REG - Card Factory PLC - Half-year Report
24/09/2024 07:00
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RNS Number : 3308F Card Factory PLC 24 September 2024
24 September 2024
Card Factory plc ("cardfactory" or the "Group")
Interim results for the six months ended 31 July 2024
Resilient revenue performance with further strategic progress achieved
including successful partnerships expansion. Full year expectations unchanged.
cardfactory, the UK's leading specialist retailer of greeting cards, gifts and
celebration essentials, announces its interim results for the six months ended
31 July 2024 ('HY25').
Financial summary1
Financial Metrics HY25 HY24 Change FY24
Revenue £233.8m £220.8m +5.9% £510.9m
EBITDA £45.3m £51.1m -11.4% £122.6m
Profit Before Tax (PBT) £14.0m £24.7m -43.3% £65.6m
Adjusted PBT(2) £14.5m £22.1m -34.4% £62.1m
Adjusted Leverage (exc. Leases)(3) 0.9x 1.0x 0.1x 0.4x
Net Debt (exc. Leases) £74.9m £71.9m +4.2% £34.4m
Cash from operations £17.5m £36.3m -51.8% £118.7m
Basic EPS 3.0 5.6p -46.4% 14.4p
Adjusted EPS 3.1p 5.0p -38.0% 13.5p
Dividend per share 1.2p N/A N/A 4.5p
1 For further information and definitions of Like-for-like (LFL) and other
alternative performance measures see Explanatory Notes (below) "Alternative
Performance Measures ("APMs").
(2) Adjusted PBT excludes impact of one-off items of £0.5 million finance
costs relating to amortisation of debt costs as a result of the refinancing
completed in HY25 (HY24: £2.6 million gain on purchase of SA Greetings).
(3) Adjusted Leverage is the ratio of Net Debt (excluding lease liabilities)
to EBITDA less lease related charges which is consistent with our covenant
reporting
Business highlights
· Group revenue of £233.8 million in HY25, up by +5.9% compared to HY24,
reflects continued positive momentum in executing our growth strategy:
o Strength of performance during the period underpinned by cardfactory
like-for-like (LFL)(4) revenue growth of +3.7%, driven by our focus on
developing our store estate and our quality and value offer. This is ahead of
the broader celebration occasions market(5) and the non-food retail sector(6).
o Gifts and celebration essentials growth of +6.0% LFL was a key driver of
revenue growth as we continue to introduce new and expand existing gifting
categories, together with a positive performance on card of +1.1% LFL,
enabling progress towards becoming a celebrations destination.
o cardfactory.co.uk revenue growth of +8.8% continues to build on the
encouraging traction seen in H2 FY24.
o Partnerships performed in line with expectations with total revenue of
£6.6 million in HY25 (£6.4 million in HY24), including £3.9 million revenue
from SA Greetings.
· HY25 Adjusted PBT was down £7.6 million to £14.5 million, reflecting
substantial increases in National Living Wage, plus freight inflation and
phasing of strategic investments. As previously guided, the benefit of our
strategic investments and robust programme of productivity measures and
efficiency savings in FY25 are weighted to the second half of the year and we
have already seen these positively impact the cost base.
· Continued strengthening of the balance sheet as a result of positive
operating cash generation and a disciplined approach to management of working
capital. Net debt increased by £3.0 million in HY25 compared to HY24, which
includes payment of a £15.5 million dividend payment in respect of FY24.
· Recommencement of an interim dividend of 1.2p demonstrating our
commitment to delivering progressive returns to shareholders and maintaining
dividend cover of around 3.0x over the course of the full year.
(4) Like-for-like "cardfactory LFL" is defined as Like-for-like sales in
Stores plus Like-for-like sales from the cardfactory website
www.cardfactory.co.uk;
(5) Kantar Worldpanel Plus | Physical Retail data to 4th August 2024
(6) BRC-KPMG Retail sales monitor February 2024 - August 2024
Post-period activity: Strategic progress in partnerships
· Multi-year agreement secured with Aldi to be the exclusive everyday
greeting card supplier across the full UK and Republic of Ireland estate.
· Entry into the US market secured through a nationwide wholesale
retail partnership which will roll out in time for Christmas.
· In advanced discussions to renew a multi-year partnership with The
Reject Shop in Australia, including an extension to a full-service model and
seasonal range supply.
· In September 2024 we completed the acquisition of Garlanna, a
publisher and wholesaler of greetings cards, wrap and gift bags in the
Republic of Ireland.
Outlook:
· Trading since the period end has been in line with the first
half.
· Preparations for our Christmas season are well advanced with new
ranges that leverage our quality and value proposition across cards, gifts and
celebration essentials.
· We have a strong track record in maintaining disciplined management
of working capital and driving returns against a range of economic backdrops.
Whilst macro-inflationary pressures have started to ease in the second half,
we continue to manage specific retail impacts.
· There are several factors that are supporting our profit margin
performance going into the second half of the year. Approximately half of
the margin growth in the second half will be driven by the seasonality of
sales. Our robust programme of productivity and efficiency savings will also
make a material contribution. In addition, we expect to benefit from
margin-enhancing range development and prudent management of operating
costs.
· Albeit we are yet to trade through the key Christmas period, the
strong topline performance in the first half, combined with our robust actions
to mitigate inflationary pressures, means that our expectations for the full
year are unchanged.
· Over the medium-term the Board remains confident in seizing the
compelling growth opportunity for the business, which will help deliver on our
FY27 targets which remain unchanged.
Darcy Willson-Rymer, Chief Executive Officer, commented:
"I am delighted to be reporting further progress against our growth strategy
with this resilient underlying performance in the first half of the year. We
continue to deliver against our strategic priorities at pace thanks to the
commitment and dedication of our colleagues.
During the period, we continued to see strong performance across our growing
store estate, with gifts and celebration essentials now a core driver of
revenue growth, building on our strength in greetings cards. Together with the
exciting partnership initiatives we are announcing today, we are helping more
customers in more places celebrate life's moments.
As we move into the second half of the year and the important Christmas
trading period, our expectations for the full year are unchanged and we
continue to focus on managing inflationary pressures within the business. Our
strategic growth ambitions are underpinned by a robust balance sheet and
strong cash flow, alongside our disciplined approach to managing working
capital and focus on driving efficiencies and productivity across the
business. Moving forward, we believe we are well placed with a strong
proposition that resonates with a broad customer base and delivers an
unrivalled quality, value and choice offering."
Interim results webcast
There will be a virtual presentation and Q&A session for analysts and
investors at 10am on the morning of the announcement. Please register for the
event via the following link:
https://stream.brrmedia.co.uk/broadcast/66964b0736704318d5bcf554
(https://stream.brrmedia.co.uk/broadcast/66964b0736704318d5bcf554)
A copy of the webcast and the accompanying presentation will be made available
via the cardfactory investor relations website: www.cardfactoryinvestors.com
(http://www.cardfactoryinvestors.com) .
Enquiries
Card Factory
plc
via Teneo (below)
Darcy Willson-Rymer, Chief Executive Officer
Matthias Seeger, Chief Financial Officer
Teneo
+44 (0) 207
353 4200
James Macey White / Jo Blackshaw
cardfactory@teneo.com
(mailto:cardfactory@teneo.com)
BUSINESS UPDATE
Performance in the period
HY25 has seen continued positive momentum across the cardfactory business,
reflecting the progress we have made in executing our 'Opening Our New Future'
growth strategy through the first six months of the year.
The strength of our store performance through the period was despite a
challenging retail backdrop and the drop in high-street footfall seen in HY25
due to the continued impact of economic pressures on consumer spending and
confidence, combined with the unseasonable weather.
Total store revenue was up +6.1% in the period as we grew our profitable UK
and Republic of Ireland store estate, with 15 net new stores opened in HY25,
bringing our leading value proposition to more customers in more locations.
LFL Store revenue growth of +3.7% was ahead of the broader celebration
occasions market and the non-food retail sector, as measured by Kantar and
BRC-KPMG Retail Sales Monitor respectively. This was driven by our continued
focus on developing our store estate, our quality and value offer and the
positive performance across our HY25 Spring seasons of Valentine's Day,
Mother's Day and Father's Day. Highlights included a particularly positive
performance for Valentine's Day across card (+8.3% LFL) and gifts (+6.8% LFL)
which included range development to reflect the growth of family celebrations
of this occasion.
As we make progress on our strategic ambition towards becoming a celebration
destination, we saw strong growth in gifts and celebration essentials having
introduced new and expanded existing gifting categories in the period. LFL
revenue growth in gifts of +10.8% has also driven an increase in average
basket value (ABV) of +7.5% compared to the same period last year, reflecting
a continuing mix shift with gifts and celebration essentials now representing
52.6% of total sales.
Online momentum continued on cardfactory.co.uk through HY25 with revenue
growth of +8.8%. This was supported by increased traffic and transactions as
we continue to invest in the online customer experience and ongoing range
development, which is focused on driving profitability.
Partnerships performed in line with expectations with total revenue of £6.6
million in HY25 (£6.4 million in HY24), including £3.9 million revenue from
SA Greetings. The performance reflects the benefit of the first full H1
trading period for SA Greetings alongside the phasing of larger wholesale
shipments seen in HY24 which will balance out through the course of the full
year. Work through the first half has also delivered notable progress since
the end of the period in expanding our UK and international partnerships, with
new multi-year agreements secured alongside the extension of existing
partnership agreements, providing a platform for future growth.
Strategy update
We have continued to make progress towards our strategic objectives in HY25 as
we execute our growth strategy and develop cardfactory into a celebrations'
destination for customers in the UK, Republic of Ireland and internationally.
Stores
· Continued to grow our profitable UK and Republic of Ireland
estate to 1,073 stores (as of 31 July 2024), opening 15 net new stores in
HY25, including a fourth central London store in Cheapside.
· Continued to make progress on store space optimisation supporting
gift and celebration essentials growth, without compromising card growth.
Leadership in card
· Ongoing range development, including significant newness, aligned
to key trends. This reflects the growing diversity in family relationships and
dynamics which supports our card market authority.
· Work undertaken in HY25 to tailor our card offering for different
regions and demographics.
Gifts and celebration essentials
· Continued to grow our authority in gifts and celebration
essentials introducing new categories, alongside the expansion of existing
gifting categories to address the broader £13.4 billion UK Celebration
Occasions market.
· New ranges introduced in HY25 include a baby gifting range,
alongside the continued development of key existing categories including soft
toys (+27% LFL), confectionery (+30% LFL) and limited collections such as
Disney and licensed ranges (+17% LFL).
