·      Technology is a growing issue.

·      Seasonality (50% of sales made in November to Christmas)

·      Short products life cycle

·      Fragile economy in the market

·      Sustainability requirements

Exhibit 3:

·      60% of sales in Q2 for their reporting period

·      Risks of broken supply chain

·      Overseas reliance

·      Saturated market

Exhibit 4:

·      Licensed board games becoming a higher % of total revenue compared to Heritage due to the growth.

• stagnating product lines- heritage games are flatlining in terms of revenue

• Low product mix - dependence on a few core products

• Margin pressures - revenue grown but gross profits haven’t (cos issues)

• Falling gross margins / shrinking profitability — gross margin has fallen year-on-year (now ~24.0%) and operating profit is much lower than three years ago despite revenue growth.

• Channel shift to online (and its costs) — online sales are growing fast ( >1/3 of revenue) which raises distribution costs (many small orders), increases returns, and creates fulfilment/IT capacity constraints.

• Supplier / manufacturing risk — manufacturing is outsourced to a small set of suppliers; problems at PZ and use of subcontractors (including overseas) create volume, quality and timing risk.

• Low-margin licensed products / licence-fee exposure — licensed games earn lower margins because of licence fees and stepped/minimum-fee arrangements that can hit cash/profitability.

• Product lifecycle / portfolio risk — some heritage titles (e.g., Mucho, Lampho) are aging or fading, requiring refresh, discontinuation or acquisition strategy decisions.

• Seasonality and liquidity pressure — ~50% of sales occur in Oct–Dec; cash dips before Christmas and the company nearly needed its overdraft.

• Inventory & returns management — high inventory levels are required and online sales increase direct consumer returns, prompting a need for a formal returns policy.

• Customer credit / concentration risk — reliance on large retailers with long payment terms and some customer cash difficulties that required restructuring.

• Rising operating costs (admin / distribution / staff) — higher promo spend, recruitment for online order processing, pay rises and increased depreciation have pushed admin costs up.

• Regulatory / reputational risks: product safety, cybercrime and sustainability — strict product-safety rules, cybercrime threats and increasing consumer demand for eco-friendly products require active compliance and supplier oversight.

Would you like these turned into a 1-paragraph executive summary you can paste into the exam, or expanded into quick exam-style talking points (causes → analysis → recommended actions) for each issue?

• Growth rate for licensed games rose at much sharper rate compared to Heritage + Jigsaw

• Heritage games most popular (Lampho + Mucho) ~ declining popularity due to trend change)

Jigsaws joint top for volume but presents the least value

60% of revenue came in Christmas period- above industry average

Apps are free to use - costing in development but not being reimbursed by them just getting marketing from it

Licensed board games earning a lower gross margin

MSRP * 25% discount is provided to retailers

• Retailers revenue dropped for third year in row. With online sales growing.

• Manufacturing costs have increased 10% each of the past 2 years.

  
  

  
  

YH contributed 8% of FFLs total revenue over the last 2 years, but this contract is due for renewal in Jan 2023 with management considering negotiations of terms.

Free to use apps, is this smart?

Due to move to online, distribution costs are rising faster than revenue, need to understand if this is feasible in the long run

Zyx

Lampho

Other

Ringover

Clown House

Modno

Other Licensors

Jigsaws

grand Games

PZ

• Yolki

• Bonanza

• Hamlin

Retail customers

• Trendy Toys

• Checkmate

• Your home is our home

• Jigjag

Suppliers

• Orvan

• grand games

• PZ

licensors

• Ringover

• Clown House

• Mondo

  
  

Responsible supply chain – FFL insists manufacturers (including overseas subcontractors) comply with its Code of Conduct and the CARE programme (no child labour, fair treatment of workers). Risk if subcontractors fail to uphold standards.