TIDMCARD
RNS Number : 1403N
Card Factory PLC
28 September 2021
28 September 2021
Card Factory plc ("Card Factory" or the "Group")
Interim results for the six months ended 31 July 2021
Results in line with expectations
Business review successfully completed - transformation underway
to omni-channel model
to deliver sustainable revenue and profit growth
Target over GBP600m of sales by FY 2026
Card Factory, the UK's leading specialist retailer of greeting
cards and complementary products, announces its
interim results for the six months ended 31 July 2021 ('HY22')
and an update on its long-term strategy.
Business highlights
-- Strategy and business review successfully completed -
transformation to an omni-channel model will position business for
future growth
-- Results in line with the Board's expectations, reflecting the
impact of 10+ weeks of store closures across the UK and Republic of
Ireland during lockdown in the period
-- Store footfall levels below pre-pandemic levels but
outperforming high street averages, demonstrating strength of brand
and customer proposition. Increased average basket value across
multiple categories, offsetting reduction in transaction volumes
given reduced footfall
-- Online performing well, albeit with a slight reduction in
demand as stores re-opened as anticipated
-- Continued investment planned to drive future growth
-- Group remains cash generative, with operating cash flow of
GBP36.1m (HY21: GBP25.2m), driven by improved trading performance,
favourable working capital movements and capex light model
-- Net debt (excluding lease liabilities) reduced to GBP96.5m
from GBP107.7m as at 31 January 2021, continued focus on
maintaining conservative yet efficient capital structure
Financial summary
Financial Metrics Note HY22 HY21 Change
------------------------------------ ------ ---------- ----------- -----------
Revenue GBP116.9m GBP100.5m 16.3%
Card Factory LFL sales (traded
days v FY20) (i) (3.7%) 1.6% (5.3 ppts)
Profit before tax (GBP6.5m) (GBP22.2m) 70.7%
EBITDA (i) GBP23.6m GBP7.8m 202.6%
Basic EPS (1.5p) (5.2p) 70.7%
Net Debt (excl. lease liabilities) (i) GBP96.5m GBP143.9m (32.9%)
------------------------------------ ------ ---------- ----------- -----------
Notes to table above:
i. See explanatory Note 1 "Alternative Performance Measures" for
further information and definitions.
Darcy Willson-Rymer, Chief Executive Officer, commented:
"Since joining the Group one of my priorities has been to review
the business and its growth strategy. Having recently completed
that process, I remain extremely excited about the opportunities
available to Card Factory.
"The delivery of the growth strategy set out in July 2020 - and
the broader retail environment itself - has obviously been impacted
by Covid-19. However, it is clear that the right way forward is to
transition Card Factory from being a store led card retailer into a
market leading, omni-channel retailer of cards and gifts. Whilst
cards will remain the largest part of our business in terms of
total contribution, we will substantially increase our focus on the
complementary gifting and party markets, enhancing our customer
offer and significantly increasing the size of our addressable
market. The successful delivery of our strategy will be achieved by
putting the customer at the heart of everything we do - ensuring
that we provide outstanding value and quality across all our
products and services, available however our customers want to
shop.
"Although there remains some uncertainty about the speed of the
post-pandemic market recovery in the short term, I firmly believe
in both the resilience of the card and gifting markets and the fact
that the majority of customer spend will remain in stores for the
years to come. We look forward to successfully executing our
strategy to transition Card Factory into a market leading
omni-channel retailer of cards and gifts, delivering sustainable
revenue and profit growth and driving value for all our
stakeholders."
Revised long-term guidance
The Group set long-term financial targets at the Capital Markets
Day in July 2020. Given the impact of the Covid-19 pandemic, and in
particular the second and third UK lockdowns which were not
envisaged at the time of the Capital Markets Day, those targets are
no longer valid and have been replaced. The new long-term guidance
is as follows:
- revenues in excess of GBP600 million for FY26, of which the
Company expects approximately 20 per cent. to come from online
& multi-channel and retail partnerships.
- expected shift in product and channel mix, alongside
investment to result in PBT margin trending towards 17% over the
longer term.
Interim results webcast
There will be an interim results webcast for analysts and
investors today, starting at 10.00am, and registration is available
via the link here .
Those analysts who wish to attend by telephone are requested to
contact Yasemin Balman of Tulchan Communications on the number
provided below or by emailing cardfactory@tulchangroup.com .
A copy of the webcast and accompanying presentation will be made
available on the day via the Card Factory investor relations
website: www.cardfactoryinvestors.com .
Enquiries
Card Factory plc via Tulchan Communications (below)
Darcy Willson-Rymer, Chief Executive Officer
Kris Lee, Chief Financial Officer
Tulchan Communications +44 (0) 207 353 4200
James Macey White / Elizabeth Snow / Victoria Boxall cardfactory@tulchangroup.com
Card Factory plc ("Card Factory" or the "Group")
Interim results for the six months ended 31 July 2021
BUSINESS UPDATE
Card Factory's growth strategy
Following the appointment of Darcy Willson-Rymer in March 2021
as Chief Executive, Darcy has led a full review of the business and
strategy. Following this review the Board has broadened its
ambition and vision for the Group, which is now focused on making
Card Factory the UK's most successful omni-channel retailer of
cards and gifts with a strong international presence - with a clear
shift in focus from being a product led business to a customer
focused business.
There are multiple opportunities for Card Factory to capitalise
upon as it works towards this ambition. These opportunities include
increasing its ranges in the complementary party and gift
categories; development into omni-channel retail to improve the
customer experience; further geographical expansion in the UK,
Republic of Ireland and - in due course - internationally; and
broadening the target market to capture spend from less price
sensitive customers. All of these opportunities have been
incorporated in the refreshed strategy, building on the strategy
set out last year, whilst focusing on offering customers unrivalled
quality, value, choice, convenience and experience.
Implementation of the strategy will enable the Group to adapt
effectively to underlying structural changes in consumer behaviour.
The majority of customer spend on cards and gifts across the market
is currently made in store, and we are highly confident that this
trend will continue. As such, a successful omni-channel offering
not only requires growth in online distribution channels and
delivery of products to customers, but a complementary, strong
store portfolio.
Card Factory is uniquely placed to capitalise upon the growth
opportunities available because of its vertically integrated
business model. This model is fully differentiated, robust, and
highly scalable.
The strategy remains based around three pillars:
1. Increasing breadth of product offering: Transformation to an
omni-channel retailer of cards and gifts with a leadership in cards
and increasing presence in complementary categories
-- While continuing to be a card-led retailer in a stable UK
market where 76% of adults are card givers, Card Factory will meet
shopper demand by providing materially expanded complementary
gifting and party ranges, across store and online channels. The
product range expansion will enable Card Factory to better serve
the large gifting and party market, worth GBP40bn per annum in the
UK, capturing more customer spend and increasing average basket
value. In addition to new complementary categories such as
confectionary and stationery, existing card ranges will be
broadened by the introduction of new contemporary categories. As we
increase our focus on complementary, higher value, lower margin
products and basket mix shifts accordingly, we anticipate a
reduction in the Group's percentage margin, which is reflected in
our revised long-term guidance;
-- Use new data capabilities, including through the rollout of
the Group's new ERP platform in Q4 2021, to understand and respond
rapidly to changing shopper habits and preferences. Among other
benefits, this will enable Card Factory to gain better insight on
price elasticity, enabling it to evolve its pricing approach whilst
maintaining high levels of customer satisfaction;
-- Continue to invest in the Card Factory brand, with emphasis
on the Group's quality and value focus, to increase shopper
awareness and improve trust; and
-- Build upon Card Factory's ESG policy to be recognised as a
socially and environmentally responsible business. We will be a
positive contributor in the communities we are present in.
