REG - Card Factory PLC - Half-year Report <Origin Href="QuoteRef">CARDC.L</Origin> - Part 2
27/09/2016 07:06
- Part 2: For the preceding part double click ID:nRSa8748Ka
cards and gifts. Getting Personal does not meet the quantitative
thresholds of a reportable segment as defined in IFRS 8. Consequently the
results of the Group are presented as a single reportable segment. Revenues
outside of the UK are not significant at less than £0.1 million.
5 Underlying EBITDA
Underlying earnings before interest, tax, depreciation and amortisation
("EBITDA") represents underlying profit for the period before net finance
expense, taxation, depreciation and amortisation.
Six months ended 31 July 2016 Six months ended 31 July 2015 Year ended 31 January 2016
£'m £'m £'m
Underlying operating profit 29.0 27.8 85.3
Depreciation and amortisation 5.2 4.7 9.7
Underlying EBITDA 34.2 32.5 95.0
6 Non-underlying items
Six months ended 31 July 2016 Six months ended 31 July 2015 Year ended 31 January 2016
£'m £'m £'m
Cost of sales
(Losses)/gains on foreign currency derivative financial instruments not designated as a hedge (0.1) 0.1 3.9
Operating expenses
Non-underlying operating expenses (0.3) - (0.3)
Net finance expense
Refinanced debt issue cost amortisation - (1.8) (1.8)
Loss on interest rate derivative financial instruments not designated as a hedge (0.2) - (0.1)
(0.2) (1.8) (1.9)
Net fair value remeasurement gains and losses on derivative financial
instruments
The Group utilises foreign currency contracts to manage the foreign exchange
risk on U.S. Dollar denominated purchases and interest rate derivative
contracts to manage the risk on floating interest rate bank borrowings. Fair
value gains and losses on such instruments are recognised in the income
statement to the extent they are not hedge accounted under IAS 39. Such gains
and losses relate to future cash flows. In accordance with the commercial
reasoning for entering into these agreements, these gains/losses are deemed
not representative of the underlying financial performance in the year and
presented as non-underlying items. Any gains or losses on maturity of such
instruments are presented within underlying profit.
Refinanced debt issue cost amortisation
Debt issue costs totalling £1.8 million were expensed to the income statement
in the prior period on completion of an amended and extended borrowing
facility on 26 June 2015. This expense relates to costs that were not yet
amortised in relation to the 30 May 2014 refinancing and is presented as a
non-underlying item.
Non-underlying operating expenses
In January 2016, Card Factory plc announced the retirement and succession of
the Chief Executive Officer. Costs attributable to the recruitment of the new
CEO and dual remuneration costs during the handover period are presented as a
non-underlying item.
7 Finance income and expense
Six months ended 31 July 2016 Six months ended 31 July 2015 Year ended 31 January 2016
£'m £'m £'m
Finance income
Bank interest received - (0.3) (0.3)
Finance expense
Interest on bank loans and overdrafts 1.3 2.2 3.3
Amortisation of loan issue costs 0.1 2.0 2.1
Fair value loss on interest rate derivative contracts 0.2 - 0.1
1.6 4.2 5.5
Net financing expense 1.6 3.9 5.2
Amortisation of loan issue costs in the prior period include £1.8 million
expensed to the income statement in relation to loan issue costs not yet
amortised on refinanced borrowing facilities. These costs are presented as a
non-underlying item, see note 6.
Fair value losses on interest rate derivative contracts are presented as a
non-underlying item, see note 6.
8 Taxation
The tax charge on underlying profit before tax for the interim period has been
calculated on the basis of the estimated effective tax rate on underlying
profit before tax for the full year to 31 January 2017 of 20.4% (six months
ended 31 July 2015 20.3%, year ended 31 January 2016 20.7%).
9 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 share incentive awards
granted to employees.
The Group has chosen to present an alternative earnings per share measure,
with profit adjusted for non-underlying items to reflect the Group's
underlying profit for the year. Underlying earnings is not a recognised profit
measure under IFRS and may not be directly comparable with 'adjusted' profit
measures used by other companies.
