TIDMCARD
RNS Number : 3686A
Card Factory PLC
28 September 2020
29 September 2020
Card Factory plc
("Card Factory" or the "Company")
Interim results for the six months ended 31 July 2020
ENCOURAGING PERFORMANCE FOLLOWING STORES REOPENING
Card Factory, the UK's leading specialist retailer of greeting
cards and complementary products, announces its interim results for
the six months ended 31 July 2020 ('HY21').
Business highlights
-- Results in line with expectations, reflecting the impact of
store closures across the UK and Republic of Ireland from 23 March
2020 until the completion of the phased reopening on 24 July
2020
-- Successfully managed costs and working capital commitments as
well as reducing capital investment to GBP3.5m (HY20: GBP9.8m), to
conserve cash during the period; as a result net debt (excluding
lease liabilities) was broadly unchanged over the period and
GBP26.4m lower than HY20
-- Established funding headroom through access to the
Government's Covid Corporate Finance Fund and renegotiated banking
covenants; expecting to remain within revised banking covenants for
the foreseeable future
-- Strong online performance with +64.4% like-for-like revenue
growth due to the increased demand during the period of store
closures and the positive response following the website relaunch
on 2 July 2020
-- Partnership sales performance better than expected, with
GBP1.9m in sales as a result of strong Aldi footfall and The Reject
Shop's positive performance since reopening following national
lockdown
-- Search for new Chief Executive progressing to plan
-- Refreshed growth strategy launched in July with focused and
deliverable growth targets for the period to FY25
Financial summary
Performance Metrics Note HY21 HY20
Revenue GBP100.5m GBP195.6m
Stores (UK & Ireland) like-for-like
revenue (i) (ii) -4.4% 1.2%
Online & Multichannel like-for-like
revenue (i) 64.4% -2.0%
Group like-for-like revenue (i) (ii) 1.6% 1.0%
Underlying (loss) / profit (i) (GBP22.3m) GBP22.0m
before tax
(Loss)/profit before tax (GBP22.2m) GBP24.3m
Underlying basic (loss) /
earnings per share (i) (5.2p) 5.2p
Basic (loss) / earnings per
share (5.2p) 5.7p
Net debt (i) GBP143.9m GBP170.3m
Net debt and lease liabilities (i) GBP290.1m GBP317.3m
i. See explanatory note 1 "Alternative Performance Measures" for
further information and definitions
ii. HY21 adjusted by removing prior period store sales reported
in Covid-19 store closure weeks on a store-by-store basis
Christmas 2020 preparations
-- Well set up for Christmas 2020 season, subject to further
impacts of Covid-19 constraints on social mobility and footfall,
including refinements to:
o Ranging of everyday as well as Christmas cards to stores
o Complementary product availability
o Multi-channel fulfilment capacity to maximise in store and
online sales
o Store layouts, to minimise disruption and provide an effective
and positive Covid-secure shopping experience
Outlook
-- Better than expected trading in stores since reopening, with
transaction numbers continuing on an improving trend since the
period end and material average basket value gains which are
holding steady, with LFL down only 6.9% for the 4 weeks to 20
September 2020
-- Good early progress against new growth strategy
-- Short term retail sector recovery remains sensitive to
Covid-19 uncertainties, including the impact of further local
restrictions on footfall
-- The Board and the management team remain confident in the
long term stability of the card market
Paul Moody, Executive Chairman, commented:
" I am extremely proud of all colleagues working across every
part of our business for the significant contribution they have
made throughout this period of unprecedented disruption. In
particular, for their unrelenting focus in driving the very
successful phased store-reopening programme. The combination of our
unique customer insight, vertically integrated business model and
market leading position continues to ensure that we are well
positioned to meet the increased online demand, supply our
commercial partners and to present the optimum ranges in our
stores.
" We are pleased with both the trading performance as our stores
have reopened and the positive feedback from customers who are
visiting less frequently, but spending more. Recognising the
uncertainty of the impact of further Covid-19 measures and changes
in consumer behaviour in the short term, we are focused on a
flawless execution of Christmas and the implementation of our
refreshed strategy."
Preliminary results announcement
There will be an interim results webcast for analysts and
investors today, starting at 10.30am, and registration is available
via the link here .
Those analysts who wish to attend by telephone are requested to
contact Yasemin Balman of Tulchan Communications on the number
provided below or by emailing cardfactory@tulchangroup.com .
A copy of the webcast and accompanying presentation will be made
available on the day via the Card Factory investor relations
website: www.cardfactoryinvestors.com .
Enquiries
Card Factory plc via Tulchan Communications
(below)
Paul Moody, Executive Chairman
Kris Lee, Chief Financial Officer
Tulchan Communications +44 (0) 207 353 4200
James Macey White / Elizabeth Snow cardfactory@tulchangroup.com
/ Amber Ahluwalia
BUSINESS UPDATE
The first half of 2020 was undoubtedly a challenging period for
most companies navigating through the uncertainties created by the
Covid-19 pandemic. Our priority at all times has been the health
and wellbeing of our colleagues and customers.
The closure of 1,018 stores across the UK and Republic of
Ireland for a significant proportion of HY21 had a material impact
on Group sales for the period, leading to a 48.6% year on year
reduction in Group revenue. The uncertainty throughout this
financial period spanned important seasons such as Mother's Day,
Easter and Father's Day, albeit we saw strong performance in our
online business, which provided some offset to the reduction in
store sales. As of 29 September 2020, we have 1,017 stores open and
operating within national and local Covid-secure guidelines.
As stores have reopened, trading has been better than expected.
Compared to an anticipated reduction in the 14-week period from
reopening to 20 September 2020 of over 20%, like-for-like sales
were down 13.6%. Reduced high street footfall has weighed on
transaction volumes, down 30%, but customers are spending more in
store with a 24% increase in average basket value. Although
transaction volumes are improving - like-for-like sales in the four
weeks ended 20 September 2020 were down only 6.9% - trading remains
sensitive to local fluctuations in Covid-19 cases and consequent
changes to government guidelines.
During the period, we have taken a number of mitigating actions
to limit the impact of the significant and unprecedented reduction
in Group revenue on the business. Nevertheless, we did, and
continue to, invest in areas of the business, which are critical to
the delivery of the refreshed five-year growth strategy.
The effects of our actions, together with government support
measures, enabled us to maintain free cash flow over the six-month
period at a broadly breakeven level. We ended the period with net
debt at a similar level to last year-end, and GBP27m lower than the
position at HY20.
Five-year growth strategy
The refreshed growth strategy was communicated to investors and
colleagues towards the period end with focused, deliverable growth
targets for the period to FY25:
-- Revenue of c. GBP635m, of which c. 20% will be derived from a
broadly equal split between Online & Multichannel and Retail
Partnerships;
-- Underlying PBT of c. GBP105m;
-- c.5,600 Distribution Points (UK and International), of which
c.1,100 will be Group operated stores;
-- Group market share of c. 45% of UK card volume; and
-- Underlying leverage range of 1.2x to 2.6x (defined as Net Debt divided by Underlying PBT)
The UK card market remains large and broadly stable - valued at
approximately GBP1.3bn - but it is evolving. Shoppers are accessing
cards in newer, multi-channel ways, while at the same time the
increase in average card prices and growth of new and non-standard
occasions are offsetting modest year-on-year volume declines in
everyday and certain traditional season card giving.
The overall vision and aspiration: " to be recognised as the
world ' s best greeting card retailer: everywhere, and for all
occasions, the first choice for greetings card s" has never been
more relevant as these trends present opportunities for the
business to diversify and expand our customer offer to grow market
share. As part of our enhanced performance culture, we are linking
all colleagues' incentives to the new strategy; also bringing
specific attention to the establishment of 'positive impact'
thinking.
We have made good, early progress against the three distinct
strategic imperatives.
Winning card-led retail proposition - enabled by sector-leading
card shopper insights
Following the success of the new humour range launched at the
end of FY20, we have achieved further success with the relaunch of
the everyday female card range in during the period and the
relaunch of the everyday male range since period end. Both new
ranges have performed very well since launch, with LFLs markedly
ahead of the overall card offering.
In addition to introducing new cards at different price points,
we have continued to trial new prices for existing ranges in order
to test price elasticity. After a successful trial that showed no
net volume reduction, an increase from our 59p price point to 69p
was rolled out across the store estate, affecting c.30m cards per
annum at steady state. Price architecture will remain an essential
component of our revenue management plan with a number of further
increases across a range of price points already or shortly to be
in trial before implementing company-wide changes.
Range is a key focus as Covid-19 restrictions have impacted
demand for certain categories such as 'Thank You Teacher', Wedding
and Children's Party. The Company remains focused on using its
wealth of data and insight to ensure that it can maximise
transactions in-store and drive average basket value.
Availability in more places, however customers shop - new
channels, formats, countries and routes to market
The new store rollout programme in H1 was limited with openings
restricted to just seven stores. Eleven stores have been
permanently closed, with three not planned to open post lockdown.