2. Create a full omni-channel offer: Improving availability and
access to our products, however customers choose to shop; enhancing
convenience and experience for shoppers
-- Transform the business from a predominantly store-driven
retail model to a full omni-channel offer that uses new and
existing infrastructure to become the first card and gifting
retailer to provide a seamless physical and online shopper
experience. This will provide access to card, gift and personalised
products anytime, anywhere, through Card Factory's stores, website,
apps and click & collect and home delivery services; allowing
Card Factory to significantly increase its online market share
while strengthening its store estate sales;
-- By providing an improved omni-channel service, Card Factory
will enhance the shopper experience and access to its offer by
being the first specialised card and gifting brand to combine an
effective digital proposition with its store estate;
-- Multiple actions have been identified to leverage our
existing assets and capabilities with modest, disciplined
investment and accelerate the transformation to a full omni-channel
offer and the growth of online, including near term investment to
provide access to an extended product range, support and services
online; increase the range of shipping options to home or store;
enable customers to access the brand and offer on the move, via
apps and instore; increase fulfilment capacity, accuracy and speed
to deliver; enable customers to self-serve throughout the journey,
supported by AI experience (recommendations, personalisation,
notifications, live chat) and create an enterprise set of business
capabilities to open new channels, categories, audiences and
territories...at lower cost and at speed;
-- The store portfolio will be optimised to ensure Card Factory
has profitable stores in high footfall locations, with 100 net new
stores added to the existing portfolio of over 1000 stores across
the UK and Republic of Ireland, by FY2026. The Group will target
under penetrated areas, including London, the Republic of Ireland,
and areas of high footfall, including retail parks. The store
optimisation programme will continue with locations selected based
on profitability and returns. The low lease lengths across the
store portfolio provide additional flexibility and optionality,
ensuring an effective overall store portfolio; and
-- The partnership model will allow Card Factory to reach more
UK shoppers for minimal investment in additional convenient
locations that meet the growing demand for impulse buying.
International partnerships will allow Card Factory to expand into
new markets that show attractive characteristics for entry and
disruption. The partnership strategy will deploy different
operating models at differentiated margins.
3. A robust and scalable central model that continues to provide
Card Factory with a distinct competitive advantage
-- Card Factory's vertically integrated business model will
remain a unique point of difference, affording great flexibility to
respond to market changes and enabling efficient, high-quality
design and production at attractive margins, supporting online
channel growth and retail partners with lower costs per unit.
Completion of successful re-financing
As previously announced on 21 May 2021, Card Factory completed a
GBP225m refinancing during the period. The facilities are
structured to incentivise an early reduction of overall debt, with
fees of up to GBP5m payable if pre-payments are not made in line
with specified dates by 30 November 2021 through until 30 July
2022. The Company is permitted to facilitate these repayments
through the issue of new equity or by using funding from
subordinated debt sources. The Company continues to evaluate the
options available to the Group and will update further as
appropriate.
Performance in the period
Notwithstanding the impact of the COVID-19 pandemic and the
challenges and uncertainties that the retail sector has faced
during the period, the business performed well in the first half.
We have continued to provide our customers great products at
excellent value despite the unprecedented pressures. This is
testament to the hard work and dedication of everyone associated
with Card Factory.
High street footfall remains below pre-pandemic levels,
impacting transaction volumes with Springboard reporting footfall
for HY22 (from April 2021) being down 27.4% on a LFL basis compared
to HY20. Average basket value has increased by 27.8% to
substantially offset the decline in transaction volumes. This is
due primarily to consumers spending more across fewer shopping
trips.
We have continued our estate review and the evolution of our
store portfolio, with a focus on higher footfall locations and
store profitability. The net number of stores increased by three
stores during the period to 1,019. LFL store revenue declined by
7.2% in the period compared to HY20 (HY21 -4.4% compared to
HY20).
Online sales performed strongly compared to HY20, i.e.,
pre-COVID-19, with revenues increasing by 50.2% compared to HY20
(HY21 +64.4% compared to HY20). As a result of stores being open
for a larger proportion of HY22 compared to HY21, total HY22 online
revenue declined by 10.3% and net transactions by 8%, with a 20.7%
decline in gettingpersonal.co.uk revenues offset in part by a 4.8%
increase in revenue from cardfactory.co.uk and 5% increase in
average basket value.
HY22 HY21 Increase/
GBP'm GBP'm (Decrease)
--------------------------- ------- ------- ------------
www.cardfactory.co.uk 5.7 5.4 4.8%
www.gettingpersonal.co.uk 6.2 7.9 (20.7%)
--------------------------- ------- ------- ------------
Total online revenue 11.9 13.3 (10.3%)
--------------------------- ------- ------- ------------
The partnership channel performed well with revenue LFL growth
of 17.8% during the period with revenue of GBP2.3m in HY22 (GBP1.9m
HY21), and the total number of locations growing to 908 from 894.
Card Factory's performance at Aldi was strong and remained
resilient during lockdown, while our contract with Aldi was also
successfully renewed. However, Card Factory's performance at TRS
and Matalan was impacted by Covid-19 related trading restrictions.
During the period we made targeted investments which will support
the business towards its long-term growth targets. Investments
during the period include IT infrastructure upgrades, including
investment in respect of the ERP implementation, sortation and
packing equipment, initial investment in marketing capability and
select store openings. We will continue to invest across the
business as we deliver against our refreshed strategy. Our focus
remains on providing excellent customer service and satisfaction by
ensuring customers can buy what they want in the way which is most
convenient to them, thereby increasing customer spend and retention
and accelerating revenue and profit growth. We are highly confident
that delivery of our refreshed strategy will ensure we are in the
best position to exploit the multiple growth opportunities
available.
Preparations for Christmas
The senior leadership team has made further enhancements to
preparations for the upcoming Christmas season, including
introduction of auto replenishment for complementary ranges, early
launch of seasonal staff recruitment, introduction of additional
warehouse shifts to meet seasonal demand. We have completed
store-by-store analysis to ensure that product ranges are located
and displayed in a way that provides our customers with the safest
and most effective way for them to shop. Further contingency
planning has been undertaken to maximise sales in when stock gaps
inevitably occur due to the reported supply chain capacity issues,
and potential driver and worker shortfalls, including maximising
opportunities through Printcraft.
Current trading and outlook
We are satisfied with trading since the period end, with
better-than-expected performance driven by improvements across all
areas of the business. Online is trading in-line with our
expectations and in store footfall and transaction volumes continue
to recover, albeit transaction volumes remain 21.9% below
pre-pandemic levels. Average basket value remains higher than
pre-pandemic levels, with basket mix reflecting our broader product
offering, offsetting lower footfall. LFL trading post period end
for the 7 weeks to 19 September is -3.6% and -6.3% versus the
equivalent period in FY21 and FY20 respectively.
Notwithstanding short-term uncertainty around the speed of the
market recovery the well-publicised disruption that is being seen
in the supply chain, shortage of staff heading into Christmas,
increasing freight costs, increased energy costs and adverse
product mix, we remain cautiously positive about the second half of
FY22.
We have worked extensively to make sure we are as well prepared
as possible for the forthcoming Christmas period to minimise the
potential disruption from driver and labour shortages. We will
continue to invest across our channels, widening the range of
products available online and in store, and ensuring the online
platform and order fulfilment capacity is able to scale to support
future growth. In addition, we will continue to develop our
customer insight tools to ensure that we continue to deliver best
in class shopper experience and customer satisfaction.
In the longer term we strongly believe in the resilience and
stability of the card market, which is well insulated from market
headwinds, and the potential for the Group within the gifting
segment, worth GBP40bn in the UK. The Board remains confident that
the refreshed growth strategy will deliver sustainable revenue and
profit growth, resulting in revenues in excess of GBP600m by 2026,
through better serving our customers and securing higher customer
spend. We remain committed to maximising shareholder value in a
sustainable manner as we deliver against the implementation of our
strategy.
CHIEF FINANCIAL OFFICER'S REVIEW
The HY22 accounting period refers to the six months ended 31
July 2021 and the comparative period "HY21" refers to the six
months ended 31 July 2020.
