It’s curious to see a share price jump on news of falling profits and moribund sales, but clearly investors had expected worse from Card Factory (CARD). The specialist retailer saw underlying cash profits fall 5 per cent in the year to January 2019, but at £89.4m it was within management’s £89m-£91m guidance. Sales were flat on a like-for-like basis, due to declining high-street footfall being mitigated somewhat by new card ranges and growth in the average basket value of each customer.
Last September, there was speculation that the special dividend paid over the previous two years was coming to an end. Although this year’s payout of 5p was at the bottom end of guidance, management said it expects to declare another special at the interim mark, subject to satisfactory trading. The ability to fund these additional returns certainly isn't guaranteed given the continuing roll-out of retail units. Even though current borrowings are negligible and overall net debt isn't onerous at 1.58 times underlying cash profits, shareholders will note the 71 per cent increase in trade/payables from FY2018.
UBS does not expect earnings growth to mirror the expanding store footprint. It is forecasting adjusted operating profits of £79m in 2020, giving EPS of 17.6p, flat on FY2019.
| CARD FACTORY (CARD) | ||||
| ORD PRICE: | 187p | MARKET VALUE: | £639m | |
| TOUCH: | 186-187p | 12-MONTH HIGH: | 247p | LOW: 159p |
| DIVIDEND YIELD: | 5.0% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 67p* | NET DEBT: | 62% | |
| Year to 31 Jan | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2015 | 353 | 42.7 | 10.6 | 6.80 |
| 2016 | 382 | 83.7 | 19.5 | 8.50 |
| 2017** | 398 | 82.8 | 19.3 | 9.10 |
| 2018** | 422 | 72.6 | 17.1 | 9.30 |
| 2019** | 436 | 66.6 | 15.0 | 9.30 |
| % change | +3 | -8 | -12 | - |
| Ex-div: | 9 May | |||
| Payment: | 18 Jun | |||
| *Includes intangible assets of £320m, or 94p a share **Dividend does not include special payment of 15p in 2017 and 2018, and 5p in 2019. | ||||
