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RNS
Card Factory PLC  -  CARD   

Half-year Report

Released 07:00 26-Sep-2017

RNS Number : 7663R
Card Factory PLC
26 September 2017
 

26 September 2017

Card Factory plc ("Card Factory" or the "Group")

Interim results for the six months ended 31 July 2017

 

Strong revenue growth and special dividend, whilst investing for the future

 

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 2017. 

Financial highlights

·    Revenue growth of +6.1% (+6.7% on an equivalent number of trading days*)

Financial Metric

H1 FY18

H1 FY17

Change

Revenue

 £179.6m

   £169.2m

+6.1%

Card Factory like-for-like sales*

+3.1%

+0.2%


Underlying EBITDA*

£32.8m

 £34.2m

-4.0%

Underlying operating profit*

£27.7m

 £29.0m

-4.6%

Operating profit

£24.6m

 £28.6m

 -13.9%

Underlying profit before tax*

£26.3m

 £27.6m

-4.8%

Profit before tax

£23.2m

 £27.0m

 -14.1%

Underlying Basic EPS*

     6.19 pence

       6.45 pence

-4.0%

Basic EPS

     5.45 pence

       6.30 pence

 -13.5%

Leverage*

         1.50 x 

1.26 x

 

 

·    Interim dividend increased by 3.6% to 2.9 pence (FY17: 2.8 pence)

·    Special dividend of 15 pence per share (FY17: 15 pence), a return of £51.2m to shareholders

·    A total of £246.5m returned to shareholders via dividends since IPO in May 2014

* Note

- Equivalent number of days reflects FY17 being a leap year.

- Underlying profit figures exclude costs principally relating to mark-to-market movements on derivatives not designated as a

  hedging relationship (see note 6 to the interim financial statements).

- Like-for-like, EBITDA and leverage are defined in note 2 of the Chief Executive's report.

Business highlights

Further progress on all four pillars of the Group's growth strategy:

1.  Like-for-like sales growth

·    Continuing improvements in quality and range of both card and non-card products delivering further growth in average spend

·    Significant uplift in non-card sales

·    Strong growth in sales from both Card Factory stores and online

·    Improved range availability and utilisation of space in store

·    Maintenance of competitive price position

 

2.  Continuing new store roll out

·    30 net new UK stores opened in the period, bringing total UK estate to 895

·    1 trial store opened in the Republic of Ireland, with a further 3 opened since the half year end

·    Strong pipeline of new store opportunities - on track to deliver approximately 50 net new UK openings by the year end and solid pipeline for FY19

 

3.  Delivering business efficiencies

·    Strong, industry-leading underlying EBITDA margins at 18.3% (H1 FY17: 20.2%), with FY18 reflecting a stronger growth in revenue from lower margin non-card sales, investment in the future and cost headwinds of c230bps (£4.2m) from foreign exchange and national living wage pressures.

·    Partial mitigation from savings in cost of goods, supply chain, retail operations and property costs

·    Potential for further savings from efficiency initiatives in H2 FY18 and FY19 to partially offset continuing headwinds from foreign exchange and national living wage

 

4.  Development of complementary online sales channels

·    Card Factory transactional website delivered growth of c30%

·    Gettingpersonal.co.uk investment in a new management team delivered positive sales growth of c5% against flat sales last year

 

Karen Hubbard, Chief Executive Officer, commented:

"We have delivered a solid set of interim results with strong growth in like-for-like sales and total revenue, despite the decline in footfall seen across the high street; however, profitability over the half year was impacted by foreign exchange, national living wage and some of the important investments we are making in the business for longer term growth.

"Our business model remains highly cash generative and we are pleased to be announcing another special dividend of 15 pence per share. Together with the interim dividend, this means we will have returned £246.5m to shareholders since IPO in May 2014. The Board intends to retain its progressive ordinary dividend policy and to continue to return any surplus funds to shareholders whilst giving consideration to the leverage of the business.

"We are the clear leaders in the greeting card market, with a strong proposition which is resonating well with customers despite challenges in the wider consumer environment. Our unique operating model continues to differentiate us from the competition, allowing us to strengthen our market-leading position.

"Trading in recent weeks has been similar to the encouraging trends seen in the first half, with continued growth in average spend as customers respond well to our new and better ranges. The Board is confident that the Group will continue to make further strategic progress, although notes that the full year profit outturn will reflect a continuation of some of the headwinds identified in the first half.

"We remain as convinced as ever of the strong growth prospects for the business."

 

Interim results presentation

A presentation for analysts will be held today starting at 9.30am at UBS Limited, 5 Broadgate, London EC2M 2QS. If you would like to register for attendance then please contact Nessyah Hart at MHP Communications on 0203 128 8156 or cardfactory@mhpc.com.

 

Enquiries

Card Factory plc                        +44 (0) 203 128 8100

Karen Hubbard, Chief Executive Officer

Kris Lee, Chief Financial Officer

 

MHP Communications                +44 (0) 203 128 8100

Simon Hockridge / Giles Robinson / Nessyah Hart

 

 

Card Factory plc ("Card Factory" or the "Group")

Interim results for the six months ended 31 July 2017

 

Chief Executive's Report

 

Overview

Card Factory has had a solid first half to the financial year, generating strong growth in revenues, both on a like-for-like and total revenue basis, despite lower footfall across the high street, with additional revenue growth online from both Card Factory and Getting Personal. However, we have not been immune to the cost headwinds of foreign exchange and national living wage.

We have been able to partially mitigate these challenges through business efficiencies, although the margin impact has been higher than initially expected, largely due to our decision not to raise prices so as to maintain our leading value proposition with our customers.

