Annual Financial Report & Notice of AGM

RNS Number : 5412Q

Card Factory PLC

19 June 2020

 

19 June 2020

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 2020 and Notice of the Company's 2020 Annual General Meeting.

The Annual General Meeting to which the notice relates is to be held at 11.00 a.m. on Thursday 30 July 2020 at the Company's registered office, Century House, Brunel Road, Wakefield 41 Industrial Estate, Wakefield WF2 0XG. 

Due to the impact of Covid-19 and in accordance with the current government guidance against gatherings of more than two people, we do not intend to admit any shareholders in person at the AGM and have made arrangements for the quorum (which is any two shareholders or their proxies/corporate representatives) to be satisfied by the presence of two employee shareholders present in person.  Shareholders are encouraged to vote by proxy in advance of the meeting.

Shareholders are invited to submit questions in advance of the AGM to [e-mail] .  You shall receive a response by email and answers to relevant questions raised, along with the results of the AGM, will be posted on the Company's website.

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

1.  Annual Report and Accounts 2020;

2.  Notice of 2020 Annual General Meeting; and

3.  Form of Proxy for the 2020 Annual General Meeting.

The Annual Report and Accounts and the Notice of the 2020 Annual General Meeting will also be accessible later today via the Company's investor relations website www.cardfactoryinvestors.com . In compliance with LR9.6.1, the Company has today submitted electronic copies of the above documents to the National Storage Mechanism appointed by the Financial Conduct Authority and these will shortly be available for inspection at http://www.morningstar.co.uk/uk/NSM.

Card Factory's preliminary results announcement on 2 June 2020 (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 2020, 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 2020.

For further information:

Ciaran Stone, Group General Counsel and Company Secretary 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 30 to 34 of the Strategic Report and also pages 55 and 56 of the Corporate Governance Report within the Annual Report and Accounts 2020 ("Annual Report").

