The first choice for greeting cards & gifts - Card Factory plc Interim Results FY23
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The first choice for greeting cards & gifts Card Factory plc Interim Results FY23 Six months ended 31 July 2022 Tuesday 27 September 2022 Celebrate life’s moments
Agenda
01 Introduction Darcy Willson-Rymer
02 Financial Performance Kris Lee
03 Strategy Update Darcy Willson-Rymer
04 Summary & Outlook Darcy Willson-Rymer
05 Q&A Darcy Willson-Rymer & Kris Lee
1
Section 1 Introduction Darcy Willson-Rymer 2
Good momentum across the business driving revenue growth.
Strong performance of everyday product with good growth in celebratory
life moments.
H1 FY23 in Effective management of inflationary pressures across the cost base.
review Good progress on our omnichannel ambitions and growth strategy.
Well placed customer proposition and preparations for Christmas season
well underway.
Continued strengthening of balance sheet with significant reduction in net
debt vs 3 years ago.
3
Section 2 Financial Performance Kris Lee 4
Good performance in first half – Stores +6.1% LFL on prior year.
Financial Effective management of inflationary pressures across cost base.
Highlights Successfully delivered refinancing to September 2025 – liquidity
headroom to deliver strategy.
Significant reduction in net debt by £73.7 million HY20 to HY23 despite
nine months of lockdown.
Expectations for FY23 remain unchanged.
5
Financial summary
Financial KPIs HY23 HY22 HY20 Full six months of trading for first time since HY20.
HY22 included lockdown period.
Revenue £198.0m £116.9m £195.6m
EBITDA 1 £43.8m £23.6m £53.1m Store portfolio increased by net six new stores to
1,026, including first central London store.
Profit/(loss) before tax 1 £14.3m (£6.5m) £24.3m
Basic profit/(loss) earnings per share 3.4 pence (1.5 pence) 5.7 pence Strong net debt performance – in-line with HY22
despite £32.1 million of deferred VAT and rent
Net debt £96.6m £96.5m £170.3m payments over that period. £73.7 million reduction
Net debt and lease liabilities £206.0m £238.9m £317.3m from HY20.
Cash from operating activities £19.7m £36.1m £34.1m Cash from operating activities of £19.7m impacted by
VAT deferrals £7 million and CJRS settlement of £2.3
million.
HY23 HY22 Group has been successful at mitigating cost inflation
Like-for-Like Sales (LFL) 2
(vs HY22) (vs HY20) (vs HY20) impacts to date. Particularly energy, currency, freight,
wages.
Card Factory LFL 2 4.1% (3.1%) (3.7%)
Notes:
1. EBITDA for HY23 includes one-off benefit associated with CJRS settlement (£2.5 million). Profit before tax includes a further one-off benefit related
to deferred fees for previous financing facilities (£1.0 million).
2. LFL calculations are based on Stores that were open in both the current year and the comparative period and compare sales in periods where
6
stores were trading in both years.
LFL sales Card Factory LFL HY23 since fully re-
opening
15.0%
(vs HY22 & HY20)
HY23 HY22
Like-for-Like Sales (LFL) 2 12.0%
(vs HY22) (vs HY20) (vs HY20)
Stores (UK & Ireland) 6.1% (4.2%) (7.2%) 9.0%
Card Factory Online (30.2%) 85.9% 167.9% 6.0%
Card Factory LFL 2 4.1% (3.1%) (3.7%) 3.0%
Getting Personal (36.7%) (35.1%) 6.9%
0.0%
-3.0%
-6.0% 3 Year (vs
Stores Transactions and ABV HY20)
-9.0%
- Stores transaction volume up 9.4% vs HY22 1 Year (vs
- Average basket value (ABV) down 3.1% vs HY22 -12.0% HY22)
- ABV increased 23.1% compared to HY20. -15.0%
Apr-22 May-22 Jun-22 Jul-22 Aug-22
Notes:
1. The LFL calculation is based on Stores that were open in both the current year and the comparative period. Comparatives for HY22 are stated vs
7
HY20.
Divisional sales analysis
HY23 HY22 HY21 HY20
Stores
198.0 Significant growth in Stores sales compared to H1 FY22, +81.7%,
Group
116.9 reflects number of trading days – 10+ weeks of store closures due to
100.5
lockdowns in prior year.
195.6
1Yr LFL growth of +6.1% reflects good momentum plus shift of
customer spend back towards the high street.
186.7
102.7 Targeted price increases – around half of LFL growth driven by price.
Stores 85.3
187.0 Strong everyday sales across card and non-card, growth in life
moments and cards with celebratory captions.
0 50 100 150 200 250 Party and confectionery categories performed well.
Sales - £m
Online
4.0
5.7 Cardfactory.co.uk delivered a good performance – despite shift
Card Factory Online 5.4
2.1
towards the high street, sales remain significantly up compared to pre-
pandemic, +85.9%.
