Annual Financial Report and Notice of AGM

RNS Number : 9743V

Card Factory PLC

22 April 2016

 

22 April 2016

Card Factory plc

Annual Financial Report and Notice of AGM

Card Factory plc ("Card Factory" or the "Company") announces that it has published its Annual Report and Accounts for the year ended 31 January 2016 and Notice of the Company's 2016 Annual General Meeting.

The Annual General Meeting to which the notice relates is to be held at 11.00 a.m. on Tuesday 24 May 2016 at the offices of Linklaters LLP, One Silk Street, London EC2Y 8HQ.

Copies of the documents listed below have today been posted to shareholders:

1.      Annual Report and Accounts 2016;

2.      Notice of 2016 Annual General Meeting; and

3.      Form of Proxy for the 2016 Annual General Meeting.

A copy of each of these documents has also been submitted to the UK Listing Authority via the National Storage Mechanism and will shortly be available for inspection at www.hemscott.com/nsm.do.

These documents will also be accessible later today via the Company's investor relations website www.cardfactoryinvestors.com.

Card Factory's preliminary results announcement on 5 April 2016 (which is available via the Company's investor relations website referred to above) included, in addition to the preliminary financial results for the year ended 31 January 2016, information on important events that occurred during the year and their impact on those financial results. That information, together with the information set out in the Appendix below is provided in compliance with the requirements of DTR6.3.5(2)(b). This information is not a substitute for reading the full Annual Report and Accounts for the year ended 31 January 2016.

For further information:

Shiv Sibal, Company Secretary and Group General Counsel Card Factory plc

Tel: [phone]

ENDS

APPENDIX

Principal Risks and Uncertainties

The principal risks and uncertainties facing the Card Factory group (the "Group") are set out below, together with details of how these are currently mitigated. For further information on how the Group manages risk, see pages 21 to 23 of the Strategic Report and also pages 41 and 42 of the Corporate Governance Report within the Annual Report and Accounts 2016 ("Annual Report").

