Card Factory Plc Robust performance in a challenging consumer environment

Card Factory Plc (LON:CARD), the UK’s leading specialist retailer of greeting cards, dressings and gifts, announces its preliminary results for the year ended 31 January 2019 (‘FY19’).

Summary

· Grown market share in volume and value of single cards in a stable card market

· Flat like-for-like (“LFL”) sales despite widespread high street footfall decline

· Strong seasonal and non-card performance underpinned by design and innovation

· Extending store footprint and trialling new routes to market and formats through third party partnerships

· FY19 profit in line with expectations after impact of easing cost headwinds

· Strong cash generation and robust returns to shareholders

Financial highlights

· Total ordinary dividend per share, including proposed final, maintained at 9.3p (FY18: 9.3p)

· A special dividend of 5.0p per share was paid in December 2018 (FY18: 15.0p)

· We remain focused on shareholder returns and committed to distributing surplus cash to shareholders; a further return is expected to be made towards the end of the FY20 financial year

* See Explanatory note 2 “Alternative Performance Measures” for further information and definitions

Business highlights

Further progress on all four pillars of the Group’s growth strategy:

1. Like-for-like sales

· Like for like sales impacted by footfall

· Further improvements in card ranges and designs, including new everyday premium ranges

· Strong performance in seasonal cards across key occasions

· Continued growth in average basket value with further new ranges in non-card offering

· Market-leading quality and price position maintained

· Utilising EPOS data to enhance product offer and range

2. Continuing new store roll out

· 51 net new stores opened in the period, bringing the total store estate to 972 (including seven in the Republic of Ireland)

· First franchise store opened in Jersey

· Strong pipeline of new store opportunities for FY20

3. Delivering business efficiencies

· Underlying EBITDA margin of 20.5% (FY18: 22.3%) reflects flat LFL performance and cost headwinds but remains industry leading

· Improved efficiency in vertical integration driving savings, particularly through lower printing costs with further opportunities identified for FY20 and beyond

· Targeted business efficiencies achieved, increasing in-store productivity and warehouse and supply chain optimisation

· Confidence in the ongoing plan with FY20 business efficiencies identified to mitigate easing cost headwinds

4. Development of complementary online sales channels

· cardfactory.co.uk sales increased by 56.3% against strong prior year comparatives and was a profitable contributor to the Group

· Attracted new customers to the online brand and introduced new products not available in store

· gettingpersonal.co.uk sales decline was disappointing; the increasing cost of customer acquisition and promotional led competitor pricing resulted in a substantial reduction in EBITDA in the year.

Karen Hubbard, Chief Executive Officer, commented:

“We delivered a robust performance for the year, maintaining flat like-for-like sales despite a tough consumer environment. Our focus has been on continual improvements to our customer offer, producing better, more innovative ranges of everyday and seasonal cards and maintaining our quality and value positioning, while also being more efficient and driving savings across the business. EBITDA for the year however, was impacted by lower footfall and Getting Personal’s disappointing performance.

“We continue to look to leverage our unique, vertically integrated model to improve our competitive advantage and drive margins. We have further initiatives planned for the current year which will bring further production back to the UK, whilst also implementing additional plans that will allow an improved focus on customer service in store.

“New stores remain our biggest growth channel, and we opened a net 51 in the year, with a good pipeline going forward. We are now also exploring other opportunities to extend our reach beyond 1,200 stores in the UK and internationally to drive profitable growth. Encouragingly, some initial trials with Aldi in the UK, in an Australian retailer, and with a franchise partner in Jersey show that the Card Factory brand is a footfall driver that has real resonance; we will pursue these types of opportunities to open new routes to market where we see attractive returns.

“Whilst the new financial year is just two months old, we are satisfied with the start we have made and are particularly pleased with record seasonal performances from Valentine’s Day and Mother’s Day. As previously stated, EBITDA for the forthcoming year is anticipated to be broadly flat year-on-year (excluding the impact of IFRS 16) in light of various external pressures, but we are confident we are laying the right foundations for future profit growth, whilst continuing to deliver healthy returns of cash to our shareholders.”

Preliminary results presentation

A presentation for analysts will be held today starting at 9.00am at UBS Limited, 5 Broadgate, London EC2M 2QS. Those analysts who wish to attend are requested to contact Nessyah Hart of MHP on the number below or at [email protected]. A copy of the presentation will be made available on the Card Factory investor relations website (www.cardfactoryinvestors.com).