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Share Name Share Symbol Market Type Share ISIN Share Description
Card Factory Plc LSE:CARD London Ordinary Share GB00BLY2F708 ORD 1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  -1.60 -2.59% 60.10 60.10 60.60 63.50 60.00 60.60 556,199 16:29:58
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Leisure Goods 285.1 -16.4 -4.0 - 205

Card Factory PLC Preliminary Results for year to 31 January 2021

10/06/2021 7:00am

UK Regulatory (RNS & others)


Card Factory (LSE:CARD)
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From May 2021 to Jul 2021

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TIDMCARD

RNS Number : 4057B

Card Factory PLC

10 June 2021

10 June 2021

Card Factory plc ("Card Factory" or the "Group")

Preliminary results for the year ended 31 January 2021

Card Factory, the UK's leading specialist retailer of greeting cards, dressings and gifts, announces its preliminary results for the year ended 31 January 2021 ('FY21').

Financial summary

 
 Financial Metrics                     Note       FY21        FY20       Change 
------------------------------------  ------  -----------  ----------  --------- 
 Revenue                                       GBP285.1m    GBP451.5m   (36.9%) 
 Card Factory LFL sales                 (i)       0.1%       (0.5%)     0.6 ppts 
 Underlying Profit before 
  tax                                   (i)    (GBP15.2m)   GBP67.2m    (122.6%) 
 Profit before tax                             (GBP16.4m)   GBP65.2m    (125.2%) 
 Underlying EBITDA                      (i)     GBP47.0m    GBP125.9m   (62.7%) 
 Underlying Basic EPS                   (i)      (3.7p)       15.7p     (123.6%) 
 Basic EPS                                       (4.0p)       15.1p     (126.4%) 
 Leverage (excl. lease liabilities)     (i)       2.3x        1.1x 
------------------------------------  ------  -----------  ----------  --------- 
 

Notes to table above:

i. See explanatory Note 1 "Alternative Performance Measures" for further information and definitions.

Summary of the financial period

   --      Store estate closed for an average of five months with significant impact on profitability 
   --      Effective and swift action preserved cash, with GBP35m reduction in net debt in FY21 
   --      Better than expected reopening performances after lockdowns one and two 

-- High growth in Card Factory online (+135.3% to GBP11.1m) and Getting Personal (+12.2% to GBP16.5m)

-- Positive initial signs from early actions following the refreshed strategy launched in July 2020

   --      PBT guidance (Jan 2021) changed due to stock provision increase of GBP4.7m 

Successful reopening following third lockdown from 12 April 2021

-- Initial store sales performance exceeded previous reopening performances, albeit activity levels settled after initial pent up demand was satisfied

-- Transaction volumes down on a two year basis in line with reduced market footfall; largely offset by increased spend per transaction

   --      Everyday Card and party ranges performing strongly 

Successful refinancing provides necessary resources to invest in growth strategy

   --      New GBP225m debt facilities agreed May 2021, comprising: 

o a GBP100m revolving credit facility (RCF), substantially on the same terms as the previous RCF, subject to revised financial covenants, intended to support the business as it returns to normalised leverage;

o a GBP75m term loan facility; and

o GBP50m Coronavirus Large Business Interruption Loan Scheme (CLBILS) facilities.

Darcy Willson-Rymer, Chief Executive Officer, commented:

"Since joining Card Factory in March 2021, I've been immensely encouraged by what I have seen and heard. We have successfully reopened our entire store estate following the third lockdown and delivered a reassuring performance in stores, whilst maintaining online momentum. Our powerful brand and unique business model means we are well placed to respond positively to the changing retail environment and to unlock the inherent potential in this business. The recent refinancing provides sufficient resources for us to do that by building on our excellent platform to drive future growth. I am excited about the opportunities ahead."

Preliminary results announcement

There will be a preliminary results webcast for analysts and investors today, starting at 9.30am, and available via https://webcasting.brrmedia.co.uk/broadcast/60a278288d9817323e2fc94e .

Those analysts who wish to attend are requested to contact Yasemin Balman of Tulchan Communications on the number provided below or by emailing cardfactory@tulchangroup.com . A copy of the webcast and accompanying presentation will be made available on the day via the Card Factory investor relations website: www.cardfactoryinvestors.com .

Enquiries

Card Factory plc via Tulchan Communications (below)

Darcy Willson-Rymer, Chief Executive Officer

Kris Lee, Chief Financial Officer

   Tulchan Communications                                                        +44 (0) 207 353 4200 

James Macey White / Elizabeth Snow cardfactory@tulchangroup.com

Explanatory notes

   1.   Alternative Performance Measures ("APMs") and other explanatory information 

"EBITDA" is defined as earnings before interest, tax, depreciation and amortisation and represents profit for the

period before net finance expense, taxation, depreciation and amortisation.

"Leverage" is calculated as the ratio of Net Debt to Underlying EBITDA for the previous 12 months.

"Like-for-like" or "LFL" is defined as follows:

The Group defines Iike-for-Iike sales as the year-on-year growth in sales via Card Factory retail channels as follows:

-- Card Factory Stores: "Store LFLs" consider stores that were open in both the current year and the comparative period. Sales are compared only for the equivalent c.55% of the year in which the applicable Card Factory stores were open for trading in FY21.

   --      Card Factory Online: made via the Card Factory website, www.cardfactory.co.uk ; 

-- "Card Factory LFL" is defined as Like-for-like sales in stores plus sales from the Card Factory website. www.cardfactory.co.uk ;

   --      Getting Personal: made via the separately branded personalised card and gift website, www.gettingpersonal.co.uk ; 

-- Where 2 year LFLs are used, these compare FY22 with FY20, because there was no comparable trade during FY21.

Sales by Printcraft, the Group's printing division, to external third-party customers are excluded from any LFL sales measure.

"Net Debt" comprises total borrowings, overdrafts, lease liabilities reported under IFRS 16 Leases and the value of capitalised debt issues costs less cash.

"Underlying" The Group has chosen to present underlying profit and earnings measures. Transactions are categorised as non-underlying if the resulting underlying profit and earnings information is believed to assist comparison of year-on-year performance.

   2.   Cautionary Statement 

This announcement contains certain forward-looking statements with respect to the financial condition, results of operations, and businesses of Card Factory plc. These statements and forecasts involve risk, uncertainty and assumptions because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. These forward-looking statements are made only as at the date of this announcement. Nothing in this announcement should be construed as a profit forecast. Except as required by law, Card Factory plc has no obligation to update the forward-looking statements or to correct any inaccuracies therein.

Card Factory plc ("Card Factory" or the "Group")

Preliminary results for the year ended 31 January 2021

CHAIRMAN'S STATEMENT

I would like to start by thanking our colleagues for the considerable fortitude and commitment that they have shown throughout the uncertainties of the last year. I am very proud of how they have responded and risen to the unprecedented challenges presented by the pandemic. Our priority remains the continued welfare of our customers and colleagues; we are grateful for the Government's Coronavirus Job Retention Scheme that helped us in supporting our team throughout this extraordinarily challenging period.

Card Factory has demonstrated strong resilience in the face of the wide-ranging impacts of the pandemic. Swift action was taken to preserve the Group's cash position and protect the balance sheet towards the start of the year and our careful cash management meant we ended the financial year with a GBP35m reduction in net debt. On behalf of the Board, I would like to thank our many partners and stakeholders who have continued to support the business.

Managing the impact of the pandemic

The closure of our stores for almost five months of the year affected key seasonal trading events, including Mother's Day and Christmas, had a very significant impact on the profitability of the business. The total lockdown of non-essential retail created a material step-up in online customer demand and we were pleased with how our two websites performed during the period, albeit recognising that we are at an early stage in the development of our digital offer.

The relaunch of cardfactory.co.uk on a new platform meant that we were better able to meet the increased demand, with a significantly improved customer experience including product range and additional new features. From December 2020, we further improved our digital platform with the launch of our new Card Factory app on iOS and then on Android, enhancing our new, highly competitive offer. Customers are embracing these apps, which accounted for 9% of online transactions by late May 2021, with the app generating 45% more repeat orders than our website.

Trading in the store estate recovered steadily following reopening after the first and second lockdowns, with transaction volumes outperforming UK retail footfall data. Footfall remained materially reduced, but was largely offset by customers choosing to buy more on each visit. We were particularly pleased with how our stores performed in October as we swiftly reacted to meet the increased customer demand to buy Christmas ranges early, accommodating the seasonal demand despite the significant disruption. Trading was also strong in December, but the November lockdown meant that the season overall was impacted as customers were able to shop the category in essential shops, that were able to trade, as well as on-line. Online demand has continued at above pre-pandemic levels but has slowed as stores reopened.

Our vertically integrated business model enabled us to identify and respond quickly to trends and satisfy customer demand. For example, lockdown humour ranges were made available online within five days of being designed, with great success. Our business model also allowed us to maintain our flexibility during the Christmas trading period; printing additional runs where necessary and avoiding overstocking as national and regional lockdowns came into effect.

Launch of our new strategy

In July 2020, we launched Card Factory's refreshed growth strategy. It is based on three pillars: a winning card-led proposition; being available in more places, however customers choose to shop; supported by a robust and scalable central model. While the overall future strategic direction for Card Factory is clear, the Board will be closely monitoring and assessing the impact of Covid-19 on the timing and phasing of the delivery of each element. Despite the challenges that the pandemic presented, we did make some important early progress against the strategy. As well as the relaunch of the cardfactory.co.uk website and accompanying app., we further optimised our card ranges and successfully implemented a number of price increases, given confidence in our ability to do so across the breadth of our categories.

Board appointments

We were delighted to welcome Darcy Willson-Rymer as our new Chief Executive on 8 March 2021. Darcy has excellent credentials and highly relevant experience to lead Card Factory through the next phase of our growth. We also welcomed Tripp Lane to the Board as a Non-Executive Director in April 2020.

