REG - Card Factory PLC - Final Results
30/04/2024 07:00
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RNS Number : 5065M Card Factory PLC 30 April 2024
30 April 2024
Card Factory plc ("cardfactory" or the "Group")
Preliminary results for the year ended 31 January 2024
Strong growth across the business and continued strategic delivery,
underpinned by a strengthened balance sheet, allows for the resumption of
dividends.
cardfactory, the UK's leading specialist retailer of greeting cards, gifts and
celebration essentials, announces its preliminary results for the year ended
31 January 2024 ("FY24").
Financial summary(1)
Financial Metrics FY24 FY23 Change £ Change %
Revenue £510.9m £463.4m £47.5m +10.3%
EBITDA £122.6m £112.0m £10.6m +9.5%
Profit Before Tax (PBT) £65.6m £52.4m £13.2m +25.2%
Adjusted PBT2 £62.1m £48.9m £13.2m +27.0%
Adjusted Leverage (exc. Leases) 0.4x 0.8x (0.4x) -
Net Debt (exc. Leases) £34.4m £57.2m £(22.8)m -39.9%
Cash from operations £118.7m £107.8m £10.9m +10.1%
Basic EPS 14.4p 12.9p 1.5p +11.6%
Adjusted EPS3 13.5p 12.1p 1.4p +11.6%
Dividend per share 4.5p - 4.5p -
(1) For further information and definitions of Like-for-like (LFL) and other
alternative performance measures see Explanatory Notes (below) "Alternative
Performance Measures ("APMs").
2 Adjusted PBT excludes one-off gains of £2.6 million gain on SA Greetings
acquisition, £2.0 million gain on release of Covid provisions, partly offset
by £1.1 million impairment charge.
3 Adjusted EPS excludes the post-tax effect of one-off transactions.
Key highlights:
· Group revenue of £510.9 million in FY24, +10.3% compared to FY23,
reflecting continued positive momentum across the business and effective
execution of our strategy:
o Total store revenue grew +8.7%, including contribution from 26 net new
store openings during the period.
o cardfactory's LFL(4) revenue grew +7.6%, driven by a strong store
performance, with growth in card, gifts and celebration essentials, combined
with positive traction in online.
o Store revenue grew +7.7% on a LFL basis reflecting development of our
store layout, customer experience and ranges, as well as annualisation of
targeted price increases.
o cardfactory.co.uk sales grew +0.4% on an LFL basis with a particularly
strong performance in the second half, reflecting the impact of ongoing
investment in capabilities.
o Partnerships revenue of £17.0 million includes SA Greetings, acquired in
April 2023, contributing £10.4 million of revenue in line with expectations.
· EBITDA for the full year grew to £122.6 million (FY23: £112.0m)
which includes £2.0 million one-off release of Covid grant provisions and
ongoing investment in capability and capacity to deliver future growth.
· Adjusted PBT growth of £13.2 million (+27.0%), excluding one-off
gains, to £62.1 million (FY23: £48.9 million) driven by revenue growth and
improved margin with inflationary pressures managed through a combination of
efficiency measures and the annualisation of targeted price increases.
· Operating cash conversion was 96.8% for the full year (FY23: 96.3%)
with cash from operations of £118.7 million.
· Successful completion of refinancing with £125 million RCF with
four-year fixed term and option to extend at a lower margin than current
facilities.
· Capex investment in FY24 of £27.8 million (FY23: £18.2 million)
continued to drive positive progress on strategic delivery, including the
completion of Phase 2 ERP implementation, our store evolution programme, and
online platform development.
· Our balance sheet continued to strengthen with a reduction in net
debt (excluding lease liabilities) to £34.4 million at the end of January
(FY23: £57.2 million) as a result of operating cash generation and careful
management of working capital.
· Recommencement of dividends, with a recommended dividend of at 4.5p
per share for FY24, in line with our updated Capital Allocation Policy.
(4) For further information and definitions of Like-for-like (LFL) and other
alternative performance measures see Explanatory Notes (below) "Alternative
Performance Measures ("APMs").
Consistent delivery against our strategic priorities:
· Stores
o Strong store performance reflecting efficient management of profitable
portfolio, investing in service experience and our focus on unlocking the
opportunity of our omnichannel strategy.
o Total store revenue grew +8.7% compared to prior year with 26 net new
store openings during the period, growing our total UK & Ireland estate to
1,058 stores at year end. Similar number of store openings expected in FY25,
as we remain on track to deliver our FY27 store expansion target.
o Positive impact of our store evolution programme enabled the optimisation
of space and balance between card, gifts and celebration essentials and
contributed to strong LFL growth in gifts and celebration essentials of +9.8%.
o Targeted price increases delivered approximately one-third of the LFL
store growth with our value and quality proposition continuing to resonate
with customers.
o Average basket value (ABV) increased +8.1% LFL and transaction volumes
remained stable, reflecting our strategic focus to further grow share of gifts
and celebration essentials categories.
o Strong seasonal performance across the year, in particular our festive
offer across cards and our expanded gifting offer.
· Leadership in card
o Innovation and range development to broaden customer appeal and price
points contributed to +4.8% LFL growth in card. Continuing to tailor offering
for different regions and demographics to further grow card market authority.
o Successful implementation of card pricing architecture maintained our
long-standing value-for-money credentials and low entry price points by
ensuring the right balance of targeted price increases and rotating
promotional offers.
· Gifts & celebration essentials
o As we continue to focus on growing our UK market share of the circa. £12
billion gifts and celebration essentials market, we expanded our ranges
further in FY24, including own-label ranges, a new stationery range and the
introduction of key licensed ranges. Particularly strong LFL growth in soft
toys +42%, stationery +63% and pocket money toys +44%.
o FY25 will see further expansion including baby gifting and stationery,
alongside further space optimisation for growth ranges such as pet gifting.
· Online including omnichannel
o Click & Collect nationwide rollout completed in April 2023, with
customers opting for 7.8% of all online orders to be collected in store as we
build our omnichannel proposition.
o Performance at cardfactory.co.uk gained traction in FY24 with LFL sales
growth of +0.4%. Encouraging H2 performance with +11.4% LFL sales growth,
reflecting the impact of ongoing investment in online capability, platform
performance and customer experience. This positive traction has continued into
FY25 resulting in five consecutive months of sales growth.
o gettingpersonal.co.uk LFL sales in the period fell -26.1% (FY23: -34.7%),
as anticipated, following strategic focus on cardfactory.co.uk in FY24 and
work now underway to scope future proposition for Getting Personal.
· Partnerships
o Good progress on new and existing retail partnerships plus acquisition of
SA Greetings drove revenue growth of +£12.0 million to £17.0 million, up
240.0%, including positive contribution in FY24 from our new partnership with
Liwa Trading Enterprises in the Middle East and from expanding our partnership
with Matalan in the UK.
o Acquisition of SA Greetings has provided a leading presence in the South
Africa market through 27 Cardies stores, an online store, and 6,500
partnership distribution points, while opening up strategic wholesale growth
and synergy opportunities.
o Remain focused on building the right infrastructure that will allow us to
expand across identified markets.
· ESG
o Launched our 'Delivering a Sustainable Future' plan outlining an updated
and expanded sustainability plan to the end of 2028, with clear and
transparent commitments and established a 'Net-Zero by 2050' goal with
near-term, science based targets to help deliver this.
o The strategy is built around five important areas for our business, both
now and in the future: (1) Climate; (2) Waste and Circularity; (3) Protecting
Nature; (4) People & Equity and (5) Governance; each aligned with the
relevant UN Sustainable Development Goals (SDGs).
Capital allocation policy & refinancing
· Following the repayment of CLBILS and Term Loan A under our 2022
facilities, we are no longer restricted from paying dividends.
· New four-year £125 million revolving credit facilities in place,
subject to extension options.
o The Board has approved an updated capital allocation policy which reflects
our commitment to balancing investment in driving the growth of the business
and delivering cash returns to shareholders, which together should drive
shareholder value.
o Dividend reinstated with the Board recommending 4.5p per share for FY24,
which includes an amount to reflect the fact that it was not able to pay an
interim dividend in the year.
o Pending shareholder approval, the dividend will be paid on 28 June 2024
with a record date of 31 May 2024.
o Progressive dividend policy, targeting a dividend cover of between 2x and
3x Adjusted EPS.
o Target Adjusted Leverage (exc. Leases) below 1.5x throughout the financial
year.
Current trading
· Trading since the start of the new financial year has been in line
with the Board's expectations, with continued positive momentum across card,
gifts and celebration essentials for the FY25 spring seasons of Valentine's
Day and Mother's Day, with a record trading day reported on the Saturday
before Mother's Day.
Outlook
· The Board remains confident in the long-term compelling growth
opportunity for cardfactory, and in its ability to deliver on the medium-term
ambitions of £650 million of sales, Profit Before Tax margins of 14% and 90
net new stores by the end of FY27.
· We expect to continue to make strategic progress toward these
ambitions in FY25, and are encouraged by the start that we have made to the
year
· As anticipated, PBT growth in FY25 is expected to be weighted toward
the second half of the year due to the phasing of planned investment and
inflationary recovery actions.
· Through the course of the year we expect to manage the overall
inflationary environment through the ongoing improvements in efficiencies and
productivity and leveraging the benefits of our vertically integrate business
model.
· Consequently, expectations for FY25 remain unchanged.
Darcy Willson-Rymer, Chief Executive Officer, commented:
"I am delighted with the progress we have made through the year which would
not have been achieved without the commitment and efforts of our colleagues.
"Now, three years into our 'Opening our New Future Strategy', cardfactory is
financially and operationally a much stronger business. This means that we are
able to both reinstate the dividend and invest in the future, while
effectively navigating the ongoing economic environment. We have confidence in
our strong value and quality customer proposition, and remain on track for
both this financial year and for achieving our FY27 targets outlined at our
Capital Markets Day in May last year."
Preliminary results webcast
There will be a meeting for analysts and investors today at 10:00am in central
London. We will also provide a live video webcast of the presentation,
available by registering via the following link:
https://storm-virtual-uk.zoom.us/webinar/register/WN_jrHCkBGbTN-TdCwKK5SWXw
(https://storm-virtual-uk.zoom.us/webinar/register/WN_jrHCkBGbTN-TdCwKK5SWXw)
Those analysts who wish to join in person are requested to contact Teneo by
emailing: cardfactory@teneo.com (mailto:cardfactory@teneo.com) to receive full
attendance details.
A copy of the webcast and accompanying presentation will be made available via
the cardfactory investor relations website:
www.cardfactoryinvestors.com/investors
(http://www.cardfactoryinvestors.com/investors)
Enquiries:
Card Factory
plc
via Teneo (below)
Darcy Willson-Rymer, Chief Executive Officer
Matthias Seeger, Chief Financial Officer
Teneo
+44 (0) 207
353 4200
James Macey White / Jo Blackshaw
cardfactory@teneo.com
(mailto:cardfactory@teneo.com)
Card Factory plc ("cardfactory" or the "Group")
Preliminary results for the year-ended 31 January 2024
CHAIR'S STATEMENT
Introduction
The strong revenue growth we saw in the year demonstrates the strength of our
customer proposition and the benefits of the 'Opening Our New Future'
strategy. There is continued good momentum within the business with our offer
is resonating well with our customers.
Our value offer remains crucial to our success, particularly during the
ongoing cost-of-living challenge that dominated consumer spending decisions
through 2023. Range development and innovation to broaden customer appeal
ensured we remained relevant for customers to support growth.
Investments made in support of our strategy are now delivering positive
outcomes across all growth areas with the store evolution programme, Click
& Collect and new partnerships being particular highlights. This success
can substantially be attributed to the cultural journey cardfactory has been
on over the past three years which has transformed our ability to understand
the needs of our customers and execute at pace, thanks to the hard work and
dedication of colleagues. In FY24, it was clear that as cardfactory transforms
itself into a truly customer-centric business, we have been able to more
effectively respond to the needs of our customers.
Year in review
Our store estate remains our greatest asset, with the revenue performance
reflecting the strength of our value and quality proposition, combined with
the positive contribution we saw from the store evolution programme. The
market leading performance of our stores underlines the importance of this
customer channel with further opportunities for growth, driven by product and
range development, whilst providing a competitive advantage in helping deliver
our omnichannel strategic ambition.
Stable transaction volumes, and an increase in average basket value, resulted
in good levels of growth which reflects our strategic focus to increase our
share of the gifts and celebration essentials categories; they now represent
over half of sales. At the same time, we continued to enjoy good levels of
Like-for-like card sales growth. We also saw strong seasonal performance
across the year, especially during the Christmas season, as customers
responded well to our festive offer across cards and the expanded gifting
range.
