Compare the quality…….Compare the price Preliminary results presentation Year ended 31 January 2015 25 March 2015
Forward-looking statements This presentation 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. 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 preliminary announcement for the financial year ended 31 January 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 FY15 FY14 change Revenue £353.3m £326.9m +8.1% LFLs +1.8% +3.1% EBITDA £88.2m £80.4m +9.6% Margin 25.0% 24.6% +0.4ppts Operating profit £79.4m £72.9m +8.9% Margin 22.5% 22.3% +0.2ppts Operating cashflow £79.2m £69.0m +14.8% Cash conversion 89.8% 85.8% +4.0ppts Net senior debt £103.6m Leverage 1.17x Notes 1. All figures shown on an underlying basis 2. Operating cashflow calculated as underlying EBITDA less capex and working capital movements 3. Cash conversion calculated as operating cashflow divided by underlying EBITDA 6
Both brands performing well Strong growth in revenue and EBITDA Year-on-year FY15 FY14 change Revenue £337.8m £314.3m +7.5% EBITDA £85.4m £78.7m +8.4% Margin 25.3% 25.1% +0.2ppts Revenue £15.5m £12.6m +23.1% EBITDA £2.8m £1.7m +67.6% Margin 18.0% 13.2% +4.8ppts Notes 1. All figures shown on an underlying basis 2. See Appendix for H1/H2 split by brand 7
Card Factory stores Sales mix by product category FY14 Sales Mix FY15 Sales Mix 2.2% 2.4% 38.5% 39.9% 57.9% 59.1% Single cards Non-card items Christmas box cards Marginal shift to non-card items with quality and range improvements and continued decline in Christmas box cards category as expected 8
Best-in-class margins Further improvements delivered FY14 Sales to EBITDA Bridge FY15 Sales to EBITDA Bridge Cost of sales Cost of sales £240.0m £223.3m 67.9% 68.3% £80.4m £88.2m 24.6% 25.0% £102.0m £110.3m 31.2% 31.2% £23.2m £25.1m 7.1% 7.1% £14.7m £15.7m 4.5% 4.4% £52.9m £57.3m 16.2% £56.7m 16.2% £53.7m 16.1% 16.4% 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 FY15 FY14 £’m £’m Underlying results EBITDA 88.2 80.4 Depreciation & amortisation (8.8) (7.5) Operating profit 79.4 72.9 Net finance expense (Note 1) (13.9) (40.9) Profit before tax 65.5 32.0 Non-underlying adjustments Gains/losses on forex derivatives not designated as a hedge (0.1) (1.9) IPO costs (3.8) - Residual Management Equity share based payment (Note 2) (11.2) - Refinanced debt issue cost amortisation (7.7) - Statutory profit before tax 42.7 30.1 Notes 1. Net financing expense reflects significantly higher cost financing prior to IPO and senior debt refinancing (both completed in May 2014). 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 FY15 FY14 £’m £’m Cash inflow from operating activities 84.9 79.1 Corporation tax (9.6) (12.1) Net cash inflow from operating activities 75.3 67.0 Capital expenditure (10.1) (12.0) Deferred consideration (0.8) (0.5) Interest received 0.3 0.5 Net cash outflow from investing activities (10.6) (12.0) Net cash inflow before financing activities 64.7 55.0 Cash conversion 89.8% 85.8% Note Cash conversion calculated as - underlying EBITDA less capex and working capital movements; divided by - underlying EBITDA Long established, consistent track record of generating surplus cash 11
Capex Low, predictable and well controlled FY15 FY14 Predictable recurring annual capex £’m £’m – c £7-8m pa One-off strategic projects Gate 4 warehouse / Head Office 0.1 1.7 Getting Personal - 0.3 Limited additional one-off strategic projects EPOS 2.6 3.3 – Well invested business Sub-total 2.7 5.3 EPOS conversion project in progress Recurring capex New stores 3.4 3.4 – Installed in all new stores Existing stores 0.9 0.4 – Conversion of existing estate continuing Relocations 0.9 1.0 – Over 50% of estate now on EPOS Other capex 2.2 1.9 Sub-total 7.4 6.7 – Completion anticipated by end FY17 Total capex 10.1 12.0 12
Senior debt refinancing New £200m corporate facility £’m Refinancing completed on 30 May 2014 As at 31 January 2015 Senior debt 172.5 Outline terms Other debt/interest 0.1 – 5yr term Debt costs capitalised (2.2) – Total borrowings 170.4 £180m senior term loan (current margin 2.0%) – £7.5m repayable every 6 months (from 31 January 2015) Analysed as: – £20m RCF facility (current margin 1.75%) Current liabilities 14.5 – No early repayment fees Non-current liabilities 155.9 170.4 Significant reduction in annualised interest cost Add: debt costs capitalised 2.2 Gross debt 172.6 £100m LIBOR swap @ 0.795% to October 2015 Less cash (69.0) Net debt 103.6 £2.6m debt costs amortising over life of facility – All cash paid on completion of debt refinancing LTM underlying EBITDA 88.2 Leverage 1.17x Significant covenant headroom Significant reduction in leverage since IPO 13
Dividend Progressive policy plus potential for surplus returns Maiden dividend calculated on a proforma basis: £’m Comments Underlying operating profit 79.4 As reported Pro forma calculations - Annualisation of incremental PLC operating costs (0.4) Assuming IPO on 31 January 2014 - Pro forma interest expense (5.4) Assuming debt refinancing on 31 January 2014 Pro forma profit before tax 73.6 Pro forma tax charge (16.2) Assuming 22% effective tax rate Pro forma profit after tax 57.4 Pro forma EPS 16.85p Assuming all shares in issue from 31 January 2014 Dividend 6.8p c40% of pro forma EPS (2.5x cover) Split 2.3p Interim and 4.5p Final, both payable in June, with Final subject to AGM approval in May For FY16 onwards, progressive dividend policy with dividends split: – Interim (announced September, payable November) – Final (announced March, payable June) Leverage to be maintained at broadly 1-2x EBITDA with surplus cash returned to shareholders 14
FY16 outlook Four pillars of growth LFL sales growth Targeting medium term LFL growth in line with 5 year average New store openings Targeting 50 net new store openings Business efficiencies Targeting maintenance of underlying EBITDA margins before incremental costs of being a listed company Online development Targeting double digit LFL growth at Getting Personal Other guidance Foreign exchange FY16 requirement c90% hedged at similar rate to FY15 average Capex Annual recurring capex c£8m One-off strategic capex of up to £4m pa - principally EPOS - c£2m pa in FY16 and FY17 - other potential strategic projects – returns critically assessed 15
Financial performance Summary Strong profit margins Strong revenue growth - Consistent track record - Like-for-like store sales - Cost control culture - New store roll out - Business efficiencies - Online development - Incremental PLC costs Strong cash generation Rapidly reducing leverage - Consistently strong operating - 1.17x EBITDA of £88.2m cashflow - To be maintained at 1-2x EBITDA - Low, predictable and well - Significant interest saving from controlled capex May 2014 debt refinancing Consistently strong financial performance across the Group 16
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 18
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