Opening our
new future
Annual Report and Accounts 2023
WELCOME
Welcome to cardfactory – the first choice to celebrate all life’s moments.
We are the UK’s leading specialist retailer of cards, gifts and celebration
essentials, with an estate of over 1,000 stores across the UK & Ireland and
supply through partner and franchise stores mainly in the UK and Australia.
Our products are high-quality, yet through our vertically integrated design,
production and omnichannel retail model, can be offered at significantly
lower prices than our competitors.
Looking back and looking forward
Contents
Strategic Report
1
FY23 highlights
3 Our purpose
4
6 Our investment case
8 Chair’s statement
10 Our market
12 Our brand
14 Our business model
16 CEO’s review
20 Strategy delivery
26 Our stakeholders
36 ESG
44 Climate change and TCFD
52 CFO’s review
58 Risk management
63 Non-financial information statement
Highlights
Governance
64 Board of Directors
66 Chair’s Letter – Corporate Governance
67 Corporate Governance Report
74 Chair’s Letter – Audit & Risk
Committee
75 Audit & Risk Committee Report
78 Chair’s Letter – Remuneration
Committee
80 Directors’ Remuneration Report
86 Annual Report on Remuneration
96 Chair’s Letter – Nomination Committee
97 Nomination Committee Report
98 Directors’ Report
103 Statement of Directors’ Responsibilities
Financial Statements
104 Independent auditor’s report
114 Consolidated income statement
114 Consolidated statement of comprehensive income
115 Consolidated statement of financial position
116 Consolidated statement of changes in equity
117 Consolidated cash flow statement
117 Notes to the financial statements
143 Parent Company statement of financial position
143 Parent Company statement of changes in equity
144 Parent Company cash flow statement
145 Notes to the Parent Company financial statements
Company Information
149 Glossary
150 Advisors and Contacts
The leading
omnichannel
retailer in our
sector with an
extensive UK &
Ireland footprint
and growing
international
presence.”
Our brand
Pgs. 12-13
CEO review
Pgs. 16-19
Governance
Pgs. 66-105
FY231 HIGHLIGHTS
Revenue (£m)
cardfactory LFL² sales (%)
(excluding periods of store closure)
Profit Before Tax (PBT) (£m)
Summary of the financial period
£463.4m
+6.7ppts
£52.4m
FY23
FY22
FY21
FY20
Leverage2
(excluding lease liabilities)
0.5x
FY23
FY22
FY21
FY20
463.4
364.4
285.1
451.5
0.5
0.9
2.4
1.1
FY23
FY22
FY21
FY20
6.7
(3.9)
0.1
(0.5)
FY23
FY22
FY21
FY20
Cash from operations² (£m)
Basic EPS (p)
£107.8m
12.9p
FY23
FY22
FY21
FY20
107.8
113.6
79.9
124.8
FY23
FY22
FY21
FY20
52.4
11.1
(16.4)
65.2
12.9
2.4
(4.0)
15.1
– Strong financial performance with results
ahead of expectations: PBT of £52.4 million
is +£41.3 million compared to prior year.
– Revenue of £463.4 million is +27% year-on-
year (YOY), reflecting first full year of trading
following the pandemic and good
momentum in stores driving cardfactory
like-for-like (LFL) sales of +6.7%.
– Successful mitigation of inflationary
headwinds through targeted price increases,
hedging and actions to enhance
productivity delivered improved margins:
EBITDA of £112.0 million improved 0.8ppts
as a percentage of sales YOY.
– Robust cash generation performance with
all Covid-related VAT and rent deferrals
now cleared.
– Successful delivery of refinancing
(to September 2025) to provide platform for
strategic growth, reduction in net debt to
£57.2 million and leverage to 0.5x.
1.
‘FY23’ is the 12 months to 31 January 2023.
2. See glossary on page 149.
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Contents Generation – PageContents Generation – Sub PageContents Generation – Section
Celebrateall life’s moments
1,032
Stores (UK & Ireland)
567
Partner retail locations (UK)
374
Partner retail locations (Australia)
4
Franchise stores
2
Card Factory plc Annual Report and Accounts 2023
Contents Generation – PageContents Generation – Sub PageContents Generation - Section OUR PURPOSE
We design, manufacture and source products to help customers
celebrate every occasion, from the everyday, to the once-in-a-lifetime,
at prices that help people keep their money in their pockets. This ethos
is encapsulated in our new brand purpose:
We make sharing in and
celebrating life’s moments
special and accessible
for everyone.
