TIDMCARD
RNS Number : 1890Y
Card Factory PLC
03 May 2023
3 May 2023
Card Factory plc (" cardfactory " or the "Group")
Preliminary results for the year-ended 31 January 2023
cardfactory , the UK's leading specialist retailer of greeting
cards, gifts and celebration essentials, announces its preliminary
results for the year ended 31 January 2023 ('FY23').
Continued positive momentum, underpinned by a resilient balance
sheet:
-- cardfactory LFL(1) revenue growth of +6.7% is underpinned by
a strong performance in the core business activity of store-based
sales and Everyday card ranges, accompanied by strong trading
through the Christmas season.
o Store revenue grew +7.6% on a LFL(1) basis, reflecting a
return of customers to the high street, the success of our new
ranges and our strong value for money proposition, alongside the
successful implementation of targeted price increases.
o cardfactory.co.uk sales fell -18.8% year-on-year, due to a
combination of customers returning to the high street and the
impact of Royal Mail strikes during the Christmas trading period,
but remained up significantly in comparison to pre-pandemic (+86.4%
3Y LFL(1) ).
-- EBITDA(1) of GBP112.0m (FY22 GBP85.6m) as the majority of
inflationary pressures were offset through a combination of
efficiency measures and targeted price increases.
-- PBT of GBP52.4m (FY22 GBP11.1m) includes GBP3.5 million of
one-off benefits due to the release of CJRS provision and
refinancing of debt facilities.
-- Strong operating cash conversion(1) through the year of +96%
contributed to a reduction in net debt (excluding lease
liabilities) to GBP57.2m (FY22: GBP74.2m), which is significantly
reduced compared to pre-pandemic levels (FY20: GBP143.1 million),
in addition to previously deferred rent positions, totalling
GBP10.8m, fully unwinding during the year.
-- Successful refinancing in April 2022 provides platform for
strategic growth, with more flexible debt portfolio enabling
reduction in gross debt.
-- Capex investment increased from GBP6.9m in FY22 to GBP18.2m
in FY23 to support key enablers to our strategic growth plans
including ERP implementation, store investment and ecommerce
initiatives to progress our omnichannel ambitions.
-- Targeted price increases delivered approximately two-thirds
of the LFL growth, with both transactions and average basket values
increasing compared to last year.
Financial summary
Financial Metrics FY23 FY22 Change
----------------------- --------------- ---------- --------
Revenue GBP463.4m GBP364.4m 27.1%
EBITDA (1) GBP112.0m(2) GBP85.6m 28.6%
Profit before tax GBP52.4m(2) GBP11.1m 368.5%
Leverage (excl. lease
liabilities) (1) 0.5x 0.9x (44.4%)
Cash from operations
(1) GBP107.8m GBP113.6m (5.2%)
Basic EPS 12.9p 2.4p 437.5%
----------------------- --------------- ---------- --------
(1) For further information and definitions of Like-for-like
(LFL) and other alternative performance measures see Explanatory
Notes (below) "Alternative Performance Measures ("APMs") and other
explanatory information".
(2) EBITDA and PBT for FY23 includes one-off benefit associated
with CJRS settlement (GBP2.5 million). Profit before tax includes a
further one-off benefit related to refinancing of debt facilities
(GBP1.0 million).
Delivering against our strategic priorities:
-- Stores
o The learnings and results we have from our model store format
trial have been used to develop our Store Evolution Programme.
o This comprises three components - capex light space
realignment being applied across 750 stores in FY24; display
reorganisation being applied across 50 stores in FY24; updated
store design being applied to new stores and a select number of
existing stores in line with existing refit costs.
o Continued focus on expanding in underpenetrated markets with
the opening of three small format trial stores in central London,
as well as continued expansion in the Republic of Ireland.
-- Leadership in Everyday Card
o Revenue growth in Everyday card was driven by range
development and our targeted pricing strategy.
o Permanent 3 for 2 mechanic on general card range introduced
delivering +20% LFL revenue growth and +48% LFL volume growth in
this category.
o Entire review of Everyday card range undertaken with new
ranges developed and expanded diversity across all card ranges to
ensure all of our customers are included.
-- Online including omnichannel
o Completed the transition of cardfactory.co.uk and
gettingpersonal.co.uk to a new shared platform to enable phased
expansion of online ranges.
o Click & Collect trial completed across 87 stores in FY23
with average order value 16% higher than our current online average
and an indication of in-store basket uplift with 7% of customers
purchasing an additional item in store. UK nationwide rollout of
Click & Collect was completed at the end of April, with further
developments to the service planned in FY24.
o Major app update added a range of new features.
-- Gifts & Celebration Essentials (formerly referred to
collectively as 'complementary categories')
o Strong LFL growth of +11.4% reflective of range development
work and expansion of Everyday and Seasonal gifting which will
continue across a wider proportion of the estate to provide
customers with greater choice.
o Broadened categories by introducing third-party brands and
licensed ranges.
o New categories introduced online including flowers and
alcohol, generating an 11% uplift in online gifting sales in H2
FY23.
-- Partnerships
o New partnership agreement signed in April 2023:
-- Long-term master franchise agreement signed with Middle
East-based, Liwa Trading Enterprises, who will act as our exclusive
franchise partner in the region, to open c. 36 cardfactory branded
stores in the Middle East.
o Acquisition post-year-end of SA Greetings:
-- Foothold into target South African market with 28 "Cardies"
retail stores.
-- Local wholesaling offer through the company's printing,
merchandising and warehousing capacity.
-- Provides opportunity to build out further wholesale
partnerships in South Africa.
o Market opportunity research conducted across both card and
gifting, validating our seven international markets of
interest.
o Foundations scoped and in development to support franchise and
wholesale partnership models.
Current trading and Outlook:
-- Trading in the first weeks of the new financial year has been
encouraging and slightly ahead of the Board's expectations. Both
Everyday and Seasonal ranges have performed strongly across cards
and gifts during this time, with our offer across our FY24 Spring
seasons of Valentine's Day and Mother's Day also landing well with
customers, resulting in a robust performance.
-- As we look ahead, we continue to have confidence in our
ability to mitigate cost inflation through a combination of
productivity initiatives and targeted price actions. This approach,
together with our clear growth strategy and compelling value-led
proposition, gives us confidence the Group will continue to make
strategic and financial progress in the year ahead.
-- The Board remains confident in the compelling growth
opportunity for the business, as well as in our ability to use our
expertise and the flexibility in our business model to drive
profitability and returns for shareholders over the long term. As
part of our Capital Markets Strategy Update, we will outline a
pathway for revenues of around GBP650m and margins around 14% in
FY27, supported by a capital investment plan of GBP24m per annum,
over the next three years.
Darcy Willson-Rymer, Chief Executive Officer, commented:
"I have been incredibly pleased with our performance this year
which has been ahead of expectations. These strong results reflect
positive momentum across the business, including notable progress
on our strategic growth initiatives, buoyed by the marked shift of
customer spend back towards the high street. Revenue growth has
been underpinned by a strong performance of store-based sales and
Everyday card ranges, alongside strong trading through the
Christmas season, with new ranges and our compelling value for
money offer clearly resonating with customers, driving both store
transactions and average basket values.
Proactive measures that we put in place to manage the
inflationary pressures faced in the year, coupled with our
strengthening financial position, have underpinned positive
progress on our strategic priorities.
Whilst remaining mindful of the ongoing impact of the cost of
living crisis on our customers, we are confident that we are well
positioned to make good progress in our transition to becoming the
market leading omnichannel retailer of cards and gifts."
Preliminary results webcast and Capital Market Strategy
Update
There will be an analyst presentation for the preliminary
results today at 10:00 am in central London. We will also provide a
live video webcast available via the following link .
The results presentation will be followed by a Capital Markets
Strategy Update, commencing at 11:30 am. The event will be hosted
by CEO Darcy Willson-Rymer and will feature a series of short
presentations from some of the cardfactory senior management team
who will provide a broader update on strategic plans through to
FY27.
A live video webcast will be available via the following link .
Those analysts who wish to join in person are requested to contact
Yasemin Balman of Teneo on the number provided below or by emailing
cardfactory@teneo.com .
A copy of the webcasts and accompanying presentations will be
made available via the cardfactory investor relations website:
www.cardfactoryinvestors.com .
Enquiries
Card Factory plc via Teneo (below)
Darcy Willson-Rymer, Chief Executive Officer
Teneo +44 (0) 207 353 4200
James Macey White / Jo Blackshaw cardfactory@teneo.com
This announcement contains certain forward-looking statements
with respect to the financial condition, results of operations, and
businesses of Card Factory plc. These statements and forecasts
involve risk, uncertainty and assumptions because they relate to
events and depend upon circumstances that will occur in the future.
There are a number of factors that could cause actual results or
developments to differ materially from those expressed or implied
by these forward-looking statements. These forward-looking
statements are made only as at the date of this announcement.
Nothing in this announcement should be construed as a profit
forecast. Except as required by law, Card Factory plc has no
obligation to update the forward-looking statements or to correct
any inaccuracies therein.
Explanatory notes
Alternative Performance Measures ("APMs") and other explanatory
information
Introduction
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. APMs should be considered in
addition to IFRS measures and are not intended to be a substitute
for IFRS measurements.
Purpose
The Directors believe that these APMs provide additional useful
information on the performance and position of the Group and are
intended to aid the user in understanding the Group's results.
The APMs presented are consistent with measures used internally
by the Board and management for performance analysis, planning,
reporting and incentive setting purposes.
Definitions of the APMs used in this report are as follows:
"EBITDA" is earnings before interest, tax, 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. A reconciliation of EBITDA to operating profit
is provided in note 3 to the condensed consolidated financial
statements. The Group uses EBITDA as a measure of trading
performance, as it usually closely correlates to the Group's
operating cash generation.
"Leverage" is the ratio of Net Debt to EBITDA for the previous
12 months. The Group monitors and reports leverage as a key measure
of its financing position and performance. Leverage is also a key
covenant defined within the Group's financing facilities. A
calculation of Leverage (both inclusive and exclusive of lease
liabilities) is provided in the Chief Financial Officer's review
below.
"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 (hence any periods of
lockdown in either period are excluded from both periods).
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 compared FY23 to FY22, unless
otherwise stated. A "3Y LFL" compares FY23 to FY20.
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 are excluded from any LFL sales measure.
"Net Debt" is calculated by subtracting the Group's cash and
cash equivalents from its borrowings. Net Debt is a key measure of
the Group's balance sheet strength, and is also a covenant in the
Group's financing facilities. The Group presents Net Debt both
inclusive and exclusive of lease liabilities, but focusses upon the
value exclusive of lease liabilities, which is consistent with the
calculation used for covenant purposes.
"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.
"Percentage Movements" have been calculated before figures were
rounded to GBP0.1m.
Card Factory plc ("cardfactory" or the "Group")
Preliminary results for the year-ended 31 January 2023
CHAIR'S STATEMENT
Ahead of management expectations, the positive performance of
FY23 reflects the good momentum we have within the business, the
strong leadership we now have in place and the unwavering
commitment from our colleagues. With revenue exceeding pre-pandemic
levels and notable progress on our strategic initiatives, we are
well placed to deliver on our growth ambitions.
Year in review
Through FY23 we saw store-based sales and Everyday card ranges
underpin our strong performance. This was accompanied by very
positive trading through the Christmas season with new ranges and
our compelling value for money offer driving improvements in both
store transactions and average basket value. We are encouraged that
this trend has continued in our FY24 Spring seasons of Valentine '
s Day and Mother ' s Day. This reflects work undertaken throughout
the year on range curation and improved availability, as well as
the successful implementation of targeted price increases.
As customers returned to the high street, online sales were down
year-on-year but remained significantly ahead of pre-pandemic
levels, reflecting the continued expansion of product ranges online
and improvements to customer experience.
Growth delivery
We have made positive progress on our strategic priorities which
are the building blocks of our future growth ambition, transforming
cardfactory into a market-leading omnichannel retailer of cards and
gifts.
Through this strategy, cardfactory will become the UK ' s number
one destination for all customers seeking unrivalled quality,
value, choice, convenience and experience, however they wish to
shop. We will transform cardfactory into the leading omnichannel
brand in the category, helping customers celebrate each and every
special occasion. We will emerge as a global competitor putting
cards and gifts in the hands of more customers.
Delivery of the 'Opening Our New Future' strategy is firmly
underway with core foundations now in place and encouraging
progress being made that is delivering tangible growth, especially
in gifts and celebration essentials. As such, the Board remains
confident in the longer-term growth opportunity for the business
and its expectations for revenues reaching around GBP650m in
FY27.
Outlook and financial headwinds
The Board is encouraged by performance since the January 2023
trading update, with current trading slightly ahead of management
expectations. We expect our performance for the coming year to
reflect continued progress on our strategic growth initiatives.
We have demonstrated our ability in FY23 to mitigate a
significant proportion of inflationary headwinds and based on the
current outlook, we are confident in our ability to continue
managing these pressures with a focus on productivity and
efficiencies whilst also benefiting from normalisation of freight
costs and annualisation of targeted price increases implemented in
FY23.
Board appointments
The Board looks forward to welcoming Matthias Seeger as Chief
Financial Officer, who will join the business in May 2023. We
extend our thanks to Kris Lee for the significant role he played in
helping guide cardfactory through the last few years, in
particular, during the pandemic-impacted period.
