HP-2020-000016 - [2025] EWHC 1451 (Ch)

In addition to the qualitative evidence set out above, MGA relied in its closing submissions on a breakeven analysis showing the revenues and sales volumes which Cabo would have had to achieve to break even in 2017, calculated by reference to MGA’s and Cabo’s alternative cost stacks, with (for each of those two alternative cost stacks) three different assumptions of the wholesale price of the Worldeez globe. For MGA’s cost stack the assumptions were £1.20 (the price paid by The Entertainer), £1.50 (the price paid by B&M) and £1.35 (the mid-point of those two prices). For Cabo’s cost stack the assumptions were £1.20, £1.35 and £1.52. The last of those figures represented Cabo’s position in closing submissions as to the average wholesale price which it said that it would have achieved, based on the blended average of the wholesale prices which were in fact paid by The Entertainer and Smyths, and the £1.75 wholesale price figure which it claimed that Smyths and TRU would have paid. The calculations then showed how, in MGA’s submission, the Worldeez globe would have had to perform against other collectible toys in order to break even during 2017 (i.e. assuming £0 profits), comparing both sales volumes and sales revenues.

Because this analysis had not been produced by MGA until its written closing submissions it could not fully be addressed during the trial, and the parties’ oral closing submissions on the analysis were therefore supplemented by the post-trial written submissions filed on 17 February 2025. Those submissions confirmed that there was no dispute as to the accuracy of MGA’s calculations as such. Nor did Cabo take issue with the relevance of considering whether Worldeez could have reached a breakeven point by the end of 2017. I agree that this is a relevant and indeed important question to consider, in the assessment of Cabo’s likely profitability, given that there is no evidence suggesting that Singleton would have continued to fund Cabo if it remained unprofitable in 2018, nor any evidence of realistic alternative sources of funding in that event. Indeed, as set out above, it appears from the evidence discussed above that Singleton expected breakeven within an even shorter period.

There was, however, a significant dispute about the reliability of MGA’s comparisons with other products. In particular, for both sales volumes and sales revenues MGA had used NPD data, which only covered 75% of the retail market. In addition, the data set used for the sales revenue comparison only covered the period January to November 2017. While MGA contended that these limitations were effectively offset by the fact that the Worldeez sales related to only a seven month period, a reliable comparison would need to take into account the strong seasonality of toy sales, and in particular the weighting towards Christmas, as well as the fact that other brands in the comparator data sets were also not on sale for the full year 2017. Cabo also disputed the reliability of comparisons with products at very different price points to the Worldeez products.

These were points on which the economic experts might have been expected to opine, but since the breakeven analysis had not been produced until the closing submissions there had (obviously) not been any opportunity to explore this in the expert evidence. While MGA said that its analysis had been prepared with “expert input” (presumably Mr Parker or BRG), the precise nature of that assistance was not disclosed. I do not, therefore, consider that I can place any significant weight on the part of the breakeven analysis which ranked Worldeez against other toy products.

The remainder of the breakeven analysis is, however, informative, and is as follows.