TIDMCARD
RNS Number : 8748K
Card Factory PLC
27 September 2016
27 September 2016
Card Factory plc ("Card Factory" or the "Group")
Interim results for the six months ended 31 July 2016
Further revenue and profit growth, and progress in line with
strategy
Special dividend of 15 pence per share, reflecting Group's
strong cash generation
Card Factory, the UK's leading specialist retailer of greeting
cards, dressings and gifts, announces its interim results for the
six months ended 31 July 2016.
Financial highlights
-- Revenues up 4.8% to GBP169.2m (H1 FY16: GBP161.4m)
o Card Factory like-for-like ("LFL") sales +0.2% (H1 FY16:
+2.8%)
-- On an underlying basis:
o EBITDA growth of 5.1% to GBP34.2m (H1 FY16: GBP32.5m)
o Operating profit growth of 4.1% to GBP29.0m (H1 FY16:
GBP27.8m)
o Profit before tax growth of 7.3% to GBP27.6m (H1 FY16:
GBP25.7m)
o Basic EPS increased by 7.1% to 6.45 pence (H1 FY16: 6.02
pence)
o Leverage of 1.26 times underlying EBITDA for the 12 months
ended 31 July 2016
-- Reported profit before tax growth of 12.5% to GBP27.0m (H1 FY16: GBP24.0m)
-- Interim dividend increased by 12.0% to 2.8 pence per share (FY16: 2.5 pence)
-- Special dividend of 15 pence per share (FY16: 15 pence), a
return of GBP51.1m to shareholders
-- A total of GBP163.8m returned to shareholders via dividends
since IPO just over two years ago
Note
Underlying profit figures exclude costs principally relating to
debt refinancing (FY16 only) and mark-to-market movements on
derivatives not designated as a hedging relationship.
Business highlights
Further progress on all four pillars of the Group's growth
strategy:
1. LFL sales growth
-- Improvements in quality and range of both card and non-card
products delivering good ongoing growth in average spend
-- Softer footfall resulted in lower than normal sales growth from stores
-- Strong growth in sales from new Card Factory website
-- Overall Card Factory like-for-like ("LFL") sales +0.2% (H1 FY16: +2.8%)
2. Continuing new store roll out
-- 34 net new stores opened in the period, bringing total estate to 848
-- A further 6 net new stores opened since period end including
at the Trafford Centre in Manchester, one of the UK's top retail
locations
-- Strong pipeline of further new store opportunities - on track
to deliver approximately 50 net new openings by the year end and
starting to build pipeline for FY18
3. Delivering business efficiencies
-- Maintenance of industry-leading underlying EBITDA margins at 20.2% (H1 FY16: 20.1%)
-- Good prospects for further savings from efficiency initiatives underway
-- Additional initiatives being assessed aimed at offsetting
FY18 margin headwinds, in particular foreign exchange
4. Development of complementary online sales channels
-- Card Factory transactional website sales growth of c300%
-- Flat sales performance from gettingpersonal.co.uk;
investments being made to return to targeted levels of growth
-- Investment of GBP1m in digital printing equipment to produce
personalised paper products including cards
Karen Hubbard, Chief Executive Officer, commented:
"We have delivered a solid set of interim results with further
growth in both revenue and profit, albeit with softer footfall
resulting in slightly lower than normal sales growth from our
stores.
"We remain highly cash generative and are pleased to be
announcing another special dividend of 15 pence per share. Together
with the interim dividend, this means we will have returned over
GBP160m to shareholders since IPO just over two years ago.
"We remain the clear leaders in our market, with a strong value
proposition, a unique vertically integrated operating model,
significant scale advantages, and industry-leading margins. The
potential for further growth - through like-for-like sales growth,
further store roll-out and the full exploitation of our online
channels - is exciting.
"Trading in recent weeks has been similar to the trends seen in
the first half, with encouraging continued growth in average spend.
We approach the important final quarter with confidence in the
quality and value of our offer, including our new Christmas ranges,
and remain confident of delivering full year underlying profit
before tax within the range of expectations.
"We remain as convinced as ever of the strong growth prospects
for the business, and of our ability to deliver further returns of
surplus cash to shareholders over the medium term."
Interim results presentation
A presentation for analysts will be held today starting at
9.30am at UBS Limited, 1 Finsbury Avenue, London EC2M 2QS. If you
would like to register for attendance then please contact Isabelle
Grainger at MHP Communications on 02031288830 or
isabelle.grainger@mhpc.com.
Enquiries
Card Factory plc Via MHP Communications on +44 (0) 203 128 8100
Karen Hubbard, Chief Executive Officer
Darren Bryant, Chief Financial Officer
MHP Communications +44 (0) 203 128 8100
John Olsen
Simon Hockridge
Card Factory plc ("Card Factory" or the "Group")
Interim results for the six months ended 31 July 2016
Chief Executive's Report
Overview
Following the record performance last year, Card Factory has had
a solid first half to the financial year, generating further growth
in revenues and profits, albeit we have not been immune to the
effect of weaker footfall patterns on the high street. We remain,
by some distance, the UK's leading specialist retailer of greeting
cards, dressings and gifts.
Cash generation remains very strong, leading to a return of
GBP51.1m of surplus cash to shareholders via a special dividend,
the second such distribution we will have made since IPO just over
two years ago.
Following an extensive induction programme, I have now been CEO
for 5 months and have had the opportunity to confirm my initial
view of the considerable strengths of the Group and the significant
future opportunities open to it. I have inherited an excellent
management team and a first class, high margin and strongly cash
generative business with an incredibly successful and proven four
pillar strategy. The underlying card market remains large and
robust with Card Factory well established as the clear market
leader. The very substantial barriers to entry built over the past
decade, through significant investment, provide us with clear
strategic advantage. As a consequence, we have seen no significant
change in competition in the first half and we remain as convinced
as ever of the strong growth prospects for the business, and of our
ability to deliver further returns of surplus cash to shareholders
over the medium term.
Strategically the four pillar approach has served the company
well and will continue to do so in both the near and medium term.
My focus will be on further enhancing and improving the key drivers
that underpin those pillars, whilst delivering our vision for the
business and ensuring that we are continually focussed on our
customers and our people. Particular opportunities include
extending the store roll-out programme into new types of location
such as retail parks to ensure that the shape of our overall estate
fully reflects the way in which our customers shop; making our
first steps into the Republic of Ireland; accelerating the growth
of our two online businesses, in part by more fully recognising the
different segments of the markets that they each serve; and
investing in system improvements to drive like-for-like sales
growth and support business efficiency programmes.
In the meantime, the Group has continued to make progress in the
first half, in each of its four strategic pillars:
1. Continue to grow like-for-like sales
As previously reported, sales growth in the first half was
softer than levels recently achieved with variability in retail
footfall impacting weekly sales patterns. Average spend has
continued to grow consistently with new ranges of both card and
non-card products resonating well with customers.
