REG - Card Factory PLC - Final Results
03/05/2022 07:00
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RNS Number : 9801J Card Factory PLC 03 May 2022
3 May 2022
Card Factory plc ("Card Factory" or the "Group")
Preliminary results for the year-ended 31 January 2022
Card Factory, the UK's leading specialist retailer of greeting cards, gifts,
wrap and bags, announces its preliminary results for the year ended 31 January
2022 ('FY22').
Financial summary
Financial Metrics Note FY22 FY21 Change
Revenue £364.4m £285.1m 28.0%
Card Factory LFL sales (cf FY20) (i) -3.9% +0.1% (4.0 ppts)
Profit before tax (i) £11.1m (£16.4m) 167.7%
EBITDA (post IFRS16) (i) £85.6m £45.8m 86.9%
Operating cash flow £113.6m £79.9m 42.2%
Basic EPS 2.4p (4.0p) 162.5%
Leverage (excl. lease liabilities) (i) 0.9x 2.4x (60.9%)
Notes to table above:
(i) See Explanatory Note 1 (below) "Alternative Performance Measures ("APMs")
and other explanatory information" for further information and definitions.
Performance ahead of management's expectations; improving momentum during the
year:
· Revenue +28% YoY to £364.4m driven by a steady recovery in store
performance following easing of lockdown restrictions, alongside an online
performance significantly ahead of pre-pandemic levels:
o Store sales +33% YOY reflecting a 20% increase in trading days and
recovery in market share. Store LFLs for the Christmas season recovered to
near to pre-pandemic levels.
o Card Factory Online LFL revenue -1.5% reflecting easing of lockdown
restrictions and return of customers to physical stores.
§ Online revenue net LFL of -13.5% incorporating gettingpersonal.co.uk LFL of
-21.6%.
o Card Factory Online LFL revenue +135% vs FY20, reflecting expansion of
product range online and improved customer experience, as well as accelerated
shift in consumer online shopping behaviours.
· Recovery in gross margins to 32% (FY21: 28%) reflecting
realignment of inventory stock provision built in FY21 being normalised in
FY22, alongside improved stock management and reduction in aged stock
provision.
· PBT of £11.1m, ahead of management's expectations despite
significant trading disruption and inflationary cost pressures.
· Strong operating cash flow, +42% to £113.6m (excluding lease
liabilities) with cash conversion (Operating cash flow to EBITDA) of 133%,
driven by tight cost control and working capital discipline.
· Improved balance sheet strength, with closing Net Debt (excluding
lease liabilities) £74.2m (FY21: £107.7m); Net Debt (including lease
liabilities) of £194.0 (FY21: £252.6m) with Leverage (including lease
liabilities) back to pre-pandemic levels at 2.3x (FY21: 5.5x).
Delivering on strategic priorities:
· Transitioning both online platforms (cardfactory.co.uk and
gettingpersonal.co.uk) onto a single, unified platform, unlocking cost
benefits and opportunity to significantly expand the cardfactory.co.uk gifting
range.
· Opened first new 'model store' as part of a wider trial,
featuring improved customer flow and store navigation, and improved
operational efficiencies.
· Strengthened leadership team with appointments into the key roles
of:
o Chief Information Officer and Digital Director appointed respectively,
recognising the critical role digital has to play in our business growth.
o Card Factory's first Customer Marketing Director to oversee new Customer
Marketing function.
o New Business Development Director to lead on the Group's partnership
strategy.
Successful completion of refinancing:
· As advised on 21 April 2022, Card Factory has agreed terms on a
refinancing with its current banking syndicate, extending debt facilities
until September 2025. Card Factory has made good progress in using its
positive cash flows to reduce overall debt and consequently has agreed revised
terms on reduced facilities of £150 million.
· The 'best efforts' commitment given by Card Factory to its banks,
to raise net equity proceeds of £70 million by 30 July 2022 has been removed
from the revised facilities. The Board therefore has no current intention of
completing an equity raise.
· Restrictions on payment of dividends will continue to apply until
CLBILS facilities and the £11.25 million term loan are fully repaid (expected
31 January 2024), and the Leverage ratio being 1.5x or less.
Current trading and Outlook:
· Trading in the new financial year has been in line with our
expectations and is contributing to a continued recovery of market share
position. We are seeing some mix shift in our Spring seasons (Valentine's Day
and Mother's Day) towards everyday ranges, which typically represent 70% of
sales. Card range developments driving sales uplift in key ranges such as
wedding.
· We expect our performance through the balance of the year to
increasingly benefit from the strategic improvements we are making including
expansion of complementary categories, further roll out of our trial model
stores and highly targeted price increases.
· The Board expects that the business will deliver revenue
recovering towards pre-pandemic levels in FY23.
· As previously guided in January, the Board expects significant
inflationary headwinds to continue through FY23. Pre-emptive action has
already mitigated a significant proportion of the identified inflationary
headwinds through a combination of efficient management of costs and working
capital as well as targeted price increases.
· While taking into consideration the inflationary headwinds
mentioned above as well as the levels of trading seen in the new financial
year, the Board's expectations for revenue and profit for FY23 remain
unchanged.
· The Board remains confident in the longer-term growth opportunity
for the business and its expectations for revenues in excess of £600m in
FY26.
Darcy Willson-Rymer, Chief Executive Officer, commented:
"We are pleased to report a robust performance for the year, ahead of our
original expectations, alongside good progress on our strategic transition,
despite the operational challenges the last year brought.
We saw a steady recovery in store performance as lockdown restrictions eased,
particularly in the run up to Christmas with store sales approaching
pre-pandemic levels in this key trading period. As we reopened our stores, we
saw our online performance decline slightly year on year; however, we remain
greatly encouraged that our Card Factory online sales were significantly ahead
of pre-pandemic levels. This year will see us make further progress in
developing our customer proposition, through a broader product range and
improved online experience, as part of our transition to a leading omnichannel
retailer.
Looking forward, we remain confident our revenue levels for next year will
continue trending towards pre-pandemic levels. We have taken pre-emptive
action to help mitigate the inflationary pressures we are seeing across the
business and we will continue to monitor and respond to developing macro
environmental pressures. Our focus is on creating opportunities across our
store estate while building out our wider capability which will allow us to
deliver our strategic initiatives and drive growth at pace.
We enter the year ahead with confidence in our ability to deliver our plan for
FY23. We remain excited by the growth opportunity ahead and continue to focus
on implementing changes to enable us to deliver on our transition from a
store-led card retailer into a market leading, omnichannel retailer of cards
and gifts."
Preliminary results announcement
There will be a preliminary results webcast for analysts and investors today,
starting at 10:00a.m. and available
via https://webcasting.brrmedia.co.uk/broadcast/62430d0f48e2f937d0543790
(https://webcasting.brrmedia.co.uk/broadcast/62430d0f48e2f937d0543790)
Those analysts who wish to join are requested to contact Yasemin Balman of
Tulchan Communications on the number provided below or by
emailing cardfactory@tulchangroup.com (mailto:cardfactory@tulchangroup.com)
. A copy of the webcast and accompanying presentation will be made available
via the Card Factory investor relations website: www.cardfactoryinvestors.com
(http://www.cardfactoryinvestors.com/) .
Enquiries
Card Factory
plc
via Tulchan Communications (below)
Darcy Willson-Rymer, Chief Executive Officer
Kris Lee, Chief Financial Officer
Tulchan
Communications
+44 (0) 207 353 4200
James Macey White / Alison
Lygo
cardfactory@tulchangroup.com (mailto:cardfactory@tulchangroup.com)
This announcement contains certain forward-looking statements with respect to
the financial condition, results of operations, and businesses of Card Factory
plc. These statements and forecasts involve risk, uncertainty and
assumptions because they relate to events and depend upon circumstances that
will occur in the future. There are a number of factors that could cause
actual results or developments to differ materially from those expressed or
implied by these forward-looking statements. These forward-looking statements
are made only as at the date of this announcement. Nothing in this
announcement should be construed as a profit forecast. Except as required by
law, Card Factory plc has no obligation to update the forward-looking
statements or to correct any inaccuracies therein.
Card Factory plc ("Card Factory" or the "Group")
Preliminary results for the year ended 31 January 2022
CHAIR'S STATEMENT
With the impact of Covid-19 lockdowns and personal constraints still being
felt throughout 2021, I am proud of the resilient performance delivered by the
Card Factory leadership team and colleagues across the business. Even though
the financial year was materially impacted by Covid-19 related restrictions,
trading and profits for FY22 were ahead of the Board's expectations, with
overall performance recovering steadily from April 2021 as those restrictions
eased.
The response from our customers as lockdowns ended was extremely positive. As
footfall increased but to levels still below historical norms, our customers
told us how much they had missed shopping at Card Factory. We believe that
this evident loyalty to our brand and customer proposition places us in a
strong position to grow the business in line with our strategic ambition and
is testament to both the strength of the Card Factory offer and the hard work
and commitment of store colleagues throughout the UK and Ireland.
I would also like to recognise all Card Factory colleagues for the exceptional
effort and drive they have shown through this second year of the pandemic.
Many of our colleagues were on furlough for much of the first quarter of the
year but they returned to the business with a passion to reopen stores and
deliver for our customers, our business and our shareholders. It is important
to recognise the unrelenting efforts of colleagues who worked through the
lockdowns, continuing to adapt with agility and pace to changing
circumstances, ensuring the business was well placed to reopen stores at,
often, short notice.
Year in review
Encouragingly, store sales recovered steadily through the year after lockdown
restrictions eased, enabling an improving top-line performance.
Profit for the 12 months to 31 January 2022 was ahead of management's
expectations despite the external headwinds facing the wider market,
particularly significant inflationary headwinds and supply chain pressures
including the increasing cost of freight and also the impact of inflation on
staff costs and utilities. As Covid-19 related restrictions eased, we saw a
steady recovery of store sales performance, with the key Christmas season
approaching pre-pandemic LFL levels.