We were encouraged by the performance in cardfactory.co.uk, which gained
traction in the year as a direct consequence of ongoing investment in online
infrastructure and the customer experience. Notably, the successful launch of
our Click & Collect service has reinforced our belief in the potential for
omnichannel.
Progress in building our partnerships channel was evidenced by signing our
Middle East partnership and the expansion of our Matalan trial to a full UK
rollout across 223 stores.
In April 2023 we were pleased to complete the acquisition of SA Greetings.
Performance has been in line with expectations and we remain positive about
the wholesale opportunity that this acquisition provides.
Outlook and macro environment
We continue to operate within a resilient market which demonstrates a
continuing shift in card purchases back to physical stores. We remain focused
on developing our core value and quality proposition and maintaining low price
points as customers continue to seek value for money.
The Board is encouraged by trading since the start of the new financial year
which has been in line with expectations. We saw positive momentum continue
across our FY25 spring seasons of Valentine's Day and Mother's Day, with good
growth across all product categories.
The planned capital expenditure of £25 million in FY25 will ensure that we
are able to deliver further strategic progress including investment in stores,
technology infrastructure and the next phase of the ERP implementation to
support operational efficiency and effectiveness improvements.
Our clear focus on increased efficiencies and productivity, alongside targeted
pricing action, will enable us to navigate the inflationary environment.
ESG strategy
In FY24 we launched our 'Delivering a Sustainable Future' plan outlining an
updated and expanded sustainability plan to the end of 2028, with clear and
transparent commitments and goals. The strategy is built around five important
areas for our business, both now and in the future: (1) Climate; (2) Waste and
Circularity; (3) Protecting Nature; (4) People & Equity; and (5)
Governance; each aligned with the relevant UN Sustainable Development Goals
(SDGs).
This ambitious plan is aligned to the outcomes of a materiality assessment
refresh completed in FY24 and includes significant focus on reducing our scope
1, 2 and 3 emissions; waste generated across our operations; understanding and
addressing our impact on nature and biodiversity; and ensuring we continue to
provide the right level of pay, benefits and support for colleagues across
cardfactory.
Board appointments
In May 2023, the Board welcomed Matthias Seeger as Chief Financial Officer.
Matthias brings extensive financial experience to the business with the
expertise and values that will support cardfactory's strategic projects and
significant change programme over the next few years.
Capital allocation policy
The Board is pleased to confirm that, following the repayment of CLBILs in
September 2023 and Term Loan A at the end of January 2024, we are no longer
restricted from paying dividends. Therefore, the Board has approved an updated
capital allocation policy which reflects our commitment to balancing
investment in driving the growth of the business and delivering cash returns
to shareholders, which together should drive shareholder value.
At the AGM on 20 June 2024, the Board will recommend reinstating an ordinary
dividend of 4.5p per share for FY24, which includes an amount to reflect the
fact that it was not able to pay an interim dividend in the year. Pending
shareholder approval, the dividend will be paid on 28 June 2024 with a record
date of 31 May 2024. This is a progressive dividend policy, targeting a
dividend cover of between 2x and 3x Adjusted EPS with a target Adjusted
Leverage (exc. Leases) of below 1.5x throughout the financial year.
Summary
With continued positive momentum across the business, the Board remains
confident in the compelling growth opportunity for the Group and in the
delivery of the FY27 targets outlined at the Capital Markets Strategy Update
in May 2023.
Paul Moody
Chair
30 April 2024
CHIEF EXECUTIVE OFFICER'S REVIEW
Introduction
Three years into cardfactory's transformation journey, we are seeing the
positive impact of the changes that have been made across the business. The
strong revenue growth we delivered in FY24 is testament to the successful
delivery of our change programme and the hard work of colleagues throughout
cardfactory.
By putting the customer first in our decision-making, we have continued to
innovate and expand our offer while remaining true to our value for money
credentials. As we broaden our appeal by extending our range across the
celebrations occasions market, we are seeing positive responses from customers
as they choose to pair their card purchases with gifts and celebration
essentials products.
As we continue to invest in our 'Opening Our New Future' strategy, we are
delivering on the key initiatives at pace and ensuring that we are maximising
our growth opportunities in store, across our digital channels, and through
our expanding partnership programme. Progress on our strategy delivery is
ensuring we are on track to meet our growth targets over the five years of the
plan.
FY24 performance
In FY24, revenue grew by +10.3% to £510.9 million with store revenue, which
represented 93.7% of total group revenue, growing by +8.7% compared to the
prior year. On a Like-for-like basis store revenue grew +7.7%, with
development of our store layout, experience and ranges driving growth,
alongside the annualisation of FY23 targeted price increases.
Transaction volumes remained stable and, combined with an increase in average
basket value of +8.1% LFL, demonstrated the importance of focusing on growing
our share of the gifts and celebration essentials categories. As we continued
to respond to changing customer needs through ongoing range enhancements, we
have increased our average card selling price from £1.09 to £1.21. We saw
card growth continue at +4.8% while still protecting our value for money
proposition.
The positive impact of our store evolution programme enabled the optimisation
of space within stores and balance between card, gifts and celebration
essentials. This contributed to strong LFL growth in gifts +15.8% and
celebration essentials +6.7%.
We continued to see strong seasonal performance across the year with our
Christmas offer performing particularly well, leading to year-on-year
increases in transactions and average basket value. Customer research is
driving our greeting cards designs in response to consumer trends, leading to
a wider breadth of celebratory captions with examples including cards from
pets as well as broader diversity and inclusion.
Investment in our online capability, platform performance, and customer
experience improvements, as well as further range expansion, led to improved
performance in cardfactory.co.uk with LFL sales growth of +0.4%. This traction
led to an encouraging performance in the second half of the year with +11.4%
LFL sales growth with this positive performance continuing into FY25. There
was good progress on our partnership strategy with both new and existing
retail partnerships, plus the acquisition of SA Greetings, driving revenue
growth of £12.0 million to £17.0 million. This included positive
contribution in FY24 from our new partnership with Liwa Trading Enterprises in
the Middle East and from expanding our partnership with Matalan in the UK.
Strategy delivery
FY24 was a year of delivery for our 'Opening Our New Future' growth strategy.
We are on track to meet our growth ambition of revenue of £650 million in
FY27, as outlined at our Capital Markets Strategy Update in May 2023.
Growth within our core business continued with 26 net new stores in FY24,
ensuring we remain on track to deliver 90 new stores over the course of the
five-year plan to FY27. Our agile store optimisation programme ensures we
continue to maintain an exceptional record on store profitability. Within our
store evolution programme, we completed our space realignment project in 729
stores which saw everyday card space reduced by 7%. There was no negative
impact seen, while gifts and celebration essentials were given additional
space resulting in sales uplift.
The successful rollout of 'The cardfactory Way' customer service excellence
programme for all store colleagues led to increased customer interaction on
the shop floor, enabling tailored customer service, product recommendations
and improved basket value.
Range improvements and expansion continued for card, gifts and celebration
essentials, with new own-label ranges, a new stationery range and the
introduction of key licensed ranges.
Our omnichannel programme saw the successful nationwide rollout of our new
Click & Collect service with customers opting for 7.8% of online orders to
be collected in-store and 50% of these Click & Collect transactions were
from customers new to cardfactory.co.uk. We have already reduced customer
order to collection lead times from 3-5 days at rollout, to 1-2 days on
average by September 2023. Wider digital investment saw the completion of the
replatforming project for cardfactory.co.uk and gettingpersonal.co.uk,
enabling benefits of using consistent systems, tools and processes.
Our partnership programme in the UK continued to expand with the rollout
across all 223 Matalan stores by December 2023. Internationally, the first
four franchised stores were opened in the Middle East with up to 36 stores
planned over the next four years. Response from customers in the Middle East
has been positive and as expected, gifts and celebration essential ranges have
performed well given the strong gifting culture in this market, with
stationery, soft toys, balloons and gift bags contributing to almost 50% of
total sales.
The acquisition of SA Greetings has provided a leading presence in the South
African market through 27 Cardies stores, an online store, and 6,500
partnership distribution points (operated by wholesale partners), while
opening up strategic wholesale growth opportunities.
People & culture
cardfactory has been on a transformative cultural journey over the past three
years and the growth we are seeing as a business can be linked to the cultural
progress we have made.
Today, our focus is on customer, community and purpose. By building a deep
understanding of the celebratory needs of our customers, both in the UK and
internationally, we are able to adapt and change so that we continue to lead
the market. We are also building an inclusive community within cardfactory and
one that is dedicated to giving something back to the communities we work
within. Putting our purpose first in everything we do ensures we have a
collective and collaborative approach to decision-making.
The cultural progress we have made has been considerable. This has been
recognised through our externally facilitated Best Companies 'b-Heard'
colleague survey, where we received a two-star 'Outstanding' to work for
accreditation in September 2023 and were also recognised as the '5th Best Big
Company to Work For'.
ESG progress
Following the launch of our 'Delivering a Sustainable Future' plan, we made
good progress across all areas of focus within the strategy. One highlight was
seeing the results of our waste reduction efforts coming through with the
elimination of non-essential single use plastic in our own-label products and
packaging, increasing recyclability and engaging with suppliers to reduce
waste in products and packaging.
In FY25 we will take our plans further by publishing science based, near-term
targets to help deliver our goal of 'Net Zero by 2050' in our FY24 Annual
Report. We are embedding sustainability into business planning and
decision-making to ensure our commitments are at the forefront of how we work
and the decisions we make every day. More detail on ESG and our sustainability
plans will be available in our FY24 Annual Report.
Summary
With strong operating cash generation, a continually strengthening balance
sheet, ongoing reductions in net debt and our updated capital allocation
policy in place, we can continue to invest with confidence in the building
blocks of growth. In addition, we continue to proactively manage risks from
inflationary headwinds.
Having made significant progress on our strategy delivery in FY24, we are
confident that we will continue to make strategic and cultural progress in
FY25 and meet our FY27 growth targets.
Darcy Willson-Rymer
Chief Executive Officer
30 April 2024
CHIEF FINANCIAL OFFICER'S REVIEW
Financial highlights
The Group delivered a strong performance and made good progress towards our
strategic ambition to deliver £650 million sales, 14% PBT margin and 90 net
new stores by FY27.
* Across our stores, we continued to grow with both higher revenues and positive
LFL sales compared to last year, providing a strong platform for our strategic
growth plans and omnichannel ambitions.
* We continued to strengthen our balance sheet, with a reduction in closing net
debt of £22.8 million, year on year, and the repayment of CLBILs in September
2023 and Term Loan A at the end of January 2024 resulting in the lifting of
dividend restrictions.
* Total sales of £510.9 million increased +10.3% from prior year, underpinned
by LFL sales of +7.7% in cardfactory stores.
* Adjusted PBT of £62.1 million, up £13.2 million, reflecting a margin of
12.2%, up from 10.5% in FY23.
* Store portfolio stands at 1,058 stores at 31 January 2024, up 26 from 31
January 2023.
* Acquisition of SA Greetings for £2.5 million fixed cash consideration, which
is performing in line with expectations.
* Strong end to the year for online sales and a positive LFL for
cardfactory.co.uk for the year of +0.4%.
* Recommencement of dividend - proposed ordinary dividend for FY24 of 4.5 pence
per share.
FY24 FY23
Revenue £510.9m £463.4m
EBITDA £122.6m £112.0m
Profit Before Tax £65.6m £52.4m
Adjusted Profit Before Tax £62.1m £48.9m
Basic earnings per share 14.4 pence 12.9 pence
Adjusted earnings per share 13.5 pence 12.1 pence
Dividend per share 4.5 pence 0.0 pence
Net debt £34.4m £57.2m
Cash from operations £118.7m £107.8m
Adjusted Leverage (exc. Leases) 0.4x 0.8x
Adjusted PBT excludes one-off transactions, which in FY24 include a one-off
gain arising on the acquisition of SA Greetings (£2.6 million), a gain
resulting from the release of provisions related to the Group's covid grants
position (£2.0 million), and a charge relating to impairment of assets in
Getting Personal (£1.1 million), a net gain of £3.5 million.
Following the cessation of capital expenditure and dividend restrictions from
31 January 2024, we have reviewed and updated our capital allocation policy.
The Board is committed to balancing delivery of sustainable long-term growth
in shareholder value with progressive cash returns, whilst being cognisant of
the needs of its other stakeholders.