Revenue
Total Group revenue during the period increased by 16.3% to
GBP116.9m (HY21: GBP100.5m), driven by the impact on trading of
Covid-19 related lockdowns:
HY22 HY21 Increase/
GBP'm GBP'm (Decrease)
--------------------- ------- ------- ------------
Card Factory stores 102.7 85.3 20.4%
Online 11.9 13.3 (10.3%)
Retail partnerships 2.3 1.9 17.8%
--------------------- ------- ------- ------------
Group 116.9 100.5 16.3%
--------------------- ------- ------- ------------
Like-for-like ("LFL") sales growth is broken down below (LFL
measure excludes periods where stores were closed due to lockdown).
Due to the impact of Covid-19, HY20 has been used as the
comparative sales period for both HY22 and HY21 LFLs. Store sales
are compared only for the days when each Card Factory store was
open for trade:
HY22 (cf HY21 (cf
HY20) HY20)
--------------------- --------- ---------
Card Factory stores (7.2%) (4.4%)
Card Factory online 167.9% 153.6%
--------------------- --------- ---------
Card Factory LFL (3.7%) 1.6%
--------------------- --------- ---------
Getting Personal 6.9% 31.8%
--------------------- --------- ---------
Ongoing improvements to the depth, quality and merchandising of
our complementary product offering led to a continuation of the mix
shift to this category. In addition, the business has placed
increased emphasis on its Everyday card offering, to ensure
customers have the widest choice of card type and greeting
messages. The half-year mix for HY22 was 47.3% single cards (HY21:
52.9%), 52.7% complementary product (HY21 47.1%).
Revenue from the Card Factory transactional website grew by
167.9% (HY21: 153.6%) versus HY20 as the impact of lockdown saw a
significant increase in visitor numbers.
Performance at Getting Personal was also encouraging, with
revenue growing 6.9% (HY21: 31.8%) versus HY20, driven by customers
increasing shopping online during mandatory store closures, driving
higher sales in both cards and gifting.
Operating costs
Cost of sales and operating expenses can be analysed as
follows:
HY22 HY22 HY22 % of revenue GBP
% of revenue (Increase) (Increase)
/ Decrease / Decrease
GBP'm
---------------------------- ------- -------------- ------------- -------------
Cost of goods sold 40.9 35.0% 0.8 ppts (13.6%)
Store wages 30.0 25.7% (2.1 ppts) (26.6%)
Store property costs 4.5 3.8% 3.1 ppts 34.8%
Other direct expenses 8.2 7.0% 1.5 ppts 3.5%
Cost of sales 83.6 71.3% 3.4 ppts (11.3%)
Operating expenses* 17.7 15.2% 2.3 ppts (1.1%)
Depreciation, amortisation
& impairment 23.6 20.2% 5.3 ppts 7.8%
Total operating
costs 41.3 35.3% 7.7 ppts 4.4%
---------------------------- ------- -------------- ------------- -------------
HY21 HY21 HY21
% of revenue
GBP'm
---------------------------- ------- --------------
Cost of goods sold 36.0 35.8%
Store wages 23.7 23.6%
Store property costs 6.9 6.9%
Other direct expenses 8.5 8.5%
Total cost of sales 75.1 74.7%
Operating expenses* 17.6 17.5%
Depreciation, amortisation
& impairment 25.6 25.5%
Total operating
costs 43.2 43.0%
---------------------------- ------- --------------
*excluding depreciation, amortisation and impairment
The overall ratio of cost of sales to revenue decreased to 71.3%
(HY21: 74.7%). This decrease was driven by the following movements
in sub-categories:
-- Cost of goods sold ("COGS"): principally comprises cost of
raw materials, production costs, finished goods purchased from
third party suppliers, import duty, freight costs, carriage costs
and warehouse wages. Product COGS (card and complementary product)
improved by 0.8 ppts at constant currency.
-- Store wages: includes wages and salaries (including bonuses)
for store-based staff, together with national insurance
contributions, apprenticeship levy, pension contributions, and
overtime, holiday and sick pay, and is shown net of Government
support through the Coronavirus Job Retention Scheme ("CJRS")
-- Store property costs : within cost of sales relate to
business rates and service charges, and benefits from UK
government's business rates relief of circa 5 months in HY22 and 4
months in HY21.
-- Other direct expenses: includes store opening costs, store
utility costs, waste disposal, store maintenance, point of sale
costs, bank charges and pay per click expenditure. This cost
category is largely variable in respect of the number of stores.
The ratio of other direct expenses to revenue decreased by 1.5 ppts
as certain costs do not change in direct proportion with revenue
impact from store closures, including premises insurance,
electricity, maintenance, and rental of payment terminals.
-- Operating expenses: includes items such as support centre
remuneration, the cost of store estate Heads of Retail and Regional
Managers, design studio costs and business insurance together with
other central overheads and administration costs. Total operating
expenses (excluding depreciation and amortisation) increased by
1.1% to GBP17.7m, representing a decrease from 17.5% to 15.2% as a
percentage of Covid-19 impacted revenue.
-- Depreciation and amortisation , including depreciation and
impairment of right-of-use property lease assets, decreased by 7.8%
to GBP23.6m (HY21: GBP25.6m).
Other Income
GBP8.0m of Government grants received in respect of
non-essential retail closure periods has been presented as Other
Income within the income statement.
EBITDA
HY22 HY21 Increase/
(Decrease)
------------------- ----- ----- ------------
EBITDA (GBPm) 23.6 7.8 202.6%
EBITDA margin (%) 20.2 7.8 12.4 ppts
------------------- ----- ----- ------------
The increase in EBITDA largely reflects the impact from
Covid-19, and the different lengths of lockdowns in the
periods.
National Living Wage cost increases, investment in IT support
and increases in headcount and platform costs for Card Factory
Online also all impacted EBITDA.
The business is likely to continue to face increasing National
Living Wage costs amongst other cost pressures.
Net financing expense
Excluding interest charges pertaining to IFRS 16 Leases, net
financing expense increased to GBP5.0m (HY21: GBP2.7m), due to the
loan issue costs of the renewed financing facilities and
accelerated amortisation of loan issue costs on the previous
facility. Including IFRS 16 Leases interest charges, the net
financing expense increased to GBP6.5m (HY21: GBP4.4m).
HY22 HY21 (Increase)
GBP'm GBP'm /Decrease
------------------------------ ------- ------- -----------
Finance expense
Interest on loans 2.9 2.6 (11.5%)
Loan issue cost amortisation 2.1 0.1 (2000.0%)
IFRS 16 Leases interest 1.5 1.7 11.8%
Net finance expense 6.5 4.4 (47.7%)
Profit before tax
Loss before tax for the period amounted to GBP6.5m (HY21: Loss
before tax GBP22.2m).
Tax
The tax credit of GBP1.3m for the period represents a tax rate
(credit) of 19.2% of loss before tax (HY21: GBP4.5m tax credit,
20.2% tax rate (credit)).
Earnings per share
Basic and diluted losses per share for the period were (1.5p)
(HY21: Losses per share 5.2p).
HY22 HY21 (Increase)
/Decrease
----------- ------- ------- -----------
Basic EPS (1.5p) (5.2p) (70.7%)
----------- ------- ------- -----------
Capital expenditure
Capital expenditure excluding IFRS 16 Leases right of use
assets, amounted to GBP3.5m (HY21: GBP3.5m), principally in
relation to new stores, supply chain investment and ERP
implementation. Total asset additions, including right of use
assets, amounted to GBP 15.0 m (HY21: GBP17.2m).
The Board continues to exercise tight control over capital
expenditure in FY22 as part of cash controls in response to
Covid-19, including postponing a large proportion of its new store
roll out and relocation programme. However, the business still
plans to invest in certain key strategic projects, including
e-commerce platforms, boosting online fulfilment capacity, SAP
implementation and various process improvement investments that
benefit from relatively short pay back periods .
Foreign exchange
With approximately half of its annual cost of goods sold expense
relating to products paid for in US dollars, the Group takes a
prudent but flexible approach to hedging the risk of exchange rate
fluctuations. The Board adopts the policy of using a combination of
vanilla forwards and structured options to hedge this exposure. The
Group has used structured options and similar instruments to good
effect for a number of years and the Board continues to view such
instruments to be commercially attractive as part of a balanced
portfolio approach to exchange rate risk management, even if cash
flow hedge accounting may not be permitted in some instances.