As customers returned to our stores following consecutive lockdowns, we saw
our online sales decline slightly year on year. However, we remain encouraged
by our Card Factory online sales in the financial year being significantly
ahead of pre-pandemic levels, reflecting the expansion of our online product
range and the improved customer experience whilst visiting the website, as
well as an accelerated shift in consumer behaviour, consequent to the extended
periods when our stores were closed.
The Board has remained focused on building the financial strength of the
business. This resulted in strong operational cash flow and improved balance
sheet strength.
The Board is pleased to have successfully refinanced the business, as
announced on 21 April 2022, with an updated and amended financing package with
our banking partners. As well as reducing the overall quantum, the refinancing
has extended the term of the Group's debt facilities comprising term loans of
£30 million, CLBILS of £20 million and a Revolving Credit Facility of £100
million. The revised agreement removed the obligation on the Group to use best
efforts to raise further equity to make prepayments of the debt facilities.
Further details of the refinancing are provided within the CFO Statement.
Platform for growth
Under the leadership of Darcy Willson-Rymer, we have comprehensively reviewed
our future growth strategy, emphasising the strategic importance of our
digital offer and the opportunity to develop partnerships with third parties
nationally and internationally. Launched to our colleagues in October 2021,
the 'Opening Our New Future' strategy will deliver the key elements that will
realise the potential for sustainable growth across the whole enterprise.
Through this strategy, Card Factory is well-positioned to become the UK's
number one destination for all customers seeking unrivalled quality, value,
choice, convenience and experience. We are working to transform Card Factory
into the leading omnichannel brand in our space to help customers celebrate
each and every special occasion. It is our aim to become a global competitor
putting cards and gifts in the hands of more customers.
Outlook and financial headwinds
As previously guided, the Board expects revenues in FY23 to be towards FY20
revenue levels.
The Board also expects significant inflationary headwinds to continue through
FY23. Pre-emptive action has already mitigated a significant proportion of
these pressures through a combination of efficient management of costs and
working capital, as well as an increased number of carefully targeted price
increases.
While taking into consideration the inflationary headwinds mentioned above as
well as the levels of trading seen in the new financial year, the Board's
expectations for revenue and profit for FY23 remain unchanged.
Board appointments during FY22
We were delighted to welcome both Darcy Willson-Rymer as our new Chief
Executive on 8 March 2021 and Robert (Rob) McWilliam as independent
Non-Executive Director, replacing David Stead who stepped down on 30 November
2021. Rob joined the Board on 1 November 2021; he has been appointed as Chair
of Card Factory's Audit & Risk Committee and as a member of the Nomination
Committee and the Remuneration Committee.
Summary
After the significant disruption that the business has faced over the past two
financial years, we ended FY22 in a robust position. We are also optimistic
about the positive impact that the 'Opening Our New Future' strategy will
deliver and the more detailed plans now in place to enable flawless execution
of those plans. We remain confident that our store estate remains a strong,
relevant channel within our longer-term omnichannel proposition.
Colleagues across the business have shown their strong support and commitment
towards the strategy and as delivery momentum continues to build, we look
forward to the future with confidence.
Paul Moody
Chair
3 May 2022
CHIEF EXECUTIVE OFFICER'S REVIEW
Introduction
Having now completed my first full year as Chief Executive of Card Factory, I
have been impressed by the potential from the design, print, manufacturing and
retail capability, as well as the culture of the business and am optimistic
about our opportunities for growth. Card Factory is a company that is loved by
both customers and colleagues, and there is an energy from our colleagues to
do the right thing.
The culture of this business and the opportunities that are open to every
colleague are as much a growth driver as anything we do for our customers. It
is only by working together, as one team with common goals in a diverse and
inclusive culture, that we can take this business to the next level.
FY22 performance
The business recovered well through the year with Group revenue up 28% driven
by growth in store sales following easing of lockdown restrictions. Store
sales increased 33% year on year reflecting a 20% increase in the number of
trading days compared to the prior year and a recovery in market share. Store
LFL sales (versus FY20) were -5.7%, albeit with steady recovery post lockdown
as footfall recovered. The key Christmas trading season benefited from
approaching pre-pandemic LFL levels.
While online sales across both cardfactory.co.uk and gettingpersonal.co.uk for
the financial year were ahead of pre-pandemic levels (+23% versus FY20), sales
were short of target due to delays to development that should have further
increased the ranges offered online. Online sales were down-13.5% YOY (made up
of cardfactory.co.uk -1.5%; gettingpersonal.co.uk -21.6%) which reflects the
easing of lockdown restrictions and the return of customers to physical stores
as well as the focus on higher margin sales on gettingpersonal.co.uk.
As expansion of our retail partnerships both in the UK and internationally is
a key component of our 'Opening Our New Future Strategy', we were delighted to
welcome our Business Development Director in September 2021. Partnership sales
were down 18% YOY, reflecting an underlying performance in line with
expectations with the decline relating to the extended Covid-19 lockdown
periods in Australia, which impacted trading at our partner, The Reject Shop.
The focus on building the financial strength of the business was seen through
the strong operating cashflow which was up 42% in FY22 to £114m. Actions to
manage cost included strong capex control, greater efficiency in stock
management (including reduced closing stock YOY) and proactive management of
additional expense costs. Improved balance sheet strength resulted in closing
Net Debt (excluding lease liabilities) of £74.2m (FY21: £107.7m), with
Leverage excluding lease liabilities of 0.9x (FY21: 2.4x) below pre-pandemic
levels (FY20: 1.1x). Inclusive of lease liabilities, Net Debt was £194.0m
(FY21: £252.6m) and Leverage 2.3x (FY21: 5.5x).
Strategy refresh
Since joining the Group, one of my priorities has been to review the business
and its growth strategy. Having completed that process, I remain extremely
excited about the opportunities available to Card Factory.
The delivery of the growth strategy set out in July 2020 - and the broader
retail environment itself - has obviously been impacted by Covid-19. However,
it is clear that the right way forward is to transition Card Factory from
being a store-led card retailer into a market leading, omnichannel retailer of
cards and gifts.
While cards will remain the largest part of our business in terms of total
contribution, we will substantially increase our focus on complementary
gifting, enhancing our customer offer and significantly increasing the size of
our addressable market. The successful delivery of our strategy will be
achieved by putting the customer at the heart of everything we do - ensuring
that we provide outstanding value and quality across all our products and
services, available however our customers want to shop.
This will include the continued expansion of our partnership strategy. The
opportunity for us to sell our products in areas of the UK where we have no
presence but do have potential customers is considerable, and there is
additional significant opportunity to satisfy shopper missions that are not
currently met through our existing store estate footprint. By further
expanding our brand and offer internationally, we will leverage the full
potential of our design, production and distribution capability.
Delivery of our strategy is now underway and some significant milestones have
already been achieved. We have strengthened our leadership team with key
appointments into the roles of Chief Information Officer and Digital Director,
recognising the critical role digital has to play in our business growth. In
addition, we have appointed a new Business Development Director and appointed
Card Factory's first Customer Marketing Director to oversee our new Customer
Marketing function. These appointments bring significant experience to our
leadership team and will ensure we have the right capabilities to drive the
next stage of our growth.
Recent delivery milestones include opening our first new look 'model store',
and we will soon complete the transitioning of both of our online stores
(cardfactory.co.uk and gettingpersonal.co.uk) onto a single, unified platform
which unlocks cost benefits and the ability to significantly expand the
cardfactory.co.uk gifting range.
Looking ahead, our focus for the next financial year is creating growth
opportunities around the store estate and building out our wider capability.
Key FY23 milestones include:
Stores
· Expand our market share in Stores in complementary categories -
We are already UK leaders in party and balloon categories and for stores we
will be looking at expanding our market share in categories such as
stationery, confectionery and toys. This will not come at the expense of cards
in-store. It is about making smarter, more agile choices about the space
dedicated to complementary categories.
· Complete the rollout of trial model stores - We opened our first
new format 'model store' in February 2022. The Coventry store features better
use of store space, improved customer flow and navigation through the store,
while also improving operational efficiencies. Results from the store have
been very promising and we expect that similar results can be achieved as more
trial stores are opened. Analysis of results will be used to prepare for wider
rollout from FY24 while taking learnings into our existing store estate.
· Open first Central London stores; continue Republic Of Ireland
expansion - We have identified a profitable route for opening our first stores
in Central London. Having enjoyed profitable success with our first 14 stores
in the Republic of Ireland, we will continue our expansion plans with a
further five stores already identified and additional openings planned.
Wider capability
· Trialling the ability for shoppers to Click & Collect any
product from our online or app platforms for collection in store - This is the
first step on rolling out our omnichannel capability which we believe provides
the opportunity to leverage our brand, store estate, vertical integration,
quality and value proposition and our investment in our online channels to
materially increase our share of the online market.
· Deliver the second phase of our ERP implementation - Already live
across the finance functions, the new ERP system will underpin the growth
strategy across the entire business allowing us to understand and respond
rapidly to changing shopper habits and preferences. It will provide the
ability to view stock in all areas of the business, which is essential for
omnichannel operations, and will allow us to integrate with future partners
both in the UK and internationally.
· Pricing strategy - To support maintaining margins, we have begun
a highly targeted set of price increases across some of our products. We are
carefully analysing the impact on sales with further price rises on other SKUs
being actively considered, whilst maintaining our value proposition.
Responding to headwinds
Continuing to respond to the inflationary headwinds outlined by Paul in the
Chair's Statement is a priority area of focus. We have taken significant
pre-emptive measures to manage costs within the business and enact sustainable
price increases.
