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

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Interim results presentation

6 months ended 31 July 2015 22 September 2015

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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.

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

Agenda

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Introduction

Geoff Cooper Chairman

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Financial review

Darren Bryant Chief Financial Officer

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Financial highlights

H1 FY16 H1 FY15 Year-on-year change Revenue £161.4m £149.4m +8.0% LFLs +2.7% +2.6% EBITDA £32.5m £30.2m +7.7% Margin 20.1% 20.2%

• 0.1ppts

Operating profit £27.8m £26.1m +6.5% Margin 17.3% 17.5%

• 0.2ppts

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

Year-on-year margin impacted by share based payment charges following IPO in May 2014 (see

• ver)

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Financial highlights

Impact of share based payment charges

H1 FY16 £’m H1 FY15 £’m Year-on-year 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

 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:

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Both brands performing well

Strong growth in revenue and EBITDA

H1 FY16 H1 FY15 Year-on-year change Revenue £154.5m £143.9m +7.4% EBITDA £31.2m £29.4m +6.3% Margin 20.2% 20.4%

• 0.2ppts

Proforma Margin (see Note 2) 20.7% 20.5% +0.2ppts 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

9 £46.3m 31.0% £25.5m 17.1% £28.1m 18.8% £7.5m 5.0% £11.8m 7.9% £30.2m 20.2%

Consistent performance through strong control of costs

Best-in-class margins

H1 FY15 Sales to EBITDA Bridge

Cost of goods sold Store property costs Store wages Other direct expenses EBITDA Operating expenses (excluding depreciation and amortisation) £50.7m 31.4% £27.5m 17.0% £29.6m 18.3% £7.8m 4.9% £13.3m 8.3% £32.5m 20.1%

H1 FY16 Sales to EBITDA Bridge

Cost of sales £115.6m 71.6% Cost of sales £107.4m 71.9%

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Reconciliation to statutory results

H1 FY16 £’m H1 FY15 £’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.

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Strong cash generation

H1 FY16 £’m H1 FY15 £’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

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Capex

Low, predictable and well controlled

 Total capex includes: – Recurring annual capex

• Maintenance and roll-out
• c £7-8m pa

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

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A more flexible, cost effective facility

Debt refinancing

New £200m RCF facility

 Refinancing completed in June 2015  New 5 year term £200m RCF – Significant reduction in annualised interest cost – New lower margin ratchet, ranging between:  100bps below 1.25x leverage; and  200bps above 2.00x leverage – Additional £100m accordion (undrawn)  Interest rate hedging – £100m LIBOR swap @ 0.795% to October 2015 – £60m hedging from October 2015  £1.0m debt costs amortising over life of facility – All payable on completion of debt refinancing – Remaining £1.8m from 2014 refinancing written off as non-underlying item  Significant covenant headroom

As at 31 July 22015 £’m 2014 £’m Bank debt 120.0 180.0 Other debt/interest 0.1 0.2 Debt costs capitalised (1.0) (2.5) Total borrowings 119.1 177.7 Analysed as: Current liabilities 0.1 14.6 Non-current liabilities 119.0 163.1 119.1 177.7 Add: debt costs capitalised 1.0 2.5 Gross debt 120.1 180.2 Less cash (11.1) (33.5) Net debt 109.0 146.7 LTM underlying EBITDA 90.5 83.1 Leverage 1.20x 1.77x

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Opportunities for further surplus cash returns

Dividends

 Interim ordinary dividend – 2.5 pence per share – Increase of 8.7% from H1 FY15 interim – Payable on 27 November  Special dividend – 15 pence per share – Total cash return of £51.1m from organic cash generation – Payable on 27 November  Total cash returns since May 2014 IPO – 24.3 pence per share – Equivalent to 10.8% of IPO issue price

2.3 2.5 4.5

FY15 FY16

Ordinary dividends (pence)

Interim Final

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Financial performance

Summary

Consistently strong performance across the Group

Strong profit margins

• Cost control culture
• Business efficiencies
• Incremental PLC costs
• Some headwinds from FY17

Strong revenue growth

• Like-for-like store sales
• New store roll out
• Online development

Surplus cash returns

• Leverage reduced to 1.20x LTM

EBITDA of £90.5m

• Special dividend of 15p (£51.1m)
• Potential for further returns

Strong cash generation

• Consistently strong operating

cashflow

• Low, predictable and well

controlled capex

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Strategic update

Richard Hayes Chief Executive Officer

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Strategy overview

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

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Like-for-like sales growth

Consistent track record of positive LFLs

 Good H1 performance +2.7% – Towards upper end of range targeted – Non-card performance particularly strong  Historic annual LFLs within narrow range – Robust, resilient market – Highlights consistency of Card Factory model  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 – Quality and range – Card and Non-card

Consistent historic LFL performance within narrow range of +1.4% to +3.2%

2.7% 2.6% 1.8% 3.1% 3.2% 1.4% 2.9% H1 FY16 H1 FY15 FY15 FY14 FY13 FY12 FY11

5 year average +2.5% pa 5 year range +1.4% to +3.2% pa

Note All figures exclude online

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New store roll out

Proven high returns model continues

 New stores performing in line with management expectations  Ongoing openings against established competitors, large and small, in new locations  Strong pipeline for FY16 – On target for c 50 net openings – Well established track record of delivery  Large number of locations still without a Card Factory

1 2 4 9 20 39 78 132 189 279 333 384 484 531 611 664 713 764 800 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 H1 Store numbers (FY) Acquisitions Store Openings Stores

Deliverable store potential

• f up to

1,200 Store numbers FY16 H1 FY15 H1 At start of period 764 713 New store openings 42 37 Closures (6) (1) At end of period 800 749 Relocations 2 5

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New store roll out

800th store opened in Reading

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Business efficiencies

Consistently strong margins maintained

 Reported margins broadly flat – Movement reflects impact of share based payment charges following IPO in May 2014 – Underlying proforma margins improved before these costs  Strong culture of cost control and economies of scale – Various business efficiency initiatives underway – Others being assessed  FY17 headwinds – Foreign exchange – National Living Wage

Underlying margins improved before incremental operating costs of May 2014 flotation

17.3% 17.5% 17.4% 20.1% 20.2% 20.0%

H1 FY16 H1 FY15 H1 FY14 Operating margin EBITDA margin

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Online development

Another period of significant progress

 Excellent H1 performance – Turnover up 24.9% to £6.9m – EBITDA up 58.8% to £1.3m  Continuation of strong FY15 H2 sales growth trend – Annualisation of impact of “responsive” website launch in mid FY15  Further margin improvements delivered  Tough prior year comparatives in H2  Significant medium term growth potential

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Online development

New Card Factory transactional website

 Soft relaunch in April 2015  Utilises in-house, responsive technology platform developed by Getting Personal  Significant enhancement to its predecessor  Early signs promising – Step change in weekly sales levels – Introduction of a small range of personalised cards and gifts  Remains small part of Group revenue – Revenue run rate approaching £1m pa  Significant medium term growth potential

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New store roll out

36 net new openings (H1 FY15: 36)

Like-for-like sales growth

+2.7% (H1 FY15: +2.6%)

Online development

Getting Personal EBITDA up 58.8% Relaunch of Card Factory website

Business efficiencies

Maintained best-in-class EBITDA margins at 20.1% (H1 FY15: 20.2%)

Board remains confident of Group’s future prospects

Summary

Delivering on our four pillars of growth

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Questions