Risk Type	Description	Mitigation
Market	The Group generates almost all of its revenue from the sale of greeting cards, dressings and gifts, which may be subject to changing customer tastes and trends. Additionally, there is a risk that the Group may not be able to effectively predict and respond to changing consumer demands and market trends.	·      Regular consumer surveys and market research. ·      Continuous investment in our in-house design and buying teams. ·      Designs continuously refreshed through key trading seasons. ·      Detailed sales analysis guides design and purchasing decisions. ·      Vertically integrated model helps the Group position itself to respond to changes in its markets.
Competition	Our sector is highly competitive, with competition on product choice and quality, store location and design, inventory, price and customer service. We compete with a wide range of retailers (including new entrants) and some of our competitors, particularly supermarkets, general merchandise discounters and stationery retailers, may have greater market presence, name recognition, financial resources and purchasing economies of scale, any of which could give them a competitive advantage.	·      In-house design and print operations help maintain and improve the quality and value of our offering. ·      Strong focus on innovation and product development helps refresh and strengthen our proposition each year. ·      All key elements of competitor activity, including new store openings and market entrants, closely monitored with selective localised pricing strategies used to protect the Group's competitive position. ·      Continuous review of individual store performance and customer trends. ·      Regular consumer surveys and market research. ·      Sustained investment in the assets, systems and people supporting our vertically integrated model which underpins our competitive position.
Our Brands	The 'Card Factory' and 'Getting Personal' brands are important assets. If we are unable to protect our brands, our reputation is damaged or we fail to sustain our appeal to our customers, our sales and future prospects could be affected.	·      Regular reviews of customer trends and competitor activity. ·      Consumer surveys address brand perception. ·      Development of our dedicated quality control function that works with our design, purchasing and print teams and third-party suppliers to ensure product quality and safety. ·      Rigorous protection of our intellectual property.
Business Strategy	Our strategy has been developed with the aim of achieving long-term value for our shareholders. The Board recognises that if the strategy and vision for the business are not properly developed, communicated or delivered there could be an adverse impact on the Group.	·      Implementation of and performance against strategy are regularly reviewed at Board and senior management team level. ·      Business objectives set in the context of our four pillar strategy in communications with key personnel. ·      Competitor analysis, consumer research and sales data used to bring focus to the development of our retail proposition.
Store portfolio expansion	Sales and profits growth depend on our ability to find good locations for new stores. Competition for store sites and acquiring them on acceptable terms are key to us achieving our strategy. Supporting this growing portfolio through our operational infrastructure, financial systems and managerial controls and procedures is critical to the Group's success.	·      Established database of new store opportunities updated regularly. ·      Formalised appraisal process for new location opportunities. ·      Commercial analysis conducted on new stores to assess potential sales and profitability taking into account the number of other Card Factory and competitor stores in close proximity. ·      Commercial developments monitored in the real estate market and our strategy is adjusted where a change may adversely affect a store's potential profitability. ·      Group's operational capabilities support the current portfolio expansion strategy in the UK.
Sourcing/ Supply Chain	Third-parties, including many in the Far East, supply nearly all of our non-card products, our handcrafted greeting cards and certain raw materials. If they fail to satisfy orders it may affect the business or result in us having to seek alternative suppliers, who may not be able to fulfil our needs. We are also exposed to changes in supplier dynamics and increases in raw material prices. Our supplier profile means we are subject to the risks of manufacturing and importing of goods from overseas including freight costs and duty as well as supply interruption and reputational risk arising from supplier labour practices.	·      Strong relationships with key suppliers. ·      Continuously developing and broadening supplier base providing greater flexibility and reducing reliance on particular suppliers. ·      Periodic inspections and third-party facilitated technical audits of factories operated by major suppliers with clear actions where weaknesses are identified. ·      Sedex membership ("the Supplier Ethics Data Exchange") combined with a programme of standalone ethical audits of key suppliers initiated during the year. ·      Dedicated product quality control function. ·      During 2015, both Sportswift Limited (which trades as "Card Factory") and Printcraft Limited, obtained Forest Stewardship Council certification.
Key Personnel	The Group's strategy and long-term success depend on our ability to: manage the succession of our CEO and support the CEO Designate, sustain and develop our senior management team and employees; to build our teams where this supports our growth; and to plan for, support and manage senior management succession.	·      Remuneration policy (set out in the Directors' Remuneration Report on pages 51 to 58 of the Annual Report) designed to incentivise senior management and promote the long-term success of the Group. ·      Delivery of the Group's strategic objectives and business performance are central to the policy with remuneration structured to align the interests of the senior management team and shareholders. ·      CEO succession plan implemented with senior management succession plans to be developed. ·      Comprehensive tailored induction and handover programme in place for CEO Designate with support from the CEO, CFO and the rest of the Board and senior management team.
Finance and Treasury	Our funding arrangements and the fact that we source the majority of our non-card merchandise, as well as handmade cards and certain raw materials, from suppliers in the Far East mean that a lack of appropriate levels of covenant headroom and /or cash resources in the Group, or significant variations in interest or exchange rates, could have an impact on our operations and performance. The CFO's Review on page 18 of the Annual Report sets out in further detail the risk to the Group of recent exchange rate fluctuations.	·      Current financing arrangements and Group cash generation continue to provide the Group with appropriate financial support and cash resources for the delivery of its strategy. ·      Treasury management processes and policy in place to govern cash management and manage exposure to foreign exchange and interest rate fluctuations. ·      Foreign exchange and interest rate hedging contracts pre-approved directly by the CFO and communicated to the Board monthly. ·      Further details of the Group's financial position are described in the CFO's Review on pages 19 and 20 and the Group's viability statement is on page 71 of the Directors' Report in the Annual Report.
Business Continuity	Any major disruption to any of the parts of our vertically integrated  business model, in particular to our printing facility, Printcraft, and our design studio, could severely affect our ability to supply our stores. Disruption to any of these functions could also force us to use third-party providers which could be expensive and on onerous terms.	·      Business Continuity Plan ("BCP") continues to be developed. ·      BCP development to be supplemented by periodic review and scenario testing which will allow the plan to evolve ensuring it meets the continuing needs of the business. ·      Stock held across multiple locations to mitigate the risk of a catastrophic event at any one of our storage facilities. ·      The Group also maintains appropriate business interruption insurance cover.
Compliance	The Group is subject to legislation and regulations in areas including corporate governance, the listing and trading of our shares, employment (including that relating to the introduction of the new National Living Wage), product quality, trading, the environment, health and safety, bribery and data protection. Any failure to comply with these could lead to penalties, fines, damages, claims or reputational damage which could impact the financial performance of the business.	·      Policies and procedures are in place governing behaviours in all key areas, some which address mandatory requirements and others adopted voluntarily. ·      Senior management team members manage compliance of the Group's key operational teams with escalation and disciplinary action where needed. ·      Group's General Counsel and Company Secretary oversees and co-ordinates compliance in the Group with the support of external advisers. Senior management team members liaise with him to ensure issues are identified and managed. ·      Impact of new legislation on the Group is monitored with changes implemented where required, eg Consumer Rights 2015. ·      Further details of the estimated impact of the new National Living Wage on the Group and the proposed mitigation of this are set out in the CFO's Review on page 17 of the Annual Report.
Information Technology	Reliable and efficient IT systems, including those supporting our retail operations (both physical and online), our head office function and our in-house design and printing operations, are important to the Group. Failure to adequately develop and maintain these or any prolonged system performance problems could seriously affect our ability to implement the Group's strategy and to carry on the business.	·      Continuing investment in people and systems. ·      Deloitte LLP have been appointed to provide internal audit services with their main focus during the first two years of their appointment being on the Group's use of technology and the structure and capability of its IT team. ·      Deloitte's consultancy division supporting the Group with the implementation of specific technology projects. ·      IT strategy and governance form part of the Audit and Risk Committee's remit for review. ·      Principal IT risks are documented and agreed service levels for recovery of key business systems are in place
Online	The Group's online presence, via our Getting Personal and Card Factory transactional websites, remains relatively new to the business. Our websites operate in a very competitive market with relatively low barriers to entry. If they do not evolve to account for changing customer tastes and the different devices being used by customers to make online purchases, they may not deliver the anticipated revenue growth. This may also affect our reputation and customer perception of our brands.	·      Continued investment in offering via in-house web development team. ·      Card Factory transactional website (www.cardfactory.co.uk) was relaunched in April 2015 on a new platform. ·      A Marketing Director has joined the Group and will focus on the development and promotion of our online proposition.

Directors' Responsibility Statement

The Annual Report and Accounts 2016 contains a responsibility statement by Richard Hayes, Chief Executive Officer, and Darren Bryant, Chief Financial Officer, by order of the Board in the following form:

"We confirm that to the best of our knowledge:

·      the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

·      the Strategic Report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

We consider the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy."

Related Party Transactions

Details of the only material transactions with related parties during the financial year ended 31 January 2016 are set out in note 28 of the financial statements on page 106 of the Annual Report.

 

END

 

 

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