We continue to generate cash, allowing us to return £51.2m of surplus cash to shareholders via a special dividend, the third such distribution we will have made since IPO in May 2014.

We have a clear strategy underpinned by four pillars of growth. The underlying card market remains large and robust with Card Factory well established as the clear market leader. The substantial barriers to entry built over the past decade through significant investment provide us with a clear strategic advantage. We remain vigilant to the competition from card and non-card retailers and will continue to adapt and evolve our proposition to changes in the market, whilst monitoring and combatting potential new entrants - which we are well practised at doing since Card Factory's inception 20 years ago.

Our focus in the medium term will be on continuing to deliver on our four strategic pillars, develop and evolve our product offering for customers and further our vertical integration across the business to strengthen our ability to grow both revenue and profit. 

The Group has continued to make progress 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 much stronger than the comparative year despite the lower levels of footfall seen on the high street. Average spend continued to grow consistently, with new ranges of both card and non-card products resonating well with customers.  We have improved range availability and utilisation of space in store and maintained our competitive price position.

Like-for-like sales growth for Card Factory increased by +3.1% (H1 FY17: +0.2%) with c30% growth from the cardfactory.co.uk website. Excluding the website, like-for-like sales performance for our store network was +3.0% (H1 FY17: -0.1%) with consistently strong growth in average spend being offset by slightly lower transaction numbers.

We have seen a very strong performance in a number of non-card categories which are incremental to our card business and this has helped drive average spend over the period.

 

2.    Continue to roll out profitable new stores

In the first half we opened 30 net new UK stores (H1 FY17: 34) bringing the total UK estate to 895 stores as at 31 July 2017 with 1 trial store in Republic of Ireland, which opened in July. The contribution of net new store openings to overall Group revenue growth was slightly lower than the first half last year, as a result of later opening dates.  

We remain on track to deliver approximately 50 net new UK stores in the current financial year, having opened a further 3 net new UK stores since the half year point and a further 3 trial stores in the Republic of Ireland. A number of our new UK stores were in retail parks; these have performed ahead of expectations, whilst providing further diversity to our store estate and product offer.

 

3.    Continue to focus on delivering business efficiencies

It is pleasing to report that the Group has delivered business efficiencies to provide best-in-class margins, whilst maintaining value for our customers by holding our low price points in light of weaker high street footfall. However, margins were impacted by foreign exchange and national living wage headwinds together with investment for the future.

Business efficiencies remain a key focus as we continue to expand, including initiatives such as lowering rental terms on existing leases; lower rates; reduction of instore tasks; and the continuing conversion to LED lighting. We are also focusing on improvements in supply chain management, with extra focus on the cost of product sourcing. Looking forward, the weakness of Sterling and anticipated increases in national living wage remain the most significant cost pressures on the business. To seek to mitigate the impact of these, a number of additional initiatives are underway.

4.    Increase penetration of the complementary online market

Having successfully relaunched the transactional website for cardfactory.co.uk in FY16, we continue to develop the medium term strategy for this sales channel. Key opportunities include refining our product offering, including exclusive web products, and improving the shopability, as customers become more and more demanding on ease of use, customer experience and speed. Whilst introducing these developments we continue to see strong sales growth. The online personalised card market segment, estimated to be worth approximately £100m, remains an attractive market niche where we are currently under-represented with a share of less than 1%.

Our rate of online sales growth at cardfactory.co.uk was c30%; we continue to target new customers by leveraging our high street presence whilst ensuring our investment delivers profitable sales growth.

Year-on-year sales performance at gettingpersonal.co.uk also improved with 5.0% revenue growth (H1 FY17: 0.1%) in a more mature online market.

We remain optimistic that we will deliver continuing growth in revenue and profit from both of the Group's online channels over the medium term, with better engagement, product offering and service levels for our customers, whilst continuing to develop improved customer navigation.

Investment for the future

To support future growth, the business has continued to make investments in people, systems and infrastructure. In particular, we have invested in new senior management to ensure that the Group can realise its full potential and execute development plans with increased precision. This includes investment in the design team with Jo Bennett joining as Studio Director after 22 years with Hallmark. We have also brought in a new Supply Chain Development Director, Craig Miles, who has nearly 25 years in the card industry and a new Chief Technology Officer in Ian Dyson joining from Debenhams and, previously, Co-op. Ian will ensure we have the right IT infrastructure, including ERP and business information systems, in place to support and drive business performance. Steve Lilley has joined us from Argos as Retail Stores Director to support store standards and drive sales performance and customer service in store.

In stores we have instigated the implementation of contactless payments, which should be completed pre-Christmas, reducing queues, improving customer experience and reducing missed sales.

We also continue to invest in our unique, vertically integrated supply chain to ensure we maintain our competitive advantage, as well as in our two online propositions.

Revenue

Total revenues during the period grew by 6.1% to £179.6m (H1 FY17: £169.2m):


H1 FY18

£'m

H1 FY17

£'m


Increase

Card Factory

172.3

162.3


+6.2%

Getting Personal

7.3

6.9


+5.0%

Group

179.6

169.2


+6.1%

 

Growth in like-for-like sales by retail channel, calculated on a calendar week basis, can be broken down as follows:


H1 FY18

H1 FY17

Card Factory stores

+3.0%

-0.1%

Card Factory online

+29.8%

+289.2%

Card Factory combined

+3.1%

+0.2%




Getting Personal

        +5.0%

+0.1%




Total online combined

+7.3%

+7.7%

 

Operating costs

Underlying cost of sales and operating expenses continue to be a key focus and are broken down as follows:


H1 FY18


H1 FY17


Increase


£'m

% of revenue


£'m

% of revenue


 

 

+11.0%

+10.7%

+3.1%

-3.6%

+7.9%

 