New format trials are on hold pending analysis of long-term
footfall expectations in target location types. As at 29 September
2020, including two new store openings after the period end, the
total estate numbered 1,017 stores trading, including 14 stores in
the Republic of Ireland.
Our online channel benefitted from the change in customer
shopping behaviour during the lockdown period, contributing a
higher proportion of Group revenue (HY21: 13.2% vs. HY20: 4.1%),
and providing a small offset against the loss of store revenue. We
responded well to the change in customer behaviour and quickly
mobilised colleagues and resources to meet the sudden and
significant increase in new online customers. We experienced a
different customer mix and record breaking daily volumes,
particularly in the card, balloon and party categories as customers
continued to celebrate life moments at home.
We launched the new website on 2 July 2020, with the clear aim
of improving our online customer experience, widening our product
range and enabling greater multi-channel capabilities that will
differentiate Cardfactory.co.uk from "pure play" online-only
operators. Boosted by the new website, online sales have continued
to perform well since stores reopened. Like-for-like sales in the
four weeks ended 20 September 2020 were up 71.6% and 9.4% from
cardfactory.co.uk and gettingpersonal.co.uk, respectively.
The task of migrating the gettingpersonal.co.uk business onto
the cardfactory.co.uk platform and the integration of the two
operations is progressing well and expected to be completed by
early 2021. The site will be managed as a complementary brand -
presenting a second storefront on the new platform - and will
benefit from a shared cost base.
A mobile app is due to be launched before the end of 2020,
adding convenience to the digital proposition, and a click and
collect trial is underway.
We have continued to successfully supply and support all of our
retail partners throughout the period. Aldi, in common with all
essential food retailers, experienced strong footfall during
lockdown, which benefited our card offer in their stores. Our
partnership arrangements are now managed as business as usual,
including c.350 The Reject Shop stores across Australia. The
15-store Matalan trial has resumed following the lifting of
lockdown restrictions and is continuing well.
We remain focused on pursuing other new growth opportunities and
retail partnerships and are currently in discussion with a number
of potential partners in the UK and overseas.
Advantaged, robust and scalable central model - underpinned by
ingrained, defensible competitive advantages
The vertically integrated business model remains a key
competitive advantage. It enables sector-leading margins whilst
providing us with agile and flexible manufacturing capacity and
capability. Our supply chain has had a transformational six months
with more positive change to come over the next twelve.
Our distribution centre consolidation plan has been largely
completed, which will enable the exit from all third-party storage.
The lease for the new pick and pack consolidation facility ("Gate
5") was taken over in April. Gate 5 will improve daily volumes and
generate significant operational cost savings, particularly when we
launch new efficient picking methods in the second half.
Online fulfilment investments have been brought forward in order
to address the likely capacity challenge in the Christmas peak,
which will enable better service and more sales while maintaining
social distancing for our colleagues working in fulfilment.
Response to Covid-19
We welcomed the intervention of the government to support
businesses, which enabled the Company to preserve jobs, with over
95% of colleagues furloughed under the Coronavirus Job Retention
Scheme during the lockdown. The phased reopening of stores allowed
us to effectively test and adapt the new Covid-secure social
distancing and enhanced hygiene measures before rolling them out
across the entire store estate.
We took a number of prompt and effective steps to conserve cash
and manage costs to mitigate the impact from the compulsory store
closure. Stock intake and supplier terms were amended, the March
quarter rent payment was deferred and rent is currently been paid
monthly in advance rather than quarterly on the majority of our
estate.
In addition to augmenting its funding headroom through access to
the Government's Covid Corporate Finance Fund (CCFF), we
successfully renegotiated our banking covenants on the existing
GBP200m Revolving Credit Facility. As a result of these actions,
the Board is confident that it has access to sufficient liquidity
to navigate the business through the uncertain times ahead, but
will keep this under review. The Board expects to take a prudent
approach, ensuring that the Group has sufficient liquidity
available, including in the event of further downturns.
We will continue to review the various Covid support schemes
that the UK Government introduces as applicable to the
business.
Preparations for Christmas
The senior leadership team has prepared a thorough and detailed
execution plan for the Christmas season. We have completed
store-by-store analysis to ensure that product ranges are located
and displayed in a way that provides our customers with the safest
and most effective way for them to shop. We have undertaken a
number of simulated shopper trials in order to give us the
opportunity to provide customers with the best possible in-store
experience whilst giving confidence that our stores will be Covid
secure.
Buying activity has been managed carefully to meet predicted
demand but, should demand be stronger than expected, we will be
able to deliver additional card volume through Printcraft.
Current trading and outlook
The Board is pleased with the trading performance since stores
have reopened, and the business has had an encouraging start to the
second half of the year. Transaction numbers remain below the prior
year, but on an improving trend; material gains in average basket
value have been maintained in the second half to date.
We have worked extensively and thoroughly to make sure we are as
well prepared as possible for the forthcoming Christmas period.
Looking forward to the long term, the Board is confident that
the refreshed growth strategy will deliver sustainable revenue and
profit growth, underpinning the reinstatement of the dividend in
the medium term and generating value for our shareholders.
However, in the short term, as well publicised, recovery in the
retail sector remains sensitive to spikes in Covid-19 cases and
potential local or national restrictions, creating uncertainty
about customer footfall and shopping habits. It is also too early
to determine whether basket mix and average spend patterns,
in-store and online, will continue or settle back to pre-Covid-19
levels. Given the level of uncertainty, it is not possible to give
guidance as to the expected outturn for the year. A trading update
will be given on Thursday 14 January 2021.
CHIEF FINANCIAL OFFICER'S REVIEW
The HY21 accounting period refers to the six months ended 31
July 2020 and the comparative period "HY20" refers to the six
months ended 31 July 2019.
The Group has chosen to present underlying profit and earnings
measures. Transactions are categorised as non-underlying if the
resulting underlying profit and earnings information is believed to
assist comparison of year-on-year performance.
Revenue
Total Group revenue during the period decreased by 48.6% to
GBP100.5m (HY20: GBP195.6m), principally due to the impact of the
Covid-19 related mandatory closure of the UK and Ireland store
estate.
To reflect the change of business emphasis and the Group's new
strategy, divisional presentation comprises the following three
channels.
Revenue by channel HY21 HY20 Increase/
GBPm GBPm (Decrease)
----------------------------------- ------ ------ ------------
Stores (UK & Ireland) 85.3 187.0 (54.4%)
Online & Multichannel 13.3 8.1 64.2%
Partnerships (UK & International) 1.9 0.5 280.0%
----------------------------------- ------ ------ ------------
Group total 100.5 195.6 (48.6%)
----------------------------------- ------ ------ ------------
Like-for-like ("LFL") sales performance was as follows:
LFL by channel HY21 HY20
----------------------------------- ------ ------
Stores (UK & Ireland) * -4.4% 1.2%
Online & Multichannel 64.4% -2.0%
Partnerships (UK & International) n/a n/a
----------------------------------- ------ ------
Group total * 1.6% 1.0%
----------------------------------- ------ ------
* HY21 adjusted by removing prior period store sales reported in
Covid-19 store closure weeks on a store-by-store basis
Stores (UK & Ireland)
Like-for-like performance
Given the impacts of Covid-19 and the adjusted nature of the
above like-for-like measures, better insight is gained from the
consideration of store performance since reopening. In the period
from 16 June to 20 September 2020, performance was as follows:
Transaction decline (30.0%)
Average basket value increase 23.6%
--------
Overall stores LFL (13.6%)
--------
Cards (17.0%)
Other categories (9.6%)
--------
Overall stores LFL (13.6%)
--------
More recently, in the four weeks ended 20 September 2020, store
LFL was down only 6.9% (transaction numbers down 24% with average
basket value up 23%), with Cards down 11.7% and other categories
down 1.5%.
Store portfolio
The Group's new store roll out programme was limited to
pre-closure openings and a small number of openings that were
legally committed. In the six months under review, seven new stores
were opened (including one in the Republic of Ireland), eleven
stores were closed, and three remained unopened after lockdown.
This resulted in a net reduction of seven stores, bringing the
total estate to 1,015 stores at 31 July 2020, including 14 stores
in the Republic of Ireland.
Online & Multichannel revenue grew by 64.2% to GBP13.3m
(HY20: GBP8.1m) due in large part to an uplift in sales resulting
from the widespread closure of non-essential retail outlets across
the UK and in Ireland. Online like-for-like sales were up 120%
during the period of store closures, from 23 March to 14 June 2020,
and in the remaining period to the reporting date, up 60%. The new
cardfactory.co.uk website was successfully launched on 2 July 2020.
Like-for-like sales from reopening to 20 September 2020 were up
87.7% and 21.2% from cardfactory.co.uk and gettingpersonal.co.uk
respectively, with margin dilution in cardfactory.co.uk due to a
high proportion of non-personalised card sales and margin
improvement in gettingpersonal.co.uk due to better pay-per-click
management. In the latter four weeks of this period, like-for-like
sales were 71.6% and 9.4% respectively.