Like-for-like sales growth for Card Factory increased by +0.2%
(H1 FY16: +2.8%) with strong growth from the new cardfactory.co.uk
website. Excluding the website, like-for-like sales performance for
our store network was broadly flat at -0.1% (H1 FY16: +2.7%) with
consistently strong growth in average spend being offset by lower
transaction numbers.
We believe that there is a significant opportunity to use the
new cardfactory.co.uk website to leverage our existing in-store
customer base to grow our share of the personalised card market
considerably (see below). As expected, our online rate of sales
growth slowed slightly in April as we reached the anniversary of
the relaunch of the cardfactory.co.uk website.
2. Continue to roll out profitable new stores
In the first half we opened 34 net new stores (H1 FY16: 36)
bringing the total estate to 848 stores as at 31 July 2016. The
contribution of net new store openings to overall Group revenue
growth was slightly lower than the first half last year, partly as
a result of openings being on average slightly later than in the
equivalent period last year.
We remain on track to deliver approximately 50 net new stores in
the current financial year with all expected to be open in advance
of the important Christmas season, having opened a further 6 net
new stores since the half year point, including in the Trafford
Centre in Manchester, one of the UK's premium retail locations.
In the first half we have also opened a small number of new
stores in retail parks, a part of the market where we currently
have limited exposure. Early signs are promising and we believe
there is significant opportunity to expand our new store roll out
into this type of location as smaller retail units, more
appropriate for the Card Factory model, increasingly become
available.
3. Continue to focus on delivering business efficiencies
It is pleasing to report that the Group's best-in-class margins
have been maintained, notwithstanding the lower than anticipated
like-for-like sales growth.
The Group has a long established track record of delivering a
wide range of business efficiencies and consistently strong
margins. This remains an important management focus with current
initiatives including the negotiation of lower rental terms on
existing leases, conversion to energy efficient LED lighting in
stores, enhancement of our loss prevention function, investment in
our supply chain and buying teams and further vertical integration
of our online operations with a GBP1m investment in digital
printing equipment.
Looking forward, the weakness of Sterling and anticipated
increases in National Living Wage remain the most significant cost
pressures on the business. A number of additional initiatives are
underway, particularly on delivering further supply chain
efficiencies, as the Group seeks to mitigate the resulting margin
impact. A further update will be provided in due course.
4. Increase penetration of the complementary online market
We have been pleased with the performance of the new
cardfactory.co.uk transactional website which has seen strong
growth since its launch in April last year. The online personalised
card market segment, estimated to be worth approximately GBP100m,
remains an attractive market niche where we are currently
under-represented with a share of less than 1% which we believe can
be increased significantly. To that end we have recently
accelerated the pace of development of the range of personalised
cards and other personalised products available online as well as
investing GBP1m in a new in-house digital print capability to
produce a wide range of personalised paper products including
greeting cards, diaries, notebooks and calendars.
Year-on-year sales performance at gettingpersonal.co.uk was
flat, however, with improvements in average spend being offset by
lower visitor numbers. Whilst gettingpersonal.co.uk faced very
strong prior year comparatives in the first half (H1 FY16: +24.9%),
the second quarter was particularly disappointing. We continue to
target like-for-like sales growth of at least 10% at
gettingpersonal.co.uk and, whilst current sales growth is below
this level, we are investing in a number of business improvement
initiatives in pursuit of this aim.
We remain optimistic that we will deliver substantial growth in
revenue and profit from both of the Group's online channels over
the medium term.
Revenue
Total revenues during the period grew by 4.8% to GBP169.2m (H1
FY16: GBP161.4m):
H1 FY17 H1 FY16 Increase
GBP'm GBP'm
Card Factory 162.3 154.5 +5.1%
Getting Personal 6.9 6.9 +0.2%
-------- --------
Group 169.2 161.4 +4.8%
-------- --------
Growth in like-for-like ("LFL") sales by retail channel,
calculated on a calendar week basis, can be broken down as
follows:
H1 FY17 H1 FY16
Card Factory stores -0.1% +2.7%
Card Factory online +289.2% +146.7%
------------- --------
Card Factory combined +0.2% +2.8%
------------- --------
Getting Personal +0.1% +24.6%
Total online combined +7.7% +26.3%
Operating costs
Underlying cost of sales and operating expenses continue to be
well controlled and are broken down as follows:
H1 FY17 H1 FY16 Increase
----------------- -----------------
GBP'm % of GBP'm % of
revenue revenue
Cost of goods
sold 51.3 30.3% 50.7 31.4%
Store wages 30.5 18.0% 27.5 17.0%
Store property
costs 31.3 18.5% 29.6 18.3%
Other direct
expenses 8.3 4.9% 7.8 4.9%
------ --------- ------ ---------
Cost of sales 121.4 71.7% 115.6 71.6%
------ --------- ------ ---------
+1.2%
+10.8%
+5.9%
+6.6%
+5.0%
Operating
expenses* 13.6 8.1% 13.3 8.3% +2.4%
------ --------- ------ ---------
*excluding depreciation and amortisation
The overall ratio of cost of sales to revenue increased
marginally to 71.7% on an underlying basis (H1 FY16: 71.6%) with
the following movements in sub-categories:
- Cost of goods sold: principally comprises cost of raw
materials, production costs, finished goods purchased from third
party suppliers, import duty, freight/carriage costs and warehouse
wages. The improvement in this cost ratio principally reflects
improvements in underlying product margins and a better weighted
average exchange rate relating to stock purchased in US Dollars. As
noted in our H1 trading statement, for the full year we expect that
US Dollar purchases in FY17 will be at a lower weighted average
rate than that achieved in FY16.
- Store wages: includes wages and salaries for store based
staff, together with bonuses, National Insurance, pension
contributions, overtime, holiday and sick pay. This cost has
increased as expected as new stores have been opened and pay
increases have been awarded, including the impact of the new
National Living Wage. The increase in the cost ratio reflects these
factors together with the lower level of anticipated like-for-like
sales.
- Store property costs: consists principally of store rents (net
of rental incentives), business rates and service charges. This
cost has increased in absolute terms as new stores have been opened
but remained broadly constant as a ratio of revenue. We continue to
target improvements in our overall rent roll as we reach break and
expiry on existing leases.
- Other direct expenses: includes store opening costs, store
utility costs, waste disposal, store maintenance, point of sale
costs and pay per click ("PPC") expenditure. This cost category is
largely variable in respect of existing stores and increases with
new store openings. The ratio of other direct expenses remained
constant at 4.9% with various business efficiency initiatives
offsetting increases in PPC spend at Getting Personal.
Total underlying operating expenses (excluding depreciation and
amortisation) in the first half increased to GBP13.6m (H1 FY16:
GBP13.3m). This cost line includes items such as head office
salaries and remuneration, costs relating to regional and area
managers, design studio costs and insurance, together with other
central overheads and administration costs. We continue to manage
overheads tightly whilst continuing to invest for future
growth.
