Character Group, the UK-branded goods manufacturer buffeted last year by disappointing sales of Star Wars: The Phantom Menace merchandising, is set to return to the film sector on Harry Potter And The Sorcerer's Stone.

The company confirmed press reports on Monday that it is in talks over the UK distribution of a range of Harry Potter goods. Character's shares rose 28.8%, valuing the company at $12m.

Character Group recorded a greater-than-expected loss of roughly $20m for 2000 when it failed to secure anticipated revenues from Star Wars merchandising. The shares fell to just $0.34 last week.

"The company notes recent press speculation regarding merchandising rights for Harry Potter and confirms that one of its subsidiaries is in negotiations concerning the distribution in the UK of a limited range of Harry Potter gift items," Character said in a statement.

Harry Potter is currently shooting for Warner Bros. Release is scheduled for November this year.