Omnichannel and Online
· Ongoing range development focused on driving profitable growth
through a focus on higher margin products.
· Continued investment in our technology transformation, as well as
the development of our online capability and platform performance to further
enhance customer experience and unlock future digital and omnichannel
propositions.
· Redesigned our online event reminder tool and introduced
AI-powered product recommendations.
· New exclusive partnership launched with Just Eat to trial an
on-demand celebrations offer across cards, balloons, gifts and gift bags,
initially from 19 stores across the UK, with plans to expand the trial to a
further 21 UK stores in the second half of the year.
Partnerships
· Very encouraging progress in expanding our UK and international
partnerships.
· Full Aldi UK and Republic of Ireland estate rollout from the end
of September 2024 with a new multi-year year partnership which will see
cardfactory be the exclusive everyday greetings card supplier for their Circa.
1,200 stores, doubling the number we currently supply.
· Entry into the US market secured through a nationwide wholesale
retail partnership which will roll out in time for Christmas.
· In advanced discussions to renew multi-year agreement with The
Reject Shop in Australia, expanding to a full-service model including seasonal
ranges.
· Continuing to optimise location, range and offer in Liwa (Middle
East) and Matalan (UK).
· Acquisition of Garlanna, a publisher and wholesaler of greetings
cards, wrap and gift bags in the Republic of Ireland, completed in September
2024, further supports the development of our retail partnerships strategy.
ESG progress
· Good progress on integrating sustainability considerations into
our core strategy and operational planning and decision making, including
establishing a Sustainability Steering Group to drive cross-business
operational delivery groups and initiatives.
· During the period we expanded the number of products that are
fully recyclable and reduced tertiary packaging used to transport products.
· Commenced work on an FY25 emissions inventory for scope 1, 2 and
3, defining renewable energy transition plans and engaging with our top
suppliers to align with cardfactory goals.
· Good progress on collection of colleague diversity data to inform
the development and progress of our diversity, equity and inclusion (DE&I)
strategy and priorities.
Preparations for Christmas
We are well prepared for our key Christmas trading period, with our seasonal
rollout now underway.
80% of our entire seasonal range is new this Christmas, including new toys and
the introduction of a 'baby's first Christmas' range and an exclusive own
label pet gifting range. We have also expanded ranges across own label and
limited collections such as Disney. Development of online ranges includes a
number of online exclusives to build on momentum seen at cardfactory.co.uk
since HY24.
We have continued to refine operations and stock allocations to enable an
agile approach to stock management through the peak season. We have also
undertaken thorough planning and preparation to manage all inbound logistics
for stock manufactured overseas.
Recruitment of seasonal colleagues for the Christmas season has commenced
through an optimised seasonal recruitment strategy to further support our
store efficiencies and productivity programme.
Current trading and outlook
Current trading is in line with the first half reflecting the continued
strength of our store estate, supported by the strategic progress we have made
in HY25 across card, gifts and celebration essentials, together with continued
momentum on cardfactory.co.uk. Planned capital expenditure will enable further
strategic progress in H2 FY25, including targeted investment to upgrade a
number of legacy stores in the portfolio, technology infrastructure and the
next phase of our ERP implementation to support future omnichannel and
partnerships propositions.
While macro inflationary pressures start to ease in the second half, we
continue to manage the impact of specific retail inflationary pressures.
Building on our strong track record of managing inflation through a
combination of pricing, efficiency and productivity, we are implementing a
robust programme of activity to drive profit margin through the second half,
as previously guided. The largest impact is being delivered through driving
greater efficiencies and improving productivity in our stores via the
introduction of a new industry-recognised labour management system implemented
in H1. This is optimising labour costs, prioritising value-add customer
service activity and removing inefficiencies. This detailed programme also
includes evolving our pricing architecture through a 'good, better, best'
approach to range development across card, gifts and celebration essentials,
enabling product margin improvements. Alongside this, we are taking a prudent
approach to management of operating costs, prioritising sales driving
activity.
Given the resilient revenue performance in the first half in a challenging
macro-environment, together with the robust action we are taking to mitigate
inflationary pressures and our disciplined approach to management of working
capital, our expectations for the full year are unchanged.
Over the medium term the Board remains confident in seizing the compelling
growth opportunity for the business, which will help deliver on our FY27
targets which remain unchanged.
Group Financial Review
Financial Highlights
Against a continuing backdrop of challenging economic conditions for both
business and consumers, cardfactory has continued to demonstrate momentum in
sales and a resilient financial performance towards our strategic ambition in
the six months ended 31 July 2024 ('HY25').
The highlights of the period are as follows:
· Strong revenue growth in Stores, with LFL sales of +3.7% (HY24:
+10.5%), showing effective mitigation of a drop in high street footfall
achieved through strong growth in gifting and celebration essentials revenue.
· Profitability weighted to the second half of the year as
expected, with EBITDA for the six months of £45.3 million, £5.8 million
behind the same period last year reflecting inflation of wages and freight
costs.
· Profit Before Tax of £14.0 million (HY24: £24.7 million).
Adjusted PBT of £14.5 million (HY24: £22.1 million) excludes one-off impact
of refinancing and represents a margin of 6.2%.
· Strong balance sheet, with positive operating cash flows and Net
Debt of £74.9 million (HY24: £71.9 million) including recommencement of
dividends. Final dividend of £15.5 million in respect of FY24 paid in June
2024.
· Successful conclusion of refinancing, having agreed a new
four-year £125 million committed revolving credit facility which provides
greater flexibility and a firm platform from which we can execute our
strategy.
· We have a proven, continuous programme to focus on lowest cost
delivery with plans in place across productivity, efficiency, and range
development to offset inflationary headwinds in H1 and H2.
HY25 HY24 Change Change %
Revenue £233.8m £220.8m £13.0m 5.9%
EBITDA £45.3m £51.1m (£5.8m) (11.4%)
EBITDA margin 19.4% 23.1% (3.7%) (3.7 ppts)
Profit Before Tax (PBT) £14.0m £24.7m (£10.7m) (43.3%)
Adjusted PBT (1) £14.5m £22.1m (£7.6m) (34.4%)
Adjusted PBT margin 6.2% 10.0% (3.8%) (3.8 ppts)
Basic earnings per share 3.0 pence 5.6 pence (2.6 pence) (46.4%)
Net Debt (exc. Leases) £74.9m £71.9m £3.0m 4.2%
Cash from operations £17.5m £36.3m (£18.8m) (51.8%)
Adjusted Leverage(2) 0.9x 1.0x 0.1x 10.0%
(1) Adjusted PBT excludes impact of one-off items of £0.5 million finance
costs relating to amortisation of debt costs as a result of the refinancing
completed in HY25 (HY24: £2.6 million gain on purchase of SA Greetings)
(2) Adjusted Leverage is the ratio of Net Debt (excluding lease liabilities)
to EBITDA less lease related charges which is consistent with our covenant
reporting
Financial Performance
Sales
Total Sales
HY25 HY24 Change %
£m £m
cardfactory Stores 221.4 208.6 6.1%
cardfactory Online 3.7 3.4 8.8%
Getting Personal 2.1 2.4 (12.5%)
Partnerships 6.6 6.4 3.1%
Group 233.8 220.8 5.9%
LFL Sales
HY25 HY24 Change %
cardfactory Stores +3.7% +10.5% -6.8 ppts
cardfactory Online +5.9% -13.1% +19.0 ppts
cardfactory LFL +3.7% +10.0% -6.3 ppts
Getting Personal -15.2% -36.6% +21.4 ppts
Total Group sales for HY25 were £233.8 million, an increase of £13.0 million
compared to the same period last year.
Our store portfolio remains the core of our business and the source of a
significant majority of our revenues. Top line sales have continued to grow
and have outperformed the wider non-food retail sector in the period. Total
Group revenue increased by £13.0m driven by like-for-like (LFL) sales in
stores of +3.7% compared to last year including strong performance in our
strategic focus areas of gifts (+10.5% LFL) and celebration essentials (+3.2%
LFL). Total Stores revenue grew by 6.1% as we continued to deliver on our plan
to open +90 net new stores by FY27, with net store openings of +15 in HY25,
ahead of our target run rate.
Combined sales performance for our Spring seasonal ranges (Valentine's Day,
Father's Day, Mother's Day) demonstrated positive LFL performance with a
particularly positive performance on Valentine's Day across card (+8.3% LFL)
and gifting (+6.8% LFL) which included range development to reflect the growth
of family celebrations of this occasion.
Optimisation of the store portfolio continues to be an important source of
sales growth. During HY25 we increased the store portfolio by a net 15 new
stores accelerating our strategy to serve more customers in more areas. At 31
July 2024, our store portfolio stood at 1,073 stores, including 35 stores in
the Republic of Ireland. We have a strong new store pipeline for H2 FY25
continuing to broaden our footprint of cardfactory stores throughout the UK
and the Republic of Ireland.
We are encouraged with continued online momentum and progress against our
online strategy with revenue growth of +8.8% against HY24.
gettingpersonal.co.uk sales were reduced compared to the same period last year
at £2.1 million (HY24: £2.4 million). The Group is still progressing with
our technology transformation programme with a focus of unlocking future
digital and omnichannel propositions.
We continue to see development in our UK and international partnerships
including entry into the US market, as well as the multi-year renewal of our
existing contract with Aldi, which includes rollout to the full UK estate, and
advanced renewal discussions with The Reject Shop in Australia. In HY25 we
have also seen increased Matalan revenue due to the impact of the full rollout
to stores in the UK in FY24.
We are encouraged by these activities in contribution towards our strategic
plan to grow Partnerships sales. Our existing Partnerships performed well,
with sales from Partnerships increasing 3.1% when compared to HY24 to £6.6
million reflecting the full half year impact of revenue from SA Greetings
which was acquired in HY24 offset by a decline in The Reject Shop revenue
largely due to timing of shipments.
In addition, on 4 September 2024 we completed the acquisition of 100% of the
share capital of Garlanna Holdings Limited, and its wholly owned subsidiary,
Garlanna Limited, strengthening the Group's position within the Irish market
and providing further wholesale opportunities.
We will report Garlanna as part of our Partnerships results going forward, the
majority of its revenue derived from sales to retail partners in Ireland.
Gross Profit
HY25 HY25 HY24 HY24
£m % Sales £m % Sales
Group Sales 233.8 220.8
COGs (69.0) (29.5%) (64.5) (29.2%)
Product Margin - Constant Currency(1) 164.8 70.5% 156.3 70.8%
FX gains / losses (0.8) (0.3%) (1.1) (0.5%)
Product Margin 164.0 70.1% 155.2 70.3%
Store & Warehouse Wages (64.4) (27.5%) (53.3) (24.1%)
Property Costs (11.8) (5.0%) (11.9) (5.4%)
Other Direct Costs (11.6) (5.0%) (8.7) (3.9%)
Gross Profit 76.2 32.6% 81.3 36.8%
(1)Product margin calculated on a constant currency basis using a consistent
GBPUSD exchange rate across both periods. FX gains and losses reflect
conversion from the constant rate to prevailing market rates.