Depreciation and amortisation increased from GBP4.7m to GBP5.2m
reflecting ongoing investment in the business.
The underlying net financing expense reduced further by 34.7% to
GBP1.4m (H1 FY16: GBP2.1m), principally reflecting improvements in
margins payable under the Group's facility agreement following the
debt refinancing completed in June last year.
As a consequence of the above factors, underlying profit before
tax increased by 7.3% to GBP27.6m (H1 FY16: GBP25.7m), with the
underlying effective tax rate of 20.4% (H1 FY16: 20.3%) remaining
close to the statutory rate.
Underlying basic earnings per share increased by 7.1% to 6.45
pence (H1 FY16: 6.02 pence).
Capital expenditure of GBP5.6m (H1 FY16: GBP6.2m) included an
investment of GBP1m in digital printing equipment to support
planned growth in online revenues from personalised paper products.
The Board continues to budget total annual capital expenditure of
approximately GBP12m per annum.
Foreign exchange
With slightly over half of the Group's annual cost of goods sold
expense relating to products sourced in US Dollars, the Group takes
a prudent but flexible approach to hedging the risk of exchange
rate fluctuations.
As disclosed in previous announcements, we have for some time
been expecting foreign exchange gross margin pressure in FY17 and
beyond due to the fall in the value of Sterling. This margin
pressure and uncertainty has increased significantly following the
result of the EU referendum.
At the date of this announcement, all of the anticipated FY17 US
Dollar cash requirement is covered at an average rate of c$1.50.
This average rate is significantly above the average spot rate for
the period but approximately 8% below that achieved in FY16, with
the weighted average rate delivered in H1 being greater than that
expected in H2. Additional hedging is in place for approximately
50% of the anticipated FY18 US Dollar cash requirement at an
average rate of c$1.45. The weighted average rates above assume all
remaining structured options are exercisable, which would be the
case with Sterling above $1.20.
Underlying EBITDA and Operating Profit
As expected, whilst there is some seasonality in our business,
the Group delivered positive operating profit in each month of the
first half.
The underlying EBITDA margin of the Group remained broadly flat
at 20.2% (H1 FY16: 20.1%), notwithstanding like-for-like sales
being slightly lower than anticipated, broken down as follows:
H1 FY17 H1 FY16 Increase/
GBP'm GBP'm (Decrease)
Underlying EBITDA
Card Factory 33.2 31.2 +6.3%
Getting Personal 1.0 1.3 -24.0%
-------- --------
Group 34.2 32.5 +5.1%
-------- --------
Underlying EBITDA
margin
Card Factory 20.5% 20.2% +0.3ppts
Getting Personal 13.9% 18.3% -4.4ppts
Group 20.2% 20.1% +0.1ppts
The lower underlying EBITDA margin at Getting Personal
principally reflects investment in the business to support future
revenue growth.
The underlying operating margin also remained broadly flat at
17.1% (H1 FY16: 17.3%).
Cash generation and returns
The Group remains highly cash generative, driven by its strong
operating margins, limited working capital absorption and the
relatively low capital expenditure requirements.
As at 31 July 2016, before deduction of capitalised debt costs,
net debt totalled GBP121.7m (31 July 2015: GBP109.0m), reflecting
strong cash generation during the period offset by the June payment
of the FY16 final dividend (GBP20.4m) and the start of the normal
working capital outflow relating to Christmas stock build:
As at 31 July 2016 2015
GBP'm GBP'm
Borrowings
Current liabilities 0.1 0.1
Non-current liabilities 124.2 119.0
------- -------
Total borrowings 124.3 119.1
Add: debt costs
capitalised 0.8 1.0
------- -------
Gross debt 125.1 120.1
Less cash (3.4) (11.1)
------- -------
Net debt 121.7 109.0
------- -------
Net debt at 31 July 2016 represented 1.26 times underlying
EBITDA for the 12 months ended on that date, a similar level to the
position reported at 31 July 2015 (1.20 times underlying EBITDA for
the 12 months ended on that date).
As previously announced, over the medium term the Board expects
to maintain leverage broadly in the range of 1.0 to 2.0 times net
debt to underlying historic LTM EBITDA. Whilst this leverage ratio
will typically vary during the financial year, the Board's current
intention is to maintain average leverage around the mid point of
this range. In assessing potential returns of surplus cash to
shareholders, the Board will take into account, inter alia, the
actual and projected leverage ratio (calculated on an LTM EBITDA
basis) and the ongoing capital requirements of the business. This
consideration will take into account expected cash generation and
any resources required for strategic developments.
On a proforma basis, taking into account the interim and special
dividends mentioned below as if they had been paid on 31 July 2016,
leverage would have represented 1.89 times underlying EBITDA for
the 12 months ended on that date. The Group typically delivers
particularly strong cash generation in the second half of its
financial year which contains the Christmas trading period. The
Board therefore expects this ratio to reduce considerably by the
year end.
Dividends
The Board has declared an interim ordinary dividend of 2.8 pence
per share (FY16: 2.5 pence). The Board intends to continue with its
progressive dividend policy, taking into account the Group's strong
earnings potential and cash flow characteristics, while allowing it
to retain sufficient capital to fund ongoing operating requirements
and to invest in our long term growth plans. The Board continues to
target dividend cover of between 2.0 and 3.0 times on an annual
basis.
As previously stated, to the extent there is surplus capital
within the business, the Board expects to return that capital to
shareholders. The Board will consider the most appropriate method
of returning such surplus cash from time to time, taking into
account, amongst other things, views of shareholders and the
liquidity of the shares. In line with this, the Board is pleased to
announce the declaration of a special dividend of 15 pence per
share, equating to a return of GBP51.1m.
Both the interim ordinary dividend and the special dividend will
be paid on 25 November 2016 to those shareholders on the register
at the close of business on 21 October 2016.
We will, at that point, have returned GBP163.8m to shareholders
since IPO just over two years ago.
Outlook
Trading in recent weeks has been similar to the trends seen in
the first half, with encouraging continued growth in average
spend.
We approach the important Christmas quarter with confidence in
the quality and value of our offer, including our new seasonal
ranges, and we remain confident of delivering full year underlying
profit before tax within the range of analysts' current
expectations of GBP80.9m to GBP83.0m.
Card Factory is the clear leader in its market, with a strong
value proposition, a unique vertically integrated operating model,
significant scale advantages, and superior margins. The potential
for further growth, through like-for-like sales growth, further
store roll-out and the full exploitation of our online channels, is
exciting. We remain as convinced as ever of the strong growth
prospects for the business, and of our ability to deliver further
returns of surplus cash to shareholders over the medium term.