People & Culture
Investing in the evolution and development of our people strategy and culture
within Card Factory is a priority for our senior management team. Developing
Card Factory into a diverse, inclusive and socially responsible business is
vital for our growth and prosperity. It creates the work environment where we
can all prosper and thrive. It attracts new people and exceptional talent into
the business, and it helps retain the exceptional talent we already have.
Over the past year, we have been collecting and listening to feedback from
across the business so that we understand where our culture is right, where we
are treating colleagues in the way they expect to be treated, where we are
fostering a leadership environment that values and encourages everyone's
contribution, and how we can best reward colleagues for the contribution they
make. Having completed a full review of our pay and rewards policies including
industry benchmarking, we have introduced a range of significant improvements.
All colleagues now benefit from a company maternity and paternity pay scheme
and an inclusive company sick pay policy, and we have made substantial steps
towards making pay for all colleagues competitive within the market.
Our ESG commitment
Another area of progress that we are proud to highlight are the steps the
business is taking to develop and deliver positive change through our ESG
strategy. We are progressing well in terms of reducing our carbon footprint
and becoming a carbon neutral business. We are on track in our efforts to
reduce waste and improve the sustainability of our product ranges, with 90% of
our products being free of single use plastic by the end of FY24, along with
all of our products being glitter free in the same time frame.
Our social policies are moving forward at pace with colleagues working
collaboratively on a range of initiatives which includes a progressive
DE&I strategy and we continue to have a positive impact within the
communities we work within and the charities we support through The Card
Factory Foundation.
At all times we are complying with guidelines and best practices, and actively
managing our ESG considerations and risks effectively, with good governance
informing our decision-making. Further details around our ESG commitments are
provided within our Annual Report.
Summary
We have made a positive start on our five-year growth journey. Through the
course of this year, we aim to make significant headway on all of the key
initiatives that will drive our future growth, especially omnichannel. The
strong return of sales through the year demonstrated that we remain a
much-loved retail brand with a unique and scalable business model that is the
ideal platform for achieving our growth ambitions. Our focus is on continuing
to return same store sales and delivering the strategic initiatives that will
drive growth at pace.
Darcy Willson-Rymer
Chief Executive Officer
3 May 2022
CHIEF FINANCIAL OFFICER'S REVIEW
The "FY22" accounting period refers to the year ended 31 January 2022 and the
comparative period "FY21" refers to the year ended 31 January 2021.
Historically, the Group has presented underlying profit and earnings measures.
During FY22, the Group has ceased such presentation.
Revenue
Total Group revenue during the year increased by 28% to £364.4 million (FY21:
£285.1 million), predominantly due to improving trading conditions as the UK
began to exit and recover from restrictions associated with the Covid-19
pandemic. Stores were closed for ten weeks due to lockdown in FY22, compared
to five months in FY21. The steady recovery in sales followed the end of the
last national lockdown in April 2021. For the financial year overall, an
increase in store average basket values ('ABV') (+22%) versus FY20 partially
offset lower footfall / transaction volumes (-23%) versus FY20. Growth in ABV
is being driven by the strength of our balloon and party ranges where Card
Factory is the market leader, alongside growth in complementary categories,
therefore our focus in FY23 will be on expanding these ranges and responding
to customer lifestyle choices.
FY22 FY21 Increase/
(Decrease)
£'m £'m £'m
Card Factory stores 336.0 251.9 84.1
Card Factory Online 10.9 11.1 (0.2)
Getting Personal 12.9 16.5 (3.6)
Retail partnerships 4.6 5.6 (1.0)
Group 364.4 285.1 79.3
The Group's programme of new store openings continues to be an important
driver of sales growth. Covid-19 led to a postponement of some new store
openings during FY21 which continued into FY22. However, despite this, 11 new
stores were opened during FY22, three stores were relocated, and seven stores
closed, giving a net increase in stores during the year of four. This brought
the total store estate to 1,020 stores at the end of the year, including 14
stores in the Republic of Ireland (FY21: 1,016 stores, 14 in the Republic of
Ireland).
The reduction in lockdown periods during FY22, compared to the prior period,
drove a proportion of sales back to stores and away from online. As mentioned
in the CEO statement, online sales for both cardfactory.co.uk and
gettingpersonal.co.uk were ahead of pre-pandemic levels although short of
target due to delays to development that should have further increased the
ranges offered online. Continued growth in online remains a key strategic
focus for the Group.
Retail partnerships sales also reduced compared to the prior year, largely due
to The Reject Shop being affected by regional lockdown restrictions during the
period.
Like-for-like ('LFL') sales growth across each division is set out in the
table below. LFL measures exclude periods where stores were closed due to
lockdown and for stores are stated compared to FY20, the last full year of
trading unaffected by Covid-19.
FY22 FY21
Card Factory stores (5.7%) (2.4%)
Card Factory online (1.5%) 135.3%
Card Factory LFL (3.9%) 0.1%
Getting Personal (21.6%) 12.2%
Ongoing improvements to the depth, quality and merchandising of our
complementary product offering led to a continuation of the mix shift to this
category. In addition, the business has placed increased emphasis on its
everyday card offering, to ensure customers have the widest choice of card
type and greeting messages. The full-year mix for FY22 was 48.4% single cards
(FY21: 51.1%), 48.4% non-card (FY21 46.7%) and 3.2% boxed cards (FY21: 2.2%).
Operating costs
Cost of sales and operating expenses are set out in the tables below.
FY22 FY22 FY22 % £
% of revenue (Increase) / Decrease (Increase) / Decrease
£'m
Cost of goods sold* 134.1 37.0% 4.4 ppts (13.5%)
Store wages 78.8 21.6% (0.7 ppts) (32.2%)
Store property costs 15.8 4.3% (0.9 ppts) (64.6%)
Other direct expenses 19.2 5.2% 1.2 ppts (4.9%)
Cost of sales 247.9 68.1% 4.0 ppts (21.2%)
Operating expenses** 38.9 10.7% 1.1 ppts (15.8%)
Depreciation, amortisation & impairment 54.0 14.8% 3.9 ppts (1.3%)
Total operating expenses 92.9 25.5% 5.0 ppts (6.9%)
FY21 FY21 FY21
% of revenue
£'m
Cost of goods sold* 118.1 41.4%
Store wages 59.7 20.9%
Store property costs 9.6 3.4%
Other direct expenses 18.3 6.4%
Cost of sales 205.7 72.1%
Operating expenses** 33.6 11.8%
Depreciation, amortisation & impairment 53.3 18.7%
Total operating expenses 86.9 30.5%
*cost of goods sold includes FX losses previously described as non-underlying
in FY21.
**excluding depreciation and amortisation.
The overall ratio of cost of sales to revenue decreased to 68.1% (FY21:
72.1%). This decrease was driven by the following movements in
sub-categories and by the increase in sales compared to the prior year:
· Cost of goods sold ('COGS'): comprises the direct costs of goods sold
in the period (principally cost of raw materials, production costs, finished
goods purchased from third party suppliers, import duty, freight costs,
carriage costs and warehouse wages). In addition to the impact from the
increase in sales and improved stock management, product COGS in FY22 was
affected by the global shipping crisis and a significant increase in freight
costs. Whilst the absolute cost of purchases increased as a result, the
knock-on impact of shipping delays to inventory values contributed to a
reduction in the overall level of provision compared to FY21, lowering COGS as
an overall percentage of revenue. Provisions as a percentage of the gross
inventory balance remain broadly consistent with the prior year.
· Store wages: comprises all staff costs for store-based staff,
including employer taxes and contributions, and is shown net of Government
support received through the CJRS. The main driver behind the absolute
increase in store wages year-on-year is the reduction in store closure periods
and associated reduction in CJRS income. The increase as a percentage of
revenue (0.7ppts compared to FY21) reflects national living wage increases
partially offset through productivity gains.
· Store property costs: principally comprises business rates and
service charges. Property costs for FY22 and FY21 reflect rates reliefs
available across the store portfolio in both periods. Overall property costs
increased in FY22 as a result of a reduction in the amount of business rates
relief available in England from July 2021.
· Other direct expenses: includes store opening costs, store utility
costs, waste disposal, store maintenance, point of sale costs, bank charges
and pay-per-click expenditure. This cost category is predominantly variable in
proportion to the number of stores. Other direct expenses decreased as a
percentage of revenue in FY22 reflecting reduced lockdown periods and
increased trading days, as certain cost categories (such as insurance and
maintenance) do not change in direct proportion with revenue from store
trading.
· Operating expenses: includes remuneration for central and regional
management and business support functions, design studio costs and business
insurance together with other central overheads and administration costs.
Indirect salary costs increased compared to the prior year, which reflects
investment in people related to future growth, reduced CJRS claims and also
the payment of staff bonuses for FY22 as a result of the improvement in
financial performance. Total operating expenses (excluding depreciation and
amortisation) increased by 15.8% to £38.9 million, representing a decrease
from 11.8% to 10.7% as a percentage of revenue.
Depreciation and amortisation charges include depreciation and impairment in
respect of right-of-use assets, which predominantly relate to the Group's
store portfolio. In FY22, depreciation and amortisation includes £5.0 million
of impairment charges in relation to right of use assets (FY21: £2.6
million), predominantly reflecting the effect of the Covid-19 pandemic and
continued cost headwinds expected in future periods, particularly in relation
to freight and the impact of inflation on staff wages and utility costs. As a
result, total depreciation and amortisation charges increased to £54.0
million (FY21: £53.3 million)
In addition to support from CJRS and rates relief described above, the Group
recognised £8.0 million of other operating income in respect of various
government grant schemes related to Covid-19 lockdowns.
