Preliminary results Year ended 31 January 2017

Transcription

1 Insert Text Here Preliminary results Year ended 31 January March 2017

2 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 of Card Factory plc. For more detailed information, please see the preliminary results announcement for the year ended 31 January 2017 which can be found on 2

3 Agenda Introduction Geoff Cooper (Chairman) Financial review Darren Bryant (CFO) Strategic update Karen Hubbard (CEO) Questions 3

4 Insert Text Here Introduction Geoff Cooper Chairman 4

5 Insert Text Here Financial review Darren Bryant Chief Financial Officer 5

6 Financial highlights Another record year 6 FY17 FY16 Year-on-year change Revenue 398.2m 381.6m +4.3% Card Factory LFLs Store LFLs +0.6% +0.4% +3.0% +2.8% EBITDA 98.5m 95.0m +3.8% Margin 24.7% 24.9% -0.2ppts Operating profit 87.8m 85.3m +3.0% Margin 22.1% 22.4% -0.3ppts Profit before tax 85.1m 82.0m +3.8% Effective tax rate 20.7% 20.7% - Earnings per share 19.8p 19.1p +3.8% Total ordinary dividend 9.1p 8.5p +7.1% Dividend cover 2.18x 2.25x Special dividend 15.0p/ 51.1m 15.0p/ 51.1m Total dividends since IPO 54.4p/ 185.4m 30.3p/ 103.2m Net debt 135.8m 123.8m Leverage 1.38x 1.30x Notes 1. All figures shown on an underlying basis 2. Total FY17 ordinary dividend includes recommended 6.3p final dividend, subject to AGM approval

7 Divisional performance Strong growth in Card Factory; Getting Personal disappointing FY17 FY16 Year-on-year change Revenue 380.5m 363.4m +4.7% EBITDA 95.7m 90.9m +5.3% Margin 25.2% 25.0% +0.2ppts Revenue 17.7m 18.2m -2.6% EBITDA 2.8m 4.1m -30.4% Margin 16.0% 22.4% -6.4ppts Notes 1. All figures shown on an underlying basis 2. See Appendix for H1/H2 split by brand 7

8 Sales mix Further improvements in non-card offering FY17 Sales Mix FY16 Sales Mix 2.4% 2.3% 42.3% 55.3% 41.3% 56.4% Single cards Non-card items Christmas Box Cards Note Mix shown for Card Factory stores only 8

9 Best-in-class margins Consistent performance through tight cost control FY17 Sales to EBITDA Bridge FY16 Sales to EBITDA Bridge Cost of sales 271.6m 68.2% Cost of sales 259.2m 67.9% 98.5m 24.7% 119.7m 30.1% 95.0m 24.9% 120.1m 31.5% 28.1m 7.1% 27.4m 7.2% 18.2m 4.5% 64.8m 16.3% 68.9m 17.3% 16.6m 4.3% 60.3m 15.8% 62.2m 16.3% Cost of goods sold Note All figures shown on an underlying basis Store Wages Store Property Costs Other Direct Expenses Operating expenses EBITDA (excluding depreciation and amortisation) 9

10 Strong cash generation Track record of generating significant surplus cash Cash inflow from operating activities Corporation tax (17.6) (13.0) Net cash inflow from operating activities Net capital expenditure (10.4) (11.5) Deferred consideration - (0.8) Interest received Net cash outflow from investing activities (10.3) (12.0) Net cash inflow before financing activities Cash conversion 90.5% 81.2% FY17 m FY16 m Note Cash conversion calculated as (i) underlying EBITDA less capex and underlying working capital movements; divided by (ii) underlying EBITDA 10

11 Capex Low, predictable and well controlled FY17 spend Lower than 12m guidance Later phasing of Printcraft and EPOS spend FY18 guidance: 15-16m Reversal of FY17 underspend Completion of EPOS roll out Medium term view unchanged (FY19 onwards) Average total annual capex of c 12m pa Capex remains low as a proportion of operating cashflow One-off strategic projects FY17 m FY16 m EPOS Digital print LED conversions Getting Personal relocation Recurring capex Sub-total New stores Existing stores Relocations Other capex Sub-total Total capex

12 Dividends Significant potential for further returns of surplus cash Ordinary dividends Interim of 2.8p (FY16: 2.5p) paid in November Final of 6.3p (FY16: 6.0p) recommended Total ordinary dividend of 9.1p (FY16: 8.5p) Increase of 7.1% from FY16 Dividend cover of 2.18x Special dividend 15p ( 51.1m) paid in November Dividends (pence) Total cash returns since May 2014 IPO* 54.4 pence per share Equivalent to 24.2% of IPO issue price *Including recommended final dividend of 6.3p FY15 FY16 FY17 Interim Final Special 12