Solid performance post re-opening

We continue to prioritise providing safe working and shopping environments in all our stores. After the third lockdown, which impacted the first two and half months of the financial year, including Valentine's and Mother's Days, we were delighted to welcome our customers back as trading restrictions began to ease across the UK and ROI from April 2021. The strong initial pent up demand has steadied and our performance since reopening has been in line with expectations. Our Everyday Card and party ranges have performed strongly, and although footfall remains reduced we are seeing evidence of customers shopping more evenly during the week and spending more per visit.

Successful refinancing

We were pleased to be able to recently announce a successful refinancing with our existing commercial banking syndicate. The increased bank facilities of GBP225m provides additional liquidity above the original GBP200m it replaced, and is for the same term through to 24 September 2023. The secured facilities provide Card Factory with the necessary financial resources to focus on its future growth strategy.

Summary

2020 was an unprecedented year for all businesses. For Card Factory in particular, key trading periods were significantly disrupted and a loss of over a third of the year's revenue inevitably had a very material impact on our financial performance. There were some challenging times for all, but I'm delighted at how the business and our colleagues navigated the consequences of the pandemic, which reflects on the robustness of the business. Our colleagues responded with great resilience ensuring our customers still received great service. We worked closely with our many stakeholders - suppliers, landlords, banking partners and the Government - to ensure that Card Factory can now confidently start to look forward to the future. I am certain that under Darcy's leadership we will take Card Factory forward, building on the strong platform that is already in place and deliver for all our stakeholders.

Paul Moody

Chairman

10 June 2021

CHIEF EXECUTIVE OFFICER'S REVIEW

This is my first CEO review since I joined Card Factory on 8 March 2021. I have long admired Card Factory both as a brand and for its market leadership. I believe that given our business model, customer offer and leading position in a substantial market, there is great potential to deliver value for all our stakeholders in the coming years .

Since joining, I have been impressed by the team, the strong culture across the business, and the affinity our customers have for the brand. The vertically integrated bu siness model provides us with a distinct and valuable competitive advantage which we can use to improve how we serve our customers, offering great products at unbeatable prices through convenient and positive shopping experiences, whilst also delivering attractive financial returns. My focus is to ensure the business maximises its opportunities to deliver, with appropriate

investment to provide a long   term platform for sustainable growth. 

One of my first priorities upon joining was the reopening of our stores across the UK and ROI from April and May 2021. I was encouraged by the store performance and it is clear from speaking to our customers just how much we have been missed. There are early indications that shoppers' habits have evolved with customers choosing to shop more evenly during the week, visiting less frequently but spending more. Clearly all retailers need a compelling online customer proposition, and we made some important progress in this regard through the last year. It remains an area of focus and opportunity for Card Factory, and something we that we will continue to invest in and develop. However - perhaps unlike other parts of the retail market - we are of the view that the majority of money spent on cards will still be in stores and on the High Street during the years ahead.

Card Factory launched a refreshed strategy in July 2020, aimed at extending and improving the customer offer, routes to market and its vertically integrated business model. The direction of travel that Card Factory needs to take is clear albeit we are currently assessing the impact of longer than expected lockdowns on the underlying elements and phasing of the strategy.

Overall, though, we remain focused on continuing to improve our customer experience and optimising our stores, using our data-led insight to respond to customer preferences for each particular store and maximise sales. We continue to monitor changes to customer behaviour to meet their needs and, following successful trials, have also continued to build on the initial price changes rolled out across the store estate during the year, with further premium ranges introduced and price increases implemented on additional card ranges from reopening of stores in April 2021. We have detailed plans in development across all channels to maximise all sales opportunities for Father's Day in June 2021 and the next key peak season of Christmas 2021.

Part of the important progress we made in the year with regard to our online offer was the launch of a new website and app. They provide the platform for further enhancements as we develop a wider omnichannel offer that allows us to put quality cards at great prices in the hands of customers wherever they choose to buy them. The preparations for our ERP implementation, on hold during the third lockdown, is now progressing well, with phase one now scheduled for October 2021. We expect this will further improve efficiency and replace multiple solutions, many of which are no longer supported and unreliable.

The recent successful refinancing provides the business with the necessary financial resources to focus on our future growth strategy. As previously announced, Card Factory intends to use its best efforts to raise net equity proceeds of GBP70m in due course, subject to independent advice and prevailing market conditions, to facilitate an early reduction of overall debt prepayments.

We are a much-loved retail brand with a business model that allows us to offer our customers outstanding value at a time and place that suits them. We can adapt quickly to new trends and changes to customer demand and deliver these products across a number of sales channels. Equally, there is still opportunity to strengthen the business to help it capitalise on the opportunities ahead. I am looking forward to leading the business through the next phase of its growth.

Darcy Willson-Rymer

Chief Executive Officer

10 June 2021

CHIEF FINANCIAL OFFICER'S REVIEW

The "FY21" accounting period refers to the year ended 31 January 2021 and the comparative period "FY20" refers to the year ended 31 January 2020.

The Group has chosen to present underlying profit and earnings measures; transactions are categorised as non-underlying if the resulting underlying profit and earnings information is believed to assist comparison of year-on-year performance.

Revenue

Total Group revenue during the year declined by 36.9% to GBP285.1m (FY20: GBP451.5m), driven by the impact on trading of Covid-19 related lockdowns:

 
                         FY21     FY20     Increase/ 
                         GBP'm    GBP'm    (Decrease) 
---------------------  -------  -------  ------------ 
 Card Factory stores    251.9    429.0      (41.3%) 
 Online                  27.6     19.4       42.0% 
 Retail partnerships     5.6      3.1        83.3% 
---------------------  -------  -------  ------------ 
 Group                  285.1    451.5      (36.9%) 
---------------------  -------  -------  ------------ 
 

Covid-19 led to a postponement of some planned new store openings in FY21; 9 new stores were opened, along with 15 store closures and 2 relocations, giving a net reduction of 6 stores during the year. This brought the total store estate to 1,016 stores at the year-end, including 14 stores in the Republic of Ireland. Going forward, store relocations will be an important driver of growth, with more modest new store roll outs.

The impact of the Covid-19 pandemic on consumer behaviour resulted in a significant boost to growth in business through our online channels.

Like-for-like ("LFL") sales growth was broken down as follows (LFL measure excludes periods where stores were closed due to lockdown):

 
                         FY21     FY20 
---------------------  -------  -------- 
 Card Factory stores    (2.4%)   (0.7%) 
 Card Factory online    135.3%    14.8% 
---------------------  -------  -------- 
 Card Factory LFL        0.1%    (0.5%) 
---------------------  -------  -------- 
 Getting Personal       12.2%    (10.0%) 
---------------------  -------  -------- 
 

Ongoing improvements to the depth, quality and merchandising of our complementary non-card product offering led to a continuation of the mix shift to this category. In addition, the business has placed increased emphasis on its Everyday card offering, to ensure customers have the widest choice of card type and greeting messages. The full-year mix for FY21 was 51.1% single cards (FY20: 52.2%), 46.7% non-card (FY20 45.8%) and 2.2% boxed cards (FY20: 2.0%).

LFL Revenue from the Card Factory transactional website grew by 135.3% (FY20: 14.8%) as the impact of lockdown saw a significant increase in visitor numbers.

Performance at Getting Personal was also encouraging, with LFL annual revenue growing 12.2% (FY20: -10.0%), again driven by increased visitors to the site and strong conversion driving higher sales in both cards and gifting.

Underlying operating costs

Underlying cost of sales and operating expenses can be analysed as follows:

 
 FY21 Underlying                FY21        FY21        % of revenue       GBP 
                                         % of revenue    (Increase)     (Increase) 
                                                          / Decrease     / Decrease 
                                GBP'm 
----------------------------  -------  --------------  -------------  ------------- 
 Cost of goods sold            116.9        41.0%        (7.2 ppts)       23.4% 
 Store wages                    59.7        20.9%        (1.5 ppts)       31.9% 
 Store property costs           9.6         3.4%          2.5 ppts        63.8% 
 Other direct expenses          18.3        6.4%         (1.3 ppts)       20.1% 
 Underlying cost 
  of sales                     204.5        71.7%        (7.5 ppts)       29.4% 
 Non-underlying FX 
  loss                          1.2 
----------------------------  -------  --------------  -------------  ------------- 
 Total cost of sales           205.7 
----------------------------  -------  --------------  -------------  ------------- 
 Operating expenses*            33.6        11.8%        (3.9 ppts)        6.1% 
 Depreciation, amortisation 
  & impairment                  53.3        18.7%        (7.6 ppts)       (6.0%) 
 Total underlying 
  operating costs               86.9        30.5%       (11.5 ppts)       (0.9%) 
----------------------------  -------  --------------  -------------  ------------- 
 Non-underlying items            - 
----------------------------  -------  --------------  -------------  ------------- 
 Total operating 
  costs                         86.9 
----------------------------  -------  --------------  -------------  ------------- 
 
 
 FY20 Underlying                FY20        FY20 
                                         % of revenue 
                                GBP'm 
----------------------------  -------  -------------- 
 Cost of goods sold            152.7        33.8% 
 Store wages                    87.7        19.4% 
 Store property costs           26.5        5.9% 
 Other direct expenses          22.9        5.1% 
 Underlying cost 
  of sales                     289.8        64.2% 
 Non-underlying FX 
  gain                         (0.5) 
----------------------------  -------  -------------- 
 Total cost of sales           289.3 
----------------------------  -------  -------------- 
 
 Operating expenses*            35.8        7.9% 
 Depreciation, amortisation 
  & impairment                  50.3        11.1% 
 Total underlying 
  operating costs               86.1        19.0% 
----------------------------  -------  -------------- 
 Non-underlying impairment      2.5 
----------------------------  -------  -------------- 
 Total operating 
  costs                         88.6 
----------------------------  -------  -------------- 
 

*excluding depreciation, amortisation and impairment

The overall ratio of cost of sales to revenue increased to 71.7% on an underlying basis (FY20: 64.2%). This increase was driven by the following movements in sub-categories and by the decline in LFL performance:

-- Underlying cost of goods sold ("COGS"): principally comprises cost of raw materials, production costs, finished goods purchased from third party suppliers, import duty, freight costs, carriage costs and warehouse wages. Product COGS (card and non-card) improved by 0.3 ppts at constant currency. However, an increase of GBP18.1m in stock provision resulted in an increase in overall COGS by 7.2 ppts. The introduction of technology to collate SKU level data has given us more visibility of individual product performance and, on the back of new product launches and more defined range management, we have decided that a large element of older stock (which includes an element of unsold stock due to Covid-19 store closures) will no longer be available for sale through the Group's channels. This gives us a much cleaner stock position and enables us to respond much more quickly to product performance. As a result we would not expect this increase in the stock provision to recur in future years.