+15.8%

Cost of goods sold

56.9

31.7%


51.3

30.3%


Store wages

33.7

18.8%


30.5

18.0%


Store property costs

32.3

18.0%


31.3

18.5%


Other direct expenses

8.1

4.5%


8.3

4.9%


Cost of sales

131.0

73.0%


121.4

71.7%









Operating expenses*

15.8

8.7%


13.6

8.1%











    *excluding depreciation and amortisation

The overall ratio of cost of sales to revenue increased to 73.0% on an underlying basis (H1 FY17: 71.7%) 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 increase in this cost ratio principally reflects the foreign exchange headwinds where the business has always been well hedged, but the prolonged step down in the sterling/dollar rate has had an increased impact; further detail is set out below. Additionally, the improvement of the offering in our non-card range has resulted in that segment performing strongly with some impact to group margin, although mitigated to some extent by underlying product sourcing improvements.

·    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 national living wage. The increase in the cost ratio reflects these factors, with some mitigation as a result of steps taken to reduce tasks in store and to manage hours more effectively.

·    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 as a ratio of revenue has reduced due to rent reductions achieved on lease renewals and the benefit of rates reassessments. We continue to target improvements in our overall rent roll as we reach break points or expiries 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 expenditure. This cost category is largely variable for existing stores and increases with new store openings. The ratio of other direct expenses has benefited from various business efficiencies, decreasing to 4.5% (H1 FY17 4.9%).

Total underlying operating expenses (excluding depreciation and amortisation) in the first half increased to £15.8m (H1 FY17: £13.6m). These costs include items such as head office salaries and remuneration, costs for regional and area managers, design studio costs and insurance, together with other central overheads and administration costs. During FY18 there has been significant investment in people to ensure we have the depth to deliver the next stage of the growth. 

Depreciation and amortisation remained relatively flat, decreasing marginally from £5.2m to £5.1m reflecting the consistent level of annual capex spend.

Net finance expense

The underlying net financing expense remained constant at £1.4m (H1 FY17: £1.4m).



H1 FY18

H1 FY17



£'m

£'m

Underlying profit before tax


26.3

27.6

Non-underlying items:




Cost of sales





Loss on foreign currency derivative financial instruments not designated as a hedge

(2.8)

(0.1)

Operating expenses





Non-underlying operating expenses

(0.3)

(0.3)

Net finance expense





Loss on interest rate derivative financial instruments not designated as a hedge

-

(0.2)

Statutory profit before tax


23.2

27.0

 

 

 

Profit before tax

As a consequence of the above factors, underlying profit before tax decreased by 4.8% to £26.3m H1 FY17: £27.6m). The table below reconciles underlying profit before tax to the statutory profit before tax:

Taxation

The underlying effective tax rate of 19.7% (H1 FY17: 20.4%) remains close to the statutory rate.

Earnings per share

Underlying basic earnings per share decreased by 4.0% to 6.19 pence (H1 FY17: 6.45 pence). Excluding the £4.2m impact of foreign exchange and national living wage, underlying basic earnings per share would have increased by approximately 11.4%. 

Capital expenditure

Capital expenditure of £6.6m (H1 FY17: £5.6m) included investment of £2.1m (H1 FY17 £0.8m) in the continued roll-out of EPOS which will complete by October, with the retrospective upgrade of existing stores on the original EPOS system to the new EPOS platform to be completed in H1 FY19. Our expectation is that capital expenditure will run at around £12m per annum over the medium term, with some additional investment in the short term to cover completion of the EPOS project.

Foreign exchange

With approximately 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 FY18 and beyond due to the fall in the value of Sterling. This margin pressure and uncertainty increased significantly following the result of the EU referendum, with Sterling currently trading at around the $1.35 level.  

At the date of this announcement, foreign exchange exposure is hedged for the remainder of FY18 and a large proportion of FY19, giving expected full year weighted average exchange rates of c$1.40 for FY18 and c$1.34 for FY19 (FY17: $1.64). The weighted average exchange rates are subject to movements on transactions yet to be hedged for FY19 and assume all structured options are exercisable.

Underlying EBITDA

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 decreased to 18.3% (H1 FY17: 20.2%), although like-for-like sales remained robustly positive in a challenging market. The underlying EBITDA margin is broken down as follows:


H1 FY18

£'m

H1 FY17

£'m


Increase/

(Decrease)

Underlying EBITDA





Card Factory

31.8

33.2


-4.1%

Getting Personal

1.0

1.0


+0.6%

Group

32.8

34.2


-4.0%






Underlying EBITDA margin





Card Factory

18.5%

20.5%


-2.0ppts

Getting Personal

13.3%

13.9%


-0.6ppts

Group

18.3%

20.2%


-1.9ppts

The reduction in underlying EBITDA reflects the impact of foreign exchange, product mix, national living wage and our investment in strengthening our competitive position by maintaining our low price points.

We previously estimated that FY18 EBITDA margin would be approximately 150bps below the levels achieved in FY17. We now estimate that, based on the headwinds experienced in H1, the full year impact will be approximately 200bps (pre mitigation approximately 320bps). The outperformance of non-card, which is lower margin than card, and our decision to maintain our leading price proposition to strengthen our competitive positioning is reflected in our latest view of margins in the full year.

The underlying EBITDA at Getting Personal remained flat despite an improvement in sales principally reflecting investment in the business to support future revenue growth, pay per click and the impact of increased supplier prices due to foreign exchange.

Cash generation

The Group has a business model which is fundamentally highly cash generative due to its strong operating margins, limited working capital absorption and relatively low capital expenditure requirements. Cash generation in the half year reduced due to an increase in stock value - in part due to the impact of foreign exchange on unit costs, and in part due to a planned build-up of stocks of popular lines.