Partnerships (UK & International) performed well in HY21.
Revenue grew by 280.0% to GBP1.9m, benefitting from the
commencement of The Reject Shop partnership and Aldi's footfall
success during lockdown in particular. The Reject Shop partnership
is now being run on a business as usual basis and Card Factory
products are retailing successfully in c. 350 stores across
Australia. Stores were impacted by Covid-19 restrictions and
subsequent local lockdowns but strong performance outside of
lockdown meant HY21 sales were in line with expectations. Franchise
operations in Guernsey, Gibraltar and Jersey were subject to
lockdown closures but also performed well outside of that period.
Finally, the 15-store Matalan trial has continued successfully.
Distribution points
The average number of distribution points for Card Factory
products during HY21 was as follows:
Distribution points by channel HY21 HY20 Increase/
average average (Decrease)
----------------------------------- --------- --------- ------------
Stores (UK & Ireland) 553 988 -44.0%
Online & Multichannel 2 2 -
Partnerships (UK & International) 853 119 617.1%
----------------------------------- --------- --------- ------------
Group total 1,409 1,109 27.0%
----------------------------------- --------- --------- ------------
These average numbers highlight the effect of the Stores (UK
& Ireland) channel closures in the period, the roll out of
additional Aldi sites in the latter half of the previous year and
the full post-trial roll out to c.350 The Reject Shop sites, during
January and February 2020.
Underlying operating costs
Underlying cost of sales and operating expenses can be analysed
as follows:
Consolidated underlying HY21 HY20 (Increase) HY21 HY20 (Increase)
operating costs / Decrease / Decrease
GBPm GBPm % of revenue % of revenue
---------------------------- ------ ------ ------------ -------------- -------------- ------------
Revenue 100.5 195.6 (48.6%)
Cost of goods sold 36.1 63.5 43.1% 35.9% 32.5% (3.4 ppts)
Store wages (net
of CJRS) 23.7 39.9 40.6% 23.6% 20.4% (3.2 ppts)
Store property
costs 6.9 13.2 47.7% 6.9% 6.7% (0.2 ppts)
Other direct expenses 8.5 10.4 18.3% 8.5% 5.3% (3.2 ppts)
Underlying cost (10.0
of sales 75.2 127.0 40.8% 74.9% 64.9% ppts)
Operating expenses* 17.6 17.8 1.1% 17.5% 9.1% (8.4 ppts)
(18.3
EBITDA 7.7 50.8 (84.8%) 7.7% 26.0% ppts)
Depreciation, amortisation (12.9
& impairment 25.6 24.6 (4.1%) 25.5% 12.6% ppts)
Total operating (21.3
expenses 43.2 42.4 (1.9%) 43.0% 21.7% ppts)
---------------------------- ------ ------ ------------ -------------- -------------- ------------
* Excluding depreciation and amortisation
The overall ratio of cost of sales to revenue increased to 74.9%
on an underlying basis (HY20: 64.9%). This increase was
significantly driven by Covid-19 related mandatory store closures,
the resulting reduction in revenue and the semi-variable or fixed
nature of certain elements of the store and operating cost base.
Further cost category information is provided below.
-- Underlying cost of goods sold ("COGS"): principally comprises
cost of raw materials, production costs, finished goods purchased
from third party suppliers, import duty, freight costs, carriage
costs and warehouse wages. The overall adverse movement was due to
a change in the margin mix from the growing proportion of Group
sales derived from Online and Partnerships; additional supply chain
incurred from implementation of Covid-secure arrangements in the
supply chain; and additional stock provisioning arising from store
estate closure during spring seasons.
-- Store wages: includes wages and salaries (including bonuses)
for store-based staff, together with national insurance
contributions, apprenticeship levy, pension contributions, and
overtime, holiday and sick pay. Card Factory was able to protect
retail jobs thanks to the Government's Coronavirus Job Retention
Scheme ("CJRS"), which provided GBP15.6m toward the cost of store
colleague wages in the period.
-- Store property costs: Under IFRS 16 Leases, store rents are
not included within cost of sales, leaving only service charges and
business rates. Card Factory benefitted from the UK government's
decision to provide business rates relief to retailers for the
2020-21 tax year; saving GBP6.8m in HY21, and the total saving for
the financial year is expected to amount to c. GBP17.1m. We
continue to target improvements in our overall rent roll as we
reach break points or expiries on existing leases, the effect of
which will be seen in the depreciation and finance cost lines of
the Income Statement under IFRS 16 Leases. Average term to next
lease events is now reduced to 2.3 years.
-- Other direct expenses: includes store opening costs, store
utility costs, waste disposal, store maintenance, point of sale
costs, bank charges and pay per click expenditure. This cost
category is largely variable in respect of existing stores and
normally increases with new store openings. The ratio of other
direct expenses to revenue increased by 3.2ppts due to elements of
fixed costs in electricity, insurance and water rates, plus the
additional cost of ensuring stores were able to operate safely when
they reopened. Since reopening, we have seen a c. 20ppt increase in
card payment mix, resulting in higher card processing fees. Online
marketing costs in Getting Personal decreased due to a more focused
direct marketing strategy. Retail partnership costs grew slightly,
reflecting increased activity year-on-year.
-- Underlying operating expenses: includes items such as support
centre remuneration, the cost of store estate Regional and Area
Managers, design studio costs, support centre and distribution
centre property costs and business insurance together with other
central overheads and administration costs. The CJRS enabled the
Group to furlough c. 55% of support centre colleagues during the
lockdown period, saving GBP1.1m in wage costs in the half. Various
other year-on-year savings, indirectly related to furlough and
homeworking, were achieved but the Group invested further in IT in
support of new strategic initiatives. It also began incurring rent
and rates for Gate 5, which amounted to c. GBP0.3m in the half. In
addition, infrastructure costs, necessary to support growth in the
Retail Partnerships and Online channels, were incurred, including
some temporary dual running hosting costs relating to the new web
platform. Total operating expenses (excluding depreciation,
amortisation & impairment) fell by 1.1% (HY20: increased 9.1%)
to GBP17.6m, representing a percentage-of-revenue increase of
8.4ppts.
Depreciation, amortisation & impairment, which includes
depreciation and impairment of right-of-use property lease assets
under IFRS 16 Leases, grew by 4.1% to GBP25.6m (HY20: GBP24.6m),
attributable to increased store lease depreciation.
Underlying net financing expense
The Group's net financing expense, excluding non-underlying
items, increased to GBP4.4m (HY20: GBP4.2m) due to an increase in
interest on bank borrowings, partly offset by reduced IFRS 16 lease
interest charges. Increased interest on bank borrowings reflects
the decision to draw down in full the RCF funding line at the start
of the Covid-19 pandemic and an increase in the effective interest
rate on loans of 0.44 ppts versus HY20. This rate increase
reflected the impact of the revised facility agreement entered into
in response to Covid-19. Lower IFRS 16 lease interest charges
reflect the on-going impact of older leases, recognised at higher
discount rates.
Consolidated underlying HY21 HY20 (Increase)
finance expense GBPm GBPm /Decrease
----------------------------------- ------ ------ -----------
Finance expense
Interest on loans 2.6 1.9 (36.8%)
Loan issue cost amortisation 0.1 0.1 -
Loss on interest rate derivatives - 0.1 -
IFRS 16 Leases interest 1.7 2.1 19.0%
----------------------------------- ------ ------ -----------
Total finance expense 4.4 4.2 (4.8%)
Net finance expense 4.4 4.2 (4.8%)
----------------------------------- ------ ------ -----------
Underlying (loss) / profit before tax
Underlying loss before tax for the period amounted to GBP22.3m
(HY20: profit GBP22.0m) can be analysed as follows:
Underlying PBT by channel HY21 HY20 Increase/
GBPm GBPm (Decrease)
----------------------------------- ------- ------ ------------
Stores (UK & Ireland) (23.0) 23.0 (200.0%)
Online & Multichannel 0.5 (1.1) 145.5%
Partnerships (UK & International) 0.2 0.1 100.0%
----------------------------------- ------- ------ ------------
Group total (22.3) 22.0 (201.4%)
----------------------------------- ------- ------ ------------
Underlying PBT margin by HY21 HY20 Increase/
channel (Decrease)
----------------------------------- -------- -------- ------------
Stores (UK & Ireland) (27.0%) 12.3% (39.3 ppts)
Online & Multichannel 3.8% (13.6%) 17.4 ppts
Partnerships (UK & International) 10.5% 20.0% (9.5 ppts)
----------------------------------- -------- -------- ------------
Group total (22.2%) 11.2% (33.4 ppts)
----------------------------------- -------- -------- ------------
Non-underlying items and reconciliation to reported PBT
The following table outlines the components of the
non-underlying items recognised in the period.
