Annual Financial Report & AGM Notice

RNS Number : 4693M

Card Factory PLC

23 May 2022

 

23 May 2022

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 2022 and Notice of the Company's 2022 Annual General Meeting.

The Annual General Meeting is to be held at the Company's registered office, at Century House, Brunel Road, Wakefield 41 Industrial Estate, Wakefield, WF2 0XG at 11.00 a.m. on Thursday 23 June 2022. 

Copies of the documents listed below have been posted to shareholders on Friday 20 May 2022:

1.  Annual Report and Accounts 2022;

2.  Notice of 2022 Annual General Meeting; and

3.  Form of Proxy for the 2022 Annual General Meeting.

The Annual Report and Accounts and the Notice of the 2022 Annual General Meeting will also be accessible later today via the Company's investor relations website www.cardfactoryinvestors.com . In compliance with LR 9.6.1, 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 https://data.fca.org.uk/#/nsm/nationalstoragemechanism .

Card Factory's preliminary results announcement on 3 May 2022 (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 2022, 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 2022.

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 38 to 41 of the Strategic Report and also pages 66 and 67 of the Corporate Governance Report within the Annual Report and Accounts 2022 ("Annual Report").

Risk	Description	Mitigation
Financial Risks
Shipping Since 2021:  New	Shipping delays: Delays realised on incoming stock from the Far East arising from capacity constraints, delaying supply of stock to customers. Shipping costs: Significant increase in container importation costs (from c. USD2,000 to current average of USD12,000) impacts profitability.	Shipping delays: Stock orders brought forward to address anticipated delays and use of multiple shipping partners to secure shipping capacity. Shipping costs: Retail pricing increases applied and being planned, with ongoing review of country of supply (including on-shoring supply), container volumes and fill to reduce overall costs.
Geopolitical Instability Since 2021: Unchanged	Suppliers : Specific categories of product rely on one supplier, region or country. China remains as a substantial source of supply. Customers : Restricted supply may impact availability or require price increases for the consumer. Profitability could be impacted from lost or reduced sales. Tariffs : Duties and tariffs could force need for alternative supply.	Suppliers : Diversification of supply base, including on-shoring supply to the UK. No product exposure to Russia or Ukraine. Planned global review of supply chain to identify alternatives. Customers : Diversification of supply mitigates availability, with price increases being implemented with analysis on price elasticity. Tariffs : Ongoing identification of changes to duties and tariffs to respond as required.
Impact of Covid-19 Since 2021: Reduced	New variants or outbreaks may require mandatory store closure or reduce store footfall, impacting revenue and profitability, however, risk of further government restriction is considered increasingly remote.	Processes, training, signage and PPE capable of being deployed as required. Planned omnichannel and growth of retail partnerships will provide additional revenue outside of our store estate. Headroom in banking covenants provides some scope to absorb impact of mandatory store closures.
Finance & Treasury Since 2021: Unchanged	Bank facilities: Future lockdowns or restrictions on trade causing underperformance could cause cash flow constraints or risk breach of banking covenants. FX/Commodities: The Group is exposed to foreign currency exchange rate fluctuations and commodity pricing (including wood pulp and energy). Margin pressure: Inflation and price increases may impact operating margins for the business.	Bank facilities: Headroom in banking covenants and cash flow forecasts are kept under review, with contingency planning to address any identified issues. FX/Commodities : Hedging for US Dollars currency requirements and energy effected for up to three years. Margin pressure: Regular review of retail pricing and maintain margins and efficiency improvements and cost controls adopted to manage overheads.
Operational Risks
ERP Implementation Since 2021: Unchanged	Ongoing design and phased implementation of ERP systems (Enterprise Resource Planning) to replace end-of-life core IT infrastructure. Significant risk of business disruption, data loss or inefficiencies if design, planning, testing and transition are not successful. Risks that the solution may not fully realise the expected benefits and provide the required platform to realise the strategic plan, including development of the omnichannel offer to customers, improvement of engagement with retail partners and operational efficiencies in our retail stores.	Initial phase implementation (including finance and master data) completed without any material disruption. Re-phasing to include incremental implementation phases has been undertaken to reduce risks on cut-over and to reduce reliance on legacy systems at risk of failure in advance of peak trading seasons and to enable realisation of key components of the strategic plan. Additional focus on business process engineering, resourcing and change management being deployed support successful implementation.
IT Infrastructure & Security Since 2021:  Unchanged	IT infrastructure: Unsupported and legacy software, some of which is subject to material tailoring, requires ongoing support to maintain functionality and significant transactional volumes. Realisation of strategic objectives is partially restricted by current system limitations. IT security: Reliance on IT systems to support all operations could be exposed to cyber risks.	IT infrastructure: The IT strategy implementation is ongoing, which includes ongoing specialist support for legacy systems and migration to new systems, including the ERP implementation (see above). IT security: Cyber expertise is employed within the business, with appropriate measures and future plans to continue to address multiple cyber risks, alongside further risk mitigations arising from replacement of legacy systems.
Business continuity Since 2021: Increased	Production failure : The business places significant reliance on its Printcraft (single site) facility which prints 70% of cards and a significant proportion of personalised online orders. If this site is unable to operate, there could be a significant impact on operations. Online fulfilment : Online orders are primarily fulfilled from the same Printcraft single site, with reliance on specialist packaging equipment. Capacity limitations, if not addressed, may limit sales opportunities in peak seasons.	Production failure : Business Continuity and Disaster Recovery plans have been fully assessed and updated with scenario planning and training scheduled. This includes identification of alternative suppliers for impacted production processes, although outsourcing will impact profitability. Insurance is also maintained. Online fulfilment : Short-term outages can be mitigated by adjustment of delivery times for online orders. Business Continuity plans include use of third parties, with the ongoing IT infrastructure improvements and ERP implementation expected to further improve IT resilience and functionality. Planning permission has been obtained to construct an additional building to create capacity for online fulfilment, to relieve capacity constraints.