EBITDA
FY22 FY21 Increase/ (Decrease)
£'m £'m
EBITDA 85.6 45.8 £39.8m
EBITDA margin 23.4% 16.1% 7.3 ppts
The increase in EBITDA (defined as earnings before interest, tax,
depreciation, amortisation and impairment charges) reflects, in particular,
the improvement in trading performance described above due to the reduction in
non-essential retail closure periods in FY22, compared to the prior year. The
business has continued to focus on delivering close control over its cost
base, with approximately 2% of the store portfolio marginally loss-making on a
variable contribution basis, reflecting the subdued footfall during the year.
The cessation of all restrictions in relation to Covid-19 in the UK gives
cause for optimism going forward; however, we anticipate ongoing inflationary
headwinds through FY23 - a significant proportion of which has been
pre-emptively mitigated through a combination of efficient management of costs
and working capital, as well as targeted price increases - including
the increasing cost of freight and also the impact of inflation on staff
costs and utilities; plus investment in headcount, IT and development of the
online platform to support the delivery of the Group's 'Opening Our New
Future' strategy.
Net financing expense
The interest charge pertaining to the Group's loan facilities increased to
£6.8 million (FY21: £5.1 million) reflecting an increase to the Group's
average effective interest rate following the refinancing of the Group's
facilities in May 2021. In addition, the Group recorded a £10.4 million
charge in respect of loan issue costs amortised to the income statement in the
period. This represented a significant increase from similar fees in prior
periods owing to the fees associated with the May 2021 refinancing, which
included costs associated with the potential equity raise, since removed in
the April 2022 refinancing, and an accelerated amortisation profile that
reflected our expectation of a further refinancing in the first quarter of
FY23. See note 13 for further details. Net finance costs are expected to
normalise to historical levels in FY23.
Including IFRS 16 Leases interest charges, the total net financing expense
increased to £20.5 million (FY21: £8.9 million).
FY22 FY21 (Increase) /Decrease
£'m £'m
Finance expense
Interest on loans 6.8 5.1 (1.7)
Loan issue cost amortisation 10.4 0.4 (10.0)
IFRS 16 Leases interest 3.3 3.4 0.1
Total finance expense 20.5 8.9 (11.6)
Profit before tax and tax charge
As a result of all of the factors described above, the profit before tax for
the financial year amounted to £11.1 million (FY21: Loss before tax of £16.4
million).
The tax charge for FY22 of £3.0 million reflects an effective tax rate
('ETR') of 27.0% (FY21: Tax credit of £2.8 million and an ETR of 17.1%). The
ETR is higher than the standard rate of corporation tax in the UK of 19%,
reflecting the impact on deferred tax balances of the budget announcement in
March 2021 that the Corporation tax rate will increase to 25% from 1 April
2023.
Earnings per share
Basic and diluted earnings per share for the year were 2.4 pence (FY21: Loss
per share of 4.0 pence).
FY22 FY21 Increase /(decrease)
Basic and Diluted EPS 2.4p (4.0p) 6.4p
Capital expenditure
Capital expenditure, excluding IFRS 16 right-of-use assets, amounted to £6.9
million (FY21: £7.5 million), principally in relation to new stores, online
investment and ERP implementation. Additions to right of use assets,
reflecting new and renewed leases in the store portfolio in the period, were
£29.8 million (FY21 £22.8 million).
Capital expenditure in FY22 continued to be tightly controlled as the business
emerged from Covid-19 restrictions. The Group remains subject to restrictions
under its banking facilities, which limit the total value of capital
expenditure that can be incurred over the next two years. Whilst operating
within these limits, we anticipate continuing to support our 'Opening Our New
Future' strategy in FY23 by investing £23 million across key initiatives,
including the next phase of our ERP implementation, continuing the roll out of
new stores, and building our e-commerce, omnichannel and manufacturing
capabilities.
Foreign exchange
Approximately half of the Group's annual cost of goods sold expense relates to
products that are purchased from overseas suppliers denominated in US dollars.
The Group has an established approach to hedging the risk of exchange rate
fluctuations, which adopts a conservative approach to risk but retains
flexibility to respond to both business and market events. The Board-approved
policy permits the use of a combination of vanilla forwards and structured
options to hedge the exposure over a rolling three-year period. The Group has
used structured options and similar instruments to good effect for a number of
years and the Board continues to view such instruments to be commercially
attractive as part of a balanced portfolio approach to exchange rate risk
management, even if cash flow hedge accounting may not be achievable or
permitted in some instances.
At the year end, the Group had commercial hedges in place giving significant
coverage for both FY23 and FY24 with anticipated average delivered rates of
c.$1.35, although this remains subject to future variation in the value of
sterling, which could impact the structured trades that form part of the
hedging portfolio, and the impact of future trading conditions on hedged cash
flows. Structured trades represent approximately one third of hedges that are
yet to mature.
Cash generation
In the year, the Group remained cash generative, driven by improved trading
performance, favourable working capital movements and close control of
operating costs and capital expenditure.
Net Debt & covenants
FY22 FY22 FY21 FY21
Net Debt Leverage Net Debt Leverage
£'m Multiple £'m Multiple
Borrowings
Current liabilities 25.5 0.2
Non-current liabilities 85.5 118.8
Total borrowings 111.0 119.0
Lease liabilities 119.8 144.9
Capitalised debt costs 1.5 1.2
Gross debt 232.3 265.1
Less cash (38.3) (12.5)
Net Debt (inc. Leases) 194.0 252.6
Leverage (inc. Leases) 2.3x 5.5x
Remove lease liabilities (119.8) (144.9)
Net Debt (exc. Leases) 74.2 107.7
Leverage (exc. Leases) 0.9x 2.4x
The Group focuses on Net Debt calculated to exclude lease liabilities, as this
reflects the way the Group's covenants are calculated within its financing
facilities.
Net Debt excluding lease liabilities was £74.2 million at 31 January 2022
(FY21: £107.7 million), the improvement reflecting careful cash and working
capital management through continued Covid-19 restrictions.
Leverage, calculated as Net Debt excluding lease liabilities divided by EBITDA
and expressed as a multiple, was 0.9 times at 31 January 2022 (FY21: 2.4
times). The Group expects Leverage to increase slightly as it returns to
normal trading patterns.
In May 2021, the Group renewed its financing facilities with its banking
partners, which at the balance sheet date comprised a £75 million Term Loan,
£50 million CLBILS and a Revolving Credit Facility of £100 million. Under
the revised covenant terms, the Group was required to achieve defined
quarterly covenant tests of Interest Cover and Leverage, alongside customary
reporting requirements which are considered to be administrative in nature.
In addition to financial covenants, under the terms of the CLBILS facility the
Group is prohibited from making distributions to shareholders until the CLBILS
facility has been repaid. The terms of the facilities require the term loan
and CLBILS facility to be repaid pro-rata.
The facilities have an expiry date of 24 September 2023 (unchanged from the
previous arrangement). The Group concluded a further refinancing of its debt
facilities on 21 April 2022, described in further detail below. The Group
expects to operate within the restrictions of its financing facilities and
meet its covenant tests for the foreseeable future.
Post-Balance sheet refinancing
Subsequent to the year end, on 21 April 2022, the Group agreed revised terms
on its financing package with its existing banking syndicate, which reduced
the overall quantum but extended the term of the Group's debt facilities.
Following this refinancing, the Group's facilities comprise term loans of £30
million, CLBILS of £20 million and a Revolving Credit Facility of £100
million.
The CLBILS and £11.25 million of the term loans are subject to an amortising
repayment profile to September 2023, and January 2024 (respectively), with the
Revolving Credit Facility and remaining term loan repayable by September 2025.
The revised agreement removed the obligation on the Group to use best efforts
to raise further equity to make prepayments of the debt facilities. The
dividend restrictions under the CLBILS facilities continue to apply.
The Group's strategic plan has been updated to reflect the new facilities and
is subject to scenario testing. The Board believes that the Group has access
to sufficient liquidity to execute its strategy under a range of different
scenarios.
Dividends and capital structure
Dividends
Historically, the Board has adopted a progressive ordinary dividend policy for
the Company, reflecting its strong earnings potential and cash flow
characteristics, while allowing it to retain sufficient capital to fund
ongoing operating requirements and to invest in the Company's long-term growth
and profitability.
Following the outbreak of the Covid-19 pandemic the Board ceased payment of
dividends, and as noted above the terms of the Group's financing facilities
now prohibit dividend payments until certain elements of the Group's
facilities are repaid.
As a result, no dividends were paid in FY21 nor FY22. The Board does not
propose payment of a final dividend in respect of FY22.
Capital structure
The Board is focused on maintaining a capital structure that is conservative
yet efficient in terms of providing long-term returns to shareholders.
Looking forward, the Board intends to maintain a leverage ratio (calculated as
Net Debt excluding lease liabilities to EBITDA) of between 0.5 and 1.5 times,
targeting the lower end of this range in the medium term. Provided leverage
remains in this range, the Board envisages considering dividends at the
year-end of FY24, at which point the CLBILS facilities and £11.25 million of
the term loan facilities will have been fully repaid. It is the Board's
intention, subject to these conditions, maintaining an appropriate Leverage
ratio and achieving financial performance in line with the strategic plan, to
pay ordinary annual dividends from this point.
It should be noted that Net Debt at the half and full year period ends is
lower than intra-year peaks, reflecting usual trading patterns and working
capital movements.
Kris Lee
Chief Financial Officer
3 May 2022
Explanatory notes
1. Alternative Performance Measures ("APMs") and other explanatory
information
Introduction
In the reporting of the financial statements, the Directors have adopted
various Alternative Performance Measures ('APMs') of financial performance,
position or cash flows other than those defined or specified under
International Financial Reporting Standards ('IFRS'). These measures are not
defined by IFRS and therefore may not be directly comparable with other
companies' APMs, including those in the Group's industry. APMs should be
considered in addition to IFRS measures and are not intended to be a
substitute for IFRS measurements.