HY21 HY20 Increase
GBPm GBPm / (Decrease)
----------------------------------- ------- ------ --------------
Non-underlying items:
Cost of sales
Gain on foreign currency
derivative financial instruments
not designated as a hedge 0.1 2.3
----------------------------------- ------- ------ --------------
Total non-underlying items 0.1 2.3
Underlying (loss) / profit
before tax (22.3) 22.0 (201.4%)
----------------------------------- ------- ------ --------------
Reported (loss) / profit
before tax inc. non-underlying (22.2) 24.3 (191.4%)
----------------------------------- ------- ------ --------------
The GBP/USD spot exchange rate was broadly consistent at 31
January 2020 and 31 July 2020, resulting in a minimal
non-underlying fair value adjustment on derivative financial
instruments that were not hedge accounted. By contrast, there was a
significant shift in the exchange rate during HY20, giving rise to
a relatively large non-underlying fair value gain in that
period.
Tax
The effective tax rate is broadly consistent with the prior
period .
(Loss ) / earnings per share
Underlying basic and diluted loss per share for the period was
5.2p (HY20: earnings 5.2p). After taking into account the
non-underlying items described above, reported basic and diluted
loss per share for the period was 5.2p (HY20: earnings 5.7p).
Consolidated (loss) / earnings HY21 HY20 (Increase)
per share /Decrease
-------------------------------- ------- ----- -----------
Underlying basic and diluted (5.2p) 5.2p (200.0%)
-------------------------------- ------- ----- -----------
Basic and diluted EPS (5.2p) 5.7p (190.8%)
-------------------------------- ------- ----- -----------
Capital expenditure
Total capital expenditure was reduced to GBP3.5m in the half
(HY20: GBP9.8m) as the business focussed on essential long-term
strategic project spend and other committed spend at the point of
lock down. Strategic investments totalled GBP1.6m, including
completion of the new cardfactory.co.uk web platform, warehouse
consolidation and voice picking technology, and in-store efficiency
projects. In addition, new store rollouts and three store
relocations amounted to GBP0.6m and a further GBP0.6m was spent on
Covid-19 related works.
Foreign exchange
With approximately half of its annual cost of goods sold expense
relating to products paid for in US dollars, the Group takes a
prudent but flexible approach to hedging the risk of exchange rate
fluctuations. The Board adopts a policy of combining vanilla
forwards and structured options to hedge this exposure. The Group
has used structured options and similar instruments to good effect
for a number of years and the Board continues to view such
instruments as commercially attractive as part of a balanced
portfolio approach to exchange rate risk management, even if cash
flow hedge accounting may not be permitted in some instances.
During the period, the Group's hedge position was reviewed in
light of reduced purchasing requirements owing to Covid-19 related
store closures, footfall reduction and cash conservation measures .
The resulting re-profiling of existing cover generated a c. GBP1.0m
foreign exchange gain on excess hedging in the half year. At the
reporting date, the Group had cover in place for forecast
purchasing requirements through to the end of FY22.
The anticipated effective full year P&L rate for FY21 on an
underlying basis is c. $1.38 and c. $1.34 for FY22, although this
remains subject to any significant shift in the value of sterling,
which could impact the structured trades that form part of the
hedging portfolio, and possible impacts of Covid-19 on hedged cash
flows. Structured trades represent approximately one third of
hedges in place.
Cash generation
The Group reported an operating cash flow of GBP25.2m in HY21,
GBP8.9m lower than the previous half year (HY20: GBP34.1m). The
negative impact of Covid-19 related sales reductions and margin
dilution was offset in part by working capital management and the
use of Government-backed schemes. In addition, cash flows from
investing activities were GBP6.4m lower, lease liability payments
were GBP8.1m lower, due to rent deferrals, and no cash was
distributed to shareholders (HY20: GBP21.9m). The resulting fall in
net debt and lease liabilities was 8.6% (from GBP317.3m to
GBP290.1m), which was better than expected.
The Group's free cash flow - calculated as net cash flow before
movements on borrowings and dividend payments - increased by
GBP8.2m to GBP1.1m (HY20: out flow 7.1m).
Net Debt & Leverage
As at 31 July 2020, net debt (including debt issue costs of
GBP1.0m) amounted to GBP290.1m, analysed as follows:
HY21 HY20
-------------------------------------
Net Debt Net Debt
-------------------------------------
GBPm GBPm
------------------------------------- --------- ---------
Borrowings
Current liabilities 1.5 0.1
Non-current liabilities 173.6 173.8
Total borrowings 175.1 173.9
Lease liabilities 146.2 147 .0
Capitalised debt costs 1.4 1.2
Gross debt 322.7 322.1
Less cash -32.6 -4.8
Net debt and lease liabilities 290.1 317.3
Remove lease liabilities -146.2 -147 .0
Net debt 143.9 170.3
Leverage (net debt / LTM Underlying
PBT) 6.3x 2.3x
As previously announced, the Group entered into a revised
agreement with its banking partners during the period. This enables
it to utilise not only the full Revolving Credit Facility ("RCF")
of GBP200m but, also secured funding from the Bank of England Covid
Corporate Financing Facility ("CCFF"). As part of this agreement,
the Group's previous covenant requirements have lapsed and have
been replaced by three new covenant tests relating to total net
debt; cash burn; and last twelve months EBITDA. These tests are
applied monthly until June 2021, after which it is envisaged that
the business will have a phased return back to its pre-Covid
six-monthly covenant tests of EBITDA to net debt and interest
cover.
Until the business returns to those pre-Covid covenant tests,
while adjusted leverage is less than 2.0x (i.e. pre-IFRS 16) and it
has no outstanding commercial papers issued under the CCFF, there
will be a prohibition of any payment to shareholders by way of
dividend or share buy-back, with the same tests applying to
acquisitions. Furthermore, the Group must use best efforts to raise
equity if leverage is above 3.0x before the later of January 2021
or 3 months before the redemption of the final commercial paper
issuance. The Board expects to take a prudent approach, ensuring
that the Group has sufficient liquidity available, including in the
event of further downturns.
Dividends and capital structure
Dividends
Historically, the Board has adopted a progressive ordinary
dividend policy for the Company, reflecting its strong earnings
potential and cash flow characteristics, while allowing it to
retain sufficient capital to fund ongoing operating requirements
and to invest in the Company's long-term growth and profitability.
Following the outbreak of the Covid-19 pandemic, the Board decided
not to declare a final ordinary dividend for the year ended 31
January 2020. The Company's dividend policy remains unchanged over
the medium term, and it will be regularly reviewed for appropriate
action in the shorter term; however, we do not expect to pay any
dividends in relation to FY21.
Total dividends for HY20 and HY21 can be summarised as
follows:
HY21 HY20
---------------------------- ------ ------
Final dividend paid - FY20 - n/a
Final dividend paid - FY19 n/a 6.4p
---------------------------- ------ ------
Total ordinary dividend
paid - 6.4p
---------------------------- ------ ------
Special dividend declared - 5.0p
Interim dividend declared - 2.9p
---------------------------- ------ ------
Total dividend - 14.3p
---------------------------- ------ ------
Capital structure
The Board is focused on maintaining a capital structure that is
conservative yet efficient in terms of providing long-term returns
to shareholders. Over the medium term, the Board expects to
maintain leverage broadly in the range of 1.0 to 2.0 times net debt
to pre-IFRS 16 Underlying EBITDA. However, due to the impact of
Covid-19, the Board expects that leverage will peak above this
range in FY21, which will impact the distribution of cash to
shareholders, as reflected above. Looking further forward, the new
strategy targets leverage in the range of 1.2 to 2.6 net debt to
Underlying PBT. It should be noted that net debt at the half and
full year period ends is normally lower than intra-year peaks,
reflecting usual trading patterns and working capital
movements.
Going Concern and the impact of Covid-19
Availability of funding
Due to the impact of Covid-19, the Group entered into an
agreement with its banks to enable it to utilise in full its RCF of
GBP200m and to utilise the arranged funding from the CCFF, to
ensure the business has sufficient liquidity in this uncertain
period, if required. This was predicated on the Group agreeing to
three new covenant tests; total net debt, cash burn and last twelve
months EBITDA until June 2021, after which it is envisaged that the
business will have a phased return back to its previous covenant
tests (EBITDA leverage and interest cover). At the date of this
report, the Group has not drawn any funds under the CCFF. The Board
is confident that it has access to sufficient liquidity to navigate
the business through the uncertain times ahead, and will keep this
under review. The Board expects to take a prudent approach,
ensuring that the Group has sufficient liquidity available,
including in the event of further downturns.
Covid-19 and cash flow forecasts
The Board has prepared cash flow forecasts for a period of 16
months from the date of approval of this interim report. This base
case scenario includes the benefits of actions already taken by
management to mitigate the trading downsides brought by Covid-19,
e.g. cancellation of dividends, significant reduction in capital
investment, cancellation and rescheduling of stock orders,
renegotiating property rents, and participating in available
government support measures amongst other actions within their
control. At the date of this report, the Group had re-commenced
trading in all but three of its pre- closure store portfolio. The
base case forecast reflects the impact of reduced footfall
expectations, partly offset by improved average basket values.