-- Store wages: includes wages and salaries (including bonuses) for store-based staff, together with national insurance contributions, apprenticeship levy, pension contributions, and overtime, holiday and sick pay, and is shown net of Government support through the Coronavirus Job Retention Scheme ("CJRS"). Wages before taking account of CJRS support rose slightly as a result of pay increases, including those influenced by the National Living Wage.

-- Store property costs : within cost of sales relate to business rates and service charges, and benefits from UK government's business rates relief of GBP18.1m in FY21.

-- Other direct expenses: includes store opening costs, store utility costs, waste disposal, store maintenance, point of sale costs, bank charges and pay per click expenditure. This cost category is largely variable in respect of the number of stores. The ratio of other direct expenses to revenue increased by 1.3 ppts as certain costs do not change in direct proportion with lower revenue from store closures, including premises insurance, electricity, maintenance, and rental of payment terminals.

-- Underlying operating expenses: includes items such as support centre remuneration, the cost of store estate Regional and Area Managers, design studio costs and business insurance together with other central overheads and administration costs. FY21 includes full year costs for new warehousing facilities, offset by savings in storage costs within Other direct expenses. FY21 also saw further investment in IT infrastructure (including new hand held terminals and SAP), and Online support (including a new platform). Total operating expenses (excluding depreciation and amortisation) fell by 6.1% to GBP33.6m, representing an increase from 7.9% to 11.8% as a percentage of Covid-19 impacted revenue.

Depreciation and amortisation, including depreciation and impairment of right-of-use property lease assets, grew by 6.0% to GBP53.3m (FY20: GBP50.3m), largely driven by a lease impairment charge of GBP2.6m.

Underlying EBITDA

 
                       FY21     FY20     Increase/ 
                                         (Decrease) 
                       GBP'm    GBP'm 
-------------------  -------  -------  ------------ 
 Underlying EBITDA     47.0    125.9      (62.7%) 
 Underlying EBITDA                         (11.4 
  margin              16.5%    27.9%       ppts) 
-------------------  -------  -------  ------------ 
 

The reduction in Underlying EBITDA reflects, in particular, the Covid-19 impacted sales performance, mitigated by strong cost control.

In addition, the stock provision increases, National Living Wage cost increases, investment in IT support and increases in headcount and platform costs for Card Factory Online all impacted underlying EBITDA.

The business is likely to continue to face increasing National Living Wage costs amongst other cost pressures. In addition, the full impact of Covid-19 on the short to medium term performance of the business is unclear. However, the business is operating close controls over its cost base and liquidity in order that it emerges from this crisis on a strong footing.

Net financing expense

Excluding interest charges pertaining to IFRS 16 Leases, net financing expense increased to GBP5.5m (FY20: GBP4.4m), due to the average effective interest rate being 0.44 ppts higher than in FY20 arising from Covid-related revisions to the facility. Including IFRS 16 Leases interest charges, the underlying net financing expense increased to GBP8.9m (FY20: GBP8.4m).

 
 All Underlying                   FY21     FY20    (Increase) 
                                                    /Decrease 
                                  GBP'm    GBP'm 
------------------------------  -------  -------  ----------- 
 Finance expense 
 Interest on loans                5.1      4.0      (27.5%) 
 Loan issue cost amortisation     0.4      0.3      (33.3%) 
 Loss on interest 
  rate derivatives                 -       0.1       100.0% 
 IFRS 16 Leases interest          3.4      4.0       15.0% 
 Net finance expense              8.9      8.4       (6.0%) 
 

Profit before tax and non-underlying items

Underlying loss before tax for the financial year amounted to GBP15.2m (FY20: Underlying profit before tax GBP67.2m). Overall loss before tax for the financial year amounted to ( GBP16.4m) (FY20: Profit before tax GBP65.2m) .

The table below reconciles underlying profit before tax to the statutory profit before tax for both financial years:

 
                                  FY21    FY20 
 
                                  GBP'm   GBP'm 
-------------------------------  ------  ------ 
 Underlying profit 
  before tax                     (15.2)   67.2 
 Non-underlying items: 
   Cost of sales 
   Loss on foreign currency 
    derivative financial 
    instruments not designated 
    as a hedge                   (1.2)    0.5 
   Operating expenses 
   Impairment of goodwill          -     (2.5) 
 Profit before tax               (16.4)   65.2 
-------------------------------  ------  ------ 
 

Tax

The tax credit of GBP2.8m for the year represents a tax rate (credit) of 17.1% of loss before tax (FY20: GBP13.6m tax charge, 20.8% tax rate).

Earnings per share

Basic and diluted underlying losses per share for the year were (3.7p) (FY20: Underlying earnings per share 15.7p). After the non-underlying items described above, basic and diluted losses per share for the year were (4.0p) (FY20: Earnings per share 15.1p).

 
                       FY21      FY21 IFRS16    FY21      FY20      FY20 IFRS16   FY20    (Increase) 
                      Adjusted                           Adjusted                          /Decrease 
------------------  ----------  ------------  -------              ------------  ------  ----------- 
 Underlying Basic 
  EPS                 (3.9p)        0.2p       (3.7p)     15.4p        0.3p       15.7p    (123.6%) 
------------------  ----------  ------------  -------  ----------  ------------  ------  ----------- 
 Basic EPS            (4.2p)        0.2p       (4.0p)     14.8p        0.3p       15.1p    (126.4%) 
------------------  ----------  ------------  -------  ----------  ------------  ------  ----------- 
 

Capital expenditure

Capital expenditure excluding IFRS 16 Leases right of use assets, amounted to GBP7.5m (FY20: GBP14.5m), principally in relation to new stores, supply chain investment and ERP implementation. Total capital expenditure, including right of use assets, amounted to GBP 30.2 m (FY20: GBP50.9m).

The Board anticipates capital expenditure in FY22 to be tightly controlled as it places stringent controls upon cash out flows in response to Covid-19 and postpones a large proportion of its new store roll out and relocation programme. However, the business still plans to invest in certain key strategic projects, including: e-commerce platforms, boosting online fulfilment capacity, SAP implementation and various process improvement investments that benefit from relatively short pay back periods .

Foreign exchange

With approximately half of its annual cost of goods sold expense relating to products paid for in US dollars, the Group takes a prudent but flexible approach to hedging the risk of exchange rate fluctuations. The Board adopts the policy of using a combination of vanilla forwards and structured options to hedge this exposure. The Group has used structured options and similar instruments to good effect for a number of years and the Board continues to view such instruments to be commercially attractive as part of a balanced portfolio approach to exchange rate risk management, even if cash flow hedge accounting may not be permitted in some instances.

At the year end, we had P&L cost of sales hedging in place for both FY22 and FY23 with anticipated effective P&L rates of c.$1.33, although this remains subject to significant shifts in the value of sterling, which could impact the structured trades that form part of the hedging portfolio, and the impact of future trading conditions on hedged cash flows. Structured trades represent approximately one third of hedges that are yet to mature.

Cash generation

In the year, the Group remained cash generative, driven by favourable working capital movements and relatively low ongoing capital expenditure requirements.

Net Debt & Covenants

As at 31 January 2021, net debt (including debt issue costs of GBP1.2m) amounted to GBP252.6m, analysed as follows:

 
                               FY21        FY21        FY20        FY20 
                              Net Debt    Leverage    Net Debt    Leverage 
                               GBP'm      Multiple     GBP'm      Multiple 
--------------------------  ----------  ----------  ----------  ---------- 
 Borrowings 
 Current liabilities            0.2                     3.6 
 Non-current liabilities       118.8                   144.0 
--------------------------  ----------  ----------  ----------  ---------- 
 Total borrowings              119.0                   147.6 
 Lease liabilities             144.9                   145.9 
 Capitalised debt costs         1.2                     1.0 
--------------------------  ----------  ----------  ----------  ---------- 
 Gross debt                    265.1                   294.5 
 Less cash                    (12.5)                   (5.5) 
--------------------------  ----------  ----------  ----------  ---------- 
 Net Debt                      252.6                   289.0 
 Leverage                                  5.4x                    2.3x 
--------------------------  ----------  ----------  ----------  ---------- 
 
 Remove lease liabilities     (144.9)                 (145.9) 
--------------------------  ----------  ----------  ----------  ---------- 
 Net Debt excl. lease 
  liabilities                  107.7                   143.1 
 Leverage excl. lease 
  liabilities                              2.3x                    1.1x 
--------------------------  ----------  ----------  ----------  ---------- 
 

Net debt excluding lease liabilities at the year-end represented 2.3 times Underlying EBITDA (FY20: 1.1 times).

The Group has renewed its financing facilities with its banking partners, which now comprise a GBP75m Term Loan, GBP50m CLBILS and a Revolving Credit Facility of GBP100m. Under revised covenant terms, the Group must achieve defined Net Debt and EBITDA targets, measured on a monthly basis until March 2022, following which the business will move to quarterly covenant tests of Interest Cover and Leverage.