Purpose
The Directors believe that these APMs provide additional useful information on
the performance and position of the Group and are intended to aid the user in
understanding the Group's results.
The APMs presented are consistent with measures used internally by the Board
and management for performance analysis, planning, reporting and incentive
setting purposes.
Definitions of the APMs used in this report are as follows:
"EBITDA" is earnings before interest, tax, depreciation, amortisation and
impairment charges. Earnings is equivalent to profit after tax calculated in
accordance with IFRS and each adjusting item is calculated in accordance with
the relevant IFRS. A reconciliation of EBITDA to profit after tax is provided
in note 3 to the consolidated financial statements. The Group uses EBITDA as a
measure of trading performance, as it usually closely correlates to the
Group's operating cash generation.
"Leverage" is the ratio of Net Debt to EBITDA for the previous 12 months. The
Group monitors and reports leverage as a key measure of its financing position
and performance. Leverage is also a key covenant defined within the Group's
financing facilities. A calculation of Leverage (both inclusive and exclusive
of lease liabilities) is provided in the Chief Financial Officer's review
above.
"Like-for-like" or "LFL" calculates the growth or decline in sales in the
current period versus a prior comparative period, excluding any sales earned
from new stores opened in the current period (or closed since the comparative
period). Throughout this report, LFLs for Card Factory stores are two-year
LFLs to FY20 (as the last full year of trading prior to Covid-19-related
closure restrictions) and exclude any periods where stores were forced to
close.
The Group defines Iike-for-Iike sales as the year-on-year growth in sales via
Card Factory retail channels as follows:
· Card Factory Stores: "Store LFLs" consider stores that were open
in both the current year and the comparative period.
· "Card Factory Online": made via the Card Factory website,
www.cardfactory.co.uk (http://www.cardfactory.co.uk) ;
· "Card Factory LFL" is defined as Like-for-like sales in stores
plus sales from the Card Factory website. www.cardfactory.co.uk
(http://www.cardfactory.co.uk) ;
· "Getting Personal": made via the separately branded personalised
card and gift website, www.gettingpersonal.co.uk
(http://www.gettingpersonal.co.uk) ;
· "Online": like for like sales for Card Factory Online and Getting
Personal combined.
Sales by Printcraft, the Group's printing division, to external third-party
customers are excluded from any LFL sales measure.
"Net Debt" is calculated by subtracting the Group's cash and cash equivalents
from its borrowings. Net Debt is a key measure of the Group's balance sheet
strength, and is also a covenant in the Group's financing facilities. The
Group presents Net Debt both inclusive and exclusive of lease liabilities, but
focusses upon the value exclusive of lease liabilities, which is consistent
with the calculation used for covenant purposes.
"Percentage Movements" have been calculated before figures were rounded to
£0.1m.
Card Factory
plc
Consolidated income statement
For the year ended 31 January 2022
2022 2021
Note £'m £'m
Revenue 364.4 285.1
Cost of sales (247.9) (205.7)
Gross profit 116.5 79.4
Other operating income 2 8.0 -
Operating expenses (92.9) (86.9)
Operating profit/(loss) 2 31.6 (7.5)
Finance expense 5 (20.5) (8.9)
Profit/(loss) before tax 11.1 (16.4)
Taxation 6 (3.0) 2.8
Profit/(loss) for the year 8.1 (13.6)
Earnings per share pence pence
- Basic and diluted 8 2.4 (4.0)
All activities relate to continuing operations.
Card Factory
plc
Consolidated statement of comprehensive income
As at 31 January 2022
2022 2021
£'m £'m
Profit/(loss) for the year 8.1 (13.6)
Items that may be recycled subsequently into profit or loss:
Cash flow hedges - changes in fair value 4.1 (1.9)
Cost of hedging reserve - changes in fair value - (0.1)
Tax relating to components of other comprehensive income (0.6) 0.4
Other comprehensive income/(expense) for the period, net of income tax 3.5 (1.6)
Total comprehensive income/(expense) for the period attributable to equity 11.6 (15.2)
shareholders of the parent
Card Factory
plc
Consolidated statement of financial position
As at 31 January 2022
Note 2022 2021
£'m £'m
Non-current assets
Intangible assets 9 320.7 320.3
Property, plant and equipment 10 31.6 36.8
Right of use assets 11 98.5 111.4
Deferred tax assets 3.6 5.3
Derivative financial instruments 1.3 -
455.7 473.8
Current assets
Inventories 33.1 36.4
Trade and other receivables 8.1 9.2
Tax receivable - 0.5
Derivative financial instruments 0.8 0.1
Cash and cash equivalents 12 38.3 12.5
80.3 58.7
Total assets 536.0 532.5
Current liabilities
Borrowings 13 (25.5) (0.2)
Lease liabilities 11 (41.1) (39.4)
Trade and other payables (71.7) (57.4)
Provisions 16 (12.2) -
Tax payable (1.5) -
Derivative financial instruments (0.2) (2.8)
(152.2) (99.8)
Non-current liabilities
Borrowings 13 (85.5) (118.8)
Lease liabilities 11 (78.7) (105.5)
Derivative financial instruments - (1.9)
(164.2) (226.2)
Total liabilities (316.4) (326.0)
Net assets 219.6 206.5
Equity
Share capital 3.4 3.4
Share premium 202.2 202.2
Hedging reserve 1.3 (3.1)
Cost of hedging reserve - 0.4
Reverse acquisition reserve (0.5) (0.5)
Merger reserve 2.7 2.7
Retained earnings 10.5 1.4
Equity attributable to equity holders of the parent 219.6 206.5
Share capital Share premium Hedging reserve Cost of hedging reserve Reverse acquisition reserve Merger reserve Retained earnings Total equity
£'m £'m £'m £'m £'m £'m £'m £'m
At 31 January 2020 3.4 202.2 (1.6) 1.1 (0.5) 2.7 14.2 221.5
Total comprehensive income for the period
Profit or loss - - - - - - (13.6) (13.6)
Other comprehensive income - - (1.5) (0.1) - - - (1.6)
- - (1.5) (0.1) - - (13.6) (15.2)
Hedging gains/(losses) and costs of hedging transferred to the cost of - - - (0.7) - - - (0.7)
inventory
Deferred tax on transfers to inventory - - - 0.1 - - - 0.1
Transactions with owners, recorded directly in equity
Share-based payment charges - - - - - - 0.8 0.8
Dividends (note 7) - - - - - - - -
Total contributions by and distributions to owners - - - - - - 0.8 0.8
At 31 January 2021 3.4 202.2 (3.1) 0.4 (0.5) 2.7 1.4 206.5
Total comprehensive expense for the period
Profit or loss - - - - - - 8.1 8.1
Other comprehensive expense - - 3.3 - - - 0.2 3.5
- - 3.3 - - - 8.3 11.6
Hedging gains/(losses) and costs of hedging transferred to the cost of - - 1.4 (0.5) - - - 0.9
inventory
Deferred tax on transfers to inventory - - (0.3) 0.1 - - - (0.2)
Transactions with owners, recorded directly in equity
Share-based payment charges - - - - - - 0.8 0.8
Dividends (note 7) - - - - - - - -
Total contributions by and distributions to owners - - - - - - 0.8 0.8
At 31 January 2022 3.4 202.2 1.3 - (0.5) 2.7 10.5 219.6
Card Factory
plc
Consolidated cash flow statement
As at 31 January 2022
Note 2022 2021
£'m £'m
Cash inflow from operating activities 14 113.6 79.9
Corporation tax paid 0.1 (6.3)
Net cash inflow from operating activities 113.7 73.6
Cash flows from investing activities
Purchase of property, plant and equipment 10 (3.6) (4.9)
Purchase of intangible assets 9 (3.3) (2.6)
Proceeds from disposal of fixed assets - 0.5
Net cash outflow from investing activities (6.9) (7.0)
Cash flows from financing activities
Interest paid on bank borrowings (6.5) (5.0)
Proceeds from bank borrowings 57.0 -
Repayment of bank borrowings (65.0) (25.6)
Other financing costs paid (8.7) -
Payment of lease liabilities (54.5) (22.1)
Interest in respect of lease liabilities (3.3) (3.4)
Net cash outflow from financing activities (81.0) (56.1)
Net increase in cash and cash equivalents 25.8 10.5
Cash and cash equivalents at the beginning of the year 12.5 2.0
Closing cash and cash equivalents 38.3 12.5
Accounting policies
General information
Card Factory plc ('the Company') is a public limited company incorporated in
the United Kingdom. The Company is domiciled in the United Kingdom and its
registered office is Century House, Brunel Road, 41 Industrial Estate,
Wakefield WF2 0XG. The Group financial statements consolidate those of the
Company and its subsidiaries (together referred to as the 'Group').
Basis of preparation
This preliminary announcement has been prepared in accordance with the
recognition and measurement principles of UK-adopted International Financial
Reporting Standards ('UK-IFRS') in conformity with the requirements of the
Companies Act 2006. It does not include all the information required for full
annual accounts. The financial information contained in this preliminary
announcement does not constitute the company's statutory accounts for the
years ended 31 January 2022 ('FY22') or 31 January 2021 ('FY21') but is
derived from these accounts. Statutory accounts for the year ended 31 January
2021 have been delivered to the registrar of companies, and those for the year
ended 31 January 2022 will be delivered to the registrar in due course. The
auditor has reported on those accounts; the audit reports were (i)
unqualified, (ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 (2) or (3) of the
Companies Act 2006.
Going concern basis of accounting
The Board continues to have a reasonable expectation that the Group has
adequate resources to continue in operation for at least the next 12 months
and that the going concern basis of accounting remains appropriate.
