Interim Results FY20 Six months ended 31 July 2019
Forward-lookingstatements This presentation 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 presentation. Nothing in this presentation 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. The financial information in this presentation does not contain sufficient detail to allow a full understanding of the results of Card Factory plc. For more detailed information, please see the interim results announcement for the six months ended 31 July 2019 which can be found at www.cardfactoryinvestors.com. FY20 Interim Results Presentation 2
Agenda: Interim Results FY20 Group overview Karen Hubbard (CEO) Financial review Kris Lee (CFO) Operational update Karen Hubbard (CEO) Half year summary Karen Hubbard (CEO) Q&A FY20 Interim Results Presentation 3
Group overview 4
Key highlights: Resilient performance despite challenging environment £195.6m +1.5% Revenue CF LFL Sales Growth Robust sales performance with growth in (H1 FY19: £185.3m) (H1 FY19: (0.2%)) all main channels Record Mother’s Day and Valentine’s Day seasons Expanded store network with 26 net new stores Card Factory 26 net new Range, Quality & Pricing continues to drive Online sales growth stores opened seasonal card and non-card performance c. 25% Investment in supply chain, operations and property management business efficiencies to deliver expected savings in the second half Continued growth and investment in New retail 1,000 th store cardfactory.co.uk partnerships: Aldi, opened in August The Reject Shop & Further progress with new sales channels – franchise stores deals agreed with The Reject Shop and Aldi, with further trials planned FY20 Interim Results Presentation 5
Financial review FY20 Interim Results Presentation 6
Financial highlights H1 FY20 H1 FY19 Y/Y Change Financial metrics £195.6m £185.3m 5.5% Revenue 1.5% (0.2%) 1.7 ppts Card Factory LFLs Card Factory Store LFLs 1.2% (0.7%) 1.9 ppts £22.0m £23.9m (7.9%) Profit before tax 5.2p 5.6p (7.1%) Basic EPS 2.9p 2.9p Interim dividend Special dividend 5.0p/£17.1m 5.0p/£17.1m Total dividends since IPO 100.9p/£344.3m 86.6p/£295.4m £170.3m £159.8m Net debt 2 1.93x 1.76x Leverage (pre-IFRS 16 Leases) Adjusted Financial Metrics 3 £28.7m £29.9m (4.0 %) Adjusted EBITDA Adjusted Margin 14.7% 16.1% (1.4 ppts) £21.1m £22.7m (7.0%) Adjusted Profit before tax 5.0p 5.3p (5.7%) Adjusted Basic EPS Note 1: All figures shown on an underlying basis Note 2: Net debt excludes debt issue costs and IFRS 16 Leases liabilities Note 3: Adjusted to remove the impact of IFRS 16 Leases FY20 Interim Results Presentation 7
Like-for-like sales: Outperforming negative footfall trends Total Card Factory H1 like-for-like Performance 3.1% 2.8% 1.5% 0.2% (0.2%) H1 FY16 H1 FY17 H1 FY18 H1 FY19 H1 FY20 Positive like-for-like growth achieved Card Factory store like-for like growth +1.2% compared to decline in prior half year Delivered through new stores and average basket value Additional +0.3% total like-for-like growth delivered through online FY20 Interim Results Presentation 8
Divisional analysis: Card Factory H1 FY20 H1 FY19 Y/Y change £189.6m £178.6m 6.2% Revenue £29.0m £29.4m (1.4%) EBITDA 15.3% 16.5% (1.2 ppts) Margin Store roll out accretive to EBITDA and delivering good return on capital Strong seasonal performance – record Mother’s Day and Valentine’s Day EPOS investment enabling better informed decisions regarding product re-design and ranging – driving improved average basket value and performance of redesigned Everyday ranges Impacted by holding extra stock (for Brexit contingency planning, investment in new lines and the acceleration of seasonal buying), National Living Wage and other headwinds Expected savings in second half from investment in business efficiencies in first half Cardfactory.co.uk continues to grow strongly despite strong prior year FY20 Interim Results Presentation 9
Divisional analysis: Getting Personal H1 FY20 H1 FY19 Y/Y change £6.0m £6.7m N/M Revenue (£0.3m) £0.5m N/M EBITDA -5.0% 6.9% (11.9 ppts) Margin Performance impacted by further increase in cost of customer acquisition and aggressive competitor discounting Underlying EBITDA impacted by 10.4% fall in sales and the rising cost of customer acquisition Strategy in place to grow sales and refocus business on target market: Increased marketing through social media, plus trialling other channels to drive brand awareness Rebranding to improve appeal and to reflect the premium nature of the Getting Personal offering Enhanced international offering FY20 Interim Results Presentation 10
