Interim results presentation 6 months ended 31 July 2015 22 - PowerPoint PPT Presentation

Compare the quality…….Compare the price Interim results presentation 6 months ended 31 July 2015 22 September 2015

Forward-looking statements 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 Card Factory plc. For more detailed information, please see the interim results announcement for the six months ended 31 July 2015 which can be found on www.cardfactoryinvestors.com. 2

Agenda  Introduction Geoff Cooper (Chairman)  Financial review Darren Bryant (CFO)  Strategic update Richard Hayes (CEO)  Questions 3

Compare the quality…….Compare the price Introduction Geoff Cooper Chairman

Compare the quality…….Compare the price Financial review Darren Bryant Chief Financial Officer

Financial highlights Year-on-year H1 FY16 H1 FY15 change Revenue £161.4m £149.4m +8.0% LFLs +2.7% +2.6% EBITDA £32.5m £30.2m +7.7% Year-on-year Margin 20.1% 20.2% -0.1ppts margin impacted by share based payment charges Operating profit £27.8m £26.1m +6.5% following IPO in May 2014 (see Margin 17.3% 17.5% -0.2ppts over) Net debt £109.0m £146.7m -25.7% Leverage 1.20x 1.77x Note 1. All figures shown on an underlying basis 2. Net debt is shown before deduction of debt costs capitalised 3. Leverage ratio calculated using period end debt (as above) and LTM underlying EBITDA 6

Financial highlights Impact of share based payment charges  Year-on-year Group margin progression distorted by build up of share based payment charges commencing on IPO – principally 2014 and 2015 LTIPs and 2015 SAYE schemes – eg accounting “cost” of each year’s LTIP award amortised over 3 year vesting period  Underlying proforma margins improved slightly, after other ongoing costs of listing: H1 FY16 H1 FY15 Year-on-year £’m £’m change EBITDA 32.5 30.2 +7.7% Share-based payments charge 0.7 0.1 Proforma EBITDA 33.2 30.3 +9.8% Proforma Margin 20.6% 20.3% +0.3ppts Operating profit 27.8 26.1 +6.5% Share-based payments charge 0.7 0.1 Proforma Operating profit 28.5 26.2 +8.9% Proforma Margin 17.7% 17.5% +0.2ppts Notes 1. All figures shown on an underlying basis 2. Proforma Margin shown before share based payment charges incurred post IPO in May 2014 7

Both brands performing well Strong growth in revenue and EBITDA Year-on-year H1 FY16 H1 FY15 change Revenue £154.5m £143.9m +7.4% EBITDA £31.2m £29.4m +6.3% Margin 20.2% 20.4% -0.2ppts Proforma Margin 20.7% 20.5% +0.2ppts (see Note 2) Revenue £6.9m £5.5m +24.9% EBITDA £1.3m £0.8m +58.8% Margin 18.3% 14.4% +3.9ppts Notes 1. All figures shown on an underlying basis 2. Proforma Margin shown before share based payment charges incurred post IPO in May 2014 8

Best-in-class margins H1 FY15 Sales to EBITDA Bridge H1 FY16 Sales to EBITDA Bridge Cost of sales Cost of sales £115.6m £107.4m 71.6% 71.9% £30.2m £32.5m 20.2% 20.1% £46.3m £50.7m 31.0% 31.4% £11.8m £13.3m 7.9% 8.3% £7.5m £7.8m 5.0% 4.9% £25.5m £27.5m £28.1m 17.1% £29.6m 17.0% 18.8% 18.3% Cost of goods sold Store wages Store property costs Other direct expenses Operating expenses EBITDA (excluding depreciation and amortisation) Consistent performance through strong control of costs 9

Reconciliation to statutory results H1 FY16 H1 FY15 £’m £’m Underlying results EBITDA 32.5 30.2 Depreciation & amortisation (4.7) (4.1) Operating profit 27.8 26.1 Net finance expense (Note 1) (2.1) (11.2) Profit before tax 25.7 14.9 Non-underlying adjustments Gains/losses on forex derivatives not designated as a hedge 0.1 (0.3) IPO costs - (3.6) Residual Management Equity share based payment (Note 2) - (11.2) Refinanced debt issue cost amortisation (1.8) (7.7) Statutory profit/(loss) before tax 24.0 (7.9) Notes 1. Net financing expense reflects significantly higher financing cost prior to IPO (completed May 2014) and debt refinancings (completed May 2014 and June 2015). 2. One-off charge relating to shares issued to certain members of management after Admission, as set out in the IPO prospectus. 10