On 26 April 2024, the Group successfully refinanced its debt facilities,
agreeing a new £125 million revolving credit facility with a syndicate of
banks, with an initial four-year term to April 2028.
Financial performance
Sales
Total Sales
FY24 FY23 Change %
£m £m
Stores 478.9 440.4 +8.7%
cardfactory online 8.8 8.8 -
Getting Personal 5.9 8.5 -30.6%
Partnerships 17.0 5.0 +240.0%
Other 0.3 0.7 -57.1%
Group 510.9 463.4 +10.3%
Partnerships includes £10.4 million of sales from SA Greetings
post-acquisition (FY23: £nil).
LFL Sales
FY24 FY23 Change %
cardfactory stores +7.7% +7.6% +0.1 ppts
cardfactory Online +0.4% -18.8% +19.2 ppts
cardfactory LFL +7.6% +6.7% +0.9 ppts
Getting Personal -26.1% -34.7% +8.6 ppts
Total Group sales for FY24 were £510.9 million, an increase of £47.5 million
or +10.3% when compared to the previous year.
This represents good progress on our strategic ambition to add £190 million
of sales from the FY23 base by FY27. We are ahead of the compound annual
growth rate required of +8.85%. The sales growth in FY24 was underpinned by
LFL sales in cardfactory stores of +7.7% and a £10.4 million contribution
from SA Greetings which we acquired in the year.
Store sales across the UK & Ireland of £478.9 million increased by £38.5
million or +8.7% compared to the prior year, with LFL sales of +7.7%. Everyday
ranges performed well, with gifts and celebration essentials showing strong
momentum with LFL sales of +9.8%, supported by positive LFL growth in both
everyday and seasonal card. Approximately a third of the total LFL growth was
delivered through annualisation of targeted price increases implemented in the
second half of FY23.
Transactions remained stable in the UK and increased +3.0% in the Republic of
Ireland on an LFL basis. Average basket values increased by +8.1%. The
increase in basket values was supported by higher average selling prices,
delivered via a combination of the price activity described above and
continuing to expand and develop our range, particularly in gifts and
celebration essentials. Our range development has clearly resonated with
customers, as party and gifting both delivered higher sales volumes than in
FY23.
We continue to optimise our store portfolio and during FY24 opened 39 new
stores and closed 13, including three relocations. As a result, the total
store portfolio increased by 26 stores to 1,058. This reflects good progress
in delivering our target of 90 net new stores by FY27. The value of our
flexible approach to the store portfolio is illustrated in the incremental
sales growth delivered by non-LFL sales in the year.
Our partnerships business, which focuses on B2B sales, delivered total sales
of £17.0 million in FY24, compared to £5.0 million in FY23. This included a
£10.4 million contribution from SA Greetings since acquisition in April 2023.
Other partnerships delivered total sales of £6.6 million, including increased
contributions from the rollout of our offer across the Matalan store estate in
the UK and the new franchise stores opened in the Middle East with our partner
in the region, Liwa Trading Enterprises.
In online, we are beginning to see positive traction from the investments made
over recent years, with cardfactory.co.uk delivering positive sales growth
towards the end of the year resulting in an LFL for the full year of +0.4%.
Sales at Getting Personal fell year-on-year, but remain an important factor in
online volume and contribute to shared fulfilment costs. The cardfactory
platform remains our strategic investment focus, with an increasing proportion
of our total online range offered via cardfactory.co.uk.
Click & Collect is a key component of our omnichannel offer,
differentiating cardfactory from pure play online and bricks and mortar
retailers. The rollout was completed across all UK stores in April 2023, and
we have seen customers opting for 7.8% of all orders from cardfactoryco.uk to
be collected in store. Average basket values for Click & Collect were
more than double the average basket value of an online order.
Gross profit
FY24 FY24 % Sales FY23 FY23 % Sales
£m £m
Group sales 510.9 463.4
COGs (155.9) (30.5%) (146.8) (31.7%)
Product margin - constant currency 355.0 69.5% 316.6 68.3%
FX gains 0.6 0.1% 1.5 0.3%
Product margin 355.6 69.6% 318.1 68.6%
Store & warehouse wages (124.0) (24.3%) (109.6) (23.7%)
Property costs (24.7) (4.8%) (26.3) (5.7%)
Other direct costs (22.0) (4.3%) (21.5) (4.7%)
Gross Profit 184.9 36.2% 160.7 34.7%
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 £24.2 million, or +15.1%, to
£184.9 million.
Product margin, when calculated using a constant GBPUSD exchange rate
year-on-year, improved by +1.2ppts to 69.5%. This improvement includes a
normalisation in international freight rates when compared to the prior year.
This saving helped to offset price inflation in material costs and the effect
of a slight shift towards lower-margin non-card products in sales mix.
The Group purchases approximately half of its goods for resale in US dollars
from suppliers in the Far East. Currency gains associated with this activity
of £0.6 million were lower than in the prior year. Our well-established
currency hedging policy continues to protect us against volatility in GBPUSD
exchange rates. Our average USD delivered rate in FY24 of 1.3121 was lower
than the prior year (1.3241), but ahead of the average spot exchange rate for
the period.
Store and warehouse wages increased by £14.4 million (13.1%), which included
the impact of the national living wage increasing by +9.7% from April 2023, as
well as expanding the store portfolio. Property costs, which cover business
rates, insurance and service charges (rent is reflected in depreciation and
interest costs as a result of the lease accounting rules in IFRS 16) reduced
by £1.6 million including a net saving in business rates costs following the
most recent revaluation exercise effective from April 2023.
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, meaning whilst overall costs increased slightly in line with
the increase in number of stores in the period, they fell as a percentage of
sales given the improved trading performance in the year. The Group has
continued to benefit from its long-term energy hedge in FY24, which fixed
commodity unit 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
FY24 FY24 % Sales FY23 FY23 % Sales
£m £m
Group sales 510.9 463.4
Gross profit 184.9 36.2% 160.7 34.7%
Other operating income 2.0 0.4% - -
Operating expenses (64.3) (12.6%) (48.7) (10.5%)
EBITDA 122.6 24.0% 112.0 24.2%
Depreciation & amortisation (10.4) (2.0%) (10.3) (2.2 %)
Right-of-use asset depreciation (34.7) (6.8%) (35.1) (7.5%)
Impairment charges (1.1) (0.2%) (2.8) (0.6%)
Operating profit 76.4 15.0% 63.8 13.8%
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 have increased £15.6 million compared to the prior
year, which reflects up-front investment in capability, capacity, systems and
processes to enable us to deliver the strategy. These investments are
principally in central staff costs, supporting major IT projects and in
marketing where spend has historically been very low. This increase also
includes a contribution of £2.6 million due to the acquisition of SA
Greetings.
As a result, driven primarily by the improved trading performance, EBITDA
improved to £122.6 million (FY23: £112.0 million); however the investment
for future growth means EBITDA margin fell slightly from 24.2% to 24.0%.
Excluding the one-off impact of other income from the release of provisions
related to government support received during the pandemic, EBITDA margin
would have been 23.4%.
It should be noted that that EBITDA does not include any benefit from reduced
store rental costs as these are reflected in depreciation and interest costs
under IFRS accounting.
Right of use asset depreciation continues to fall reflecting our flexible
approach to managing the store portfolio. We maintain an average lease term of
five years, with a break clause at three years. On average 20% of the lease
portfolio renews each year enabling us to capture reductions in market rents
where available. During FY24, we achieved rent reductions on renewal of up to
20% which will flow through depreciation charges in future years.
EBITDA, after deducting depreciation and interest charges relating to store
leases, was £81.8 million (a margin of 16.0%) in FY24 compared to £71.1
million in FY23 (a margin of 15.4%).
Depreciation and amortisation, at £10.4 million, remained broadly in line
with the prior year.
Impairment charges reflect a write down in respect of Getting Personal assets,
following a further period of reduced sales.
Profit Before Tax
FY24 FY24 % Sales FY23 FY23 % Sales
£m £m
Group sales 510.9 463.4
Operating profit 76.4 15.0% 63.8 13.8%
Gain on acquisition 2.6 0.5% - -
Finance costs (13.4) (2.6%) (11.4) (2.5%)
Profit Before Tax 65.6 12.8% 52.4 11.3%
One-off transactions (3.5) (0.6%) (3.5) (0.8%)
Adjusted Profit Before Tax 62.1 12.2% 48.9 10.5%
The total reported result for the year includes an acquisition gain in respect
of SA Greetings of £2.6 million, and a further £2.0 million gain as a result
of releasing provisions no longer considered to be required in respect of
Covid business support grants received subject to subsidy control. These
items, along with the impairment charge in respect of Getting Personal of
£1.1 million, are considered to be one-off in nature and have been excluded
from Adjusted PBT. (FY23: One-off gains in relation to CJRS settlement and
refinancing excluded totalling £3.5 million from Adjusted PBT).
Total finance costs increased by £2.0 million to £13.4 million.
The composition of our finance costs is set out in the table below. The
increase in both interest payable on loans and interest in respect of leases
reflects the increase in SONIA interest rates during the period, from 3.4% at
31 January 2023 to 5.2% at 31 January 2024.
FY24 FY23
£m £m
Interest on loans 6.5 6.0
Loan issue cost amortisation 0.6 0.9
IFRS 16 Leases interest 6.3 4.5
Total finance expenses 13.4 11.4
FY24 FY23
£m £m
IFRS 16 depreciation 34.5 36.3
IFRS 16 leases interest 6.3 4.5
Total IFRS 16 expenses 40.8 40.8
IFRS 16 depreciation includes impairment and gains/losses on disposal. Total
costs in this table reflect lease costs not included in the calculation of
EBITDA, above.
The average cost of debt, taking into account margin, indexation and the
impact of hedging activity, in the period was 7.4% (FY23: 5.7%). The impact of
this increase on our overall debt service cost was mitigated by the Group
continuing to deleverage and lower levels of gross debt drawn when compared to
FY23.
As a result, Profit Before Tax for the year was £65.6 million, up £13.2
million from £52.4 million for the previous year.
Adjusted PBT, which excludes the impact of one-off transactions in the period
that are not reflective of the Group's underlying trading performance, was
£62.1 million compared to £48.9 million in FY23.
Taxation
In March 2023 the results of our latest business risk review were confirmed
with HMRC, at which we achieved a 'Low' risk rating in all of the categories
assessed.
The tax charge for FY24 of £16.1 million reflects an effective tax rate of
24.5% and has increased £7.9 million compared to FY23.
The effective rate of tax for the year is higher than the equivalent rate
applied for the same period last year (15.6%) largely due to increases in
corporation tax rates effective from 1 April 2023 and the impact of prior year
adjustments that reduced the FY23 charge. The rate is slightly higher than the
standard rate applicable to the current financial year (24.0%).
The Group makes UK corporation tax payments under the 'Very Large' companies'
regime and thus pays its expected tax bill for the financial year in quarterly
instalments in advance. Corporation tax payments in FY24 totalled £13.5
million (FY23: £7.9 million).
Earnings per share
The net result for the year was a Profit After Tax of £49.5 million,
increased from £44.2 million in FY23. As a result, basic earnings per share
(EPS) for the year was 14.4 pence, with diluted EPS of 14.3 pence.
FY24 FY23
Profit after tax (£m) 49.5 44.2
Basic EPS (pence) 14.4 pence 12.9 pence
Diluted EPS (pence) 14.3 pence 12.8 pence
Adjusted EPS, which excludes the post-tax effect of one-off transactions in
the period, was 13.5 pence compared to 12.1 pence in FY23. A reconciliation of
all Alternative Performance Measures is set out in the appendix below.
Cash flows
FY24 FY23
£m £m
Cash from Operating Activities (after tax) 105.2 99.9
Cash used in Investing Activities (30.0) (18.2)
Cash used in Financing Activities (73.2) (110.1)
Impact of foreign currency exchange rates (0.8) -
Net Cash Flow for Year 1.2 (28.4)
Operating cash flows less lease repayments 61.5 42.9
Operating cash conversion (%) 96.8% 96.3%
Free Cash Flow 27.1 16.7
The Group continued to deliver strong cash performance in FY24, with cash from
operations (before corporation tax payments) of £118.7 million increased from
£107.8 million in the prior year, reflecting the improved trading performance
described above. There was a small decrease in working capital outflow, with
deployment of working capital normalised following the impact of the pandemic.
FY23 also included a one-off cash benefit from the alignment of VAT payments
with our financial year end that did not recur in FY24.
Operating cash conversion, which is the ratio of Cash from Operations to
EBITDA, improved slightly as a result to 96.8% (FY23: 96.3%).
