Extra stock holding costs and a slow Christmas period served to depress Card Factory’s (CARD) full-year profits. The retailer has earmarked 10 per cent of its stores for reopening around 15 June, and is aiming to return to near pre-covid trading levels by December 2020, despite the uncertainty posed by virus control measures in outlets and the speed of its sales recovery.
Card Factory had an additional £15m of inventories at its half-year end as part of its Brexit contingency plans, and opted to bring Christmas stock forwards. It incurred £4.4m of additional costs that the retailer doesn’t expect to repeat, and coronavirus will prompt a reduction in stock intake.
Card Factory’s Christmas period was impacted by “the self-impacts of having too little stock on key ranges”, according to Peel Hunt, while weak consumer sentiment also undermined trading. Chief executive Karen Hubbard acknowledged the company’s “ranging issue” and said that the issue had been investigated, adding that these won’t be repeated.
Working capital has been brought in line with the year-end target, but the level of debt financing and leasehold commitments is a major problem given the hiatus in trading. A second round of imposed store closures could push it towards breaching its updated financial covenants.
Peel Hunt forecasts full year 2021 adjusted pre-tax profits of £1.7m and 0.4p respectively, rising to £13.9m and 3.3p in 2022.
| CARD FACTORY (CARD) | ||||
| ORD PRICE: | 42p | MARKET VALUE: | £ 143m | |
| TOUCH: | 41-42p | 12-MONTH HIGH: | 199p | LOW: 22p |
| DIVIDEND YIELD: | 6.9% | PE RATIO: | 3 | |
| NET ASSET VALUE: | 65p* | NET DEBT: | 131%** | |
| Year to 31 Jan | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 382 | 83.7 | 19.5 | 8.5 |
| 2017 | 398 | 82.8 | 19.3 | 9.1 |
| 2018† | 422 | 72.6 | 17.1 | 9.3 |
| 2019† | 436 | 68.2 | 15.4 | 6.4 |
| 2020† | 452 | 65.2 | 15.1 | 2.9 |
| % change | +4 | -4 | -2 | -55 |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £320m, or 94p a share **Includes lease liabilities of £151.2m †Dividend does not include special dividends of 15p in 2017 and 2018, and 5p in 2019 and 2020 | ||||