In FY23 we were also pleased to welcome Indira Thambiah as
Non-Executive Director. Indira is an experienced multi-channel
retail executive and consultant.
Following the decision by Octavia Morley to step down from the
Board at the end of January 2023, Indira was appointed Chair of the
Remuneration Committee, with effect from 1 February 2023. Roger
Whiteside has assumed the role of Senior Independent non-Executive
Director.
Summary
There is clear, positive momentum within the business and early
signs that the 'Opening Our New Future' strategy will help deliver
our growth ambition. While mindful of the ongoing impact of the
cost-of-living crisis, we remain confident that our great value for
money proposition across a range of products and price points will
resonate with customers who continue prioritising celebrating life
' s moments.
Paul Moody
Chair
3 May 2023
CHIEF EXECUTIVE OFFICER'S REVIEW
Introduction
With sales in FY23 exceeding pre-pandemic levels and delivery of
our 'Opening Our New Future' growth strategy showing early signs of
success, it is clear there is good momentum within the
business.
The return of footfall to the high street and the unwavering
loyalty from our customers has made a significant contribution to
this success. In addition, the cultural transformation the business
has undergone and the dedication of colleagues across the business
and their willingness to embrace change over the past two years,
has fuelled that return of sales and the growth that we are now
enjoying.
cardfactory needed to become customer-centric in its thinking
and approach and to achieve that we have placed customer data at
the heart of our decision-making. From product creative in our
design studio to the customer service experience training we are
giving our colleagues in-store, we are now applying customer data
into our thinking and how we respond to market change. This is
leading to positive, data-led outcomes around the customer which is
being seen across every part of the business.
FY23 performance
Revenue of GBP463.4 million reflects the continued progress
across the business alongside the shift of customer spend back
towards the high street. cardfactory LFL revenue growth of +6.7%
was driven by strong performance of stores and Everyday card
ranges.
Store sales grew +7.6% on a LFL basis reflecting a return of
customers to the high street, the success of our new ranges, our
strong value for money proposition, and selective price increases.
It is through the strength of our store footprint that we will be
able to deliver on our omnichannel proposition and ambitions.
Strong performance in Everyday product across card, gifts and
celebration essentials supported increased sales across the year.
We also achieved double-digit Like-for-like growth in specific card
ranges including our fully refreshed wedding range, as well as life
moments and children's.
Christmas trading saw increased store transactions and average
basket values, supported by new ranges, the strength of our
expanding gifting offer, and our strong value for money offer.
These trends have continued through to Valentine's Day and Mother's
Day in Q1 FY24.
We successfully executed our pricing strategy in FY23 whilst
choosing to protect our competitive entry price point and building
greater value into our pricing architecture. This resulted in
minimal impact on customer switching.
Following expansion of our gifts and celebration essentials
(previously together referred to under the single 'complementary
categories' heading we have now split this out to conform to
industry recognised market analysis and to enable clearer
measurement) we have continued to grow share in line with our
strategic priorities. By targeting the gifts and celebration
essentials market we have also been able to recalculate the total
addressable UK market opportunity for cardfactory at GBP13.4bn.
Customers returning to the high street and the impact of Royal
Mail strikes during the Christmas trading period saw
cardfactory.co.uk sales decline -18.8% year-on-year although this
remained significantly up in comparison to pre-pandemic (+86.4% 3Y
LFL). At -34.7%, gettingpersonal.co.uk was also impacted by postal
strikes as well as a pause on new product development while
replatforming was undertaken. This is now complete and will enable
the opportunity for range development and further
functionality.
In FY23 we saw a continued robust performance of existing
partnerships during the year with a 10% increase in sales compared
to the prior year. Considerable work was undertaken to lay the
foundations for future partnership growth.
Strategy delivery
FY23 was the launch year of our business transformation as we
began delivery of our strategy and we have achieved significant
milestones across all our areas of focus. By delivering on our
strategy we are confident we will achieve our growth ambition of
reaching GBP650m in FY27.
Within our core business, we will build upon our leadership in
cards within the UK using insight-led innovation and range
development. This work is well underway and is delivering sales
growth in both Everyday and Seasonal. Store Like-for-like sales are
expected to continue to grow through our store estate as we
continue with our store location optimisation programme and expand
into under penetrated markets.
The building blocks of our additional revenue growth will come
from three areas. Already we are seeing positive growth from our
first area of focus: gifts and celebration essentials. We saw total
sales of Everyday gifts and celebration essentials through our
stores, on a Like-for-like basis, increase by 11.4% with
confectionery being the largest sales growth area at +111% and
tableware achieving the largest volume increase at +124%. Our
gifting offer will be further supported by our Store Evolution
Programme which has been developed from the learnings of our model
store trial. Comprised of three key components: space realignment
that will be applied across 750 stores in FY24; display
reorganisation that will be applied across 50 stores in FY24; and
an updated store design to new stores and a select number of
existing stores in FY24.
We also made significant progress in delivering on our
omnichannel ambition, rolling out a successful Click & Collect
trial across 87 stores. This was the first of our omnichannel
propositions and UK nationwide rollout to over 1,000 stores was
completed at end of April 2023. Further developments to the service
are planned for FY24.
Finally, for partnerships we are pleased to have announced our
first master franchise partnership in the Middle East. Our
exclusive franchise partner in the UAE, Liwa, will open c. 36
cardfactory branded stores in the Middle East over the next five
years. We also recently announced the acquisition of SA Greetings,
meaning we now have our first presence within this market both as a
retailer and wholesaler. This supports our partnerships strategy by
providing access to key wholesale accounts through the company's
printing, merchandising and warehousing capacity. It also provides
us with the opportunity to learn how we can deliver similar local
capability in our other target international markets. In FY23 we
completed the research of the international market opportunity for
both card and gifting, validating our seven international markets
of interest. The foundations for our partnership model have now
been scoped and are in development to support both franchise and
wholesale partnership models. We also invested in our
transformation capability with a new Transformation Office which is
providing the planning, collaboration and risk management diligence
that will ensure we deliver at pace, to plan, on time and on
budget
Responding to headwinds
The successful management of significant inflationary cost
pressures faced in FY23 was achieved through a combination of
proactive measures including efficient management of costs and
working capital, improved store efficiencies and targeted price
increases, alongside benefits from hedging policies across both
energy and foreign exchange.
People & Culture
Creating the culture and behaviours that both addresses barriers
to transformation and unlocks the potential of the business is
fundamental for any business which is serious about a growth
agenda. The fact that we have been able to make such a strong start
in FY23 on the delivery of our strategy is down to the fact that we
have made positive headway in evolving our culture and
behaviours.
As we enter FY24, it is clear that the progress we have made is
already paying dividends. The business is delivering on the
strategy from a position of strength with a powerful culture and
strong foundations in place.
This change has been recognised not just in our delivery but
also through external recognition with cardfactory named as the
number one best big retail business, and the third best big company
in the UK to work for in Best Companies Q1 2023 awards. We are
delighted and very proud to receive this in recognition of our
commitment to workplace engagement.
In FY23 we also refreshed our brand, placing customers and their
celebrations at its heart. As part of this work, we have updated
our values to reflect both the natural evolution of the business
and the values we need to live and breathe if we are going to
successfully deliver our growth strategy. For the whole team at
cardfactory, these are values we are actively embracing in
everything we do from the way we make decisions, interact with our
customers and each other, through to how we are approaching the
delivery of our strategy.
Our ESG commitment
The delivery of our ambitious 'Opening Our New Future' growth
strategy and the business transformation this requires are
underpinned by our commitment to operate sustainably across all
areas of our business. As such, work has begun to update our
five-year ESG strategy and roadmap, starting with a refreshed
materiality assessment and assessment of our scope 3 greenhouse gas
emissions which will ensure our priorities reflect the changing
world around us and remain aligned with those of our
stakeholders.
At the same time, we continued to make positive progress through
FY23. One highlight was the business entering into partnership with
the Woodland Trust to support their work to protect, restore and
create native woodland in the UK.
Summary
The business has a strengthened balance sheet now in place and
we are clear on our core business priorities and building blocks of
growth. Having made a strong start on our growth delivery in FY23,
we have good momentum within the business which will enable us to
reach our revenue target of around GBP650m in FY27.
Darcy Willson-Rymer
Chief Executive Officer
3 May 2023
CHIEF FINANCIAL OFFICER'S REVIEW
Financial Highlights
The Group has delivered a strong performance in the year ended
31 January 2023 (FY23), the first full year of trading
post-pandemic, with results ahead of management expectations set at
the start of the year as follows:
- Encouraging trading performance in stores, with stores
Like-for-like(1) sales +7.6% compared to the prior year underpinned
by growth in Everyday ranges. Sales are now slightly ahead of
pre-pandemic levels.
- Year-on-year improvement in EBITDA to GBP112.0 million
reflects sales growth plus effective management of inflationary
headwinds and targeted investment in people, systems and
infrastructure to support growth.
- Profit before tax of GBP52.4 million includes GBP3.5 million
of one-off benefits relating to CJRS settlement and
refinancing.
- Cash from operations of GBP107.8 million, with reduction in
net debt to GBP57.2 million having cleared GBP10.8 million of
Covid-19 rent deferrals.
- Successful refinancing of banking facilities to September
2025, providing liquidity headroom to support delivery of the
strategy.
FY23 FY22
Revenue GBP463.4m GBP364.4m
----------- ----------
EBITDA (1) GBP112.0m GBP85.6m
----------- ----------
Profit before tax GBP52.4m GBP11.1m
----------- ----------
Basic earnings per 12.9 pence 2.4 pence
share
----------- ----------
Net debt (1) GBP57.2m GBP74.2m
----------- ----------
Cash from operations GBP107.8m GBP113.6m
----------- ----------
Leverage (excl. lease
liabilities) (1) 0.5x 0.9x
----------- ----------
(1) For definitions of Like-for-like (LFL) and other alternative
performance measures, see Explanatory Notes (above) "Alternative
Performance Measures ("APMs") and other explanatory
information".
Financial Performance
Sales
GBPm Total Sales
FY23 FY22
------ ------
Stores 441.1 336.0
------ ------
cardfactory Online 8.8 10.9
------ ------
Getting Personal 8.5 12.9
------ ------
Partnerships 5.0 4.6
------ ------
Group 463.4 364.4
------ ------
LFL Sales
FY23 FY22
------- -------
Stores +7.6% -5.7%
------- -------
cardfactory Online -18.8% -1.5%
------- -------
cardfactory
LFL +6.7% -3.9%
------- -------
Getting Personal -34.7% -21.6%
------- -------
Total Group sales for FY23 were GBP463.4 million, an increase of
GBP99.0 million compared to the previous year.
Our stores remain the source of a significant majority of our
revenues, and therefore a large part of this increase in total
sales reflects that stores were forced to close for approximately
ten weeks in the first quarter of FY22 due to Covid-19 related
lockdowns. However, we are encouraged by the positive stores LFL of
+7.6% which reflects an increase in both transactions and average
basket values compared to the prior year when considering just the
period where stores were open in both years.
The increase in basket values was partly driven by targeted
price increases; which have helped to offset the cost of
inflationary headwinds, without any significant impact on sales
volumes.
We were pleased to see strong performance in our Everyday
ranges, and our continued drive to improve our offer to customers
was reflected in double-digit LFL growth across a number of
celebration categories, including wedding, life moments and
children's.
Online sales, across both cardfactory.co.uk and
gettingpersonal.co.uk, were down compared to the prior year,
falling 18.8% and 34.7% respectively compared to FY22, reflecting
the investment phase of these businesses, as well as being impacted
by Royal Mail strikes in the run up to Christmas and customers
returning to the high street. However, online remains an important
enabler of store sales and a key part of our omnichannel strategy
and cardfactory.co.uk sales remain significantly ahead of
pre-pandemic levels.
Partnership sales increased to GBP5.0 million (FY22: GBP4.6
million). FY23 saw a 3% increase in points of sale and we are now
selling through 949 partner locations, and this remains an area
where we expect to see growth in the future supported by the
investment we have made in our team to add capability during this
year.
Optimisation of our store portfolio continues to be an important
source of sales growth. During FY23 we opened 33 new stores and
closed 21 stores, including five relocations. This resulted in a
net increase in the overall store portfolio of 12 stores. At the
end of the financial year, our store portfolio stood at 1,032
stores, including 27 stores in the Republic of Ireland and three
trial central London stores.
Gross Profit
FY23 FY23 FY22 FY22
GBPm % Sales GBPm % Sales
Group Sales 463.4 364.4
-------- --------- -------- ---------
COGs (146.8) (31.7%) (124.1) (34.1%)
-------- --------- -------- ---------
Product Margin
- Constant Currency
(1) 316.6 68.3% 240.3 65.9%
-------- --------- -------- ---------
FX gains / losses 1.5 0.3% 2.6 0.7%
-------- --------- -------- ---------
Product Margin 318.1 68.6% 242.9 66.6%
-------- --------- -------- ---------
Store & Warehouse
Wages (109.6) (23.7%) (91.4) (25.1%)
-------- --------- -------- ---------
Property Costs (26.3) (5.7%) (15.8) (4.3%)
-------- --------- -------- ---------
Other Direct
Costs (21.5) (4.7%) (19.2) (5.2%)
-------- --------- -------- ---------
Gross Profit 160.7 34.7% 116.5 32.0%
-------- --------- -------- ---------
(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.