Capital expenditure increased to £27.8 million in the year, as we invested in
infrastructure and growth projects to support our strategy.
Free cash flow, which we define as net cash before M&A activity,
distributions or debt repayments, was £27.1 million. We invested £2.5
million in the acquisition of SA Greetings (see below) and made net debt
repayments of £23.6 million. The increase in free cash flow supports the
recommencement of dividend payments, as described in further detail below.
Balance sheet
Acquisition of SA Greetings
As reported in the FY23 preliminary results, on 25 April 2023 the Group
acquired 100% of the issued equity of SA Greetings Corporation (Pty) Ltd ("SA
Greetings") for fixed cash consideration of £2.5 million, funded from
existing cash reserves.
SA Greetings is the leading wholesaler of greetings cards and gift packaging
in South Africa. It also operates 27 'Cardies' retail stores including four
stores operated by franchisees, an online store, 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.
SA Greetings delivered sales of £10.4 million during the period from
acquisition to the end of the year and made a small positive contribution to
Profit Before Tax. We look forward to exploring the full range of
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.
The Group has concluded the accounting for the acquisition and recognised a
gain on acquisition of £2.6 million. See note 30 to the consolidated
financial statements for more information.
Capital expenditure
Total capital investments to grow the business and deliver the strategy were
£27.8 million in FY24, increased from £18.2 million in FY23 and slightly
ahead of our capital markets update guidance as we accelerated certain
investment plans and including the impact of capital expenditure in SA
Greetings.
Key investments included the continued delivery of our long-term project to
upgrade our business support systems, with extended ERP functionality in
relation to inventory management, developing our network infrastructure in
stores, enhancing platform functionality in cardfactory.co.uk, and expanding
our online fulfilment capacity in Printcraft.
In addition, we continue to invest in opening new stores and refreshing the
store estate, including delivery of our space realignment programme which as
part of our store evolution programme, has expanded the amount of space in
store available for gifts and celebration essentials without negatively
impacting card LFLs.
Looking forward, in line with the guidance given at our Capital Markets
Strategy Update in May 2023, we expect annual capital expenditure to remain
around the £25 million mark. FY25 priorities include a point of sale (POS)
upgrade in stores and other infrastructure projects to enable us to deliver
online and partnerships growth.
Net debt
FY24 FY24 Leverage FY23 FY23 Leverage
£m £m
Current borrowings 7.1 27.1
Non-current borrowings 37.9 40.4
Total Borrowings 45.0 67.5
Add back capitalised debt costs 0.7 1.4
Gross Bank Debt 45.7 68.9
Less cash (11.3) (11.7)
Net Debt (exc. Leases) 34.4 57.2
Leverage (exc. Leases) 0.3x 0.5x
Adjusted Leverage (exc. Leases) 0.4x 0.8x
Lease Liabilities 100.8 105.4
Net Debt (inc. Leases) 135.2 162.6
Leverage (inc. Leases) 1.2x 1.4x
We continued to strengthen our balance sheet in FY24, with a further reduction
in net debt at 31 January 2024 of £22.8 million supported by strong operating
cash flow combined with careful allocation of capital to invest and deliver
future growth.
The Group focuses on net debt excluding lease liabilities, this reflects the
way the Group's covenants are calculated in its financing facilities. Leverage
compares the ratio of net debt to EBITDA as calculated above, Adjusted
Leverage reflects adjustments in the Group's bank facilities to deduct
lease-related charges from EBITDA. A full description, calculation and
reconciliation of Alternative Performance Measures is provided in the appendix
below.
The Group's banking facilities and amounts drawn in the current and prior
periods are summarised in the table below:
Facility 31 January 2024 31 January 2023
£m £m
£11.25m Term Loan 'A' - 9.0
£18.75m Term Loan 'B' 18.8 18.8
£20m CLBILs - 16.1
£100m Revolving Credit Facility 26.0 23.0
Overdraft facilities 0.2 1.8
Property mortgage 0.6 -
Accrued interest 0.1 0.2
Gross Bank Debt 45.7 68.9
During FY24, we made repayments of £16.1 million in respect of the CLBILs
facilities and £9.0 million in respect of term loans. At 31 January 2024 the
Group had undrawn committed facilities of £74.0 million (FY23: £75.2
million)
The CLBILs facilities were fully extinguished on 25 September 2023 and Term
Loan 'A' fully extinguished on 31 January 2024. Following these repayments,
restrictions in the Group's financing facilities relating to capital
expenditure and distributions were released.
Subsequent to the year end, on 26 April 2024, the Group successfully concluded
a refinancing of its debt facilities, having agreed a new four-year £125
million committed revolving credit facility with a syndicate of banks. The
existing revolving credit facility and Term Loan B have been fully repaid and
cancelled.
The new facilities have an initial maturity date in April 2028, with options
to extend by up to 19 months, subject to lender approval. The facilities
include a £75 million accordion, which can be drawn subject to lender
approval. The interest margin on the facilities is dependent upon the Group's
leverage position, with margins between 1.9-2.8% which is lower than the
previous facilities.
The new facilities include covenants for a maximum leverage ratio (calculated
as net debt excluding leases divided by EBITDA less rent costs for the prior
12 months) of 2.5x and a fixed charge cover ratio of at least 1.75x. The
leverage covenant is consistent with the Group's definition of Adjusted
Leverage. The Group expects to operate comfortably within these covenant
levels for the foreseeable future.
The new facilities are on what we consider to be market standard terms,
marking an end to the more restrictive conditions applied during the pandemic
years and providing a firm platform from which we can execute our strategy.
Notably, dividend and capital expenditure limitations are now removed.
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 led 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. During FY24, Adjusted Leverage at
the intra-year peak was approximately 1.2x.
Capital structure & distributions
The Group has reviewed and updated its capital allocation policy (as outlined
below). The Board is focused on delivering attractive, progressive,
sustainable returns to shareholders, whilst continuing to drive the growth of
the business.
The Board confirms that it has decided to recommend the payment of an ordinary
dividend. Whilst any dividend will be dependent on, inter alia, the
performance and prospects of the Group, the Board will target a progressive
dividend policy, which it expects to deliver a dividend cover over time of
between 2x and 3x Adjusted EPS.
The ordinary dividend will comprise interim and final dividends; the Board
currently expects the interim dividend to be around one quarter of the total
dividend for the previous year, each year.
For the financial year ending 31 January 2024, the Board is cognisant of the
fact that it was not able to pay an interim dividend in the year. The Board
is therefore recommending a dividend of 4.5p per share, an amount which would
have been split between interim and final dividends if the Board had been able
to pay an interim dividend. This dividend is covered by Adjusted EPS to 31
January 2024 by 3x.
At the Annual General Meeting on 20 June 2024, the Board will recommend to
shareholders a resolution to pay the dividend for the year. If approved, the
dividend will be paid on 28 June 2024 with a record date of 31 May 2023.
Where the Board concludes that the Group has excess cash, taking into account,
inter alia, the performance and prospects of the Group, together with any
potential investment opportunities, the Board expects to make additional
returns to shareholders. The Board will consider at the time the most
appropriate method of returning such cash to shareholders.
The Board is committed to funding ordinary and additional shareholder returns
from the free cash generation of the Group, and will target maintaining an
Adjusted Leverage (exc. Leases) ratio below 1.5x throughout the financial
year.
Outlook
The Board remains confident in the compelling growth opportunity for our
business, and our medium-term ambitions to deliver £650 million of sales, PBT
margins of 14% and 90 net new stores by the end of FY27.
We expect to see continued top line growth in FY25, driven largely by same
store sales and the continued growth of our store portfolio.
Whilst the cost-of-living crisis has eased, inflationary challenges remain for
retailers, particularly in wages, freight and energy. We are well placed to
manage these challenges and remain confident in offsetting cost inflation over
the course of the year through ongoing improvements in efficiencies &
productivity and leveraging our vertically integrated business model. PBT
growth in FY25 is expected to be weighted to the second half of the year,
reflecting phasing of planned investments and inflation recovery actions.
Matthias Seeger
Chief Financial Officer
30 April 2024
Capital Allocation Policy
cardfactory aims to balance delivery of sustainable, long-term growth in
shareholder value against cash returns to shareholders and the needs of its
other stakeholders.
Each year, the Group will assess the appropriate use of free cash after
allocating funds to investments that will deliver the stated strategy. The
Group is committed to a transparent, systemic and disciplined use of cash.
Business expenditures and investment opportunities will change over time. The
Board will, as part of its annual planning cycle, review investment
opportunities and allocate capital between strengthening the balance sheet,
investment to deliver the strategy and returns to shareholders in line with
the below principles and taking into account prevailing wider macro-economic
factors.
· Maintain a strong balance sheet: Retain sufficient cash and committed
facilities to ensure liquidity headroom throughout the annual operating cycle;
maintain Adjusted Leverage below 1.5x throughout the year.
· Invest to deliver the strategy: Capital will be invested each year to
ensure the group complies with obligations and delivers its business plans;
investments to accelerate business progress need to deliver attractive returns
in excess of cost of capital.
· Regular, progressive returns to shareholders: The Board anticipates
an ordinary dividend, targeting dividend cover between 2-3x Adjusted EPS, paid
as interim (c.25%) and final (c.75%) dividends. The Board will consider, from
time to time, share purchases to offset dilution from employee share
schemes.
· Disciplined use of surplus cash: Total returns will not exceed free
cash generated.
Any dividend will depend on, inter-alia, the performance and prospects of the
Group. Adjusted Leverage is defined under Alternative Performance Measures,
below.
Condensed consolidated financial statements
Consolidated income statement for the year ended 31 January 2024
Note 2024 2023
£'m £'m
Revenue 4 510.9 463.4
Cost of sales (326.0) (302.7)
Gross profit 184.9 160.7
Other operating income 20 2.0 -
Operating expenses 5 (110.5) (96.9)
Operating profit 5 76.4 63.8
Gain on bargain purchase 23 2.6 -
Finance expense 8 (13.4) (11.4)
Profit before tax 65.6 52.4
Taxation 9 (16.1) (8.2)
Profit for the year 49.5 44.2
Earnings per share Pence pence
- Basic 11 14.4 12.9
- Diluted 11 14.3 12.8
All activities relate to continuing operations.