At the year end, we had P&L cost of sales hedging in place
for both FY22 and FY23 with anticipated effective P&L rates of
c.$1.33, although this remains subject to significant shifts in the
value of sterling, which could impact the structured trades that
form part of the hedging portfolio, and the impact of future
trading conditions on hedged cash flows. Structured trades
represent approximately one third of hedges that are yet to
mature.
Cash generation
In the period, the Group remained cash generative, driven by
favourable working capital movements and relatively low ongoing
capital expenditure requirements.
Net Debt & Covenants
As at 31 July 2021, net debt (including debt issue costs of
GBP2.4m) amounted to GBP238.9m, analysed as follows:
HY22 HY22 HY21 HY21
Net Debt Leverage Net Debt Leverage
GBP'm Multiple GBP'm Multiple
-------------------------- ---------- ---------- ---------- ----------
Borrowings
Current liabilities 0.2 1.5
Non-current liabilities 114.6 173.6
-------------------------- ---------- ---------- ---------- ----------
Total borrowings 114.8 175.1
Lease liabilities 142.4 146.2
Capitalised debt costs 2.4 1.4
-------------------------- ---------- ---------- ---------- ----------
Gross debt 259.6 322.7
Less cash (20.7) (32.6)
-------------------------- ---------- ---------- ---------- ----------
Net Debt 238.9 290.1
Leverage 10.0x 37.7x
-------------------------- ---------- ---------- ---------- ----------
Remove lease liabilities (142.4) (146.2)
-------------------------- ---------- ---------- ---------- ----------
Net Debt excl. lease
liabilities 96.5 143.9
Leverage excl. lease
liabilities 4.1x 18.4x
-------------------------- ---------- ---------- ---------- ----------
There was a reduction in deferrals in the period to GBP32.7m,
comprising GBP7.25m VAT and GBP25.5m net property arrears on a
legal obligation basis at 31 July 2021, (31 January 2021: GBP40.0m
comprising GBP19.0m and GBP21.0m respectively).
The Group renewed its financing facilities with its banking
partners, which now comprise a GBP75m Term Loan, GBP50m CLBILS
facilities and a Revolving Credit Facility of GBP100m. Under
revised covenant terms, the Group must achieve defined Net Debt and
EBITDA targets, measured on a monthly basis until March 2022,
following which the business will move to quarterly covenant tests
of Interest Cover and Leverage (pre IFRS 16 Leases).
Until the business has no outstanding amounts under the Term
Loan and CLBILS facilities, there will be a prohibition of any
payment to shareholders by way of dividend or share buy-back. The
facilities are structured to incentivise an early reduction of
overall debt, with fees of up to GBP5m payable if pre-payments are
not made in line with specified dates by 30 November 2021 through
until 30 July 2022. The Company is permitted to facilitate these
repayments through the issue of new equity or by using funding from
subordinated debt sources. The Company continues to evaluate the
options available to the Group and will update further as
appropriate.
The facilities have an expiry date of 24 September 2023
(unchanged from the previous arrangement), with the RCF element
being extendable by 1 year to 24 September 2024 if the Company
achieves certain debt repayment milestones by 30 November 2021 or
30 July 2022.
Going Concern
The Group has modelled a number of severe but plausible downside
scenarios involving further closures of its stores, including
scenarios where government imposed lockdowns require a three-month
closure during the winter period including where the Group's stores
are closed for the whole of the peak trading month of December
2021.
On the basis of implementing a number of mitigating actions, the
sensitised forecast cash-flows indicate that, even on the basis of
full closure for the three months, the Group would continue to be
able to operate within the terms of its facility and to settle its
liabilities as they fall due for a period of at least 12 months
from date of approval of these financial statements. 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.
For further details of the basis of preparation; see Note 2 to
the interim financial statements, below.
Dividends and capital structure
Dividends
Historically, the Board has adopted a progressive ordinary
dividend policy for the Company, reflecting its strong earnings
potential and cash flow characteristics, while allowing it to
retain sufficient capital to fund ongoing operating requirements
and to invest in the Company's long-term growth and profitability.
Following the outbreak of the Covid-19 pandemic, the Board
suspended dividend payments and no dividends were declared in HY22
(HY21: nil).
Currently, we do not expect to pay any dividends in relation to
FY22. The terms of the Company's refinancing restrict the payment
of dividends until the GBP75m Term Loan and GBP50m CLBILS
facilities have been repaid.
Capital structure
The Board is focused on maintaining a capital structure that is
conservative yet efficient in terms of providing long-term returns
to shareholders.
Given the inherent uncertainty around the recovery of the
business following the extended lockdowns experienced to date, and
the risk of any subsequent lockdowns that may be imposed in the
future, the Board will consider various options to ensure the key
stakeholders of the business are protected as much as possible in
these uncertain times and will look to provide a further update on
capital policy as trading conditions and the outlook become
clearer.
Kris Lee
Chief Financial Officer
28 September 2021
Explanatory notes
1. Alternative Performance Measures ("APMs") and other explanatory information
"EBITDA" is defined as earnings before interest, tax,
depreciation and amortisation and represents profit for the
period before net finance expense, taxation, depreciation and
amortisation.
"Leverage" is calculated as the ratio of Net Debt to EBITDA for
the previous 12 months.
"Like-for-like" or "LFL" is defined as follows:
The Group defines Iike-for-Iike sales as the year-on-year growth
in sales via Card Factory retail channels as follows:
-- Card Factory Stores: "Store LFLs" consider stores that were
open in both the current year and the comparative period. Due to
the impact of Covid-19, HY20 has been used as the comparative sales
period for both HY22 and HY21 LFLs. Sales are compared only for the
days when Card Factory stores were open for trade;
-- Card Factory Online: made via the Card Factory website, www.cardfactory.co.uk ;
-- "Card Factory LFL" is defined as Like-for-like sales in
stores plus sales from the Card Factory website.
www.cardfactory.co.uk ;
-- Getting Personal: made via the separately branded personalised card and gift website, www.gettingpersonal.co.uk ;
Sales by Printcraft, the Group's printing division, to external
third-party customers are excluded from any LFL sales measure.
"Net Debt" comprises total borrowings, overdrafts, lease
liabilities reported under IFRS 16 Leases and the value of
capitalised debt issues costs less cash.
2. Cautionary Statement
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.
Consolidated income statement
For the six months ended 31 July 2021
Six months Six months Year ended
ended 31 ended 31 31 January
July 2021 July 2020 2021
Note GBP'm GBP'm GBP'm
Revenue 116.9 100.5 285.1
Cost of sales (83.6) (75.1) (205.7)
--------------------- ----- ----------- ----------- ------------
Gross profit 33.3 25.4 79.4
Operating expenses (41.3) (43.2) (86.9)
Other income 3 8.0 - -
--------------------- ----- ----------- ----------- ------------
Operating loss - (17.8) (7.5)
Finance income 6 - - -
Finance expense 6 (6.5) (4.4) (8.9)
--------------------- ----- ----------- ----------- ------------
Net finance expense (6.5) (4.4) (8.9)
Loss before tax (6.5) (22.2) (16.4)
Taxation 7 1.3 4.5 2.8
Loss for the period (5.2) (17.7) (13.6)
--------------------- ----- ----------- ----------- ------------
Earnings per share pence pence pence
- Basic 8 (1.5 ) (5.2) (4.0)
- Diluted 8 ( 1.5) (5.2) (4.0)
--------------------- ----- ----------- ----------- ------------
All activities relate to continuing operations.