Over the course of the current and previous year, the Group has been
materially affected by the Covid-19 pandemic, with stores forced to close for
approximately eight months during that two-year period and revenues and
trading results adversely affected as a result. Through a strong focus on cash
management, de-levering the business and with support from Government
(including the Coronavirus Job Retention Scheme, business rates relief and
lockdown grant payments) and its wider stakeholders the Group has emerged from
this period with a robust balance sheet and a platform to execute its future
strategy.
Trading since the end of lockdown, and since the balance sheet date, has been
in line with expectations, with LFL sales in certain periods returning to
pre-pandemic levels.
The Group renewed its financing facilities with its banking partners in April
2022, reducing the quantum of the Group's term loan facilities to £150
million and extending the tenure of the Group's debt to September 2025 (see
notes 13 and 17). The first repayments under these facilities fall due in
January 2023, with full repayment of the CLBILS facilities by September 2023.
The Board believes the renewed facilities provide adequate liquidity and
headroom for the Group to execute its strategic plan. At 31 January 2022, Net
Debt excluding lease liabilities was £74.2 million.
The Group has prepared cash flow forecasts for the 12 months following the
date of approval of these accounts which incorporate the updated debt
facilities and related covenant measures. These forecasts are based on the
approved budget and business plan and include the Board's assumptions on
trading performance, including the extent and speed of the recovery of store
sales following reopening, and the timing of cash flows including amounts
where payment was deferred due to Covid-19. The Board's trading assumptions
are cautious compared to the Group's actual experience since stores reopened
and model a gradual recovery to pre-Covid levels, with negative overall LFL
sales forecast in FY23 when compared to FY20. These forecasts indicate that
the Group would have significant headroom within its agreed financing
arrangements, would comfortably meet all covenant tests within those
arrangements, and would be able to settle its liabilities as they fall due for
the duration of the forecasts, including repayment of borrowings in line with
the terms of the new facility agreements.
Whilst the current outlook is positive, the pandemic is not over. Accordingly,
the Group has modelled a number of severe, but plausible, downside scenarios
involving further closures of its stores, including scenarios where government
imposed lockdowns require a two-month closure during the winter period. The
Group's assumptions regarding trading in lockdown periods and the impact on
fixed and variable overheads was based on the Group's actual experience in
FY21 and FY22 and included assumptions regarding the availability of
government support, particularly in respect of salary costs and business
rates, on a basis consistent with the support received during previous
lockdowns. The projections did not assume any further lockdown grant income,
nor additional discretionary cost savings.
In all cases, the scenario analysis indicated that, whilst the impact would be
severe, the Group would meet the covenant thresholds in its financing
facilities and maintain sufficient liquidity to meet its liabilities as they
fall due.
The Group also modelled more extreme scenarios, beyond those considered
plausible. The analysis demonstrated that the Group had additional headroom in
its forecasts and the existence of further mitigations that could be taken, if
required.
Based on these factors, the Board has a reasonable expectation that the Group
has adequate resources and sufficient loan facility headroom and accordingly
the accounts are prepared on a going concern basis.
Principal Accounting Policies
The preliminary announcement has been prepared using the accounting policies
published in the Group's accounts for the year-ended 31 January 2021
(available on the Company's website).
1 Segmental reporting
The Group has two operating segments trading under the names Card Factory and
Getting Personal.
Card Factory retails greeting cards, dressing and gifts principally through an
extensive UK store network, with a small number of stores in the Republic of
Ireland, and also through 3(rd) party retail partners. Getting Personal is an
online retailer of personalised cards and gifts. The accounting policies
applied in preparing financial information for each of the Group's segments
are consistent with those applied in the preparation of the consolidated
financial statements. The information reviewed by the Board is consolidated,
except that revenue is shown separately for each segment.
Revenue for each segment, and a reconciliation to consolidated revenue, is
provided in the table below:
2022 2021
£'m £'m
Card Factory revenue 351.5 268.6
Getting Personal revenue 12.9 16.5
Consolidated revenue 364.4 285.1
Of which derived from customers in the UK 357.5 277.6
Of which derived from customers overseas 6.9 7.5
Group revenue is almost entirely derived from retail customers. Average
transaction value is low and products are transferred at the point of sale.
Group revenue is presented as a single category subject to substantially the
same economic factors that impact the nature, amount, timing and uncertainty
of revenue and cash flows. Revenue from retail partnerships and non-retail
customers were circa £5.6m in the year (2021: £6.6 million). Revenue from
overseas reflects revenues earned from the Group's stores in the Republic of
Ireland and retail partners based outside the UK.
Of the Group's non-current assets, £2.1 million relates to assets based
outside of the UK, principally in relation to the Group's stores in the
Republic of Ireland.
2 Operating profit/(loss)
Operating profit/(loss) is stated after charging/(crediting) the following
items:
2022 2021
£'m £'m
Staff costs (note 4) 113.8 90.9
Government grant income (8.0) -
Depreciation expense
- owned fixed assets (note 10) 8.8 9.2
- right of use assets (note 11) 37.4 39.9
Amortisation expense (note 9) 2.9 1.6
Impairment of right of use assets (note 11) 5.0 2.6
Profit on disposal of fixed assets - -
Foreign exchange gain 2.6 (0.3)
Government grants and Covid-19 support
During the 2022 and 2021 financial years, the Group has received
government-backed financial support in the form of payments under the
Coronavirus Job Retention Scheme ("CJRS"), business rates relief and income
from lockdown grants.
The operating profit for 2022 includes circa £9.4 million (2021: c.£31.4
million) in respect of payments received under CJRS, £8.0 million (2021:
£nil) of lockdown grant income, and circa £13.1 million (2021: c£18.1
million) retail business rates relief. These values are stated net of
provisions made where the Group expects to make repayments of amounts received
in excess of the value the Group reasonably believes it is entitled to retain
(see note 16).
Under the CJRS, grant income was claimed in respect of certain costs to the
Group of furloughed employees. Staff costs above is stated net of CJRS support
received.
Business rates relief for the Group's entire store portfolio commenced 1 April
2020, with no business rates payable in respect of retail locations until 1
July 2021, at which point retail locations in England received a 66% discount
on the total rates bill with no rates payable in the rest of the UK. Property
costs, included in cost of sales (where related to the store portfolio) and
operating expenses (where related to administrative buildings) in the income
statement, are presented net of business rates relief received.
Lockdown grant income is presented separately in the income statement as other
operating income, and reflects the value of payments received in respect of
lockdown grants, where the Group has reasonable assurance that it will comply
with the conditions attached to the grants.
The total fees payable by the Group to KPMG LLP and their associates during
the period was as follows:
2022 2021
£'000 £'000
Audit of the consolidated and Company financial statements 30 34
Amounts receivable by the Company's auditor and its associates in respect of:
Audit of financial statements of subsidiaries of the Company 340 340
Audit-related assurance services 45 25
Other assurance services 288 -
Total fees 703 399
Other assurance services provided in the year were in respect of assurance
services in connection with the Group's financial statements for transactions
that did not proceed. The appointment of KPMG LLP to provide such services was
made in accordance with the Group's policy on external auditors supplying
non-audit services.
3 EBITDA
Earnings before interest, tax, depreciation and amortisation ("EBITDA")
represents profit for the period before net finance expense, taxation,
depreciation and amortisation.
2022 2021
£'m £'m
Operating profit/(loss) 31.6 (7.5)
Depreciation, amortisation and impairment 54.0 53.3
EBITDA 85.6 45.8
4 Employee numbers and costs
The average number of people employed by the Group (including Directors)
during the year, analysed by category, was as follows:
2022 2021
Number Number
Management and administration 434 425
Operations 8,736 9,322
9,170 9,747
The aggregate payroll costs of all employees including Directors were as
follows:
2022 2021
£'m £'m
Employee wages and salaries 99.8 78.0
Equity-settled share-based payment expense 0.8 0.8
Social security costs 6.5 5.9
Defined contribution pension costs 1.5 1.3
Total employee costs 108.6 86.0
Agency labour costs 5.2 4.9
Total staff costs 113.8 90.9
Total employee costs are presented net of £9.4 million (2021: £31.4 million)
recovered through the coronavirus job retention scheme.
Key management personnel
The key management personnel of the Group comprise the Card Factory plc Board
of Directors, the Executive Board and the Operating Board. Key management
personnel compensation is as follows:
2022 2021
£'m £'m
Salaries and short-term benefits 4.4 4.4
Equity-settled share-based payment expense 0.6 0.7
Social security costs 0.6 0.6
Defined contribution pension costs 0.1 0.1
5.7 5.8
5 Finance expense
2022 2021
£'m £'m
Finance expense
Interest on bank loans and overdrafts 6.8 5.1
Amortisation of loan issue costs 10.4 0.4
Lease interest 3.3 3.4
20.5 8.9
Amortisation of loan issue costs includes £1.2 million in relation to the
Group's previous financing facilities where amortisation was accelerated
following the refinancing in May 2021, in addition to amounts relating to
the debt facilities agreed in May 2021, and costs incurred associated with
alternative financing options that ultimately did not complete. See note 13
for further details.
6 Taxation
The tax charge includes both current and deferred tax. The tax charge
reflects the estimated effective tax on the profit before tax for the Group
for the year ending 31(st) January 2022 and the movement in the deferred tax
balance in the year, so far as it relates to items recognised in the income
statement.
Taxable profit or loss differs from profit or loss before tax as reported in
the income statement, because it excludes items of income or expenditure that
are either taxable or deductible in other years or never taxable or
deductible.