Consolidated statement of comprehensive income
For the year ended 31 January 2024
2024 2023
£'m £'m
Profit for the year 49.5 44.2
Items that may be recycled subsequently into profit or loss:
Exchange differences on translation of foreign operations (0.5) (0.2)
Cash flow hedges - changes in fair value (2.9) 8.2
Cost of hedging reserve - changes in fair value 0.1 (0.2)
Tax relating to components of other comprehensive income 9 0.7 (1.2)
Other comprehensive income for the period, net of income tax (2.6) 6.6
Total comprehensive income for the period attributable to equity shareholders 46.9 50.8
of the parent
Consolidated statement of financial position
As at 31 January 2024
Note 2024 2023
£'m £'m
Non-current assets
Intangible assets 12 331.4 326.3
Property, plant and equipment 13 45.9 32.2
Right of use assets 14 99.2 100.5
Deferred tax assets 1.2 2.1
Derivative financial instruments 0.6 0.5
478.3 461.6
Current assets
Inventories 15 50.0 45.3
Trade and other receivables 11.6 13.3
Derivative financial instruments 0.9 5.3
Cash at bank and in hand 16 11.3 11.7
73.8 75.6
Total assets 552.1 537.2
Current liabilities
Borrowings 17 (7.1) (27.1)
Lease liabilities 14 (25.3) (27.3)
Trade and other payables (80.1) (84.7)
Provisions 20 (7.5) (9.5)
Tax payable (0.4) -
Derivative financial instruments (1.7) (1.4)
(122.1) (150.0)
Non-current liabilities
Borrowings 17 (37.9) (40.4)
Lease liabilities 14 (75.5) (78.1)
Derivative financial instruments (0.8) (0.5)
(114.2) (119.0)
Total liabilities (236.3) (269.0)
Net assets 315.8 268.2
Equity
Share capital 3.5 3.4
Share premium 202.7 202.2
Hedging reserve (0.6) 3.5
Cost of hedging reserve - (0.1)
Reverse acquisition reserve (0.5) (0.5)
Merger reserve 2.7 2.7
Retained earnings 108.0 57.0
Equity attributable to equity holders of the parent 315.8 268.2
Consolidated statement of changes in equity
For the year ended 31 January 2024
Share capital Share premium Hedging reserve Cost of hedging reserve Reverse acquisition reserve Merger reserve Retained earnings Total
equity
£'m £'m £'m £'m £'m £'m £'m
£'m
At 31 January 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 - - (5.2) -- -- -- -- (5.2)
inventory
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 10) - - - - - - - -
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
Total comprehensive income for the period
Profit or loss - - - - - - 49.5 49.5
Other comprehensive income - - (2.2) 0.1 - - (0.4) (2.5)
- - (2.2) 0.1 - - 49.1 47.0
Hedging gains/(losses) and costs of hedging transferred to the cost of - - (2.5) -- -- -- -- (2.5)
inventory
Deferred tax on transfers to inventory -- - 0.6 - - - - 0.6
Deferred tax related to Share-based payments -- - -- - - - (0.2) (0.2)
Transactions with owners, recorded directly in equity
Shares issued 0.1 0.5 - - - - - 0.6
Share-based payment charges - - - - - - 2.1 2.1
Dividends (note 10) - - - - - - - -
Total contributions by and distributions to owners 0.1 0.5 - - - - 2.1 2.7
At 31 January 2024 3.5 202.7 (0.6) - (0.5) 2.7 108.0 315.8
Consolidated cash flow statement
For the year ended 31 January 2024
Note 2024 2023
£'m £'m
Cash from operations 18 118.7 107.8
Corporation tax paid (13.5) (7.9)
Net cash inflow from operating activities 105.2 99.9
Cash flows from investing activities
Purchase of property, plant and equipment 13 (18.8) (8.8)
Purchase of intangible assets 12 (9.0) (9.4)
Acquisition of SA Greetings net of cash acquired 23 (2.2) -
Net cash outflow from investing activities (30.0) (18.2)
Cash flows from financing activities
Interest paid on bank borrowings 8 (6.5) (6.2)
Proceeds from bank borrowings 19 167.0 27.8
Repayment of bank borrowings 19 (190.6) (72.9)
Other financing costs paid 8 - (1.8)
Shares issued under employee share schemes 0.6 -
Payment of lease liabilities 19 (37.5) (52.5)
Interest paid in respect of lease liabilities 19 (6.2) (4.5)
Net cash outflow from financing activities (73.2) (110.1)
Impact of changes in foreign exchange rates (0.8) -
Net increase/(decrease) in cash and cash equivalents 1.2 (28.4)
Cash and cash equivalents at the beginning of the year 9.9 38.3
Closing cash and cash equivalents 16 11.1 9.9
Notes to the condensed consolidated 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
This preliminary announcement and condensed consolidated financial statements
have been prepared in accordance with the recognition and measurement
principles of UK-adopted International Accounting 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
2024 ('FY24') or 31 January 2023 ('FY23') but is derived from these accounts.
Statutory accounts for the year ended 31 January 2023 have been delivered to
the registrar of companies, and those for the year ended 31 January 2024 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 second full year of
trading after two consecutive years that were materially affected by the
Covid-19 pandemic. LFL sales have been positive and the Group has delivered
robust operating cash flows allowing the Group to reduce 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 adversely
affected the Group's liquidity headroom.
The Group's financing facilities at the balance sheet date (see note 17)
extended to September 2025 which covers a period greater than the minimum
assessment period of 12 months from the date of approval of the financial
statements. Subsequent to the year end, on 26 April 2024, the Group entered
into an updated £125 million revolving credit facility with an initial term
to April 2028 (see note 17). The Board believes that the updated facilities
provide adequate headroom for the Group to execute its strategic plan. At 31
January 2024, net debt (excluding lease liabilities) was £34.4 million and
the Group had £74.0 million of undrawn facilities.
The UK Corporate Governance Code requires that an assessment is made of the
Group's ability to continue as a going concern for a period of at least 12
months from the signing of these financial statements; however it is not
specified how far beyond 12 months should be considered. For the purpose of
assessing the going concern assumption, the Group has prepared cash flow
forecasts for the 12 month period following the date of approval of these
accounts, which incorporate the updated debt facilities and related covenant
measures. These forecasts are extracted from the Group's approved budget and
strategic plan which covers a period of five years. Within the 12-month
period, the Group has considered qualitative scenarios and the Group's ability
to operate within its existing banking facilities and meet covenant
requirements. Beyond the 12-month period, the Group has qualitatively
considered whether any factors (for example the timing of debt repayments, or
longer-term trading assumptions) indicate a longer period warrants
consideration.
The results of this analysis were:
The Group's base case forecasts indicate that the Group will continue to trade
profitably, generate positive operating cash flows and retain substantial
liquidity headroom against facility limits and meet all covenant requirements
on the relevant test dates (see note 17 for more information in respect of
covenant requirements) in the 12-month period.
In the Board's view, there are no other factors arising in the period
immediately following 12 months from the date of signing 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 25%, 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 breach of
covenants associated with the Group's financing. 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 either a covenant breach or exhausting
liquidity 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.
Such scenarios, in excess of the scenarios considered above, are not
considered reasonably plausible and the analysis did not consider any
potential upside from mitigating actions that could be taken to reduce
discretionary costs and provide further headroom or the increased headroom
afforded by the new facilities agreed.
Over recent 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.
Subsequent to the year end, on 26 April 2024, the Group successfully concluded
a refinancing of its debt facilities, having agreed a new four-year £125
million committed revolving credit facility with a syndicate of banks. The
existing revolving credit facility and Term Loan B have been fully repaid and
cancelled.
The new facilities have an initial maturity date in April 2028, with options
to extend by up to 19 months, subject to lender approval. The facilities
include a £75 million accordion, which can be drawn subject to lender
approval. The interest margin on the facilities is dependent upon the Group's
leverage position, with margins between 1.9-2.8% which is lower than the
previous facilities. The new facilities include covenants for a maximum
leverage ratio (calculated as net debt excluding leases divided by EBITDA less
rent costs for the prior 12 months) of 2.5x and a fixed charge cover ratio of
at least 1.75x. The Group expects to operate comfortably within these covenant
levels for the foreseeable future.
Based on these factors, the Board has a reasonable expectation that the Group
has adequate resources and sufficient loan facility headroom and accordingly
the accounts are prepared on a going concern basis.
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.
Judgements are also reviewed on an ongoing basis to ensure they remain
appropriate. The Group does not consider there to be any judgements made in
the current period that have had a significant material 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.
Inventory provisioning
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.
In FY24, 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 FY24, the total inventory provision was £9.6 million (FY23:
£16.1 million), comprised of fully-provided stock lines of £1.3 million and
partially provided lines of £8.3 million. The reduction in the value of the
provision year-on-year generally reflects the continued normalisation of stock
levels following the Covid pandemic as well as the reduction due to changes in
provisioning percentages as a result of higher sell through rates in FY24
compared with the prior year. 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 balanced 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 2024, and could require a
material adjustment to the carrying amount of the provision in the next
financial year.
The element of the provision which is most sensitive to estimation is the
percentages applied to the various categories of stock in stores and
distribution centres. A +/-5% change in the percentages applied to each
category would cause a +/-£0.7m movement in the overall value of the
provision.
Other sources of estimation uncertainty
Grant income
During the Covid-19 pandemic, the Group received financial assistance under
various Government schemes
intended to support businesses affected by local and national restrictions,
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 for, 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 20), the Group recognised £8.0 million of other operating
income in relation to such grants received during FY22.
In July 2022, following an unprompted disclosure to HMRC and resulting
investigation, the Group made a payment of £2.3 million in final settlement
of its CJRS position. As a result of this settlement, the Group released a
further £2.5 million from the provision that is no longer expected to be
required, as the matter is now closed. This release was recognised as a
one-off benefit in the income statement in FY23.
Subsequent to the balance sheet date, the Group has reached a proposed
settlement with the Department for Business and Trade for a portion of the
provision that relates to business support grants received by the Group during
FY21 and FY22. The value of the proposed settlement is £3.3 million and,
following a review of the residual position, the Group has released a further
£2.0 million from the provision which reflects a proportionate reduction in
the value of the provision for the amounts still to be settled. This release
has been recognised as a one-off benefit in other operating income in the FY24
income statement. The business support grants settlement of £3.3m was paid in
April 2024.
The Group continues to hold discussions regarding settlement of the remaining
element of the provision and to date has received no new substantive evidence
regarding its position in respect of other support received relating to
business rates relief. A further provision of £2.2 million is held at the
balance sheet date in respect of potential repayment of support received in
excess of subsidy control thresholds for business rates relief, consistent
with the nature of the provision held in the prior year. The minimum
requirement for this element of the provision is expected to be £1.2 million,
subject to interpretation of the guidance relating to individual support
schemes and subsidy control thresholds. The Group believes a range of
reasonably possible outcomes remains and that the Group's provision reflects a
reasonable assessment of the amount that may be repayable. The Group does not
believe that any position within the range of reasonably possible outcomes
would reflect a material change to the provision held at the balance sheet
date.
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.
Goodwill
In FY24, the Group conducted an impairment review in respect of goodwill. The
carrying amount of goodwill in the consolidated balance sheet of £313.8
million is allocated in its entirety to the group of CGUs, shared assets and
functions that comprise the Group's Stores business and noted no reasonably
possible change in assumptions that would lead to a material change in the
accounting outcome.
Right of use assets and Tangible assets
In addition, the Group conducted a store-level impairment review specifically
covering right-of-use assets and property, plant and equipment insofar as they
are directly allocable to stores. As below, the Group estimates the value in
use of ROU and tangible assets at a store level based on future cash flows
derived from forecasts included within the Group's approved budget. 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 around 1% of the store portfolio can
be loss-making at any time, the Group concluded this condition was met for
FY24.
Intangible assets
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.
Approach and results
The Group assessed the recoverable amount of these 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 12 (intangible assets)
and note 14 (leases) which includes the key assumptions considered. The
impairment test 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 a material
impairment. The impairment tests show that reasonably possible changes in the
assumptions relating to the Online assets could lead to an immaterial
impairment charge in the future if Online sales do not grow in line with our
expectations in future years.
The Group recorded a net nil impairment charge in respect of stores, which is
comprised of £2.7 million of impairment charges and £2.7 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 and outlook. The net impairment charge in the current year included a
net reversal to impairment on Right of use assets of £0.2m and a net charge
to PPE of £0.2m. 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 of £1.1
million. The charge relates to costs incurred in developing the Online
Platform within the Getting Personal CGU that is considered to be impaired as
a result of the expected future cash flows expected to be derived from the
Getting Personal CGU. Although an impairment has been recorded against the
intangible asset carrying value, the Getting Personal platform continues to
trade and provides valuable support to the overall strategy of growing online
sales across both platforms and makes an important contribution to total
online sales volumes. The Group's strategic focus online continues to be the
CF Online platform where the Group is investing and is encouraged by recent
positive LFL (Like-for-like) sales performance.
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 12 and 13), going concern (note 1, below), and
inventory provisions (impact of customer preferences and ESG considerations on
potential stock obsolescence, note 15 and above) and concluded in each case
that there is no material impact in each area at 31 January 2024.
3 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).
Amended standards and interpretations effective in the period do not have a
material effect on the Group's financial statements.
In the period the Group has early-adopted the requirements of Classification
of Liabilities as Current or Non-current and Non-current Liabilities with
Covenants (Amendments to IAS 1). These amendments clarify the treatment of
non-current liabilities with covenants attached to them - in particular, that
when assessing whether a liability with covenants is current or non-current,
an entity should classify a liability as non-current if it has the right to
defer settlement of an obligation for a period of at least 12 months from the
balance sheet date. Covenants shall affect this analysis only if the entity is
required to comply with the covenant on or before the end of the reporting
period.
Comparatives for the year ending 31 January 2023 in these financial statements
have been restated on the same basis.
The adoption of these amendments has had no other impact on the Group's
financial statements.
4 Segmental reporting and revenue
Following investment in the Group's people, systems and infrastructure to
support its strategy, the Group is organised into five main business areas
which meet the definition of an Operating segment under IFRS, those being
cardfactory Stores, cardfactory Online, Getting Personal, Partnerships and
Printcraft. Each of these business areas has a dedicated management team and
reports discrete financial information to the Board for the purpose of
decision making.
· cardfactory Stores retails greeting cards, celebration accessories,
and gifts principally through an extensive UK store network, with a small
number of stores in the Republic of Ireland.
· cardfactory Online retails greetings cards, celebration accessories,
and gifts via its online platform.
· Getting Personal is an online retailer of personalised cards and
gifts.
· Partnerships sells greetings cards, celebration accessories and gifts
via a network of third party retail partners both in the UK and overseas.
· Printcraft is a manufacturer of greetings cards and personalised
gifts, and sells the majority of its output intra-group to the Stores and
online businesses.
