Card Factory makes its debut

It's more meaningful to look at underlying operating profit, which jumped 9 per cent to £26.1m on like-for-like sales growth of nearly 3 per cent. Chief executive Richard Hayes told us new merchandising, improved product quality and ranges, and market share gains from maturing stores had all contributed to the strong like-for-like growth. Meanwhile, store openings boosted sales further, with 37 opened in the half year, bringing the total to 749. Card Factory has launched 50 stores a year over the past decade, and Mr Hayes said this year would be no exception. The group's online portal, gettingpersonal.co.uk, is gathering momentum, too. Sales there rose by 16 per cent to £5.5m, while cash profits more than doubled to £0.8m.

The business model is vertically integrated, so almost everything that Card Factory sells is designed in house. That means it can deliver some of the best operating margins in the sector. In the first half, margins were maintained at 17.5 per cent, but they're typically higher in the second half as a result of the Christmas trading period, so the full-year margin tends to hover around the 22 per cent mark. Mr Hayes says there's also a huge focus on cost control and efficiency in areas such as the supply chain, employee costs and rent negotiations with landlords. "The vertically integrated model we operate enables us to minimise costs and maximise margins," he explained.

The business is very cash generative and will announce a maiden dividend when it reports full-year results. Investec expects pre-tax profit of £73.2m for the full year, giving EPS of 16p.