We have continued to actively manage our cost base against ongoing
Inflationary pressure, particularly linked to international freight costs, to
largely maintain product margins when calculated at a constant currency.
Product margin includes the purchase price of goods, along with inbound
freight, carriage and packing. Calculated on a constant currency basis,
product margin was broadly in line at 70.5% in HY25 compared to 70.8% in HY24.
Stock provisions did not significantly affect product margin as overall
inventory levels have largely normalised following a number of years of higher
provision cover. We have also used effective promotional activity in order to
support our strong sales performance and improve sell-through rates to reduce
the risk of inventory obsolescence.
The Group purchases approximately 50% of its total goods for resale in US
dollars and has a well-established hedging policy to manage the risk of
adverse fluctuations in market GBPUSD rates. In the six months ended 31 July
2024, we achieved an average rate of approximately £1:$1.26 on US dollar
purchases, which has seen a decrease in the YoY FX losses. The FX loss
reflects an overall strengthening of Sterling relative to the US Dollar
compared to the market rates at the time the contracts were executed, reducing
the value of outstanding contracts. Considered and disciplined use of
structured option products, in line with our established hedging policy,
typically enables us to achieve better FX rates than those that could be
achieved in the forward market alone.
Direct wages, including store and warehouse colleagues, include a minimum 9.8%
increase in National Living Wage from April 2024 in addition to the impact of
an overall increase in the size of our store portfolio. As a result of the
increase in National Living Wage, store and warehouse wages increased as a
percentage of sales which has contributed to the reduction in Gross Margin.
Other direct expenses include warehouse costs, store opening costs, utilities,
maintenance, point of sale and pay-per-click expenditure. A proportion of
costs in this category are variable in relation to the size of the store
portfolio and available trading days, meaning they increased YoY as the store
portfolio grew and the number of trading days in HY25 is slightly higher than
in the equivalent period for HY24. Whilst the Group continues to benefit from
its three-year fix on electricity commodity costs until October this year,
non-commodity costs are passed-through from energy suppliers and increased in
April 2024. As a result, overall other direct costs increased in absolute
terms and as a percentage of revenue.
As a result, Gross profit for the Group, when compared to the same period last
year, decreased by £5.1 million to £76.2 million, with a 4.2ppts fall in
gross margin to 32.6%.
We have a proven, continuous programme to focus on lowest cost delivery
(across productivity, efficiency, and range) and have plans in place to offset
inflationary headwinds in both H1 and H2. Our plans include continued range
development, with a focus on gifts and celebration essentials, an optimised
store labour model utilising an industry-recognised tool that has been
implemented in the first half, a store efficiency programme to eliminate
non-value-adding activities and a focus on operational efficiency in our
central overheads and support operations. We expect the majority of the fiscal
benefits of these plans to begin to come through in the second half of the
year, whilst ensuring we retain and develop the appropriate capacity, skills
and resources to enable us to execute our strategic growth ambition.
EBITDA & Operating Profit
HY25 HY25 HY24 HY24
£m % Sales £m % Sales
Group Sales 233.8 220.8
Gross Profit 76.2 32.6% 81.3 36.8%
Operating Expenses (30.9) (13.2%) (30.3) (13.7%)
EBITDA 45.3 19.4% 51.0 23.1%
Depreciation & Amortisation (6.1) (2.6%) (5.0) (2.3%)
Right-of-use asset depreciation (17.7) (7.6%) (17.9) (8.1%)
Operating Profit 21.5 9.2% 28.1 12.7%
Operating expenses (excluding depreciation and amortisation) include
remuneration for central and regional management, business support functions,
design studio costs and business insurance together with central overheads and
administration costs.
In operating expenses we also have seen the annualisation of investment in our
leadership and support capabilities, especially in IT where technology is a
key enabler to our omnichannel ambitions. The increased IT investment has been
offset by efficient cost management across other areas of operating
expenditure.
Total operating expenses increased by £0.6 million compared to the same
period last year, although given the strong LFL performance of store sales,
this represents a reduction of 0.5ppts as a percentage of sales. The absolute
increase in operating expenses reflects the impact of the acquisition of SA
Greetings in April 2024 as we have included a full 6 months of trading in the
half year results, seeing operating expenses increase by c.£1.0m. Excluding
the impact of SA Greetings, our ongoing programme to focus on lowest cost
delivery has reduced operating expenses by c.£0.4m compared to the same
period last year despite an increase in investment in the second half of FY24.
Group EBITDA decreased to £45.3 million in HY25, largely because of the
increase in inflationary pressures, predominantly evident in direct staff
costs following the significant minimum wage increase.
Total depreciation and amortisation charges, including depreciation on
right-of-use assets which are predominantly related to our store portfolio,
increased by £1.1 million compared to the same period last year reflecting
the increase in capital expenditure in the prior year compared to earlier
periods.
Profit Before Tax
HY25 HY25 HY24 HY24
£m % Sales £m % Sales
Group Sales 233.8 220.8
Operating Profit 21.5 9.2% 28.1 12.7%
Gain on acquisition - - 2.6 1.2%
Finance Costs (7.5) (3.2%) (6.0) (2.7%)
Profit Before Tax 14.0 6.0% 24.7 11.2%
Adjusting items 0.5 (2.6)
Adjusted Profit Before Tax 14.5 22.1
Total finance costs at £7.5 million increased from the prior period; the
components of this charge are set out in the table below.
HY25 HY24
£m £m
Interest on loans 3.0 2.9
Loan issue cost amortisation 0.8 0.3
IFRS 16 Leases interest 3.7 2.8
Total Finance Expenses 7.5 6.0
Interest on our debt facilities remained flat year-on-year at £3.0 million,
as we continue to strengthen the balance sheet and carefully manage Net Debt.
Whilst overall Net Debt increased in the first half, when compared to last
year, following the reinstatement of dividend payments we also benefitted from
a reduction in margin following a refinancing of the Group's debt facilities
in April 2024 (see below). The average cost of debt, taking into account
margin, indexation and the impact of hedging activity, in the period was 6.9%
(HY24: 6.6%).
As a result of the refinancing, loan issue cost amortisation includes £0.5m
of costs that are one-off in nature and have been excluded from Adjusted
Profit Before Tax.
Market interest rates have increased slightly over the last 12 months. On 31
July 2024 the Sterling Overnight Index Average (SONIA) rate stood at 5.2%,
compared to 4.93% on the same day last year.
Lease interest has increased by £0.9m in the first half of FY25 relative to
the prior year which reflects the number of lease renewals having taken place
through the last 12 months and the effective interest rate on these leases
being higher than the previous lease due to the increase SONIA rate. IFRS 16
interest costs are more heavily weighted towards the start of the overall
lease period.
As a result of the above factors, Profit Before Tax for the year was £14.0
million, down £10.7 million from £24.7 million for the previous year. The
reduction year on year is predominantly driven by the increase in direct costs
as a result of the impact of minimum wage increases of direct wages.
Adjusted Profit Before Tax, which excludes the one-off financing costs in
HY25, was £14.5 million, compared to £22.1 million in the same period last
year, which excludes the impact of the gain on acquisition of SA Greetings.
See the "Alternative Performance Measures ("APMs") and other explanatory
information" section, below, for further information regarding Adjusted Profit
Before Tax and other alternative performance measures used by the Group.
Taxation
The tax charge for the six months ended 31 July 2024 of £3.5 million is based
on the expected effective tax rate for the full year of 25.0%. This rate is
higher than the equivalent rate applied for the same period last year (22.2%)
largely due to increases in corporation tax rates effective from 1 April 2023
and the reduction of the anticipated impact of deferred tax as a result of
capital allowances in the HY25 tax charge.
The Group makes UK corporation tax payments under the 'Very Large' companies'
regime and thus pays its expected tax bill for the financial year in quarterly
instalments in advance. Corporation tax payments in the six months ended 31
July 2024 were £8.6 million, compared to £6.1 million in the same period
last year.
Earnings per share
The net result for the period was a profit after tax of £10.5 million,
decreased from £19.2 million in the same period last year. As a result, basic
earnings per share (EPS) for the year was 3.0 pence, with diluted EPS of 3.0
pence.
Adjusted EPS, which is based on earnings calculated by applying the effective
tax rate to Adjusted PBT for the period, was 3.1 pence for HY25 (HY24: 5.0
pence).
We remain focused on delivering value for shareholders via execution of our
strategy.
HY25 HY24
Profit after tax (£m) 10.5 19.2
Basic EPS (pence) 3.0 pence 5.6 pence
Diluted EPS (pence) 3.0 pence 5.5 pence
Adjusted Profit after Tax (£m) 10.9 17.2
Adjusted EPS (pence) 3.1 5.0
Cash flows
HY25 HY24
£m £m
Cash from Operating Activities (after tax payments) 8.9 30.2
Cash used in investing activities (6.8) (17.5)
Cash used in financing activities 12.9 (1.4)
Net Cash Flow for period 15.0 11.3
Operating cash flows less lease repayments (9.6) 10.3
Operating Cash Conversion 38.6% 71.0%
The Group continued to deliver positive cash performance in the six months
ended 31 July 2024, cash from operations (before lease repayments and tax) was
£17.5 million (HY24: £36.3 million) which contributed to an overall
reduction in net debt excluding the one-time impact of reinstating dividends
for FY24 (see below).
The decrease in operating cash flows reflects our margin which was in line
with expectations and investment in our working capital at the half year stage
which is seen in the increased inventory holding as at the end of July. The
Group's trading pattern is seasonal, with greater sales and thus cash inflows
in the second half of the year. The inverse is true in the first half, as
inventory builds ahead of the key Christmas season. In that context the
working capital outflow in the six months ended 31 July 2024 of £29.1 million
was in line with expectations and as we proactively reacted to pressure on
freight rates to invest in our inventory holdings as well as processing the
repayment of the Covid-19 business support grants of £3.3m.
Operating Cash Conversion (which is cash from operations expressed as a
percentage of EBITDA for the period) was 38.6% (HY24: 71.0%) reflecting the
reduced profit and working capital outflows discussed above.
