REG - Card Factory PLC - Half Yearly Report <Origin Href="QuoteRef">CARDC.L</Origin> - Part 2
22/09/2015 07:00
- Part 2: For the preceding part double click ID:nRSV7319Za
segments trading under the names Card Factory and
Getting Personal. Card Factory retails cards and gifts in the UK through an
extensive store network. Getting Personal is an online retailer of
personalised cards and gifts. Getting Personal does not meet the quantitative
thresholds of a reportable segment as defined in IFRS 8. Consequently the
results of the Group are presented as a single reportable segment. Revenues
outside of the UK are not significant at less than £0.1 million.
5 Underlying EBITDA
Underlying earnings before interest, tax, depreciation and amortisation
("EBITDA") represents underlying profit for the period before net finance
expense, taxation, depreciation and amortisation.
Six months ended 31 July 2015 Six months ended 31 July 2014 Year ended 31 January 2015
£'m £'m £'m
Underlying operating profit 27.8 26.1 79.4
Depreciation and amortisation 4.7 4.1 8.8
Underlying EBITDA 32.5 30.2 88.2
6 Non-underlying items
Six months ended 31 July 2015 Six months ended 31 July 2014 Year ended 31 January 2015
£'m £'m £'m
Cost of sales
Gains/(losses) on foreign currency derivative financial instruments not designated as a hedge 0.1 (0.3) (0.1)
Operating expenses
IPO costs - (3.6) (3.8)
Residual management equity share based payment - (11.2) (11.2)
- (14.8) (15.0)
Net finance expense
Refinanced loan issue cost amortisation (1.8) (7.7) (7.7)
Net fair value remeasurement gains and losses on derivative financial
instruments
The Group utilises foreign currency contracts to manage the foreign exchange
risk on U.S. Dollar denominated purchases. Fair value gains and losses on such
instruments are recognised in the income statement to the extent they are not
hedge accounted under IAS 39. Such gains and losses relate to future cash
flows. In accordance with the commercial reasoning for entering into these
agreements, these gains/losses are deemed not representative of the underlying
financial performance in the year and presented as non-underlying items. Any
gains or losses on maturity of such instruments are presented within
underlying profit to the extent the gain or loss is not recognised in the
hedging reserve.
IPO costs
In May 2014, Card Factory plc floated on the London Stock Exchange.
Non-recurring IPO related costs in the prior period totalled £5.3 million of
which £3.8 million was charged to the income statement and £1.5 million was
recognised within share premium as costs directly related to the issue of new
shares.
Residual management equity share based payment
On admission to the London Stock Exchange in May 2014, shares with a fair
value of £9.8 million were issued in relation to residual management equity as
detailed in the IPO prospectus. Employer national insurance of £1.4 million
was incurred on the issue of the shares. These non-recurring share based
payments were presented as non-underlying items in the prior period.
Refinanced loan issue cost amortisation
Loan issue costs totalling £1.8 million were expensed to the income statement
in the period on completion of an amended borrowing facility on 26 June 2015.
This expense relates to costs that were not yet amortised in relation to the
30 May 2014 refinancing and is presented as a non-underlying item.
Loan issue costs totalling £7.7 million were expensed to the income statement
in the six months ended 31 July 2014 and the year ended 31 January 2015 on the
repayment and refinancing of previous borrowing facilities on 30 May 2014.
This expense relates to costs that were not yet amortised in relation to
previous borrowing facilities and is presented as a non-underlying item.
See note 15 for details of net debt movements.
7 Finance income and expense
Six months ended 31 July 2015 Six months ended 31 July 2014 Year ended 31 January 2015
£'m £'m £'m
Finance income
Bank interest received (0.3) (0.2) (0.3)
Finance expense
Interest on bank loans and overdrafts 2.2 6.0 8.5
Amortisation of loan issue costs 2.0 8.7 9.0
Interest on loan notes - 4.3 4.3
Other interest payable - 0.1 0.1
4.2 19.1 21.9
Net financing expense 3.9 18.9 21.6
Amortisation of loan issue costs in the period include £1.8 million (six
months ended 31 July 2014 and the year ended 31 January 2015 £7.7 million)
expensed to the income statement in relation to loan issue costs not yet
amortised on refinanced borrowing facilities. These costs are presented as
non-underlying items, see note 6.
8 Taxation
The tax charge on underlying profit before tax for the interim period has been
calculated on the basis of the estimated effective tax rate on underlying
profit before tax for the full year to 31 January 2016 of 20.3% (six months
ended 31 July 2014 21.6%, year ended 31 January 2015 22.0%).
9 Earnings per share
Basic earnings per share is calculated by dividing the profit for the period
attributable to ordinary shareholders by the weighted average number of
ordinary shares in issue during the period.
Diluted earnings per share is based on the weighted average number of shares
in issue for the period, adjusted for the dilutive effect of potential
ordinary shares. Potential ordinary shares represent share incentive awards
granted to employees.
The Group has chosen to present an alternative earnings per share measure,
with profit adjusted for non-underlying items to reflect the Group's
underlying profit for the year. Underlying earnings is not a recognised profit
measure under IFRS and may not be directly comparable with 'adjusted' profit
measures used by other companies.