Overall gross profit for the Group increased by GBP44.2 million
to GBP160.7 million, a 2.7ppts improvement in gross margin to
34.7%. The overall trend in the year reflects active management of
inflationary pressures, in particular the benefit of our currency
and energy hedging and through targeted price increases, plus
efficiency benefits arising from a full-year of trade and
deliberate actions taken to improve productivity and stabilise
costs.
Product margins, calculated on a constant currency basis,
improved 2.4ppts from 65.9% in FY22 to 68.3% this year. This
improvement largely reflects the impact of targeted price increases
on sales, which offset the impact of wage inflation as well as
material price inflation. Product margins include the purchase
price of goods, along with inbound freight, carriage and packing.
Product margin also benefitted from a reduction in stock provisions
as supply chain and inventory management challenges that affected
FY22 did not recur in FY23, and overall inventory levels normalised
following the pandemic. Changes in the value of stock provisions
and other stock losses had a small negative impact on margin of
approximately 0.5ppts in the year.
Within the cost of goods sold, we saw a 0.6ppts increase in the
cost of inbound freight, as market prices for sea freight rose
significantly towards the end of 2021 and remained high through
much of the 2022 calendar year. This added over GBP5 million to the
overall cost of goods sold in FY23. This impact was partially
mitigated through optimisation of inbound shipments where
possible.
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
FY23 we achieved an average GBPUSD rate of approximately 1.32 on US
dollar purchases, slightly adverse to the rate achieved in FY22
reflecting the weakening of sterling in the period, but still
significantly ahead of the average market spot rate for the
year.
Store and warehouse wages reduced by 1.4ppts year-on-year as a
percentage of sales, which includes a one-off GBP2.5 million
benefit in respect of provisions released following the settlement
of our CJRS position with HMRC. Excluding this credit and making an
equivalent adjustment in the prior period, store wages as a
percentage of sales are comparable in both years despite national
living wage increases of 6.6% being applicable from April 2022, due
to targeted price increases and more efficient deployment of labour
resources, enabled by stores being open for the whole year.
Employee costs for FY22 are stated net of CJRS support received in
that period.
Property costs increased by 1.4ppts as a percentage of sales,
reflecting the cessation of extended business rates reliefs from
April 2022. Property costs do not include rents as the accounting
treatment for leases results in these costs being reflected as
right-of-use depreciation and a finance charge on lease
liabilities, both below gross profit, a combined charge of GBP39.4
million in FY23 (FY22: GBP40.7 million).
Other direct expenses include warehouse costs, store opening
costs, utilities, maintenance, point of sale and pay-per-click
expenditure. A large proportion of costs in this category are
variable in relation only to the size of the store portfolio and
available trading days, meaning whilst overall costs increased,
they fell as a percentage of sales given the improved trading
performance in the year. The Group has benefitted from its
long-term energy hedge, which fixed commodity costs at FY22 levels.
All of the Group's UK energy costs will continue to benefit from
this hedge until September 2024.
EBITDA & Operating Profit
FY23 FY23 FY22 FY22
GBPm % Sales GBPm % Sales
Group Sales 463.4 364.4
------- --------- ------- ---------
Gross Profit 160.7 34.7% 116.5 34.2%
------- --------- ------- ---------
Operating Expenses (48.7) (10.5%) (38.9) (10.7%)
------- --------- ------- ---------
Other operating
income - - 8.0 2.2%
------- --------- ------- ---------
EBITDA 112.0 24.2% 85.6 23.5%
------- --------- ------- ---------
Depreciation
& Amortisation (10.3) (2.2 %) (11.6) (3.2%)
------- --------- ------- ---------
Right-of-use
asset depreciation (35.1) (7.5%) (37.4) (10.3%)
------- --------- ------- ---------
Impairment Charges (2.8) (0.6%) (5.0) (1.4%)
------- --------- ------- ---------
Operating Profit 63.8 13.8% 31.6 8.7%
------- --------- ------- ---------
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.
Total operating expenses increased by GBP9.7 million to GBP48.7
million in FY23, reflecting the cessation of furlough for central
staff alongside investment in our people and strengthening our IT
infrastructure and marketing approach to support our 'Opening Our
New Future' strategy to provide a platform for future growth.
As a result, driven by the improved trading performance,
effective management of inflationary pressures and carefully
targeted investment for growth, Group EBITDA increased to GBP112.0
million in FY23.
Total depreciation and amortisation charges reduced by GBP3.6
million compared to the prior year. This largely reflects a
reduction in depreciation charges on right-of-use assets in
relation to our store portfolio. Store rents, and therefore the
related right-of-use assets, have continued to fall since the
pandemic and our dynamic, flexible approach to the store portfolio
has enabled us to continue to capture these reductions as part of
lease renewals or relocations.
Impairment charges, net of reversals, in respect of store
right-of-use assets reduced from GBP5.0 million in FY22 to GBP1.3
million in FY23, reflecting the improved trading performance and
our future expectations regarding store performance and cost
inflation. Impairment charges for FY23 also includes a one-off
GBP1.5 million impairment charge in respect of online platform
development for gettingpersonal.co.uk. The impairment reflects
development work that did not form part of the final solution,
which was deployed shortly after the year end in March 2023.
Profit Before Tax
FY23 FY23 FY22 FY22
GBPm % Sales GBPm % Sales
Group Sales 463.4 364.4
------- --------- ------- ---------
Operating Profit 63.8 13.8% 31.6 8.7%
------- --------- ------- ---------
Finance Costs (11.4) (2.5%) (20.5) (5.7%)
------- --------- ------- ---------
Profit Before
Tax 52.4 11.3% 11.1 3.0%
------- --------- ------- ---------
Total finance costs reduced significantly compared to the
previous year, from GBP20.5 million to GBP11.4 million. This
largely reflects a reduction in loan issue costs charged to the
income statement.
GBPm FY23 FY22
Interest on loans 6.0 6.8
----- -----
Loan issue cost amortisation 0.9 10.4
----- -----
IFRS 16 Leases interest 4.5 3.3
----- -----
Total Finance Expenses 11.4 20.5
----- -----
FY22 included GBP10.4 million of costs associated with the May
2021 refinancing which included costs related to a potential equity
raise, the requirement for which was removed by the subsequent
refinancing in April 2022.
Our updated facilities, described in further detail below and in
Note 12 to the condensed consolidated financial statements, provide
much greater flexibility to the Group, which in combination with
continued delivery of operating cash flows has enabled us to reduce
levels of gross debt. Taken in conjunction with our interest rate
hedging programme, which has provided a degree of protection from
increases in market rates during FY23, the interest payable on our
debt facilities reduced compared to the previous year.
As a result, profit before tax for the year was GBP52.4 million,
up GBP41.3 million from GBP11.1 million for the previous year.
Taxation
The Group is committed to being a responsible taxpayer, paying
the right amount of tax at the right time is a fundamental
principle of our operation. We aim to maintain an open and honest
relationship with the tax authorities in the jurisdictions where we
operate.
During FY23, we underwent a routine review of our business risk
rating with HMRC, which was confirmed in March 2023 as 'low'.
Our improved trading performance and subsequent increase in
profitability, as described above, means the Group made cash
payments in respect of UK corporation tax for the first time since
2020. Our tax charge for the year was GBP8.2 million (FY22: GBP3.0
million). This represents an effective rate of corporation tax for
the year of 15.1%, which is lower than the standard rate of UK
Corporation tax applicable in the period of 19%. This principally
reflects the impact of prior year adjustments, with no tax
ultimately payable in respect of FY22 owing to the allocation of
brought-forward tax losses and reliefs to the period, when the tax
computations for that period were finalised, partly offset by the
impact of deferred tax balances being accrued at the higher rate of
25% applicable from 1 April 2023. The Group paid cash taxes of
GBP7.5 million in FY23, which all relate to the FY23 financial
year.
Earnings per share
The net result for the year was a profit after tax of GBP44.2
million, increased from GBP8.1 million in FY22. As a result, basic
earnings per share (EPS) for the year was 12.9 pence, with diluted
EPS of 12.8 pence.
FY23 FY22
Profit after tax (GBPm) 44.2 8.1
----------- ----------
Basic EPS (pence) 12.9 pence 2.4 pence
----------- ----------
Diluted EPS (pence) 12.8 pence 2.4 pence
----------- ----------
Cash flows
FY23 FY22
GBPm GBPm
Net cash from Operating Activities 99.9 113.7
-------- -------
Net cash used in Investing Activities (18.2) (6.9)
-------- -------
Net cash used in Financing Activities (110.1) (81.0)
-------- -------
Net Cash Flow for Year (28.4) 25.8
-------- -------
Operating cash flows less lease
repayments(1) 47.4 59.2
-------- -------
Operating cash conversion(2) 96% 133%
-------- -------
(1) Operating cash flows less lease repayments is net cash from
operating activities of GBP99.9 million less lease payments of
GBP52.5 million.
(2) Operating cash conversion is Cash from operations (cash from
operating activities before tax payments) of GBP107.8 million as a
percentage of EBITDA. Alternative performance measures are
described in further detail in the explanatory notes (above).
The Group continued to deliver positive cash performance in
FY23, with cash from operations (before lease repayments and tax)
of GBP107.8 million (2022: GBP113.6 million) contributing to an
overall reduction in net debt (See below).
Operating cash flows were slightly lower than in the previous
year, which reflects the normalisation of working capital profiles
as we delivered a full year of trading - including an GBP11 million
increase in inventory levels to support higher sales - partly
offset by a net one-time benefit arising from the realignment of
VAT payment quarter ends with our fiscal year. The position at the
end of FY22 was impacted by the protective actions taken to secure
cash and liquidity during and immediately after the pandemic and
the impact on inventory balances as a result of global supply chain
issues during that year that did not recur in FY23. Operating cash
conversion (calculated as EBITDA / cash from operations) was 96%,
despite the working capital normalisation.
Capital expenditure increased from GBP6.9 million to GBP18.2
million, as investment increased following the cessation of all but
essential spend during the pandemic-affected years and the
commencement of projects to drive future growth.
Cash used in financing activities includes GBP45.1 million of
debt facility repayments (2022: GBP8 million of debt repayments)
following the refinancing and subsequent management of the
revolving facility position, and GBP52.5 million of payments in
respect of lease liabilities for the store portfolio (2022: GBP54.5
million).
Lease payments were higher than normal, albeit broadly aligned
with the prior year, reflecting the continued settlement of
deferred payment plans agreed during the pandemic. The Group
cleared approximately GBP11 million of deferred rents during FY23
and has no VAT or rent deferrals outstanding at 31 January
2023.
Balance Sheet
Capital Expenditure
Total capital expenditure in FY23 was GBP18.2 million, increased
from GBP6.9 million in FY22.
Key projects included the continuing development of our
Group-wide ERP implementation, with the next significant
functionality updates expected during FY24. We also invested in our
new model stores, in addition to ongoing spend in relation to the
expansion and optimisation of the store portfolio.
eCommerce initiatives to support our omnichannel strategy were
another key focus, with the new platform for our
gettingpersonal.co.uk website going live in March 2023.
Looking forward, we expect capital investment to continue to
increase to approximately GBP24 million per annum, as we invest to
deliver our strategy.
Net Debt
FY23 FY23 Leverage FY22 FY22 Leverage
Net Debt Net Debt
GBPm GBPm
Current borrowings 50.1 25.5
---------- -------------- ---------- --------------
Non-current borrowings 17.4 85.5
---------- -------------- ---------- --------------
Total Borrowings 67.5 111.0
---------- -------------- ---------- --------------
Add back capitalised
debt costs 1.4 1.5
---------- -------------- ---------- --------------
Gross Bank Debt 68.9 112.5
---------- -------------- ---------- --------------
Less cash (11.7) (38.3)
---------- -------------- ---------- --------------
Net Debt (exc. Leases) 57.2 74.2
---------- -------------- ---------- --------------
Leverage (exc. Leases) 0.5x 0.9x
---------- -------------- ---------- --------------
Lease Liabilities 105.4 119.8
---------- -------------- ---------- --------------
Net Debt (inc. Leases) 162.6 194.0
---------- -------------- ---------- --------------
Leverage (inc. Leases) 1.4x 2.3x
---------- -------------- ---------- --------------
On 21 April 2022, the Group agreed an updated and amended
financing package with its banking partners, which reduced the
overall quantum and extended the term of the Group's facilities.
The new package also provided greater flexibility, with a
proportion of the previous term loans effectively repaid and
replaced with a revolving facility.
The revised facilities comprised term loans of GBP30 million,
CLBILS of GBP20 million and an RCF of GBP100 million. The CLBILS
are subject to an amortising repayment profile with final maturity
in September 2023. The Term Loans are set in two tranches, both
with an amortising repayment profile. Tranche 'A' has a final
maturity in January 2024 and Tranche 'B' is coterminous with the
RCF in September 2025. The interest rates applicable to each
facility are set out in Note 12 to the condensed consolidated
financial statements.
The Group focuses on net debt excluding lease liabilities, this
reflects the way the Group's covenants are calculated in its
financing facilities. The cash generation trend described above has
contributed to a reduction in both gross and net debt during FY23,
with Leverage (calculated as Net Debt / EBITDA) falling to the
bottom end of our target 0.5-1.5x range as a result.
The Group made scheduled repayments in respect of the CLBILs and
term loan tranche 'A' totalling GBP6.1 million in January 2023. At
31 January 2023, the Group had undrawn committed facilities of
GBP77 million.
