What significant factors led Card Factory to anticipate a loss during FY21?

  • January 15, 2021 03:25 PM GMT
  • Kunal Sawhney
    Kunal Sawhney
    CEO Kunal Sawhney
    2782 Posts

    Kunal Sawhney is founder & CEO at Kalkine and is a richly experienced and accomplished financial professional with a wealth of knowledge in the Australian Equities Market. Kunal obtained a Master of Business Administration degree from University of T...

What significant factors led Card Factory to anticipate a loss during FY21?

Summary

  • Card Factory Plc had reported a decline of 33.7% in its revenue to £281.4 million during the first eleven months period of FY21 ending 31 December 2020.
  • The gross store sales declined by 38.1% during the period.
  • The Company had anticipated its FY21 revenue to be approximately £284 million and its loss before tax to be around negative £10 million.
  • Darcy Willson-Rymer will join the organization as Chief Executive Officer from 08 March 2021.

Card Factory Plc (LON: CARD) is the FTSE All-Share listed consumer stock. The Company is the one of the most prominent UK-based retailer of greeting cards and gifts. The Company’s shares have generated a return of about negative 62.27%.

Business Model

The Company is one of the most prominent retailer of greeting cards present in the UK. The Company run its business through two operating segments –

  • Card Factory
  • Getting Personal

According to the management estimate, the Company had 33% of the market volume in 2019. The competitive environment is briefed below -

(Source: Company website)

UK Greeting Card Market

As per management analysis of the Company, 76% of UK adults had purchased a greeting card during 2019. According to the estimates, around 875 million cards were sold in the entire UK for 2019. The key growth driver was the higher average price per greeting card. 

Strategy Progress

(Source: Company presentation)

Trading Update (for eleven-month period ending 31 December 2020, as on 14 January 2021)

  • The Company had reported a decline of 33.7% in its revenue to £281.4 million during the first eleven months period of FY21, while it was £424.5 million during an equivalent period of the prior year.
  • The gross store sales of the Company were declined by 38.1% during the period due to temporary closure of stores as it remained closed for approximately 37% of trading days during the period. The Company had reported a growth of 63% in sales to the trading partners.
  • The Company had shown resilient performance in its online segment as its website “co.uk” achieved 137% LFL sales growth, and “gettingpersonal.co.uk” delivered 10% LFL growth during the period.
  • The Company had sufficient banking facilities of £200 million considering current national lockdown would get over by 30 April 2021.
  • Regarding the customers’ footfall, the British Retail Consortium had reported that customers footfall was slipped by 43.4% during FY20, while it was reduced by 46.1% during December 2020 from the comparative period of the prior year.
  • On an optimistic note, the Company had achieved LFL sales growth of 17.7% for the period from 01 October 2020 to 02 November 2020 compared to an equivalent period of the prior year.
  • The national lockdown had hampered the November 2020 sales and impacted trading performance during December 2020.
  • The Company had reinforced its balance sheet by reducing its net debt from £119 million as of 31 December 2019 to £90 million as of 31 December 2020.

 

Recent News

On 21 December 2020, the Company had announced that Darcy Willson-Rymer will join the organization as Chief Executive Officer from 08 March 2021. He had been the CEO of Costcutter Supermarkets for the last eight years.

Financial Highlights (for six months ended 31 July 2020, as on 29 September 2020)

(Source: Company result)

  • The Group revenue was plunged by 48.6% year-on-year to £100.5 million during H1 FY21 due to the closure of stores for the significant portion of the period. The like for like revenue related to stores in the UK & Ireland went down by 4.4% during the period.
  • The online segment had witnessed LFL sales growth of 64.4% due to a spike in demand amid the closure period.
  • The Company had reported a loss before tax of negative £22.2 million during H1 FY21, while it had achieved a profit before tax of £24.3 million during an equivalent period of the prior year.
  • The underlying basic loss per share was negative 5.2 pence during H1 FY21.
  • The Company had managed to decrease the net debt from £170.3 million during H1 FY20 to £143.9 million during H1 FY21 due to the cash conservation measures.
  • The Company had generated operating cash flow of £25.2 million during H1 FY21 compared to £34.1 million during H1 FY20.
  • On the leverage front, the Company had maintained net debt/LTM underlying PBT of 6.3x as of 31 July 2020.
  • The operational performance was adversely impacted by Covid-19 pandemic during the spring season.
  • The Company had reduced its capital investment to £3.5 million during H1 FY21 compared to £9.8 million during H1 FY20.

Operational Highlights (as on 29 September 2020)

  • The Company had relaunched cardfactory.co.uk platform on 02 July 2020.
  • The Company had 1,017 stores operational as of 29 September 2020.
  • The franchise operations across Jersey, Gibraltar and Guernsey, had shown robust trading performance during H1 FY21.

Share Price Performance Analysis of Card Factory Plc 

(Source: Refinitiv, chart created by Kalkine group)

Shares of Card Factory Plc were trading at GBX 37.90 and were up by close to 1.61% against the previous closing price as on 15 January 2021, (before the market close at 10:00 AM GMT). CARD's 52-week High and Low were GBX 101.10 and GBX 22.00, respectively. Card Factory Plc had a market capitalization of around £127.43 million.

Business Outlook

The Company seemed to be quite sure that all stores would be closed at least till the end of January 2021. The Company had anticipated its FY21 revenue to be approximately £284 million and its loss before tax to be around negative £10 million. The Company is currently under review of compiling and announcement of its final results. Considering the duration of restrictions and closure is undetermined, the Company could not provide proper financial guidance for FY22.

 

 


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