13 FY18 guidance Four pillars of growth LFL sales growth Targeting medium term LFL growth within historic range (+1% to +3% pa) New store openings Targeting 50 net new store openings Business efficiencies Industry-wide cost pressures, in particular FX and NLW Business rates saving of c 2m pa anticipated (from April 2017) Remaining lease renewal opportunities but not straight line Ongoing investment to support medium term growth plans Online Targeting LFL growth at Getting Personal of at least 10% Other Operating margins Net margin impact, post mitigation, estimated at c150bps (pre mitigation c300bps); slightly H1 weighted Capex FY18 capex of c 15-16m; then returning to 12m pa Leverage Maintain in targeted range of 1-2x historic LTM EBITDA 13

14 Summary Another record year Good revenue growth - Positive like-for-like store sales - New store roll out Strong profit margins - Business efficiencies - Increasing cost headwinds in FY18 Strong cash generation - Consistently strong operating cashflow - Low, predictable and well controlled capex Surplus cash returns - Special dividend of 15p ( 51.1m) - Leverage of 1.38x at year end - Potential for further cash returns 14

15 Insert Text Here Strategic update Karen Hubbard Chief Executive Officer 15

16 FY17 Four Pillar Performance Like-for-like sales growth New store roll out Business efficiencies Online development Store LFL: +0.4% Non-card mix: 42.3% cardfactory.co.uk: +49.4% 51 net new store openings 865 stores Increasing opportunities in retail parks EBITDA margin maintained FX cost headwind Mitigation plans in place Sales growth (GP) -2.6% EBITDA 2.8m 16

17 Market update Well established, robust and resilient; stable volumes, modest value growth forecast to continue F 2017F 2019F F 2017F 2018F UK Singles Market Volume Forecast, F Millions of Cards 1, Forecast Base: +0.1% UK Singles Market Value Forecast, F m CAGR CAGR F 1,400 Forecast +0.2% Upside: +1.2% Downside: -1.1% 1,300 1,200 1,100 1, CAGR CAGR F Upside: +2.3% +1.3% Base: +1.2% Downside: +0.7% Keynote forecast a 2.0% growth rate; Mintel forecast a 1.9% growth Source: OC&C 17

18 Market update Card sending remains deeply ingrained with high levels of emotional attachment Attitudes to Card Purchasing by Occasion % Agreeing and strongly agreeing with each statement I would always give my child a card to take to their friend s birthday If I am attending a wedding I will always bring a card I would always bring a birthday card to a friend s birthday party I always send Christmas cards to all my friends and family I always send a Valentine card to my significant other I will always send a card to celebrate a friend s achievement (e.g. passing a driving test, graduating...) Source: OC&C Online Consumer Surveys (March 2017, March 2016, March 2015, Nov 2013 & Dec 2012) 18

19 Market update No meaningful shift in digital substitution Card buyers usage of digital greetings % of Total Card Buyers % 100% 100% 100% 100% % 20% 31% 23% 19% Don t Use Digital Greetings % 57% 51% 62% 64% Use Digital Greetings But Not As Replacement For Physical Card The proportion of the market replacing physical cards with digital alternatives has not significantly increased over time (ie Card Factory s addressable market is not shrinking) 10 25% 23% 18% 14% 18% Replace Physical Card With Digital Alternative Source: OC&C Online Consumer Surveys (March 2017, March 2016, March 2015, Nov 2013 & Dec 2012) 19

20 Market update Card Factory remains highly differentiated in terms of the consumer s perception of value 20

21 What s great about Card Factory Well established market Greeting card culture is deeply ingrained Has maintained competitive advantage Growing market share Highly cash generative 21

22 What s great about Card Factory ~ And ~ Further opportunities to exploit competitive advantage through vertical integration Further market share gains possible through broadening our appeal, and Operational initiatives can improve efficiencies 22

23 Trusted for quality and value to help celebrate everyone s life moments 23

24 What our customers are saying Great value for money A card for 29p is amazing value and the special cards are great and not Clinton prices I see cards that people have bought. They spend 3 for the same quality as Card Factory at 1 Great quality for the price Wide range of cards There s a lot of choice, they have great variety I love not only the Value for Money but the fact that I can get everything under one roof Can get everything under one roof Too busy in the store I ve walked past the store before and not gone in because of the queues They need to get rid of the clutter in store Hard to find everything I want in store 24