Actual revenue trends since re-opening continue to track closely to
our initial expectations. The forecast anticipates a slow but
steady continued recovery, albeit with peak Christmas trade subject
to an eleme nt of expected Covid capacity constraint . Under this
base case scenario, the Group is expected to continue to have
significant headroom relative to the funding available to it and to
comply with its banking covenants.
The Board has also considered various other severe but plausible
downside scenarios, including the possibility that the recovery of
trade is much more sluggish than assumed in the base case. Taking
into account further mitigating actions reasonably available to
management, the Board has determined that the Group could continue
to comply with all its banking covenants if store revenue, on
average, was up to 16% lower than FY20 levels across all of the
next 16 months. The Board considers such a persistent store revenue
shortfall to be very unlikely except in the event of significant
further widespread restrictions to trade from Covid-19. In such a
circumstance, the Group would be at risk of breaching its covenants
and would seek to agree a waiver or variation of terms with its
banks, who have been consistently supportive of the business but
the Board cannot predict with certainty how the banks would
respond.
The above situation gives rise to a material uncertainty, as
defined in auditing and accounting standards, related to events or
conditions that may cast significant doubt on the entity's ability
to continue as a going concern. In such circumstances, it may
therefore be unable to realise its assets and discharge its
liabilities in the normal course of business. Reflecting the
Board's confidence, the Group continues to adopt the going concern
basis in preparing its financial statements. The financial
statements do not include any adjustments that would result from
the basis of preparation being inappropriate.
Kris Lee
Chief Financial Officer
29 September 2020
Explanatory notes
1. Alternative Performance Measures ("APMs") and other explanatory information
"Stores (UK & Ireland) like-for-like revenue" comprises:
-- Like-for-like revenue performance of group's UK and Ireland
store estate for stores that have been opened for a full year; this
is calculated on a calendar week basis
-- HY21 like-for-like revenue has been adjusted by removing
prior period store sales reported in Covid-19 store closure weeks
on a store-by-store basis
"Online & Multichannel like-for-like revenue" comprises y
ear-on-year growth in revenue from the group's online channel and
is calculated on a calendar week basis
"Group like-for-like revenue" comprises both Stores (UK &
Ireland) like-for-like revenue and Online & Multichannel
like-for-like revenue
"Point of distribution" equates to the number of web brands and
individual retail outlets, owned or partnered, in which Card
Factory products are available
"EBITDA" is defined as earnings before interest, tax,
depreciation and amortisation and represents profit for the period
before net finance expense, taxation, depreciation, amortisation
and impairments.
"Free cash flow" is equal to the net increase in cash and cash
equivalents but excluding proceeds from bank borrowing and dividend
payments, as detailed in Condensed Consolidated Cash Flow
Statement
"Net debt" comprises total borrowings, overdrafts and the value
of capitalised debt issues costs less cash
"Net debt and lease liabilities" comprises net debt and lease
liabilities reported under IFRS 16 Leases, as detailed in the
Condensed Consolidated Statement of Financial Position
"Underlying" The Group has chosen to present underlying profit
and earnings measures. Transactions are categorised as
non-underlying if the resulting underlying profit and earnings
information is believed to assist comparison of year-on-year
performance.
Percentage movements have been calculated before figures were
rounded to GBP0.1m.
2. Cautionary Statement
This announcement contains certain forward-looking statements
with respect to the financial condition, results of operations, and
businesses of Card Factory plc. These statements and forecasts
involve risk, uncertainty and assumptions because they relate to
events and depend upon circumstances that will occur in the future.
There are a number of factors that could cause actual results or
developments to differ materially from those expressed or implied
by these forward-looking statements. These forward-looking
statements are made only as at the date of this announcement.
Nothing in this announcement should be construed as a profit
forecast. Except as required by law, Card Factory plc has no
obligation to update the forward-looking statements or to correct
any inaccuracies therein.
Condensed consolidated income statement
For the six months ended 31 July 2020
Six months ended Six months ended Year ended 31 January
31 July 2020 31 July 2019 2020
----------------- ----------------- ----------------------
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 100.5 - 100.5 195.6 - 195.6 451.5 - 451.5
Cost of sales (75.2) 0.1 (75.1) (127.0) 2.3 (124.7) (289.8) 0.5 (289.3)
---------------- ----------- --------------- ------- ----------- --------------- -------- ----------- --------------- --------
Gross profit 25.3 0.1 25.4 68.6 2.3 70.9 161.7 0.5 162.2
Operating
expenses (43.2) - (43.2) (42.4) - (42.4) (86.1) (2.5) (88.6)
---------------- ----------- --------------- ------- ----------- --------------- -------- ----------- --------------- --------
Operating
(loss)/profit (17.9) 0.1 (17.8) 26.2 2.3 28.5 75.6 (2.0) 73.6
Finance income 7 - - - - - - - - -
Finance expense 7 (4.4) - (4.4) (4.2) - (4.2) (8.4) - (8.4)
---------------- ----------- --------------- ------- ----------- --------------- -------- ----------- --------------- --------
Net finance
expense (4.4) - (4.4) (4.2) - (4.2) (8.4) - (8.4)
(Loss)/profit
before tax (22.3) 0.1 (22.2) 22.0 2.3 24.3 67.2 (2.0) 65.2
Taxation 8 4.5 - 4.5 (4.4) (0.4) (4.8) (13.5) (0.1) (13.6)
(Loss)/profit
for the period (17.8) 0.1 (17.7) 17.6 1.9 19.5 53.7 (2.1) 51.6
---------------- ----------- --------------- ------- ----------- --------------- -------- ----------- --------------- --------
Earnings per pence pence pence pence pence pence
share
(5.2 (5.2
- Basic 9 ) ) 5.2 5.7 15.7 15.1
- Diluted 9 ( 5.2) ( 5.2) 5.2 5.7 15.7 15.1
---------------- ----------- --------------- ------- ----------- --------------- -------- ----------- --------------- --------
All activities relate to continuing operations.
Condensed consolidated statement of comprehensive income
For the six months ended 31 July 2020
Six months Six months Year ended
ended 31 ended 31 31 January
July 2020 July 2019 2020
GBP'm GBP 'm GBP'm
(Loss)/profit for the period (17.7) 19.5 51.6
---------------------------------------- ----------- ----------- ------------
Items that are or may be recycled
subsequently into profit or loss:
Cash flow hedges - changes in fair
value (0.6) 4.5 0.6
Cost of hedging reserve - changes
in fair value 0.2 0.9 1.7
Cost of hedging reserve - reclassified
to profit or loss - (0.1) (0.1)
Tax relating to components of other
comprehensive income 0.1 (1.0) (0.4)
---------------------------------------- ----------- ----------- ------------
Other comprehensive (expense)/income
for the period, net of income tax (0.3) 4.3 1.8
Total comprehensive (expense)/income
for the period attributable to equity
shareholders of the parent (18.0) 23.8 53.4
---------------------------------------- ----------- ----------- ------------
Condensed consolidated statement of financial position
As at 31 July 2020
Note 31 July 2020 31 July 2019 31 January
2020
GBP 'm GBP'm GBP'm
Non-current assets
Intangible assets 11 319.5 321.2 319.8
Property, plant and equipment 12 39.1 43.6 41.6
Right of use assets 13 124.9 132.8 132.4
Deferred tax assets 2.6 1.7 2.7
Derivative financial instruments 15 0.5 2.6 0.5
---------------------------------- ----- ------------- ------------- -----------
486.6 501.9 497.0
Current assets
Inventories 57.6 70.2 54.4
Trade and other receivables 7.2 19.4 10.8
Tax receivable 4.4 - -
Derivative financial instruments 15 0.8 6.7 1.1
Cash and cash equivalents 32.6 4.8 5.5
---------------------------------- ----- ------------- ------------- -----------
102.6 101.1 71.8
Total assets 589.2 603.0 568.8
Current liabilities
Borrowings (1.5) (0.1) (3.6)
Lease liabilities 13 (41.1) (39.3) (40.7)
Trade and other payables (61.5) (54.2) (45.0)
Tax payable - (5.0) (6.5)
Derivative financial instruments 15 (1.2) (0.4) (1.0)
---------------------------------- ----- ------------- ------------- -----------
(105.3) (99.0) (96.8)
Non-current liabilities
Borrowings (173.6) (173.8) (144.0)
Lease liabilities 13 (105.1) (107.7) (105.2)
Derivative financial instruments 15 (1.4) (0.6) (1.3)
---------------------------------- ----- ------------- ------------- -----------
(280.1) (282.1) (250.5)
Total liabilities (385.4) (381.1) (347.3)
Net assets 203.8 221.9 221.5
---------------------------------- ----- ------------- ------------- -----------
Equity
Share capital 3.4 3.4 3.4
Share premium 202.2 202.2 202.2
Hedging reserve (2.1) 4.5 (1.6)
Cost of hedging reserve 1.1 0.8 1.1
Reverse acquisition reserve (0.5) (0.5) (0.5)
Merger reserve 2.7 2.7 2.7
Retained earnings (3.0) 8.8 14.2
---------------------------------- ----- ------------- ------------- -----------
Equity attributable to equity
holders of the parent 203.8 221.9 221.5