Capital expenditure decreased from £15.3 million to £6.8 million which was
anticipated in the first half of the year as we are able to manage investment
opportunities in a robust and disciplined way. Planned capital expenditure to
FY27 remains to enable further strategic progress including investments in
stores and technology infrastructure. The HY24 cash used in investing
activities included the £2.2 million net consideration paid in respect of the
SA Greetings acquisition.
Cash generated from financing activities includes a net £53.6 million draw on
our debt facilities (HY24: net £24.7 million draw on debt facilities), £18.5
million of payments in respect of lease liabilities for the store portfolio
(HY24: £19.9 million) and £15.5 million of dividend payments to shareholders
in respect of the final dividend for FY24 (HY24: £nil).
Balance Sheet
Capital Expenditure
Total capital expenditure in the six months ended 31 July 2024 was £6.8
million, reduced from £15.3 million in HY24. We continued to invest in both
infrastructure and growth projects with targeted investment to refresh older
format stores, alongside opening new stores, and ongoing development in
technology infrastructure to unlock future omnichannel opportunities. We have
actively managed investment in HY25. We will continue to invest in H2 enable
further strategic progress, including investments in stores and technology
infrastructure. We continue to expect average capital expenditure of
approximately £25 million per annum over the period from FY24 to FY27 to
support delivery of our FY27 targets.
Ongoing investment in our Online platforms and digital experience remains a
key focus area.
Net Debt
HY25 Net Debt HY25 Leverage HY24 Net Debt HY24 Leverage
£m £m
Current borrowings 0.7 23.6
Non-current borrowings 99.2 74.8
Total Borrowings 99.9 98.4
Add back capitalised debt costs 1.6 1.0
Gross Bank Debt 101.5 99.4
Less cash 26.6 27.5
Net Debt (exc. Leases) 74.9 71.9
Leverage (exc. Leases) 0.6x 0.6x
Adjusted Leverage (exc. Leases) 0.9x 1.0x
Lease Liabilities 103.5 101.6
Net Debt (inc. Leases) 178.4 173.5
Leverage (inc. Leases) 1.5x 1.5x
The Group focuses on Net Debt excluding lease liabilities, this reflects the
way the Group's covenants are calculated in its financing facilities.
Leverage compares the ratio of Net Debt to EBITDA as calculated above.
Adjusted Leverage reflects adjustments in the Group's banking facilities to
deduct lease-related charges from EBITDA.
During the first six months of the year, we have seen net debt increase by
£3.0m compared to HY24. This movement includes £15.5 million in relation to
the final dividend in respect of FY24, the first time the Group has paid a
dividend in several years. Excluding the impact of the dividend, our robust
trading performance and careful management of capital investment in HY25 has
seen net debt reduce by £12.5m.
The Group's banking facilities and amounts drawn in the current and prior
periods are summarised in the table below:
Facility 31 July 2024 31 July 2023 31 January 2024
(HY25) (HY24) (FY24)
£11.25m Term Loan 'A' - £4.6m -
£18.75m Term Loan 'B' - £18.8m £18.8m
£20m CLBILs - £8.2m -
£100m Revolving Credit Facility(1) - £60.0m £26.0m
£125m Revolving Credit Facility £100.0m - -
Overdraft facilities £0.7m £7.2m £0.2m
Other Term Facilities £0.5m £0.5m £0.6m
Accrued interest £0.3m £0.3m £0.1m
Gross Bank Debt £101.5m £99.4m £45.7m
1 Overdraft facilities formed part of, and to the extent utilised reduced
available commitment under, the £100 million RCF.
On 26 April 2024, the Group successfully concluded a refinancing of its debt
facilities, having agreed a new four-year £125 million committed revolving
credit facility with a syndicate of banks. The previous revolving credit
facility and Term Loan B were fully repaid and cancelled.
The new facilities have an initial maturity date in April 2028, with options
to extend by up to 19 months, subject to lender approval. The facilities
include a £75 million accordion, which can be drawn subject to lender
approval. The interest margin on the facilities is dependent on the Group's
Adjusted leverage position, with margins between 1.9-2.8% which is lower than
the previous facilities. The new facilities include covenants for a maximum
Adjusted leverage ratio of 2.5x and a fixed charge cover ratio of at least
1.75x, tested semi-annually. The Group expects to operate comfortably within
these covenant levels for the foreseeable future.
The new facilities represent an important landmark in the Group's strategic
and financial progress since the pandemic, reflecting a return to financing
terms more aligned with the broader market and the removal of remaining
restrictions and administrative requirements associated with the pandemic
period.
At 31 July 2024, the Group had undrawn committed facilities of £23.8 million
under the new financing agreement and therefore had cash and committed
facilities of £50.4 million, in addition to the undrawn accordion facility of
£75 million.
Following repayment of the previous term loans, the new facilities provide
enhanced flexibility to the Group which better matches its cash generation
profile. The Group's cash generation profile typically follows an annualised
pattern, cash outflows are higher in the first half of the year associated
with lower seasonal sales and investment in working capital ahead of the
Christmas season. The inverse is then usually true in the second half, as
Christmas sales lead to reduced stock levels and higher cash inflows. As a
result, Net Debt at the end of the first half and the end of the year is
usually lower than the intra-year peak, which typically occurs during the
third quarter of the fiscal year.
The Group continues to hold a provision of £2.2 million relating to the
potential overpayment of government support during the pandemic, with
reference to subsidy control limits. The Group is actively taking steps to
resolve its position.
Capital Structure & Distributions
At the preliminary results in April 2024, the Board presented its reviewed and
updated Capital Allocation Policy (CAP). Through its CAP, cardfactory aims to
balance delivery of sustainable, long-term growth in shareholder value against
cash returns to shareholders and the needs of its other stakeholders.
The four principles of the CAP are:
· Maintain a strong balance sheet - retaining sufficient cash and
committed facilities to ensure liquidity headroom throughout the annual
operating cycle with an Adjusted Leverage ratio below 1.5x throughout the
year.
· Invest to deliver the strategy - investing capital each year to
ensure the Group complies with obligations and delivers its business plans;
investments to accelerate business progress need to deliver attractive returns
in excess of the cost of capital.
· Regular, progressive returns to shareholders - ordinary dividends
with a dividend cover ratio, based on Adjusted EPS, of between 2-3x for the
full year, paid as interim (c.25%) and final (c.75%) dividends.
· Disciplined use of surplus cash - total returns will not exceed
free cash flow generation in the period to which the returns relate.
The Board will also consider share purchases from time to time, to offset
dilution from employee share schemes.
In June 2024, the Group paid a final dividend of 4.5 pence per share
(totalling £15.5 million) in respect of the FY24 financial year. This
dividend represented the total dividend for FY24 (including an amount in lieu
of an interim dividend) under the CAP, with interim dividends unable to be
paid last year due to restrictions that remained in place until 31 January
2024.
Following the resilient performance of the business in the first half of the
year and reflecting the Board's unchanged expectations with regard to full
year performance, the Board has proposed an interim dividend in respect of
FY25 of 1.2 pence.
The interim dividend reflects approximately 25% of the expected full year
dividend, subject to the financial performance of the Group meeting
expectations in the second half of the year, particularly with respect to the
important Christmas season. The interim dividend will be payable to
shareholders on the share register on 1 November 2024, with payments to be
made on 11 December 2024.
Where the Board concludes the Group has excess cash, taking into account,
inter-alia, the performance and prospects of the Group, together with any
potential investment opportunities. The Board expects to make additional
returns to shareholders. Given the seasonal nature of the Group's cash flow
generation, with negative free cash flows in the first half, the Board next
expects to consider surplus cash requirements at the end of the financial
year.
Consolidated income statement
For the six months ended 31 July 2024
Note Six months ended 31 July 2024 Six months ended 31 July 2023 Year ended 31 January 2024
£'m £'m £'m
Revenue 233.8 220.8 510.9
Cost of sales (157.6) (139.5) (326.0)
Gross profit 76.2 81.3 184.9
Other operating income - - 2.0
Operating expenses (54.7) (53.2) (110.5)
Operating profit 21.5 28.1 76.4
Gain on bargain purchase - 2.6 2.6
Finance expense 6 (7.5) (6.0) (13.4)
Profit Before Tax 14.0 24.7 65.6
Taxation 7 (3.5) (5.5) (16.1)
Profit for period 10.5 19.2 49.5
Earnings per share pence pence pence
- Basic 8 3.0 5.6 14.4
- Diluted 8 3.0 5.5 14.3
All activities relate to continuing operations.