Until the business has no outstanding CLBILS, there will be a prohibition of any payment to shareholders by way of dividend or share buy-back. Furthermore, the Group must use best efforts to raise GBP70m net equity by July 22, or alternatively to prepay GBP70m using funding from other subordinated sources

The facilities have an expiry date of 24 September 2023 (unchanged from the previous arrangement), with the RCF element being extendable by 1 year to 24 September 2024 if the Company achieves certain debt repayment milestones by 30 November 2021.

The reduction in Net Debt of GBP35m in FY21 is driven by deferrals of VAT (GBP19m) and property payments (GBP21m).

Dividends and capital structure

Dividends

Historically, the Board has adopted a progressive ordinary dividend policy for the Company, reflecting its strong earnings potential and cash flow characteristics, while allowing it to retain sufficient capital to fund ongoing operating requirements and to invest in the Company's long-term growth and profitability. Following the outbreak of the Covid-19 pandemic, the Board suspended dividend payments and no dividends were declared in FY21 (FY20: 2.9p interim dividend, nil final dividend, 5.0p special dividend).

Currently, we do not expect to pay any dividends in relation to FY22. The terms of the Company's refinancing restrict the payment of dividends until certain de-leveraging milestones are achieved.

Capital structure

The Board is focused on maintaining a capital structure that is conservative yet efficient in terms of providing long-term returns to shareholders.

Following the impact of Covid-19, the Board intends to prioritise de-levering the business, which will impact the distribution of cash to shareholders in the short-term, as reflected above. Given the inherent uncertainty around the recovery of the business following the extended lockdowns experienced to date, and the risk of any subsequent lockdowns that may be imposed in the future, the Board will consider various options to ensure the key stakeholders of the business are protected as much as possible in these uncertain times and will look to provide a further update on capital policy as trading conditions become clearer.

It should be noted that net debt at the half and full year period ends is lower than intra-year peaks, reflecting usual trading patterns and working capital movements.

Kris Lee

Chief Financial Officer

10 June 2021

Consolidated income statement

For the year ended 31 January 2021

 
                                                     2021                                    2020 
                                   Underlying   Non-underlying     Total   Underlying   Non-underlying     Total 
                                                         (note                                   (note 
                                                            2)                                      2) 
                            Note        GBP'm            GBP'm     GBP'm        GBP'm            GBP'm     GBP'm 
-------------------------  -----  -----------  ---------------  --------  -----------  ---------------  -------- 
 
 Revenue                                285.1                -     285.1        451.5                -     451.5 
                                                          (1.2 
 Cost of sales                        (204.5)                )   (205.7)      (289.8)              0.5   (289.3) 
-------------------------  -----  -----------  ---------------  --------  -----------  ---------------  -------- 
                                                          (1.2 
 Gross profit                            80.6                )      79.4        161.7              0.5     162.2 
 
 Operating expenses                    (86.9)                -    (86.9)       (86.1)            (2.5)    (88.6) 
-------------------------  -----  -----------  ---------------  --------  -----------  ---------------  -------- 
                                         (6.3                       (7.5 
 Operating (loss)/profit    3,4             )            (1.2)         )         75.6            (2.0)      73.6 
 
 Finance expense             6          (8.9)                -     (8.9)        (8.4)                -     (8.4) 
 
 (Loss)/profit before                   (15.2                      (16.4 
  tax                                       )            (1.2)         )         67.2            (2.0)      65.2 
 
                                                                                                  (0.1 
 Taxation                    7            2.6              0.2       2.8       (13.5)                )    (13.6) 
 
 (Loss)/profit for the                  (12.6                      (13.6 
  year                                      )            (1.0)         )         53.7            (2.1)      51.6 
-------------------------  -----  -----------  ---------------  --------  -----------  ---------------  -------- 
 
 Earnings per share                     pence                      pence        pence                      pence 
                                         (3.7                       (4.0 
  - Basic and diluted        9              )                          )         15.7                       15.1 
-------------------------  -----  -----------  ---------------  --------  -----------  ---------------  -------- 
 

All activities relate to continuing operations.

Consolidated statement of comprehensive income

For the year ended 31 January 2021

 
                                                                2021     2020 
                                                              GBP 'm   GBP 'm 
----------------------------------------------------------  --------  ------- 
 
 (Loss)/profit for the year                                  (13 .6)     51.6 
----------------------------------------------------------  --------  ------- 
 Items that are or may be recycled subsequently into 
  profit or loss: 
 Cash flow hedges - changes in fair value                     ( 1.9)      0.6 
 Cost of hedging reserve - changes in fair value               (0.1)      1.7 
 Cost of hedging reserve - reclassified to profit or 
  loss                                                             -   ( 0.1) 
 Tax relating to components of other comprehensive income        0.4    (0.4) 
----------------------------------------------------------  --------  ------- 
 Other comprehensive (expense)/income for the period, 
  net of income tax                                            (1.6)      1.8 
 
 Total comprehensive (expense)/income for the period 
  attributable to equity shareholders of the parent           (15.2)     53.4 
----------------------------------------------------------  --------  ------- 
 

Consolidated statement of financial position

As at 31 January 2021

 
                                          Note      2021        2020 
                                                   GBP'm     GBP'm 
---------------------------------------  -----  --------  -------- 
 Non-current assets 
 Intangible assets                         10      320.3       319.8 
 Property, plant and equipment             11       36.8        41.6 
 Right of use assets                       12      111.4       132.4 
 Deferred tax assets                                 5.3         2.7 
 Derivative financial instruments                      -         0.5 
---------------------------------------  -----  --------  ---------- 
                                                   473.8       497.0 
 Current assets 
 Inventories                                        36.4        54.4 
 Trade and other receivables                         9.2        10.8 
 Tax receivable                                      0.5           - 
 Derivative financial instruments                    0.1         1.1 
 Cash and cash equivalents                 13       12.5         5.5 
---------------------------------------  -----  --------  ---------- 
                                                    58.7        71.8 
 
 Total assets                                      532.5       568.8 
 
 Current liabilities 
 Borrowings                                14      (0.2)       (3.6) 
 Lease liabilities                         12     (39.4)      (40.7) 
 Trade and other payables                         (57.4)      (45.0) 
 Tax payable                                           -       (6.5) 
 Derivative financial instruments                  (2.8)       (1.0) 
---------------------------------------  -----  --------  ---------- 
                                                  (99.8)      (96.8) 
 Non-current liabilities 
 Borrowings                                14    (118.8)     (144.0) 
 Lease liabilities                         12    (105.5)     (105.2) 
 Derivative financial instruments                  (1.9)       (1.3) 
---------------------------------------  -----  --------  ---------- 
                                                 (226.2)     (250.5) 
 
 Total liabilities                               (326.0)     (347.3) 
 
 Net assets                                        206.5       221.5 
---------------------------------------  -----  --------  ---------- 
 
 Equity 
 Share capital                                       3.4         3.4 
 Share premium                                     202.2       202.2 
 Hedging reserve                                   (3.1)      (1.6 ) 
 Cost of hedging reserve                             0.4         1.1 
 Reverse acquisition reserve                       (0.5)       (0.5) 
 Merger reserve                                      2.7         2.7 
 Retained earnings                                   1.4        14.2 
---------------------------------------  -----  --------  ---------- 
 Equity attributable to equity holders 
  of the parent                                    206.5       221.5 
---------------------------------------  -----  --------  ---------- 
 

Consolidated statement of changes in equity

For the year ended 31 January 2021

 
                                Share      Share    Hedging       Cost        Reverse     Merger    Retained     Total 
                              capital    premium    reserve         of    acquisition    reserve    earnings    equity 
                                                               hedging        reserve 
                                                               reserve 
                                GBP'm      GBP'm      GBP'm      GBP'm          GBP'm      GBP'm       GBP'm     GBP'm 
--------------------------  ---------  ---------  ---------  ---------  -------------  ---------  ----------  -------- 
 
 
                                                                                 (0.5 
 At 31 January 2019               3.4      202.2        0.9        0.4              )        2.7        11.0     220.1 
--------------------------  ---------  ---------  ---------  ---------  -------------  ---------  ----------  -------- 
 
 Total comprehensive 
 income for 
 the period 
 Profit or loss                     -          -          -          -              -          -        51.6      51.6 
 Other comprehensive 
  income                            -          -        0.5        1.3              -          -           -       1.8 
--------------------------  ---------  ---------  ---------  ---------  -------------  ---------  ----------  -------- 
                                    -          -        0.5        1.3              -          -        51.6      53.4 
 Hedging gains/(losses) 
  and costs 
  of hedging transferred 
  to the                                               (3.6       (0.8                                            (4.4 
  cost of inventory                 -          -          )          )              -          -           -         ) 
 Deferred tax on transfers 
  to 
  inventory                         -          -        0.6        0.2              -          -           -       0.8 
 
 Transactions with owners, 
 recorded 
 directly in equity 
 Share-based payment 
  charges                           -          -          -          -              -          -         0.5       0.5 
                                                                                                       (48.9     (48.9 
 Dividends (note 8)                 -          -          -          -              -          -           )         ) 
--------------------------  ---------  ---------  ---------  ---------  -------------  ---------  ----------  -------- 
 Total contributions by 
  and distributions 
  to owners                         -          -          -          -              -          -      (48.4)    (48.4) 
 
                                                       (1.6 
 At 31 January 2020               3.4      202.2          )        1.1          (0.5)        2.7        14.2     221.5 
 
 Total comprehensive 
 expense for 
 the period 
                                                                                                       (13.6     (13.6 
 Profit or loss                     -          -          -          -              -          -           )         ) 
 Other comprehensive                                   (1.5       (0.1                                            (1.6 
  expense                           -          -          )          )              -          -           -         ) 
--------------------------  ---------  ---------  ---------  ---------  -------------  ---------  ----------  -------- 
                                                       (1.5       (0.1                                 (13.6     (15.2 
                                    -          -          )          )              -          -           )         ) 
 Hedging gains/(losses) 
  and costs 
  of hedging transferred 
  to the 
  cost of inventory                 -          -          -      (0.7)              -          -           -     (0.7) 
 Deferred tax on transfers 
  to 
  inventory                         -          -          -        0.1              -          -           -       0.1 
 
