises in designing toys, arranging for them to be manufactured in the Far East and then selling them to retailers (such as Argos), mostly in the UK and Scandinavia.
I first bought these shares in October 2019 at £3.506 per share, putting them into my Modified price earnings ratio portfolio. They were selling at a cyclically adjusted price earnings ratio of £3.506/£0.34 = 10.3.
In January I met the directors at the company’s AGM and then started to view Character as a Warren Buffett-style investment, possessing (a) strong business franchises, (b) competent and trustworthy managers, (c) good financial stability, (d) a high return on capital employed, and (d) an excellent cash flow and profits history.
I bought some more shares at £3.29 (market capitalisation was then £70m).
The details on the rationale for these purchases can be found in the following newsletters: 29 October – 5 November 2019, 20 - 28 January 2000.
Character’s shares have fallen recently as investors worry about consumers’ inability to buy toys from physical stores, which is where, prior to the lockdown, two-thirds of UK toys were obtained.
Mr Market’s pessimism on the firm’s outlook and hence the lowered price raised the question of whether to buy some more.  This depended on whether the company is capable, within a 2-3 year timespan, of restoring profits to the levels achieved in 2015, 2016 and 2017, when they were over £10m after tax.
Current market capitalisation is £2.52 x 21.36m shares = £53.8m. So, if profits are restored to £10m, I would be buying at a forward price earnings ratio of just over five, or an earnings yield of 18.6.
If dividends rise again to the level of 25p paid in 2019 then my new shares would be on a dividend yield of 10 – a much better income than on a bank account.
But there are some problems for the company to overcome if it is to revert to previous levels:

1. The lost Peppa Pig

The US toy company Hasbro has taken ownership of the rights of Peppa Pig and Ben & Holly and said that from June 2021 they will not license most of these rights for other toy companies to make and sell such toys – but they might license more niche products.
Character’s ability to design and sell Peppa, etc., currently accounts for around one-quarter of Group profits. That is a big chunk to make up.
But the directors are making progress in finding replacement income streams.  For example, they have already created wooden toys based on Peppa – ideal for nursery schools.  Hasbro have licensed Character to make and sell these until December 2022, and word is that the license is likely to be extended.  Hasbro shows no desire to move into wooden toys (or any smaller-volume toys), so Character might have this product area to itself for many years.
The production of these wooden toys has sparked the imagination at Character Group – perhaps Disney and other franchise owners might be persuaded to allow wooden toys to be licensed (a more environmentally friendly product than plastic)?
And the company is confident that it already has a pipeline of excellent new products, as described in the latest interim report covering the six months to end February:
“Our portfolio of products and ranges has performed well in the limited channels of distribution that have been available to our customers during the lockdowns (principally online) but, after the lockdowns end and market conditions normalise, we anticipate that demand for this exciting and innovative range of products will be restored in all of our markets. New product and range launches are scheduled thr………………To read more subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1