4.0
6.2
Performance in Getting Personal was behind expectations.
Getting Personal 7.9
6.0 Partnerships
3.4
Strong performance year-on-year driving revenue growth.
2.3
Partnerships 1.9 Continuing to analyse and identify new partnership opportunities with a
0.5
focus on building the right partnerships to grow the business.
0 2 4 6 8 10
8 Sales - £m
Covid-impact
Margins
Higher sales and costs reflect increased trading days compared HY23 % HY22 %
to HY22 – Margins improved through a combination of efficiency
HY23 of HY22 of YoY
gains and inflation mitigation.
Revenue Revenue
COGS: Sales £198.0m £116.9m
- COGS (card and non-card) improved by 0.6 ppts
- On a constant currency basis COGS declined by -0.2 ppts COGS (£68.1m) 34.4% (£40.9m) 35.0% 0.6 ppts
- Increase in freight and raw material costs mitigated
Store Wages (£41.8m) 21.1% (£30.0m) 25.7% 4.6 ppts
Store wages:
- Living wage increases offset by efficiency gains Store Property Costs (£12.2m) 6.2% (£4.5m) 3.8% (2.4 ppts)
- One-off £2.5 million benefit following CJRS settlement –
release of excess provisions Other Direct Expenses (£10.1m) 5.2% (£8.2m) 7.0% 1.8 ppts
Cost of Sales (£132.2m) 66.8% (£83.6m) 71.3% 4.5 ppts
Store property costs:
- Cessation of business rates reliefs from April 2022 Operating Expenses (£22.0m) 11.1% (£17.7m) 15.2% 4.1 ppts
Other direct expenses: Other Income £0.0m 0.0% £8.0m 6.8% 6.8 ppts
- Energy costs hedged through to September 2024
- Well hedged on USD FX exposure EBITDA £43.8m 22.1% £23.6m 20.2% 1.9ppts
Operating expenses: Depreciation & Amort. (£23.8m) 12.0% (£23.6m) 20.2% 8.2 ppts
- Investment in strategy and people
Net Finance Expense (£5.7m) 2.9% (£6.5m) 5.6% 2.7ppts
- Prior year includes impact of staff being out on furlough
Operating Profit
Other income: £14.3m 7.2% (£6.5m) 5.6% 1.6 ppts
/(Loss)
- £8 million of Covid lockdown government grant income in prior
year, non-recurring in HY23.
93 year net debt bridge
Leverage1 Leverage1 Leverage1
1.4x 1.6x 0.9x
LTM Operating cash flow after rent
payments of £54.2 million
(excluding deferred rents)
Rent
deferrals
One-off cash
c.£25
costs of
million, VAT
c.£7.5m
deferrals
c£7 million.
Net Debt Movement Net Debt VAT & Rent Normalised EBITDA Lease Capital Debt Working Net Debt
HY20 HY22 deferrals HY22 Net repayments expenditure service capital & HY23
Debt Others
Net debt, excluding lease liabilities, of £96.6 million is significantly reduced compared to a 3-year pre-pandemic view (H1 FY20: £170.3
million).
Reflects a strong performance, with VAT and rent deferrals reduced by £32.1 million during the period, now standing at £0.6 million.
10 Notes:
1. Leverage calculated as Net Debt (excluding lease liabilities) / EBITDA on LTM basis.
2. LTM = Last 12 monthsFree cash flow
HY23 HY22 Change
Profit before tax 14.3 (6.5) 20.8
Deferred VAT
Net finance expense 5.7 6.5 (0.8) payments*,
Depreciation, amortisation and impairments 23.8 23.6 0.2 Christmas
inventory build,
Loss on disposal, share based payments & hedging reserve (1.1) 0.4 (1.5) one-off Covid
Operating cash flow before working capital 42.7 24.0 18.7 support in HY22,
CJRS settlement.
Net working capital movement (22.9) 12.1 (35.0)
Corporation tax 0.1 - 0.1
Capex (5.6) (3.5) (2.1)
Lease liability payments (30.9) (13.7) (17.1) Lease liabilities
includes deferred
Net interest paid (5.5) (4.4) (1.2) rent payments*
Free cash flow (22.2) 14.5 (36.7)
Proceeds from borrowings 73.2 41.7 31.5
Repayment of borrowings (80.8) (48.0) (40.3)
Net cash flow (29.8) 8.2 (38.0)
11 * VAT and Rent deferrals at HY23 stand at £0.6m, a combined reduction from HY22 of £32.1mSuccessfully completed refinancing providing liquidity headroom to
deliver strategy with extended maturity dates and greater flexibility
Refinancing
New £150m debt facilities agreed April 2022
Revolving Credit Facility of £100m, maturing in September 2025
successfully £30m Term Loan and £20m CLBILS
completed Balance sheet allows capital investment in the key projects that support
the group’s long term growth objectives
Restrictions on payment of dividends continue to apply until CLBILs and
term loans repaid.