Six months ended 31 July 2016 Six months ended 31 July 2015 Year ended 31 January 2016
Number Number Number
Weighted average number of shares in issue 340,752,254 340,696,235 340,696,235
Weighted average number of dilutive share options 346,121 363,656 478,006
Weighted average number of shares for diluted earnings per share 341,098,375 341,059,891 341,174,241
£'m £'m £'m
Profit for the financial period 21.5 19.1 66.4
Non-underlying items 0.5 1.4 (1.4)
Total underlying profit for underlying earnings per share 22.0 20.5 65.0
pence pence pence
Basic earnings per share 6.30 5.61 19.47
Diluted earnings per share 6.29 5.60 19.45
Underlying basic earnings per share 6.45 6.02 19.08
Underlying diluted earnings per share 6.45 6.02 19.05
10 Dividends
The Directors have declared an interim dividend of 2.8 pence per share for the
period ended 31 July 2016 which equates to £9.5 million and a special dividend
of 15.0 pence per share which equates to £51.1 million. Both dividends will be
paid on 25 November 2016 to shareholders on the register at the close of
business on 21 October 2016. The interim and special dividend were approved by
the Board on 27 September 2016 and, as such, have not been included as a
liability as at 31 July 2016.
Six months ended 31 July 2016 Six months ended 31 July 2015 Year ended 31 January 2016
Pence per share Pence per share Pence per share
Dividends declared not yet paid at 31 July 2016:
Special dividend for the year ended 31 January 2017 15.0p - -
Interim dividend for the year ended 31 January 2017 2.8p - -
17.8p - -
Dividends paid:
Final dividend for the year ended 31 January 2016 6.0p - -
Special dividend for the year ended 31 January 2016 - - 15.0p
Interim dividend for the year ended 31 January 2016 - - 2.5p
Final dividend for the year ended 31 January 2015 - 4.5p 4.5p
Interim dividend for the year ended 31 January 2015 - 2.3p 2.3p
6.0p 6.8p 24.3p
23.8p 6.8p 24.3p
Six months ended 31 July 2016 Six months ended 31 July 2015 Year ended 31 January 2016
£'m £'m £'m
Dividends declared not yet paid at 31 July 2016:
Special dividend for the year ended 31 January 2017 51.1 - -
Interim dividend for the year ended 31 January 2017 9.5 - -
60.6 - -
Dividends paid:
Final dividend for the year ended 31 January 2016 20.4 - -
Special dividend for the year ended 31 January 2016 - - 51.1
Interim dividend for the year ended 31 January 2016 - - 8.5
Final dividend for the year ended 31 January 2015 - 15.4 15.4
Interim dividend for the year ended 31 January 2015 - 7.8 7.8
20.4 23.2 82.8
81.0 23.2 82.8
11 Intangible assets
Goodwill Software Total
£'m £'m £'m
Cost
At 1 February 2016 328.2 7.3 335.5
Additions - 0.9 0.9
Disposal - (0.1) (0.1)
At 31 July 2016 328.2 8.1 336.3
Amortisation
At 1 February 2016 - 4.5 4.5
Provided in the period - 0.6 0.6
Disposals - (0.1) (0.1)
At 31 July 2016 - 5.0 5.0
Net book value
At 31 July 2016 328.2 3.1 331.3
At 31 January 2016 328.2 2.8 331.0
12 Property, plant and equipment
Freehold property Leasehold improvements Plant, equipment, fixtures & vehicles Total
£'m £'m £'m £'m
Cost
At 1 February 2016 17.3 28.8 43.7 89.8
Additions 0.1 1.9 2.7 4.7
Disposals - (0.4) (0.2) (0.6)
At 31 July 2016 17.4 30.3 46.2 93.9
Depreciation
At 1 February 2016 1.9 20.7 27.3 49.9
Provided in the period 0.2 1.5 2.9 4.6
Disposals - (0.4) (0.1) (0.5)
At 31 July 2016 2.1 21.8 30.1 54.0
Net book value
At 31 July 2016 15.3 8.5 16.1 39.9
At 31 January 2016 15.4 8.1 16.4 39.9
13 Financial instruments
Financial instruments carried at fair value are measured by reference to the
following fair value hierarchy:
• Level 1: quoted prices in active markets for identical assets or
liabilities
• Level 2: inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and
• Level 3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
Derivative financial instruments are carried at fair value and measured under
a level 2 valuation method. Valuations are provided by the instrument
counterparty.