Recognised in the income statement
2022 2021
£'m £'m
Current tax charge/(credit)
Current year 1.2 (0.8)
Adjustments in respect of prior periods 0.8 0.1
2.0 (0.7)
Deferred tax charge/(credit)
Origination and reversal of temporary differences 1.2 (1.9)
Adjustments in respect of prior periods (0.7) 0.1
Effect of change in tax rate 0.5 (0.3)
1.0 (2.1)
Total income tax charge/(credit) 3.0 (2.8)
The effective tax rate of 27.0% (2021: 17.1% credit) on the profit (2021:
loss) before taxation for the year is higher than (2021: lower than) the
average rate of mainstream corporation tax in the UK of 19% (2021: 19%). The
higher effective tax rate is principally due to the effect of changes in
future tax rates.
The tax charge is reconciled to the standard rate of UK corporation tax as
follows:
2022 2021
£'m £'m
Profit/(loss) before tax 11.1 (16.4)
Tax at the standard UK corporation tax rate of 19.0% (2021: 19.0%) 2.1 (3.1)
Tax effects of:
Expenses not deductible for tax purposes 0.3 0.4
Adjustments in respect of prior periods 0.1 0.2
Effect of change in tax rate 0.5 (0.3)
Total income tax charge/(credit) 3.0 (2.8)
Total taxation recognised through the income statement, other comprehensive
income and through equity are as follows:
2022 2021
Current Deferred Total Current Deferred Total
£'m £'m £'m £'m £'m £'m
Income statement 2.0 1.0 3.0 (0.7) (2.1) (2.8)
Other comprehensive income 0.6 0.6 - (0.4) (0.4)
Equity 0.2 0.2 - (0.1) (0.1)
Total tax 2.0 1.8 3.8 (0.7) (2.6) (3.3)
7 Dividends
There were no dividends paid in either the current or the previous year. The
Board is not recommending a final dividend in respect of the financial year
ended 31 January 2022 (2021: no final dividend).
Whilst the Group's CLBILS and term loan facilities, as drawn at 31 January
2022, remain outstanding (see note 13), the Group is prohibited from making
distributions.
8 Earnings per share
Basic earnings per share is calculated by dividing the profit for the period
attributable to ordinary shareholders by the weighted average number of
ordinary shares in issue during the period.
Diluted earnings per share is based on the weighted average number of shares
in issue for the period, adjusted for the dilutive effect of potential
ordinary shares. Potential ordinary shares represent employee share incentive
awards and save as you earn share options.
2022 2021
(Number) (Number)
Weighted average number of shares in issue 341,770,579 341,626,396
Weighted average number of dilutive share options 1,843,537 128,446
Weighted average number of shares for diluted earnings per share 343,614,116 341,754,842
£'m £'m
Profit for the financial period 8.1 (13.6)
pence pence
Basic earnings per share 2.4 (4.0)
Diluted earnings per share 2.4 (4.0)
9 Intangible assets
Goodwill Software Total
£'m £'m £'m
Cost
At 1 February 2021 328.2 13.7 341.9
Additions - 3.3 3.3
Disposals - - -
At 31 January 2022 328.2 17.0 345.2
Amortisation/impairment
At 1 February 2021 14.4 7.2 21.6
Amortisation in the period - 2.9 2.9
Amortisation on disposals - - -
At 31 January 2022 14.4 10.1 24.5
Net book value
At 31 January 2022 313.8 6.9 320.7
At 31 January 2021 313.8 6.5 320.3
Goodwill Software Total
£'m £'m £'m
Cost
At 1 February 2020 328.2 14.1 342.3
Additions - 2.6 2.6
Disposals - (3.0) (3.0)
At 31 January 2021 328.2 13.7 341.9
Amortisation/impairment
At 1 February 2020 14.4 8.1 22.5
Amortisation in the period - 1.6 1.6
Impairment in the period - (2.5) (2.5)
At 31 January 2021 14.4 7.2 21.6
Net book value
At 31 January 2021 313.8 6.5 320.3
At 31 January 2020 313.8 6.0 319.8
Impairment testing
Goodwill arising on the acquisition of Getting Personal in 2011 of £14.4
million is allocated to the Getting Personal CGU, which corresponds to the
Getting Personal operating segment (see note 1). Goodwill in respect of the
Getting Personal CGU was fully written down in 2020.
All remaining goodwill is in respect of the Card Factory business, which is
comprised of all of the Card Factory stores (each an individual CGU for
impairment testing purposes), associated central functions, and shared assets.
Card Factory is the lowest level at which the Group's management monitors
goodwill internally, and also corresponds with the Card Factory operating
segment disclosed in note 1.
The total carrying amount of the Card Factory CGU, inclusive of liabilities
that are necessarily considered in determining the recoverable amount of the
CGU, at 31 January 2022 was £295.0 million. The recoverable amount of the
Card Factory CGU has been determined based on a value-in-use calculation. This
value-in-use calculation is based on the Group's most recent approved
five-year plan with a 0% (2021: 0%) terminal growth rate applied thereafter,
representing management's estimate of the long term growth rate of the sector.
The analysis does not include new or additional revenue streams such as new
stores and new retail partnerships, to reflect the value-in-use of the
existing business.
The key assumptions used to forecast operating cash flows include: sales
growth, based on historic performance and latest expectations; product mix;
foreign exchange rates, based on hedges in place and market forward curves for
unhedged items, the Group's current expectations in relation to operational
costs; and the wider macro-economic factors affecting the Group's trading
environment. The values assigned to each of these assumptions were determined
based on historical performance and expected future trends.
The forecast cash flows are discounted at a pre-tax rate of 12.0% (2021:
12.0%) calculated using the capital asset pricing model utilising available
market data and compared to the published discount rates of comparable
businesses.
No impairment loss was identified. The valuation indicates sufficient headroom
such that any reasonably possible change to key assumptions would not result
in an impairment of the related goodwill.
10 Property, plant and equipment
Freehold property Leasehold improvements Plant, equipment, fixtures & vehicles Total
£'m £'m £'m £'m
Cost
At 1 February 2021 17.8 40.2 67.6 125.6
Additions 0.1 0.7 2.8 3.6
Disposals - (0.1) (0.1) (0.2)
At 31 January 2022 17.9 40.8 70.3 129.0
Depreciation
At 1 February 2021 3.9 34.8 50.1 88.8
Depreciation in the period 0.5 2.6 5.7 8.8
Depreciation on disposals - (0.1) (0.1) (0.2)
At 31 January 2022 4.4 37.3 55.7 97.4
Net book value
At 31 January 2022 13.5 3.5 14.6 31.6
At 31 January 2021 13.9 5.4 17.5 36.8
Freehold property Leasehold improvements Plant, equipment, fixtures & vehicles Total
£'m £'m £'m £'m
Cost
At 1 February 2020 17.5 40.3 66.4 124.2
Additions 0.3 0.7 3.9 4.9
Disposals - (0.8) (2.7) (3.5)
At 31 January 2021 17.8 40.2 67.6 125.6
Depreciation
At 1 February 2020 3.5 32.4 46.7 82.6
Provided in the period 0.4 3.1 5.7 9.2
Depreciation on disposals - (0.7) (2.3) (3.0)
At 31 January 2021 3.9 34.8 50.1 88.8
Net book value
At 31 January 2021 13.9 5.4 17.5 36.8
At 31 January 2020 14.0 7.9 19.7 41.6
11 Leases
The Group has lease contracts, within the definition of IFRS 16 leases, in
relation to its entire store lease portfolio, some warehousing office
locations, an office location and motor vehicles. Other contracts, including
distribution contracts and IT equipment, are deemed not to be a lease within
the definition of IFRS 16 or are subject to the election not to apply the
requirements of IFRS 16 to short-term or low value leases. Assets,
liabilities and the income statement expense in relation to leases are
detailed below.
Right of use assets
Buildings Motor Vehicles Total
£'m £'m £'m
Cost
At 1 February 2021 316.3 1.6 317.9
Additions 29.7 0.1 29.8
Disposals (45.2) (0.4) (45.6)
Effect of foreign exchange rates (0.2) - (0.2)
At 31 January 2022 300.6 1.3 301.9
Depreciation and impairment
At 1 February 2021 205.7 0.8 206.5
Depreciation in the period 37.0 0.4 37.4
Impairment in the period 5.0 - 5.0
Depreciation on disposals (44.3) (0.3) (44.6)
Impairment on disposals (0.8) - (0.8)
Effect of foreign exchange rates (0.1) - (0.1)
At 31 January 2022 202.5 0.9 203.4
Net book value
At 31 January 2022 98.1 0.4 98.5
At 31 January 2021 110.6 0.8 111.4
Buildings Motor Vehicles Total
£'m £'m £'m
Cost
At 1 February 2020 324.5 1.3 325.8
Additions 22.2 0.6 22.8
Disposals (30.4) (0.3) (30.7)
At 31 January 2021 316.3 1.6 317.9
Depreciation and impairment
At 1 February 2020 192.7 0.7 193.4
Depreciation in the period 39.5 0.4 39.9
Impairment in the period 2.6 - 2.6
Depreciation on disposals (28.9) (0.3) (29.2)
Impairment on disposals (0.2) - (0.2)
At 31 January 2021 205.7 0.8 206.5
Net book value
At 31 January 2021 110.6 0.8 111.4
At 31 January 2020 131.8 0.6 132.4
Disposals and depreciation on disposals includes fully depreciated
right-of-use assets where the lease term has expired, including amounts in
respect of leases that have expired but the asset remained in use whilst a new
lease was negotiated.
