Trading Statement

RNS Number : 8072C

Card Factory PLC

22 January 2015

 

22 January 2015

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

Trading Update

A further year of strong growth

Card Factory, the UK's leading specialist retailer of greeting cards, gifts and dressings, is pleased to announce its trading update covering the period from 1 February 2014 to date.  Operational and financial information relates to the 11 months ended 31 December 2014 unless stated otherwise.

The Group continues to trade in line with the Board's expectations.

The Group remains highly cash generative.  The Board expects to report a significant reduction in net debt at the year end to a level lower than the current range of market expectations (see Note 3 below).

In the 11 months ended 31 December 2014, revenue increased by 8.1%, driven by a combination of like-for-like sales growth, new store roll out and further growth in our online business, Getting Personal.  This growth rate is similar to that delivered in the 11 months ended 31 December 2013 (8.9%).

Delivering on our four pillars of growth

1.    Like-for-like sales growth in existing stores

Card Factory's like-for-like store sales grew by +1.8% during the period despite a strong comparable period last year when like-for-like sales grew by +3.1% (see Note 2 below).   

The like-for-like performance since the half year reflects, in part, investment in localised pricing strategies adopted during the year, particularly in the final quarter.   We will continue to adopt this approach to strongly defend our market leading position, whilst maintaining our focus on delivering best-in-class margins.  

2.    Continuing new store roll out

A total of 51 net new stores have been opened in the year to date, bringing the total estate to 764 stores as at 31 December 2014. 

Looking ahead to our next financial year ending 31 January 2016, the Group has a strong pipeline of additional new store opportunities and we remain confident of continuing our historic opening rate of approximately 50 net new stores per annum. 

3.    Delivering business efficiencies

The Group has consistently delivered extremely strong margins by leveraging its vertically integrated model which has been established and developed over many years.  The Board continues to balance the driving of economies of scale and business efficiencies with ongoing investment in the business in anticipation of future growth. 

A key focus for this investment has been the continued roll out of our new EPOS system which is now installed in over 50% of the store estate.  As disclosed previously, the Board anticipates a number of business efficiencies will flow from this system over the medium term.

4.    Development of complementary online sales channel

The Group, as a relatively new entrant, continues to grow its online division rapidly, with continued double digit revenue growth achieved through Getting Personal since the half year stage.

As previously announced, Paul McCrudden, EMEA Head of Content Marketing at Twitter, has joined the Board as an Independent Non-Executive Director.  Paul brings a wealth of digital and marketing experience that will be particularly helpful as we continue to develop our online activities.

Preliminary results announcement

The Group will announce its preliminary results for the year ending 31 January 2015 on 25 March 2015.

Richard Hayes, Card Factory's Chief Executive Officer, said:

"With only a few days of our financial year remaining, it is pleasing to report that the Group continues to perform well, has had a solid Christmas trading period, and is on course to deliver sales growth at a similar level to the previous year.

"The strength of our retail proposition is the key to our consistent performance and we are well placed to further improve our customer offer in the year ahead.  This is underpinned by our established vertically integrated model which has been developed over the past decade with significant investment.

"As the clear market leader, we remain confident of our ability to achieve further profitable growth."

ENDS

Enquiries

Card Factory plc                                                  [phone]

Richard Hayes, Chief Executive Officer

Darren Bryant, Chief Financial Officer

MHP Communications                                     [phone]

John Olsen                        

Simon Hockridge

Notes to Editors

1.    Background information

Card Factory is the UK's leading specialist retailer of greeting cards, gifts and dressings. It focuses on the value and mid-market segments of the UK's large, resilient and growing greeting cards market, and also offers a wide range of other quality products, including small gifts and gift dressings, at affordable prices. Card Factory principally operates through its nationwide chain of over 750 Card Factory stores, as well as through its online offerings: www.gettingpersonal.co.uk (which sells personalised cards and gifts) and www.cardfactory.eu.com (which sells a selection of the products available in Card Factory stores).

Card Factory commenced operations in 1997 with just one store and has expanded its store estate primarily through organic growth into a market-leading value retailer with a nationwide presence. The Group's stores are in a wide range of locations including on high streets in small towns through to major cities, shopping centre developments, out-of-town retail parks and factory outlet centres.

Over the last 10 years, Card Factory has developed a vertically integrated business model with an in-house design team, an in-house printing facility and central warehousing capacity of over 360,000 sq. ft. This model differentiates the Group from its competitors by significantly reducing external costs and adding value to customers in terms of both price and quality, underpinning the Group's motto: "compare the quality, compare the price".

Card Factory sold over 285 million single cards in the financial year ended 31 January 2014. In that year, the Group achieved revenue growth of 9.0% to £326.9 million and underlying EBITDA growth of 9.2% to £80.4 million (2013: £73.6 million) at a margin of 24.6%.

2.    Like-for-like definition

The Group defines like-for-like sales as the year-on-year growth in sales for Card Factory stores which have been opened for a full year, calculated on a calendar week basis.  As such, this reported like-for-like sales figure excludes sales:

• relating to Card Factory stores that have not yet been open for a full 52 weeks;

• from the Card Factory transactional website, www.cardfactory.eu.com;

• made via the separately branded personalised card and gift website, Getting Personal;

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

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

As highlighted in the IPO prospectus, like-for-like sales in the year ended 31 January 2014 benefitted to a small degree from the administration of a competitor in May 2012.

3.    Net debt

The Board understands analyst expectations of forecast net debt at 31 January 2015 to be in the range £114m to £135m.

4.    Cautionary Statement

This announcement is based on information from unaudited management accounts and contains certain forward-looking statements with respect to the financial condition, results of operations, and businesses of Card Factory plc.  These statements and forecasts involve risk, uncertainty and assumptions because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. These forward-looking statements are made only as at the date of this announcement.  Nothing in this announcement should be construed as a profit forecast.  Except as required by law, Card Factory plc has no obligation to update the forward-looking statements or to correct any inaccuracies therein.

 

END

 

 

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