 Transactions with owners, 
 recorded 
 directly in equity 
 Share-based payment 
  charges                           -          -          -          -              -          -         0.8       0.8 
 Dividends (note 8)                 -          -          -          -              -          -           -         - 
--------------------------  ---------  ---------  ---------  ---------  -------------  ---------  ----------  -------- 
 Total contributions by 
  and distributions 
  to owners                         -          -          -          -              -          -         0.8       0.8 
 
 At 31 January 2021               3.4      202.2      (3.1)        0.4          (0.5)        2.7         1.4     206.5 
--------------------------  ---------  ---------  ---------  ---------  -------------  ---------  ----------  -------- 
 

Consolidated cash flow statement

For the year ended 31 January 2021

 
                                                         Note     2021     2020 
                                                                 GBP'm    GBP'm 
------------------------------------------------------  -----  -------  ------- 
 
 Cash inflow from operating activities                    15      79.9    124.8 
 Corporation tax paid                                            (6.3)   (14.6) 
------------------------------------------------------  -----  -------  ------- 
 Net cash inflow from operating activities                        73.6    110.2 
 
 Cash flows from investing activities 
 Purchase of property, plant and equipment                11     (4.9)   (11.0) 
                                                                  (2.6 
 Purchase of intangible assets                            10         )    (3.5) 
 Proceeds from disposal of fixed assets                            0.5      0.4 
------------------------------------------------------  -----  -------  ------- 
 Net cash outflow from investing activities                      (7.0)   (14.1) 
 
 Cash flows from financing activities 
 Interest paid                                                   (8.4)    (8.0) 
 Repayment of bank borrowings                                    (25.6        - 
                                                                     ) 
 Payment of lease liabilities                                   (22.1)   (41.0) 
 Dividends paid                                           8          -   (48.9) 
------------------------------------------------------  -----  -------  ------- 
 Net cash outflow from financing activities                     (56.1)   (97.9) 
 
 Net increase/(decrease) in cash and cash equivalents             10.5   (1.8 ) 
 Cash and cash equivalents at the beginning of the 
  year                                                             2.0      3.8 
------------------------------------------------------  -----  -------  ------- 
 Closing cash and cash equivalents                        13      12.5      2.0 
------------------------------------------------------  -----  -------  ------- 
 

Accounting policies

General information

Card Factory plc ('the Company') is a public limited company incorporated in the United Kingdom. The Company is domiciled in the United Kingdom and its registered office is Century House, Brunel Road, 41 Industrial Estate, Wakefield WF2 0XG.

The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the 'Group').

Basis of preparation

This preliminary announcement has been prepared in accordance with the recognition and measurement principles of international accounting standards in conformity with the requirements of the Companies Act 2006. It does not include all the information required for full annual accounts.

The financial information contained in this preliminary announcement does not constitute the company's statutory accounts for the years ended 31 January 2021 or 31 January 2020 but is derived from these accounts. Statutory accounts for the year ended 31 January 2020 have been delivered to the registrar of companies, and those for the year ended 31 January 2021 will be delivered to the registrar in due course. The auditor has reported on those accounts; the audit reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

Going concern basis of accounting

The Board continues to have a reasonable expectation that the Group has adequate resources to continue in operation for at least the next 12 months and that the going concern basis of accounting remains appropriate. The outbreak of the Covid-19 pandemic and the measures adopted by governments in our key markets to mitigate its spread have impacted the Group. These measures required the Group to close its retail outlets for over 5 months in total during FY21. This has negatively impacted the Group's financial performance during the year and also its liquidity position.

The Group renewed its financing facilities with its banking partners in May 2021 (see Note 14 for further detail), through which it has access to GBP225m of credit. As at 31 May 2021, the Group's net debt excluding lease liabilities was GBP111.9m.

The Group has prepared cashflow forecasts for the 12 months following the date of approval of these accounts which incorporate the new debt facility and related covenant measures. These forecasts are based on the approved budget and business plan and include the Board's assumptions on trading performance, including the extent and speed of the recovery of store sales following reopening, and the timing of cashflows including amounts where payment was deferred due to Covid-19. The Board's trading assumptions are cautious compared to the Group's actual experience since stores reopened and model a gradual recovery to pre-COVID levels. These forecasts indicate that the Group would have significant headroom within its agreed financing arrangements and would comfortably meet all covenant tests within those arrangements, and would be able to settle its liabilities as they fall due for the duration of the forecasts.

There is still uncertainty over how the future development of the pandemic will impact the Group's business and customer demand for its products. The Group has therefore modelled a number of severe but plausible downside scenarios involving further closures of its stores, including scenarios where government imposed lockdowns require a two-month closure during the winter period and a separate scenario where the Group's stores are closed for the whole of the peak trading month of December 2021. The impact of a December lockdown is the most severe and, in such a scenario, without assuming the availability of government support (including the coronavirus job retention scheme) during this period of enforced closure, the Board would be required to take mitigating actions to reduce costs, optimise the Group's cash flow and preserve liquidity, including laying off retail staff during the period of closure and deferring or cancelling any potential bonuses. Additional cost saving measures such as deferring non-essential capital expenditure, which have not been modelled, would also be available to the Group.

On the basis of these mitigating actions the sensitised forecast cashflows indicate that, even on the basis of full closure in December and no government support, the Group would continue to be able to operate within the terms of its facility and to settle its liabilities as they fall due for a period of at least 12 months from date of approval of these financial statements. Based on these factors, the Board has a reasonable expectation that the Group has adequate resources and sufficient loan facility headroom and accordingly the accounts are prepared on a going concern basis.

Principal accounting policies

The preliminary announcement has been prepared using the accounting policies published in the Group's accounts for the year ended 31 January 2020 (available on the Company's website).

Underlying profit and earnings

The Group has chosen to present an underlying profit and earnings measure. Transactions are categorised as non-underlying if the resulting underlying profit and earnings information provides a more meaningful comparison of performance year-on-year. Underlying earnings is not a recognised profit measure under UK IFRS and may not be directly comparable with 'adjusted' profit measures reported by other companies. The reported non-underlying adjustments are as follows:

Net fair value remeasurement gains and losses on derivative financial instruments

The Group utilises foreign currency derivative contracts to manage the foreign exchange risk on US Dollar denominated purchases and interest rate derivative contracts to manage the risk on floating interest rate bank borrowings. Fair value gains and losses on such instruments are recognised in the income statement to the extent they are not hedge accounted under IFRS 9. Such gains and losses relate to future cash flows. In accordance with the commercial reasoning for entering into the agreements, these gains/losses are deemed not representative of the underlying financial performance in the year and presented as non-underlying items. Any gains or losses on maturity of such instruments are presented within underlying profit.

Impairment of goodwill

In the prior period goodwill attributable to the Getting Personal cash generating unit ('CGU') was been impaired (see note 10). The impairment was a non-cash charge to the income statement reflecting a reduction in future performance expectations of Getting Personal and was presented as a non-underlying item.

   1      Segmental reporting 

The Group has two operating segments trading under the names Card Factory and Getting Personal. Card Factory retails greeting cards, dressing and gifts principally through an extensive UK store network, with a small number of stores in the Republic of Ireland, and also through our 3(rd) party retail partners. Card Factory revenue for the year was GBP268.6m (FY20: GBP436.8m). Getting Personal is an online retailer of personalised cards and gifts. Getting Personal revenue for the year was GBP16.5 million (FY20: GBP14.7 million).

Group revenue is almost entirely derived from retail customers. Average transaction value is low and products are transferred at the point of sale. Group revenue is presented as a single category subject to substantially the same economic factors that impact the nature, amount, timing and uncertainty of revenue and cash flows. Revenue from retail partnerships and non-retail customers were circa GBP6.6m in the year. Revenue from outside the UK is circa GBP3.8m of Group Revenue.

   2          Non-underlying items 
 
                                                            2021    2020 
                                                           GBP'm   GBP'm 
--------------------------------------------------------  ------  ------ 
 Cost of sales 
 (Loss)/profit on foreign currency derivative financial 
  instruments not designated as a hedge                    (1.2)     0.5 
--------------------------------------------------------  ------  ------ 
 
 Operating expenses 
 Impairment of goodwill (note 10)                              -   (2.5) 
--------------------------------------------------------  ------  ------ 
 

Further details of the non-underlying items are included in the principal accounting policies.

   3          Operating loss/profit 

Operating loss/profit is stated after charging/(crediting) the following items:

 
                                                 2021    2020 
                                                GBP'm   GBP'm 
---------------------------------------------  ------  ------ 
 
 Staff costs (note 5)                            90.9   122.1 
 Depreciation expense 
   - owned fixed assets (note 11)                 9.2     9.6 
   - right of use assets (note 12)               39.9    38.9 
 Amortisation expense (note 10)                   1.6     1.4 
 Impairment of right of use assets (note 12)      2.6     0.4 
 Profit on disposal of fixed assets                 -   (0.3) 
 Foreign exchange gain                          (0.3)   (1.5) 
 Impairment of goodwill (note 10)                   -     2.5 
---------------------------------------------  ------  ------ 
 

Non-underlying items included in the above are detailed in note 2.

The operating loss for the year end 2021 includes circa GBP31.4 million in respect of government grants receivable under the Coronavirus Job Retention Scheme ("CJRS") and circa GBP18.1 million retail business rates relief. Under the CJRS, grant income may be claimed in respect of certain costs to the Group of furloughed employees. Business rates relief for the Group's entire store portfolio commenced 1 April 2020, with no business rates payable in respect of retail locations for the remained of the financial year.