Consolidated statement of comprehensive income
For the six months ended 31 July 2021
Six months Six months Year ended
ended 31 ended 31 31 January
July 2021 July 2020 2021
GBP'm GBP 'm GBP'm
Loss for the period (5.2) (17.7) (13.6)
--------------------------------------------- ----------- ----------- ------------
Items that are or may be recycled
subsequently into profit or loss:
Cash flow hedges - changes in fair
value 1.2 (0.6) (1.9)
Cost of hedging reserve - changes
in fair value (0.1) 0.2 (0.1)
Cost of hedging reserve - reclassified - - -
to profit or loss
Tax relating to components of other
comprehensive income (0.2) 0.1 0.4
--------------------------------------------- ----------- ----------- ------------
Other comprehensive income/(expense)
for the period, net of income tax 0.9 (0.3) (1.6)
Total comprehensive expense for the
period attributable to equity shareholders
of the parent (4.3) (18.0) (15.2)
--------------------------------------------- ----------- ----------- ------------
Consolidated statement of financial position
As at 31 July 2021
Note 31 July 2021 31 July 2020 31 January
2021
GBP 'm GBP'm GBP'm
Non-current assets
Intangible assets 10 321.3 319.5 320.3
Property, plant and equipment 11 34.0 39.1 36.8
Right of use assets 12 104.3 124.9 111.4
Deferred tax assets 4.9 2.6 5.3
Derivative financial instruments 14 - 0.5 -
---------------------------------- ----- ------------- ------------- -----------
464.5 486.6 473.8
Current assets
Inventories 39.7 57.6 36.4
Trade and other receivables 6.4 7.2 9.2
Tax receivable 2.1 4.4 0.5
Derivative financial instruments 14 - 0.8 0.1
Cash and cash equivalents 20.7 32.6 12.5
---------------------------------- ----- ------------- ------------- -----------
68.9 102.6 58.7
Total assets 533.4 589.2 532.5
Current liabilities
Borrowings (0.2) (1.5) (0.2)
Lease liabilities 12 (38.7) (41.1) (39.4)
Trade and other payables (69.7) (61.5) (57.4)
Derivative financial instruments 14 (2.9) (1.2) (2.8)
---------------------------------- ----- ------------- ------------- -----------
(111.5) (105.3) (99.8)
Non-current liabilities
Borrowings (114.6) (173.6) (118.8)
Lease liabilities 12 (103.7) (105.1) (105.5)
Derivative financial instruments 14 (0.9) (1.4) (1.9)
---------------------------------- ----- ------------- ------------- -----------
(219.2) (280.1) (226.2)
Total liabilities (330.7) (385.4) (326.0)
Net assets 202.7 203.8 206.5
---------------------------------- ----- ------------- ------------- -----------
Equity
Share capital 3.4 3.4 3.4
Share premium 202.2 202.2 202.2
Hedging reserve (2.1) (2.1 ) (3.1)
Cost of hedging reserve 0.1 1.1 0.4
Reverse acquisition reserve (0.5) (0.5) (0.5)
Merger reserve 2.7 2.7 2.7
Retained earnings (3.1) (3.0 ) 1.4
---------------------------------- ----- ------------- ------------- -----------
Equity attributable to equity
holders of the parent 202.7 203.8 206.5
---------------------------------- ----- ------------- ------------- -----------
Consolidated statement of changes in equity
For the six months ended 31 July 2021
Share Share Hedging Cost Reverse Merger Retained Total
capital premium reserve of acquisition reserve earnings equity
hedging reserve
reserve
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Six months ended 31
July 2021
At 31 January 2021 3.4 202.2 (3.1) 0.4 (0.5) 2.7 1.4 206.5
------------------------ --------- --------- --------- --------- ------------- --------- ---------- --------
Total comprehensive
expense
for the period
Profit or loss - - - - - - (5.2) (5.2)
Other comprehensive
expense - - 1.0 (0.1) - - - 0.9
------------------------ --------- --------- --------- --------- ------------- --------- ---------- --------
- - 1.0 (0.1) - - (5.2) (4.3)
Hedging gains and
losses and
costs of hedging
transferred
to the cost of
inventory - - - (0.3) - - - (0.3)
Deferred tax on
transfers to
inventory - - - 0.1 - - - 0.1
Transactions with
owners, recorded
directly in equity
Share-based payment
charges - - - - - - 0.7 0.7
Dividends (note 9) - - - - - - - -
Total contributions by
and
distributions to
owners - - - - - - 0.7 0.7
At 31 July 2021 3.4 202.2 (2.1) 0.1 (0.5) 2.7 (3.1) 202.7
------------------------ --------- --------- --------- --------- ------------- --------- ---------- --------
Six months ended 31
July 2020
(1.6
At 31 January 2020 3.4 202.2 ) 1.1 (0.5) 2.7 14.2 221.5
------------------------ --------- --------- --------- --------- ------------- --------- ---------- --------
Total comprehensive
expense
for the period
Profit or loss - - - - - - (17.7) (17.7)
Other comprehensive
income - - (0.5) 0.2 - - - (0.3)
------------------------ --------- --------- --------- --------- ------------- --------- ---------- --------
- - (0.5) 0.2 - - (17.7) (18.0)
Hedging gains and
losses and
costs of hedging
transferred
to the cost of
inventory - - - (0.3) - - - (0.3)
Deferred tax on
transfers to
inventory - - - 0.1 - - - 0.1
Transactions with
owners, recorded
directly in equity
Share-based payment
charges - - - - - - 0.5 0.5
Dividends (note 9) - - - - - - - -
------------------------ --------- --------- --------- --------- ------------- --------- ---------- --------
Total contributions by
and
distributions to
owners - - - - - - 0.5 0.5
At 31 July 2020 3.4 202.2 (2.1) 1.1 (0.5) 2.7 (3.0) 203.8
------------------------ --------- --------- --------- --------- ------------- --------- ---------- --------
Year ended 31 January
2021
At 31 January 2020 3.4 202.2 (1.6) 1.1 (0.5) 2.7 14.2 221.5
------------------------ --------- --------- --------- --------- ------------- --------- ---------- --------
Total comprehensive
expense
for the period
Profit or loss - - - - - - (13.6) (13.6)
Other comprehensive
income - - (1.5) (0.1) - - - (1.6)
------------------------ --------- --------- --------- --------- ------------- --------- ---------- --------
- - (1.5) (0.1) - - (13.6) (15.2)
Hedging gains and
losses and
costs of hedging
transferred
to the cost of
inventory - - - (0.7) - - - (0.7)
Deferred tax on
transfers to
inventory - - - 0.1 - - - 0.1
Transactions with
owners, recorded
directly in equity
Share-based payment
charges - - - - - - 0.8 0.8
Dividends (note 9) - - - - - - - -
------------------------ --------- --------- --------- --------- ------------- --------- ---------- --------
Total contributions by
and
distributions to
owners - - - - - - 0.8 0.8
At 31 January 2021 3.4 202.2 (3.1) 0.4 (0.5) 2.7 1.4 206.5
------------------------ --------- --------- --------- --------- ------------- --------- ---------- --------
Consolidated cash flow statement
For the six months ended 31 July 2021
Note Six months Six months Year ended
ended 31 ended 31 31
July 2021 July 2020 January 2021
GBP'm GBP'm GBP'm
Cash inflow from operating
activities 15 36.1 25.2 79.9
Corporation tax paid - (6.2) (6.3)
-------------------------------------- ----- ----------- ----------- --------------
Net cash inflow from operating
activities 36.1 19.0 73.6
Cash flows from investing activities
Purchase of property, plant
and equipment 11 (1.3) (2.6) (4.9)
Purchase of intangible assets 10 (2.2) (0.9) (2.6)
Proceeds from disposal of fixed
assets - 0.5 0.5
Net cash outflow from investing
activities (3.5) (3.0) (7.0)
Cash flows from financing activities
Proceeds from bank borrowings 41.7 29.5 -
Interest paid (4.4) (2.9) (8.4)
Repayment of bank borrowings (48.0) - (25.6)
Payment of lease liabilities (13.7) (12.0) (22.1)
-------------------------------------- ----- ----------- ----------- --------------
Net cash outflow from financing
activities (24.4 ) 14.6 (56.1)
Net increase in cash and cash
equivalents 8.2 30.6 10.5
Cash and cash equivalents at
the beginning of the period 12.5 2.0 2.0
Closing cash and cash equivalents 20.7 32.6 12.5
-------------------------------------- ----- ----------- ----------- --------------
Notes to the interim financial statements
1 General information
Card Factory plc ('the Company') is a public limited company
incorporated in the United Kingdom. The Company is domiciled in the
United Kingdom and its registered office is Century House, Brunel
Road, 41 Industrial Estate, Wakefield WF2 0XG.