Dividends

The Board has declared an interim ordinary dividend of 2.9p per share (FY17: 2.8p).

In addition, the Board is pleased to declare a special dividend of 15.0p per share, equating to a special return to shareholders of £51.2m.

Both the interim ordinary dividend and the special dividend will be paid on 15 December 2017 to shareholders on the register at close of business on 10 November 2017. We will, at that point, have returned a total of 72.3p per share (£246.5m) to shareholders since IPO in May 2014 - equivalent to over 32% of the IPO price.

Net debt

As at 31 July 2017, before deduction of capitalised debt costs, net debt totalled £146.0m (31 July 2016: £121.7m, 31 January 2017: £135.8m).

As at 31 July

2018

£'m

2017

£'m

Borrowings



Current liabilities

0.0

0.1

Non-current liabilities

149.4

124.2

Total borrowings

149.4

124.3

Add: debt costs capitalised

0.6

0.8

Gross debt

150.0

125.1

Less cash

(4.0)

(3.4)

Net debt

146.0

121.7

Net debt at 31 July 2017 represented 1.50x underlying EBITDA for the 12 months ended on that date, compared with 1.26x at 31 July 2016 and 1.20x at 31 July 2015.

Capital policy

The Board intends to retain its progressive ordinary dividend policy and to continue to return any surplus funds to shareholders by way of special dividend or other form of distribution. It also retains its previously stated objective of maintaining leverage at a level of 1.0x - 2.0x last twelve months underlying EBITDA. Therefore, mindful of the increase in leverage noted above, as well as the margin and cost headwinds which may limit profit growth in the short to medium term, the Board plans to review the amount and timing of future special dividends. The review will take into account anticipated trading performance together with likely reinvestment requirements, and may result in a deviation from the pattern of annual special dividends which has been established over recent years.

Outlook

We have delivered a solid set of interim results with strong growth in like-for-like sales and total revenue despite the decline in footfall seen on the high street; however, profitability over the half year was impacted by foreign exchange, national living wage and some of the important investments we are making in the business for longer term growth.

We are confident in our ability to deliver further returns of surplus cash to shareholders. FY19 will continue to see headwinds from foreign exchange and living wage increases; we will continue to mitigate an element of this through business efficiencies.

We remain as convinced as ever of the strong growth prospects for the business.

 

Karen Hubbard

Chief Executive Officer

26 September 2017

 

 

 

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 like-for-like 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 2017, the Group achieved revenue growth of 4.3% to £398.2m (FY16: £381.6m) and underlying EBITDA growth of +3.8% to £98.5m (FY16: £95.0m) at a margin of 24.7% (FY16: 24.9%).

 

2.         Definitions

"Like-for-like"

The Group defines Card Factory store Iike-for-Iike ('LFL') sales as the year-on-year growth in sales for Card Factory stores which have been opened for a full year, calculated on a calendar week basis. The reported LFL sales figure excludes sales:

·    made via the Card Factory website, www.cardfactory.co.uk;

·    made via the separately branded personalized card and gift website, Getting Personal, www.gettingpersonal.co.uk;

·    by Printcraft, the Group's printing division, to external third-party customers; and

·    from stores closed for all or part of the relevant period (or the prior year comparable period).

Card Factory stores are included in the reported LFL figures for each week of trading after having been open for 52 weeks.

Total Card Factory LFLs are reported including the impact of the Card Factory website.

The Group defines Getting Personal LFL sales as the year-on-year growth in sales for the Getting Personal website, calculated on a calendar week basis.

"EBITDA" - Underlying earnings before interest, tax, depreciation and amortisation ('EBITDA') represents underlying profit for the period before net finance expense, taxation, depreciation and amortisation.

"Leverage" - Leverage is calculated as the ratio of net debt to underlying EBITDA for the previous 12 months.

Percentage Movements - Percentage changes have been calculated before figures were rounded to £0.1m.

 

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 2017

 

 



Six months ended 31 July 2017


Six months ended 31 July 2016


Year ended 31 January 2017



Underlying

Non-underlying (note 6)

Total


Underlying

Non-underlying (note 6)

Total


Underlying

Non-underlying (note 6)

Total


Note

£'m

£'m

£'m


£'m

£'m

£'m


£'m

£'m

£'m














Revenue


179.6

-

179.6


169.2

-

169.2


398.2

-

398.2

Cost of sales


(131.0)

(2.8)

(133.8)


(121.4)

(0.1)

(121.5)


(271.6)

(0.6)

(272.2)

Gross profit/(loss)


48.6

(2.8)

45.8


47.8

(0.1)

47.7


126.6

(0.6)

126.0














Operating expenses


(20.9)

(0.3)

(21.2)


(18.8)

(0.3)

(19.1)


(38.8)

(1.5)

(40.3)

Operating profit/(loss)


27.7

(3.1)

24.6


29.0

(0.4)

28.6


87.8

(2.1)

85.7














Financial income

7

-

-

-


-

-

-


0.1

-

0.1

Financial expense

7

(1.4)

-

(1.4)


(1.4)

(0.2)

(1.6)


(2.8)

(0.2)

(3.0)

Net financing expense


(1.4)

-

(1.4)


(1.4)

(0.2)

(1.6)


(2.7)

(0.2)

(2.9)



             

             

             


             

             

             


             

             

             

Profit/(loss) before tax


26.3

(3.1)

23.2


27.6

(0.6)

27.0


85.1

(2.3)

82.8














Taxation

8

(5.2)

0.6

(4.6)


(5.6)

0.1

(5.5)


(17.6)

0.5

(17.1)














Profit/(loss) for the period


21.1

(2.5)

18.6


22.0

(0.5)

21.5


67.5

(1.8)

65.7



























Earnings per share


pence


pence


pence


pence


pence


pence

 - Basic

9

6.19


5.45


6.45


6.30


19.81


19.26

 - Diluted

9

6.19


5.45


6.45


6.29


19.80


19.25

 

 

All activities relate to continuing operations.