Revenue: Consistent sales growth £’m Group Revenue H/H (£m) 250.7 242.5 229.0 220.2 H2 H1 195.6 185.3 179.6 169.2 161.4 FY16 FY17 FY18 FY19 FY20 Five-year H1 Group Revenue CAGR +4.9% H1 FY20 growth driven by like-for-like performance, new store openings and online Strong non-LFL growth through new store openings FY20 Interim Results Presentation 11
Operating margins: Best-in-class H1 FY20 H1 FY19 Pre-IFRS 16 IFRS 16 Post-IFRS % of Restated % of £’m £’m 16 revenue £’m revenue £’m Cost of goods sold 63.5 - 63.5 32.5% 59.5 32.1% 39.9 - 39.9 35.8 19.3% Store wages 20.4% Store property costs 34.6 (21.6) 13.0 6.6% 12.6 6.8% Other direct expenses 10.6 - 10.6 5.4% 9.5 5.1% Cost ofsales 148.6 (21.6) 127.0 64.9% 117.4 63.4% Operating expenses 18.3 (0.5) 17.8 9.1% 16.5 8.9% (excl. depreciation) 28.7 22.1 50.8 51.4 27.7% EBITDA 26.0% Increased cost headwinds including NLW and costs of extra stock holding Investment in IT store support for EPOS and other IT projects including distribution centre voice picking Cost growth from debit/credit card transactions volume growth and higher merchant fees Investment in increased capability and capacity of Card Factory online resource Note: All figures shown on an underlying basis FY20 Interim Results Presentation 12
Free cash flow: Strong cash generation impacted by working capital H1 FY20 H1 FY19 Y/Y Change £’m £’m Underlying EBITDA(pre-IFRS 16 Leases ) 28.7 29.9 (4%) IFRS 16 Leases adjustments 22.1 21.5 Underlying EBITDA 50.8 51.4 (1%) Non-underlying FX gain/loss 2.3 4.5 Loss on disposal, share-based payment & hedge reserve gains (0.3) 0.3 Operating cash flow before working capital 52.8 56.2 (6%) Net working capital movement (18.7) 1.7 Corporation tax (7.7) (5.6) Capital expenditure(ex IFRS 16 Leases ) (9.8) (5.6) Disposal proceeds / (costs) 0.4 (0.1) Lease liability payments (20.1) (19.3) Net interest paid (inc. IFRS 16 Leases ) (4.0) (3.9) Free cash flow (7.1) 23.4 (130%) Free cash flow is distorted by the timing of working capital payments in and around the FY19 year-end, as previously highlighted Exceptional impact of holding extra stock for a prolonged period for Brexit contingency planning, investment in new lines and the acceleration of seasonal buying FY20 Interim Results Presentation 13
Capex: Low, predictable and well controlled H1 FY20 spend H1 FY20 H1 FY19 £’m £’m Investment in one-off strategic One-off strategic projects: projects including new digital printing press, supply chain technology and the Vertical integration 3.8 1.5 replatforming of Cardfactory.co.uk EPOS - 0.6 Ongoing investment in store estate Commercial initiatives / other 0.8 0.4 Replatforming cardfactory .co.uk 0.8 - Capex remains low as a proportion of operating cash flow Supply chain technology 0.6 - Sub-total 6.0 2.5 FY20 guidance – ca. £18m Recurring capex: Further investment in vertical New stores 2.2 1.8 integration and completion of Existing stores 0.2 0.1 Cardfactory.co.uk replatforming Relocations 0.5 0.2 Additional c. 24 net store openings Other capex 0.9 1.0 Sub-total 3.8 3.1 Commercial initiatives Total capex 9.8 5.6 FY20 Interim Results Presentation 14
Dividends: Capital policy remains unchanged Interim ordinary dividend 2.9 pence £344.3m returned to shareholders since IPO in May 2014 per share* (H1 FY19 2.9 pence) Special dividend of 5.0 pence per Dividend (pence per share) £’m share* (H1 FY19 5.0 pence) Total cash return since IPO of £344.3m from organic cash generation Final 6.4 6.3 6.0 Special Our policy is to target year-end net Interim debt in the range of 1.0 to 2.0x 6.4 15.0 15.0 15.0 Adjusted EBITDA 5.0 5.0 Maintain a capital structure that is 4.5 conservative yet efficient in terms of 2.8 2.9 2.9 2.9 2.3 2.5 providing returns to shareholders FY15 FY16 FY17 FY18 FY19 FY20 * Payable on 19 December 2019 to those on register on 8 November 2019 FY20 Interim Results Presentation 15
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