Consolidated statement of comprehensive income
For the six months ended 31 July 2024
Six months ended 31 July 2024 Six months ended 31 July 2023 Year ended 31 January 2024
£'m £'m £'m
Profit for the period 10.5 19.2 49.5
Items that are or may be recycled subsequently into profit or loss:
Exchange differences on translation of foreign operations (0.2) 0.1 (0.5)
Cash flow hedges - changes in fair value (0.6) (3.4) (2.9)
Cost of hedging reserve - changes in fair value (0.1) 0.2 0.1
Tax relating to components of other comprehensive income 0.2 0.8 0.7
Other comprehensive (expense)/income for the period, net of income tax (0.7) (2.3) (2.6)
Total comprehensive income for the period attributable to equity shareholders 9.8 16.9 46.9
of the parent
Consolidated statement of financial
position
As at 31 July 2024
Note 31 July 2024 31 July 2023 31 January 2024
£'m £'m £'m
Non-current assets
Intangible assets 10 331.7 331.0 331.4
Property, plant and equipment 11 46.3 40.8 45.9
Right of use assets 12 102.7 98.6 99.2
Deferred tax assets 1.9 2.9 1.2
Derivative financial instruments 15 0.6 0.7 0.6
483.2 474.0 478.3
Current assets
Inventories 13 56.4 49.5 50.0
Trade and other receivables 26.5 23.6 11.6
Tax receivable 4.6 0.9 -
Derivative financial instruments 15 0.7 1.7 0.9
Cash at bank and in hand 26.6 27.5 11.3
114.8 103.2 73.8
Total assets 598.0 577.2 552.1
Current liabilities
Borrowings (0.7) (23.6) (7.1)
Lease liabilities 12 (22.1) (26.0) (25.3)
Trade and other payables (76.5) (78.7) (80.1)
Provisions 17 (4.2) (9.2) (7.5)
Tax payable - - (0.4)
Derivative financial instruments 15 (1.3) (2.5) (1.7)
(104.8) (140.0) (122.1)
Non-current liabilities
Borrowings (99.2) (74.8) (37.9)
Lease liabilities 12 (81.4) (75.6) (75.5)
Derivative financial instruments 15 (0.8) (1.0) (0.8)
(181.4) (151.4) (114.2)
Total liabilities (286.2) (291.4) (236.3)
Net assets 311.8 285.8 315.8
Equity
Share capital 3.5 3.4 3.5
Share premium 202.8 202.3 202.7
Hedging reserve (0.4) 0.6 (0.6)
Cost of hedging reserve (0.1) - -
Reverse acquisition reserve (0.5) (0.5) (0.5)
Merger reserve 2.7 2.7 2.7
Retained earnings 103.8 77.3 108.0
Equity attributable to equity holders of the parent 311.8 285.8 315.8
Consolidated statement of changes in
equity
For the six months ended 31 July 2024
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
Six months ended 31 July 2024
At 31 January 2024 3.5 202.7 (0.6) - (0.5) 2.7 108.0 315.8
Total comprehensive expense for the period
Profit or loss - - - - - - 10.5 10.5
Other comprehensive expense - - (0.4) (0.1) - - (0.2) (0.7)
-- - (0.4) (0.1) - - 10.3 9.8
Hedging gains and 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 - 0.1 - - - - 1.4 1.5
Dividends (note 9)(1) - - - - - - (15.9) (15.9)
Total contributions by and distributions to owners - 0.1 - - - - (14.5) (14.4)
At 31 July 2024 3.5 202.8 (0.4) (0.1) (0.5) 2.7 103.8 311.8
(1)Dividends includes £0.4m of dividend equivalents payable on employee share
awards
Six months ended 31 July 2023
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 2023 3.4 202.2 3.5 (0.1) (0.5) 2.7 57.0 268.2
Total comprehensive expense for the period
Profit or loss - - - - - - 19.2 19.2
Other comprehensive expense - - (2.5) 0.1 - - 0.1 (2.3)
-- - (2.5) 0.1 - - 19.3 16.9
Hedging gains and losses and costs of hedging transferred to the cost of - - (0.5) - - - - (0.5)
inventory
Deferred tax on transfers to inventory - - 0.1 -- - - - 0.1
Transactions with owners, recorded directly in equity
Share-based payment charges - 0.1 - - - - 1.0 1.1
Dividends (note 9) - - - - - - - -
Total contributions by and distributions to owners - 0.1 - - - - 1.0 1.1
At 31 July 2023 3.4 202.3 0.6 - (0.5) 2.7 77.3 285.8
Year ended 31 January 2024
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 2023 3.4 202.2 3.5 (0.1) (0.5) 2.7 57.0 268.2
Total comprehensive expense for the period
Profit or loss - - - - - - 49.5 49.5
Other comprehensive income - - (2.2) 0.1 - - (0.4) (2.5)
- - (2.2) 0.1 - - 49.1 47.0
Hedging gains and losses and costs of hedging transferred to the cost of - - (2.5) - - - - (2.5)
inventory
Deferred tax on transfers to inventory - - 0.6 - - - - 0.6
Deferred tax related to Share-based payments - - -- - - - (0.2) (0.2)
Transactions with owners, recorded directly in equity
Shares issued 0.1 0.5 - - - - - 0.6
Share-based payment charges - - - - - - 2.1 2.1
Dividends (note 9) - - - - - - - -
Total contributions by and distributions to owners 0.1 0.5 - - - - 2.1 2.7
At 31 January 2024 3.5 202.7 (0.6) - (0.5) 2.7 108.0 315.8
Consolidated cash flow statement
For the six months ended 31 July 2024
Note Six months ended 31 July 2024 Six months ended 31 July 2023 Year ended 31
January 2024
£'m £'m £'m
Cash from operations 16 17.5 36.3 118.7
Corporation tax paid (8.6) (6.1) (13.5)
Net cash inflow from operating activities 8.9 30.2 105.2
Cash flows from investing activities
Purchase of property, plant and equipment 11 (5.0) (9.0) (18.8)
Purchase of intangible assets 10 (1.8) (6.3) (9.0)
Acquisition of SA Greetings net of cash acquired - (2.2) (2.2)
Net cash outflow from investing activities (6.8) (17.5) (30.0)
Cash flows from financing activities
Interest paid (3.0) (3.4) (6.5)
Proceeds from bank borrowings(1) 196.5 37.0 167.0
Repayment of bank borrowings(1) (141.2) (12.3) (190.6)
Other financing costs paid(2) (1.7) - -
Dividends paid (15.5) - -
Shares issued under employee share schemes - - 0.6
Payment of lease liabilities (18.5) (19.9) (37.5)
Interest in respect of lease liabilities 6 (3.7) (2.8) (6.2)
Net cash inflow/(outflow) from financing activities 12.9 (1.4) (73.2)
Net (decrease)/increase in cash in the period 15.0 11.3 2.0
Cash and cash equivalents at the beginning of the period 11.1 9.9 9.9
Exchange (losses)/gains on cash and cash equivalents (0.2) 0.2 (0.8)
Closing cash and cash equivalents 25.9 21.4 11.1
(1)Proceeds and repayments from bank borrowings includes the impact of
refinancing completed in April 2024 as explained in note 14. The previous
facilities were repaid in full and new facilities drawn down at the point of
refinancing
(2)Other financing costs paid includes costs incurred directly as a result of
the refinancing
Notes to the condensed consolidated interim financial statements
1 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').
2 Basis of preparation
These unaudited condensed consolidated interim financial statements ('interim
financial statements') for the six months ended 31 July 2024 comprise the
Company and its subsidiaries (together referred to as the 'Group'). The
interim financial statements have been prepared in accordance with the
Disclosure and Transparency Rules of the Financial Conduct Authority and the
requirements of IAS 34 Interim Financial Reporting as adopted by the United
Kingdom. The interim report was approved by the Board of Directors on 23
September 2024.
These condensed interim financial statements do not comprise statutory
accounts within the meaning of section 434 of the Companies Act 2006. The
interim financial statements should be read in conjunction with the annual
financial statements for the year ended 31 January 2024 ('Annual Report')
which have been prepared in accordance with UK-adopted international financial
reporting standards (UK IFRS) and applicable law.
The comparative figures for the financial year ended 31 January 2024 are an
extract from the Annual Report and are not the Group's statutory accounts for
that financial year within the meaning of section 434 of the Companies Act
2006. Those accounts have been reported on by the Company's auditor and
delivered to the registrar of companies. The report was (i) unqualified, (ii)
did not contain an emphasis of matter paragraph and (iii) did not contain any
statement under section 498 of the Companies Act 2006. The statutory accounts
for the year ended 31 January 2024 were approved by the Board of Directors on
3 May 2024 and delivered to the Registrar of Companies.
Significant judgements and sources of estimation uncertainty
The preparation of the interim financial statements in accordance with UK IFRS
requires the application of judgement in forming the Group's accounting
policies. It also requires the use of estimates and assumptions that affect
the reported amounts of assets, liabilities, income and expenses. Actual
results may subsequently differ from these estimates.
Estimates and assumptions are reviewed on an ongoing basis, with revisions
recognised in the period in which the estimates are revised and in any future
periods affected. Judgements are also reviewed on an ongoing basis to ensure
they remain appropriate.
There were no judgements made in the six months ended 31 July that had a
material effect on the Group's interim financial statements.
The review of estimates and assumptions in the period concluded that the key
sources of estimation uncertainty were the same as those that applied to the
consolidated financial statements for the year ended 31 January 2024. In each
case, estimates were made using a consistent methodology, with inputs and
assumptions updated to reflect the Group's latest forecasts and prevailing
market conditions at 31 July 2024 where appropriate.
As part of this process, the Group maintained assumptions in respect of
inventory provisions where sales data for the six months ended 31 July 2024
indicated a consistent provisioning requirement with retail inventory as at 31
January 2024. Overall these assumptions reduced the value of inventory
provisions by approximately £0.1 million, compared to the provision value as
at 31 January 2024. The total inventory provision at 31 July 2024 was £9.5
million (see note 13).
Comparative information
The Group provides comparative financial information in these interim
financial statements for both the six months ended 31 July 2023 ('HY24') and
the year ended 31 January 2024 ('FY24'). Where included within text, income
statement comparatives refer to the six months ended 31 July 2023 and balance
sheet comparatives are as at 31 January 2024, unless otherwise stated.
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 application of the going concern basis of accounting remains
appropriate.
The Group has delivered a resilient financial performance in the six months
ended 31 July 2024, with encouraging sales momentum, profit margins in line
with expectation and positive operating cash generation. In additional, Net
Debt levels have continued to fall (compared to the equivalent period last
year excluding the impact of dividends) and the Group has maintained its
Leverage ratio year-on-year. See the Business Update and Group Financial
Review in this report for more information regarding trading in the first half
of the year.
On 26 April 2024, the Group entered into a new £125 million revolving credit
facility with an initial term to April 2028 (see note 17). The Board believes
that the updated facilities provide adequate headroom for the Group to execute
its strategic plan. At 31 July 2024, Net Debt (excluding lease liabilities)
was £74.9 million and the Group had £25.0 million of undrawn facilities.
The Group's most recent cash flow forecasts, which cover the period extending
12 months from the date these interim financial statements were approved,
indicate that the Group expects to have significant headroom within its agreed
financing arrangements, 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 amortising repayment schedule set out in the terms of the facilities.
The UK Corporate Governance Code requires that an assessment is made of the
Group's ability to continue as a going concern for a period of at least 12
months from the signing of these financial statements; however it is not
specified how far beyond 12 months should be considered. For the purpose of
assessing the going concern assumption, the Group has prepared cash flow
forecasts for the 12 month period following the date of approval of these
accounts, which incorporate the updated debt facilities and related covenant
measures.
These forecasts are extracted from the Group's approved budget and strategic
plan which covers a period of five years. Within the 12-month period, the
Group has considered qualitative scenarios and the Group's ability to operate
within its existing banking facilities and meet covenant requirements.
Beyond the 12-month period, the Group has qualitatively considered whether any
factors (for example the timing of debt repayments, or longer-term trading
assumptions) indicate a longer period warrants consideration.
The results of this analysis were:
• The Group's base case forecasts indicate that the Group will continue to
trade profitably, generate positive operating cash flows whilst retaining
substantial liquidity headroom against current facility limits and meet all
covenant requirements on the relevant test dates in the 12 month period.
• In the Board's view, there are no other factors arising in the period
immediately following 12 months from the date of these accounts that warrant
further consideration.
• The Group performed a review of the scenario analysis performed for its
FY24 Annual Report & Accounts. Performance in the six months ended 31 July
2024 is consistent with the forecasts that underpinned this analysis, and
therefore do not consider the analysis to be materially changed.