Strong cash generation H1 FY16 H1 FY15 £’m £’m Cash inflow from operating activities 32.8 30.5 Corporation tax (5.4) (5.1) Net cash inflow from operating activities 27.4 25.4 Cash outflow from investing activities Capital expenditure (see over) (6.2) (5.6) Deferred consideration (0.8) (0.7) Interest received 0.3 0.2 Net cash outflow from investing activities (6.7) (6.1) Net cash inflow before financing activities 20.7 19.3 Consistently strong performance 11

Capex Low, predictable and well controlled  H1 FY16 H1 FY15 Total capex includes: £’m £’m – Recurring annual capex One-off strategic projects - Maintenance and roll-out Getting Personal 0.2 0.1 EPOS 2.1 1.5 - c £7-8m pa Sub-total 2.3 1.6 – One-off strategic projects Recurring capex  H1 FY16 one-off strategic capex New stores 2.5 1.7 Existing stores 0.1 0.8 – Getting Personal office relocation Relocations 0.2 0.3 – Ongoing EPOS conversion project Other capex 1.1 1.2 Sub-total 3.9 4.0  Medium term view Total capex 6.2 5.6 – Budgeting total annual capex of c£12m pa 12

Debt refinancing New £200m RCF facility  Refinancing completed in June 2015 22015 2014 As at 31 July £’m £’m  New 5 year term £200m RCF Bank debt 120.0 180.0 – Significant reduction in annualised interest cost Other debt/interest 0.1 0.2 – New lower margin ratchet, ranging between: Debt costs capitalised (1.0) (2.5)  100bps below 1.25x leverage; and Total borrowings 119.1 177.7  200bps above 2.00x leverage – Additional £100m accordion (undrawn) Analysed as: Current liabilities 0.1 14.6  Non-current liabilities 119.0 163.1 Interest rate hedging – 119.1 177.7 £100m LIBOR swap @ 0.795% to October 2015 Add: debt costs capitalised 1.0 2.5 – £60m hedging from October 2015 Gross debt 120.1 180.2 Less cash (11.1) (33.5)  £1.0m debt costs amortising over life of facility Net debt 109.0 146.7 – All payable on completion of debt refinancing – Remaining £1.8m from 2014 refinancing written off LTM underlying EBITDA 90.5 83.1 as non-underlying item Leverage 1.20x 1.77x  Significant covenant headroom A more flexible, cost effective facility 13

Dividends Ordinary dividends  Interim ordinary dividend (pence) – 2.5 pence per share – Increase of 8.7% from H1 FY15 interim – Payable on 27 November  Special dividend 4.5 – 15 pence per share – Total cash return of £51.1m from organic cash generation – Payable on 27 November  2.5 Total cash returns since May 2014 IPO 2.3 – 24.3 pence per share – Equivalent to 10.8% of IPO issue price FY15 FY16 Interim Final Opportunities for further surplus cash returns 14

Financial performance Summary Strong profit margins Strong revenue growth - Cost control culture - Like-for-like store sales - Business efficiencies - New store roll out - Incremental PLC costs - Online development - Some headwinds from FY17 Strong cash generation Surplus cash returns - Consistently strong operating - Leverage reduced to 1.20x LTM cashflow EBITDA of £90.5m - Low, predictable and well - Special dividend of 15p (£51.1m) controlled capex - Potential for further returns Consistently strong performance across the Group 15

Compare the quality…….Compare the price Strategic update Richard Hayes Chief Executive Officer

Strategy overview Four pillars of growth Like-for-like sales growth New store roll out Business efficiencies Online development Consistently strong cash generation and shareholder returns 17

Like-for-like sales growth Consistent track record of positive LFLs 3.1% 3.2%  Good H1 performance +2.7% 5 year range 2.9% – Towards upper end of range targeted +1.4% to +3.2% pa 2.7% 2.6% – Non-card performance particularly strong 5 year average +2.5% pa  Historic annual LFLs within narrow range – 1.8% Robust, resilient market – Highlights consistency of Card Factory model 1.4%  Board continues to target similar medium term trend going forward – May be degree of variation from period to period  Continued focus on improving retail proposition H1 H1 FY15 FY14 FY13 FY12 FY11 – Quality and range FY16 FY15 – Card and Non-card Note All figures exclude online Consistent historic LFL performance within narrow range of +1.4% to +3.2% 18