# Card Factory PLC Continued sales growth – special dividend maintained

- Link: https://www.directorstalkinterviews.com/card-factory-plc-continued-sales-growth-special-dividend-maintained/412793532
- Published: 2019-09-24T07:39:47+01:00
- Author: Giles Arbor

**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.

**Highlights**

| Financial Metrics | H1 FY20 | H1 FY19Restated | Change | 
| Revenue | £195.6m | £185.3m | 5.5% | 
| 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 pence | 5.6 pence | (7.1%) | 
| Basic EPS | 5.7 pence | 6.7 pence | (14.9%) | 
| Leverage (pre-IFRS 16 _Leases_) ^((i) (ii)) | 1.93 x | 1.76 x |   | 
|   |   |   |   | 
| **Adjusted Financial Metrics **^((iii))excl. accounting for IFRS 16 _Leases_ | H1 FY20 | H1 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 pence | 5.3 pence | (5.7%) | 
| Adjusted basic EPS | 5.5 pence | 6.4 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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