The total fees payable by the Group to KPMG LLP and their associates during the period was as follows:

 
                                                                   2021      2020 
                                                                GBP'000   GBP'000 
-------------------------------------------------------------  --------  -------- 
 
 Audit of the consolidated and Company financial statements          34        23 
 
 Amounts receivable by the Company's auditor and its 
  associates in respect of: 
 Audit of financial statements of subsidiaries of the 
  Company                                                           340       167 
 Other services closely related to the audit                         25         7 
 Total fees                                                         399       197 
-------------------------------------------------------------  --------  -------- 
 
 
   4          EBITDA 

Earnings before interest, tax, depreciation and amortisation ("EBITDA") represents profit for the period before net finance expense, taxation, depreciation and amortisation.

 
                                                        2021                                  2020 
                                     -----------  ---------------  ------  -----------  ---------------  ------ 
                                      Underlying   Non-underlying   Total   Underlying   Non-underlying   Total 
                                                            (note                                 (note 
                                                               2)                                    2) 
                               Note        GBP'm            GBP'm   GBP'm        GBP'm            GBP'm   GBP'm 
 
                                            (6.3                     (7.5 
 Operating (loss)/profit                       )            (1.2)       )         75.6            (2.0)    73.6 
----------------------------  -----  -----------  ---------------  ------  -----------  ---------------  ------ 
 Depreciation, amortisation 
  and impairment                  3         53.3                -    53.3         50.3              2.5    52.8 
----------------------------  -----  -----------  ---------------  ------  -----------  ---------------  ------ 
                                                             (1.2 
 EBITDA                                     47.0                )    45.8        125.9              0.5   126.4 
----------------------------  -----  -----------  ---------------  ------  -----------  ---------------  ------ 
 
   5          Employee numbers and costs 

The average number of people employed by the Group (including Directors) during the year, analysed by category, was as follows:

 
                                    2021     2020 
                                  Number   Number 
-------------------------------  -------  ------- 
 
 Management and administration       425      429 
 Operations                        9,322    9,213 
-------------------------------  -------  ------- 
                                   9,747    9,642 
-------------------------------  -------  ------- 
 

The aggregate payroll costs of all employees including Directors were as follows:

 
                                                2021    2020 
                                               GBP'm   GBP'm 
--------------------------------------------  ------  ------ 
 
 Employee wages and salaries                    78.0   109.1 
 Equity-settled share-based payment expense      0.8     0.5 
 Social security costs                           5.9     6.7 
 Defined contribution pension costs              1.3     1.4 
--------------------------------------------  ------  ------ 
 Total employee costs                           86.0   117.7 
 Agency labour costs                             4.9     4.1 
--------------------------------------------  ------  ------ 
 Total staff costs                              90.9   121.8 
--------------------------------------------  ------  ------ 
 

Total employee costs are presented net of GBP31.4m recovered through the coronavirus job retention scheme.

Key management personnel

The key management personnel of the Group comprise the Card Factory plc Board of Directors, the Executive Board and the Operating Board. Key management personnel compensation is as follows:

 
                                                2021    2020 
                                               GBP'm   GBP'm 
--------------------------------------------  ------  ------ 
 
 Salaries and short-term benefits                4.4     4.1 
 Equity-settled share-based payment expense      0.7     0.3 
 Social security costs                           0.6     0.5 
 Defined contribution pension costs              0.1     0.1 
--------------------------------------------  ------  ------ 
                                                 5.8     5.0 
--------------------------------------------  ------  ------ 
 
   6          Finance expense 
 
                                                2021    2020 
                                               GBP'm   GBP'm 
--------------------------------------------  ------  ------ 
 Finance expense 
 Interest on bank loans and overdrafts           5.1     4.0 
 Amortisation of loan issue costs                0.4     0.3 
 Lease interest                                  3.4     4.0 
 Loss on interest rate derivative contracts        -     0.1 
--------------------------------------------  ------  ------ 
                                                 8.9     8.4 
--------------------------------------------  ------  ------ 
 
   7          Taxation 

Recognised in the income statement

 
                                                       2021    2020 
                                                      GBP'm   GBP'm 
---------------------------------------------------  ------  ------ 
 Current tax (credit )/expense 
                                                       (0.8 
 Current year                                             )    13.5 
 Adjustments in respect of prior periods                0.1       - 
---------------------------------------------------  ------  ------ 
                                                       (0.7 
                                                          )    13.5 
 Deferred tax (credit)/charge 
 Origination and reversal of temporary differences     (1.9       - 
                                                          ) 
 Adjustments in respect of prior periods                0.1       - 
                                                       (0.3 
 Effect of change in tax rate                             )     0.1 
---------------------------------------------------  ------  ------ 
                                                       (2.1 
                                                          )     0.1 
---------------------------------------------------  ------  ------ 
                                                       (2.8 
 Total income tax (credit )/expense                       )    13.6 
---------------------------------------------------  ------  ------ 
 

The effective tax credit rate of 17.1% (2020: 20.8% tax charge) is lower than the standard rate of corporation tax in the UK principally due to expenses not deductible for tax purposes within the loss for the year. The tax charge is reconciled to the standard rate of UK corporation tax as follows:

 
                                                          2021    2020 
                                                         GBP'm   GBP'm 
------------------------------------------------------  ------  ------ 
 
                                                         (16.4 
 Profit before tax                                           )    65.2 
------------------------------------------------------  ------  ------ 
 
 Tax at the standard UK corporation tax rate of 19.0%     (3.1 
  (2020: 19.0%)                                              )    12.4 
 Tax effects of: 
 Expenses not deductible for tax purposes                  0.4     1.1 
 Adjustments in respect of prior periods                   0.2       - 
                                                          (0.3 
 Effect of change in tax rate                                )     0.1 
------------------------------------------------------  ------  ------ 
                                                          (2.8 
 Total income tax expense                                    )    13.6 
------------------------------------------------------  ------  ------ 
 

Total taxation recognised through the income statement, other comprehensive income and through equity are as follows:

 
                                             2021                         2020 
                               Current   Deferred   Total   Current   Deferred   Total 
                                 GBP'm      GBP'm   GBP'm     GBP'm      GBP'm   GBP'm 
----------------------------  --------  ---------  ------  --------  ---------  ------ 
 
 Income statement                (0.7)      (2.1)   (2.8)      13.5        0.1    13.6 
 Other comprehensive income          -      (0.4)   (0.4)         -        0.4     0.4 
 Equity                              -      (0.1)   (0.1)         -      (0.8)   (0.8) 
 Total tax                       (0.7)      (2.6)   (3.3)      13.5      (0.3)    13.2 
----------------------------  --------  ---------  ------  --------  ---------  ------ 
 
   8          Dividends 

There were no dividends paid in the year and the Board is not recommending a final dividend in respect of the financial year ended 31 January 2021 (2020: no final dividend).

 
 Dividends paid in the year:               Pence per    2021    2020 
                                             share 
                                                       GBP'm   GBP'm 
----------------------------------------  ----------  ------  ------ 
 
 Special dividend for the year ended 31 
  January 2020                               5.0p          -    17.1 
 Interim dividend for the year ended 31 
  January 2020                               2.9p          -     9.9 
 Final dividend for the year ended 31 
  January 2019                               6.4p          -    21.9 
 Total dividends paid to shareholders 
  in the year                                              -    48.9 
----------------------------------------  ----------  ------  ------ 
 
   9          Earnings per share 

Basic earnings per share is calculated by dividing the profit for the period attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the period.

Diluted earnings per share is based on the weighted average number of shares in issue for the period, adjusted for the dilutive effect of potential ordinary shares. Potential ordinary shares represent employee share incentive awards and save as you earn share options.

The Group has chosen to present an alternative earnings per share measure, with profit adjusted for non-underlying items to reflect the Group's underlying profit for the year. Underlying earnings is not a recognised profit measure under IFRS and may not be directly comparable with 'adjusted' profit measures used by other companies.

 
                                                                  2021          2020 
                                                              (Number)      (Number) 
--------------------------------------------------------  ------------  ------------ 
 Weighted average number of shares in issue                341,626,396   341,575,284 
 Weighted average number of dilutive share options             128,446             - 
--------------------------------------------------------  ------------  ------------ 
 Weighted average number of shares for diluted earnings 
  per share                                                341,754,842   341,575,284 
--------------------------------------------------------  ------------  ------------ 
 
 
                                                         GBP'm   GBP'm 
-----------------------------------------------------  -------  ------ 
                                                         (13.6 
 Profit for the financial period                             )    51.6 
 Non-underlying items                                      1.0     2.1 
-----------------------------------------------------  -------  ------ 
 Total underlying profit for underlying earnings per 
  share                                                 (12.6)    53.7 
-----------------------------------------------------  -------  ------ 
 
 
                                          pence   pence 
---------------------------------------  ------  ------ 
 Basic earnings per share                 (4.0)    15.1 
 Diluted earnings per share               (4.0)    15.1 
 Underlying basic earnings per share      (3.7)    15.7 
 Underlying diluted earnings per share    (3.7)    15.7 
---------------------------------------  ------  ------ 
 
   10        Intangible assets 
 
                               Goodwill   Software    Total 
                                  GBP'm      GBP'm    GBP'm 
----------------------------  ---------  ---------  ------- 
 Cost 
 At 1 February 2020               328.2       14.1    342.3 
 Additions                            -        2.6      2.6 
 Disposals                            -     (3.0 )   (3.0 ) 
----------------------------  ---------  ---------  ------- 
 At 31 January 2021               328.2       13.7    341.9 
 
 Amortisation/impairment 
 At 1 February 2020                14.4        8.1     22.5 
 Amortisation in the period           -        1.6      1.6 
 Amortisation on disposals            -      (2.5)    (2.5) 
----------------------------  ---------  ---------  ------- 
 At 31 January 2021                14.4        7.2     21.6 
 
 Net book value 
----------------------------  ---------  ---------  ------- 
 At 31 January 2021               313.8        6.5    320.3 
----------------------------  ---------  ---------  ------- 
 
 At 31 January 2020               313.8        6.0    319.8 
----------------------------  ---------  ---------  ------- 
 
 
                                Goodwill   Software   Total 
                                   GBP'm      GBP'm   GBP'm 
----------------------------   ---------  ---------  ------ 
 Cost 
 At 1 February 2019                328.2       10.6   338.8 
 Additions                             -        3.5     3.5 
-----------------------------  ---------  ---------  ------ 
 At 31 January 2020                328.2       14.1   342.3 
 
 Amortisation/impairment 
 At 1 February 2019                 11.9        6.7    18.6 
 Amortisation in the period            -        1.4     1.4 
 Impairment in the period            2.5          -     2.5 
-----------------------------  ---------  ---------  ------ 
 At 31 January 2020                 14.4        8.1    22.5 
 
 Net book value 
----------------------------   ---------  ---------  ------ 
 At 31 January 2020                313.8        6.0   319.8 
-----------------------------  ---------  ---------  ------ 
 
 At 31 January 2019                316.3        3.9   320.2 
-----------------------------  ---------  ---------  ------ 
 

Impairment testing

Goodwill in respect of the Getting Personal CGU was impaired to nil in the prior year. All remaining goodwill is in respect of the Card Factory CGU.