Six months ended 31 July 2015 Six months ended 31 July 2014 Year ended 31 January 2015
Number Number Number
Weighted average number of shares in issue 340,696,235 283,974,614 312,568,527
Weighted average number of dilutive share options 363,656 - 15,919
Weighted average number of shares for diluted earnings per share 341,059,891 283,974,614 312,584,446
£'m £'m £'m
Profit for the financial period 19.1 (6.3) 33.2
Non-underlying items 1.4 18.0 17.9
Total underlying profit for underlying earnings per share 20.5 11.7 51.1
pence pence pence
Basic and diluted earnings per share 5.6 (2.2) 10.6
Underlying basic and diluted earnings per share 6.0 4.1 16.3
10 Dividends
The Directors have declared an interim dividend of 2.5 pence per share for the
period ended 31 July 2015 which equates to £8.5 million and a special dividend
of 15.0 pence per share which equates to £51.1 million. Both dividends will be
paid on 27 November 2015 to shareholders on the register at the close of
business on 16 October 2015. The interim dividend was approved by the Board on
22 September 2015 and, as such, has not been included as a liability as at 31
July 2015.
Dividends totalling £23.2 million were paid in the period comprising an
interim dividend of 2.3 pence per share in respect of the period ended 31 July
2014 and a final dividend of 4.5 pence per share in respect of the financial
year ended 31 January 2015. No dividends were paid in the year ending 31
January 2015.
11 Intangible Assets
31 July 2015 31 July 2014 31 January 2015
£'m £'m £'m
Net book value
At the beginning of the period 331.0 331.2 331.2
Additions 0.6 0.6 0.9
Amortisation (0.5) (0.6) (1.1)
At the end of the period 331.1 331.2 331.0
12 Property, plant and equipment
31 July 2015 31 July 2014 31 January 2015
£'m £'m £'m
Net book value
At the beginning of the period 38.2 36.7 36.7
Additions 5.6 5.0 9.2
Depreciation (4.2) (3.5) (7.7)
At the end of the period 39.6 38.2 38.2
13 Financial instruments
Financial instruments carried at fair value are measured by reference to the
following fair value hierarchy:
- Level 1: quoted prices in active markets for identical assets or
liabilities
- Level 2: inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and
- Level 3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
Derivative financial instruments are carried at fair value and measured under
a level 2 valuation method. Valuations are provided by the instrument
counter-party.
31 July 2015 31 July 2014 31 January 2015
£'m £'m £'m
Derivative assets
Current
Interest rate contracts - 0.2 -
Foreign exchange contracts 2.3 - 5.8
2.3 0.2 5.8
Non-current
Foreign exchange contracts 0.1 0.1 -
Derivative liabilities
Current
Interest rate contracts (0.1) - (0.1)
Foreign exchange contracts - (1.7) -
(0.1) (1.7) (0.1)
Non-current
Foreign exchange contracts (0.2) (0.1) -
14 Notes to the cash flow statement
Reconciliation of operating profit to cash generated from operations:
Six months ended 31 July 2015 Six months ended 31 July 2014 Year ended 31 January 2015
£'m £'m £'m
Profit/(loss) before tax 24.0 (7.9) 42.7
Net finance expense 3.9 18.9 21.6
Operating profit 27.9 11.0 64.3
Adjusted for:
Depreciation and amortisation 4.7 4.1 8.8
Cash flow hedging foreign currency losses/(gains) 0.6 (0.7) 0.4
Share based payments charge 0.6 9.9 10.3
Operating cash flows before changes in working capital 33.8 24.3 83.8
(Increase)/decrease in receivables (9.3) (8.7) 0.7
Increase in inventories (5.3) (0.6) (2.2)
Increase in payables 13.6 15.5 2.6
Cash inflow from operating activities 32.8 30.5 84.9
15 Analysis of net debt
Six months ended 31 July 2015 At 1 February 2015 Cash flow Non-cash changes At 31 July 2015
£'m £'m £'m £'m
Unsecured bank loans (170.4) 53.3 (2.0) (119.1)
Cash and cash equivalents 69.0 (57.9) - 11.1
Total net debt (101.4) (4.6) (2.0) (108.0)
Six months ended 31 July 2014 At 1 February 2014 Cash flow Non-cash changes At 31 July 2014
£'m £'m £'m £'m
Unsecured bank loans (277.8) 108.7 (8.5) (177.6)
Loan notes and accrued interest (109.7) - 109.7 -
Finance leases (0.1) - - (0.1)
Total borrowings (387.6) 108.7 101.2 (177.7)
Cash and cash equivalents 40.7 (7.2) - 33.5
Total net debt (346.9) 101.5 101.2 (144.2)
Year ended 31 January 2015 At 1 February 2014 Cash flow Non-cash changes At 31 January 2015
£'m £'m £'m £'m
Unsecured bank loans (277.8) 116.2 (8.8) (170.4)
Loan notes and accrued interest (109.7) - 109.7 -
Finance leases (0.1) 0.1 - -
Total borrowings (387.6) 116.3 100.9 (170.4)
Cash and cash equivalents 40.7 28.3 - 69.0
Total net debt (346.9) 144.6 100.9 (101.4)
In May 2014, prior to the IPO, the Group issued shares at market value in full
settlement of £114.0 million loan notes and accrued interest.