We retail principally through our store estate
in the UK & Ireland, as well as through our
websites, cardfactory.co.uk and
gettingpersonal.co.uk.
£463.4m
Total revenue
1,977
Distribution points
9,400+
Colleagues
1,032 cardfactory
locations
556 Aldi locations
11 Matalan locations
4 cardfactory
franchise locations
374 The Reject Shop
locations
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* All data correct as at 31 January 2023.
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LOOKING BACK
Celebrating the last
25 years
Over the past 25 years, cardfactory has built a strong
position in the £1.4 billion UK greeting cards market,
which has also provided us with a platform for growth in
the wider celebration occasions market.
1
store in
the UK
650+
stores across
the UK
1,032
stores in
the UK &
Ireland
1997
First store opens on Teall
Street, Wakefield, on
1 November 1997.
2003
• Ventured into Scotland,
Wales & South of England.
• Acquired warehouse and
manufacturing facility.
4
Card Factory plc Annual Report and Accounts 2023
2013
2014
2017
2022
Operations moved into
Century House offices and
gate 4 opened.
Card Factory plc floated via
an initial public offering on the
London Stock Exchange.
We opened our 900th UK
store in 2017.
In November 2022, we celebrated
the 25th anniversary of the opening
of the first cardfactory store,
throwing a large celebration for
colleagues. This celebration saw
us launch our new values and new
brand purpose.
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‘Opening Our New Future’ strategy
Customer focused
Refreshed brand and values
FY23 was the first year of business
transformation as we began delivery of our
‘Opening Our New Future’ strategy.
As part of our strategy, we are expanding our market focus
to target the broader celebration occasions market, including
celebration essentials and gifts. The cardfactory focus on this
market opportunity has resulted in the brand achieving a no.1
UK market position in the balloon category¹. As we progress
into the second year of the transformation programme, we
have solid foundations in place to help cardfactory become
the UK’s no.1 destination for all customers seeking unrivalled
quality, value, choice and experience.
We will continue to invest in the cardfactory
brand, with emphasis on our quality and
value to increase shopper awareness and
improve trust.
With a new customer marketing function now in place, we
will build on awareness of the brand to connect with more
customers, both in-store and online, and our new brand purpose
affirms the importance of the steps we are taking to become
a fully customer-centric organisation. Our ‘Opening Our New
Future’ strategy has the customer at its heart and therefore its
success is reliant on colleague delivery and support. As such, we
will continue developing our leadership talent while devolving
decision-making so all colleagues feel empowered to make the
right decisions for their function.
FY23 was the right time to update our brand
and values to set ourselves on the right
course for the next 25 years.
cardfactory is recognised and loved by consumers across the
UK, both for the breadth and quality of our ranges and our
value for money. In FY23, we completed a review of our brand
purpose and values to position cardfactory for our next phase
of growth, and it remains anchored in the core truth that life
needs celebration: We make sharing in and celebrating life’s
moments special and accessible for everyone. Our focus for
FY24 is to bring the brand to life across all touchpoints, for our
colleagues, our customers and our investors.
Read more about Our strategy on pages 20-25
Read more about Our market on pages 10-11
Read more about Our brand on pages 12-13
In the year to come we are looking forward to
continue delivering on our ‘Opening Our New
Future’ strategy, expanding our market focus
to fulfil our strategic ambition of becoming the
leading omnichannel retailer in our sector.
and looking
forwardto the next 25
Kantar World Panel Plus (Physical Retail) data 53 w/e 22 January 2023.
1.
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OUR INVESTMENT CASE
Transformation and
growth
80% of cards and70% of gifts
are designed in-house
No.1 for range, value and choice
Expanding within £13.4 billion market
Opportunity for future growth
cardfactory is now growing within the celebration
occasions market, combining our greeting cards offer
with our growing gifts and celebration essentials ranges.
We are now addressing a £13.4 billion market in the
UK with further growth opportunities internationally
through our franchise and wholesale partners.
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Card Factory plc Annual Report and Accounts 2023
Virtuous circle of design, manufacturing
and retail provides barriers to entry
Established brand – making celebrating
life’s moments accessible for all
We design 80% of our store cards and 70% of our store gifts
in-house through our team of 74 creative designers, verse
writers and creative management. This allows us to rapidly
respond to changes in customer taste and needs, evidenced
through our design of a new Pride range in FY23, two designs
of which now remain on shelves year round.
Last year we manufactured 164.5 million of our cards and
other products in our Printcraft facility in Baildon, Yorkshire.