Karen Hubbard
Chief Executive Officer
27 September 2016
Notes
1. Background information
Card Factory is the UK's leading specialist retailer of greeting
cards, dressings and gifts. It focuses on the value and mid-market
segments of the UK's large and resilient greeting cards market, and
also offers a wide range of other quality products, including small
gifts and gift dressings, at affordable prices. Card Factory
principally operates through its nationwide chain of over 850 Card
Factory stores, as well as through its online offerings:
www.gettingpersonal.co.uk and www.cardfactory.co.uk.
The Group's clear strategy is focused on four pillars of
growth:
- continuing to grow LFL sales;
- continuing to roll out profitable new stores;
- continuing to focus on delivering business efficiencies; and
- increasing penetration of the complementary online market.
Card Factory commenced operations in 1997 with just one store
and has expanded its store estate primarily through organic growth
into a market-leading value retailer with a nationwide presence.
The Group's stores are in a wide range of locations including on
high streets in small towns through to major cities, shopping
centre developments, out-of-town retail parks and factory outlet
centres.
Since 2005, Card Factory has developed a vertically integrated
business model with an in-house design team, an in-house printing
facility and central warehousing capacity of over 360,000 sqft.
This model differentiates the Group from its competitors by
significantly reducing costs and adding value to customers in terms
of both price and quality, underpinning the Group's motto: "compare
the quality, compare the price".
In the financial year ended 31 January 2016, the Group achieved
revenue growth of 8.0% to GBP381.6m (FY15: GBP353.3m) and
underlying EBITDA growth of +7.7% to GBP95.0m (FY15: GBP88.2m) at a
margin of 24.9% (FY15: 25.0%).
2. Calculation of percentage movements
Percentage changes have been calculated before figures were
rounded to GBP0.1m.
3. Cautionary Statement
This announcement is based on information from unaudited
management accounts and contains certain forward-looking statements
with respect to the financial condition, results of operations, and
businesses of Card Factory plc. These statements and forecasts
involve risk, uncertainty and assumptions because they relate to
events and depend upon circumstances that will occur in the future.
There are a number of factors that could cause actual results or
developments to differ materially from those expressed or implied
by these forward-looking statements. These forward-looking
statements are made only as at the date of this announcement.
Nothing in this announcement should be construed as a profit
forecast. Except as required by law, Card Factory plc has no
obligation to update the forward-looking statements or to correct
any inaccuracies therein.
Condensed consolidated income statement
For the six months ended 31 July 2016
Six months ended Six months ended Year ended 31
31 July 2016 31 July 2015 January 2016
----------------------------------------- -------------------------------------- --------------------------------------
Underlying Non-underlying Total Underlying Non-underlying Total Underlying Non-underlying Total
(note (note (note
6) 6) 6)
Note GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Revenue 169.2 - 169.2 161.4 - 161.4 381.6 - 381.6
Cost of
sales (121.4) (0.1) (121.5) (115.6) 0.1 (115.5) (259.2) 3.9 (255.3)
--------------- ----- -------------- --------------- -------- ----------- --------------- -------- ----------- --------------- --------
Gross
profit/(loss) 47.8 (0.1) 47.7 45.8 0.1 45.9 122.4 3.9 126.3
Operating
expenses (18.8) (0.3) (19.1) (18.0) - (18.0) (37.1) (0.3) (37.4)
--------------- ----- -------------- --------------- -------- ----------- --------------- -------- ----------- --------------- --------
Operating
profit/(loss) 29.0 (0.4) 28.6 27.8 0.1 27.9 85.3 3.6 88.9
Finance
income 7 - - - 0.3 - 0.3 0.3 - 0.3
Finance
expense 7 (1.4) (0.2) (1.6) (2.4) (1.8) (4.2) (3.6) (1.9) (5.5)
--------------- ----- -------------- --------------- -------- ----------- --------------- -------- ----------- --------------- --------
Net financing
expense (1.4) (0.2) (1.6) (2.1) (1.8) (3.9) (3.3) (1.9) (5.2)
Profit/(loss)
before tax 27.6 (0.6) 27.0 25.7 (1.7) 24.0 82.0 1.7 83.7
Taxation 8 (5.6) 0.1 (5.5) (5.2) 0.3 (4.9) (17.0) (0.3) (17.3)
Profit/(loss)
for the
period 22.0 (0.5) 21.5 20.5 (1.4) 19.1 65.0 1.4 66.4
--------------- ----- -------------- --------------- -------- ----------- --------------- -------- ----------- --------------- --------
Earnings pence pence pence pence pence pence
per share
- Basic 9 6.45 6.30 6.02 5.61 19.08 19.47
- Diluted 9 6.45 6.29 6.02 5.60 19.05 19.45
--------------- ----- -------------- --------------- -------- ----------- --------------- -------- ----------- --------------- --------
All activities relate to continuing operations.
Condensed consolidated statement of comprehensive income
For the six months ended 31 July 2016
Six months Six months Year ended
ended ended 31 January
31 July 31 July 2016
2016 2015
GBP'm GBP'm GBP'm
Profit for the period 21.5 19.1 66.4
--------------------------------- ----------- ----------- ------------
Items that are or may be
recycled subsequently into
profit or loss:
Effective portion of changes
in fair value of cash flow
hedges 1.9 (3.5) 0.7
Net change in fair value
of cash flow hedges recycled
to profit or loss (2.4) 0.6 (3.1)
Tax relating to components
of other comprehensive income 0.1 0.6 0.5
--------------------------------- ----------- ----------- ------------
Other comprehensive expense
for the period, net of tax (0.4) (2.3) (1.9)
Total comprehensive income
for the period attributable
to equity shareholders of
the parent 21.1 16.8 64.5
--------------------------------- ----------- ----------- ------------
Condensed consolidated statement of financial position
As at 31 July 2016
Note 31 July 31 July 31 January
2016 2015 2016
GBP'm GBP'm GBP'm
Non-current assets
Intangible assets 11 331.3 331.1 331.0
Property, plant and equipment 12 39.9 39.6 39.9
Deferred tax assets 0.5 - 0.2
Other receivables 1.0 1.1 1.0
Derivative financial instruments 13 0.7 0.1 1.8
---------------------------------- ----- -------- -------- -----------
373.4 371.9 373.9
Current assets
Inventories 46.4 46.8 50.4
Trade and other receivables 29.1 27.0 17.0
Derivative financial instruments 13 3.9 2.3 3.5
Cash and cash equivalents 3.4 11.1 11.3
---------------------------------- ----- -------- -------- -----------
82.8 87.2 82.2
Total assets 456.2 459.1 456.1
Current liabilities
Borrowings (0.1) (0.1) (0.1)
Trade and other payables (47.5) (47.8) (35.8)
Tax payable (5.7) (3.8) (8.8)
Derivative financial instruments 13 (0.2) (0.1) (0.2)
---------------------------------- ----- -------- -------- -----------