Loss of key personnel and organisational culture Since 2021: Unchanged	Loss of key personnel: Risk that the business doesn ' t have the expertise and capacity to meet the requirements of the business, in particular to deliver complex change to realise the strategic targets. Organisational culture : Failure to maintain and develop a cohesive culture capable of realising the Group ' s strategic objectives.	Loss of key personnel : A number of changes to the management team have been effected with additional capacity constraints having been identified and appropriate appointments prioritised. Organisational culture : Improvements to pay and benefits, values review, leadership framework and DE&I consultations and strategy developments, demonstrate progress against colleague engagement feedback.
Supplier CSR breach Since 2021: Unchanged	Supply base audits : Risk of failure by suppliers to maintain compliance  standards in their supply chains (e.g. Modern Slavery, Anti Bribery & Corruption) and for products supplied (e.g. safety and labelling standards) which could damage Card Factory ' s reputation. Getting Personal : Suppliers to the Getting Personal business (who do not also supply Card Factory) have not been subject to the same supply base requirements adopted by Card Factory brands.	Supply base audits: Processes adopted for suppliers to agree to appropriate standards, which are subject to regular audit to validate compliance, with a strict ' no audit - no order ' policy in place. Getting Personal: The risk profile for most suppliers to Getting Personal is significantly lower, with limited supplies from the Far East. Plans are in development to extend the quality control and technical team ' s scope to include these suppliers with adoption of appropriate requirements to mitigate risks.
Retail Partner exposure Since 2021: New	Underperformance : Card Factory may not realise the growth in profitable revenue from retail partners, which is a significant component for future growth of the business. Brand impact : Card Factory ' s brand or reputation could be damaged by actions by retail partners.	Underperformance : Following a period of transition, a Business Development team is being formed to build relationships with existing partners and develop a pipeline of future partners. Brand impact : Brand standard requirements are being developed to provide a clear framework for partners, with regular reviews adopted. Enhanced requirements will be incorporated in any future retail partner requirements.
Strategic Risks
Investor Relations Since 2021: Unchanged	Risk that investor regard for Card Factory investment is restricted, with limited conviction that the strategy and targets can be achieved.	Additional investor relations expertise recruited to improve investor communications, to ensure clearer articulation of the strategy and to demonstrate progress made and to share additional data and insight in respect of the card and gifting markets.
ESG Compliance and climate change risks Since 2021: Unchanged	Investors : Failure to develop sufficiently ambitious targets and demonstrate progress could result in reduced investment appetite in Card Factory, depressing share price. Customers : Customer demand may be impacted if ESG brand perceptions are not realised, impacting long-term prospects. Energy and GHG emissions : Availability, reliability of energy supply and increased costs could impact trade.	Investors : Ongoing development of ESG planning and target setting, including material progress on DE&I strategy. Customers : Ongoing brand strategy development will include articulation of ESG policy and developments to customers. Energy and GHG emissions : Electricity prices fixed for a number of years with specialist third party expertise engaged to assess and develop a trajectory towards being carbon neutral.
Adapting to customer preferences Since 2021: Unchanged	Product and range development: Realisation of strategic targets relies upon successful adaptation to changing customer preferences for purchase via our developing sales channels, including increased focus on omnichannel and retail partners. Customer and marketing insight : Card Factory has historically adopted no meaningful customer and marketing insight to drive empirical decision making. Customer service and fulfilment : Realisation of a true omnichannel experience for customers will require enhanced fulfilment and service expectations, which must be achieved for successful ongoing growth.	Product and range development : Design, buying and merchandising teams are using increased insight and data analysis to inform product and range decisions, with greater customer and competitor analysis. Customer and marketing insight : Marketing and insight capabilities are being developed, with support from partners such as Kantar and Brandvue Savanta to improve understanding of our customers and to embed customer insight into decision making. Customer service and fulfilment : Development of systems and capabilities is in progress to launch click and collect during FY23, with further enhancements scheduled thereafter.
Brand customer experience Since 2021: New	Brand perception : Card Factory ' s brand recognition has fallen since 2019. If not addressed it could lead to transactional decline. VFM proposition: Card Factory ' s strength in its value offering has been impacted by Covid-19 and increased competition from supermarkets. Price increases may also impact the value proposition to customers. LFL declines: The UK card market is realising reduced volume demand, and if not addressed, growth targets may not be achieved.	Brand perception : A customer marketing function is in development to develop and implement a brand strategy to elevate the brand ' s key attributes. VFM proposition : The newly formed customer marketing team will increase marketing activity, to elevate the VFM messaging and perception. LFL declines : Implementation of the strategic plan is designed to address LFL declines, including an increase in range and sales of complementary categories, increasing customer retention and use of marketing to extend brand appeal to new customers.

Directors' Responsibility Statement

The Annual Report and Accounts 2022 contains a statement of directors' responsibility by Darcy Willson-Rymer, 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 2022 are set out in note 28 of the financial statements on page 151 of the Annual Report and Accounts.

 

END

 

 

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