The reduction in lease liabilities reflects the repayment of
deferred rentals during FY23 that remained outstanding at the end
of the previous year.
The Group's cash generation profile typically follows an
annualised 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 the year is usually lower than the intra-year peak, which
typically occurs during the third quarter.
The Group continues to hold a provision of GBP7.4 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
The Board remains committed to maintaining a capital structure
that is conservative yet efficient in terms of providing long-term
returns to shareholders after allowing for investment to fund
ongoing operational requirements and strategic growth.
The Group remains prohibited from making distributions under the
terms of its financing facilities until such time as the CLBILS and
Tranche 'A' of the term loans are fully repaid. Accordingly, there
were no dividend payments made in either the current or the
preceding year.
The final maturity date for tranche 'A' of the term loans is 31
January 2024, and accordingly the earliest that dividend payments
will be considered is during the FY25 financial year. Subject to
continued financial performance in line with the strategic plan,
the Board envisages recommencing dividend payments at a level of
2-3x dividend cover based on profit after tax, subject to a
Leverage ratio assessed across the financial year of not more than
1.5x (excluding lease liabilities) being maintained after the
distribution is made.
Acquisition of SA Greetings
Following the year end, on 25 April 2023, the Group acquired a
100% stake in SA Greetings Corporation (Pty) Ltd ("SA Greetings")
for fixed cash consideration of GBP2.5 million, funded from
existing cash reserves and working capital.
SA Greetings is the leading wholesaler of greetings cards and
gift packaging in South Africa. It also operates 24 'Cardies'
retail stores, with four further stores operated by franchisees,
and owns and operates a roll-wrap production facility. Its head
office and main warehouse are located in Johannesburg, with sales
offices in Durban and Cape Town.
The acquisition gives the Group immediate access to the South
African market via an established, successful business and expands
cardfactory's global presence in line with our strategy. We expect
the acquisition to make a small positive contribution to the
Group's EBITDA and PBT in FY24 and look forward to exploring the
opportunities to support the development of the SA Greetings
business and enhance the Group's production, wholesale and retail
offer in both South Africa and the UK.
Outlook
Trading in the first weeks of the new financial year is slightly
ahead of the Board's expectations. Strong performance across both
our Everyday ranges and Spring seasons of Valentine's Day and
Mother's Day compared to FY23, has seen increased store
transactions and average basket values, driven by effective range
development, an expanding gifting offer and our compelling value
for money offer across both cards and gifts.
Based on the current inflationary outlook, we are confident in
our ability to withstand these pressures with a continued focus on
productivity and efficiencies whilst also benefiting from the
normalisation of freight costs and annualisation of targeted price
increases in FY23. We have full energy hedging and over 90% of our
currency requirements in place for FY24.
Whilst mindful of the ongoing impact of the cost of living
crisis, we remain confident that our compelling value for money
proposition across a range of products and price points will
resonate with customers.
This approach, together with our clear growth strategy, gives us
confidence the Group will continue to make strategic and financial
progress in the year ahead.
In addition, the Board remains confident in the compelling
growth opportunity for the business. As part of our Capital Markets
Strategy Update, we will outline a pathway for revenues of around
GBP650 million and margins of around 14% in FY27, supported by a
capital investment plan of GBP24 million per annum, over the next
three years.
Simon Comer
Interim Chief Financial Officer
3 May 2023
Condensed consolidated financial statements
Consolidated income statement
For the year ended 31 January 2023
2023 2022
Note GBP'm GBP'm
----------------------- ---- ------- -------
Revenue 463.4 364.4
----------------------- ---- ------- -------
Cost of sales (302.7) (247.9)
----------------------- ---- ------- -------
Gross profit 160.7 116.5
----------------------- ---- ------- -------
Other operating income 2 - 8.0
----------------------- ---- ------- -------
Operating expenses (96.9) (92.9)
----------------------- ---- ------- -------
Operating profit 2 63.8 31.6
----------------------- ---- ------- -------
Finance expense 5 (11.4) (20.5)
----------------------- ---- ------- -------
Profit before tax 52.4 11.1
----------------------- ---- ------- -------
Taxation 6 (8.2) (3.0)
----------------------- ---- ------- -------
Profit for the year 44.2 8.1
----------------------- ---- ------- -------
Earnings per share pence pence
----------------------- ---- ------- -------
- Basic 8 12.9 2.4
----------------------- ---- ------- -------
- Diluted 8 12.8 2.4
----------------------- ---- ------- -------
All activities relate to continuing operations.
Consolidated statement of comprehensive income
For the year ended 31 January 2023
2023 2022
GBP'm GBP'm
---------------------------------------------------------- ------ ------
Profit for the year 44.2 8.1
---------------------------------------------------------- ------ ------
Items that may be recycled subsequently into profit or
loss:
---------------------------------------------------------- ------ ------
Exchange differences on translation of foreign operations (0.2) -
---------------------------------------------------------- ------ ------
Cash flow hedges - changes in fair value 8.2 4.1
---------------------------------------------------------- ------ ------
Cost of hedging reserve - changes in fair value (0.2) -
---------------------------------------------------------- ------ ------
Tax relating to components of other comprehensive income (1.2) (0.6)
---------------------------------------------------------- ------ ------
Other comprehensive income for the period, net of income
tax 6.6 3.5
---------------------------------------------------------- ------ ------
Total comprehensive income for the period attributable
to equity shareholders of the parent 50.8 11.6
---------------------------------------------------------- ------ ------
Consolidated statement of financial position
As at 31 January 2023
2023 2022
Note GBP'm GBP'm
--------------------------------------------- ---- ------- -------
Non-current assets
--------------------------------------------- ---- ------- -------
Intangible assets 9 326.3 320.7
--------------------------------------------- ---- ------- -------
Property, plant and equipment 32.2 31.6
--------------------------------------------- ---- ------- -------
Right of use assets 10 100.5 98.5
--------------------------------------------- ---- ------- -------
Deferred tax assets 2.1 3.6
--------------------------------------------- ---- ------- -------
Derivative financial instruments 0.5 1.3
--------------------------------------------- ---- ------- -------
461.6 455.7
--------------------------------------------- ---- ------- -------
Current assets
--------------------------------------------- ---- ------- -------
Inventories 45.3 33.1
--------------------------------------------- ---- ------- -------
Trade and other receivables 13.3 8.1
--------------------------------------------- ---- ------- -------
Derivative financial instruments 5.3 0.8
--------------------------------------------- ---- ------- -------
Cash at bank and in hand 11 11.7 38.3
--------------------------------------------- ---- ------- -------
75.6 80.3
--------------------------------------------- ---- ------- -------
Total assets 537.2 536.0
--------------------------------------------- ---- ------- -------
Current liabilities
--------------------------------------------- ---- ------- -------
Borrowings 12 (50.1) (25.5)
--------------------------------------------- ---- ------- -------
Lease liabilities 10 (27.3) (41.1)
--------------------------------------------- ---- ------- -------
Trade and other payables (84.7) (71.7)
--------------------------------------------- ---- ------- -------
Provisions 15 (9.5) (12.2)
--------------------------------------------- ---- ------- -------
Tax payable - (1.5)
--------------------------------------------- ---- ------- -------
Derivative financial instruments (1.4) (0.2)
--------------------------------------------- ---- ------- -------
(173.0) (152.2)
--------------------------------------------- ---- ------- -------
Non-current liabilities
--------------------------------------------- ---- ------- -------
Borrowings 12 (17.4) (85.5)
--------------------------------------------- ---- ------- -------
Lease liabilities 10 (78.1) (78.7)
--------------------------------------------- ---- ------- -------
Derivative financial instruments (0.5) -
--------------------------------------------- ---- ------- -------
(96.0) (164.2)
--------------------------------------------- ---- ------- -------
Total liabilities (269.0) (316.4)
--------------------------------------------- ---- ------- -------
Net assets 268.2 219.6
--------------------------------------------- ---- ------- -------
Equity
--------------------------------------------- ---- ------- -------
Share capital 3.4 3.4
--------------------------------------------- ---- ------- -------
Share premium 202.2 202.2
--------------------------------------------- ---- ------- -------
Hedging reserve 3.5 1.3
--------------------------------------------- ---- ------- -------
Cost of hedging reserve (0.1) -
--------------------------------------------- ---- ------- -------
Reverse acquisition reserve (0.5) (0.5)
--------------------------------------------- ---- ------- -------
Merger reserve 2.7 2.7
--------------------------------------------- ---- ------- -------
Retained earnings 57.0 10.5
--------------------------------------------- ---- ------- -------
Equity attributable to equity holders of the
parent 268.2 219.6
--------------------------------------------- ---- ------- -------
Consolidated statement of changes in equity
For the year ended 31 January 2023
Cost Reverse
Share Share Hedging of hedging acquisition Merger Retained Total
capital premium reserve reserve reserve reserve earnings equity
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
------------------------------- -------- -------- -------- ----------- ------------ -------- --------- -------
At 31 January 2021 3.4 202.2 (3.1) 0.4 (0.5) 2.7 1.4 206.5
------------------------------- -------- -------- -------- ----------- ------------ -------- --------- -------
Total comprehensive income
for the period
------------------------------- -------- -------- -------- ----------- ------------ -------- --------- -------
Profit or loss - - - - - - 8.1 8.1
------------------------------- -------- -------- -------- ----------- ------------ -------- --------- -------
Other comprehensive income - - 3.3 - - - 0.2 3.5
------------------------------- -------- -------- -------- ----------- ------------ -------- --------- -------
- - 3.3 - - - 8.3 11.6
------------------------------- -------- -------- -------- ----------- ------------ -------- --------- -------
Hedging gains/(losses)
and costs of hedging
transferred
to the cost of inventory - - 1.4 (0.5) - - - 0.9
------------------------------- -------- -------- -------- ----------- ------------ -------- --------- -------
Deferred tax on transfers
to inventory - - (0.3) 0.1 - - - (0.2)
------------------------------- -------- -------- -------- ----------- ------------ -------- --------- -------
Transactions with owners,
recorded directly in equity
------------------------------- -------- -------- -------- ----------- ------------ -------- --------- -------
Share-based payment charges - - - - - - 0.8 0.8
------------------------------- -------- -------- -------- ----------- ------------ -------- --------- -------
Dividends (note 7) - - - - - - - -
------------------------------- -------- -------- -------- ----------- ------------ -------- --------- -------
Total contributions by
and distributions to owners - - - - - - 0.8 0.8
------------------------------- -------- -------- -------- ----------- ------------ -------- --------- -------
At 31 January 2022 3.4 202.2 1.3 - (0.5) 2.7 10.5 219.6
------------------------------- -------- -------- -------- ----------- ------------ -------- --------- -------
Total comprehensive income
for the period
------------------------------- -------- -------- -------- ----------- ------------ -------- --------- -------
Profit or loss - - - - - - 44.2 44.2
------------------------------- -------- -------- -------- ----------- ------------ -------- --------- -------
Other comprehensive income - - 6.1 (0.1) - - 0.6 6.6
------------------------------- -------- -------- -------- ----------- ------------ -------- --------- -------
- - 6.1 (0.1) - - 44.8 50.8
------------------------------- -------- -------- -------- ----------- ------------ -------- --------- -------
Hedging gains/(losses)
and costs of hedging
transferred
to the cost of inventory - - (5.2) -- -- -- -- (5.2)
------------------------------- -------- -------- -------- ----------- ------------ -------- --------- -------
Deferred tax on transfers
to inventory -- - 1.3 - - - - 1.3
------------------------------- -------- -------- -------- ----------- ------------ -------- --------- -------
Transactions with owners,
recorded directly in equity
------------------------------- -------- -------- -------- ----------- ------------ -------- --------- -------
Share-based payment charges - - - - - - 1.7 1.7
------------------------------- -------- -------- -------- ----------- ------------ -------- --------- -------
Dividends (note 7) - - - - - - - -
------------------------------- -------- -------- -------- ----------- ------------ -------- --------- -------
Total contributions by
and distributions to owners - - - - - - 1.7 1.7
------------------------------- -------- -------- -------- ----------- ------------ -------- --------- -------
At 31 January 2023 3.4 202.2 3.5 (0.1) (0.5) 2.7 57.0 268.2
------------------------------- -------- -------- -------- ----------- ------------ -------- --------- -------
Consolidated cash flow statement
For the year ended 31 January 2023
2023 2022
Note GBP'm GBP'm
----------------------------------------------------- ---- ------- ------
Cash from operations 13 107.8 113.6
----------------------------------------------------- ---- ------- ------
Corporation tax paid (7.9) 0.1
----------------------------------------------------- ---- ------- ------
Net cash inflow from operating activities 99.9 113.7
----------------------------------------------------- ---- ------- ------
Cash flows from investing activities
----------------------------------------------------- ---- ------- ------
Purchase of property, plant and equipment (8.8) (3.6)
----------------------------------------------------- ---- ------- ------
Purchase of intangible assets 9 (9.4) (3.3)
----------------------------------------------------- ---- ------- ------
Net cash outflow from investing activities (18.2) (6.9)
----------------------------------------------------- ---- ------- ------
Cash flows from financing activities
----------------------------------------------------- ---- ------- ------
Interest paid on bank borrowings (6.2) (6.5)
----------------------------------------------------- ---- ------- ------
Proceeds from bank borrowings 27.8 57.0
----------------------------------------------------- ---- ------- ------
Repayment of bank borrowings (72.9) (65.0)
----------------------------------------------------- ---- ------- ------
Other financing costs paid (1.8) (8.7)
----------------------------------------------------- ---- ------- ------
Payment of lease liabilities (52.5) (54.5)
----------------------------------------------------- ---- ------- ------
Interest in respect of lease liabilities (4.5) (3.3)
----------------------------------------------------- ---- ------- ------
Net cash outflow from financing activities (110.1) (81.0)
----------------------------------------------------- ---- ------- ------
Net (decrease)/increase in cash and cash equivalents (28.4) 25.8
----------------------------------------------------- ---- ------- ------
Cash and cash equivalents at the beginning of
the year 38.3 12.5
----------------------------------------------------- ---- ------- ------
Closing cash and cash equivalents 9.9 38.3
----------------------------------------------------- ---- ------- ------
Accounting policies
General information
Card Factory plc ('the Company') is a public limited company
incorporated in the United Kingdom. The Company is domiciled in the
United Kingdom and its registered office is Century House, Brunel
Road, 41 Industrial Estate, Wakefield WF2 0XG. The Group financial
statements consolidate those of the Company and its subsidiaries
(together referred to as the 'Group').