(53.5) (51.8) (44.9)
Non-current liabilities
Borrowings (124.2) (119.0) (134.1)
Trade and other payables (11.6) (10.7) (11.4)
Deferred tax liabilities - (0.2) -
Derivative financial instruments 13 - (0.2) -
---------------------------------- ----- -------- -------- -----------
(135.8) (130.1) (145.5)
Total liabilities (189.3) (181.9) (190.4)
Net assets 266.9 277.2 265.7
---------------------------------- ----- -------- -------- -----------
Equity
Share capital 14 3.4 3.4 3.4
Share premium 14 201.9 201.6 201.6
Hedging reserve 2.7 2.7 3.1
Reverse acquisition reserve (0.5) (0.5) (0.5)
Merger reserve 2.7 2.7 2.7
Retained earnings 56.7 67.3 55.4
---------------------------------- ----- -------- -------- -----------
Equity attributable to
equity holders of the
parent 266.9 277.2 265.7
---------------------------------- ----- -------- -------- -----------
Condensed consolidated statement of changes in equity
For the six months ended 31 July 2016
Six months ended 31 Share Share Hedging Reverse Merger Retained Total
July 2016 capital premium reserve acquisition reserve earnings equity
reserve
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Balance at 1 February
2016 3.4 201.6 3.1 (0.5) 2.7 55.4 265.7
--------------------------- --------- --------- --------- ------------- --------- ---------- --------
Total comprehensive
income for the period
Profit or loss - - - - - 21.5 21.5
Other comprehensive
expense - - (0.4) - - - (0.4)
--------------------------- --------- --------- --------- ------------- --------- ---------- --------
- - (0.4) - - 21.5 21.1
Transactions with owners,
recorded directly in
equity
Issue of shares (note
14) - 0.3 - - - - 0.3
Share based payment
charges - - - - - 0.3 0.3
Taxation on share based
payments recognised
in equity - - - - - (0.1) (0.1)
Dividends - - - - - (20.4) (20.4)
--------------------------- --------- --------- --------- ------------- --------- ---------- --------
- 0.3 - - - (20.2) (19.9)
Balance at 31 July 2016 3.4 201.9 2.7 (0.5) 2.7 56.7 266.9
--------------------------- --------- --------- --------- ------------- --------- ---------- --------
Six months ended 31 Share Share Hedging Reverse Merger Retained Total
July 2015 capital premium reserve acquisition reserve earnings equity
reserve
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Balance at 1 February
2015 3.4 201.6 5.0 (0.5) 2.7 70.7 282.9
--------------------------- --------- --------- --------- ------------- --------- ---------- --------
Total comprehensive
income for the period
Profit or loss - - - - - 19.1 19.1
Other comprehensive
expense - - (2.3) - - - (2.3)
--------------------------- --------- --------- --------- ------------- --------- ---------- --------
- - (2.3) - - 19.1 16.8
Transactions with owners,
recorded directly in
equity
Share based payment
charges - - - - - 0.6 0.6
Taxation on share based
payments recognised
in equity - - - - - 0.1 0.1
Dividends - - - - - (23.2) (23.2)
--------------------------- --------- --------- --------- ------------- --------- ---------- --------
- - - - - (22.5) (22.5)
Balance at 31 July 2015 3.4 201.6 2.7 (0.5) 2.7 67.3 277.2
--------------------------- --------- --------- --------- ------------- --------- ---------- --------
Year ended 31 January Share Share Hedging Reverse Merger Retained Total
2016 capital premium reserve acquisition reserve earnings equity
reserve
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Balance at 1 February
2015 3.4 201.6 5.0 (0.5) 2.7 70.7 282.9
--------------------------- --------- --------- --------- ------------- --------- ---------- --------
Total comprehensive
income for the year
Profit or loss - - - - - 66.4 66.4
Other comprehensive
expense - - (1.9) - - - (1.9)
--------------------------- --------- --------- --------- ------------- --------- ---------- --------
- - (1.9) - - 66.4 64.5
Transactions with owners,
recorded directly in
equity
Share based payment
charges - - - - - 1.3 1.3
Taxation on share based
payments recognised
in equity - - - - - 0.1 0.1
Dividends - - - - - (83.1) (83.1)
--------------------------- --------- --------- --------- ------------- --------- ---------- --------
- - - - - (81.7) (81.7)
Balance at 31 January
2016 3.4 201.6 3.1 (0.5) 2.7 55.4 265.7
--------------------------- --------- --------- --------- ------------- --------- ---------- --------
Condensed consolidated cash flow statement
For the six months ended 31 July 2016
Note Six months Six months Year ended
ended ended 31 January
31 July 31 July 2016
2016 2015
GBP'm GBP'm GBP'm
Cash inflow from operating
activities 15 37.9 32.8 92.2
Corporation tax paid (8.8) (5.4) (13.0)
----------------------------------- ----- ----------- ----------- ------------
Net cash inflow from operating
activities 29.1 27.4 79.2
Cash flows from investing
activities
Purchase of property,
plant and equipment (4.7) (5.6) (10.5)
Purchase of intangible
assets (0.9) (0.6) (1.1)
Payment of deferred consideration - (0.8) (0.8)
Proceeds from sale of
property, plant and equipment - - 0.1
Interest received - 0.3 0.3
----------------------------------- ----- ----------- ----------- ------------
Net cash outflow from
investing activities (5.6) (6.7) (12.0)
Cash flows from financing
activities
Proceeds from bank borrowings - 144.2 144.2
Purchase of interest rate
caps - - (0.5)
Interest paid (1.3) (2.1) (3.3)
Repayment of bank borrowings (10.0) (197.5) (182.5)
Proceeds from new shares
issued 14 0.3 - -
Dividends paid (20.4) (23.2) (82.8)
----------------------------------- ----- ----------- ----------- ------------
Net cash outflow from
financing activities (31.4) (78.6) (124.9)
Net decrease in cash and
cash equivalents (7.9) (57.9) (57.7)
Cash and cash equivalents
at the beginning of the
period 11.3 69.0 69.0
----------------------------------- ----- ----------- ----------- ------------
Closing cash and cash
equivalents 3.4 11.1 11.3
----------------------------------- ----- ----------- ----------- ------------
Notes to the interim financial statements
1 General information
Card Factory plc (the 'Company') is a public limited company
incorporated in the United Kingdom. The Company is domiciled in the
United Kingdom and its registered office is Century House, Brunel
Road, 41 Industrial Estate, Wakefield WF2 0XG.
2 Basis of preparation
These unaudited condensed consolidated interim financial
statements ('interim financial statements') for the six months
ended 31 July 2016 comprise the Company and its subsidiaries
(together referred to as the 'Group'). The interim financial
statements have been prepared in accordance with the Disclosure and
Transparency Rules of the Financial Conduct Authority and the
requirements of IAS 34 Interim Financial Reporting as adopted by
the European Union. The interim report was approved by the Board of
Directors on 27 September 2016.