 

 

 

Condensed consolidated statement of comprehensive income

For the six months ended 31 July 2017

 

 


Six months ended 31 July 2017


Six months ended 31 July 2016


Year ended 31 January 2017


£'m


£'m


£'m







Profit for the period

18.6


21.5


65.7

Items that are or may be recycled subsequently into profit or loss:






Effective portion of changes in fair value of cash flow hedges

(2.2)


1.9


3.8

Net change in fair value of cash flow hedges recycled to profit or loss

(1.6)


(2.4)


(5.1)

Tax relating to components of other comprehensive income

0.7


0.1


0.2

Other comprehensive expense for the period, net of income tax 

(3.1)


(0.4)


(1.1)


             


             


             

Total comprehensive income for the period attributable to equity shareholders of the parent

15.5


21.1


64.6

 

 

 

Condensed consolidated statement of financial position

As at 31 July 2017

 

 


Note

31 July 2017


31 July 2016


31 January 2017



£'m


£'m


£'m

Non-current assets







Intangible assets

11

330.8


331.3


330.2

Property, plant and equipment

12

39.9


39.9


39.1

Deferred tax assets


1.3


0.5


0.6

Other receivables


0.7


1.0


0.8

Derivative financial instruments

15

-


0.7


0.6



372.7


373.4


371.3

Current assets







Inventories


59.9


46.4


51.4

Trade and other receivables


26.5


29.1


16.6

Derivative financial instruments

15

1.6


3.9


3.5

Cash and cash equivalents

13

4.0


3.4


3.0



92.0


82.8


74.5



             


             



Total assets


464.7


456.2


445.8








Current liabilities







Borrowings


-


(0.1)


(8.8)

Trade and other payables


(53.9)


(47.5)


(37.4)

Tax payable


(4.3)


(5.7)


(8.7)

Derivative financial instruments

15

(1.3)


(0.2)


(0.7)



(59.5)


(53.5)


(55.6)

Non-current liabilities







Borrowings


(149.4)


(124.2)


(129.3)

Trade and other payables


(10.7)


(11.6)


(11.2)

Derivative financial instruments

15

(1.2)


-


(0.2)



(161.3)


(135.8)


(140.7)








Total liabilities


(220.8)


(189.3)


(196.3)



             


             



Net assets


243.9


266.9


249.5








Equity







Share capital

16

3.4


3.4


3.4

Share premium

16

202.2


201.9


201.9

Hedging reserve


(1.1)


2.7


2.0

Reverse acquisition reserve


(0.5)


(0.5)


(0.5)

Merger reserve


2.7


2.7


2.7

Retained earnings


37.2


56.7


40.0

Equity attributable to equity holders of the parent


243.9


266.9


249.5

 

 

 

Condensed consolidated statement of changes in equity

For the six months ended 31 July 2017

 

 

Six months ended 31 July 2017

Share Capital

Share Premium

Hedging reserve

Reverse acquisition reserve

Merger reserve

Retained Earnings

Total Equity


£'m

£'m

£'m

£'m

£'m

£'m

£'m









At 1 February 2017

3.4

201.9

2.0

(0.5)

2.7

40.0

249.5









Total comprehensive income for the period








Profit or loss

-

-

-

-

-

18.6

18.6

Other comprehensive expense

-

-

(3.1)

-

-

-

(3.1)


-

-

(3.1)

-

-

18.6

15.5

Transactions with owners, recorded directly in equity








Issue of shares (note 16)

-

0.3

-

-

-

-

0.3

Share based payment charges

-

-

-

-

-

-

-

Taxation on share based payments recognised in equity

-

-

-

-

-

0.1

0.1

Dividends (note 10)

-

-

-

-

-

(21.5)

(21.5)

Total contributions by and distributions to owners

-

0.3

-

-

-

(21.4)

(21.1)









At 31 July 2017

3.4

202.2

(1.1)

(0.5)

2.7

37.2

243.9

 

 

Six months ended 31 July 2016

Share capital

Share premium

Hedging reserve

Reverse acquisition reserve

Merger reserve

Retained earnings

Total equity


£'m

£'m

£'m

£'m

£'m

£'m

£'m









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 16)

-

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 (note 10)

-

-

-

-

-

(20.4)

(20.4)

Total contributions by and distributions to owners

-

0.3

-

-

-

(20.2)

(19.9)









At 31 July 2016

3.4

201.9

2.7

(0.5)

2.7

56.7

266.9

 

 

Year ended 31 January 2017

Share capital

Share premium

Hedging reserve

Reverse acquisition reserve

Merger reserve

Retained earnings

Total equity


£'m

£'m

£'m

£'m

£'m

£'m

£'m









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

-

-

-

-

-

65.7

65.7

Other comprehensive expense

-

-

(1.1)

-

-

-

(1.1)


-

-

(1.1)

-

-

65.7

64.6

Transactions with owners, recorded directly in equity








Issue of shares (note 16)

-

0.3

-

-

-

-

0.3

Share based payment charges

-

-

-

-

-

0.2

0.2

Taxation on share based payments recognised in equity

-

-

-

-

-

(0.1)

(0.1)

Dividends (note 10)

-

-

-

-

-

(81.2)

(81.2)

Total contributions by and distributions to owners

-

0.3

-

-

-

(81.1)

(80.8)