The Group acquired SA Greetings on 25 April 2023 (see note 23). The results of
SA Greetings have been included in the Partnerships segment for the year ended
31 January 2024.
The accounting policies applied in preparing financial information for each of
the Group's segments are consistent with those applied in the preparation of
the consolidated financial statements. The Group's support centre and
administrative functions are run by the cardfactory Stores segment, with
operating costs recharged to other segments where they are directly
attributable to the operations of that segment.
The Board reviews revenue and EBITDA by segment, with the exception of
Printcraft by virtue of its operations being predominantly intra-group in
nature. Note that under IFRS EBITDA is considered to be a non-GAAP measure as
considered in the appendix to these financial statements. 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:
2024 2023
£'m £'m
Revenue:
cardfactory Stores 478.9 440.4
cardfactory Online 8.8 8.8
Getting Personal 5.9 8.5
Partnerships 17.0 5.0
Other 0.3 0.7
Consolidated Group revenue 510.9 463.4
Of which derived from customers in the UK 484.8 451.6
Of which derived from customers overseas 26.1 11.8
EBITDA(1):
cardfactory Stores 127.4 116.1
cardfactory Online (3.7) (2.2)
Getting Personal (2.0) (1.5)
Partnerships 1.2 1.4
Other (0.3) (1.8)
Consolidated Group EBITDA(1) 122.6 112.0
Consolidated Group depreciation, amortisation & impairment (47.4) (48.7)
Consolidated Group gain on disposal 1.2 0.5
Consolidated Group Operating Profit 76.4 63.8
(1)This is an Alternative Performance Measure not defined under IFRS
The "Other" category principally reflects central overheads, Printcraft
sales to third parties and consolidation adjustments not impacting another
operating segment.
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:
2024 2023
£'m £'m
Revenue derived from customers in the UK 484.8 451.6
Revenue derived from customers overseas 26.1 11.8
Consolidated revenue 510.9 463.4
Revenue from overseas reflects revenue earned from i) the Group's Stores in
the Republic of Ireland (£11.1 million in FY24 and £8.1 million in FY23),
ii) the Group's wholesale and retail activities in South Africa (£10.4
million in FY24), and iii) from other retail partners based outside of the UK
(£4.6 million in FY24 and £3.7 million in FY23).
Of the Group's non-current assets, £10.0 million (2023: £5.0 million)
relates to assets based outside of the UK, principally in relation to the
Group's stores in the Republic of Ireland and in South Africa. Non-current
assets based in the Republic of Ireland are £4.8 million as at 31 January
2024 (FY23: £5.0 million) and non-current assets based in South Africa are
£5.2 million (FY23: nil). The increase compared to the prior year reflects
the impact of the acquisition of SA Greetings.
5 Operating profit
Operating profit is stated after charging/(crediting) the following items:
2024 2023
£'m £'m
Staff costs (note 7) 162.4 138.2
Depreciation expense
- owned fixed assets (note 13) 7.6 8.0
- right of use assets (note 14) 35.9 35.7
Amortisation expense (note 12) 2.8 2.3
Impairment of right-of-use assets (note 14) (0.2) 1.3
Impairment of tangible assets (note 13) 0.2 -
Impairment of intangible assets (note 12) 1.1 1.5
Profit on disposal of fixed assets (note 14) (1.2) (0.6)
Foreign exchange gain 0.6 1.5
The total fees payable by the Group to Mazars LLP (2023: KPMG LLP) and their
associates during the period was as follows:
2024 2023
£'000 £'000
Audit of the consolidated and Company financial statements 55 30
Amounts receivable by the Company's auditor and its associates in respect of:
Audit of financial statements of subsidiaries of the Company 498 620
Audit-related assurance services 85 50
Total fees 638 700
6 EBITDA
EBITDA represents profit for the period before net finance expense, taxation,
gains or losses on disposal, depreciation, amortisation and impairment
charges.
2024 2023
£'m £'m
Operating profit 76.4 63.8
Depreciation, amortisation and impairment 47.4 48.8
Gain on disposal (1.2) (0.6)
EBITDA(1) 122.6 112.0
(1)This is an Alternative Performance Measure not defined under IFRS
7 Employee numbers and costs
The average number of people employed by the Group (including Directors)
during the year, analysed by category, was as follows:
2024 2023
Number Number
Management and administration 534 482
Operations 9,797 9,367
10,331 9,849
The aggregate payroll costs of all employees including Directors were as
follows:
2024 2023
£'m £'m
Employee wages and salaries 143.1 120.5
Equity-settled share-based payment expense 2.0 1.7
Social security costs 9.3 8.2
Defined contribution pension costs 2.1 1.8
Total employee costs 156.5 132.2
Agency labour costs 5.9 6.0
Total staff costs 162.4 138.2
Key management personnel
The key management personnel of the Group comprise the Card Factory plc Board
of Directors and the Executive Board. Key management personnel compensation is
as follows:
2024 2023
£'m £'m
Salaries and short-term benefits 7.4 6.1
Equity-settled share-based payment expense 1.6 1.4
Social security costs 1.0 0.8
Defined contribution pension costs 0.2 0.2
10.2 8.5
Remuneration of Directors
2024 2023
£'m £'m
Directors' remuneration 1.6 1.9
Amounts receivable under long-term incentive schemes 0.5 0.1
Company contributions to defined contribution pension plans - -
2.1 2.0
The table above includes the remuneration of Directors in each year.
Director's remuneration for the prior period includes £40k 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.
Further details of the remuneration of the current directors are disclosed in
the Directors' Remuneration Report in the final Annual Report. The basis of
calculation for certain items described in the Directors' Remuneration Report
may differ to that used in this note, reflecting differences in the relevant
regulations.
8 Finance expense
2024 2023
£'m £'m
Finance expense
Interest on bank loans and overdrafts 6.5 6.0
Amortisation of loan issue costs 0.6 0.9
Lease interest 6.3 4.5
13.4 11.4
9 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 ended 31 January 2024 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
2024 2023
£'m £'m
Current tax charge/(credit)
Current year 13.8 8.3
Adjustments in respect of prior periods 0.2 (1.6)
Total current tax charge 14.0 6.7
Deferred tax charge/(credit)
Origination and reversal of temporary differences 2.1 2.5
Adjustments in respect of prior periods - (1.8)
Effect of change in tax rate - 0.8
Total deferred tax charge 2.1 1.5
Total income tax charge 16.1 8.2
The effective tax rate of 24.5% (2023: 15.6%) on the profit before taxation
for the year is slightly higher than (2023: lower than) the average rate of
mainstream corporation tax in the UK for the year of 24% (2023: 19%).
The tax charge is reconciled to the standard rate of UK corporation tax as
follows:
2024 2023
£'m £'m
Profit before tax 65.6 52.4
Tax at the standard UK corporation tax rate of 25%(1) (2023: 19.0%) 15.8 10.0
Tax effects of:
Expenses not deductible for tax purposes 0.6 0.7
Income not taxable for tax purposes (0.6) -
Adjustments in respect of prior periods 0.3 (3.3)
Effect of change in tax rate - 0.8
Total income tax charge 16.1 8.2
Total taxation recognised through the income statement, other comprehensive
income and through equity are as follows:
2024 2023
Current Deferred Total Current Deferred Total
£'m £'m £'m £'m £'m £'m
Income statement 14.0 2.1 16.1 6.7 1.5 8.2
Other comprehensive income - (0.7) (0.7) - 1.2 1.2
Equity - (0.4) (0.4) - (1.3) (1.3)
Total tax 14.0 1.0 15.0 6.7 1.4 8.1
1 In October 2022, the Government announced changes to the Corporation
Tax rate increasing the main rate of Corporation Tax to 25% (previously 19%).
This became effective as at 1 April 2023 giving an average Corporation Tax
rate of 24.03% for the year to 31 January 2024.
10 Dividends
There were no dividends paid in either the current or the previous year.
Following the cessation of restrictions in the Group's financing facilities in
relation to dividend payments, at the forthcoming Annual General Meeting, the
Board will recommend to shareholders that a resolution is passed to approve
payment for a final dividend for the year ended 31 January 2024 of 4.5 pence
per share (equivalent to approximately £15.5 million) payable on 28 June
2024. The dividend has not been recorded as a liability at 31 January 2024.
The Board is cognisant of the fact it was unable to pay an interim dividend
for the year ended 31 January 2024 and therefore the final dividend for the
year reflects an amount that would have been split between interim and final
dividends, had an interim dividend been able to be paid. The proposed final
dividend is therefore also the total dividend payable in respect of the 2024
financial year.
11 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.
2024 2023
(Number) (Number)
Weighted average number of shares in issue 343,339,468 342,328,622
Weighted average number of dilutive share options 3,940,467 1,604,107
Weighted average number of shares for diluted earnings per share 347,279,935 343,932,729
£'m £'m
Profit for the financial period 49.5 44.2
Pence pence
Basic earnings per share 14.4 12.9
Diluted earnings per share 14.3 12.8
12 Intangible assets
Goodwill Software Total
£'m £'m £'m
Cost
At 1 February 2023 328.2 26.0 354.2
Additions - 9.0 9.0
At 31 January 2024 328.2 35.0 363.2
Amortisation/impairment
At 1 February 2023 14.4 13.5 27.9
Amortisation in the period - 2.8 2.8
Impairment in the period - 1.1 1.1
At 31 January 2024 14.4 17.4 31.8
Net book value
At 31 January 2024 313.8 17.6 331.4
At 31 January 2023 313.8 12.5 326.3
During the year, the Group recognised an impairment charge of £1.1 million in
respect of work performed for the online platform for Getting Personal. The
charge to the Getting Personal assets reflects the more focussed investment
being targeted at the CF Online platform as considered in note 1.
As at 31 January 2024, the Group held £1.9 million of assets under
construction within Software.
Goodwill Software Total
£'m £'m £'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
Goodwill arising on the acquisition of Getting Personal in 2011 of £14.4
million was allocated to the Getting Personal CGU, which corresponds to the
Getting Personal operating segment (see note 4). 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
asset impairment testing purposes), associated central functions and shared
assets. Cardfactory Stores is the lowest level at which the Group's management
monitors goodwill internally.
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 2024 was
£341.1 million (2023: £315.5 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% (2023: 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 13.0% (2023:
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 2024.
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 2024 was not
material individually. The value of intangible assets not yet available for
use included in the carrying amount was £1.1 million for Getting Personal and
£2.7 million for CF Online.
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.
The CF Online valuation indicated sufficient headroom such that any reasonably
possible change in assumptions would not result in a material impairment
charge.
The Group booked an impairment charge in respect of intangible assets in
Getting Personal of £1.1 million, reflecting costs incurred in developing a
new Online Platform that is considered to be impaired as a result of the
outlook for the Getting Personal CGU. The Group's strategic focus online
continues to be the CF Online platform where the Group is investing and is
encouraged by recent positive LFL sales performance.
13 Property, plant and equipment
Freehold Leasehold improvements Plant, equipment, fixtures & vehicles Total
property
£'m £'m £'m
£'m
Cost
At 1 February 2023 18.6 40.8 78.2 137.6
Additions 1.3 - 17.5 18.8
Acquisition of SA Greetings (note 23) 2.7 - - 2.7
At 31 January 2024 22.6 40.8 95.7 159.1
Depreciation
At 1 February 2023 4.9 39.0 61.5 105.4
Depreciation in the period 0.4 1.0 6.2 7.6
Impairment in the period - - 0.2 0.2
At 31 January 2024 5.3 40.0 67.9 113.2
Net book value
At 31 January 2024 17.3 0.8 27.8 45.9
At 31 January 2023 13.7 1.8 16.7 32.2
Freehold Leasehold improvements Plant, equipment, fixtures & vehicles Total
property
£'m £'m £'m
£'m
Cost
At 1 February 2022 17.9 40.8 70.3 129.0
Additions 0.9 - 7.9 8.8
Disposals (0.2) - - (0.2)
At 31 January 2023 18.6 40.8 78.2 137.6
Depreciation
At 1 February 2022 4.4 37.3 55.7 97.4
Depreciation in the period 0.5 1.7 5.8 8.0
Depreciation on disposals - - - -
At 31 January 2023 4.9 39.0 61.5 105.4
Net book value
At 31 January 2023 13.7 1.8 16.7 32.2
At 31 January 2022 13.5 3.5 14.6 31.6
As at 31 January 2024, the Group held assets under construction of £2.2
million within Plant, equipment, fixtures and vehicles.
