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Card Factory Plc

Card Factory PLC Continued sales growth – special dividend maintained

Card Factory (LON: CARD), the UK’s leading specialist retailer of greeting cards, dressings and gifts, announced today its interim results for the six months ended 31 July 2019.


Financial MetricsH1 FY20H1 FY19RestatedChange
Card Factory like-for-like sales (i)1.5%(0.2%)1.7 ppts
Underlying profit before tax (i)£22.0m£23.9m(7.9%)
Profit before tax£24.3m£28.4m(14.4%)
Underlying basic EPS (i)5.2 pence5.6 pence(7.1%)
Basic EPS5.7 pence6.7 pence(14.9%)
Leverage (pre-IFRS 16 Leases(i) (ii)1.93 x1.76 x 
Adjusted Financial Metrics (iii)excl. accounting for IFRS 16 LeasesH1 FY20H1 FY19 Change
Adjusted Underlying EBITDA (i)£28.7m£29.9m(4.0%)
Adjusted Underlying profit before tax (i)£21.1m£22.7m(7.0%)
Adjusted profit before tax£23.4m£27.2m(14.0%)
Adjusted Underlying basic EPS (i)5.0 pence5.3 pence(5.7%)
Adjusted basic EPS5.5 pence6.4 pence(14.1%)

Notes to table above:

i. See explanatory Note 2 “Alternative Performance Measures” for further information and definitions.

ii. Leverage is calculated as the ratio of Net Debt to Adjusted Underlying EBITDA for the previous 12 months, both measures defined as excluding the impact of accounting under IFRS 16 Leases; this definition provides consistency with the Group’s Capital Policy and with the terms of its borrowing arrangements.

iii. Adjusted financial metrics, which exclude the impact of the transition to IFRS 16 Leases, have been provided – for further information see note 18 to the interim financial statements.

Robust sales performance

· Overall Card Factory like-for-like sales growth of 1.5%

· 1.2% increase in store like-for-like sales, outperforming reported negative high street footfall

· Cardfactory.co.uk sales grew by 25% with strong performance against external and internal KPIs

· 26 net new stores opened, driving additional revenue growth

Industry leading margin performance despite increased headwinds

· Underlying EBITDA margin impacted by the additional cost of holding increased stock levels (for Brexit contingency planning, investment in new lines and the acceleration of seasonal buying) in addition to increases in the National Living Wage

· First half investment in supply chain, operations and property management business efficiencies to deliver expected savings in the second half of FY20

· The continued increase in the proportion of card payments improves customer experience but, coupled with merchant fee increases, leads to an increase in costs

· We have invested in the capability and capacity of our online team ahead of new web platform launch and increased range

Leveraging data and improved space utilisation driving increased average spend across card and non-card

· EPOS data utilised to identify individual card performance and target areas of redesign resulting in an improved performance of Everyday ranges

· Customers responding well to new ranges with record Valentine’s Day and Mother’s Day performances in terms of both volume and value

· Focus on customer experience and better utilisation of space via range review and new fixtures in store

Continuing returns to shareholders – £344.3m of dividends will have been paid since IPO

· Interim dividend of 2.9 pence (FY19: 2.9 pence)

· Special dividend of 5.0 pence per share (FY19: 5.0 pence), an additional return of £17.1m to shareholders; consistent with our capital policy

New retail partnerships extending Card Factory’s market share in the UK and overseas

· Following a successful trial across over 130 stores, we now have an agreement with Aldi to supply half of their UK estate, totalling 440 stores, from November 2019

· Exclusive partnership with the largest greeting cards retailer in Australia – “The Reject Shop” – to supply all of their 360 stores with Card Factory branded cards from January 2020

· Branded concessions being trialled in 15 Matalan stores

· Two new franchise stores opened in Guernsey and Gibraltar, adding to Jersey opened in FY19

Outlook: well established as the clear market leader and growing market share

· Underlying card market remains resilient despite continuing weaker consumer confidence

· Strong pipeline of new store opportunities – on track to deliver approximately 50 net new UK and Republic of Ireland openings by the year end

· Currently in discussion with a number of other potential retail partners in the UK and overseas

· Continued investment in vertical supply chain delivering margin improvements

· New strategy underway to improve performance at Getting Personal

· The Board expects FY20 Adjusted Underlying EBITDA to be in line with market expectations

Karen Hubbard, Card Factory Chief Executive Officer, commented:

“We have delivered a satisfactory sales performance in the first half of the year. A strong seasonal performance, which saw another year of record sales for both Valentine’s Day and Mother’s Day, was achieved against the backdrop of an increasingly challenging UK high street environment and consequent weaker footfall. The successful seasonal trading, combined with more sophisticated use of data and improvements to our customer experience, gives us confidence for the key Christmas trading period ahead.

We are pleased with the progress made on the strategic initiatives that are underway. These include using consumer insight to develop our customer proposition across all channels and a number of commercial partnerships. Maintaining a sharp focus on the execution of these various initiatives is a key priority for the senior leadership team.

Although the current economic uncertainty continues to impact consumer confidence, we remain positive about the resilience of the card market, the strength of the Card Factory business model, and our growth opportunities for the business over the medium term.”

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