In May 2014 the Group re-financed secured bank borrowings, utilising retained
cash and proceeds from the IPO to reduce bank debt to £180.0 million with a
£20 million revolving credit facility ("RCF") for working capital purposes.
In June 2015 the Group amended the existing bank borrowing facility to a £200
million RCF terminating 26 June 2020 with an additional £100 million
accordion. Borrowings under the revised facility attract interest at LIBOR
plus a margin in the range 1.0% to 2.0%, subject to a leverage ratchet (LIBOR
plus 1.0% at 31 July 2015). The facilities are subject to financial covenants
typical to an arrangement of this nature. Under the revised borrowing facility
the Group has utilised cash balances to reduce bank borrowings.
Since the balance sheet date, the Group has entered into interest rate
contracts to hedge a proportion of the Group's exposure to interest rate risk.
The Group entered into a 2 year £20.0 million LIBOR swap at 1.18%, a 2 year
£20.0 million LIBOR cap of 1.25% and a 3 year £20.0 million LIBOR cap of
2.00%, all commencing 31 October 2015 on expiry of an existing £100.0 million
LIBOR swap at 0.795%.
16 Principal risks and uncertainties
The Board and the senior management team are collectively responsible for
managing risks and uncertainties across the Group. In determining the nature
and extent of the risks the Group is willing to take and how these are
managed, the Board, Audit and Risk Committee and the senior management team
look to ensure an appropriate balance is achieved which enables the Group to
achieve its strategic and operational objectives and facilitates the long-term
success of the Group. The Group's Audit and Risk Committee is responsible for
reviewing the Group's risk management framework and monitoring how relevant
and effective it is in supporting the Group.
The principal risks and uncertainties which could have a material impact on
the Group's performance over the remaining six months of the financial year
and beyond, and which could cause actual results to differ materially from
expected and historical results are as follows:
· Changes in consumer demands and market trends
· Increased competition
· Damage to brand and reputation
· Success of, or inability to implement, Group strategy
· Inability to find suitable locations for new stores
· Supply chain and product sourcing
· Attracting, motivating and retaining key personnel
· Treasury and financial risk
· Business continuity and response to major incidents
· Compliance with legal requirements, standards and regulations
· Maintenance and performance of IT systems
· Development of the Group's online business
The Board considers that these principal risks and uncertainties affecting the
Group (as published and explained in more detail on pages 20 to 25 of the
Group's Annual Report and Accounts for the year ended 31 January 2015) remain
unchanged.
Responsibility statement of the directors in respect of the half-yearly
financial report
We confirm that to the best of our knowledge:
· the condensed set of financial statements has been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by the EU;
· the interim management report includes a fair review of the information
required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication
of important events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial statements;
and a description of the principal risks and uncertainties for the remaining
six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during that period; and any changes in the related
party transactions described in the last annual report that could do so.
By order of the Board
Richard Hayes Darren Bryant
Chief Executive Officer Chief Financial Officer
22 September 2015
Independent review report to Card Factory plc
Introduction
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 31
July 2015 which comprises the condensed consolidated income statement, the
condensed consolidated statement of comprehensive income, the condensed
consolidated statement of financial position, the condensed consolidated
statement of changes in equity, the condensed consolidated cash flow statement
and the related explanatory notes. We have read the other information
contained in the half-yearly financial report and considered whether it
contains any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the Disclosure
and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority
("the UK FCA"). Our review has been undertaken so that we might state to the
company those matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company for our review work,
for this report, or for the conclusions we have reached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the DTR of the UK FCA.
As disclosed in note 2, the annual financial statements of the group are
prepared in accordance with IFRSs as adopted by the EU. The condensed set of
financial statements included in this half-yearly financial report has been
prepared in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 Review of Interim Financial Information
Performed by the Independent Auditor of the Entity issued by the Auditing
Practices Board for use in the UK. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK and Ireland) and consequently
does not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 31 July 2015 is not prepared, in all
material respects, in accordance with IAS 34 as adopted by the EU and the DTR
of the UK FCA.
Chris Hearld
Senior Statutory Auditor
for and on behalf of KPMG LLP
Statutory Auditor,
Chartered Accountants
1 The Embankment
Neville Street
Leeds
West Yorkshire
LS1 4DW
22 September 2015
This information is provided by RNS
The company news service from the London Stock ExchangeRecent news on Card Factory
See all newsREG - Card Factory PLC - Holding(s) in Company
AnnouncementREG - Card Factory PLC - Holding(s) in Company
AnnouncementREG - Card Factory PLC - Block Listing Review
AnnouncementREG - Card Factory PLC - Trading Statement
AnnouncementREG - Card Factory PLC - Total Voting Rights
Announcement