The Group financial statements consolidate those of the Company
and its subsidiaries (together referred to as the 'Group').
2 Basis of preparation
These unaudited condensed consolidated interim financial
statements ('interim financial statements') for the six months
ended 31 July 2021 ('HY22') comprise the Company and its
subsidiaries (together referred to as the 'Group'). The interim
financial statements have been prepared in accordance with IAS 34
Interim Financial Reporting as adopted for use in the UK and the
Disclosure Guidance and Transparency Rules of the UK's Financial
Conduct Authority. The interim report was approved by the Board of
Directors on 27September 2021.
These condensed interim financial statements do not comprise
statutory accounts within the meaning of section 434 of the
Companies Act 2006. The interim financial statements should be read
in conjunction with the annual financial statements for the year
ended 31 January 2021 ('Annual Report') which were prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and in accordance
with international financial reporting standards adopted pursuant
to Regulation (EC) No 1606/2002 as it applies in the European
Union. The comparative figures for the financial year ended 31
January 2021 are an extract from the Annual Report and are not the
Group's statutory accounts for that financial year within the
meaning of section 435 of the Companies Act 2006. In the Annual
Report the Group presented non-underlying items separately on the
face of the consolidated income statement. The presentation of the
income statement has been changed such that non-underlying items
are no longer presented separately. Those accounts have been
reported on by the Company's auditor and delivered to the registrar
of companies. The report was (i) unqualified, (ii) did not contain
an emphasis of matter paragraph and (iii) did not contain any
statement under section 498 of the Companies Act 2006. The
statutory accounts for the year ended 31 January 2021 were approved
by the Board of Directors on 10 June 2021 and delivered to the
Registrar of Companies. The auditor's review report for the six
month period ended 31 July 2021 is attached.
Significant judgements and estimates
The preparation of the interim financial statements requires the
use of judgements, estimates and assumptions that affect the
application of the Group's accounting policies and reported amounts
of assets and liabilities, income and expenses. Actual results may
differ from these estimates. The significant judgements and key
sources of estimation uncertainty were consistent with those
applied to the consolidated financial statements for the year ended
31 January 2021.
Going concern basis of accounting
The Board continues to have a reasonable expectation that the
Group has adequate resources to continue in operation for at least
the next 12 months and that the going concern basis of accounting
remains appropriate. The outbreak of the Covid-19 pandemic and the
measures adopted by governments in our key markets to mitigate its
spread have impacted the Group. These measures required the Group
to close its retail outlets from the start of the year until the 12
April 2021 when stores in England and Wales were able to recommence
trading, with later re-opening dates for the other devolved UK
administrations and the Republic of Ireland. This has negatively
impacted the Group's financial performance and its liquidity
position.
The Group renewed its financing facilities with its banking
partners in May 2021 (see Note 13 for further detail), through
which it had access to GBP225m of credit. This has reduced
subsequently to GBP217m of credit with the repayment of GBP8m in
July 2021. As at 31 July 2021, the Group's net debt excluding lease
liabilities was GBP96.5m.
The Group has prepared cashflow forecasts for the 12 months
following the date of approval of these interim financial
statements which incorporate the new debt facility and related
covenant measures. These forecasts are based on the approved budget
and business plan and include the Board's assumptions on trading
performance, including the extent and speed of the recovery of
store sales following reopening, and the timing of cashflows
including amounts where payment was deferred due to Covid-19. The
Board's trading assumptions are cautious compared to the Group's
actual experience since stores reopened and model a gradual
recovery to pre-COVID levels. These forecasts indicate that the
Group would have significant headroom within its agreed financing
arrangements and would comfortably meet all covenant tests within
those arrangements, and would be able to settle its liabilities as
they fall due for the duration of the forecasts.
There is still uncertainty over how the future development of
the pandemic will impact the Group's business and customer demand
for its products. The Group has therefore modelled a number of
severe but plausible downside scenarios involving further closures
of its stores, including scenarios where government imposed
lockdowns require a three-month closure during the winter period
including where the Group's stores are closed for the whole of the
peak trading month of December 2021.
In preparing the reasonable worst-case scenario, the Group has
reflected the following sensitivities in preparing the reasonable
worst-case scenario:
(i) the only restriction on the Group's ability to trade will be
full closure of the Group's store estate in the UK and Republic of
Ireland between 1 December 2021 and 28 February 2022;
(ii) full re-opening of all stores on 1 March 2022, with a
temporary uplift in sales, as seen on the reopening of stores
following all three prior lockdowns;
(iii) an increase in the Group's retail partnership and online
sales for the period of full closure of the Group's store estate,
as seen in all three prior lockdowns, with such sales returning
back immediately to normalised levels on 1 March 2022;
(iv) the UK CJRS and business rate support schemes and the
equivalent schemes in the Republic of Ireland being available to
cover the full period of closure, on the same terms as during
previous periods of lockdown.
(v) that there is no further wave of pandemic infection,
involving new strains or otherwise, that lead to forced closure or
the imposition of material restrictions on the ability of the
Company to trade; and
(vi) further to the re-opening of all stores on 1 March 2022,
operating margins are expected to remain consistent with pre
COVID-19 levels
With this worse-case scenario the Board would be required to
take mitigating actions to reduce costs, optimise the Group's cash
flow and preserve liquidity, including making savings on variable
costs that are associated with opening its stores, including the
costs incurred paying seasonal workers, annual bonuses, electricity
costs and bank charges on transactions in stores;.
On the basis of these mitigating actions the sensitised forecast
cash-flows indicate that, even on the basis of full closure for the
three month period, the Group would continue to be able to operate
within the terms of its facility and to settle its liabilities as
they fall due for a period of at least 12 months from date of
approval of these financial statements. Based on these factors, the
Board has a reasonable expectation that the Group has adequate
resources and sufficient loan facility headroom and accordingly the
accounts are prepared on a going concern basis .
3 Principal accounting policies
The financial statements have been prepared under the historical
cost convention except for derivative financial instruments which
are stated at their fair value. The accounting policies are
consistent with those applied in the consolidated financial
statements for the year ended 31 January 2021.
Amended standards and interpretations effective in the year do
not have a material effect on the Group's financial statements
GBP8.0m of Government grants received in respect of
non-essential retail closure periods has been presented as Other
Income within the income statement.
4 Segmental reporting and revenue
The Group has two operating segments trading under the names
Card Factory and Getting Personal. Card Factory retails greeting
cards, dressing and gifts principally through an extensive UK store
network, with a small number of stores in the Republic of Ireland,
and also through our 3rd party retail partners. Card Factory
revenue for the six months to 31 July 2021 was GBP110.7m (six
months to 31 July 2020: GBP92.6m). Getting Personal is an online
retailer of personalised cards and gifts. Getting Personal revenue
for the six months to 31 July 2021 was GBP6.2m (six months to 31
July 2020: GBP7.9m)
Group revenue is almost entirely derived from retail customers.
Average transaction value is low and product are transferred at the
point of sale. Group revenue is presented as a single category
subject to substantially the same economic factors that impact the
nature, amount, timing and uncertainty of revenue and cash flows.
Revenue from retail partnerships and non-retail customers were
circa GBP2.7m in the period. Revenue from outside the UK is circa
GBP1.3m of Group Revenue.
5 EBITDA
Earnings before interest, tax, depreciation and amortisation
("EBITDA") represents profit for the period before net finance
expense, taxation, depreciation, amortisation and impairment of
assets.
