Sparks - Card Factory

Card Factory’s H127 results showed solid top-line growth and a much stronger cash performance, but underlying profit was broadly flat against a still-difficult UK consumer backdrop. Group revenue rose 5.3% to £260.8m, helped by the acquisition of Funky Pigeon and continued growth in wholesale, while adjusted EBITDA increased 2.0% to £45.1m. Adjusted PBT was slightly lower at £12.7m versus £13.2m last year, reflecting improved profitability in the store estate being offset by investment in digital and international growth. UK store trading remained the main area of pressure, with like-for-like sales down 2.3% as weaker footfall and transactions outweighed a roughly 3.6% increase in average basket value. Encouragingly, store profitability improved as product margins strengthened materially, with UK store product margin up around 200bp year-on-year.

The results also contained a number of positive strategic and operational proof points. The new party proposition has delivered a 13% sales increase since its mid-July roll-out, while the 118 stores using the enhanced segmentation and space-allocation model traded 1.6pp ahead of the wider estate. Republic of Ireland remained particularly strong, with like-for-like sales up 5.6%, and wholesale sales increased 13.6%. In digital, Funky Pigeon integration remains on track for the expected £5m of synergies from FY28, with new customer growth of 11% following renewed marketing investment. cardfactory.co.uk’s  revenue continued to decline, by 15.5% on a like-for-like basis as it repositions to focus more on celebrations and party products. Cash generation was a standout: adjusted free cash flow improved to positive £0.8m from a £6.3m outflow last year, supported by disciplined working-capital management, although net debt rose to £87.4m. Management remains confident in full-year adjusted PBT expectations, noting that UK like-for-like performance has improved since the half year and has returned to positive growth in recent weeks, with delivery still heavily weighted to the Golden Quarter and Christmas trading period. The quotes consensus range is £54-59m, with an average of £56.7m versus £56m in FY26.

With respect to shareholder returns, the interim dividend has increased to 1.4p/share from 1.3p/share and the previously announced £15m share buyback is now 83% complete. The company intends to launch a £3m share buyback to treasury to satisfy future obligations under share schemes.