We are the most trusted brand in our sector in the UK1 with our
brand anchored in the core truth that life needs celebration.
However, our customers find bringing celebrations to life is not
always easy; it can be both time consuming and costs can add
up. From this, we defined our brand purpose, which we launched
in November 2022: We make sharing in and celebrating life’s
moments special and accessible for everyone. Our focus for FY24
is to bring the brand to life across all touchpoints.
We have more than 1,900 distribution points for retail, including
our online sales at cardfactory.co.uk and gettingpersonal.co.uk
and in cardfactory retail and partner stores.
At the same time, we have made enormous headway on
improving our gifts and celebration essentials offer, which is the
biggest growth area. We are ranked at no.1 for ‘good value’1 and
ranked the no.1 destination for balloons2.
1. Savanta BrandVue February 2022 to January 2023.
2. Kantar World Panel Plus (Physical retails) data 52 w/e 22 January 2023.
Contents Generation – PageContents Generation – Sub PageContents Generation - Section growth
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£52.4m PBT (up from £11.1m in FY22)
4.3/5 stars on Feefo
Partnership opportunity
Growing sales and profit
Proven sources of growth
In FY23, cardfactory LFL revenue growth of +6.7% was
underpinned by a strong performance in the core business
activity of store-based sales and Everyday card ranges,
accompanied by strong trading through the Christmas season.
Store revenue grew +7.6% on a LFL basis, reflecting a return
of customers to the high street, the success of our new ranges
and our strong value for money proposition despite selective
price increases. This led to a PBT of £52.4 million, up from
£11.1 million in FY22.
We delivered a successful Click & Collect trial with higher than
online standard average order value (AOV) (+16%) and positive
customer feedback (4.3/5 stars on Feefo). 87 stores went live
with the trial and nationwide rollout to 930 stores live by
mid-FY24. We continued with online and in-store range
expansion with access to an enlarged range of products and
categories. In addition, we broadened the gifting categories,
including flowers, alcohol and perfumes.
Return to shareholder distributions after January 2024,
when prudent.
New store format trial rollout improves in the in-store
experience through space realignment and product
adjacency improvements.
Cash generative model with diversifying
income sources
Scope for generating growth from proven success of current
relationship with Aldi and an ongoing trial with Matalan.
Concessions in 374 The Reject Shop stores in Australia provides
additional model for further growth.
The appointment of a franchise partner in the Middle East
and the post-year end acquisition of SA Greetings, adds to
the diversification, with franchised presence to be established,
initially in Abu Dhabi and Dubai, supplemented by expertise in
wholesaling to a range of retail customers in South Africa.
Read more on about our strategy delivery on pages 20-25
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CHAIR'S STATEMENT
Good
momentum“There is clear, positive momentum within the business
and early signs that the ‘Opening Our New Future’
strategy will deliver our growth ambition.”
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Card Factory plc Annual Report and Accounts 2023
Paul Moody
Chair
Contents Generation – PageContents Generation – Sub PageContents Generation - Section We have made positive progress on our
strategic priorities which are the building
blocks of our future growth ambition.”
Summary
There is clear, positive momentum within the
business and early signs that the ‘Opening Our
New Future’ strategy will deliver our growth
ambition. While mindful of the ongoing impact
of the cost-of-living crisis, we remain confident
that our great value for money proposition
across a range of products and price points
will resonate with customers who continue
prioritising celebrating life’s moments.
Paul Moody
Chair
3 May 2023
Board appointments
The Board looks forward to welcoming
Matthias Seeger as Chief Financial Officer who
will join the business in May 2023. We extend
our thanks to Kris Lee for the significant role he
played in helping guide cardfactory through
the last few years, in particular during the
pandemic impacted period.
In FY23 we were also pleased to welcome Indira
Thambiah as Non-Executive Director. Indira is
an experienced multi-channel retail executive
and consultant.
Following the decision by Octavia Morley
to step down from the Board at the end of
January 2023, Indira was appointed Chair
of the Remuneration Committee, with effect
from 1 February 2023. Roger Whiteside has
assumed the role of Senior Independent Non-
Executive Director.
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Dear Shareholder,
Ahead of management expectations, the
positive performance of FY23 reflects
the good momentum we have within the
business, the strong leadership we now have
in place and the unwavering commitment
from our colleagues. With revenue exceeding
pre-pandemic levels and notable progress on
our strategic initiatives, we are well placed to
deliver on our growth ambitions.