These condensed interim financial statements do not comprise
statutory accounts within the meaning of section 434 of the
Companies Act 2006. The interim financial statements should be read
in conjunction with the annual financial statements for the year
ended 31 January 2016 ('Annual Report') which have been prepared in
accordance with IFRSs as adopted by the European Union. The
comparative figures for the financial year ended 31 January 2016
are an extract from the Annual Report and are not the Group's
statutory accounts for that financial year. Those accounts have
been reported on by the Company's auditor and delivered to the
registrar of companies. The report was (i) unqualified, (ii) did
not contain an emphasis of matter paragraph and (iii) did not
contain any statement under section 498 of the Companies Act 2006.
The statutory accounts for the year ended 31 January 2016 were
approved by the Board of Directors on 4 April 2016 and delivered to
the Registrar of Companies. The auditor's review report for the six
month period ended 31 July 2016 is attached.
Significant judgements and estimates
The preparation of the interim financial statements requires the
use of judgements, estimates and assumptions that affect the
application of the Group's accounting policies and reported amounts
of assets and liabilities, income and expenses. Actual results may
differ from these estimates. The significant judgements and key
sources of estimation uncertainty were consistent with those
applied to the consolidated financial statements for the year ended
31 January 2016.
Going concern
Taking into account current and anticipated trading performance,
current and anticipated levels of borrowings and the availability
of borrowing facilities and exposures to and management of the
financial risks detailed in the Annual Report, the Board is of the
opinion that there is a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future, a period of not less than 12 months from the
date of this report. Accordingly, the interim financial statements
continue to be prepared on a going concern basis.
Cash flow presentation
The presentation of net repayments of bank borrowings for the
six months ended 31 July 2015 has been adjusted to present both
proceeds from and repayments of borrowing facilities amended and
extended on 26 June 2015.
3 Principal accounting policies
The financial statements have been prepared under the historical
cost convention except for derivative financial instruments which
are stated at their fair value.
The accounting policies are consistent with those applied in the
consolidated financial statements for the year ended 31 January
2016. New or amended international financial reporting standards
that are effective in the current period do not have a significant
impact on the interim financial statements.
EU Endorsed International Financial Reporting Standards
effective in the current period
-- Amendments to IAS 16 and IAS 38 - Clarification of acceptable
methods of depreciation and amortisation
-- Amendments to IAS 27 - Equity method in separate financial statements
-- Annual Improvements to IFRSs 2012 - 2014 cycle
-- Amendments to IAS 1 - Disclosure initiative
EU Endorsed International Financial Reporting Standards in issue
but not yet effective
New and revised accounting standards, interpretations or
amendments effective for future periods are currently awaiting EU
endorsement.
4 Segmental reporting
The Group has two operating segments trading under the names
Card Factory and Getting Personal. Card Factory retails cards and
gifts in the UK principally through an extensive store network.
Getting Personal is an online retailer of personalised cards and
gifts. Getting Personal does not meet the quantitative thresholds
of a reportable segment as defined in IFRS 8. Consequently the
results of the Group are presented as a single reportable segment.
Revenues outside of the UK are not significant at less than GBP0.1
million.
5 Underlying EBITDA
Underlying earnings before interest, tax, depreciation and
amortisation ("EBITDA") represents underlying profit for the period
before net finance expense, taxation, depreciation and
amortisation.
Six months Six months Year ended
ended ended 31 January
31 July 31 July 2016
2016 2015
GBP'm GBP'm GBP'm
Underlying operating profit 29.0 27.8 85.3
Depreciation and amortisation 5.2 4.7 9.7
------------------------------- ----------- ----------- ------------
Underlying EBITDA 34.2 32.5 95.0
------------------------------- ----------- ----------- ------------
6 Non-underlying items
Six months Six months Year ended
ended ended 31 January
31 July 31 July 2016
2016 2015
GBP'm GBP'm GBP'm
Cost of sales
(Losses)/gains on foreign
currency derivative financial
instruments not designated
as a hedge (0.1) 0.1 3.9
---------------------------------- ----------- ----------- ------------
Operating expenses
Non-underlying operating
expenses (0.3) - (0.3)
---------------------------------- ----------- ----------- ------------
Net finance expense
Refinanced debt issue cost
amortisation - (1.8) (1.8)
Loss on interest rate derivative
financial instruments not
designated as a hedge (0.2) - (0.1)
---------------------------------- ----------- ----------- ------------
(0.2) (1.8) (1.9)
---------------------------------- ----------- ----------- ------------
Net fair value remeasurement gains and losses on derivative
financial instruments
The Group utilises foreign currency contracts to manage the
foreign exchange risk on U.S. Dollar denominated purchases and
interest rate derivative contracts to manage the risk on floating
interest rate bank borrowings. Fair value gains and losses on such
instruments are recognised in the income statement to the extent
they are not hedge accounted under IAS 39. Such gains and losses
relate to future cash flows. In accordance with the commercial
reasoning for entering into these agreements, these gains/losses
are deemed not representative of the underlying financial
performance in the year and presented as non-underlying items. Any
gains or losses on maturity of such instruments are presented
within underlying profit.
Refinanced debt issue cost amortisation
Debt issue costs totalling GBP1.8 million were expensed to the
income statement in the prior period on completion of an amended
and extended borrowing facility on 26 June 2015. This expense
relates to costs that were not yet amortised in relation to the 30
May 2014 refinancing and is presented as a non-underlying item.
Non-underlying operating expenses
In January 2016, Card Factory plc announced the retirement and
succession of the Chief Executive Officer. Costs attributable to
the recruitment of the new CEO and dual remuneration costs during
the handover period are presented as a non-underlying item.
7 Finance income and expense
Six months Six months Year ended
ended ended 31 January
31 July 31 July 2016
2016 2015
GBP'm GBP'm GBP'm
Finance income
Bank interest received - (0.3) (0.3)
----------------------------- ----------- ----------- ------------
Finance expense
Interest on bank loans and
overdrafts 1.3 2.2 3.3
Amortisation of loan issue
costs 0.1 2.0 2.1
Fair value loss on interest
rate derivative contracts 0.2 - 0.1
----------------------------- ----------- ----------- ------------
1.6 4.2 5.5
----------------------------- ----------- ----------- ------------
Net financing expense 1.6 3.9 5.2
----------------------------- ----------- ----------- ------------
Amortisation of loan issue costs in the prior period include
GBP1.8 million expensed to the income statement in relation to loan
issue costs not yet amortised on refinanced borrowing facilities.
These costs are presented as a non-underlying item, see note 6.
Fair value losses on interest rate derivative contracts are
presented as a non-underlying item, see note 6.
8 Taxation
The tax charge on underlying profit before tax for the interim
period has been calculated on the basis of the estimated effective
tax rate on underlying profit before tax for the full year to 31
January 2017 of 20.4% (six months ended 31 July 2015 20.3%, year
ended 31 January 2016 20.7%).
