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Card Factory to keep the special divis coming

After January's downbeat trading update, the cards and gifts retailer settled some nerves with earnings in line with reduced expectations and the promise of another special dividend - albeit not of the scale of last year's special

Birthday card
"The greetings card market remains resilient and robust," said Karen Hubbard, CEO of Card Factory

Fears that cards and gifts flogger Card Factory PLC (LON:CARD) would be unable to keep the special dividends coming have proved unfounde so far.

The retailer, which paid a special dividend of 15p in respect of 2017 to supplement the regular full-year dividend of 9.3p (up 2.2% year-on-year), said it expects to declare another special dividend of 5-10p with its half-year results.

READ Card Factory tumbles as margin pressures put the squeeze on profits

The shares, which yield 4.65% excluding the special dividends, rose 10p to 200p on the release of the results.

Underlying earnings (Ebitda) in the year to January 31 fell 4.6% to £94.0mln from £98.5mln the year before, slap bang in the middle of the guidance range issued at the time of its profit warning in January.

Underlying profit before slipped 5.5% to £80.5mln from £85.1mln the previous year.

Revenue rose 6% to £422.1mln from £398.2mln, with like-for-like (LFL) sales at Card Factory up 2.9% year-on-year, compared to a 0.6% gain in LFL sales the year before.

In January, the company had reported LFL sales growth in its stores of 2.7%.

"We delivered strong like-for-like sales growth in a tough trading environment,” declared Karen Hubbard, the chief executive officer of Card Factory.

“We sold more cards than the prior year and delivered a higher average card selling price and total basket size. We also saw a record-breaking number of customers shopping with Card Factory for both card and complementary non-card products, demonstrating our resilience against a backdrop of High Street footfall decline,” she added.

"Whilst the new financial year is just two months old, we are satisfied with the start we have made and particularly pleased with the record seasonal performances from Valentine's Day, Mother's Day and Easter,” she added.

Notwithstanding the solid start to the year, the retailer admitted any underlying Ebitda growth for the current year is likely to be limited, and the focus will be on maintaining margins.

Broker Liberum Capital Markets said the results came in “broadly as expected” but grumbled that “there contains little by the way of a positive catalyst in our view”.

It said that few should be surprised that the expectations for a special dividend are now between 5-10p this year versus 15p last year.

It thinks there is little scope for underlying Ebitda growth this year and has reduced its target price accordingly to 210p from 240p, which just about makes the shares a ‘buy’, especially when the dividends are factored in; Liberum is currently forecasting a special dividend of 10p for the current fiscal year.

Quick facts: Card Factory

Price: 158.5 GBX

Market: LSE
Market Cap: £541.36 m

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