Card Factory (CARD) has surprised investors on two counts. First, half-year pre-tax profit – which was expected to contract year on year – fell short of some analysts' expectations due to higher than expected wage costs and adverse foreign exchange rates. Second, despite another 15p special dividend (the third since the May 2014 IPO), squeezed cash profits and a step-up in group debt has prompted the board to “review the amount and timing” of future special returns. This was enough to send the shares plummeting by over 15 per cent on results day, while analysts at Peel Hunt chose to revise their forecasts downward. The broker now expects pre-tax profit of £85.4m (from £87.8m) for the year ending January 2018, giving EPS of 19.5p (from £85.1m and 19.5p in FY2017).
Chief executive Karen Hubbard did her best to mitigate the damage, insisting the new perspective on dividends doesn’t mean the group will stop special returns altogether; just that the board doesn’t want to “bake in” any specific amount while trading conditions remain variable. Ms Hubbard added that the group was “really confident” heading into the second half and, crucially, the peak Christmas trading period.
CARD FACTORY (CARD) | ||||
ORD PRICE: | 308p | MARKET VALUE: | £1.05bn | |
TOUCH: | 307-309p | 12-MONTH HIGH: | 359p | LOW: 232p |
DIVIDEND YIELD: | 3%* | PE RATIO: | 17 | |
NET ASSET VALUE: | 71p** | NET DEBT: | 60% |
Half-year to 31 Jul | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
2016 | 169 | 27.0 | 6.3 | 2.8 |
2017 | 180 | 23.2 | 5.5 | 2.9 |
% change | +6 | -14 | -13 | +4 |
Ex-div: | 9 Nov | |||
Payment: | 15 Dec | |||
*Excludes special dividend of 15p in FY2017 and an additional 15p in respect of the half year | ||||
**Includes intangible assets of £331m, or 97p a share |