Basis of preparation
This preliminary announcement and condensed consolidated
financial statements have been prepared in accordance with the
recognition and measurement principles of UK-adopted International
Financial Reporting Standards ('UK-IFRS') in conformity with the
requirements of the Companies Act 2006. It does not include all the
information required for full annual accounts. The financial
information contained in this preliminary announcement does not
constitute the company's statutory accounts for the years ended 31
January 2023 ('FY23') or 31 January 2022 ('FY22') but is derived
from these accounts. Statutory accounts for the year ended 31
January 2022 have been delivered to the registrar of companies, and
those for the year ended 31 January 2023 will be delivered to the
registrar in due course. The auditor has reported on those
accounts; the audit reports were (i) unqualified, (ii) did not
include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 (2) or (3) of
the Companies Act 2006.
Going concern basis of accounting
The Board continues to have a reasonable expectation that both
the Group and the parent company have adequate resources to
continue in operation for at least the next 12 months and that the
going concern basis of accounting remains appropriate.
The Group has delivered a strong financial performance in the
current financial year, with encouraging sales momentum in the
first full year of trading after two consecutive years that were
materially affected by the Covid-19 pandemic. LFL sales have been
positive and broadly in line when compared to pre-pandemic, and as
a result the Group has delivered robust operating cash flows,
cleared deferred VAT and rent payments, and reduced net debt and
leverage year-on-year. Trading since the balance sheet date has
remained in line with expectations and there have been no material
events that have affected the Group's liquidity headroom.
The Group renewed its financing facilities with its banking
partners in April 2022, reducing the quantum of the Group's term
loan facilities to GBP150 million and extending the tenure of the
Group's debt to September 2025 (see note 12). The first scheduled
repayments under these facilities were made in January 2023, with
full repayment of the Coronavirus Large Business Interruption Loan
Scheme ('CLBILS') facilities by September 2023. Following the final
repayment of the CLBILs facilities, the Group does not expect to
utilise further government backed support going forward, other than
those schemes that are generally available in the ordinary course
of business (such as rates reliefs). The Board believes the renewed
facilities provide adequate liquidity and headroom for the Group to
execute its strategic plan. At 31 January 2023, net debt excluding
lease liabilities was GBP57.2 million.
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 and make scheduled debt repayments whilst retaining
substantial liquidity headroom against current facility limits and
meet all covenant requirements on the relevant test dates (see note
12 for more information in respect of covenant requirements) in the
12 month period.
-- Whilst debt repayments continue in the period following the
going concern assessment, they are much lower in the 12 months
immediately following (cGBP9 million) than those occurring in the
going concern period itself (cGBP27 million).
-- 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.
-- Scenario analysis, which considered a reduction in sales,
profitability and cash flows on both a permanent basis of circa
10%, or a significant one-off event affecting the Christmas period
and reducing sales by 20%, indicated that the Group would maintain
liquidity headroom and covenant compliance throughout the 12 month
period. The analysis did not consider any potential upside from
mitigating actions that could be taken to reduce discretionary
costs and provide further headroom.
In addition, the Group conducted a reverse stress test analysis
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
early in the year.
The reverse stress test analysis 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 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.
Over the preceding two years, the business has demonstrated a
significant degree of resilience and a proven ability to manage
cash flows and liquidity during a period of unprecedented economic
downturn. Accordingly the Board retains confidence that, were such
a level of downturn to reoccur in the assessment period, the Group
would be able to take action to mitigate its effects.
Based on these factors, the Board has a reasonable expectation
that the Group has adequate resources and sufficient loan facility
headroom and accordingly the accounts are prepared on a going
concern basis.
Principal Accounting Policies
The preliminary announcement has been prepared using accounting
policies that are consistent with those published in the Group's
accounts for the year-ended 31 January 2022 (available on the
Company's website).
Accounting judgements and estimates
The preparation of financial statements in conformity with UK
IFRS requires judgement to be applied in forming the Group's
accounting policies. It also requires the use of estimates and
assumptions that affect the reported amount of assets, liabilities,
income and expenses. Actual results may subsequently differ from
these estimates.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to estimates are recognised prospectively in the
period in which the estimate is revised.
The Group does not consider there to be any judgements made in
the current period that have had a significant effect on the
amounts recognised in the financial statements.
Key sources of estimation uncertainty
The key sources of estimation uncertainty, being those estimates
and assumptions that carry the most significant risk of a material
adjustment to the carrying amounts of assets and liabilities in the
next financial year, are set out below.
Inventories
The Group holds significant volumes, and a broad range of
inventory. The inventory provision is calculated in accordance with
a documented policy, that is based on historical experience and the
Group's stock management strategy, which determines the range of
product that will be available for sale in-store and online. The
Group provides against the carrying value of inventories where it
is anticipated the amount realised may be below the cost
recognised. Provision is made in full where there are no current
plans to trade prior season stock through stores, and partial
provision is made against seasonal stock from prior seasons or
where certain ranges do not perform as anticipated. The amounts
provided for partial provisions are adjusted annually to reflect
experience.
The Group applied a consistent inventory provisioning policy
with that applied in the prior year, making only small amendments
to partial provisioning percentages based on the Group's experience
of stock sell through rates for partially provided product lines.
These changes are not considered to have had a material impact on
the overall value of the provision, although reduced the value of
the provision compared to the prior year.
At the end of FY23, the total inventory provision was GBP16.1
million (FY22: GBP20.7 million), comprised of fully-provided stock
lines of GBP4.3 million and partially provided lines of GBP11.8
million. The reduction in the value of the provision year-on-year
generally reflects the normalisation of stock levels following the
Covid pandemic and supply chain challenges experienced in the prior
year (which have resulted in a reduction in the value of stock
lines provided for in full), as well as the reduction due to
changes in provisioning percentages described above. As a result,
the overall proportion of gross inventory provided for reduced
compared to the prior year.
The full range of reasonably possible outcomes in respect of the
provision is difficult to calculate at the balance sheet date as it
is dependent on the accuracy of forecasts for sales volumes and
future decisions we may take on aged, discontinued and potentially
excess stock in response to market and supply developments. The
Group believes it has taken a cautious approach in determining the
provision. It has considered the nature of the estimates involved
and has concluded that it is possible, on the basis of existing
knowledge, that outcomes within the next financial year may be
different from the Group's assumptions applied as at 31 January
2023, and could require a material adjustment to the carrying
amount of the provision in the next financial year.
The two elements of the provision which are most sensitive to
judgement are:
-- An GBP8.5m provision for aged and discontinued stock, the
gross value of which is GBP10.1m, which assumes limited
sell-through and is consistent with the current merchandising plan;
and
-- a further GBP7.9m provision, which represents 50% of a gross
carrying amount of GBP15.7m), reflecting our current estimates of
future sell-through of stock lines with high forecast sales cover,
or which are carried forward from prior seasons, and our
expectations of product life.
Grant income
During the previous financial year, the Group received financial
assistance under various Government schemes intended to support
businesses affected by local and national restrictions during the
Covid-19 pandemic, including CJRS payments, business rates relief
and lockdown grant payments. IAS 20 requires that the Group has
reasonable assurance that the various conditions attached to
Government grants will be complied with before recognising the
income in its financial statements. Income received under the
lockdown grant schemes is subject to conditions applied by the UK's
subsidy control regime, in addition to the rules and conditions
attached to each individual grant. The most material of these
conditions relate to determining the eligible period for grant
receipts and the calculation of the Group's 'uncovered fixed costs'
in the eligible period, upon which the value of permitted relief is
based. The nature of the grants received, and the unprecedented
nature of the pandemic and the support mechanisms available, means
the conditions and rules attached to each payment are complex and
open to a degree of interpretation at the balance sheet date.
Accordingly, the Group had to make certain assumptions regarding
which of the payments received it is reasonably certain to have met
all of the conditions, and thus that the grants are unlikely to be
repaid in a future period.
After making a provision for amounts the Group does not believe
meet the above criteria (see note 22), the Group recognised GBP8.0
million of other operating income in relation to such grants
received during FY22.
During FY23, the Group formally settled its CJRS position with
HMRC utilising GBP2.3 million and releasing GBP2.5 million from the
provision. The Group has received no new substantive evidence
regarding its position in respect of other support received and
accordingly has not changed its position. A provision of GBP7.4
million continues to be held in respect of potential repayment of
support received in excess of subsidy control thresholds,
consistent with the provision held in the prior year for the same
purpose. The minimum provision requirement is expected to be GBP4.5
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 cautious assessment of the
amount that may be repayable.
Other sources of estimation uncertainty
Impairment testing
An impairment review is conducted annually in respect of
goodwill, and as required for other assets and cash-generating
units ('CGUs') where an indicator of potential impairment exists.
The carrying amounts of the assets involved and the level of
estimation uncertainty inherent in determining appropriate
assumptions for the calculation of the assets' recoverable amounts
means impairment reviews are an area of significant management
focus. However, whether that estimation uncertainty is significant
to the financial statements is not known until the analysis is
concluded. The Group generally considers the estimation uncertainty
in impairment reviews to be significant if a reasonably possible
change in the key assumptions would lead to a material change in
the accounting outcome.
In FY23, the Group conducted an impairment review in respect of
goodwill. The carrying amount of goodwill in the consolidated
balance sheet of GBP313.8 million is allocated in its entirety to
the group of CGUs, shared assets and functions that comprise the
Group's Stores business.
In addition, the Group conducted a store-level impairment review
specifically covering right-of-use assets and property, plant and
equipment insofar as directly allocable to stores. The Group
assesses indicators of impairment for the store portfolio on the
basis of whether a material impairment charge (or reversal) could
arise in respect of the store portfolio as a whole in the period.
Due to the challenging macro-economic environment, existence of a
material carried forward impairment charge, and an ongoing
expectation that up to 1-2% of the store portfolio can be
loss-making at any time, the Group concluded this condition was met
for FY23.
Due to the existence of intangible assets that are not yet ready
for use, the Group also conducted an impairment test of each of the
Card Factory Online and Getting Personal CGUs.
The Group assessed the recoverable amount of all CGUs on a value
in use basis, using consistent assumptions across all reviews where
applicable, with estimates of future cash flows derived from
forecasts included within the Group's approved budget adjusted to
exclude cash flows from new stores and initiatives so as to assess
the assets in their current state and condition. Where impairment
reviews are prepared in respect of assets not yet ready for use,
future development costs and revenues are not excluded so as to
fairly reflect the value of the assets being developed and costs to
complete. The assessment of future cash flows that underpin such
impairment reviews inherently require the use of estimates, notably
in respect of future revenues, operating costs including material,
freight, wage and energy inflation, terminal growth rates, foreign
currency exchange rates, and discount rates.
The results of the impairment tests are set out in note 10
(goodwill and intangible assets) and note 12 (stores). The
impairment tests in respect of the Stores business and Card Factory
Online had significant headroom and accordingly, having undertaken
scenario analysis on the key assumptions, the Group does not
believe there are any reasonably possible changes in those key
assumptions that would lead to an impairment.
The Group booked a net impairment charge in respect of stores of
GBP1.3 million, which is comprised of GBP3.7 million of impairment
charges and GBP2.4 million of impairment charge reversals. The
reversals reflect those stores where an impairment charge made in a
prior period has been reversed due to improved trading. Having
considered scenarios consistent with those reviewed in respect of
goodwill impairment testing, the Group is satisfied that reasonable
changes in the key assumptions would not materially change the
impairment charge for stores.
The Group booked an impairment charge in respect of intangible
assets in Getting Personal of GBP1.5 million, reflecting costs
incurred in developing a new Online Platform that will not form
part of the final solution once deployed and will thus not be
supported by future cash flows. The remaining carrying amount of
the Getting Personal CGU is not material, and therefore no change
in assumptions would result in a material additional impairment
charge.
Climate Change
The Group has reviewed the potential impact of climate change
and ESG-related risks and uncertainties on the consolidated
financial statements. Given the nature of the Group's business and
operations, the exposure to both physical and transitional risks
associated with climate change is considered to be low.
In particular, the Group has considered climate change in
respect of impairment testing (potential impact of climate and ESG
risks on estimates of future cash flows, notes 10 and 11), going
concern (note 1, below), and inventory provisions (impact of
customer preferences and ESG considerations on potential stock
obsolescence, note 14 and above) and concluded in each case that
there is no material impact in each area at 31 January 2023.