The Group also conducted a review of the reverse stress test analysis
originally performed for the FY24 Annual Report & Accounts, which
considered the extent of sales loss or cost increase that would be required to
result in either a complete loss of liquidity headroom, or a covenant breach
during the period. Seasonality of the Group's cash flows, with higher
purchases and cash outflows over the summer to build stock for Christmas,
means liquidity headroom is at its lowest in September and October ahead of
the Christmas season. Conversely, covenant compliance is most sensitive at the
half-year rather than at the year-end as part of the now biannual testing
points.
Updating the reverse stress test analysis to reflect actual performance in the
period to 31 July 2024 demonstrated that the level of sales loss or cost
increase required (either on a sustained basis or as a significant one-off
downside event) to result in a breach would still require circumstances akin
to a pandemic lockdown for a period of several weeks, or other events with a
similar quantum of effect that would be unprecedented in nature. Accordingly,
such scenarios are not considered to be reasonably likely to occur. As with
the scenario analysis above, the stress test was conducted before considering
any potential benefit from available mitigating actions.
The Group expects to operate comfortably within these covenant levels for the
foreseeable future. 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.
3 Principal accounting policies
The interim financial statements have been prepared under the historical cost
convention except for certain assets and liabilities (principally derivative
financial instruments) which are stated at their fair value. The accounting
policies are consistent with those applied in the consolidated financial
statements for the year ended 31 January 2024.
Amended standards and interpretations effective in the period do not have a
material effect on the Group's financial statements.
4 Segmental reporting and revenue
Following investment in the Group's people, systems and infrastructure to
support its strategy, the Group is organised into five main business areas
which meet the definition of an Operating segment under IFRS, those being
cardfactory Stores, cardfactory Online, Getting Personal, Partnerships and
Printcraft. Each of these business areas has a dedicated management team and
reports discrete financial information to the Board for the purpose of
decision making.
· cardfactory Stores retails greeting cards, celebration
accessories, and gifts principally through an extensive UK store network, with
a small number of Stores in the Republic of Ireland.
· cardfactory Online retails greetings cards, celebration
accessories, and gifts via its online platform.
· Getting Personal is an online retailer of personalised cards and
gifts.
· Partnerships sells greetings cards, celebration accessories and
gifts via a network of third party retail partners both in the UK and
overseas.
· Printcraft is a manufacturer of greetings cards and personalised
gifts, and sells the majority of its output intra-group to the Stores and
Online businesses.
The results of SA Greetings have been included in the Partnerships segment for
the six months ended 31 July 2024.
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 Group's support centre and
administrative functions are run by the cardfactory Stores segment, with
operating costs recharged to other segments where they are directly
attributable to the operations of that segment.
The Board reviews revenue and EBITDA by segment, with the exception of
Printcraft by virtue of its operations being predominantly intra-group in
nature. Whilst only cardfactory Stores meets the quantitative thresholds in
IFRS to require disclosure, the Group's other trading segments are reported
below as the Group considers that this information is useful to stakeholders
in the context of the Group's Opening Our New Future strategy.
Revenue and EBITDA for each segment, and a reconciliation to consolidated
operating profit, is provided in the table below:
Six months ended 31 July 2024 Six months ended 31 July 2023 Year ended 31 January 2024
£'m £'m £'m
Revenue:
cardfactory Stores 221.4 208.4 478.9
cardfactory Online 3.6 3.4 8.8
Getting Personal 2.1 2.4 5.9
Partnerships 6.6 6.4 17.0
Other 0.1 0.2 0.3
Consolidated Group revenue 233.8 220.8 510.9
Of which derived from customers in the UK 222.3 210.2 484.8
Of which derived from customers overseas 11.5 10.6 26.1
EBITDA:
cardfactory Stores 49.7 55.2 127.4
cardfactory Online (2.0) (1.9) (3.7)
Getting Personal (1.3) (1.1) (2.0)
Partnerships 0.7 1.5 1.2
Other (1.8) (2.6) (0.3)
Consolidated Group EBITDA 45.3 51.1 122.6
Consolidated Group depreciation, amortisation & impairment (23.8) (24.0) (47.4)
Consolidated Group gain on disposal - 1.0 1.2
Consolidated Group Operating Profit 21.5 28.1 76.4
The "Other" column principally reflects central overheads and Printcraft sales
to third parties.
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 as, by segment, revenues are
subject to substantially the same economic factors that impact the nature,
amount, timing and uncertainty of revenue and cash flows.
Revenue from overseas reflects revenue earned from i) the Group's Stores in
the Republic of Ireland, ii) the Group's wholesale and retail activities in
South Africa (via its SA Greetings subsidiary), and iii) from other retail
partners based outside of the UK.
5 EBITDA
Earnings before interest, tax, depreciation, amortisation and impairment
charges (EBITDA) represents profit for the period before net finance expense,
taxation, depreciation, amortisation and impairment of assets.
Six months ended 31 July 2024 Six months ended 31 July 2023 Year ended 31 January 2024
£'m £'m £'m
Operating profit 21.5 28.1 76.4
Depreciation, amortisation and impairment 23.8 24.0 47.4
Gain on disposal - (1.0) (1.2)
EBITDA 45.3 51.1 122.6
6 Finance expense
Six months ended 31 July 2024 Six months ended 31 July 2023 Year ended 31 January 2024
£'m £'m £'m
Finance expense
Interest on bank loans and overdrafts 3.0 2.9 6.5
Amortisation of debt issue costs 0.8 0.3 0.6
Lease interest 3.7 2.8 6.3
7.5 6.0 13.4
7 Taxation
The tax charge for the six months ended 31 July 2024 has been calculated on
the basis of the estimated effective tax rate on profit before tax for the
full financial year to 31 January 2025, which has been assessed as 25% (HY24:
22.2%).
The estimated effective tax rate is in line with the standard rate of
corporation tax in the UK applicable for the period (25%). We consider that
although the deductions for capital allowances are likely to be greater than
the equivalent depreciation charge for the period, the impact on the effective
tax rate will not be material.
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 share incentive awards
and save as you earn share options.
Six months ended Six months ended Year ended
31 July 2024
31 July 2023
31 January 2024
(Number) (Number) (Number)
Weighted average number of shares in issue 345,984,119 342,701,920 343,339,468
Weighted average number of dilutive share options 2,413,510 4,586,823 3,940,467
Weighted average number of shares for diluted earnings per share 348,397,629 347,288,743 347,279,935
£'m £'m £'m
Profit for the financial period 10.5 19.2 49.5
pence pence pence
Basic earnings per share 3.0 5.6 14.4
Diluted earnings per share 3.0 5.5 14.3
9 Dividends
On 23 September 2024, the Directors resolved to pay an interim dividend of 1.2
pence per share. This represents approximately 25% of the expected full year
dividend, subject to the financial performance of the Group in the remainder
of the financial year being in line with expectations. The interim dividend
will be payable to shareholders on the share register on 1 November 2024, with
payments to be made on 11 December 2024.
In June 2024, the Group paid a final dividend of 4.5 pence per share
(totalling £15.5 million) in respect of the FY24 financial year. This
dividend represented the total dividend for FY24 (including an amount in lieu
of an interim dividend) with interim dividends unable to be paid last year due
to restrictions in the Group's previous financing facilities that remained in
place until 31 January 2024.
10 Intangible assets
Goodwill Software Total
£'m £'m £'m
Cost
At 1 February 2024 328.2 35.0 363.2
Additions - 1.8 1.8
Transfers - - -
At 31 July 2024 328.2 36.8 365.0
Amortisation and impairment
At 1 February 2024 14.4 17.4 31.8
Amortisation in the period - 1.5 1.5
Impairment in the period - - -
At 31 July 2024 14.4 18.9 33.3
Net book value
At 31 July 2024 313.8 17.9 331.7
At 31 January 2024 313.8 17.6 331.4
11 Property, plant and equipment
Freehold property Leasehold improvements Plant, equipment, fixtures & vehicles Total
£'m £'m £'m £'m
Cost
At 1 February 2024 22.6 40.8 95.7 159.1
Additions - - 5.0 5.0
At 31 July 2024 22.6 40.8 100.7 164.1
Depreciation and impairment
At 1 February 2024 5.3 40.0 67.9 113.2
Depreciation in the period 0.4 0.3 3.9 4.6
At 31 July 2024 5.7 40.3 71.8 117.8
Net book value
At 31 July 2024 16.9 0.5 28.9 46.3
At 31 January 2024 17.3 0.8 27.8 45.9
12 Leases
The Group has lease contracts, within the definition of IFRS 16 leases, in
relation to its entire Store lease portfolio, some warehousing locations 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.
Right of use assets Six months ended Six months ended Year ended 31 January 2024
31 July 2024
31 July 2023
£'m £'m £'m
Buildings 101.7 97.8 98.2
Motor Vehicles 1.0 0.8 1.0
102.7 98.6 99.2
The right of use assets movement in the year is as follows:
Six months ended Six months ended Year ended 31 January 2024
31 July 2024
31 July 2023
£'m £'m £'m
At the beginning of the period 99.2 100.5 100.5
Acquisition of SA Greetings - 1.4 1.9
Additions:
Buildings 21.4 15.0 32.0
Motor vehicles 0.3 0.8 1.2
Disposals (0.5) (0.4) (0.7)
Depreciation charge:
Buildings (17.4) (18.7) (35.4)
Motor vehicles (0.3) (0.2) (0.5)
Net impairment Reversal/(Charge) - 0.2 0.2
At the end of the period 102.7 98.6 99.2
Disposals and depreciation on disposals include fully depreciated right of use
assets in respect of expired leases where the asset remained in use whilst a
lease renewal was negotiated.
Lease liabilities Six months ended 31 July 2024 Six months ended 31 July 2023 Year ended 31 January 2024
£'m £'m £'m
Current lease liabilities (22.1) (26.0) (25.3)
Non-current lease liabilities (81.4) (75.6) (75.5)
Total lease liabilities (103.5) (101.6) (100.8)
Lease expense Six months ended 31 July 2024 Six months ended 31 July 2023 Year ended 31 January 2024
£'m £'m £'m
Depreciation expense on right of use assets 17.7 18.9 35.9
Impairment of right of use assets - - (0.2)
Profit on disposal of right of use assets - (1.0) (1.2)
Lease interest 3.7 2.8 6.3
Expense relating to variable lease payments 0.2 0.1 0.6
Total lease related income statement expense 21.6 20.8 41.4
13 Inventories
31 July 2024 31 July 2023 31 January 2024
£'m £'m £'m
Finished Goods 55.5 48.4 49.5
Work in progress 0.9 1.1 0.5
56.4 49.5 50.0
Inventories are stated net of provisions totalling £9.5 million (FY24: £9.6
million). The cost of inventories recognised as an expense and charged to cost
of sales in the period, net of movements in provisions, was £69.8 million
(HY24: £65.6 million).