---------------------------------- ----- ------------- ------------- -----------
Condensed consolidated statement of changes in equity
For the six months ended 31 July 2020
Share Share Hedging Cost Reverse Merger Retained Total
capital premium reserve of acquisition reserve earnings equity
hedging reserve
reserve
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Six months ended 31
July 2020
------------------------ --------- --------- --------- --------- ------------- --------- ---------- --------
At 31 January 2020 3.4 202.2 (1.6) 1.1 (0.5) 2.7 14.2 221.5
Total comprehensive
expense
for the period
Profit or loss - - - - - - (17.7) (17.7)
Other comprehensive
expense - - (0.5) 0.2 - - - (0.3)
------------------------ --------- --------- --------- --------- ------------- --------- ---------- --------
- - (0.5) 0.2 - - (17.7) (18.0)
Hedging gains and
losses and
costs of hedging
transferred
to the cost of
inventory - - - (0.3) - - - (0.3)
Deferred tax on
transfers to
inventory - - - 0.1 - - - 0.1
Transactions with
owners, recorded
directly in equity
Share-based payment
charges - - - - - - 0.5 0.5
Total contributions by
and
distributions to
owners - - - - - - 0.5 0.5
(2.1 (3.0
At 31 July 2020 3.4 202.2 ) 1.1 (0.5) 2.7 ) 203.8
------------------------ --------- --------- --------- --------- ------------- --------- ---------- --------
Six months ended 31
July 2019
------------------------ --------- --------- --------- --------- ------------- --------- ---------- --------
At 31 January 2019 3.4 202.2 0.9 0.4 (0.5) 2.7 11.0 220.1
Total comprehensive
income
for the period
Profit or loss - - - - - - 19.5 19.5
Other comprehensive
income - - 3.6 0.7 - - - 4.3
------------------------ --------- --------- --------- --------- ------------- --------- ---------- --------
- - 3.6 0.7 - - 19.5 23.8
Hedging gains and
losses and
costs of hedging
transferred
to the cost of
inventory - - - (0.3) - - - (0.3)
Transactions with
owners, recorded
directly in equity
Share-based payment
charges - - - - - - 0.1 0.1
Dividends (note 10) - - - - - - (21.8) (21.8)
------------------------ --------- --------- --------- --------- ------------- --------- ---------- --------
Total contributions by
and
distributions to
owners - - - - - - (21.7) (21.7)
At 31 July 2019 3.4 202.2 4.5 0.8 (0.5) 2.7 8.8 221.9
------------------------ --------- --------- --------- --------- ------------- --------- ---------- --------
Year ended 31 January
2020
------------------------ --------- --------- --------- --------- ------------- --------- ---------- --------
At 31 January 2019 3.4 202.2 0.9 0.4 (0.5) 2.7 11.0 220.1
Total comprehensive
income
for the period
Profit or loss - - - - - - 51.6 51.6
Other comprehensive
income - - 0.5 1.3 - - - 1.8
------------------------ --------- --------- --------- --------- ------------- --------- ---------- --------
- - 0.5 1.3 - - 51.6 53.4
Hedging gains and
losses and
costs of hedging
transferred
to the cost of
inventory - - (3.6) (0.8) - - - (4.4)
Deferred tax on
transfers to
inventory - - 0.6 0.2 - - - 0.8
Transactions with
owners, recorded
directly in equity
Share-based payment
charges - - - - - - 0.5 0.5
Dividends (note 10) - - - - - - (48.9) (48.9)
------------------------ --------- --------- --------- --------- ------------- --------- ---------- --------
Total contributions by
and
distributions to
owners - - - - - - (48.4) (48.4)
At 31 January 2020 3.4 202.2 (1.6) 1.1 (0.5) 2.7 14.2 221.5
------------------------ --------- --------- --------- --------- ------------- --------- ---------- --------
Condensed consolidated cash flow statement
For the six months ended 31 July 2020
Note Six months Six months Year ended
ended 31 ended 31 31 January
July 2020 July 2019 2020
GBP'm GBP'm GBP'm
Cash inflow from operating activities 16 25.2 34.1 124.8
Corporation tax paid (6.2) (7.7) (14.6)
--------------------------------------- ----- ----------- ----------- ------------
Net cash inflow from operating
activities 19.0 26.4 110.2
Cash flows from investing activities
Purchase of property, plant
and equipment 12 (2.6) (8.1) (11.0)
Purchase of intangible assets 11 (0.9) (1.7) (3.5)
Proceeds (less costs) from disposal
of fixed assets 0.5 0.4 0.4
Net cash outflow from investing
activities (3.0) (9.4) (14.1)
Cash flows from financing activities
Proceeds from bank borrowings 29.5 30.0 -
Interest paid (2.9) (4.0) (8.0)
Payment of lease liabilities (12.0) (20.1) (41.0)
Dividends paid 10 - (21.9) (48.9)
--------------------------------------- ----- ----------- ----------- ------------
Net cash outflow from financing
activities 14.6 (16.0) (97.9)
Net increase in cash and cash
equivalents 30.6 1.0 (1.8)
Cash and cash equivalents at
the beginning of the period 2.0 3.8 3.8
Closing cash and cash equivalents 32.6 4.8 2.0
--------------------------------------- ----- ----------- ----------- ------------
Notes to the interim financial statement
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 2020 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 29 September 2020.
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 2020 ('Annual Report') which have been prepared in
accordance with IFRSs as adopted by the European Union ('EU IFRS').
The comparative figures for the financial year ended 31 January
2020 are an extract from the Annual Report and are not the Group's
statutory accounts for that financial year within the meaning of
section 435 of the Companies Act 2006. Those accounts have been
reported on by the Company's auditor and delivered to the registrar
of companies. The report was unqualified and did not contain any
statement under section 498 of the Companies Act 2006. The report
included a material uncertainty relating to going concern in the
event of a severe but plausible downside scenario arising from
further restrictions to trade as a result of the Covid-19 pandemic.
The statutory accounts for the year ended 31 January 2020 were
approved by the Board of Directors on 1 June 2020 and delivered to
the Registrar of Companies. The auditor's review report for the six
month period ended 31 July 2020 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 2020.
Going concern
Due to the impact of COVID-19, the Group entered into an
agreement with its banks to enable it to utilise the full Revolving
Credit Facility ("RCF") of GBP200m and utilise the arranged funding
from the Bank of England Covid Corporate Financing Facility
("CCFF") to ensure the business has sufficient liquidity in this
uncertain period, if required. This was predicated on the Group
agreeing to three new covenant tests; total net debt, cash burn and
last twelve months EBITDA until June 2021, after which it is
envisaged that the business will have a phased return back to its
previous covenant tests (EBITDA leverage and interest cover). At
the date of this report the Group has not drawn any funds under the
CCFF.
The Board has prepared cash flow forecasts for a period of 16
months from the date of approval of this interim report. This base
case scenario includes the benefits of actions already taken by
management to mitigate the trading downsides brought by Covid-19,
e.g. cancellation of dividends, significant reduction in capital
investment, cancellation and rescheduling of stock orders,
renegotiating property rents, and available government support
measures amongst other actions within their control. At the date of
this report the Group had re-commenced trading in almost all of its
pre-Covid store portfolio. The base case forecast reflects the
impact of reduced footfall expectations, partly offset by improved
average basket values. Actual revenue trends since re-opening
continue to track closely to our initial expectations. The forecast
anticipates a slow but steady continued recovery, albeit with peak
Christmas trade subject to an element of Covid capacity
constraints. Under this base case scenario, the Group is expected
to continue to have very significant headroom relative to the
funding available to it and to comply with its banking
covenants.
The Board has also considered various other severe but plausible
downside scenarios, including the possibility that the recovery of
trade is much more sluggish than assumed in the base case. Taking
into account further mitigating actions reasonably available to
management, the Board has determined that the Group could continue
to comply with all its banking covenants if store revenue, on
average, was up to 16% lower than FY20 levels across all of the
next 16 months. The Board considers such a persistent store revenue
shortfall to be very unlikely except in the event of significant
further widespread restrictions to trade from COVID-19. In such a
circumstance the Group would be at risk of breaching its covenants
and would seek to agree a waiver or variation of terms with the
banks, who have been consistently supportive of the business but,
the Board cannot predict with certainty how the banks would
respond.
The above situation gives rise to a material uncertainty, as
defined in auditing and accounting standards, related to events or
conditions that may cast significant doubt on the entity's ability
to continue as a going concern. In such circumstances, it may
therefore be unable to realise its assets and discharge its
liabilities in the normal course of business. Reflecting the
Board's confidence, the Group continues to adopt the going concern
basis in preparing its financial statements. The financial
statements do not include any adjustments that would result from
the basis of preparation being inappropriate.