The recoverable amount has been determined based on value-in-use calculations. Value-in-use calculations are based on 5-year management forecasts and operating cash flows with a 0% (2020: 2%) terminal growth rate applied thereafter, representing management's estimate of the long term growth rate of the sector. Forecasts do not include new or additional revenue streams such as new stores and new retail partnerships, to reflect the value-in-use of the existing business.

The key assumptions used to forecast operating cash flows include: sales growth, based on historic performance and latest expectations; product mix; foreign exchange rates, based on hedges in place and market forecasts for unhedged items, the Group's current expectations in relation to operational costs; and the Covid-19 trading environment. The values assigned to each of these assumptions were determined based on historical performance of the CGU and expected future trends.

The forecast cash flows are discounted at a pre-tax discount rate of 12.0% (2020: 12.0%) calculated using the capital asset pricing model utilising available market data and compared to the published discount rates of comparable businesses.

No impairment loss was identified. The valuations indicate sufficient headroom such that a reasonably possible change to key assumptions would not result in an impairment of the related goodwill. Whilst the continued impact of Covid-19 remains uncertain, the Board do not anticipate that further short-term Covid-19 downsides will result in an impairment of the Card factory CGU.

   11        Property, plant and equipment 
 
                                Freehold       Leasehold        Plant,   Total 
                                property    improvements    equipment, 
                                                              fixtures 
                                                            & vehicles 
                                   GBP'm           GBP'm         GBP'm   GBP'm 
----------------------------  ----------  --------------  ------------  ------ 
 Cost 
 At 1 February 2020                 17.5            40.3          66.4   124.2 
 Additions                           0.3             0.7           3.9     4.9 
 Disposals                             -           (0.8)         (2.7)   (3.5) 
----------------------------  ----------  --------------  ------------  ------ 
 At 31 January 2021                 17.8            40.2          67.6   125.6 
 
 Depreciation 
 At 1 February 2020                  3.5            32.4          46.7    82.6 
 Depreciation in the period          0.4             3.1           5.7     9.2 
 Depreciation on disposals             -           (0.7)         (2.3)   (3.0) 
----------------------------  ----------  --------------  ------------  ------ 
 At 31 January 2021                  3.9            34.8          50.1    88.8 
 
 Net book value 
----------------------------  ----------  --------------  ------------  ------ 
 At 31 January 2021                 13.9             5.4          17.5    36.8 
----------------------------  ----------  --------------  ------------  ------ 
 
 At 31 January 2020                 14.0             7.9          19.7    41.6 
----------------------------  ----------  --------------  ------------  ------ 
 
 
                                Freehold       Leasehold        Plant,   Total 
                                property    improvements    equipment, 
                                                              fixtures 
                                                            & vehicles 
                                   GBP'm           GBP'm         GBP'm   GBP'm 
---------------------------   ----------  --------------  ------------  ------ 
 Cost 
 At 1 February 2019                 17.5            38.1          59.2   114.8 
 Additions                             -             2.6           8.4    11.0 
 Disposals                             -           (0.4)         (1.2)   (1.6) 
----------------------------  ----------  --------------  ------------  ------ 
 At 31 January 2020                 17.5            40.3          66.4   124.2 
 
 Depreciation 
 At 1 February 2019                  3.1            29.3          42.0    74.4 
 Provided in the period              0.4             3.4           5.8     9.6 
 Depreciation on disposals             -           (0.3)         (1.1)   (1.4) 
----------------------------  ----------  --------------  ------------  ------ 
 At 31 January 2020                  3.5            32.4          46.7    82.6 
 
 Net book value 
---------------------------   ----------  --------------  ------------  ------ 
 At 31 January 2020                 14.0             7.9          19.7    41.6 
----------------------------  ----------  --------------  ------------  ------ 
 
 At 31 January 2019                 14.4             8.8          17.2    40.4 
----------------------------  ----------  --------------  ------------  ------ 
 
   12        Leases 

The Group has lease contracts, within the definition of IFRS 16 leases, in relation to its entire store lease portfolio, some warehousing office locations, an office location and motor vehicles. Other contracts, including distribution contracts and IT equipment, are deemed not to be a lease within the definition of IFRS 16 or are subject to the election not to apply the requirements of IFRS 16 to short-term or low value leases. Assets, liabilities and the income statement expense in relation to leases are detailed below.

Right of use assets

 
                                Buildings       Motor    Total 
                                             Vehicles 
                                    GBP'm       GBP'm    GBP'm 
-----------------------------  ----------  ----------  ------- 
 Cost 
 At 1 February 2020                 324.5         1.3    325.8 
 Additions                           22.2         0.6     22.8 
 Disposals                         (30.4)       (0.3)   (30.7) 
----------------------------- 
 At 31 January 2021                 316.3         1.6    317.9 
 
 Depreciation and impairment 
 At 1 February 2020                 192.7         0.7    193.4 
 Depreciation in the period          39.5         0.4     39.9 
 Impairment in the period             2.6           -      2.6 
 Depreciation on disposals         (28.9)       (0.3)   (29.2) 
 Impairment on disposals            (0.2)           -    (0.2) 
----------------------------- 
 At 31 January 2021                 205.7         0.8    206.5 
 
 Net book value 
 At 31 January 2021                 110.6         0.8    111.4 
-----------------------------  ----------  ----------  ------- 
 
 At 31 January 2020                 131.8         0.6    132.4 
-----------------------------  ----------  ----------  ------- 
 
 
                                Buildings       Motor    Total 
                                             Vehicles 
                                    GBP'm       GBP'm    GBP'm 
-----------------------------  ----------  ----------  ------- 
 Cost 
 At 1 February 2019                 311.6         1.0    312.6 
 Additions                           35.9         0.5     36.4 
 Disposals                         (23.0)       (0.2)   (23.2) 
----------------------------- 
 At 31 January 2020                 324.5         1.3    325.8 
 
 Depreciation and impairment 
 At 1 February 2019                 176.1         0.6    176.7 
 Depreciation in the period          38.6         0.3     38.9 
 Impairment in the period             0.4           -      0.4 
 Depreciation on disposals         (22.3)       (0.2)   (22.5) 
 Impairment on disposals            (0.1)           -    (0.1) 
----------------------------- 
 At 31 January 2020                 192.7         0.7    193.4 
 
 Net book value 
 At 31 January 2020                 131.8         0.6    132.4 
-----------------------------  ----------  ----------  ------- 
 
 At 31 January 2019                 135.5         0.4    135.9 
-----------------------------  ----------  ----------  ------- 
 

Disposals and depreciation on disposals include fully depreciated right of use assets in respect of leases that expired but the asset remained in use whilst a lease renewal was negotiated.

Lease liabilities

 
                                     2021      2020 
                                    GBP'm     GBP'm 
-------------------------------  --------  -------- 
 
 Current lease liabilities         (39.4)    (40.7) 
 Non-current lease liabilities    (105.5)   (105.2) 
-------------------------------  --------  -------- 
 Total lease liabilities          (144.9)   (145.9) 
-------------------------------  --------  -------- 
 

Rent concessions agreed in the year in response to Covid-19 were principally in respect of the timing of payments and did not significantly impact the total consideration payable in respect of leases. In accordance with the amendment to IFRS16 in respect of Covid-19 concessions, lease liabilities have not been re-measured in respect of Covid-19 concessions except to the extent the rent concession was agreed as part of a lease renewal or extension. Total lease liabilities remain consistent with prior periods as the deferral of lease payments in response to Covid-19 is offset by slight reductions in the total store portfolio and average lease term.

Lease expense :

 
 Total lease related expenses                            2021     2020 
                                                        GBP'm    GBP'm 
-----------------------------------------------------  ------  ------- 
 
 Depreciation expense on right of use assets             39.9     38.9 
 Impairment of right of use assets                        2.6      0.4 
 Profit on disposal of fixed assets                     (0.3)    (0.1) 
 Lease interest                                           3.4      4.0 
 Expense relating to short term and low value leases 
  *                                                       0.6      0.5 
 Expense relating to variable lease payments **             -   (0.3 ) 
-----------------------------------------------------  ------  ------- 
 Total lease related income statement expense            46.2     43.4 
-----------------------------------------------------  ------  ------- 
 

* Contracts subject to the election not to apply the requirements of IFRS 16 to short-term or low value leases.

** A small proportion of the store lease portfolio are subject to an element of turnover linked variable rents that are excluded from the definition of a lease under IFRS 16.

   13        Cash and cash equivalents 
 
                                        2021    2020 
                                       GBP'm   GBP'm 
------------------------------------  ------  ------ 
 
 Cash at bank and in hand               12.5     5.5 
 Unsecured bank overdraft (note 14)        -   (3.5) 
------------------------------------  ------  ------ 
 Net cash and cash equivalents          12.5     2.0 
------------------------------------  ------  ------ 
 

Group cash and cash equivalents held in bank accounts within the RCF facility described in note 14 are subject to a netting arrangement. At the prior year end GBP14.3m overdrawn Sterling balances were netted against GBP10.8m US dollar balances giving rise to a net GBP3.5m overdrawn balance within the RCF.