Six months Six months Year ended
ended 31 ended 31 31 January
July 2021 July 2020 2021
GBP'm GBP'm GBP'm
Operating loss - (17.8) (7.5)
Depreciation, amortisation and impairment 23.6 25.6 53.3
------------------------------------------- ----------- ----------- ----------------
EBITDA 23.6 7.8 45.8
------------------------------------------- ----------- ----------- ----------------
6 Finance expense
Six months Six months Year ended
ended 31 ended 31 31
July 2021 July 2020 January 2021
GBP 'm GBP'm GBP'm
Finance expense
Interest on bank loans and overdrafts 2.9 2.6 5.1
Amortisation of debt issue costs 2.1 0.1 0.4
Lease interest 1.5 1.7 3.4
6.5 4.4 8.9
--------------------------------------- ----------- ----------- ---------------
Amortisation of debt issue costs in the period include GBP1.1
million in relation to previous loan facilities, expensed to the
income statement on completion of a renewed financing facility.
7 Taxation
The tax charge on profit before tax for the interim period has
been calculated on the basis of the estimated effective tax rate on
profit before tax for the full year to 31 January 2022 of 19.2%
(six months ended 31 July 2020 20.2%, year ended 31 January 2021
17.1%).
8 Earnings per share
Basic earnings per share is calculated by dividing the profit
for the period attributable to ordinary shareholders by the
weighted average number of ordinary shares in issue during the
period.
Diluted earnings per share is based on the weighted average
number of shares in issue for the period, adjusted for the dilutive
effect of potential ordinary shares. Potential ordinary shares
represent share incentive awards and save as you earn share
options.
Six months Six months Year ended
ended 31 ended 31
July 2021 31 July 2020 January 2021
(Number) (Number) (Number)
Weighted average number of shares
in issue 341,654,476 341,626,396 341,626,396
Weighted average number of dilutive
share options 2,194,059 - 128,446
------------------------------------- ------------ -------------- --------------
Weighted average number of shares
for diluted earnings per share 343,848,535 341,626,396 341,754,842
------------------------------------- ------------ -------------- --------------
GBP'm GBP'm GBP'm
Profit for the financial period (5.2) (17.7) (13.6)
--------------------------------- ------ ------- -------
pence pence pence
Basic earnings per share (1.5) (5.2) (4.0)
Diluted earnings per share (1.5) (5.2) (4.0)
---------------------------- ------ ------ ------
9 Dividends
The Directors have not declared an interim dividend for the
period ended 31 July 2021. There were no dividends paid in the
previous financial year ended 31 January 2021.
10 Intangible assets
Goodwill Software Total
GBP'm GBP'm GBP'm
Cost
At 1 February 2021 328.2 13.7 341.9
Additions - 2.2 2.2
At 31 July 2021 328.2 15.9 344.1
Amortisation and impairment
At 1 February 2021 14.4 7.2 21.6
Amortisation in the period - 1.2 1.2
At 31 July 2021 14.4 8.4 22.8
Net book value
At 31 July 2021 313.8 7.5 321.3
----------------------------- --------- --------- ------
At 31 January 2021 313.8 6.5 320.3
----------------------------- --------- --------- ------
11 Property, plant and equipment
Freehold Leasehold Plant, equipment, Total
property improvements fixtures &
vehicles
GBP'm GBP'm GBP'm GBP'm
Cost
At 1 February 2021 17.8 40.2 67.6 125.6
Additions - 0.4 0.9 1.3
Disposals - (0.1) 0.0 (0.1)
----------------------------- ---------- -------------- ------------------ ------
At 31 July 2021 17.8 40.5 68.4 126.8
Depreciation and impairment
At 1 February 2021 3.9 34.8 50.1 88.8
Depreciation in the
period 0.2 1.3 2.6 4.1
Depreciation on disposals - (0.1) 0.0 (0.1)
At 31 July 2021 4.1 36.0 52.7 92.8
Net book value
At 31 July 2021 13.7 4.5 15.8 34.0
----------------------------- ---------- -------------- ------------------ ------
At 31 January 2021 14.0 5.3 17.5 36.8
----------------------------- ---------- -------------- ------------------ ------
12 Leases
The Group has lease contracts, within the definition of IFRS 16
leases, in relation to its entire store lease portfolio, some
warehousing locations and motor vehicles. Other contracts,
including distribution contracts and IT equipment, are deemed not
to be a lease within the definition of IFRS 16 or are subject to
the election not to apply the requirements of IFRS 16 to short-term
or low value leases.
Right of use assets Buildings Motor Vehicles Total
GBP'm GBP'm GBP'm
Cost
At 1 February 2021 316.3 1.6 317.9
Additions 11.5 - 11.5
Disposals (23.5) (0.1) (23.6)
-----------------------------
At 31 July 2021 304.3 1.5 305.8
Depreciation and impairment
At 1 February 2021 205.7 0.8 206.5
Depreciation in the period 18.1 0.2 18.3
Depreciation on disposals (22.6) - (22.6)
Impairment on disposals (0.7) - (0.7)
----------------------------- ---------- --------------- -------
At 31 July 2021 200.5 1.0 201.5
Net book value
At 31 July 2021 103.8 0.5 104.3
----------------------------- ---------- --------------- -------
At 31 January 2021 110.6 0.8 111.4
----------------------------- ---------- --------------- -------
Disposals and depreciation on disposals include fully
depreciated right of use assets in respect of expired leases where
the asset remained in use whilst a lease renewal was
negotiated.
Lease liabilities Six months Six months Year ended
ended 31 ended 31 31 January
July 2021 July 2020 2021
GBP'm GBP'm GBP'm
------------------------------- ----------- ----------- ----------------
Current lease liabilities (38.7) (41.1) (39.4)
Non-current lease liabilities (103.7) (105.1) (105.5)
------------------------------- ----------- ----------- ----------------
Total lease liabilities (142.4) (146.2) (144.9)
------------------------------- ----------- ----------- ----------------
Rent concessions agreed in the prior year in response to
Covid-19 were principally in respect of the timing of payments and
did not significantly impact the total consideration payable in
respect of leases. Rent concessions agreed in the current year
include a combination of timing and total consideration impacts. In
accordance with the amendment to IFRS16 in respect of Covid-19
concessions, lease liabilities have not been re-measured in respect
of Covid-19 concessions except to the extent the rent concession
was agreed as part of a lease renewal or extension.