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 2020.
Amended standards and interpretations effective in the year do
not have a material effect on the Group's financial statements.
4 Segmental reporting and revenue
The Group has two operating segments trading under the names
Card Factory and Getting Personal. Card Factory retails greeting
cards, dressing and gifts principally through an extensive UK store
network. 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.
Group revenue is almost entirely derived from retail customers.
Average transaction value is low and products are transferred at
the point of sale. Group revenue is presented as a single category
subject to substantially the same economic factors that impact the
nature, amount, timing and uncertainty of revenue and cash flows.
Revenue from non-retail customers and revenue from outside the UK
currently represent less than 1% of annual Group Revenues.
5 Underlying EBITDA
Underlying earnings before interest, tax, depreciation and
amortisation ("Underlying EBITDA") represents underlying profit for
the period before net finance expense, taxation, depreciation,
amortisation and impairment of assets.
Six months Six months Year ended
ended 31 ended 31 31 January
July 2020 July 2019 2020
GBP'm GBP'm GBP'm
Operating (loss)/profit (17.8) 28.5 73.6
Non-underlying items 0.1 (2.3) 2.0
------------------------------------------- ----------- ----------- ----------------
Underlying operating profit (17.9) 26.2 75.6
Depreciation, amortisation and impairment 25.6 24.6 52.8
Non-underlying impairment - - (2.5)
------------------------------------------- ----------- ----------- ----------------
Underlying EBITDA 7.7 50.8 125.9
------------------------------------------- ----------- ----------- ----------------
6 Non-underlying items
Six months Six months Year ended
ended 31 ended 31 31 January
July 2020 July 2019 2020
GBP'm GBP'm GBP'm
Cost of sales
Profit on foreign currency derivative
financial instruments not designated
as a hedge 0.1 2.3 0.5
Operating expenses
Impairment of goodwill - - (2.5)
--------------------------------------- ----------- ----------- -----------------
The Group has chosen to present an underlying profit and
earnings measure. Transactions are categorised as non-underlying if
the resulting underlying profit and earnings information provides a
more meaningful comparison of performance year-on-year. 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 IFRS 9. Such gains and
losses relate to future cash flows. In accordance with the
commercial reasoning for entering into the 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 to the extent the gain or loss
is not recognised in the hedging reserve or cost of hedging
reserve.
Impairment of goodwill
During the prior year goodwill attributable to the Getting
Personal cash generating unit ('CGU') was impaired to nil. The
impairment was a non-cash charge to the income statement reflecting
a reduction in future performance expectations of Getting Personal
and is presented as a non-underlying item in the prior year.
7 Finance expense
Six months Six months Year ended
ended 31 ended 31 31 January
July 2020 July 2019 2020
GBP 'm GBP'm GBP'm
Finance expense
Interest on bank loans and overdrafts 2.6 1.9 4.0
Amortisation of loan issue costs 0.1 0.1 0.3
Lease interest 1.7 2.1 4.0
Loss on interest rate derivative
contracts - 0.1 0.1
--------------------------------------- ----------- ----------- ------------
4.4 4.2 8.4
--------------------------------------- ----------- ----------- ------------
8 Taxation
The reduction in anticipated profit before tax and the increased
uncertainties in forecasting gives rise to a wide range of possible
forecast effective tax rates for the year ending 31 January 2021.
Therefore the tax charge on underlying profit before tax for the
interim period has been calculated at the underlying effective rate
for the year ending 31 January 2020 of 20.1%.
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 Six months Year ended
ended 31 ended 31 31
July 2020 July 2019 January
2020
(Number) (Number) (Number)
Weighted average number of shares
in issue 341,626,396 341,549,306 341,575,284
Weighted average number of dilutive - - -
share options
------------------------------------- ------------ ------------ ------------
Weighted average number of shares
for diluted earnings per share 341,626,396 341,549,306 341,575,284
------------------------------------- ------------ ------------ ------------
GBP'm GBP'm GBP'm
Profit for the financial period (17.7) 19.5 51.6
Non-underlying items (0.1) (1.9) 2.1
---------------------------------------- ------- ------ ------
Total underlying profit for underlying
earnings per share (17.8) 17.6 53.7
---------------------------------------- ------- ------ ------
pence pence pence
Basic earnings per share (5.2) 5.7 15.1
Diluted earnings per share (5.2) 5.7 15.1
Underlying basic earnings per share (5.2) 5.2 15.7
Underlying diluted earnings per
share (5.2) 5.2 15.7
------------------------------------- ------ ------ ------
10 Dividends
The Directors have not declared an interim dividend for the
period ended 31 July 2020.
Six months Six months Year ended
ended 31 ended 31 31 January
July 2020 July 2019 2020
Pence per Pence per Pence per
share share share
Dividends declared not yet paid
at 31 July:
Special dividend - 5.0p -
Interim dividend - 2.9p -
------------------------------------- ------------ ----------- ----------------
- 7.9p -
Dividends paid:
Final dividend for the year ended - 6.4p -
31 January 2020
Special dividend for the year ended
31 January 2020 - - 5.0p
Interim dividend for the year ended
31 January 2020 - - 2.9p
Final dividend for the year ended
31 January 2019 - - 6.4p
- 6.4p 14.3p
Total dividends - 14.3p 14.3p
------------------------------------- ------------- ----------- ----------------
11 Intangible assets
Goodwill Software Total
GBP'm GBP'm GBP'm
Cost
At 1 February 2020 328.2 14.1 342.3
Additions - 0.9 0.9
Disposals - (2.7) (2.7)
----------------------------- --------- --------- ------
At 31 July 2020 328.2 12.3 340.5
Amortisation and impairment
At 1 February 2020 14.4 8.1 22.5
Amortisation in the period - 0.8 0.8
Amortisation on disposals - (2.3) (2.3)
----------------------------- --------- --------- ------
At 31 July 2020 14.4 6.6 21.0
Net book value
At 31 July 2020 313.8 5.7 319.5
----------------------------- --------- --------- ------
At 31 January 2020 313.8 6.0 319.8
----------------------------- --------- --------- ------
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 2020 17.5 40.3 66.4 124.2
Additions 0.3 0.4 1.9 2.6
Disposals - (0.5) (2.4) (2.9)
----------------------------- ---------- -------------- ------------------ ------
At 31 July 2020 17.8 40.2 65.9 123.9
Depreciation and impairment
At 1 February 2020 3.5 32.4 46.7 82.6
Depreciation in the
period 0.2 1.6 2.9 4.7
Depreciation on disposals - (0.4) (2.1) (2.5)
At 31 July 2020 3.7 33.6 47.5 84.8
Net book value
At 31 July 2020 14.1 6.6 18.4 39.1
----------------------------- ---------- -------------- ------------------ ------
At 31 January 2020 14.0 7.9 19.7 41.6
----------------------------- ---------- -------------- ------------------ ------
13 Leases
The Group has lease contracts, within the definition of IFRS 16
leases, in relation to its entire store lease portfolio, some
warehousing locations and motor vehicles. Other contracts,
including distribution contracts and IT equipment, are deemed not
to be a lease within the definition of IFRS 16 or are subject to
the election not to apply the requirements of IFRS 16 to short-term
or low value leases.
Right of use assets Buildings Motor Vehicles Total
GBP'm GBP'm GBP'm
Cost
At 1 February 2020 324.5 1.3 325.8
Additions 13.1 0.6 13.7
Disposals (17.6) (0.1) (17.7)
-----------------------------
At 31 July 2020 320.0 1.8 321.8
Depreciation and impairment
At 1 February 2020 192.7 0.7 193.4
Depreciation in the period 19.7 0.2 19.9
Impairment in the period 0.2 0.0 0.2
Depreciation on disposals (16.3) (0.1) (16.4)
Impairment on disposals (0.2) 0.0 (0.2)
----------------------------- ---------- --------------- -------
At 31 July 2020 196.1 0.8 196.9
Net book value
At 31 July 2020 123.9 1.0 124.9
----------------------------- ---------- --------------- -------
At 31 January 2020 131.8 0.6 132.4
----------------------------- ---------- --------------- -------
Disposals and depreciation on disposals include fully
depreciated right of use assets in respect of expired leases where
the asset remained in use whilst a lease renewal was
negotiated.
Lease liabilities Six months Six months Year ended
ended 31 ended 31 31 January
July 2020 July 2019 2020
GBP'm GBP'm GBP'm
------------------------------- ----------- ----------- ----------------
Current lease liabilities (41.1) (39.3) (40.7)
Non-current lease liabilities (105.1) (107.7) (105.2)
------------------------------- ----------- ----------- ----------------
Total lease liabilities (146.2) (147.0) (145.9)
------------------------------- ----------- ----------- ----------------
Rent concessions agreed in response to Covid-19 are principally
in respect of the timing of payments and do not significantly
impact the total consideration payable in respect of the lease.