Year in review
Through FY23 we saw store-based sales and
Everyday card ranges underpin our strong
performance. This was accompanied by
very positive trading through the Christmas
season with new ranges and our compelling
value-for-money offer driving improvements
in both store transactions and average basket
value. We are encouraged that this trend
has continued in our FY24 Spring seasons
of Valentine’s Day and Mother’s Day. This
reflects work undertaken throughout the year
on range curation and improved availability,
as well as the successful implementation of
targeted price increases.
As customers returned to the high street,
online sales were down year-on-year
but remained significantly ahead of pre-
pandemic levels, reflecting the continued
expansion of product ranges online and
improvements to customer experience.
Growth delivery
We have made positive progress on our
strategic priorities which are the building
blocks of our future growth ambition,
transforming cardfactory into a market-
leading omnichannel retailer of cards
and gifts.
Through this strategy, cardfactory will become
the UK’s no.1 destination for all customers
seeking unrivalled quality, value, choice,
convenience and experience, however they
wish to shop.
12.9p
Basic earnings per share
We will transform cardfactory into the
leading omnichannel brand in the category,
helping customers celebrate each and every
special occasion. We will emerge as a global
competitor putting cards and gifts in the
hands of more customers.
Delivery of the ‘Opening Our New Future’
strategy is firmly underway with core
foundations now in place and encouraging
progress being made that is delivering
tangible growth, especially in gifts and
celebration essentials. As such, the Board
remains confident in the longer-term
growth opportunity for the business and its
expectations for revenues reaching around
£650 million in FY27.
Outlook and financial headwinds
The Board is encouraged by performance
since the January 2023 trading update, with
current trading slightly ahead of management
expectations. We expect our performance for
the coming year to reflect continued progress
on our strategic growth initiatives.
We have demonstrated our ability, in FY23,
to mitigate a significant proportion of
inflationary headwinds and, based on the
current outlook, we are confident in our ability
to continue managing these pressures with a
focus on productivity and efficiencies whilst
also benefitting from normalisation of freight
costs and annualisation of targeted price
increases implemented in FY23.
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OUR MARKET
The role of celebrations
As the country finds its new normal post-
pandemic and the cost-of-living crisis
continues, consumers are rethinking their
priorities around where they spend their
money and how they spend their time. In this
challenging context, consumer behaviour has
reaffirmed the central role of celebrations. In a
recent cardfactory survey, 73% of respondents
stated that celebrations are important to
them1, for spending time together, for feeling
closer, for having something to look forward to
and for providing a break from the everyday.
As a nation, we participate in a vast number of
celebrations and special occasions each year.
Although everyone celebrates in their own way,
we are seeing a universal motivation to continue
coming together, marking moments and
toasting achievements, even during challenging
times. The queues outside our cardfactory stores
as we reopened after periods of lockdown are
a testament to both the strength of our brand
and the enduring role celebrations play when it
comes to sharing love.
UK market focus
As part of our ‘Opening Our New Future’
strategy, we are expanding our market focus
to target the broader celebration occasions
market. This is in line with our strategic ambition
to be the leading omnichannel retailer in our
sector, selling a wide range of products to help
customers celebrate all life’s moments.
The celebration occasions market includes:
•
the c.£1.4 billion UK greeting cards market2
– this represents the current core of
our business;
•
the c.£2 billion celebration essentials
market3 – this includes the party and
balloon categories alongside other card
adjacent categories including wrap, bags
and tape; and
• an identified c.£10 billion addressable
market in gifts4 – this includes categories
such as toys, stationery, books, candles
and more.
Celebration occasions include:
birthdays, births,
engagements, weddings,
new jobs, exam results,
home moves, sport
milestones...
International market opportunity
Building on cardfactory success in the UK
greeting cards market, we have recently worked
with GlobalData and completed comprehensive
analysis of the international landscape. The
research looked at a range of factors in key
markets including demand context, cards
and gifts market size and forecasts, consumer
behaviour and expectations, and the state
of the competitor landscape. This identified
an £8 billion5 greeting cards addressable
opportunity, which grows to an addressable
market of over £80 billion (including gifting),
in seven priority international markets, and
provided quality insights to inform our strategic
planning and execution.
UK greeting cards market
Over the past 25 years, cardfactory has
built a strong position in the £1.4 billion UK
greeting cards market. This has provided
a platform for growth within the adjacent
celebration essentials market, worth
c.£2 billion per annum. The cardfactory
focus on this market opportunity over recent
years, combined with innovation and range
development, has resulted in the brand
achieving a no.1 UK market position in the
balloon category6.