14 Analysis of Net Debt
Six months ended 31 July 2024 At 1 February 2024 Cash flow Non-cash changes At 31 July 2024
£'m £'m £'m £'m
Secured bank loans and accrued interest (44.8) (53.5) (0.9) (99.2)
Lease liabilities (100.8) 22.2 (24.9) (103.5)
Total debt (145.6) (31.3) (25.8) (202.7)
Debt costs capitalised (0.7) (1.7) 0.8 (1.6)
Bank overdraft (0.2) (0.5) - (0.7)
Cash and cash equivalents 11.3 15.3 - 26.6
Net Debt (135.2) (18.2) (25.0) (178.4)
Lease liabilities 100.8 (22.2) 24.9 103.5
Net Debt excluding lease liabilities (34.4) (40.4) (0.1) (74.9)
Six months ended 31 July 2023 At 1 February 2023 Cash flow Non-cash changes At 31 July 2023
£'m £'m £'m £'m
Secured bank loans and accrued interest (65.7) (21.7) (4.9)* (92.3)
Lease liabilities (105.4) 21.3 (17.5) (101.6)
Total Debt (171.1) (0.4) (22.4) (193.9)
Debt costs capitalised (1.4) - 0.4 (1.0)
Bank overdraft (1.8) (4.3) - (6.1)
Cash and cash equivalents 11.7 15.8 - 27.5
Net Debt (162.6) 11.1 (22.0) (173.5)
Lease liabilities 105.4 (21.3) 17.5 101.6
Net Debt excluding lease liabilities (57.2) (10.2) (4.5) (71.9)
Year ended 31 January 2024 At 1 February 2023 Cash flow Non-cash changes At 31 January 2024
£'m £'m £'m £'m
Secured bank loans and accrued interest (65.7) 30.1 (9.2) (44.8)
Lease liabilities (105.4) 43.7 (39.1) (100.8)
Total debt (171.1) 73.8 (48.3) (145.6)
Debt costs capitalised (1.4) - 0.7 (0.7)
Bank overdraft (1.8) 1.8 (0.2) (0.2)
Cash and cash equivalents 11.7 (0.4) - 11.3
Net Debt (162.6) 75.2 (47.8) (135.2)
Lease liabilities 105.4 (43.7) 39.1 100.8
Net Debt excluding lease liabilities (57.2) 31.5 (8.7) (34.4)
On 26 April 2024, the Group successfully concluded a refinancing of its debt
facilities, having agreed a new four-year £125 million committed revolving
credit facility with a syndicate of banks. The previous revolving credit
facility and Term Loan B have been fully repaid and cancelled as part of
refinancing.
The new facilities have an initial maturity date in April 2028, with options
to extend by up to 19 months, subject to lender approval. The facilities
include a £75 million accordion, which can be drawn subject to lender
approval. The interest margin on the facilities is dependent upon the Group's
Leverage position, with margins between 1.9-2.8% which is lower than the
previous facilities. The new facilities include covenants for a maximum
leverage ratio (calculated as Net Debt excluding leases divided by EBITDA less
rent costs for the prior 12 months) of 2.5x and a fixed charge cover ratio of
at least 1.75x tested semi-annually. The Group expects to operate comfortably
within these covenant levels for the foreseeable future.
The Group's cash generation profile typically follows a seasonal pattern, with
higher cash outflows in the first half of the year associated with lower
seasonal sales and investment in working capital ahead of the Christmas
season. The inverse is then usually true in the second half, as Christmas
sales lead to reduced stock levels and higher cash inflows. As a result, Net
Debt at the end of both the half year and at the year-end is usually lower
than the intra-year peak, which typically occurs during the third quarter.
15 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.
For all other financial instruments, the fair value approximates to their
carrying amounts.
31 July 2024 31 July 2023 31 January 2024
£'m £'m £'m
Derivative assets
Non-current
Interest-rate contracts - 0.2 -
Foreign exchange contracts 0.6 0.5 0.6
0.6 0.7 0.6
Current
Interest-rate contracts 0.1 0.8 0.2
Foreign exchange contracts 0.6 0.9 0.7
0.7 1.7 0.9
Derivative liabilities
Current
Interest rate contracts -- - (0.1)
Foreign exchange contracts (1.3) (2.5) (1.6)
(1.3) (2.5) (1.7)
Non-current
Interest rate contracts - - (0.1)
Foreign exchange contracts (0.8) (1.0) (0.7)
(0.8) (1.0) (0.8)
Net derivative financial instruments
Interest rate contracts 0.1 1.0 -
Foreign exchange contracts (0.9) (2.1) (1.0)
(0.8) (1.1) (1.0)
Fair value movements in foreign currency derivatives are recognised in other
comprehensive income to the extent the contract is part of an effective
hedging relationship. The fair value loss of £0.1 million that do not form
part of an effective hedging relationship have been charged to the income
statement (HY24: loss on £0.9 million) within cost of sales.
16 Notes to the cash flow statement
Reconciliation of operating profit to cash generated from operations:
31 July 2024 31 July 2023 31 January 2024
£'m £'m £'m
Profit Before Tax 14.0 24.7 65.6
Gain on bargain purchase - (2.6) (2.6)
Net finance expense 7.5 6.0 13.4
Operating profit 21.5 28.1 76.4
Adjusted for:
Depreciation and amortisation 24.3 24.0 46.3
Reversal of Impairment of right of use assets (0.5) - (0.2)
Impairment of tangible assets - - 0.2
Impairment of intangible assets - - 1.1
Gain on disposal of fixed assets - (1.0) (1.2)
Cash flow hedging foreign currency movements (0.1) 1.3 (0.4)
Unrealised foreign exchange (gains)/losses - - 0.5
Share-based payments charge 1.5 1.0 2.1
Operating cash flows before changes in working capital 46.7 53.4 124.8
(Increase)/Decrease in receivables (14.8) (8.5) 3.6
(Increase) in inventories (6.5) (0.4) (1.2)
(Decrease) in payables (4.6) (7.9) (6.5)
Movement in provisions (3.3) (0.3) (2.0)
Cash from Operations 17.5 36.3 118.7
17 Provisions
Six months ended 31 July 2024 Covid-19-related support Property Provision Total
£'m £'m £'m
At 1 February 2024 5.4 2.1 7.5
Provisions utilised during the period (3.2) - (3.2)
Provisions released during the period - 0.1 0.1
Provisions provided during the period - (0.2) (0.2)
At 31 July 2024 2.2 2.0 4.2
Six months ended 31 July 2023 Covid-19-related support Property Provision Total
£'m £'m £'m
At 1 February 2023 7.4 2.1 9.5
Provisions utilised during the period - (0.1) (0.1)
Provisions released during the period - (0.4) (0.4)
Provisions provided during the period - 0.2 0.2
At 31 July 2023 7.4 1.8 9.2
Year ended 31 January 2024 Covid-19-related support Property Provision Total
£'m £'m £'m
At 1 February 2023 7.4 2.1 9.5
Provisions utilised during the year - (0.2) (0.2)
Provisions released during the year (2.0) 0.2 (1.8)
Provisions provided during the year - - -
At 31 January 2024 5.4 2.1 7.5
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. Although the actual amount that will be repaid is not certain, events up to 31 July 2024 have added a level of comfort that the outstanding provision is materially correct.
In February 2024 the Group reached a proposed settlement with the Department for Business and Trade for a portion of the provision that relates to business support grants received by the Group during FY21 and FY22. The value of the proposed settlement was £3.2 million and following a review of the residual position, in FY24 the Group released £2.0 million from the provision which reflected a proportionate reduction in the value of the provision for the amounts to be settled at the time. The business support grants settlement was paid in April 2024 and has been utilised from the provision as above.
The Group continues to hold discussions regarding settlement of the remaining element of the provision and to date has received no new substantive evidence regarding its position in respect of other support received relating to business rates relief. A further provision of £2.2 million remains at 31 July 2024 in respect of potential repayment of support received in excess of subsidy control thresholds for business rates relief, consistent with the nature of the provision held in the prior year. The minimum requirement for this element of the provision is expected to be £1.2 million, subject to interpretation of the guidance relating to individual support schemes and subsidy control thresholds. The Group believes a range of reasonably possible outcomes remains and that the Group's provision reflects a reasonable assessment of the amount that may be repayable. The Group does not believe that any position within the range of reasonably possible outcomes would reflect a material change to the provision held at 31 July 2024 and this provision is classified as current as the Group is actively aiming to resolve this settlement in the next 12 months.
The Group maintains provisions in respect of its store portfolio to cover both the estimated cost of restoring properties to their original condition upon exit of the property and any non-lease components of lease contracts (such as service charges) that may be onerous. Despite the size of the Group's store portfolio, such provisions are generally small which is consistent with the Group's experience of actual dilapidations and restoration costs. Specific provisions are usually made where the Group has a reasonable expectation that the related property may be exited, or is at a higher risk of exiting, in the near future and are generally expected to be utilised in the short-term. Any non-current portion of the provision is considered immaterial.
18 Principal risks and uncertainties
The principal risks and uncertainties facing the Group are materially
unchanged since the publication of the Annual Report (as published and
explained in more detail on pages 64 to 68 of the Group's Annual Report for
the year ended 31 January 2024) and are set out below for each category of
risk.
Financial Risks:
- Geopolitical Instability
- Cost price inflation
Operational Risks:
- IT Infrastructure and Security
- Business continuity
- Cyber
- Supply Chain
- Regulatory compliance
Strategic Risks:
- ESG Compliance and climate change risks
19 Related party transactions
The Group has taken advantage of the exemptions contained within IAS 24
'Related Party Disclosures' from the requirement to disclose transactions
between Group companies as these have been eliminated on consolidated.
A full listing of the Group's subsidiary undertakings is provided in the 2024
Annual Report and Accounts. Since 31 January 2024, the Group has added two new
subsidiaries, in connection with an expansion into the US market, as set out
below:
Cardfactory US Holdings Inc.
Cardfactory USA LLC
The Group owns 100% of each of these entities, all of which are incorporated
in USA at the registered address Corporation Trust Center, 1209 Orange Street,
Wilmington, New Castle, Delaware,19801.
The key management personnel of the Group comprise the Card Factory plc Board
of Directors, the Executive Board and the Senior Leadership Team. Disclosures
relating to remuneration of key management personnel are included in note 5 of
the 2024 Annual Report and Accounts financial statements. Further details of
Directors' remuneration are set out in the Directors' Remuneration Report of
the Annual Report and Accounts on pages 84 to 107. Directors of the Company
and their immediate families control 0.022% of the ordinary shares of the
Company.