31 July 2016 31 July 2015 31 January 2016
£'m £'m £'m
Derivative assets
Non-current
Interest rate contracts - - 0.3
Foreign exchange contracts 0.7 0.1 1.5
0.7 0.1 1.8
Current
Foreign exchange contracts 3.9 2.3 3.5
Derivative liabilities
Current
Interest rate contracts (0.2) (0.1) (0.2)
Non-current
Foreign exchange contracts - (0.2) -
14 Share capital and share premium
31 July 2016 31 July 2015 31 January 2016
Share capital (Number) (Number) (Number)
Allotted, called up and fully paid ordinary shares of one pence:
At the start of the period 340,696,235 340,696,235 340,696,235
Shares issued in relation to share options exercised 148,629 - -
At the end of the period 340,844,864 340,696,235 340,696,235
£'m £'m £'m
Share capital
At the start of the period 3.4 3.4 3.4
Shares issued in relation to share options exercised - - -
At the end of the period 3.4 3.4 3.4
£'m £'m £'m
Share premium
At the start of the period 201.6 201.6 201.6
Shares issued in relation to share options exercised 0.3 - -
At the end of the period 201.9 201.6 201.6
15 Notes to the cash flow statement
Reconciliation of operating profit to cash generated from operations:
Six months ended 31 July 2016 Six months ended 31 July 2015 Year ended 31 January 2016
£'m £'m £'m
Profit before tax 27.0 24.0 83.7
Net finance expense 1.6 3.9 5.2
Operating profit 28.6 27.9 88.9
Adjusted for:
Depreciation and amortisation 5.2 4.7 9.7
Loss on disposal of fixed assets 0.1 - 0.1
Cash flow hedging foreign currency (gains)/losses (0.2) 0.6 2.4
Share based payments charge 0.3 0.6 1.3
Operating cash flows before changes in working capital 34.0 33.8 102.4
Increase in receivables (11.9) (9.3) (3.0)
Decrease/(increase) in inventories 4.0 (5.3) (8.9)
Increase in payables 11.8 13.6 1.7
Cash inflow from operating activities 37.9 32.8 92.2
16 Analysis of net debt
Six months ended 31 July 2016 At 1 February 2016 Cash flow Non-cash changes At 31 July 2016
£'m £'m £'m £'m
Unsecured bank loans (134.2) 10.0 (0.1) (124.3)
Cash and cash equivalents 11.3 (7.9) - 3.4
Total net debt (122.9) 2.1 (0.1) (120.9)
Six months ended 31 July 2015 At 1 February 2015 Cash flow Non-cash changes At 31 July 2015
£'m £'m £'m £'m
Unsecured bank loans (170.4) 53.3 (2.0) (119.1)
Cash and cash equivalents 69.0 (57.9) - 11.1
Total net debt (101.4) (4.6) (2.0) (108.0)
Year ended 31 January 2016 At 1 February 2015 Cash flow Non-cash changes At 31 January 2016
£'m £'m £'m £'m
Unsecured bank loans (170.4) 38.3 (2.1) (134.2)
Cash and cash equivalents 69.0 (57.7) - 11.3
Total net debt (101.4) (19.4) (2.1) (122.9)
In the prior year the Group amended and extended the bank borrowing facility
to a £200 million revolving credit facility terminating 26 June 2020 with an
additional £100 million accordion. Borrowings under the revised facility
attract interest at LIBOR plus a margin in the range 1.0% to 2.0%, subject to
a leverage ratchet (LIBOR plus 1.25% at 31 July 2016). The facilities are
subject to financial covenants typical to an arrangement of this nature.