The UK greeting cards market has shown
ongoing resilience over recent years, continuing
its post-pandemic recovery, with a volume
growth of +2% YOY2. The number of UK adults
purchasing greeting cards rose to 40.3 million,
a +7pp increase from last year, and 827 million
cards were bought in total, up from 811 million
the previous year. The average number of cards
purchased per person was 19.9 per annum.
There was positive growth in the younger
audience categories, with the 16-24 age group
rising to 24 cards per person, per annum, an
increase of +14% on FY22. In terms of card
categories, Mother’s/Father’s and Valentine’s
categories saw a sizeable increase of +153% on
the previous year, as did Wedding, up +170%.
1. cardfactory OnePulse survey July 2022.
2. cardfactory bespoke annual UK Greeting Card Market
Survey FY23 (4,501 participants) commissioned with Dynata,
February 2023.
3. Kantar Worldpanel Plus (Physical Retail) data to 52 w/e
22 Jan 2023 & GlobalData Retail Occasions Series UK,
Partyware 2022.
4. Kantar Worldpanel Plus (Physical Retail) data to 52 w/e
22 Jan 2023 & Whitecap Consulting Ltd September 2021.
5. GlobalData Global Expansion Project (July 2022).
6. Kantar World Panel Plus (Physical Retail) data 52 w/e
22 January 2023.
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Card Factory plc Annual Report and Accounts 2023
Key highlights2
40.3m
80% of UK adults purchased greeting
cards vs 73% in FY22.
19.9
Number of cards bought per UK
shopper, per annum.
827m
Overall UK card market size. Number
of cards purchased, up from 811m in
FY22.
+14%
YOY volume growth in cards
purchased per annum by younger UK
audiences aged 16-24.
+153%
YOY UK volume growth of Mother’s/
Father’s/Valentine’s Day cards.
+170%
YOY UK volume growth of Wedding
cards.
Contents Generation – PageContents Generation – Sub PageContents Generation - Section Overall, FY23 has seen a strong return to
greeting card purchases from physical stores,
particularly high street stores. Offline retail
value percentage of the total greeting card
market has grown as follows:
FY23: 79%
FY22: 72%
FY21: 64%
Source: cardfactory bespoke annual UK Greeting Card Market.
Survey FY23 (4,501 participants) commissioned with Dynata,
February 2023.
The size of the online market has fallen back
from the peaks seen during the years of
the pandemic but remains at a higher level
than pre-2020, with the online cards market
representing 21% of the total cards market in
FY23 vs 13% in FY20.
Online sales continue to present cardfactory
with a significant growth opportunity. With
comparatively low penetration of the online
market, but high overall brand awareness,
we will seek to build awareness of and
engagement in our digital proposition.
Customer satisfaction for customers who have
purchased from our online channels is strong
and comparable with our store channel,
demonstrating that the offer is well received
by those who do access it.
‘Opening Our New Future’
As part of our ‘Opening Our New Future’
strategy, cardfactory is well positioned
to grow within the celebration occasions
market, both in the UK & Ireland and in key
international markets through a combination
of franchising and wholesale. Over 25 years,
through our high levels of brand awareness,
consideration and trust, alongside our
leadership in value for money, cardfactory has
built a strong position in greeting cards for all
occasions. More recently, we have developed
and built share of the celebration essentials
market, including a UK no.1 position in
balloons and are now focusing on our creative
and commercial capability to develop our
share and subsequent success in the sizeable
gifts category.
c.£1.4bn
UK greeting
cards market
Source: cardfactory bespoke
annual UK Greeting Card Market
Survey FY23 (4,501 participants)
commissioned with Dynata,
February 2023.
We hold a unique position in the UK market
Bubble size = Overall value strength
Value in brackets = Rank on overall value
80%
75%
70%
65%
60%
55%
50%
45%
40%
%
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Higher quality perception retailers
are generally seen as more
expensive
Moonpig (7)
Clintons (9)
Independent
card shop (6)
Asda(4)
Lower price
retailers tend
to be delivering
below average
on quality
cardfactory (1)
Some retailers are in the
middle ground for both
price and quality
Tesco(8)
B&M (5)
Card Zone (3)
Home
Bargains (2)
0%
10%
20%
30%
40%
50%
60%
70%
Low price %
Source: Kantar Worldpanel Plus (Physical Retail) data to 52 w/e 22 Jan 2023
& GlobalData Retail Occasions Series UK, Partyware 2022.
cardfactory sales are anchored in a highly differentiated market position, with a better value
for money perception than other specialists, and a higher quality perception than other value
brands and supermarkets.