1 Segmental reporting
Following investment in the Group's people, systems and
infrastructure to support its strategy, the Group is organised into
five main business areas which mean 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 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 the
consolidated operating profit per the financial statements, is
provided in the table below:
2023 - GBPm cardfactory cardfactory Getting Partnerships Other Group
Stores Online Personal
Segment Revenue 440.4 8.8 8.5 5.0 0.7 463.4
------------ ------------ ---------- ------------- ------ -------
Segment EBITDA 116.1 (2.2) (1.5) 1.4 (1.8) 112.0
------------ ------------ ---------- ------------- ------ -------
Depreciation, amortisation
& impairment (48.2)
------------ ------------ ---------- ------------- ------ -------
Consolidated Operating
Profit 63.8
------------ ------------ ---------- ------------- ------ -------
2022 - GBPm cardfactory cardfactory Getting Partnerships Other Group
Stores Online Personal
Segment Revenue 335.1 10.9 12.9 4.5 1.0 364.4
------------ ------------ ---------- ------------- ------ -------
Segment EBITDA 82.0 0.6 1.0 2.3 (0.3) 85.6
------------ ------------ ---------- ------------- ------ -------
Depreciation, amortisation
& impairment (54.0)
------------ ------------ ---------- ------------- ------ -------
Consolidated Operating
Profit 31.6
------------ ------------ ---------- ------------- ------ -------
The "Other" column principally reflects central overheads and
Printcraft sales to third parties.
In the prior year, the Group disclosed a "Card Factory" segment
which was effectively an aggregation of the cardfactory Stores,
cardfactory Online and Partnerships segments disclosed above. The
disclosure has been updated this year to reflect changes in the
Group's organisational structure and internal reporting.
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.
The table below sets out a geographical analysis of revenues for
the current and prior year:
2023 2022
GBP'm GBP'm
----------------------------------------- ------ ------
Revenue derived from customers in the UK 451.6 357.5
----------------------------------------- ------ ------
Revenue derived from customers overseas 11.8 6.9
----------------------------------------- ------ ------
Consolidated revenue 463.4 364.4
----------------------------------------- ------ ------
Revenue from overseas reflects revenues earned from the Group's
stores in the Republic of Ireland and from retail partners based
outside of the UK.
Of the Group's non-current assets, GBP5.0 million (2022: GBP2.1
million) relates to assets based outside of the UK, principally in
relation to the Group's stores in the Republic of Ireland. The
increase compared to the prior year reflects the impact of the
increase in the store portfolio on the value of right-of-use
assets.
2 Operating profit
Operating profit is stated after charging/(crediting) the
following items:
2023 2022
GBP'm GBP'm
-------------------------------------------- ------ ------
Staff costs (note 4) 138.2 113.8
-------------------------------------------- ------ ------
Government grant income - (8.0)
-------------------------------------------- ------ ------
Depreciation expense
-------------------------------------------- ------ ------
- owned fixed assets 8.0 8.8
-------------------------------------------- ------ ------
- right of use assets (note 11) 35.7 37.4
-------------------------------------------- ------ ------
Amortisation expense (note 9) 2.3 2.9
-------------------------------------------- ------ ------
Impairment of right-of-use assets (note 10) 1.3 5.0
-------------------------------------------- ------ ------
Impairment of intangible assets (note 9) 1.5 -
-------------------------------------------- ------ ------
Profit on disposal of fixed assets (0.6) -
-------------------------------------------- ------ ------
Foreign exchange gain 1.5 2.6
-------------------------------------------- ------ ------
The total fees payable by the Group to KPMG LLP and their
associates during the period was as follows:
2023 2022
GBP'000 GBP'000
--------------------------------------------------------------- -------- -------------------
Audit of the consolidated and Company financial statements 30 30
--------------------------------------------------------------- -------- -------------------
Amounts receivable by the Company's auditor and its associates
in respect of:
--------------------------------------------------------------- -------- -------------------
Audit of financial statements of subsidiaries of the
Company 620 340
--------------------------------------------------------------- -------- -------------------
Audit-related assurance services 50 45
--------------------------------------------------------------- -------- -------------------
Other assurance services - 288
--------------------------------------------------------------- -------- -------------------
Total fees 700 703
--------------------------------------------------------------- -------- -------------------
Other assurance services provided in the prior year were in
respect of assurance services in connection with the Group's
financial statements for transactions that did not proceed. The
appointment of KPMG LLP to provide such services was made in
accordance with the Group's policy on external auditors supplying
non-audit services.
3 EBITDA
EBITDA represents profit for the period before net finance
expense, taxation, gains or losses on disposal, depreciation,
amortisation and impairment charges.
2023 2022
GBP'm GBP'm
------------------------------------------ ------ ------
Operating profit 63.8 31.6
------------------------------------------ ------ ------
Depreciation, amortisation and impairment 48.2 54.0
------------------------------------------ ------ ------
EBITDA 112.0 85.6
------------------------------------------ ------ ------
4 Employee numbers and costs
The average number of people employed by the Group (including
Directors) during the year, analysed by category, was as
follows:
2023 2022
Number Number
------------------------------ ------- -------
Management and administration 482 434
------------------------------ ------- -------
Operations 9,367 8,736
------------------------------ ------- -------
9,849 9,170
------------------------------ ------- -------
The aggregate payroll costs of all employees including Directors
were as follows:
2023 2022
GBP'm GBP'm
------------------------------------------- ------ ------
Employee wages and salaries 120.5 99.8
------------------------------------------- ------ ------
Equity-settled share-based payment expense 1.7 0.8
------------------------------------------- ------ ------
Social security costs 8.2 6.5
------------------------------------------- ------ ------
Defined contribution pension costs 1.8 1.5
------------------------------------------- ------ ------
Total employee costs 132.2 108.6
------------------------------------------- ------ ------
Agency labour costs 6.0 5.2
------------------------------------------- ------ ------
Total staff costs 138.2 113.8
------------------------------------------- ------ ------
Total employee costs are presented net of GBPnil (2022: GBP9.4
million) recovered through the CJRS.
Key management personnel
The key management personnel of the Group comprise the Card
Factory plc Board of Directors, the Executive Board and the
Operating Board. Key management personnel compensation is as
follows:
2023 2022
GBP'm GBP'm
------------------------------------------- ------ ------
Salaries and short-term benefits 6.1 4.4
------------------------------------------- ------ ------
Equity-settled share-based payment expense 1.4 0.6
------------------------------------------- ------ ------
Social security costs 0.8 0.6
------------------------------------------- ------ ------
Defined contribution pension costs 0.2 0.1
------------------------------------------- ------ ------
8.5 5.7
------------------------------------------- ------ ------
Remuneration of Directors
2023 2022
GBP'm GBP'm
------------------------------------------------------ ------ ------
Directors' remuneration 1.9 1.8
------------------------------------------------------ ------ ------
Amounts receivable under long-term incentive schemes 0.1 0.1
------------------------------------------------------ ------ ------
Company contributions to defined contribution pension
plans - -
------------------------------------------------------ ------ ------
2.0 1.9
------------------------------------------------------ ------ ------
The table above includes the remuneration of Directors in each
year. Director's remuneration for the period includes GBP40k in
respect of compensation for loss of office for Kris Lee following
his resignation on 31 January 2023.
Amounts receivable under long-term incentive schemes reflects
the value of options exercised during the year.
5 Finance expense
2023 2022
GBP'm GBP'm
-------------------------------------- ------ ------
Finance expense
-------------------------------------- ------ ------
Interest on bank loans and overdrafts 6.0 6.8
-------------------------------------- ------ ------
Amortisation of loan issue costs 0.9 10.4
-------------------------------------- ------ ------
Lease interest 4.5 3.3
-------------------------------------- ------ ------
11.4 20.5
-------------------------------------- ------ ------
6 Taxation
The tax charge includes both current and deferred tax. The tax
charge reflects the estimated effective tax on the profit before
tax for the Group for the year ending 31 January 2023 and the
movement in the deferred tax balance in the year, so far as it
relates to items recognised in the income statement.
Taxable profit or loss differs from profit or loss before tax as
reported in the income statement, because it excludes items of
income or expenditure that are either taxable or deductible in
other years or never taxable or deductible.
Recognised in the income statement
2023 2022
GBP'm GBP'm
-------------------------------------------------- ------ ------
Current tax charge/(credit)
-------------------------------------------------- ------ ------
Current year 8.3 1.2
-------------------------------------------------- ------ ------
Adjustments in respect of prior periods (1.6) 0.8
-------------------------------------------------- ------ ------
Total current tax charge 6.7 2.0
-------------------------------------------------- ------ ------
Deferred tax charge/(credit)
-------------------------------------------------- ------ ------
Origination and reversal of temporary differences 2.5 1.2
-------------------------------------------------- ------ ------
Adjustments in respect of prior periods (1.8) (0.7)
-------------------------------------------------- ------ ------
Effect of change in tax rate 0.8 0.5
-------------------------------------------------- ------ ------
Total deferred tax charge 1.5 1.0
-------------------------------------------------- ------ ------
Total income tax charge/(credit) 8.2 3.0
-------------------------------------------------- ------ ------
The effective tax rate of 15.6% (2022: 27.0%) on the profit
before taxation for the year is lower than (2022: higher than) the
average rate of mainstream corporation tax in the UK of 19% (2022:
19%). The lower effective tax rate is principally due to
adjustments in respect of prior periods following the allocation of
brought-forward losses and reliefs when the tax computations for
that period were finalised subsequent to the publication of the
consolidated financial statements for the FY22 financial year,
partially offset by the effect of higher rates applicable to
deferred tax balances.
The tax charge is reconciled to the standard rate of UK
corporation tax as follows:
2023 2022
GBP'm GBP'm
---------------------------------------------------------- ------ ------
Profit before tax 52.4 11.1
---------------------------------------------------------- ------ ------
Tax at the standard UK corporation tax rate of 19% (2022:
19.0%) 10.0 2.1
---------------------------------------------------------- ------ ------
Tax effects of:
---------------------------------------------------------- ------ ------
Expenses not deductible for tax purposes 0.7 0.3
---------------------------------------------------------- ------ ------
Adjustments in respect of prior periods (3.3) 0.1
---------------------------------------------------------- ------ ------
Effect of change in tax rate 0.8 0.5
---------------------------------------------------------- ------ ------
Total income tax charge 8.2 3.0
---------------------------------------------------------- ------ ------
Total taxation recognised through the income statement, other
comprehensive income and through equity are as follows:
2023 2022
--------------------------- ------------------------- -------------------------
Current Deferred Total Current Deferred Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
--------------------------- ------- -------- ------ ------- -------- ------
Income statement 6.7 1.5 8.2 2.0 1.0 3.0
--------------------------- ------- -------- ------ ------- -------- ------
Other comprehensive income - 1.2 1.2 - 0.6 0.6
--------------------------- ------- -------- ------ ------- -------- ------
Equity - (1.3) (1.3) - 0.2 0.2
--------------------------- ------- -------- ------ ------- -------- ------
Total tax 6.7 1.4 8.1 2.0 1.8 3.8
--------------------------- ------- -------- ------ ------- -------- ------
7 Dividends
There were no dividends paid in either the current or the
previous year. The Board is not recommending a final dividend in
respect of the financial year ended 31 January 2023 (2022: no final
dividend).
Whilst the Group's CLBILS and tranche A of the term loan
facilities remain outstanding (see note 12), the Group is
prohibited from making distributions under the terms of its
financing arrangements.
8 Earnings per share
Basic earnings per share is calculated by dividing the profit
for the period attributable to ordinary shareholders by the
weighted average number of ordinary shares in issue during the
period.
Diluted earnings per share is based on the weighted average
number of shares in issue for the period, adjusted for the dilutive
effect of potential ordinary shares. Potential ordinary shares
represent employee share incentive awards and save as you earn
share options.
2023 2022
(Number) (Number)
------------------------------------------------------- ----------- -----------
Weighted average number of shares in issue 342,328,622 341,770,579
------------------------------------------------------- ----------- -----------
Weighted average number of dilutive share options 1,604,107 1,843,537
------------------------------------------------------- ----------- -----------
Weighted average number of shares for diluted earnings
per share 343,932,729 343,614,116
------------------------------------------------------- ----------- -----------
GBP'm GBP'm
-------------------------------- ----- -----
Profit for the financial period 44.2 8.1
-------------------------------- ----- -----
pence pence
--------------------------- ----- -----
Basic earnings per share 12.9 2.4
--------------------------- ----- -----
Diluted earnings per share 12.8 2.4
--------------------------- ----- -----
9 Intangible assets
Goodwill Software Total
GBP'm GBP'm GBP'm
--------------------------- -------- -------- ------
Cost
--------------------------- -------- -------- ------
At 1 February 2022 328.2 17.0 345.2
--------------------------- -------- -------- ------
Additions - 9.4 9.4
--------------------------- -------- -------- ------
Disposals - (0.4) (0.4)
--------------------------- -------- -------- ------
At 31 January 2023 328.2 26.0 354.2
--------------------------- -------- -------- ------
Amortisation/impairment
--------------------------- -------- -------- ------
At 1 February 2022 14.4 10.1 24.5
--------------------------- -------- -------- ------
Amortisation in the period - 2.3 2.3
--------------------------- -------- -------- ------
Impairment in the period - 1.5 1.5
--------------------------- -------- -------- ------
Amortisation on disposals - (0.4) (0.4)
--------------------------- -------- -------- ------
At 31 January 2023 14.4 13.5 27.9
--------------------------- -------- -------- ------
Net book value
--------------------------- -------- -------- ------
At 31 January 2023 313.8 12.5 326.3
--------------------------- -------- -------- ------
At 31 January 2022 313.8 6.9 320.7
--------------------------- -------- -------- ------
During the year, the Group recognised an impairment charge of
GBP1.5 million in respect of work performed in respect of a new
online platform for Getting Personal. The charge reflects work on
functionality which was ultimately not part of the platform when it
went live in March 2023.