At 31 January 2017

3.4

201.9

2.0

(0.5)

2.7

40.0

249.5

 

 

Condensed consolidated cash flow statement

For the six months ended 31 July 2017

 

 


Note

Six months ended 31 July 2017


Six months ended 31 July 2016


Year ended 31 January 2017



£'m


£'m


£'m








Cash inflow from operating activities

17

27.6


37.9


99.4

Corporation tax paid


(8.8)


(8.8)


(17.6)

Net cash inflow from operating activities


18.8


29.1


81.8








Cash flows from investing activities







Purchase of property, plant and equipment

12

(5.5)


(4.7)


(8.6)

Purchase of intangible assets

11

(1.1)


(0.9)


(1.8)

Interest received


-


-


0.1

Net cash outflow from investing activities


(6.6)


(5.6)


(10.3)








Cash flows from financing activities







Proceeds from bank borrowings


19.9


-


-

Purchase of interest rate derivatives


-


-


(0.1)

Interest paid


(1.2)


(1.3)


(2.6)

Repayment of bank borrowings


-


(10.0)


(5.0)

Proceeds from new shares issued

16

0.3


0.3


0.3

Dividends paid


(21.5)


(20.4)


(81.1)

Net cash outflow from financing activities


(2.5)

            

(31.4)


(88.5)



            

            

            



Net increase/(decrease) in cash and cash equivalents


9.7


(7.9)


(17.0)

Cash and cash equivalents at the beginning of the year


(5.7)


11.3


11.3

Closing cash and cash equivalents

13

4.0


3.4


(5.7)


 

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 2017 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 26 September 2017.

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 2017 ('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 2017 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 2017 were approved by the Board of Directors on 27 March 2017 and delivered to the Registrar of Companies. The auditor's review report for the six month period ended 31 July 2017 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 2017.

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.

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 2017. Amendments to International Financial Reporting Standards effective in the current period do not have a significant impact on the interim financial statements.

Amendments to International Financial Reporting Standards effective in the current period (not yet EU endorsed)

•    Recognition of deferred tax assets for unrealised losses (Amendments to IAS 12)

•    Disclosure initiative (Amendments to IAS 7)

•    Annual Improvements to IFRS 2014-2016 cycle (Amendments to IFRS 12)

EU Endorsed International Financial Reporting Standards in issue but not yet effective

•    IFRS 9 Financial Instruments

•    IFRS 15 Revenue from Contracts with Customers

IFRS 9 'Financial instruments' will supersede IAS 39 and is effective for accounting periods commencing on or after 1 January 2018.  IFRS 9 is not expected to have a significant impact on the financial statements in respect of classification and measurement of the financial assets and financial liabilities of the Group or impairment of the Group's financial assets. Adopting the hedging requirements of IFRS 9 would require an amendment to the accounting policy in respect of cash flow hedge accounting. Gains or losses recognised in other comprehensive income in respect of a cash flow hedge of a forecast transaction that results in the recognition of a non-financial asset or liability would be required to be included in the initial measurement of the asset or liability. The current accounting policy recognises such gains or losses in profit or loss in the same period or periods during which the hedged forecast transaction, or a resulting asset or liability affects profit or loss, but does not recognise the gain or loss in the initial measurement of a resulting asset or liability. Such a change in accounting policy would be applied prospectively under the transitional arrangements of IFRS 9. Foreign exchange gains recognised in the hedging reserve totalling £0.3 million (31 July 2016 £1.8 million, 31 January 2017 £2.7 million) would have been recognised in inventory were IFRS 9 hedge accounting policies effective in those periods, with no impact on profit or loss. Other amendments to accounting policies in respect of hedge accounting under IFRS 9 would not have a significant impact on the financial statements and the Group's designated hedging relationships under IAS 39 would qualify as continuing hedging relationships under IFRS 9.

IFRS 15 'revenue from contracts' introduces principles to recognise revenue by allocation of the transaction price to performance obligations and is effective for accounting periods commencing on or after 1 January 2018. Adoption of the standard is not expected to have a significant impact on the financial statements.

New and revised International Financial Reporting Standards or interpretations effective for future periods that are currently awaiting EU endorsement include IFRS 16 Leases (effective for annual periods beginning on or after 1 January 2019). IFRS 16 will replace IAS 17 and related interpretations and requires entities to apply a single lessee accounting model, with lessees recognising right of use assets and lease liabilities on balance sheet for all applicable leases. The majority of the operating lease commitments disclosed in note 22 of the Annual Report for the year ended 31 January 2017 would meet the definition of a lease under IFRS 16. The Group continues to assess the impact of adopting the standard under the different options available on transition.

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 the UK are not significant at less than £0.1 million. Card Factory opened its first store in the Republic of Ireland in July 2017.

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 ended 31 July 2017


Six months ended 31 July 2016


Year ended 31 January 2017


£'m


£'m


£'m







Underlying operating profit

27.7


29.0


87.8

Depreciation and amortisation

5.1


5.2


10.7

Underlying EBITDA

32.8


34.2


98.5

 

6        Non-underlying items


Six months ended 31 July 2017


Six months ended 31 July 2016


Year ended 31 January 2017


£'m


£'m


£'m

Cost of sales






Loss on foreign currency derivative financial instruments not designated as a hedge

(2.8)


(0.1)


(0.6)







Operating expenses






Loss on disposal of redundant EPOS assets

-


-


(0.9)

Accelerated depreciation on EPOS assets

-


-


(0.2)

Other non-underlying operating expenses

(0.3)


(0.3)


(0.4)


(0.3)


(0.3)


(1.5)

Net finance expense






Loss on interest rate derivative financial instruments not designated as a hedge

-


(0.2)


(0.2)

The Group has chosen to present an underlying profit and earnings measure. The Group believes that underlying profit and earnings provides additional useful information for shareholders. Underlying earnings is not a recognised profit measure under EU IFRS and may not be directly comparable with 'adjusted' profit measures reported by other companies. The reported non-underlying adjustments are as follows:

Net fair value remeasurement gains and losses on derivative financial instruments

The Group utilises foreign currency derivative contracts to manage the foreign exchange risk on US 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. Where such gains and losses relate to future cash flows, these are deemed not representative of the underlying financial performance in the year and presented as non-underlying items in accordance with the commercial reasoning for entering into the agreements. Any gains or losses on maturity of such instruments are presented within underlying profit to the extent the gain or loss is not recognised in the hedging reserve.