Lease liabilities have not been re-measured in respect of changes
in payment profiles. Rent concessions agreed as part of a lease
renewal or extension have been included in the measurement of the
lease liability. Total lease liabilities remain consistent with
prior periods as deferral of lease payments in response to COVID-19
is offset by a reduction in new leases following the Group's
decision to significantly reduce new store openings in the current
year.
Lease expense Six months Six months Year ended
ended 31 ended 31 31 January
July 2020 July 2019 2020
GBP'm GBP'm GBP'm
-------------------------------------- ----------- ----------- ----------------
Depreciation expense on right of
use assets 19.9 19.1 38.9
Impairment of right of use assets
(note 13) 0.2 - 0.4
Profit on disposal of right of use
assets (0.2) (0.2) (0.1)
Lease interest 1.7 2.1 4.0
Expense relating to short term and
low value leases 0.2 0.2 0.5
Expense relating to variable lease
payments - (0.2) (0.3)
-------------------------------------- ----------- ----------- ----------------
Total lease related income statement
expense 21.8 21.0 43.4
-------------------------------------- ----------- ----------- ----------------
14 Analysis of net debt
Six months ended 31 July 2020 At 1 February Cash flow Non-cash At 31 July
2020 changes 2020
GBP'm GBP'm GBP'm GBP'm
Unsecured bank loans and accrued
interest (144.1) (29.5) (1.5) (175.1)
Lease liabilities (145.9) 12.0 (12.3) (146.2)
Debt costs capitalised (1.0) (0.5) 0.1 (1.4)
---------------------------------- -------------- ---------- --------- -----------
Gross debt (291.0) (18.0) (13.7) (322.7)
Cash and cash equivalents 2.0 30.6 - 32.6
---------------------------------- -------------- ---------- --------- -----------
Net debt and lease liabilities (289.0) 12.6 (13.7) (290.1)
Lease liabilities 145.9 (12.0) 12.3 146.2
---------------------------------- -------------- ---------- --------- -----------
Net debt (143.1) 0.6 (1.4) (143.9)
---------------------------------- -------------- ---------- --------- -----------
Six months ended 31 July 2019 At 1 February Cash flow Non-cash At 31 July
2019 changes 2019
GBP'm GBP'm GBP'm GBP'm
Unsecured bank loans and accrued
interest ( 143.8) ( 30.0) ( 0.1) ( 173.9)
Lease liabilities ( 151.2) 20.1 ( 15.9) ( 147.0)
Debt costs capitalised ( 1.3) - 0.1 ( 1.2)
---------------------------------- -------------- ---------- --------- -----------
Gross debt ( 296.3) ( 9.9) ( 15.9) ( 322.1)
Cash and cash equivalents 3.8 1.0 - 4.8
---------------------------------- -------------- ---------- --------- -----------
Net debt and lease liabilities ( 292.5) ( 8.9) ( 15.9) ( 317.3)
Lease liabilities 151.2 (20.1 ) 15.9 147.0
---------------------------------- -------------- ---------- --------- -----------
Net debt (141.3 ) (29.0 ) - (170.3 )
---------------------------------- -------------- ---------- --------- -----------
Year ended 31 January 2020 At 1 February Cash flow Non-cash At 31 January
2019 changes 2020
GBP'm GBP'm GBP'm GBP'm
Unsecured bank loans and accrued
interest (143.8) - (0.3) (144.1)
Lease liabilities (151.2) 41.0 (35.7) (145.9)
Debt costs capitalised (1.3) - 0.3 (1.0)
---------------------------------- -------------- ---------- --------- --------------
Gross debt (296.3) 41.0 (35.7) (291.0)
Cash and cash equivalents 3.8 (1.8) - 2.0
---------------------------------- -------------- ---------- --------- --------------
Net debt and lease liabilities (292.5) 39.2 (35.7) (289.0)
Lease liabilities 151.2 (41.0) 35.7 145.9
---------------------------------- -------------- ---------- --------- --------------
Net debt (141.3) (1.8) - (143.1)
---------------------------------- -------------- ---------- --------- --------------
Group borrowing facilities consist of a GBP200 million revolving
credit facility ('RCF') terminating 31 October 2023 with an
additional GBP100 million accordion. Borrowings under the facility
attract interest at LIBOR plus a margin in the range 1.0% to 2.5%,
subject to a leverage ratchet. Under the agreement detailed below
the maximum margin of 2.5% will apply until the pre COVID-19
covenants are re-instated.
COVID-19
As announce on 6 May 2020, the Group has entered into an
agreement with our banks to enable us to utilise the full Revolving
Credit Facility ("RCF") of GBP200m and utilise the arranged funding
from the Bank of England Covid Corporate Financing Facility
("CCFF") to ensure the business has sufficient liquidity in this
uncertain period, if required. In order to do this, the Group has
agreed three main covenant tests around; total net debt, cash burn
and last twelve months EBITDA until June 2021, after which it is
envisaged that the business will have a phased return back to
existing covenant tests of EBITDA to Leverage and EBITDA to
interest cover.
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 2020 31 July 2019 31 January
2020
GBP'm GBP'm GBP'm
Derivative assets
Non-current
Foreign exchange contracts 0.5 2.6 0.5
-------------------------------------- ------------- ------------- -----------
0.5 2.6 0.5
Current
Foreign exchange contracts 0.8 6.7 1.1
-------------------------------------- ------------- ------------- -----------
Derivative liabilities
Current
Interest rate contracts (0.9) (0.3) (0.4)
Foreign exchange contracts (0.3) (0.1) (0.6)
-------------------------------------- ------------- ------------- -----------
(1.2) (0.4) (1.0)
Non-current
Interest rate contracts (1.0) (0.6) (0.5)
Foreign exchange contracts (0.4) - (0.8)
-------------------------------------- ------------- ------------- -----------
(1.4) (0.6) (1.3)
Net derivative financial instruments
Interest rate contracts (1.9) (0.9) (0.9)
Foreign exchange contracts 0.6 9.2 0.2
-------------------------------------- ------------- ------------- -----------
( 1.3) 8.3 (0.7)
-------------------------------------- ------------- ------------- -----------
16 Notes to the cash flow statement
Reconciliation of operating profit to cash generated from
operations:
31 July 2020 31 July 2019 31 January
2020
GBP'm GBP'm GBP'm
Profit before tax (22.2) 24.3 65.2
Net finance expense 4.4 4.2 8.4
--------------------------------------- ------------- ------------- -----------
Operating profit (17.8) 28.5 73.6
Adjusted for:
Depreciation and amortisation 25.4 24.6 49.9
Impairment of right of use assets 0.2 - 0.4
Goodwill impairment - - 2.5
Loss/(profit) on disposal of fixed
assets 0.1 (0.4) (0.3)
Cash flow hedging foreign currency
movements - - 0.2
Share-based payments charge 0.5 0.1 0.5
--------------------------------------- ------------- ------------- -----------
Operating cash flows before changes
in working capital 8.4 52.8 126.8
Decrease/(increase) in receivables 3.8 (12.6) (2.9)
(Increase)/decrease in inventories (3.2) (1.6) 14.2
Increase/(decrease) in payables 16.2 (4.5) (13.3)
--------------------------------------- ------------- ------------- -----------
Cash inflow from operating activities 25.2 34.1 124.8
--------------------------------------- ------------- ------------- -----------
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 facing the Group have been
reassessed since the Annual Report and are set out below from
highest risk to lowest.
- Covid-19
- ERP Implementation
- IT Infrastructure requirements
- Investor Relations
- IT Security / disruption
- Geopolitical Instability
- Brexit
- Employment Compliance
- Loss of Key Personnel / Organisational Culture
- Environmental and Social Governance
- Supplier compliance breach
- Cash Management
- Adapting to customer preferences
- Brand protection / customer experience
- Printcraft / online fulfilment service disruption
- Regulatory Compliance
- Theft/Fraud
- Exposure to Retail Partner
- Intellectual Property protection
- Supplier capacity
- Health & safety
- Design Studio disruption.
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
Paul Moody Kris Lee
Executive Chairman Chief Financial Officer
29 September 2020
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 2020 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 2020 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").
Material uncertainty related to going concern
We draw attention to note 2 to the condensed set of financial
statements which indicates that, in a severe but plausible downside
scenario of significant further widespread restrictions to trade
from Covid-19, the ability of the Group to continue as a going
concern is dependent on the external lender not calling in the debt
owing to it in the event of the Group breaching its covenants.
These events and conditions, along with the other matters explained
in note 2, constitute a material uncertainty that may cast
significant doubt on the group's ability to continue as a going
concern.
Our conclusion is not modified in respect of this matter.
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.
Nick Plumb (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 Sovereign Square
Sovereign Street
Leeds
LS1 4DW
29 September 2020
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR KKFBKDBKBNCB
(END) Dow Jones Newswires
September 29, 2020 02:00 ET (06:00 GMT)
Card Factory (LSE:CARD)
Historical Stock Chart
From Apr 2024 to May 2024
Card Factory (LSE:CARD)
Historical Stock Chart
From May 2023 to May 2024