Risk	Description	Mitigation
Covid-19 Since 2019: New	The Covid-19 pandemic has resulted in the prolonged closure of our entire store estate with impact on our stakeholders and on sales. It may result, at least in the short term, in fundamental changes in the way we operate, to prevent further spread or a second wave of the disease. At the time of writing this report, the timing of reopening stores and the trading performance following reopening is uncertain, as customer behaviours change and social distancing could reduce footfall. It is possible that a second peak of infections could result in a further period of store closures, extending the period of significantly reduced turnover. In the longer-term consumer confidence and shopping habits may be affected which may significantly impact our business if this results in lower high-street footfall.	• Our Covid-19 Emergency Response Team has managed the impact of the pandemic across the Group with input from all business functions with detailed plans to reopen stores whilst prioritising safety of colleagues and customers. • The Board have received regular updates from the Chief Executive Officer (CEO) and CFO and provided support in managing the crisis. • Secured access all relevant Government support schemes including access to Covid Corporate Financing Facility. • Furloughed over 90% of our colleagues from across the Group (including all retail colleagues). • Expanded the scope of our online offering in anticipation of launching our new platform. • Review of 5 year strategic plan being undertaken to account for Covid-19 impacts.
Finance and treasury Since 2019: Increased	Cash management has become critical for the Group since trading from retail stores ceased in March 2020 due to the Covid-19 pandemic. Group finance arrangements and a reliance on overseas suppliers mean that: a lack of appropriate levels of covenant headroom and/ or cash resources; interest or exchange rate fluctuation, or inadequate cost control could impact operations and performance. The Chief Finance Officer's (CFO) Review from page 24 reports on action taken to address liquidity issues arising from Covid-19 and details the Group exposure to exchange rate fluctuation.	• Agreement secured with a large proportion of suppliers and landlords to revised terms (including order and payment deferral to preserve liquidity). • Access to Covid Corporate Finance Facility and revised terms agreed with banking syndicate to provide access to additional debt funding, if required. • Cost accountability and tracking in place. • Adequacy of current financing, hedging and cash flow for operations monitored by CFO including ongoing impact of Brexit-related volatility. • Treasury strategy effectiveness monitored by CFO and Board. • Comprehensive review of financial controls manual in progress. • Further details of the Group's financial position are in CFO's Review on pages 24 to 29 and the Group's viability statement from page 90 of the Directors' Report.
Our Market Since 2019:  No change	Group generates most revenue from cards, dressings, balloons and gifts. Customers, trends and tastes can change quickly. It's essential to predict and respond to these challenges and to declining high-street footfall.	• Strategy underpinned by customer and market analysis. • Data-led commercial and studio teams drive quality, value and innovation. • New platform for cardfactory.co.uk to drive more sales online and capture channel shift. • Restructured commercial team. • Well-invested manufacturing facility driving flexibility to react to market and underpinning strategic partnerships with Aldi and The Reject Store.
Increasing Competition Since 2019:  No change	Competition remains fierce, particularly during key seasonal card-buying occasions. Range depth, quality and value remain key differentiators. Competitor groups, including supermarkets, enjoy strong brand recognition, flexible retail space, purchasing power, more mature multi-channel capability and pricing flexibility.	• Comprehensive strategic review, led by Strategy and Insight Director, including current competitive landscape. • Vertical integration and brand strength have driven strategic partnerships with Aldi and The Reject Store in Australia. • Innovation, in both design and manufacturing, driving differentiation in our offer and underpinning competitiveness. • Partnerships and concessions established to increase share from the convenience consumer by making our cards available in more locations. • Investment in new platform for cardfactory.co.uk to drive online channel. • Strategic trials conducted to address competitive challenges.
Protecting and promoting our brands Since 2019:  No change	Protecting and enhancing the 'Card Factory' brand underpins our reputation. Sustaining and growing our appeal is critical to our long-term sustainability.	• Invested in marketing and PR to drive brand awareness. • Strategic review covered brand perception. • Rigorous protection of intellectual property and guidance provided to our teams. • Continued investment in colleague development underpinning 'customer first' approach. • Comprehensive store review process to identify improvement opportunities. • Operating 'no audit no order' policy for all suppliers.
Evolving our strategy Since 2019:  No change	Evolving our strategy to reflect current market dynamics and customer shopping habits, including widespread high-street footfall decline, is critical to the long-term performance and sustainability of the business for the benefit of all key stakeholders.	• Comprehensive strategic review undertaken establishing the Group's objectives over the short, medium and longer term, facilitated by new Strategy and Insight Director. • Board and senior management engaged throughout the process and engaged on actions to implement the strategy. • Review considered all key stakeholder interests. • Key commercial elements successfully contracted with retail partners; The Reject Store in Australia and Aldi. • Focus on customer segmentation, addressing competitive challenges and growing our market share in cards. • Financial and personal bonus objectives aligned with strategic goals.
Developing our culture and leadership Since 2019: Increased	Developing a culture, management cohesion and leadership behaviours that support the Group ' s strategic vision is critical to long-term sustainable success. The Group ' s most recent colleague engagement survey has highlighted clear development opportunities.	• Corporate purpose refined, sitting alongside established values. • Organisational and leadership review alongside strategy development. • Targeted functional plans addressing engagement survey feedback. • Designated Non-Executive Director appointed to attend newly created Combined Colleague Advisory Group (CCAG), created to provide Group-wide voice on culture and leadership.
Loss of key personnel Since 2019: Increased	Retaining key colleagues remains challenging. Effective succession planning and ensuring we have the capacity, capability and organisational structure to implement our strategy are critical to the Group's long ‑ term success.	• Organisational and leadership review alongside strategy development. • Nomination Committee now overseeing succession planning across senior management. • New Chief Commercial Officer, Chief Information Officer (CIO), People Director and General Counsel recruited.  Strategy and Insight Director role created. • Group's remuneration policy aligns incentives with strategic goals.