EPOS asset disposals and accelerated depreciation

In the prior year the decision was taken to upgrade Electronic point of sale ('EPOS') software implemented in recent years with a replacement system offering enhanced capabilities. The resulting loss on disposal of redundant assets and accelerated depreciation arising on assets to be replaced in advance of their original estimated useful economic life were considered a one-off event and not representative of underlying performance for the year. As such they were presented as a non-underlying item.

Other 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 were presented as a non-underlying item. In January 2017, Card Factory plc announced the retirement and succession of the Chief Financial Officer. Costs attributable to the recruitment of a new CFO and dual remuneration costs during the handover period are presented as a non-underlying item.

7        Finance income and expense


Six months ended 31 July 2017


Six months ended 31 July 2016


Year ended 31 January 2017


£'m


£'m


£'m

Finance income






Bank interest received

-


-


(0.1)







Finance expense






Interest on bank loans and overdrafts

1.2


1.3


2.6

Amortisation of loan issue costs

0.1


0.1


0.2

Fair value loss on interest rate derivative contracts

0.1


0.2


0.2


1.4


1.6


3.0

Net finance expense

1.4


1.6


2.9

Where fair value losses on interest rate derivative contracts relate to a future cash flow these 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 2018 of 19.7% (six months ended 31 July 2016 20.4%, year ended 31 January 2017 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 and save as you earn share options.

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 EU IFRS and may not be directly comparable with 'adjusted' profit measures used by other companies.


Six months ended 31 July 2017


Six months ended 31 July 2016


Year ended 31 January 2017








Number


Number


Number

Weighted average number of shares in issue

341,058,641


340,752,254


        340,798,812

Weighted average number of dilutive share options

75,766


346,121


              171,016

Weighted average number of shares for diluted earnings per share

341,134,407


341,098,375


340,969,828

 


£'m


£'m


£'m

Profit for the financial period

18.6


21.5


65.7

Non-underlying items

2.5


0.5


1.8

Total underlying profit for underlying earnings per share

21.1


22.0


67.5

 


pence


pence


pence

Basic earnings per share

5.45


6.30


19.26

Diluted earnings per share

5.45


6.29


19.25

Underlying basic earnings per share

6.19


6.45


19.81

Underlying diluted earnings per share

6.19


6.45


19.80

 

10      Dividends

The Directors have declared an interim dividend of 2.9 pence per share for the period ended 31 July 2017 which equates to £9.9 million and a special dividend of 15.0 pence per share which equates to £51.2 million. Both dividends will be paid on 15 December 2017 to shareholders on the register at the close of business on 10 November 2017. The interim and special dividend were approved by the Board on 26 September 2017 and, as such, have not been included as a liability as at 31 July 2017.

 

 

Six months ended 31 July 2017


Six months ended 31 July 2016


Year ended 31 January 2017


Pence per share


Pence per share


Pence per share

Dividends declared not yet paid at 31 July 2017:






Special dividend for the year ended 31 January 2018

15.0p


-


-

Interim dividend for the year ended 31 January 2018

2.9p


-


-


17.9p


-


-

Dividends paid:






Final dividend for the year ended 31 January 2017

6.3p


-


-

Special dividend for the year ended 31 January 2017

-


-


15.0p

Interim dividend for the year ended 31 January 2017

-


-


2.8p

Final dividend for the year ended 31 January 2016

-


6.0p


6.0p


6.3p


6.0p


23.8p








24.2p


6.0p


23.8p






 

 

 

Six months ended 31 July 2017


Six months ended 31 July 2016


Year ended 31 January 2017


£'m


£'m


£'m

Dividends declared not yet paid at 31 July 2017:






Special dividend for the year ended 31 January 2018

51.2


-


-

Interim dividend for the year ended 31 January 2018

9.9


-


-


61.1


-


-

Dividends paid:






Final dividend for the year ended 31 January 2017

21.5


-


-

Special dividend for the year ended 31 January 2017

-


-


51.1

Interim dividend for the year ended 31 January 2017

-


-


9.6

Final dividend for the year ended 31 January 2016

-


20.4


20.4

.44…


                     21.5


20.4


81.1








82.6


20.4

4.