Goodwill Software Total
GBP'm GBP'm GBP'm
----------------------------------------------- -------- -------- -------
Cost
----------------------------------------------- -------- -------- -------
At 1 February 2021 328.2 13.7 341.9
----------------------------------------------- -------- -------- -------
Additions - 3.3 3.3
----------------------------------------------- -------- -------- -------
Disposals - - -
----------------------------------------------- -------- -------- -------
At 31 January 2022 328.2 17.0 345.2
----------------------------------------------- -------- -------- -------
Amortisation/impairment
----------------------------------------------- -------- -------- -------
At 1 February 2021 14.4 7.2 21.6
----------------------------------------------- -------- -------- -------
Amortisation in the period - 2.9 2.9
----------------------------------------------- -------- -------- -------
Amortisation on disposals - - -
----------------------------------------------- -------- -------- -------
At 31 January 2022 14.4 10.1 24.5
----------------------------------------------- -------- -------- -------
Net book value
----------------------------------------------- -------- -------- -------
At 31 January 2022 313.8 6.9 320.7
----------------------------------------------- -------- -------- -------
At 31 January 2021 313.8 6.5 320.3
----------------------------------------------- -------- -------- -------
Impairment Testing: Goodwill
Goodwill arising on the acquisition of Getting Personal in 2011
of GBP14.4 million was allocated to the Getting Personal CGU, which
corresponds to the Getting Personal operating segment (see note 2).
Goodwill in respect of the Getting Personal CGU was fully written
down in 2020.
All remaining goodwill is in respect of the cardfactory Stores
business, which is comprised of all of the cardfactory stores (each
an individual CGU for impairment testing purposes), associated
central functions and shared assets (hereafter referred to in this
note as "Card Factory"). cardfactory stores is the lowest level at
which the Group's management monitors goodwill internally.
As described in note 1, the Group updated its view of operating
segments in the period. The cardfactory Stores business previously
formed part of the 'Card Factory' operating segment, which has been
divided into 'cardfactory Stores', 'cardfactory Online' and
'Partnerships' segments in FY23. The cardfactory Stores business is
comparable to the 'cardfactory Stores' operating segment. Within
the previous, aggregated segment, the assets attributable to each
of these lines of business was clearly identifiable given the
different nature of the sales platforms and customers to each.
Goodwill of GBP313.8 million was previously allocated to the
cardfactory business within the 'Card Factory' segment.
Accordingly, upon amending the segmental analysis, the allocation
of assets to each CGU has not changed as the assets attributable to
the cardfactory Stores business were identifiable within the
previous Card Factory segment.
The total carrying amount of the cardfactory Stores group of
CGUs for impairment testing purposes, inclusive of liabilities that
are necessarily considered in determining the recoverable amount,
at 31 January 2023 was GBP315.5 million (2022: GBP295.0
million).
The recoverable amount has been determined based on a
value-in-use calculation. This value-in-use calculation is based on
the Group's most recent approved five-year strategic plan, to
exclude any value from planned new stores or initiatives, so as to
assess the valuation of the assets in their current state and
condition.
The key assumptions used in determining the recoverable amount
are:
-- Future trading performance including sales growth, product
mix, material and operating costs;
-- Foreign exchange rates applicable to the Group's purchases of goods for resale;
-- The terminal growth rate applied; and
-- The discount rate.
The values assigned to the variables that underpin the Group's
expectations of future trading performance were determined based on
historical performance and the Group's expectations with regard to
future trends. Where applicable, amounts take into account the
Group's hedges and fixed contracts, changes in market prices and
rates, and relevant industry and consumer data to inform
expectations around future trends.
The Group assumes a long-term GBPUSD exchange rate in line with
published forward curves at the balance sheet date, adjusted to
reflect the value of forward contracts in place. The fair value of
these contracts is included in the carrying amount.
A 0% (2022: 0%) terminal growth rate is applied beyond the
five-year term of the plan, representing a sensitised view of the
Group's estimate of the long-term growth rate of the sector. Whilst
such long-term rates are inherently difficult to benchmark using
independent data, the Group's reverse stress-testing of the
goodwill impairment model indicated a significant negative terminal
decline would be required in order to eliminate the headroom
completely.
The forecast cash flows are discounted at a pre-tax rate of
12.0% (2022: 12.0%). The discount rate is derived from a
calculation using the capital asset pricing model to calculate cost
of equity utilising available market data. The discount rate is
compared to the published discount rates of comparable businesses
and relevant industry data prior to being adopted.
No impairment loss was identified. The valuation indicates
sufficient headroom such that any reasonably possible change to the
key assumptions would not result in an impairment of the related
goodwill.
Impairment Testing: Intangible assets not yet available for
use
Both the Getting Personal and cardfactory Online CGUs include
intangible assets that are not yet available for use. Accordingly,
an impairment test in respect of these CGUs was carried out at 31
January 2023.
The total carrying amount of the Getting Personal and
cardfactory Online CGUs for impairment testing purposes, inclusive
of liabilities that are necessarily considered in determining the
recoverable amount, at 31 January 2023 was not material either
individually or in aggregate. The value of intangible assets not
yet available for use included in the carrying amount was GBP3.5
million.
The key assumptions are consistent with those set out above in
respect of the goodwill impairment review, with the exception of
foreign exchange rates which are not significant to the analysis
for these CGUs. To ensure the analysis fairly reflected the
expected value in use of the assets within each CGU, the estimated
future cash flows included all costs to complete the assets under
development and sales associated with those assets once deployed
into use.
No impairment loss above that already recorded (above) in
respect of either CGU was identified. The cardfactory Online
valuation indicated sufficient headroom such that any reasonably
possible change in assumptions would not result in an impairment
charge. The Getting Personal valuation headroom was limited,
reflecting the impairment charge recorded in respect of intangible
assets; however given the immaterial remaining carrying amount, any
change in assumptions would not materially change the impairment
charge for the period.
10 Leases
The Group has lease contracts, within the definition of IFRS 16
Leases, in relation to its entire store lease portfolio, some
warehousing office locations, an office location and motor
vehicles. Other contracts, including distribution contracts and IT
equipment, are deemed not to be a lease within the definition of
IFRS 16 or are subject to the election not to apply the
requirements of IFRS 16 to short-term or low value leases.
Accounting policies for leases are detailed in note 1. Assets,
liabilities and the income statement expense in relation to leases
are detailed below.
Right-of-use assets
Buildings Motor Vehicles Total
GBP'm GBP'm GBP'm
---------------------------------- --------- -------------- ------
Cost
---------------------------------- --------- -------------- ------
At 1 February 2022 300.6 1.3 301.9
---------------------------------- --------- -------------- ------
Additions 39.4 0.2 39.6
---------------------------------- --------- -------------- ------
Disposals (60.7) (0.7) (61.4)
---------------------------------- --------- -------------- ------
Effect of foreign exchange rates - - -
---------------------------------- --------- -------------- ------
At 31 January 2023 279.3 0.8 280.1
---------------------------------- --------- -------------- ------
Depreciation and impairment
---------------------------------- --------- -------------- ------
At 1 February 2022 202.5 0.9 203.4
---------------------------------- --------- -------------- ------
Depreciation in the period 35.3 0.4 35.7
---------------------------------- --------- -------------- ------
Impairment charges in the period 3.7 - 3.7
---------------------------------- --------- -------------- ------
Impairment reversed in the period (2.4) - (2.4)
---------------------------------- --------- -------------- ------
Depreciation on disposals (59.4) (0.7) (60.1)
---------------------------------- --------- -------------- ------
Impairment on disposals (0.7) - (0.7)
---------------------------------- --------- -------------- ------
Effect of foreign exchange rates - - -
---------------------------------- --------- -------------- ------
At 31 January 2023 179.0 0.6 179.6
---------------------------------- --------- -------------- ------
Net book value
---------------------------------- --------- -------------- ------
At 31 January 2023 100.3 0.2 100.5
---------------------------------- --------- -------------- ------
At 31 January 2022 98.1 0.4 98.5
---------------------------------- --------- -------------- ------
Buildings Motor Vehicles Total
GBP'm GBP'm GBP'm
--------------------------------- --------- -------------- ------
Cost
--------------------------------- --------- -------------- ------
At 1 February 2021 316.3 1.6 317.9
--------------------------------- --------- -------------- ------
Additions 29.7 0.1 29.8
--------------------------------- --------- -------------- ------
Disposals (45.2) (0.4) (45.6)
--------------------------------- --------- -------------- ------
Effect of foreign exchange rates (0.2) - (0.2)
--------------------------------- --------- -------------- ------
At 31 January 2022 300.6 1.3 301.9
--------------------------------- --------- -------------- ------
Depreciation and impairment
--------------------------------- --------- -------------- ------
At 1 February 2021 205.7 0.8 206.5
--------------------------------- --------- -------------- ------
Depreciation in the period 37.0 0.4 37.4
--------------------------------- --------- -------------- ------
Impairment in the period 5.0 - 5.0
--------------------------------- --------- -------------- ------
Depreciation on disposals (44.3) (0.3) (44.6)
--------------------------------- --------- -------------- ------
Impairment on disposals (0.8) - (0.8)
--------------------------------- --------- -------------- ------
Effect of foreign exchange rates (0.1) -- (0.1)
--------------------------------- --------- -------------- ------
At 31 January 2022 202.5 0.9 203.4
--------------------------------- --------- -------------- ------
Net book value
--------------------------------- --------- -------------- ------
At 31 January 2022 98.1 0.4 98.5
--------------------------------- --------- -------------- ------
At 31 January 2021 110.6 0.8 111.4
--------------------------------- --------- -------------- ------
Disposals and depreciation/impairment on disposals includes
fully depreciated right-of-use assets where the lease term has
expired, including amounts in respect of leases that have expired
but the asset remained in use whilst a new lease was
negotiated.
Impairment Testing: Store assets
Reflecting continued macro-economic uncertainty, cost inflation
and the existence of loss making stores within the portfolio, the
Group considers that an indicator of potential impairment exists in
respect of the store portfolio and, accordingly, an impairment
review of the Group's store assets was undertaken in the 2023
financial year.
For this purpose, each of the Group's stores is considered to be
a CGU, with each store's carrying amount determined by assessing
the value of right-of-use assets and property, plant and equipment
insofar as they are directly allocable to an individual store. The
assessment of whether an indicator of impairment may exist in
respect of store assets is considered across the store portfolio
and not on a store-by-store basis. Accordingly, the store
impairment review considers all stores in the portfolio.
The recoverable amount of each store was determined based on the
expected future cash flows applicable to each store, assessed using
a basis consistent with the future cash flows used in the goodwill
impairment test described in note 9, but limited to the term of the
current lease as assessed under IFRS 16. As a result, the key
assumptions are also considered to be consistent with those
described in note 10, in addition to the allocation of central and
shared costs to individual stores insofar as such an allocation can
be made on a reasonable and consistent basis. Most such costs are
allocated on the basis of the relative sales of each individual
store.
Application of these assumptions resulted in a net impairment
charge of GBP1.3 million (2022: GBP5.0 million), comprised of
impairment charges of GBP3.7 million (2022: GBP5.0 million) and the
reversal of previous impairment charges of GBP2.4 million (2022:
GBPnil).
Having conducted scenario analysis, the Group does not consider
any reasonably possible change in the key assumptions would result
in a material change to the impairment charge.
Lease liabilities
2023 2022
GBP'm GBP'm
------------------------------ ------- -------
Current lease liabilities (27.3) (41.1)
------------------------------ ------- -------
Non-current lease liabilities (78.1) (78.7)
------------------------------ ------- -------
Total lease liabilities (105.4) (119.8)
------------------------------ ------- -------
Lease expense:
2023 2022
Total lease related expenses GBP'm GBP'm
------------------------------------------------------- ------ ------
Depreciation expense on right-of-use assets 35.7 37.4
------------------------------------------------------- ------ ------
Impairment of right-of-use assets 1.3 5.0
------------------------------------------------------- ------ ------
Profit on disposal of fixed assets (0.5) -
------------------------------------------------------- ------ ------
Lease interest 4.5 3.3
------------------------------------------------------- ------ ------
Expense relating to short-term and low value leases(1) - -
------------------------------------------------------- ------ ------
Expense relating to variable lease payments(2) 0.2 0.2
------------------------------------------------------- ------ ------
Total lease related income statement expense 41.2 45.9
------------------------------------------------------- ------ ------
1 Contracts subject to the election not to apply the
requirements of IFRS 16 to short-term or low value leases.
2 A small proportion of the store lease portfolio are subject to
an element of turnover linked variable rents that are excluded from
the definition of a lease under IFRS 16.