Lease expense Six months Six months Year ended
ended 31 ended 31 31 January
July 2021 July 2020 2021
GBP'm GBP'm GBP'm
-------------------------------------- ----------- ----------- ------------
Depreciation expense on right of
use assets 18.3 19.9 39.9
Impairment of right of use assets - 0.2 2.6
Profit on disposal of right of use
assets - (0.2) (0.3)
Lease interest 1.5 1.7 3.4
Expense relating to short term and
low value leases 0.2 0.2 0.6
Expense relating to variable lease 0.1 - -
payments
-------------------------------------- ----------- ----------- ------------
Total lease related income statement
expense 20.1 21.8 46.2
-------------------------------------- ----------- ----------- ------------
13 Analysis of net debt
Six months ended 31 July 2021 At 1 February Cash flow Non-cash At 31 July
2021 changes 2021
GBP'm GBP'm GBP'm GBP'm
Unsecured bank loans and accrued
interest (119.0) 6.3 (2.1) (114.8)
Lease liabilities (144.9) 13.7 (11.2) (142.4)
Total debt (263.9) 20.0 (13.3) (257.2)
Debt costs capitalised (1.2) (3.3) 2.1 (2.4)
Cash and cash equivalents 12.5 8.2 - 20.7
-------------------------------------- -------------- ---------- --------- -----------
Net debt (252.6) 24.9 (11.2) (238.9)
Lease liabilities 144.9 (13.7) 11.2 142.4
-------------------------------------- -------------- ---------- --------- -----------
Net debt excluding lease liabilities (107.7) 11.2 - (96.5)
-------------------------------------- -------------- ---------- --------- -----------
Six months ended 31 July 2020 At 1 February Cash flow Non-cash At 31 July
2020 changes 2020
GBP'm GBP'm GBP'm GBP'm
Unsecured bank loans and accrued
interest ( 144.1) ( 29.5) ( 1.5) ( 175.1)
Lease liabilities ( 145.9) 12.0 ( 12.3) ( 146.2)
Total debt ( 290.0) ( 17.5) ( 13.8) ( 321.3)
Debt costs capitalised ( 1.0) ( 0.5) 0.1 ( 1.4)
Cash and cash equivalents 2.0 30.6 - 32.6
-------------------------------------- -------------- ---------- --------- -----------
Net debt ( 289.0) 12.6 ( 13.7) ( 290.1)
Lease liabilities 145.9 (12.0 ) 12.3 146.2
-------------------------------------- -------------- ---------- --------- -----------
Net debt excluding lease liabilities (143.1 ) 0.6 (1.4 ) (143.9 )
-------------------------------------- -------------- ---------- --------- -----------
Year ended 31 January 2021 At 1 February Cash flow Non-cash At 31 January
2020 changes 2021
GBP'm GBP'm GBP'm GBP'm
Unsecured bank loans and accrued
interest (144.1) 25.6 (0.5) (119.0)
Lease liabilities (145.9) 22.1 (21.1) (144.9)
Total debt (290.0) 47.7 (21.6) (263.9)
Debt costs capitalised (1.0) (0.6) 0.4 (1.2)
Cash and cash equivalents 2.0 10.5 - 12.5
-------------------------------------- -------------- ---------- --------- --------------
Net debt (289.0) 57.6 (21.2) (252.6)
Lease liabilities 145.9 (22.1) 21.1 144.9
-------------------------------------- -------------- ---------- --------- --------------
Net debt excluding lease liabilities (143.1) 35.5 (0.1) (107.7)
-------------------------------------- -------------- ---------- --------- --------------
Following multiple periods of prolonged non-essential retail
closures, the Group renewed its financing facilities with its
banking partners on 21 May 2021, to comprise a GBP75m Term Loan,
GBP50m CLBILS facilities and a Revolving Credit Facility of
GBP100m. Under revised covenant terms, the Group must achieve
defined Net Debt and EBITDA targets, measured on a monthly basis
until March 2022, following which the business will move to
quarterly covenant tests of Interest Cover and Leverage. Covenant
thresholds are phased to return to 2.5x leverage and 2x interest
cover by January 2023. The facilities have an expiry date of 24
September 2023 (unchanged from the previous arrangement), with the
RCF element being extendable by 1 year to 24 September 2024 if the
Company achieves certain debt repayment milestones by 30 November
2021.
Until the business has no outstanding amounts under the term
loan and CLBILS facilities, there will be a prohibition of any
payment to shareholders by way of dividend or share buy-back. The
facilities are structured to incentivise an early reduction of
overall debt, with fees of up to GBP5m payable if pre-payments are
not made in line with specified dates by 30 November 2021 through
until 30 July 2022. The Company is permitted to facilitate these
repayments through the issue of new equity or by using funding from
subordinated debt sources. The Company continues to evaluate the
options available to the Group and will update further as
appropriate.
In accordance with the terms of the agreement, the Group has
made repayments of GBP4.8m against the GBP75m Term Loan and GBP3.2m
against the CLBILS in recognition of GBP8.0m Government grants
received in respect of non-essential retail closure periods.
14 Financial instruments
Financial instruments carried at fair value are measured by
reference to the following fair value hierarchy:
- Level 1: quoted prices in active markets for identical assets or liabilities
- Level 2: inputs other than quoted prices included within Level
1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices); and
- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
Derivative financial instruments are carried at fair value and
measured under a level 2 valuation method. Valuations are provided
by the instrument counterparty.
31 July 2021 31 July 2020 31 January
2021
GBP'm GBP'm GBP'm
Derivative assets
Non-current
Foreign exchange contracts - 0.5 -
-------------------------------------- -------------------- ----------------------- --------------------------
- 0.5 -
Current
Foreign exchange contracts - 0.8 0.1
-------------------------------------- -------------------- ----------------------- --------------------------
Derivative liabilities
Current
Interest rate contracts (0.5) (0.9) (0.7)
Foreign exchange contracts (2.4) (0.3) (2.1)
-------------------------------------- -------------------- ----------------------- --------------------------
(2.9) (1.2) (2.8)
Non-current
Interest rate contracts (0.1) (1.0) (0.6)
Foreign exchange contracts (0.8) (0.4) (1.3)
-------------------------------------- -------------------- ----------------------- --------------------------
(0.9) (1.4) (1.9)
Net derivative financial instruments
Interest rate contracts (0.6) (1.9) (1.3)
Foreign exchange contracts (3.2) 0.6 (3.3)
-------------------------------------- -------------------- ----------------------- --------------------------
(3.8) (1.3) (4.6)
-------------------------------------- -------------------- ----------------------- --------------------------
15 Notes to the cash flow statement
Reconciliation of operating profit to cash generated from
operations:
31 July 2021 31 July 2020 31 January
2021
GBP'm GBP'm GBP'm
Profit before tax (6.5) (22.2) (16.4)
Net finance expense 6.5 4.4 8.9
--------------------------------------- ------------- ------------- -----------
Operating profit 0.0 (17.8) (7.5)
Adjusted for:
Depreciation and amortisation 23.6 25.4 50.7
Impairment of right of use assets - 0.2 2.6
Loss/(profit) on disposal of fixed
assets - 0.1 0.0
Cash flow hedging foreign currency
movements (0.3) - (0.1)
Share-based payments charge 0.7 0.5 0.8
--------------------------------------- ------------- ------------- -----------
Operating cash flows before changes
in working capital 24.0 8.4 46.5
Decrease/(increase) in receivables 3.0 3.8 2.2
(Increase)/decrease in inventories (3.3) (3.2) 18.0
Increase/(decrease) in payables 12.4 16.2 13.2
--------------------------------------- ------------- ------------- -----------
Cash inflow from operating activities 36.1 25.2 79.9
--------------------------------------- ------------- ------------- -----------
16 Principal risks and uncertainties
With the exception of the recent increases in labour, energy and
supply chain risks, the principal risks and uncertainties facing
the Group are materially unchanged since the publication of the
Annual Report (as published and explained in more detail on pages
40 to 42 of the Group's Annual Report for the year ended 31 January
2021) and are set out below for each category of risk, from highest
risk to lowest.
Financial Risks:
- Impact of Coronavirus
- Geopolitical Instability
- Finance & Treasury
Operational Risks:
- ERP Implementation
- IT Infrastructure and risk of IT/security disruption
- HR Compliance
- Loss of Key Personnel & Organisational Culture
- Supplier CSR breach
- Business Continuity
Strategic Risks:
- ESG Compliance and climate change risks
- Adapting to customer preferences
Responsibility statement of the Directors in respect of the
half-yearly financial report
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted
for use in the UK;
-- the interim management report includes a fair review of the information required by:
a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed
set of financial statements; and a description of the principal
risks and uncertainties for the remaining six months of the year;
and
b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
By order of the Board
Darcy Willson-Rymer Kris Lee
Chief Executive Officer Chief Financial Officer
28 September 2021
Independent review report to Card Factory plc
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31 July 2021 which comprises the condensed
consolidated income statement, the condensed consolidated statement
of comprehensive income, the condensed consolidated statement of
financial position, the condensed consolidated statement of changes
in equity, the condensed consolidated cash flow statement and the
related explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31(st)
July 2021 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted for use in the
UK and the Disclosure Guidance and Transparency Rules ("the DTR")
of the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in note 2, the latest annual financial statements
of the group were prepared in accordance with International
Financial Reporting Standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union and in accordance
with international accounting standards in conformity with the
requirements of the Companies Act 2006 and the next annual
financial statements will be prepared in accordance with UK-adopted
international accounting standards. The directors are responsible
for preparing the condensed set of financial statements included in
the half-yearly financial report in accordance with IAS 34 as
adopted for use in the UK.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
Nick Plumb (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 Sovereign Square
Sovereign Street
Leeds
LS1 4DW
28 September 2021
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END
IR DKOBKDBKBBCB
(END) Dow Jones Newswires
September 28, 2021 01:59 ET (05:59 GMT)
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