17 Principal risks and uncertainties
The Board and the senior management team are collectively responsible for
managing risks and uncertainties across the Group. In determining the Group's
risk appetite and how risks are managed, the Board, Audit and Risk Committee
and the senior management team look to ensure an appropriate balance is
achieved which enables the Group to achieve its strategic and operational
objectives and facilitates the long-term success of the Group. The Group's
Audit and Risk Committee is responsible for reviewing the Group's risk
management framework and ensuring that it enables the Committee and the Board
to carry out a robust assessment of the principal risks facing the Group,
including those that would threaten its business model, future performance,
solvency or liquidity.
The principal risks and uncertainties which could have a material impact on
the Group's performance over the remaining six months of the financial year
and beyond, and which could cause actual results to differ materially from
expected and historical results are as follows:
- Changes in consumer demands and market trends
- Increased competition
- Damage to brand and reputation
- Success of, or inability to implement, Group strategy
- Inability to find suitable locations for new stores
- Supply chain and product sourcing
- Attracting, motivating and retaining key personnel
- Treasury and financial risk
- Business continuity and response to major incidents
- Compliance with legal requirements, standards and regulations
- Maintenance and performance of IT systems
- Development of the Group's online business
The Board considers that these principal risks and uncertainties affecting the
Group (as published and explained in more detail on pages 21 to 23 of the
Group's Annual Report for the year ended 31 January 2016) remain unchanged
other than in respect of the potential impacts of Brexit.
Brexit
On 23 June 2016 the UK held a referendum and voted in favour of leaving the
EU. The subsequent fall in the value of Sterling increases the financial risks
and uncertainties in respect of foreign exchange adversely impacting future
performance. The impact on US Dollar denominated purchases is largely
mitigated in the current financial year by the foreign exchange hedging policy
of the Group. Management continue to monitor developments and prepare
contingency plans to mitigate, as far as possible, any adverse impacts on the
Group.
Responsibility statement of the Directors in respect of the half-yearly
financial report
We confirm that to the best of our knowledge:
• the condensed set of financial statements has been prepared in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU;
• the interim management report includes a fair review of the information
required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication
of important events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial statements;
and a description of the principal risks and uncertainties for the remaining
six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during that period; and any changes in the related
party transactions described in the last annual report that could do so.
By order of the Board
Karen Hubbard Darren Bryant
Chief Executive Officer Chief Financial Officer
27 September 2016
Independent review report to Card Factory plc
Introduction
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 31
July 2016 which comprises the condensed consolidated income statement, the
condensed consolidated statement of comprehensive income, the condensed
consolidated statement of financial position, the condensed consolidated
statement of changes in equity, the condensed consolidated cash flow statement
and the related explanatory notes. We have read the other information
contained in the half-yearly financial report and considered whether it
contains any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the Disclosure
and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority
("the UK FCA"). Our review has been undertaken so that we might state to the
company those matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company for our review work,
for this report, or for the conclusions we have reached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the DTR of the UK FCA.
As disclosed in note 2, the annual financial statements of the group are
prepared in accordance with IFRSs as adopted by the EU. The condensed set of
financial statements included in this half-yearly financial report has been
prepared in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 Review of Interim Financial Information
Performed by the Independent Auditor of the Entity issued by the Auditing
Practices Board for use in the UK. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK and Ireland) and consequently
does not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 31 July 2016 is not prepared, in all
material respects, in accordance with IAS 34 as adopted by the EU and the DTR
of the UK FCA.
Nicola Quayle (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 Sovereign Square
Sovereign Street
Leeds
LS1 4DW
27 September 2016
This information is provided by RNS
The company news service from the London Stock ExchangeRecent news on Card Factory
See all newsREG - Card Factory PLC - Holding(s) in Company
AnnouncementREG - Card Factory PLC - Holding(s) in Company
AnnouncementREG - Card Factory PLC - Block Listing Review
AnnouncementREG - Card Factory PLC - Trading Statement
AnnouncementREG - Card Factory PLC - Total Voting Rights
Announcement