11 Cash and cash equivalents
2023 2022
GBP'm GBP'm
---------------------------------------------------------- ------ ------
Cash at bank and in hand 11.7 38.3
---------------------------------------------------------- ------ ------
Cash presented as current assets in the balance sheet 11.7 38.3
---------------------------------------------------------- ------ ------
Unsecured bank overdraft (1.8) -
---------------------------------------------------------- ------ ------
Overdraft presented as current liabilities in the balance
sheet (1.8) -
---------------------------------------------------------- ------ ------
Net cash and cash equivalents 9.9 38.3
---------------------------------------------------------- ------ ------
The Group manages its liquidity requirements on a Group-wide
basis and regularly sweeps and pools cash in order to optimise
returns and / or ensure the most efficient deployment of borrowing
facilities in order to minimise fees whilst maintaining sufficient
short-term liquidity to meet its liabilities as they fall due.
Cash in bank accounts and overdrafts are presented net where the
Group has a legal right to offset amounts - such as those with the
same banking provider or included in netting arrangements under its
financing facilities.
The Group's cash and cash equivalents are denominated in the
following currencies:
2023 2022
GBP'm GBP'm
---------- ------ ------
Sterling 0.2 21.5
---------- ------ ------
Euro 4.8 1.4
---------- ------ ------
US Dollar 4.9 15.4
---------- ------ ------
9.9 38.3
---------- ------ ------
12 Borrowings
2023 2022
GBP'm GBP'm
-------------------------------- ------ ------
Current liabilities
-------------------------------- ------ ------
Bank loans and accrued interest 48.3 25.5
-------------------------------- ------ ------
Bank overdraft 1.8 -
-------------------------------- ------ ------
Total current liabilities 50.1 25.5
-------------------------------- ------ ------
Non-current liabilities
-------------------------------- ------ ------
Bank loans 17.4 85.5
-------------------------------- ------ ------
Current liabilities includes bank loans where the liability is
due to be settled in the next 12 months (such as scheduled
repayments in respect of secured term loans and CLBILs) or where
the Group does not have an unconditional right to defer repayment
beyond 12 months (such as revolving facilities subject to covenant
requirements).
Bank loans
Bank borrowings as at 31 January 2023 are summarised as
follows:
Interest
margin
Interest ratchet
Liability rate range
GBP'm % %
------------------------- --------- ------------ -------- -----------------------------
31 January 2023
------------------------- --------- ------------ -------- -----------------------------
Secured term loans
- Tranche 'A' 9.0 5.00 + SONIA -
------------------------- --------- ------------ -------- -----------------------------
Secured term loans
- Tranche 'B' 18.8 5.50 +SONIA -
------------------------- --------- ------------ -------- -----------------------------
Secured CLBILs 16.1 See note -
------------------------- --------- ------------ -------- -----------------------------
Secured revolving credit Margin + 2.75 - Total facility size = GBP100
facility 23.0 SONIA 4.50 million
------------------------- --------- ------------ -------- -----------------------------
Accrued interest 0.2
------------------------- --------- ------------ -------- -----------------------------
Bank overdraft 1.8
------------------------- --------- ------------ -------- -----------------------------
Debt issue costs (1.4)
------------------------- --------- ------------ -------- -----------------------------
67.5
------------------------- --------- ------------ -------- -----------------------------
31 January 2022
------------------------- --------- ------------ -------- -----------------------------
Interest rate increases 1.00%
Secured term loans 67.2 4.50 + SONIA - every six months
------------------------- --------- ------------ -------- -----------------------------
Secured CLBILs 44.8 See note. -
------------------------- --------- ------------ -------- -----------------------------
Secured revolving credit Margin + 2.75 - Total facility size = GBP100
facility - SONIA 4.50 million
------------------------- --------- ------------ -------- -----------------------------
Accrued interest 0.5
------------------------- --------- ------------ -------- -----------------------------
Debt issue costs (1.5)
------------------------- --------- ------------ -------- -----------------------------
111.0
------------------------- --------- ------------ -------- -----------------------------
On 21 April 2022, the Group agreed an updated and amended
financing package with its banking partners, which reduced the
overall quantum and extended the term of the Group's
facilities.
The revised facilities comprised term loans of GBP30 million,
CLBILS of GBP20 million and an RCF of GBP100 million. The CLBILS
are subject to an amortising repayment profile with final maturity
in September 2023. The Term Loans are set in two tranches, both
with an amortising repayment profile. Tranche 'A' has a final
maturity in January 2024 and Tranche 'B' is coterminous with the
RCF in September 2025.
The Term Loan 'A' interest rate margin was 5.0% over SONIA, and
the Term Loan 'B' interest rate margin was 5.5% over SONIA. The
CLBILS facilities attract interest rates of between 3.1% and 3.75%
over SONIA or the Bank of England Base Rate. The RCF, when drawn,
is subject to an interest rate ratchet of between 2.75% and 4.5%
over SONIA based upon the Group's leverage position.
The revised Term Loan and CLBILS facilities were drawn in full
from the refinancing date, with the RCF drawn to replace the
existing term loans and CLBILs that were paid down. The RCF was
subsequently drawn during the period to support liquidity when
needed and includes up to GBP17.5 million that can be utilised as
an overdraft facility on certain of the Group's bank accounts. The
full RCF remains available to draw on if required, with GBP75.2
million of undrawn committed facilities available to the Group at
the balance sheet date.
Total repayments in respect of the revised Term Loan and CLBILS
facilities during FY23 were GBP6.1 million.
At the balance sheet date, the Group remained subject to two
financial covenants, tested quarterly, in relation to leverage
(ratio of net debt to EBITDA) and interest cover (ratio of interest
and rent costs to EBITDA). Covenant thresholds are phased to return
to 2.5x leverage and 1.75x interest cover by January 2024. In
addition, the terms of the facilities prevent the Group from making
any distributions to shareholders whilst the CLBILS and Term Loan
'A' remain outstanding and places a limit on the total value of
capital expenditure the Group can make in each financial year to
FY25. The Group expects to be able to operate and have sufficient
headroom within these covenants to deliver its strategy.
Debt issue costs in respect of the April 2022 refinancing
totalled GBP1.8 million and are being amortised to the income
statement over the duration of the revised facilities.
13 Notes to the cash flow statement
Reconciliation of operating profit to cash generated from
operations:
2023 2022
GBP'm GBP'm
------------------------------------------------------- ------ ------
Profit before tax 52.4 11.1
------------------------------------------------------- ------ ------
Net finance expense 11.4 20.5
------------------------------------------------------- ------ ------
Operating profit 63.8 31.6
------------------------------------------------------- ------ ------
Adjusted for:
------------------------------------------------------- ------ ------
Depreciation and amortisation 46.0 49.1
------------------------------------------------------- ------ ------
Impairment of right-of-use assets 1.3 5.0
------------------------------------------------------- ------ ------
Impairment of intangible assets 1.5 -
------------------------------------------------------- ------ ------
Gain on disposal of fixed assets (0.5) -
------------------------------------------------------- ------ ------
Cash flow hedging foreign currency movements 0.8 (1.4)
------------------------------------------------------- ------ ------
Share-based payments charge 1.7 0.8
------------------------------------------------------- ------ ------
Operating cash flows before changes in working capital 114.6 85.1
------------------------------------------------------- ------ ------
(Increase)/decrease in receivables (5.2) 1.1
------------------------------------------------------- ------ ------
(Increase)/decrease in inventories (12.2) 3.3
------------------------------------------------------- ------ ------
Increase/(decrease) in payables 15.4 11.9
------------------------------------------------------- ------ ------
Movement in provisions (4.8) 12.2
------------------------------------------------------- ------ ------
Cash inflow from operating activities 107.8 113.6
------------------------------------------------------- ------ ------
14 Analysis of net debt
At 31
At 1 February Non-cash January
2022 Cash flow changes 2023
GBP'm GBP'm GBP'm GBP'm
---------------------------------------- ------------- --------- -------- --------
Secured bank loans and accrued interest
(note 12) (111.0) 51.4 (6.1) (65.7)
---------------------------------------- ------------- --------- -------- --------
Lease liabilities (119.8) 57.0 (42.6) (105.4)
---------------------------------------- ------------- --------- -------- --------
Total debt (230.8) 108.4 (48.7) (171.1)
---------------------------------------- ------------- --------- -------- --------
Add: debt costs capitalised (1.5) (1.8) 1.9 (1.4)
---------------------------------------- ------------- --------- -------- --------
Add: bank overdraft - (1.8) - (1.8)
---------------------------------------- ------------- --------- -------- --------
Less: cash and cash equivalents 38.3 (26.6) - 11.7
---------------------------------------- ------------- --------- -------- --------
Net debt (194.0) 78.0 (46.8) (162.6)
---------------------------------------- ------------- --------- -------- --------
Lease liabilities 119.8 (57.0) 42.6 105.4
---------------------------------------- ------------- --------- -------- --------
Net debt excluding lease liabilities (74.2) 21.1 (4.1) (57.2)
---------------------------------------- ------------- --------- -------- --------
At 1 February Non-cash At 31 January
2021 Cash flow changes 2022
GBP'm GBP'm GBP'm GBP'm
---------------------------------------- ------------- --------- -------- -------------
Secured bank loans and accrued interest
(note 12) (119.0) 8.0 - (111.0)
---------------------------------------- ------------- --------- -------- -------------
Lease liabilities (144.9) 57.8 (32.7) (119.8)
---------------------------------------- ------------- --------- -------- -------------
Total debt (263.9) 65.8 (32.7) (230.8)
---------------------------------------- ------------- --------- -------- -------------
Add: debt costs capitalised (1.2) (8.7) 8.4 (1.5)
---------------------------------------- ------------- --------- -------- -------------
Less: cash and cash equivalents 12.5 25.8 - 38.3
---------------------------------------- ------------- --------- -------- -------------
Net debt (252.6) 82.9 (24.3) (194.0)
---------------------------------------- ------------- --------- -------- -------------
Lease liabilities 144.9 (57.8) 32.7 119.8
---------------------------------------- ------------- --------- -------- -------------
Net debt excluding lease liabilities (107.7) 25.1 8.4 (74.2)
---------------------------------------- ------------- --------- -------- -------------
Non-cash changes in respect of lease liabilities reflect changes
in the carrying amount of leases arising from additions, disposals
and modifications.
15 Provisions
Covid-19-related Property
support provisions Total
GBP'm GBP'm GBP'm
------------------------------------ ---------------- ----------- ------
At 1 February 2021 - -
------------------------------------ ---------------- ----------- ------
Provisions made during the year 12.2 12.2
------------------------------------ ---------------- ----------- ------
At 31 January 2022 12.2 12.2
------------------------------------ ---------------- ----------- ------
Transfer from contract liabilities - 2.5 2.5
------------------------------------ ---------------- ----------- ------
Provisions utilised during the year (2.3) (0.9) (3.2)
------------------------------------ ---------------- ----------- ------
Provisions released during the year (2.5) (0.9) (3.4)
------------------------------------ ---------------- ----------- ------
Amounts provided during the year - 1.4 1.4
------------------------------------ ---------------- ----------- ------
At 31 January 2023 7.4 2.1 9.5
------------------------------------ ---------------- ----------- ------
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.
However, the actual amount that will be repaid is not certain.
In July 2022, following an unprompted disclosure to HMRC and
resulting investigation, the Group made a payment of GBP2.3 million
in final settlement of its CJRS position. As a result of this
settlement, the Group released a further GBP2.5 million from the
provision that is no longer expected to be required, as the matter
is now closed. This release has been recognised as a one-off
benefit in the income statement in the period.
The remaining provision relates to covid-related lockdown grants
and similar support schemes. The Group is taking steps to confirm
amounts repayable and settle its positions. This exercise is
expected to conclude within the next financial year.
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. Such
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. Accordingly such
provisions are generally expected to be utilised in the short-term.
Amounts relating to property provisions, previously recognised and
presented within contract liabilities, have been reclassified to
provisions in the year. Comparative balances have not been
reclassified as the amounts are not considered material.
16 Subsequent events
Acquisition of SA Greetings Corporation (Pty) Limited
On 25 April 2023, the Group acquired 100% of the issued share
capital of SA Greetings Corporation (Pty) Ltd ("SA Greetings") a
wholesaler and retailer of greetings cards and gift packaging based
in South Africa, for fixed cash consideration of GBP2.5
million.
The acquisition enables the Group to access the South African
card and gifts market and is aligned with the Group's strategy to
expand internationally. In the future, we expect the acquisition to
provide opportunities to develop the Group's retail partnerships
business, alongside the Group's production capability and retail
offer both in South Africa and the UK.
Given the short time between the acquisition date and the
approval of these condensed consolidated financial statements, the
initial acquisition accounting has not been completed and
accordingly the full disclosures required by IFRS 3 are not
provided in these condensed consolidated financial statements. The
Group expects to initially conclude the accounting in time to
include these disclosures in its half year report for FY24.
In its unaudited management accounts for the year ended 28
February 2023, SA Greetings reported revenue of GBP9.4 million,
profit before tax of GBP0.2 million and net assets of GBP5.8
million (all figures converted using a GBPZAR rate of 20:1).
Acquisition-related costs have been expensed to the income
statement as incurred, the value of such costs recognised in the
year-ended 31 January 2023 was immaterial.
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END
FR EAESAEFFDEAA
(END) Dow Jones Newswires
May 03, 2023 02:00 ET (06:00 GMT)
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