The Group's cash and cash equivalents are denominated in the following currencies:

 
               2021     2020 
              GBP'm    GBP'm 
-----------  ------  ------- 
 
 Sterling       1.1   (9.3 ) 
 Euro           0.4      0.5 
 US dollar     11.0     10.8 
-----------  ------  ------- 
               12.5      2.0 
-----------  ------  ------- 
 
   14        Borrowings 
 
                                               2021        2020 
                                              GBP'm       GBP'm 
-------------------------------------------  ------      ------ 
 Current liabilities 
 Unsecured bank loans and accrued interest      0.2         0.1 
 Unsecured bank overdraft                         -         3.5 
-------------------------------------------  ------      ------ 
                                                0.2         3.6 
 Non-current liabilities 
 Unsecured bank loans                         118.8       144.0 
-------------------------------------------  ------      ------ 
 
 

Bank loans

Bank borrowings as at 31 January 2021 are summarised as follows:

 
                        Liability   Interest rate   Interest   Repayment terms 
                                                     margin 
                                                     ratchet 
                                                     range 
                        GBP'm       %               % 
---------------------  ----------  --------------  ---------  ------------------------ 
 31 January 2021 
 Unsecured bank loan    120.0       2.5 + LIBOR     1.00 -     GBP200m RCF (see below 
                                                     2.50       for renewed facility 
                                                                terms) 
 Accrued interest       0.2                                    The facility terminates 
                                                                on 24 September 2023 
                                                              ------------------------ 
 Debt issue costs       (1.2) 
---------------------  ----------  --------------  ---------  ------------------------ 
                        119.0 
---------------------  ----------  --------------  ---------  ------------------------ 
 
 31 January 2020 
 Unsecured bank loan    145.0       1.65 + LIBOR    1.00 -     GBP200m RCF 
                                                     2.50 
 Accrued interest       0.1                                    The facility terminates 
                                                                on 24 September 2023 
                                                              ------------------------ 
 Debt issue costs       (1.0) 
---------------------  ----------  --------------  ---------  ------------------------ 
                        144.1 
---------------------  ----------  --------------  ---------  ------------------------ 
 

In response to the first period of non-essential retail closures due to Covid-19, the Group previously announced on 6 May 2020, an agreement with its banks to enable continued full utilisation of the GBP200m Revolving Credit Facility ("RCF") to ensure the business had sufficient liquidity in the uncertain period. In order to do this, the Group had agreed three main covenant tests around; total net debt, cash burn and last twelve months EBITDA until June 2021, after which it was envisaged that the business would have a phased return back to existing covenant tests of EBITDA to Leverage and EBITDA to interest cover.

Following further periods of non-essential retail closures, on 21 May 2021 the Group renewed its financing facilities with its banking partners, which now comprise a GBP75m Term Loan, GBP50m CLBILS and a Revolving Credit Facility of GBP100m. Under revised covenant terms, the Group must achieve defined Net Debt and EBITDA targets, measured on a monthly basis until March 2022, following which the business will move to quarterly covenant tests of Interest Cover and Leverage. Covenant thresholds are phased to return to 2.5x leverage and 2x interest cover by January 2023. The facilities have an expiry date of 24 September 2023 (unchanged from the previous arrangement), with the RCF element being extendable by 1 year to 24 September 2024 if the Company achieves certain debt repayment milestones by 30 November 2021.

The facilities are structured to incentivise an early reduction of overall debt with fees of up to GBP5m payable if pre-payments are not made in line with specified dates from 30 November 2021 through until 30 July 2022. Subject to prevailing market conditions and upon taking independent advice, the Company intends to use its best efforts to raise net equity proceeds of GBP70m to facilitate these prepayments. The Company is also permitted, under the terms of the facilities, to prepay GBP70m using funding from other subordinated sources. In accordance with the terms of the CLBILS facilities, restrictions on payment of dividends will apply whilst the CLBILS facilities remain outstanding. Prepayments shall discharge the Term Loan facility and the CLBILS facilities pro-rata.

Until the business has no outstanding CLBILS, there will be a prohibition of any payment to shareholders by way of dividend or share buy-back. Furthermore, the Group must use best efforts to raise at least GBP70m (net) in equity before the 31 July 2022, or alternatively to prepay GBP70m using funding from other subordinated sources.

   15        Notes to the cash flow statement 

Reconciliation of operating profit to cash generated from operations

 
                                                            2021     2020 
                                                           GBP'm    GBP'm 
--------------------------------------------------------  ------  ------- 
 
                                                           (16.4 
 Profit before tax                                             )     65.2 
 Net finance expense                                         8.9      8.4 
--------------------------------------------------------  ------  ------- 
                                                            (7.5 
 Operating profit                                              )     73.6 
 Adjusted for: 
 Depreciation and amortisation                              50.7     49.9 
 Impairment of right of use assets                           2.6      0.4 
 Goodwill impairment                                           -      2.5 
 Loss on disposal of fixed assets                              -    (0.3) 
                                                            (0.1 
 Cash flow hedging foreign currency movements                  )      0.2 
 Share-based payments charge                                 0.8      0.5 
--------------------------------------------------------  ------  ------- 
 Operating cash flows before changes in working capital     46.5    126.8 
 Increase in receivables                                     2.2   (2.9 ) 
 Decrease/(increase) in inventories                         18.0     14.2 
                                                                    (13.3 
 (Decrease)/increase in payables                            13.2        ) 
--------------------------------------------------------  ------  ------- 
 Cash inflow from operating activities                      79.9    124.8 
--------------------------------------------------------  ------  ------- 
 
   16        Analysis of net debt 
 
                                         At 1 February   Cash flow   Non-cash   At 31 January 
                                                  2020                changes            2021 
                                                 GBP'm       GBP'm      GBP'm           GBP'm 
--------------------------------------  --------------  ----------  ---------  -------------- 
 
 Unsecured bank loans and accrued 
  interest (note 14)                           (144.1)        25.6      (0.5)         (119.0) 
 Lease liabilities                             (145.9)        22.1     (21.1)         (144.9) 
--------------------------------------  --------------  ----------  ---------  -------------- 
 Total debt                                    (290.0)        47.7     (21.6)         (263.9) 
 Debt costs capitalised                          (1.0)       (0.6)        0.4           (1.2) 
 Cash and cash equivalents (note 
  13)                                              2.0        10.5          -            12.5 
--------------------------------------  --------------  ----------  ---------  -------------- 
 Net debt                                      (289.0)        57.6     (21.2)         (252.6) 
 Lease liabilities                               145.9      (22.1)       21.1           144.9 
--------------------------------------  --------------  ----------  ---------  -------------- 
 Net debt excluding lease liabilities          (143.1)        35.5      (0.1)         (107.7) 
--------------------------------------  --------------  ----------  ---------  -------------- 
 
 
                                         At 1 February   Cash flow   Non-cash   At 31 January 
                                                  2019                changes            2020 
                                                 GBP'm       GBP'm      GBP'm           GBP'm 
--------------------------------------  --------------  ----------  ---------  -------------- 
 
 Unsecured bank loans and accrued 
  interest (note 14)                           (143.8)           -      (0.3)         (144.1) 
 Lease liabilities                             (151.2)        41.0     (35.7)         (145.9) 
--------------------------------------  --------------  ----------  ---------  -------------- 
 Total debt                                    (295.0)        41.0     (36.0)         (290.0) 
 Debt costs capitalised                          (1.3)           -        0.3           (1.0) 
 Cash and cash equivalents (note 
  13)                                              3.8       (1.8)          -             2.0 
--------------------------------------  --------------  ----------  ---------  -------------- 
 Net debt                                      (292.5)        39.2     (35.7)         (289.0) 
 Lease liabilities                               151.2      (41.0)       35.7           145.9 
--------------------------------------  --------------  ----------  ---------  -------------- 
 Net debt excluding lease liabilities          (141.3)       (1.8)          -         (143.1) 
--------------------------------------  --------------  ----------  ---------  -------------- 
 
   17        Subsequent events 

Liquidity

On 21 May 2021 the Group renewed its financing facilities with its banking partners, which now comprise a GBP75m Term Loan, GBP50m CLBILS and a Revolving Credit Facility of GBP100m. Under revised covenant terms, the Group must achieve defined Net Debt and EBITDA targets, measured on a monthly basis until March 2022, following which the business will move to quarterly covenant tests of Interest Cover and Leverage. Covenant thresholds are phased to return to 2.5x leverage and 2x interest cover by January 2023. The facilities have an expiry date of 24 September 2023 (unchanged from the previous arrangement), with the RCF element being extendable by 1 year to 24 September 2024 if the Company achieves certain debt repayment milestones by 30 November 2021.

The facilities are structured to incentivise an early reduction of overall debt with fees of up to GBP5m payable if pre-payments are not made in line with specified dates from 30 November 2021 through until 30 July 2022. Subject to prevailing market conditions and upon taking independent advice, the Company intends to use its best efforts to raise net equity proceeds of GBP70m to facilitate these prepayments. The Company is also permitted, under the terms of the facilities, to prepay GBP70m using funding from other subordinated sources. In accordance with the terms of the CLBILS facilities, restrictions on payment of dividends will apply whilst the CLBILS facilities remain outstanding. Prepayments shall discharge the Term Loan facility and the CLBILS facilities pro-rata.

Until the business has no outstanding CLBILS, there will be a prohibition of any payment to shareholders by way of dividend or share buy-back. Furthermore, the Group must use best efforts to raise at least GBP70m (net) in equity before the 31 July 2022, or alternatively to prepay GBP70m using funding from other subordinated sources.

Store re-opening dates

In accordance with Government guidelines, we welcomed our colleagues and customers back into our stores in England and Wales (12 April), Scotland (26 April), Northern Ireland (30 April) and the Republic of Ireland (17 May).

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END

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