There were no other related party transactions in the period.
20 Subsequent Events
On 4 September 2024, the Group completed the acquisition of Garlanna Holdings
Limited and its subsidiary companies (Garlanna). Garlanna trades as a
publisher and wholesale supplier of cards, wrap and gift bags in the Republic
of Ireland. Garlanna's historical revenues have typically been <1% of the
consolidated annual revenue of the Group. The acquisition will strengthen the
Group's position within the Republic of Ireland market and is expected to
provide further wholesale opportunities. Given the short period of time
between the completion of the acquisition and these interim financial
statements being published, the acquisition accounting is incomplete and the
disclosures required by IFRS 3 have not been provided. The Group expects to
include provisional acquisition disclosures commensurate with the size of the
acquisition as part of its annual report for FY25.
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 contained in UK-adopted
IFRS;
• 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
Darcy Wilson Rymer
Matthias Seeger
Chief Executive Officer Chief
Financial Officer
24 September 2024
Independent review report to Card Factory plc
Conclusion
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 2024 which comprises consolidated income statement, consolidated
statement of comprehensive income, consolidated statement of financial
position, consolidated statement of changes in equity, consolidated cash flow
statement and related notes.
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 2024 is not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 (Revised), "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued for use in the
United Kingdom. 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 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.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with UK adopted IFRSs. The condensed set of financial
statements included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34, "Interim
Financial Reporting".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis of Conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410 (Revised), however future events or conditions may cause the
entity to cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority. In preparing the half-yearly
financial report, the directors are responsible for assessing the company's
ability to continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting
unless the directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statement in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of the review report
This report is made solely to the Company in accordance with International
Standard on Review Engagements (UK) 2410 issued by the Financial Reporting
Council and our Engagement Letter dated 17 September 2024. Our work has been
undertaken so that we might state to the Company those matters we are required
to state to it in an independent review 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 formed.
Forvis Mazars LLP
Chartered Accountants
One St Peter's Square
Manchester
M2 3DE
Date: 24 September 2024
Alternative Performance Measures ("APMs") and other explanatory information
In the reporting of the preliminary results and condensed consolidated
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
or that appear to have similar titles or labels. APMs should be considered in
addition to IFRS measures and are not intended to be a substitute for IFRS
measurements.
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.
The table below sets out the APMS used in this report, with further
information regarding the APM, and a reconciliation to the closest IFRS
equivalent measure, below.
Sales APMs Like-for-Like Sales (LFL)
Profitability APMs EBITDA
Adjusted Profit Before Tax (PBT)
Adjusted Earnings per Share (EPS)
Financial Position APMs Net Debt
Leverage and Adjusted Leverage
Cash Flow APMS Operating Cash Conversion
Sales APMs
LFL Sales
Closest IFRS Equivalent: Revenue
Like-for-like or LFL calculates the growth or decline in gross sales in the
current period versus a prior comparative period.
For Stores, LFL measures exclude any sales earned from new stores opened in
the current period or closed since the comparative period and only consider
the time period where stores were open and trading in both the current and
prior period.
LFL measures for product lines or categories, where quoted, are calculated
using the same principles.
LFL measures for our Online businesses (cardfactory.co.uk and
gettingpersonal.co.uk) compare gross sales for the current and comparative
period made through the respective Online platform.
All LFL measures in this report compare HY25 to HY24, unless otherwise stated.
In addition, the Group reports combined Like-for-Iike sales measures for
certain components of the business as follows:
"cardfactory LFL" is defined as Like-for-like sales in Stores plus
Like-for-like sales from the cardfactory website www.cardfactory.co.uk;
"Online": Like-for-like sales for cardfactory.co.uk and gettingpersonal.co.uk
combined.
Sales by Printcraft, the Group's printing division, to external third-party
customers and Partnerships sales are excluded from any LFL sales measure.
Reconciliation of Revenue to LFL Sales
cardfactory Stores cardfactory Online cardfactory Getting Personal
£m £m LFL £m
£m
Revenue HY25 221.4 3.7 225.1 2.1
VAT 37.3 0.7 38.0 0.4
Adjustment for Stores not open in both periods (6.7) - (6.7) -
LFL Sales HY25 252.0 4.4 256.4 2.5
Revenue HY24 208.6 3.4 212.0 2.4
VAT 41.0 0.8 41.8 0.6
Adjustment for Stores not open in both periods (6.6) - (6.6) -
LFL Sales HY24 243.0 4.2 247.2 3.0
LFL Sales Growth +3.7% +5.9% +3.7% -15.2%
Note percentages are calculated based on absolute figures before rounding.
Profitability APMs
EBITDA
Closest IFRS Equivalent: Operating Profit1
1 Whilst operating profit is not defined formally in IFRS, it is considered a
generally accepted accounting measure.
EBITDA is earnings before interest, tax, gains or losses on disposal,
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.
The Group uses EBITDA as a measure of trading performance, as it usually
closely correlates to the Group's operating cash generation.
Reconciliation of EBITDA to Operating Profit
HY25 HY24
£m £m
Operating Profit 21.5 28.1
Add back:
Depreciation 22.3 22.4
Amortisation 1.5 1.6
Gains on disposal - (1.0)
Impairment charges - -
EBITDA 45.3 51.1
Adjusted PBT
Closest IFRS Equivalent: Profit Before Tax
Adjusted PBT is Profit Before Tax adjusted to exclude the effect of
transactions that, in the opinion of the Directors, are one-off in nature and
as such are not expected to recur in future period and could distort the
impression of future performance trends based on the current year results. The
Group uses Adjusted PBT to assess its performance on an underlying basis
excluding these items and believe measures adjusted in this manner provide
additional information about the impact of unusual or one-off items on the
Group's performance in the period.
In the six months ended 31 July 2024, the Directors have identified the
following items that they believe to meet the definition of 'one-off' for this
purpose:
· £0.5 million of finance costs relating to amortisation of debt
costs as a result of the refinancing completed in HY25.
The following items were taken into account in arriving at Adjusted PBT for
the equivalent period last year (HY24):
· The gain on bargain purchase related to the acquisition of SA
Greetings of £2.6 million.
Reconciliation of Adjusted PBT to Profit Before Tax
HY25 HY24
£m £m
Profit Before Tax 14.0 24.7
Add back / (Deduct):
Acquisition gain - (2.6)
Refinancing cost 0.5 -
Adjusted PBT 14.5 22.1
Adjusted Earnings per Share (EPS)
Closest IFRS Equivalent: Basic Earnings per Share
Adjusted EPS is earnings per share adjusted to exclude the post-tax effect of
items identified as one-off and excluded from Adjusted PBT in the period.
The calculation applies the effective tax rate for the period (determined by
dividing the tax charge by profit before tax for the period), to Adjusted PBT
(as calculated above) to determine an adjusted earnings figure. No adjustments
are made to the weighted average number of shares used in the EPS calculation.
The Group calculates Adjusted EPS as it is the basis of dividend calculations
under its capital allocation policy, under which the Board targets a dividend
cover ration of between 2-3x Adjusted EPS.
Calculation of Adjusted EPS and reconciliation to Basic EPS.
HY25 HY24
Weighted average number of shares in issue (A) 345,984,119 342,701,920
Profit after tax for the period (B) £10.5m £19.2m
Basic EPS (B)/(A) 3.0 pence 5.6 pence
Adjusted PBT £14.5m £22.1m
Effective tax rate 25.0% 22.2%
Tax charge on Adjusted PBT (£3.6m) (£4.9m)
Adjusted Profit for the period (C) £10.9m £17.2m
Adjusted EPS (C)/(A) 3.1 pence 5.0 pence
Financial Position APMs
Net Debt
Closest IFRS Equivalent: No equivalent; however is calculated by combining
IFRS measures for Cash and Borrowings.
Net Debt is calculated by subtracting the Group's cash and cash equivalents
from its gross borrowings (before debt-issue costs). 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.
Calculation of Net Debt
HY25 HY24
£m £m
Current Borrowings 0.7 23.6
Non-Current Borrowings 99.2 74.8
Add back Debt Issue Costs 1.6 1.0
Gross Borrowings 101.5 99.4
Cash (26.6) (27.5)
Net Debt (exc. Leases) 74.9 71.9
Lease Liabilities 103.5 101.6
Net Debt (inc. Leases) 178.4 173.5
Leverage
Closest IFRS Equivalent: No equivalent; however, is calculated with reference
to Net Debt and EBITDA, which are reconciled to relevant IFRS measures in this
section.
Leverage is the ratio of Net Debt (excluding lease liabilities) to EBITDA for
the previous 12 months expressed as a multiple. Adjusted Leverage is
calculated in the same way, but deducts lease-related charges from EBITDA.
The Group monitors and reports leverage as a key measure of its financing
position and as an assessment of the Group's ability to manage and repay its
debt position. Adjusted Leverage is consistent with a covenant defined within
the Group's financing facilities.
Under its capital allocation policy, the Group targets Adjusted Leverage below
1.5x throughout the financial year. As described in the Group Financial Review
above the Group's cash flows and earnings are materially affected by
seasonality, with higher sales and cash flows in the second half of the year
linked to the Christmas season. As a result, net debt levels are lower and
Leverage improved at the year end, after the Christmas season.
Calculation of Leverage
HY25 HY24
£m £m
Net Debt (as calculated above) 74.9 71.9
EBITDA for H1 (as calculated above) 45.3 51.1
EBITDA for H2 of prior year 71.5 71.2
EBITDA (last 12 months) 116.8 122.3
Leverage 0.6x 0.6x
Cash Flow APMs
Operating Cash Conversion
Closest IFRS Equivalent: No equivalent; however is calculated with reference
to Cash from Operating Activities (an IFRS measure) and EBITDA, which is
reconciled to Operating Profit in this section.
Operating cash conversion is Cash from operations (calculated as cash from
operating activities before corporation tax payments) per the cash flow
statement prepared in accordance with IFRS divided by EBITDA and expressed as
a percentage.
Calculation of Operating Cash Conversion
HY25 HY24
£m £m
Cash from Operations 17.5 36.3
EBITDA 45.3 51.1
Operating Cash conversion 38.6% 71.0%
Other Financial Calculation Information
Unless otherwise stated, amounts in this report are presented in Pound
Sterling (GBP), and have been rounded to the nearest £0.1 million.
Information in tables or charts may not add down or across, or calculate
precisely, due to rounding.
Percentage movements, where provided, are based on amounts before they were
rounded to the nearest £0.1 million.
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