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Card Factory returns to profit

The return to the high street boosted sales, but analysts expect profits to remain down against pre-pandemic levels for the foreseeable future
September 27, 2022
  • Raised prices
  • Can't make dividend payments

Card Factory (CARD) bounced back into the black against a dire pandemic-hit comparative as shoppers once again picked up their birthday and wedding cards in the flesh. The greeting cards and gifts retailer, which relies on high street sales, is hopeful that its “value proposition” will bear fruit as consumers tighten their belts.

Chief executive Darcy Willson-Rymer said that “targeted price increases” and “pre-emptive actions” on costs helped the business to offset challenging inflationary pressures. A 1.9 percentage point increase in the cash profit margin to 22.1 per cent suggests progress. 

The key top-line figure was store sales, as online trading contributes a miniscule amount to the revenue pie. Store sales boomed by 82 per cent to £187m, with shoppers able to peruse the company’s c.1,000 high-street sites post-lockdown, and store transaction numbers were up by over 9 per cent on a like-for-like basis. Online sales, however, were down by almost a third to £4mn. While well ahead of pre-Covid numbers, online sales are still relatively low. But there was positive news for omnichannel ambitions with a click-and-collect trial being launched in 84 stores by the end of the next financial year.

On the balance sheet, the refinancing of debt facilities in April brought more stability. However, management expects that the £20mn coronavirus large business interruption loan scheme facility will only be repaid by the end of financial year 2024, which means a dividend can’t be paid until that point.

Brokers think the shares can climb much higher – Investec has a target price of 120p and Liberum 110p. The consensus analyst position per FactSet is for revenue to outstrip pre-pandemic levels by financial year 2024. But expectations for annual pre-tax profit postings out to 2025 suggest that the business won't return to pre-Covid levels any time soon. Hold.

Last IC View: Hold, 62p, 4 May 2022

CARD FACTORY (CARD)   
ORD PRICE:46pMARKET VALUE:£158mn
TOUCH:46-46.5p12-MONTH HIGH:67pLOW: 39p
DIVIDEND YIELD:nilPE RATIO:6
NET ASSET VALUE:69p*NET DEBT:86%
Half-year to 31 JulTurnover (£mn)Pre-tax profit (£mn)Earnings per share (p)Dividend per share (p)
2021117-6.50-1.50nil
202219814.33.40nil
% change+69---
Ex-div:-   
Payment:-   
*Includes intangible assets of £322mn, or 94p a share