Reflecting the impact of Covid-19 on the Group's store portfolio and the
expectation of future cost headwinds in the Group's strategic plan, both of
which were considered to be an indicator of potential impairment, an
impairment review of the Group's store assets was undertaken in the 2022
financial year. For this purpose, each of the Group's stores is considered to
be a CGU, with each store's carrying amount determined by assessing the value
of right-of-use assets and property, plant and equipment insofar as they are
directly allocable to an individual store. The recoverable amount of each
store was determined based on the expected future cash flows applicable to
each store, assessed using a basis consistent with the future cash flows used
in the goodwill impairment test described in note 9. As a result, the key
assumptions are also considered to be consistent with those described in note
9, in addition to the allocation of central and shared costs to individual
stores. Application of these assumptions resulted in an impairment charge of
£5.0 million (2021: £2.6 million). Having conducted scenario analysis, the
Group does not consider any reasonably possible change in the key assumptions
would result in a material change to the impairment charge.
Lease liabilities
2022 2021
£'m £'m
Current lease liabilities (41.1) (39.4)
Non-current lease liabilities (78.7) (105.5)
Total lease liabilities (119.8) (144.9)
Rent concessions agreed across FY21 and FY22 in response to Covid-19 were
principally in respect of the timing of payments and did not significantly
impact the total consideration payable in respect of leases. In accordance
with the amendment to IFRS16 in respect of Covid-19 concessions, lease
liabilities have not been re-measured in respect of Covid-19 concessions
except to the extent the rent concession was agreed as part of a lease renewal
or extension.
Lease expense:
Total lease related expenses 2022 2021
£'m £'m
Depreciation expense on right of use assets 37.4 39.9
Impairment of right of use assets 5.0 2.6
Profit on disposal of fixed assets - (0.3)
Lease interest 3.3 3.4
Expense relating to short term and low value leases * - 0.6
Expense relating to variable lease payments ** 0.2 -
Total lease related income statement expense 45.9 46.2
* Contracts subject to the election not to apply the requirements of IFRS 16
to short-term or low value leases.
** A small proportion of the store lease portfolio are subject to an element
of turnover linked variable rents that are excluded from the definition of a
lease under IFRS 16.
12 Cash and cash equivalents
2022 2021
£'m £'m
Cash at bank and in hand 38.3 12.5
Bank overdraft - -
Net cash and cash equivalents 38.3 12.5
Group cash and cash equivalents held in bank accounts within the RCF facility
described in note 13 are subject to a netting arrangement.
The Group's cash and cash equivalents are denominated in the following
currencies:
2022 2021
£'m £'m
Sterling 21.5 1.1
Euro 1.4 0.4
US dollar 15.4 11.0
38.3 12.5
13 Borrowings
2022 2021
£'m £'m
Current liabilities
Bank loans and accrued interest 25.5 0.2
Bank overdraft - -
25.5 0.2
Non-current liabilities
Unsecured bank loans 85.5 118.8
Bank loans
Bank borrowings as at 31 January 2022 are summarised as follows:
Liability Interest rate Interest margin ratchet range Other information
£'m % %
31 January 2022
Secured term loans 67.2 4.50 + SONIA - Interest rate increases 1.00% every six months
Secured CLBILS 44.8 See note. -
Secured revolving credit facility - 4.50 + SONIA 2.75 - 4.50 Total facility size = £100 million
Accrued interest 0.5
Debt issue costs (1.5)
111.0
31 January 2021
Unsecured revolving credit facility 120.0 2.5 + LIBOR 1.00 - 2.50 Total facility size = £200 million
Accrued interest 0.2
Debt issue costs (1.2)
119.0
On 21 May 2021, the Group concluded a refinancing of its borrowing facilities
with its banking syndicate. The revised facilities comprised a £75 million
Term Loan, £50 million Coronavirus Large Business Interruption Loan Scheme
(CLBILS) loan, and a Revolving Credit Facility (RCF) of £100 million. The
facilities introduced security via fixed and floating charges over certain of
the Group's assets.
The Term Loan interest rate margin was 4.5% over SONIA, increasing at 1% every
six months until fully repaid. The CLBILS facilities attract interest rates of
between 3.1% and 3.75% over SONIA or the Bank of England Base Rate. The RCF,
when drawn, was subject to an interest rate ratchet of between 2.75% and 4.5%
over SONIA based upon the Group's leverage position.
The Group drew down the Term Loan and CLBILS facility in full at the
commencement date. The RCF was drawn during the period to support liquidity
when needed; however these drawings have been repaid and the RCF is undrawn at
the balance sheet date. The full RCF remains available to draw on if required.
All of the revised facilities were due to expire on 24 September 2023, with
the Term Loan and CLBILS facilities subject to a defined repayment schedule,
which commenced on 31 January 2022. Total repayments in respect of the Term
Loan and CLBILS facilities during FY22 were £13 million, which included an
additional prepayment of £8 million in accordance with the facility terms
over and above the defined schedule.
At the balance sheet date, The Group remained subject to two financial
covenants, tested quarterly from March 2022, in relation to Leverage (ratio of
Net Debt to EBITDA) and interest cover (ratio of interest and rent costs to
EBITDA). Covenant thresholds were phased to return to 2.5x Leverage and 2.0x
interest cover by January 2023. In addition, the terms of the CLBILS
facilities prevent the Group from making any distributions to shareholders
whilst the CLBILS remain outstanding.
Debt issue costs in respect of the May 2021 refinancing totalled £6.7 million
and included £5.0 million of deferred fees that were contingent upon
prepayments being made by November 2021. The value of debt issue costs
remaining deferred on the balance sheet at 31 January reflected the Group's
expectation that a further refinancing would conclude in the first quarter of
FY23. In addition, during FY22, the Group incurred £2.5 million of costs in
respect of financing transactions that did not proceed.
Subsequent to the balance sheet date, on 21 April 2022, the Group concluded a
further refinancing of its bank facilities which reduced the quantum and
extended the tenure of the facilities, alongside changes to the covenant
terms. See note 17 for further details.
14 Notes to the cash flow statement
Reconciliation of operating profit to cash generated from operations
2022 2021
£'m £'m
Profit/(loss) before tax 11.1 (16.4)
Net finance expense 20.5 8.9
Operating profit/(loss) 31.6 (7.5)
Adjusted for:
Depreciation and amortisation 49.1 50.7
Impairment of right of use assets 5.0 2.6
Cash flow hedging foreign currency movements (1.4) (0.1)
Share-based payments charge 0.8 0.8
Operating cash flows before changes in working capital 85.1 46.5
Decrease/(Increase) in receivables 1.1 2.2
Decrease in inventories 3.3 18.0
Increase/(Decrease) in payables 11.9 13.2
Movement in provisions 12.2 -
Cash inflow from operating activities 113.6 79.9
15 Analysis of Net Debt
At 1 February 2021 Cash flow Non-cash changes At 31 January 2022
£'m £'m £'m £'m
Secured bank loans and accrued interest (note 13) (119.0) 8.0 - (111.0)
Lease liabilities (144.9) 57.8 (32.7) (119.8)
Total debt (263.9) 65.8 (32.7) (230.2)
Add: debt costs capitalised (1.2) (8.7) 8.4 (1.5)
Less: cash and cash equivalents 12.5 25.8 - 38.3
Net Debt (252.6) 82.9 (24.3) (194.0)
Lease liabilities 144.9 (57.8) 32.7 119.8
Net Debt excluding lease liabilities (107.7) 25.1 8.4 (74.2)
At 1 February 2020 Cash flow Non-cash changes At 31 January 2021
£'m £'m £'m £'m
Unsecured bank loans and accrued interest (note 13) (144.1) 25.6 (0.5) (119.0)
Lease liabilities (145.9) 22.1 (21.1) (144.9)
Total debt (290.0) 47.7 (21.6) (263.9)
Add: debt costs capitalised (1.0) (0.6) 0.4 (1.2)
Less: cash and cash equivalents 2.0 10.5 - 12.5
Net Debt (289.0) 57.6 (21.2) (252.6)
Lease liabilities 145.9 (22.1) 21.1 144.9
Net Debt excluding lease liabilities (143.1) 35.5 (0.1) (107.7)
16 Provisions
Covid-19-related support Total
£'m £'m
At 1 February 2020, 31 January 2021 and 1 February 2022 - -
Provisions made during the year 12.2 12.2
At 31 January 2022 12.2 12.2
Covid-19-related support provisions reflect amounts received under one-off
schemes designed to provide support to businesses affected by Covid-19
restrictions, including lockdown grants and CJRS, in excess of the value the
Group reasonably believes it is entitled to retain under the terms and
conditions of those schemes. The provisions have been estimated based on the
Group's interpretation of the terms and conditions of the respective schemes
and, where applicable, independent professional advice. However, the actual
amount that will be repaid is not certain.
The Group is taking steps to confirm amounts repayable and settle its
positions. This exercise is expected to conclude within the next financial
year.
17 Subsequent events
Refinancing
On 21 April 2022, the Group agreed an updated and amended financing package
with its banking partners, which reduced the quantum and extended the term of
the Group's facilities.
The revised facilities comprise term loans of £30 million, CLBILS of £20
million and a revolving credit facility (RCF) of £100 million. The aggregate
value of the Group's facilities therefore reduced to £150 million. The CLBILs
facilities are subject to an amortising repayment profile, with final maturity
in September 2023. The term loans are subject to an amortising repayment
profile with final maturity in September 2025. The RCF final maturity is in
September 2025.
The interest rate attached to the CLBILs facilities is unchanged. The term
loans will attract a fixed margin of 500bps and the RCF margin remains based
on a ratchet between 275 and 450 bps dependent upon the Group's leverage
position.
The covenant package attached to the facilities remains based on quarterly
tests of interest cover and leverage, tested quarterly. The Group must
maintain interest cover of 1.5x to 31 October 2023 and 1.75x thereafter, and
maintain leverage of below 3.75x to 31 October 2022, 3.0x to 31 October 2023,
and 2.5x thereafter. The requirement for the Group to use best efforts to
raise £70 million of equity proceeds to pay down debt has been removed.
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