9 Earnings per share
Basic earnings per share is calculated by dividing the profit
for the period attributable to ordinary shareholders by the
weighted average number of ordinary shares in issue during the
period.
Diluted earnings per share is based on the weighted average
number of shares in issue for the period, adjusted for the dilutive
effect of potential ordinary shares. Potential ordinary shares
represent share incentive awards granted to employees.
The Group has chosen to present an alternative earnings per
share measure, with profit adjusted for non-underlying items to
reflect the Group's underlying profit for the year. Underlying
earnings is not a recognised profit measure under IFRS and may not
be directly comparable with 'adjusted' profit measures used by
other companies.
Six months Six months Year ended
ended ended 31 January
31 July 31 July 2016
2016 2015
Number Number Number
Weighted average number of
shares in issue 340,752,254 340,696,235 340,696,235
Weighted average number of
dilutive share options 346,121 363,656 478,006
------------------------------ ------------ ------------ ------------
Weighted average number of
shares for diluted earnings
per share 341,098,375 341,059,891 341,174,241
------------------------------ ------------ ------------ ------------
GBP'm GBP'm GBP'm
Profit for the financial
period 21.5 19.1 66.4
Non-underlying items 0.5 1.4 (1.4)
-------------------------------- ------ ------ ------
Total underlying profit for
underlying earnings per share 22.0 20.5 65.0
-------------------------------- ------ ------ ------
pence pence pence
Basic earnings per share 6.30 5.61 19.47
Diluted earnings per share 6.29 5.60 19.45
Underlying basic earnings
per share 6.45 6.02 19.08
Underlying diluted earnings
per share 6.45 6.02 19.05
----------------------------- ------ ------ ------
10 Dividends
The Directors have declared an interim dividend of 2.8 pence per
share for the period ended 31 July 2016 which equates to GBP9.5
million and a special dividend of 15.0 pence per share which
equates to GBP51.1 million. Both dividends will be paid on 25
November 2016 to shareholders on the register at the close of
business on 21 October 2016. The interim and special dividend were
approved by the Board on 27 September 2016 and, as such, have not
been included as a liability as at 31 July 2016.
Six months Six months Year ended
ended ended 31 January
31 July 31 July 2016
2016 2015
Pence Pence Pence
per share per share per share
Dividends declared not yet
paid at 31 July 2016:
Special dividend for the 15.0p - -
year ended 31 January 2017
Interim dividend for the 2.8p - -
year ended 31 January 2017
----------------------------- ----------- ----------- ------------
17.8p - -
Dividends paid:
Final dividend for the year 6.0p - -
ended 31 January 2016
Special dividend for the
year ended 31 January 2016 - - 15.0p
Interim dividend for the
year ended 31 January 2016 - - 2.5p
Final dividend for the year
ended 31 January 2015 - 4.5p 4.5p
Interim dividend for the
year ended 31 January 2015 - 2.3p 2.3p
----------------------------- ----------- ----------- ------------
6.0p 6.8p 24.3p
23.8p 6.8p 24.3p
----------------------------- ----------- ----------- ------------
Six months Six months Year ended
ended ended 31 January
31 July 31 July 2016
2016 2015
GBP'm GBP'm GBP'm
Dividends declared not yet
paid at 31 July 2016:
Special dividend for the 51.1 - -
year ended 31 January 2017
Interim dividend for the 9.5 - -
year ended 31 January 2017
----------------------------- ----------- ----------- ------------
60.6 - -
Dividends paid:
Final dividend for the year 20.4 - -
ended 31 January 2016
Special dividend for the
year ended 31 January 2016 - - 51.1
Interim dividend for the
year ended 31 January 2016 - - 8.5
Final dividend for the year
ended 31 January 2015 - 15.4 15.4
Interim dividend for the
year ended 31 January 2015 - 7.8 7.8
----------------------------- ----------- ----------- ------------
20.4 23.2 82.8
81.0 23.2 82.8
----------------------------- ----------- ----------- ------------
11 Intangible assets
Goodwill Software Total
GBP'm GBP'm GBP'm
Cost
At 1 February 2016 328.2 7.3 335.5
Additions - 0.9 0.9
Disposal - (0.1) (0.1)
------------------------- --------- --------- ------
At 31 July 2016 328.2 8.1 336.3
Amortisation
At 1 February 2016 - 4.5 4.5
Provided in the period - 0.6 0.6
Disposals - (0.1) (0.1)
------------------------- --------- --------- ------
At 31 July 2016 - 5.0 5.0
Net book value
At 31 July 2016 328.2 3.1 331.3
------------------------- --------- --------- ------
At 31 January 2016 328.2 2.8 331.0
------------------------- --------- --------- ------
12 Property, plant and equipment
Freehold Leasehold Plant, equipment, Total
property improvements fixtures
& vehicles
GBP'm GBP'm GBP'm GBP'm
Cost
At 1 February
2016 17.3 28.8 43.7 89.8
Additions 0.1 1.9 2.7 4.7
Disposals - (0.4) (0.2) (0.6)
------------------ ---------- -------------- ------------------ ------
At 31 July 2016 17.4 30.3 46.2 93.9
Depreciation
At 1 February
2016 1.9 20.7 27.3 49.9
Provided in the
period 0.2 1.5 2.9 4.6
Disposals - (0.4) (0.1) (0.5)
------------------ ---------- -------------- ------------------ ------
At 31 July 2016 2.1 21.8 30.1 54.0
Net book value
At 31 July 2016 15.3 8.5 16.1 39.9
------------------ ---------- -------------- ------------------ ------
At 31 January
2016 15.4 8.1 16.4 39.9
------------------ ---------- -------------- ------------------ ------
13 Financial instruments
Financial instruments carried at fair value are measured by
reference to the following fair value hierarchy:
-- Level 1: quoted prices in active markets for identical assets or liabilities
-- Level 2: inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices);
and
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
Derivative financial instruments are carried at fair value and
measured under a level 2 valuation method. Valuations are provided
by the instrument counterparty.