25 What our colleagues are saying We re Grafters Our people are grafters that get things done we pull together as a team to make it happen for our customers. We re loyal Our people are fiercely loyal to the colleagues they work with every day and that builds customer loyalty too. We lead the way Our people are proud and passionate about being first and leading the way we improve things every day. We re part of the story Our people are here because they re excited by what the business has done so far and want to play a part in taking it to the next level. We re a little bit mad Card Factory isn t for everyone we move at a fast pace ( Card Factory Time ) that some can t handle you need to be a little bit mad to work here! 25

26 Undertaken a detailed review of our four pillars Like-for-like sales growth New store roll out Business efficiencies Online development 26

27 3 year plan Like-for-like sales growth Card: Continue growth of market share Design & Innovation is a key driver for growth Non-card: Increase contribution Focus on design, quality & value in core categories Like-for-like sales growth Customer offer: Driving footfall Improved availability Space & merchandising planning Focus on customer service & operational standards 27

28 What will we deliver in FY18 Like-for-like sales growth Card: Responding to customer demand with a focus on new and modern designs Introduction of new ranges at higher price points in line with customer requests Further development of humour ranges Non-Card: New ranges introduced in line with current trends following on from success with Pugs and Fairy ranges Re-design in key categories of Balloons, Milestone Age, Wedding and Party Increased focus on Ranging & Availability to drive sales 28

29 What will we deliver in FY18 Like-for-like sales growth Retail Academy: Addressing manager vacancies Reducing staff turnover Using development to retain colleagues and drive loyalty 29

30 EPOS system Completed review of system Switching to an alternative software system Proven solution Future proof Remaining stores on new EPOS system All stores: Contactless payment Gift cards Entire estate on new EPOS system by end

31 3 year plan New store roll out c.50 new stores a year, giving more customers easy access to Card Factory, where they shop Cost effective store estate driving strong returns New store roll out Maintaining a quality estate representing our brand Build a strong presence in Republic of Ireland clear opportunity exists 31

32 Store numbers (FY) 3 year plan New store roll out Ongoing openings against established competitors, large and small, in new locations Strong pipeline for FY18 On target for c 50 net openings Well established track record of delivery Store numbers FY17 FY16 At start of period New store openings Closures (3) (10) At end of period Relocations 6 6 Large number of locations still without a Card Factory Acquisitions Store Openings Stores Deliverable store potential of up to 1,

33 3 year plan Business efficiencies Lowering the cost of sales through better buying Supply chain efficiencies driving lean fulfilment Business efficiencies Operational productivity by keeping things simple in store Simplicity in stores Continue to harness our unique vertically integrated model 33

34 3 year plan Online development Acquire customers through all channels Improved conversion through testing, development and experience Online development Unique product innovation is a key driver for growth Provide the best customer service to increase retention 34

35 3 year plan Two distinct brands & propositions Card Factory - a multi-channel business Quality & value Card Factory ranges personalised online Bulk purchases and an edited range from store Unique and Personalised Gifts online Focus on the personal and fun Product innovation Gifts the primary purchase, cards secondary 35

36 cardfactory.co.uk Compelling range of personalised cards & gifts Same focus on quality & value Price significantly lower than on-line competition Focused on customer service delivery option to suit every need Non-personalised products Gifts, wrapping paper & associated gifting Extended ranges in core non-card categories - balloons & party 36

37 Getting Personal Clear strategic plan Product innovation for personalised products Single Customer View Web development refocused on mobile-first 37

38 Building team to drive growth Lucy Crowther: Group HR Director Jorden Jones: MD Getting Personal Claire Bolton: Programme Director 38

39 Summary Market opportunity as strong as ever Strategy remains firmly based on the four pillars Potential to further strengthen the business Clear priorities for FY18 and a 3 year plan Recent trading on track Strong Brand, Talented Teams, Investing for Growth 39

40 Trusted for quality and value to help celebrate everyone s life moments 40

41 Insert Text Here Questions 41

42 Appendix H1/H2 performance by brand FY17(H1) FY16(H1) YoY change FY17(H2) FY16(H2) YoY change Revenue 162.3m 154.5m +5.1% 218.2m 208.9m +4.4% EBITDA 33.2m 31.2m +6.3% 62.5m 59.7m +4.8% Margin 20.5% 20.2% +0.3ppts 28.6% 28.6% - Revenue 6.9m 6.9m +0.2% 10.8m 11.3m -4.4% EBITDA 1.0m 1.3m -24.0% 1.8m 2.8m -33.4% Margin 13.9% 18.3% -4.4ppts 17.4% 25.0% -7.6ppts Group Revenue 169.2m 161.4m +4.8% 229.0m 220.2m +4.0% EBITDA 34.2m 32.5m +5.1% 64.3m 62.5m +3.1% Margin 20.2% 20.1% +0.1ppts 28.1% 28.4% -0.3ppts Notes All figures shown on an underlying basis 42