14 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 2024 2023
£m £m
Buildings 98.2 100.2
Motor Vehicles 1.0 0.3
99.2 100.5
The right-of-use assets movement in the year is as follows:
2024 2023
£m £m
At the beginning of the year 100.5 98.5
Acquisition of SA Greetings 1.9 -
Additions:
Buildings 32.0 39.4
Motor Vehicles 1.2 0.2
Disposals (0.7) (0.6)
Depreciation charge:
Buildings (35.4) (35.3)
Motor Vehicles (0.5) (0.4)
Net Impairment Reversal / (Charge) 0.2 (1.3)
At the end of the year 99.2 100.5
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. The net impairment reversal and disposals above
relate entirely to Buildings.
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 2024 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 12, 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 12, 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. Such costs are allocated on the basis of
the relative contribution of each individual store.
Application of these assumptions resulted in a net impairment charge of £nil
(2023: £1.3 million), comprised of impairment charges of £2.7 million (2023:
£3.7 million) and the reversal of previous impairment charges of £2.7
million (2023: £2.4 million). The net impairment charge in the current year
included a net reversal to impairment on Right of use assets of £0.2m and a
net impairment charge to PPE of £0.2m.
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 2024 2023
£m £m
Current lease liabilities (25.3) (27.3)
Non-current lease liabilities (75.5) (78.1)
Total lease liabilities (100.8) (105.4)
Lease expense 2024 2023
£m £m
Depreciation expense on right of use assets 35.9 35.7
(Reversal of Impairment) / impairment of right of use assets (0.2) 1.3
Profit on disposal of right of use assets (1.2) (0.5)
Lease interest 6.3 4.5
Expense relating to short-term and low value leases1 - -
Expense relating to variable lease payments2 0.6 0.2
Total lease related income statement expense 41.4 41.2
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.
Accounting policies for leases are detailed in note 1. Assets, liabilities and
the income statement expense in relation to leases are detailed below.
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. Profits on disposal arise where leases that have been
exited before the end of the lease term where the asset has been previously
impaired. The Group's full accounting policy in respect of leases and
right-of-use assets is set out in note 1.
15 Inventories
2024 2023
£'m £'m
Finished goods 49.5 44.7
Work in progress 0.5 0.6
50.0 45.3
Inventories are stated net of provisions totalling £ million (2023: £16.1
million). The cost of inventories recognised as an expense and charged to cost
of sales in the year, net of movements in provisions, was £155.8 million
(2023: £145.3 million).
16 Cash and cash equivalents
2024 2023
£'m £'m
Cash at bank and in hand 11.3 11.7
Cash presented as current assets in the balance sheet 11.3 11.7
Bank overdraft (0.2) (1.8)
Overdraft presented as current liabilities in the balance sheet (0.2) (1.8)
Net cash and cash equivalents 11.1 9.9
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:
2024 2023
£'m £'m
Sterling 6.8 0.2
Euro 3.3 4.8
US Dollar 1.2 4.9
South African Rand (0.2) -
11.1 9.9
17 Borrowings
2024 2023
£'m £'m
Current liabilities
Bank loans and accrued interest 6.9 25.3
Bank overdraft 0.2 1.8
Total current liabilities 7.1 27.1
Non-current liabilities
Bank loans 37.9 40.4
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). Following early adoption of amendments to IAS
1, the Group has reclassified amounts due under its secured revolving credit
facility as non-current on the basis that it has the right to roll over such
obligations until September 2025 and is compliant with all relevant covenant
requirements at the balance sheet date. Comparatives for the year ended 31
January 2023 in these financial statements have been restated on the same
basis. The amount reclassified as non-current liabilities in the comparative
period is £23.0m, there would have been no reclassification in FY22 as the
balance drawn on the RCF was nil.
Bank loans
Bank borrowings as at 31 January 2024 are summarised as follows:
Liability Interest rate Interest margin
ratchet range
£'m %
%
31 January 2024
Secured term loans - Tranche 'A' - 5.00 + SONIA -
Secured term loans - Tranche 'B' 18.8 5.50 +SONIA -
Secured CLBILs - See note -
Secured revolving credit facility 26.0 Margin + SONIA 2.75 - 4.50 Total facility size = £100 million
Accrued interest 0.1
SA Greetings property mortgage 0.6
Bank overdraft 0.2
Debt issue costs (0.7)
45.0
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 facility 23.0 Margin + SONIA 2.75 - 4.50 Total facility size = £100 million
Accrued interest 0.2
Bank overdraft 1.8
Debt issue costs (1.4)
67.5
The Group's primary financing facilities at the balance sheet date were
entered into as part of a refinancing exercise in April 2022. During FY24, the
Group made repayments in respect of the revised Term Loan and CLBILS
facilities of £25.1 million and as a result the Term Loan 'A' and CLBILs
facilities were fully repaid. The term of the remaining Term Loan 'B' and RCF
extended to September 2025. The Group had undrawn, committed facilities at 31
January 2024 of £74 million.
As part of the transaction to acquire SA Greetings (see note 23) the Group
acquired a property mortgage and overdraft facility, which are denominated in
South African Rand. The carrying amount of these facilities at 31 January 2024
was £0.8 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 were 2.5x leverage and 1.75x interest cover. In addition,
the terms of the facilities prevented the Group from making any distributions
to shareholders whilst the CLBILS and Term Loan 'A' remained outstanding and
placed a limit on the total value of capital expenditure the Group can make in
each financial year to FY25.
Debt issue costs in respect of the April 2022 refinancing totalled £1.8
million and are being amortised to the income statement over the duration of
the revised facilities.
Subsequent to the year end, on 26 April 2024, the Group successfully concluded
a refinancing of its debt facilities, having agreed a new four-year £125
million committed revolving credit facility with a syndicate of banks. The
existing revolving credit facility and Term Loan B have been fully repaid and
cancelled as part of the refinancing.
The new facilities have an initial maturity date in April 2028, with options
to extend by up to 19 months, subject to lender approval. The facilities
include a £75 million accordion, which can be drawn subject to lender
approval. The interest margin on the facilities is dependent upon the Group's
leverage position, with margins between 1.9-2.8% which is lower than the
previous facilities. The new facilities include covenants for a maximum
leverage ratio (calculated as net debt excluding leases divided by EBITDA less
rent costs for the prior 12 months) of 2.5x and a fixed charge cover ratio of
at least 1.75x tested semi-annually. The Group expects to operate comfortably
within these covenant levels for the foreseeable future.
18 Notes to the cash flow statement
Reconciliation of operating profit to cash generated from operations:
2024 2023
£'m £'m
Profit before tax 65.6 52.4
Gain on bargain purchase (2.6) -
Net finance expense 13.4 11.4
Operating profit 76.4 63.8
Adjusted for:
Depreciation and amortisation 46.3 46.0
Impairment of right-of-use assets (0.2) 1.3
Impairment of tangible assets 0.2 -
Impairment of intangible assets 1.1 1.5
Gain on disposal of fixed assets (1.2) (0.5)
Cash flow hedging foreign currency movements (0.4) 0.8
Unrealised foreign exchange (gains) / losses 0.5 -
Share-based payments charge 2.1 1.7
Operating cash flows before changes in working capital 124.8 114.6
Decrease/(increase) in receivables 3.6 (5.2)
Decrease/(increase) in inventories (1.2) (12.2)
(Decrease)/increase in payables (6.5) 13.3
Movement in provisions (2.0) (2.7)
Cash inflow from operating activities 118.7 107.8
19 Analysis of net debt
At 1 February Cash flow Non-cash At 31 January
2023
changes
2024
£'m
£'m £'m £'m
Secured bank loans and accrued interest (note 17) (65.7) 30.1 (9.2) (44.8)
Lease liabilities (105.4) 43.7 (39.1) (100.8)
Total debt (171.1) 73.8 (48.3) (145.6)
Add: debt costs capitalised (1.4) - 0.7 (0.7)
Add: bank overdraft (1.8) 1.8 (0.2) (0.2)
Less: cash and cash equivalents (note 16) 11.7 (0.4) - 11.3
Net debt (162.6) 75.2 (47.8) (135.2)
Lease liabilities 105.4 (43.7) 39.1 100.8
Net debt excluding lease liabilities (57.2) 31.5 (8.7) (34.4)
At 1 February Cash flow Non-cash At 31 January
2022
changes
2023
£'m
£'m £'m £'m
Secured bank loans and accrued interest (note 17) (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 (note 16) 38.3 (26.6) - 11.7
Net debt (194.0) 78.2 (46.8) (162.6)
Lease liabilities 119.8 (57.0) 42.6 105.4
Net debt excluding lease liabilities (74.2) 21.2 (4.2) (57.2)
Non-cash changes in respect of lease liabilities reflect changes in the
carrying amount of leases arising from additions, disposals and modifications.
20 Provisions
Covid-19-related support Property provisions Total
£'m £'m £'m
At 1 February 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
Provisions utilised during the year - (0.2) (0.2)
Provisions released during the year (2.0) 0.2 (1.8)
Amounts provided during the year - - -
At 31 January 2024 5.4 2.1 7.5
Covid-19-related support provisions reflect amounts received under one-off
schemes designed to provide support to businesses affected by Covid-19
restrictions, including lockdown grants and CJRS, in excess of the value the
Group reasonably believes it is entitled to retain under the terms and
conditions of those schemes. The provisions have been estimated based on the
Group's interpretation of the terms and conditions of the respective schemes
and, where applicable, independent professional advice. Although the actual
amount that will be repaid is not certain, events through the year to 31
January 2024 have added a level of comfort that the outstanding provision is
materially correct.
In July 2022, following an unprompted disclosure to HMRC and resulting
investigation, the Group made a payment of £2.3 million in final settlement
of its CJRS position. As a result of this settlement, the Group released a
further £2.5 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 FY23.
Subsequent to the balance sheet date, the Group have reached a proposed
settlement with the Department for Business and Trade for a portion of the
provision that relates to regarding business support grants received by the
Group during FY21 and FY22. The value of the proposed settlement is £3.3
million and following a review of the residual position, the Group has
released £2.0m from the provision which reflects a proportionate reduction in
the value of the provision for the amounts to be settled. The business support
grants settlement was paid in April 2024 but was unpaid at the year-end and
£3.3m remains in the provision held on the balance sheet.
The Group continues to hold discussions regarding settlement of the remaining
element of the provision and to date has received no new substantive evidence
regarding its position in respect of other support received relating to
business rates relief. A further provision of £2.2 million is held at the
balance sheet date in respect of potential repayment of support received in
excess of subsidy control thresholds for business rates relief, consistent
with the nature of the provision held in the prior year. The minimum
requirement for this element of the provision is expected to be £1.2 million,
subject to interpretation of the guidance relating to individual support
schemes and subsidy control thresholds. The Group believes a range of
reasonably possible outcomes remains and that the Group's provision reflects a
reasonable assessment of the amount that may be repayable. The Group does not
believe that any position within the range of reasonably possible outcomes
would reflect a material change to the provision held at the balance sheet
date and this provision is classified as current as the Group is actively
aiming to resolve this settlement in the next 12 months.
The Group maintains provisions in respect of its store portfolio to cover both
the estimated cost of restoring properties to their original condition upon
exit of the property and any non-lease components of lease contracts (such as
service charges) that may be onerous. Despite the size of the Group's store
portfolio, such provisions are generally small which is consistent with the
Group's experience of actual dilapidations and restoration costs. Specific
provisions are usually made where the Group has a reasonable expectation that
the related property may be exited, or is at a higher risk of exiting, in the
near future and are generally expected to be utilised in the short-term. Any
non-current portion of the provision is considered immaterial.
21 Related party transactions
The Group has taken advantage of the exemptions contained within IAS 24
'Related Party Disclosures' from the requirement to disclose transactions
between Group companies as these have been eliminated on consolidation.
The Card Factory Foundation is considered a related party of the Group due to
one common individual considered as key management personnel. In the year
ended 31 January 2024 the Group donated £1.5 million (FY23: £1.4m) to the
Foundation from carrier bag sales and has an outstanding balance owed to the
Foundation of £0.5m at 31 January 2024.
22 Subsequent events
Subsequent to the year end, on 26 April 2024, the Group successfully concluded
a refinancing of its debt facilities, having agreed a new four-year £125
million committed revolving credit facility with a syndicate of banks. The
existing revolving credit facility and Term Loan B have been fully repaid and
cancelled. See note 17 for further detail.
23 Business combination
Business combinations are accounted for using the acquisition method. The
identifiable assets acquired and liabilities assumed are recognised at their
fair values at the acquisition date.