81.1






 

11      Intangible assets

 


Goodwill

Software

Total


£'m

£'m

£'m

Cost




At 1 February 2017

328.2

6.4

334.6

Additions

-

1.1

1.1

At 31 July 2017

328.2

7.5

335.7





Amortisation




At 1 February 2017

-

4.4

4.4

Provided in the period

-

0.5

0.5

At 31 July 2017

-

4.9

4.9





Net book value




At 31 July 2017

328.2

2.6

330.8





At 31 January 2017

328.2

2.0

330.2

 

12      Property, plant and equipment

 


Freehold property

Leasehold improvements

Plant, equipment, fixtures & vehicles

Total


£'m

£'m

£'m

£'m

Cost





At 1 February 2017

17.4

32.1

47.1

96.6

Additions

-

2.3

3.2

5.5

Disposals

-

(0.2)

(0.1)

(0.3)

At 31 July 2017

17.4

34.2

50.2

101.8






Depreciation





At 1 February 2017

2.3

23.3

31.9

57.5

Provided in the period

0.2

1.6

2.8

4.6

Disposals

-

(0.1)

(0.1)

(0.2)

At 31 July 2017

2.5

24.8

34.6

61.9






Net book value





At 31 July 2017

14.9

9.4

15.6

39.9






At 31 January 2017

15.1

8.8

15.2

39.1

 

13      Cash and cash equivalents

 


31 July 2017


31 July 2016


31 January 2017


£'m


£'m


£'m







Cash at bank and in hand

4.0


3.4


3.0

Unsecured bank overdraft

-


-


(8.7)

Net cash and cash equivalents

4.0


3.4


(5.7)

 

14      Analysis of net debt

Six months ended 31 July 2017

At 1 February 2017

Cash flow

Non-cash changes

At 31 July 2017


£'m

£'m

£'m

£'m






Unsecured bank loans and accrued interest

(129.4)

(19.9)

(0.1)

(149.4)

Cash and cash equivalents (note 13)

(5.7)

9.7

-

4.0

Total net debt

(135.1)

(10.2)

(0.1)

(145.4)

 

Six months ended 31 July 2016

At 1 February 2016

Cash flow

Non-cash changes

At 31 July 2016


£'m

£'m

£'m

£'m






Unsecured bank loans and accrued interest

(134.2)

10.0

(0.1)

(124.3)

Cash and cash equivalents (note 13)

11.3

(7.9)

-

3.4

Total net debt

(122.9)

2.1

(0.1)

(120.9)

 

Year ended 31 January 2017

At 1 February 2016

Cash flow

Non-cash changes

At 31 January 2017


£'m

£'m

£'m

£'m






Unsecured bank loans and accrued interest

(134.2)

5.0

(0.2)

(129.4)

Cash and cash equivalents (note 13)

11.3

(17.0)

-

(5.7)

Total net debt

(122.9)

(12.0)

(0.2)

(135.1)

Group borrowing facilities consist of a £200 million revolving credit facility ('RCF') terminating 26 June 2020 with an additional £100 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 2017). The facilities are subject to financial covenants typical to an arrangement of this nature.

15      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 2017


31 July 2016


31 January 2017


£'m


£'m


£'m

Derivative assets






Non-current






Interest rate contracts

-


-


0.1

Foreign exchange contracts

-


0.7


0.5


-


0.7


0.6

Current






Foreign exchange contracts

1.6


3.9


3.5







Derivative liabilities






Current






Interest rate contracts

(0.1)


(0.2)


(0.1)

Foreign exchange contracts

(1.2)


-


(0.6)


(1.3)


(0.2)


(0.7)

Non-current






Foreign exchange contracts

(1.2)


-


(0.2)

 

16      Share capital and share premium


31 July 2017


31 July 2016


31 January 2017







Share capital

(Number)


(Number)


(Number)

Allotted, called up and fully paid ordinary shares of one pence:






At the start of the period

340,844,864


340,696,235


340,696,235

Shares issued in relation to share based payments

612,262


148,629


148,629

At the end of the period

341,457,126


340,844,864


340,844,864








£'m


£'m


£'m

Share capital






At the start of the period

3.4


3.4


3.4

Shares issued in relation to share based payments

-


-


-

At the end of the period

3.4


3.4


3.4








£'m


£'m


£'m

Share premium






At the start of the period

201.9


201.6


201.6

Shares issued in relation to share based payment

0.3


0.3


0.3

At the end of the period

202.2


201.9


201.9

 

17      Notes to the cash flow statement

Reconciliation of operating profit to cash generated from operations:


31 July 2017


31 July 2016


31 January 2017


£'m


£'m


£'m







Profit before tax

23.2


27.0


82.8

Net finance expense

1.4


1.6


2.9

Operating profit

24.6


28.6


85.7

Adjusted for:






Depreciation and amortisation

5.1


5.2


10.9

Loss on disposal of fixed assets

0.1


0.1


1.1

Cash flow hedging foreign currency movements

(2.6)


(0.2)


(0.2)

Share based payments charge

-


0.3


0.2

Operating cash flows before changes in working capital

27.2


34.0


97.7

(Increase)/decrease in receivables

(8.1)


(11.9)


1.1

(Increase)/decrease in inventories

(8.5)


4.0


(1.0)

Increase in payables

17.0


11.8


1.6

Cash inflow from operating activities

27.6


37.9


99.4

 

18      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

-           Managing business initiatives and change alongside business as usual activities

-           Treasury and financial risk

-           Business continuity and response to major incidents

-           Compliance with legal requirements, standards and regulations

-           Maintenance and development 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 23 to 26 of the Group's Annual Report for the year ended 31 January 2017) remain unchanged.

 

 

 

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                           Kris Lee

Chief Executive Officer                Chief Financial Officer

26 September 2017 

 

 

 

Independent review report to Card Factory plc

 

 

Conclusion 

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 2017 which comprises the consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of financial position, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement and the related explanatory notes. 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 July 2017 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").   

Scope of review 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. 

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion. 

Directors' responsibilities 

The half-yearly financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA. 

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards as adopted by the EU.  The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted 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. 

The purpose of our review work and to whom we owe our responsibilities

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the DTR of the UK FCA.  Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached. 

 

 

 

 

Nicola Quayle (Senior Statutory Auditor)

for and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants

1 Sovereign Square

Sovereign Street

Leeds

LS1 4DW

26 September 2017


This information is provided by RNS
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Half-year Report - RNS