Board intends to maintain a leverage ratio of between 0.5 and 1.5 times
(on a pre-IFRS 16 basis) and is focussed on paying dividends at the
appropriate time.
Earliest the Board will consider recommencement of dividend payments is
January 2024.
12Financial outlook
Expectations for the full year remain unchanged.
We anticipate that cost headwinds will continue – energy, currency, freight, material costs, wage
inflation.
Expect to continue to manage known inflationary pressures through combination of targeted price
increases, efficiency savings and hedged position.
Full impact of price actions should come through in second half.
We are well covered from our existing hedge on both energy costs and USD FX exposure, which
gives us good visibility on the shape of our cost base.
13Section 3 Strategy Update Darcy Willson-Rymer 14
Transforming Card Factory
… into a truly differentiated market leader in the UK with international reach by
leveraging its vertically integrated model and physical assets to deliver future
growth.
The leading omnichannel brand that is helping customers every day to celebrate any special
occasion.
The number one UK destination for all customers seeking unrivalled quality, value, choice,
convenience and experience.
A global competitor putting cards and gifts in the hands of more customers.
15Strategy Delivery of our omnichannel strategy about to begin through the launch of our
Click & Collect trial.
progress Our digital investment has also continued with the completion of the
replatforming of cardfactory.co.uk which has opened up product and ranging
capability across our gifting categories.
Continuing to focus on the analysis of our first five model stores.
Omnichannel By opening two small format trial stores in central London, as well as six new
stores in the Republic of Ireland, we continue with our plans to diversify our store
estate into underpenetrated markets.
Click & Collect trial to be launched across a total of 84 stores by end of FY23.
New model store format extended to a further five locations by the end of
FY23.
On course to deliver ERP phase 2 in early 2023, providing the ability to view
stock in all areas of the business and enable integration with future partners
both in the UK and internationally.
16Strategy Strong performance in complementary categories reflective of the strategic
planning and range expansion work undertaken in the first half to grow our share
of an identified £5 billion UK market opportunity.
progress As the return of social events and celebrations continue following the lifting of
lockdown restrictions, we have seen strong performance in balloons and party
with +29% LFL in party sales.
Complementary Due to the expansion of the range to meet a broader set of customer needs,
confectionery sales increased 98% on a one-year LFL.
Categories We have launched new ranges in licensed gifts and partyware.
Expand our offer in confectionary, home accessories and toys, as well as
flowers and alcohol on cardfactory.co.uk.
17Strategy We are continuing to analyse and identify new partnership opportunities with a
focus on building the right partnerships to grow the business.
progress Completed research and sizing of international opportunities and have identified
new potential international markets in India and the Middle East.
UK &
International
partnerships Develop pipeline of opportunities and build out internal capabilities to
support delivery in newly identified markets.
18ESG progress
Reducing waste
Reducing carbon footprint
H1 Progress:
· Entered into partnership with the Woodland Trust to support their Carbon neutral objective
work to protect, restore and create native woodland in the UK. Hitting ever bolder recycling targets
· Working with energy consultancy to provide enhanced insight and Increasing sustainability of our product
recommendations to reduce scope 1, 2 and 3 emissions. ranges
· Commissioned review of ESG structure and strategy to support
creation of future roadmap.
Diversity, Equality & Inclusion
· Received ‘Best Place to Work’ recognition with inclusion in Q2 strategy
league tables for:
Social Mobility for colleagues
- Best Companies 'UK's Top 10 Best Big Companies To Charity & Community
Work For’
19 - 'Retail's Top 10 Companies To Work For'Section 4 Summary & Outlook Darcy Willson-Rymer 20
Christmas preparation
Continue to benefit from the agility provided by having our
own UK based production facility.
Brought forward ordering and delivery of Far East orders to
mitigate against any potential supply chain disruption from
industrial action.
Further enhancements made to store stock replenishment to
increase availability of products for customers.
Benefit from cleared through legacy stock created by
pandemic disruption.
Recruitment of store colleagues for the Christmas season
has commenced – confident in our ability to meet staffing
requirements for this seasonal peak.
21Summary
Significant milestones achieved in HY23 as we progress our strategic
growth plans.
Developing our digital proposition and leveraging the strength of our store
estate to transform Card Factory into an omnichannel business.
Building on a strong proposition which offers great value for money
across an increasing range of products and price points.
Financial strength of the business continues to build – highly profitable,
strong cash generation, significant reduction in net debt.
22Outlook
Based on the current inflationary outlook, expectations for the remainder of
FY23 are unchanged.
Our value proposition positions us well to navigate challenging economic
backdrop.
Demonstrated our ability to effectively manage inflationary headwinds.
For FY23 we are well covered from a hedging perspective on both energy
costs and USD FX exposure.
23Q&A 24
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