Acquisition-related costs totalling £0.2 million have been expensed and
included within operating expenses in the Consolidated Income Statement.
Acquisition of SA Greetings Corporation (Pty) Ltd
On 25 April 2023, the Group acquired 100% of the share capital of SA Greetings
Corporation (Pty) Ltd and its subsidiaries, which trade as SA Greetings.
SA Greetings is a wholesaler and retailer of greeting cards and gift packaging
based in South Africa, and the acquisition gives the Group access to the South
African cards and gifts market, expanding the international partnerships
business, and provides opportunities to grow and develop the business through
synergies with the Group's existing range, production and supply chain.
The total cash consideration for the transaction was £2.5M, all of which paid
on the acquisition date, with no further contingent or deferred consideration
payable.
The purchase price allocation was prepared on a provisional basis in
accordance with IFRS 3 with the fair values of the assets and liabilities set
out below:
Fair value
£'m
Non-current assets 4.7
Intangible assets -
Property, plant & equipment 2.7
Right-of-use assets 1.9
Deferred tax assets 0.1
Current assets 5.9
Inventories 3.8
Trade & other receivables 1.8
Cash at bank and in hand 0.3
Total assets 10.6
Current liabilities (4.2)
Borrowings (1.5)
Lease liabilities (0.8)
Trade & other payables (1.8)
Tax payable -
Contingent liabilities (0.1)
Non-current liabilities (1.3)
Borrowings (0.5)
Lease liabilities (0.8)
Total liabilities (5.5)
Net assets 5.1
The gross contractual amounts receivable for trade & other receivables is
£2.1 million and, at the acquisition date, the group's best estimate of the
contractual cash flows not expected to be collected is £0.3 million.
The adjustments made to the identifiable assets and liabilities in the
acquiree's local financial records in arriving at the provisional fair values
required by IFRS 3 were:
· Recognising and measuring the acquiree's lease liabilities as defined
in IFRS 16, as if the leases were a new lease at the acquisition date (£1.6
million adjustment to right-of-use assets and lease liabilities). No
adjustments were required to reflect lease terms that were favourable or
unfavourable to market terms.
· Recognising a contingent liability (£0.1 million) in relation to a
legal process that remains in progress. A corresponding contingent asset has
not been recognised.
The fair value of the assets and liabilities acquired is £5.1M, which is
higher than the fair value of the consideration paid of £2.5M, therefore a
gain on bargain purchase of £2.6M has been recognised in the Consolidated
Income Statement in the period.
SA Greetings Corporation (Pty) Ltd contributed revenue of £10.4 million and a
profit of £0.2 million to the Group's profit after tax for the period between
the date of acquisition and the reporting date.
If the acquisition of SA Greetings Corporation (Pty) Ltd had been completed on
the first day of the financial year, Group revenues for the year to 31 January
2024 would have been £513.2 million and Group profit after tax would have
been £47.0 million. SA Greetings has a similar seasonal trading pattern to
the rest of the Group and generates the majority of its sales and profits in
the second half of the financial year.
Explanatory Notes
Alternative Performance Measures ("APMS") and other explanatory information
In the reporting of the 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 Accounting Standards ('IFRS').
These measures are not defined by IFRS and therefore may not be directly
comparable with other companies' APMs, including those in the Group's industry
or that appear to have similar titles or labels. APMs should be considered in
addition to IFRS measures and are not intended to be a substitute for IFRS
measurements.
The Directors believe that these APMs provide additional useful information on
the performance and position of the Group and are intended to aid the user in
understanding the Group's results. The APMs presented are consistent with
measures used internally by the Board and management for performance analysis,
planning, reporting and incentive setting purposes.
The table below sets out the APMs used in this report, with further
information regarding the APM, and a reconciliation to the closest IFRS
equivalent measure, below.
Sales APMs Like-for-like Sales (LFL)
Profitability APMs EBITDA
Adjusted Profit Before Tax (PBT)
Adjusted EPS
Financial Position APMs Net Debt
Leverage and Adjusted Leverage
Cash Flow APMS Operating Cash Conversion
Following the approval of the Group's updated capital allocation policy,
Adjusted Leverage and Adjusted EPS have been included in this report for the
first time. These measures play an important role in the Group's capital
allocation decisions.
Sales APMs
LFL Sales
Closest IFRS Equivalent: Revenue
Like-for-like or LFL calculates the growth or decline in gross sales in the
current period versus a prior comparative period.
For stores, LFL measures exclude any sales earned from new stores opened in
the current period or closed since the comparative period and only consider
the time period where stores were open and trading in both the current and
prior period.
LFL measures for product lines or categories, where quoted, are calculated
using the same principles.
LFL measures for our online businesses (cardfactory.co.uk and
gettingpersonal.co.uk) compare gross sales for the current and comparative
period made through the respective online platform.
All LFL measures in this report compare FY24 to FY23, unless otherwise stated.
In addition, the Group reports combined Like-for-Iike sales measures for
certain components of the business as follows:
· "cardfactory LFL" is defined as Like-for-like sales in stores plus
Like-for-like sales from the cardfactory website www.cardfactory.co.uk.
· "Online": Like-for-like sales for cardfactory.co.uk and
gettingpersonal.co.uk combined.
Sales by Printcraft, the Group's printing division, to external third-party
customers and partnerships sales are excluded from any LFL sales measure.
Reconciliation of Revenue to LFL Sales
cardfactory Stores cardfactory Online cardfactory LFL Getting Personal
£m £m £m £m
Revenue FY24 478.9 8.8 487.7 5.9
VAT / other 89.9 1.9 91.8 1.5
Adjustment for Stores not open in both periods (7.6) - (7.6) -
LFL Sales FY24 561.2 10.7 571.9 7.4
Revenue FY23 440.4 8.8 449.2 8.5
VAT / other 83.4 1.9 85.3 1.4
Adjustment for Stores not open in both periods (2.7) - (2.7) -
LFL Sales FY23 521.1 10.7 531.8 9.9
LFL Sales Growth 7.7% +0.4% 7.6% -26.1%
Note percentages are calculated based on absolute figures before rounding.
Profitability APMs
EBITDA
Closest IFRS Equivalent: Operating Profit(1)
EBITDA is earnings before interest, tax, gains or losses on disposal,
depreciation, amortisation and impairment charges. Earnings is equivalent to
profit after tax calculated in accordance with IFRS and each adjusting item is
calculated in accordance with the relevant IFRS.
The Group uses EBITDA as a measure of trading performance, as it usually
closely correlates to the Group's operating cash generation.
Reconciliation of EBITDA to Operating Profit
FY24 FY23
£m £m
Operating Profit 76.4 63.8
Add back:
Depreciation 43.5 43.7
Amortisation 2.8 2.3
Gains on disposal (1.2) (0.6)
Impairment charges 1.1 2.8
EBITDA 122.6 112.0
(1) Whilst operating profit is not defined formally in IFRS, it is
considered a generally accepted accounting measure
Adjusted PBT
Closest IFRS Equivalent: Profit Before Tax
Adjusted PBT is Profit Before Tax adjusted to exclude the effect of
transactions that, in the opinion of the Directors, are one-off in nature and
as such are not expected to recur in future period and could distort the
impression of future performance trends based on the current year results. The
adjustments are consistent with those made in calculating Adjusted EBITDA,
above, and similarly the Group uses Adjusted PBT to assess its performance on
an underlying basis excluding these items and believe measures adjusted in
this manner provide additional information about the impact of unusual or
one-off items on the Group's performance in the period.
In FY24 the Directors have identified the following items that they believe to
meet the definition of 'one-off' for this purpose:
· The gain on bargain purchase related to the acquisition of SA
Greetings of £2.6 million.
· A gain relating to the release of covid-related provisions of £2.0
million
· An impairment charge relating to Getting Personal of £1.1 million
The following items are taken into account in arriving at Adjusted PBT for the
equivalent period last year (FY23):
· A £2.5 million benefit arising as a result of releasing provisions
no longer required following settlement of the Group's CJRS position with
HMRC.
· A £1.0 million benefit arising as a result of the refinancing of the
Group's debt facilities in April 2022.
Reconciliation of Adjusted PBT to Profit Before Tax.
FY24 FY23
£m £m
Profit Before Tax 65.6 52.4
Add back / (Deduct):
Acquisition gain (2.6) -
COVID provision release (2.0) -
GP Intangible impairment 1.1 -
CJRS settlement - (2.5)
Refinancing benefit - (1.0)
Adjusted PBT 62.1 48.9
Adjusted EPS
Closest IFRS Equivalent: Basic EPS
Adjusted EPS is earnings per share adjusted to exclude the post-tax effect of
items identified as one-off and excluded from Adjusted PBT in the period.
The Group calculates adjusted EPS as it is the basis of dividend calculations
under its capital allocation policy, under which the Board targets a dividend
cover ratio of between 2-3x Adjusted EPS.
The starting point of the calculation is Adjusted PBT, as calculated above.
Calculation of Adjusted EPS
FY24 FY23
£m £m
Adjusted PBT 62.1 48.9
Tax charge (16.1) (8.2)
Tax impact of non-underlying items 0.5 0.7
Adjusted PAT 46.5 41.4
Weighted average number of shares 343,339,468 342,328,622
Adjusted EPS 13.5p 12.1p
Financial Position APMs
Net Debt
Closest IFRS Equivalent: No equivalent; however is calculated by combining
IFRS measures for Cash and Borrowings.
Net Debt is calculated by subtracting the Group's cash and cash equivalents
from its gross borrowings (before debt-issue costs). Net Debt is a key measure
of the Group's balance sheet strength, and is also a covenant in the Group's
financing facilities. The Group presents Net Debt both inclusive and exclusive
of lease liabilities, but focusses upon the value exclusive of lease
liabilities, which is consistent with the calculation used for covenant
purposes.
Calculation of Net Debt
FY24 FY23
£m £m
Current Borrowings 7.1 27.1
Non-Current Borrowings 37.9 40.4
Add back Debt Issue Costs 0.7 1.4
Gross Borrowings 45.7 68.9
Cash (11.3) (11.7)
Net Debt (exc. Leases) 34.4 57.2
Lease Liabilities 100.8 105.4
Net Debt (inc. Leases) 135.2 162.6
Leverage & Adjusted Leverage
Closest IFRS Equivalent: No equivalent; however is calculated with reference
to Net Debt and EBITDA, which are reconciled to relevant IFRS measures in this
section.
Leverage is the ratio of Net Debt (excluding lease liabilities) to EBITDA for
the previous 12 months expressed as a multiple. Adjusted Leverage is
calculated in the same way, but deducts lease-related charges from EBITDA. The
Group monitors and reports leverage as a key measure of its financing position
and as an assessment of the Group's ability to manage and repay its debt
position. Adjusted Leverage is consistent with a covenant defined within the
Group's financing facilities.
Under its capital allocation policy, the Group targets Adjusted Leverage below
1.5x throughout the financial year. As described in the financial review
above, the Group's cash flows and earnings are materially affected by
seasonality, with higher sales and cash flows in the second half of the year
linked to the Christmas season. As a result, net debt levels are lower and
Leverage improved at the year end, after the Christmas season.
Calculation of Leverage
FY24 FY23
£m £m
Net debt (as calculated above) A 34.4 57.2
EBITDA (as calculated above) B 122.6 112.0
IFRS 16 depreciation (35.9) (35.7)
IFRS 16 impairment 0.2 (1.3)
Gains on modification/disposal 1.2 0.5
IFRS 16 interest (6.3) (4.5)
EBITDA less rent costs C 81.8 71.0
Leverage (A/B) 0.3x 0.5x
Adjusted Leverage (A/C) 0.4x 0.8x
Cash Flow APMs
Operating Cash Conversion
Closest IFRS Equivalent: No equivalent; however is calculated with reference
to Cash from Operating Activities (an IFRS measure) and EBITDA, which is
reconciled to Operating Profit in this section
Operating cash conversion is Cash from operations (calculated as cash from
operating activities before corporation tax payments) per the cash flow
statement prepared in accordance with IFRS divided by EBITDA and expressed as
a percentage.
Calculation of Operating Cash Conversion
FY24 FY23
£m £m
Cash from Operations 118.7 107.8
EBITDA 122.6 112.0
Operating Cash conversion 96.8% 96.3%
Other Financial Calculation Information
Unless otherwise stated, amounts in this report are presented in Pound
Sterling (GBP), and have been rounded to the nearest £0.1 million.
Information in tables or charts may not add down or across, or calculate
precisely, due to rounding.
Percentage movements, where provided, are based on amounts before they were
rounded to the nearest £0.1 million.
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