31 July 31 July 31 January
2016 2015 2016
GBP'm GBP'm GBP'm
Derivative assets
Non-current
Interest rate contracts - - 0.3
Foreign exchange contracts 0.7 0.1 1.5
---------------------------- -------- -------- -----------
0.7 0.1 1.8
Current
Foreign exchange contracts 3.9 2.3 3.5
---------------------------- -------- -------- -----------
Derivative liabilities
Current
Interest rate contracts (0.2) (0.1) (0.2)
---------------------------- -------- -------- -----------
Non-current
Foreign exchange contracts - (0.2) -
---------------------------- -------- -------- -----------
14 Share capital and share premium
31 July 31 July 31 January
2016 2015 2016
Share capital (Number) (Number) (Number)
Allotted, called up and fully
paid ordinary shares of one
pence:
At the start of the period 340,696,235 340,696,235 340,696,235
Shares issued in relation 148,629 - -
to share options exercised
At the end of the period 340,844,864 340,696,235 340,696,235
------------------------------- ------------ ------------ ------------
GBP'm GBP'm GBP'm
Share capital
At the start of the period 3.4 3.4 3.4
Shares issued in relation - - -
to share options exercised
At the end of the period 3.4 3.4 3.4
------------------------------- ------------ ------------ ------------
GBP'm GBP'm GBP'm
Share premium
At the start of the period 201.6 201.6 201.6
Shares issued in relation 0.3 - -
to share options exercised
At the end of the period 201.9 201.6 201.6
------------------------------- ------------ ------------ ------------
15 Notes to the cash flow statement
Reconciliation of operating profit to cash generated from
operations:
Six months Six months Year ended
ended ended 31 January
31 July 31 July 2016
2016 2015
GBP'm GBP'm GBP'm
Profit before tax 27.0 24.0 83.7
Net finance expense 1.6 3.9 5.2
------------------------------------ ----------- ----------- ------------
Operating profit 28.6 27.9 88.9
Adjusted for:
Depreciation and amortisation 5.2 4.7 9.7
Loss on disposal of fixed
assets 0.1 - 0.1
Cash flow hedging foreign
currency (gains)/losses (0.2) 0.6 2.4
Share based payments charge 0.3 0.6 1.3
------------------------------------ ----------- ----------- ------------
Operating cash flows before
changes in working capital 34.0 33.8 102.4
Increase in receivables (11.9) (9.3) (3.0)
Decrease/(increase) in inventories 4.0 (5.3) (8.9)
Increase in payables 11.8 13.6 1.7
------------------------------------ ----------- ----------- ------------
Cash inflow from operating
activities 37.9 32.8 92.2
------------------------------------ ----------- ----------- ------------
16 Analysis of net debt
Six months ended At 1 February Cash flow Non-cash At 31 July
31 July 2016 2016 changes 2016
GBP'm GBP'm GBP'm GBP'm
Unsecured bank
loans (134.2) 10.0 (0.1) (124.3)
Cash and cash equivalents 11.3 (7.9) - 3.4
--------------------------- -------------- ---------- --------- -----------
Total net debt (122.9) 2.1 (0.1) (120.9)
--------------------------- -------------- ---------- --------- -----------
Six months ended At 1 February Cash flow Non-cash At 31 July
31 July 2015 2015 changes 2015
GBP'm GBP'm GBP'm GBP'm
Unsecured bank
loans (170.4) 53.3 (2.0) (119.1)
Cash and cash equivalents 69.0 (57.9) - 11.1
--------------------------- -------------- ---------- --------- -----------
Total net debt (101.4) (4.6) (2.0) (108.0)
--------------------------- -------------- ---------- --------- -----------
Year ended 31 January At 1 February Cash flow Non-cash At 31 January
2016 2015 changes 2016
GBP'm GBP'm GBP'm GBP'm
Unsecured bank
loans (170.4) 38.3 (2.1) (134.2)
Cash and cash equivalents 69.0 (57.7) - 11.3
--------------------------- -------------- ---------- --------- --------------
Total net debt (101.4) (19.4) (2.1) (122.9)
--------------------------- -------------- ---------- --------- --------------
In the prior year the Group amended and extended the bank
borrowing facility to a GBP200 million revolving credit facility
terminating 26 June 2020 with an additional GBP100 million
accordion. Borrowings under the revised facility attract interest
at LIBOR plus a margin in the range 1.0% to 2.0%, subject to a
leverage ratchet (LIBOR plus 1.25% at 31 July 2016). The facilities
are subject to financial covenants typical to an arrangement of
this nature.
17 Principal risks and uncertainties
The Board and the senior management team are collectively
responsible for managing risks and uncertainties across the Group.
In determining the Group's risk appetite and how risks are managed,
the Board, Audit and Risk Committee and the senior management team
look to ensure an appropriate balance is achieved which enables the
Group to achieve its strategic and operational objectives and
facilitates the long-term success of the Group. The Group's Audit
and Risk Committee is responsible for reviewing the Group's risk
management framework and ensuring that it enables the Committee and
the Board to carry out a robust assessment of the principal risks
facing the Group, including those that would threaten its business
model, future performance, solvency or liquidity.
The principal risks and uncertainties which could have a
material impact on the Group's performance over the remaining six
months of the financial year and beyond, and which could cause
actual results to differ materially from expected and historical
results are as follows:
- Changes in consumer demands and market trends
- Increased competition
- Damage to brand and reputation
- Success of, or inability to implement, Group strategy
- Inability to find suitable locations for new stores
- Supply chain and product sourcing
- Attracting, motivating and retaining key personnel
- Treasury and financial risk
- Business continuity and response to major incidents
- Compliance with legal requirements, standards and regulations
- Maintenance and performance of IT systems
- Development of the Group's online business
The Board considers that these principal risks and uncertainties
affecting the Group (as published and explained in more detail on
pages 21 to 23 of the Group's Annual Report for the year ended 31
January 2016) remain unchanged other than in respect of the
potential impacts of Brexit.
Brexit
On 23 June 2016 the UK held a referendum and voted in favour of
leaving the EU. The subsequent fall in the value of Sterling
increases the financial risks and uncertainties in respect of
foreign exchange adversely impacting future performance. The impact
on US Dollar denominated purchases is largely mitigated in the
current financial year by the foreign exchange hedging policy of
the Group. Management continue to monitor developments and prepare
contingency plans to mitigate, as far as possible, any adverse
impacts on the Group.
Responsibility statement of the Directors in respect of the
half-yearly financial report
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU;
-- the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred during the
first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
By order of the Board
Karen Hubbard Darren Bryant
Chief Executive Officer Chief Financial Officer
27 September 2016
Independent review report to Card Factory plc
Introduction
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31 July 2016 which comprises the condensed
consolidated income statement, the condensed consolidated statement
of comprehensive income, the condensed consolidated statement of
financial position, the condensed consolidated statement of changes
in equity, the condensed consolidated cash flow statement and the
related explanatory notes. We have read the other information
contained in the half-yearly financial report and considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of
financial statements.
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the Disclosure and Transparency Rules ("the DTR")
of the UK's Financial Conduct Authority ("the UK FCA"). Our review
has been undertaken so that we might state to the company those
matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company
for our review work, for this report, or for the conclusions we
have reached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the EU.
The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with
IAS 34 Interim Financial Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK and Ireland) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
July 2016 is not prepared, in all material respects, in accordance
with IAS 34 as adopted by the EU and the DTR of the UK FCA.
Nicola Quayle (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 Sovereign Square
Sovereign Street
Leeds
LS1 4DW
27 September 2016
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR AKADDFBKDACB
(END) Dow Jones Newswires
September 27, 2016 02:01 ET (06:01 GMT)
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