Managing change Since 2019:  No Change	Group continues to pursue significant technology-focused change programmes underpinning our strategic ambitions, enabling greater efficiency and growth. ' Business as usual ' activities could be compromised if ambition outweighs current capacity to manage change.	• New Programme Management Office established and accountable for change-management governance. • Significant additional investment in, and restructuring of, the leadership team with wider and clearer accountabilities. • Board and senior management committed significant time to strategic development. • Board receive programme updates to enable, support and challenge. • Organisational and leadership review alongside strategy development.
Information Technology Since 2019: Increased	Our IT infrastructure needs further investment and development to ensure it is resilient, secure and supports the strategic ambitions and business transformation agenda of the Group, in addition to maintaining our day-to-day operations. This is critical to our future success.	• New Group Chief Information Officer appointed. Accountable for IT and transformation. • Chief Information Officer undertaking a comprehensive review of infrastructure and team. • IT strategy development to ensure infrastructure supports both strategic objectives and core operations. • Group programme management office to support project governance, delivery and benefits realisation. • IT governance process embedded. • Continuing infrastructure investment supporting resilience and security. • ERP tender commenced and new platform for cardfactory.co.uk going live in 2020.
ERP Implementation Since 2019: New	The Group is due to implement a new ERP (Enterprise Resource Planning) solution. This significant project involves changing the core IT infrastructure on which the Group operates, to facilitate efficiencies, and provide a platform future growth. However, ensuring appropriate design of any ERP system, and implementation of business change to realise the benefits of it require proper execution. There are inherent risks of business disruption, data loss or delays in any ERP implementation.	• Established, proven suppliers are being assessed in response to the request for proposal. • Detailed assessment and planning is being undertaken to ensure suitability of the ERP solution. • Implementation on a module-by-module basis, only following appropriate testing, is expected to reduce extent of business disruption should material challenge arise.
Managing our supply chain Since 2019: Increased	Heavily reliant on overseas suppliers, for complementary categories, products and handcrafted greeting cards. There is a risk they may not be able to satisfy orders and we are exposed to increases in raw material prices, freight costs and duty, as well as supply interruption and reputational risk arising from supplier labour practices. The Covid-19 outbreak initially caused delay to manufacturing output in China and to the delivery of finished products but its development into a global pandemic and the lockdown measures in the UK could result in us carrying excess stock as a result of committed orders and a lack of store-generated sales.	• Area of focus for our new Chief Commercial Officer, with further investment in strategic supply chain resource. • Maintain strong, category-led relationships with key suppliers. • Focus on diversifying supplier base, reducing risk and increasing flexibility. • Investment in manufacturing technology and R&D to 'on shore' greeting cards. • Compulsory for supplier to agree to our standard terms before any orders are placed. • 'No audit no order' policy implemented. Mandatory ethical and technical audits. • Formally assessed impact of changes in tariffs and stock requirements in light of Brexit. • Our Covid-19 Emergency Response Team has led an impact assessment for Covid-19 across the Group with input from all business functions. • We are working closely with our product suppliers to manage both our purchasing requirements and our payment terms.
Brexit Since 2019: New	The terms of trade deals that the UK Government may secure on expiry of the transitional period for the UK's exit from the European Union remain uncertain and the economic consequences from Brexit remain unclear. The business uncertainty arising from Brexit may impact on foreign exchange rates, potentially increasing the cost of supplies or reducing the sterling value of sales denominated in other currencies. Imported supplies and shipments to overseas partners and stores may be subject to tariffs and delays at port.	• Foreign exchange hedging adopted by the Group mitigates foreign exchange variance that may arise from Brexit in the short term. • A large proportion of the Group's product is produced by the Group in the UK. • The Group's business model and market position support its ability to withstand reductions in disposable income of consumers arising from economic impact from Brexit.
Sustainability Since 2019: New	The future success of Card Factory relies on progressive adoption of sustainable solutions to support the environment and long-term growth. Procuring sustainably sourced materials, and development of recyclable products, whilst reducing our carbon footprint are business priorities, recognising that failure to do so is likely to create adverse publicity and could limit growth.	• Demonstrable progress in reduction of carbon footprint. • Compliance with EU Timber Regulations and adoption of equivalent due diligence for card product sold by the business. • Production uses FSC certified materials with active engagement with suppliers to meet these standards. • Simple supply chain model adopted which facilitates due diligence on compliance purposes.
Business Continuity Since 2019:  No change	Major disruption to our business, but particularly our manufacturing and online fulfilment facility, Printcraft, our distribution centre or our design studio, could severely affect our performance and profitability.	• Group crisis management plan in place and used to manage response to the Covid-19 outbreak. • New warehousing capacity acquired providing additional resilience. • Online fulfilment model under review. • Consistent infrastructure for Group-wide IT back-ups. Enhancements planned for FY21. • Printcraft disaster recovery being further developed in FY21.
Compliance Since 2019:  No change	Compliance requirements continue to grow with the new UK Corporate Governance Code, Modern Slavery, GDPR, National Living and Minimum Wage all requiring operational focus and action. Compliance is time-intensive and costly with sanctions becoming more punitive.	• General Counsel and Company Secretary oversee compliance, with support from external advisers and collaboration from senior management. • Key legislation trackers in place, with Audit and Risk Committee regularly updated. • GDPR compliance programme in place and monitored. • Ethical trading and anti-slavery policy adopted by the Board and rolled-out. • Policies and procedures governing behaviours in all key areas.
E-commerce development Since 2019:  No change	The Group's websites are important sales channels supporting our strategic ambitions. Developing our e-commerce model, including the introduction of 'click and collect' and a mobile app, is critical to meeting evolving customer expectations and shopping preferences and to taking market share in these channels.	• Investment in new platform for cardfactory.co.uk to go live this year. • Dedicated online team within our design studio. • Expanded and refreshed product ranges with third party card designs. • Invested in PR and marketing initiatives to drive traffic and sales. • In-store 'on-demand' and 'click and collect' to be piloted in 2020.

Directors' Responsibility Statement

The Annual Report and Accounts 2020 contains a statement of directors' responsibility by Karen Hubbard, Chief Executive Officer, and Kristian Lee, 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 2020 are set out in note 28 of the financial statements on page 134 of the Annual Report and Accounts.

 

END

 

 

ACSLKLFFBQLFBBE