Source: cardfactory price and value research commissioned with boxclever, November 2022.
Source: Kantar Worldpanel Plus (Physical Retail) data to 52 w/e 22 Jan 2023
& Whitecap Consulting Ltd September 2021.
c.£2.0bn
UK celebration
essentials
market
c.£10bn
UK gift market
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OUR BRAND
Creativity...
values...
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Card Factory plc Annual Report and Accounts 2023
culture
Contents Generation – PageContents Generation – Sub PageContents Generation - Section In FY23, we completed a review of our brand purpose, proposition
and values to position cardfactory for our next phase of growth, in
line with our ambition to become the leading omnichannel retailer
in the celebration occasions market.
Driven by our ‘Opening Our New Future’ strategy, the outputs will
provide the platform for building on our strong position in greeting
cards and growing our share of the celebration essentials and
gift markets.
1. Brand awareness
+19pp
difference in
awareness vs
key competitor
average1
On 1 November 2022, the 25th anniversary
of the first cardfactory store opening in
Wakefield, we launched our new brand
purpose and values across the business.
Our brand is anchored in the core truth that
life needs celebration. Conversations with
consumers reaffirmed the powerful role that
celebrations play in our lives: they bring us
together, help us show love and help us feel
loved. However, our exploration also revealed
that for consumers, finding what they need
to bring their celebrations to life is not always
easy; it takes time and costs can add up.
From this truth, we defined our compelling
brand purpose:
We make sharing in
and celebrating life’s
moments special and
accessible for everyone
Our brand strategy unifies and galvanises the
business around the clear role that we have in
people’s lives, which is to help them celebrate
all of life’s moments. It is underpinned by the
creative mindset and values-driven culture
that shapes all we do. Our focus for FY24 is to
bring the brand to life across all touchpoints,
from store experience, to communications,
to product range; for our colleagues, our
customers and our investors.
Recognised and loved
cardfactory has a differentiated and
defensible market position and is recognised
and loved by consumers across the UK. Our
strong value-for-money proposition continues
to resonate powerfully and has underpinned
the acquisition of new customers and the
return of lapsed customers to the brand in
FY23. cardfactory is particularly well known
for its unique and broad range of cards and
gifts, for every occasion and every budget.
Recent research reaffirmed our no. 1 ranking
by customers for key metrics including value
for money and breadth of range and ease.
As the cost-of-living crisis continues to
influence consumer attitudes and behaviours,
cardfactory’s unique blend of quality and
choice at accessible prices has proven more
relevant than ever.
2. Brand consideration
+21pp
difference in
consideration vs
key competitor
average2
3. NPS
+42.1
NPS score
+12 points vs
key competitor
average3
1.
Source: Savanta BrandVue Feb 2022 to Jan 2023
(FY23 awareness figure is 90%).
2. Source: Savanta BrandVue Feb 2022 to Jan 2023
(FY23 consideration figure is 43%).
3. Source: Savanta BrandVue Feb 2022 to Jan 2023
(NB: restated to an FY23 12 month read).
4. Source: Savanta BrandVue Feb 2022 to Jan 2023.
Key competitors are specialist UK card and gift retailers.
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4. cardfactory no.1 metrics4
• Good value
• Wide range of products
• Ease of finding what you want
• For people like you
• Trusted
• Convenient
5. Values
• We lead the way
• We celebrate our differences
• We make it happen
• We do the right thing
• We care
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OUR BUSINESS MODEL
Unique vertically
integrated
model
Our business model not only continues
to provide competitive advantage but
also provides:
• The flexibility the business benefitted from
during the FY22 supply chain challenges.
• The ability to respond rapidly to changing
consumer demands that has been crucial
post-Covid-19 and as we deliver our strategy.
• The platform for transitioning cardfactory into
an omnichannel business.
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Card Factory plc Annual Report and Accounts 2023
Our design insight ›
Using insights, sales data and trend analysis, our design
studio and commercial team continue to ensure our product
offering meets the needs of loyal customers while drawing
in new demographics.
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Data-led design ensures rapid
response to changing consumer trends
and preferences.
• End-to-end control of product chain
allows flexible and rapid adaptation e.g.
to reprint an unexpectedly popular line.
• Card designs are planned in line with
the forward price architecture (‘design
to the budget’).
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Design colleagues
421
Support colleagues
1.
Design
Own estate of over 1,000 retail stores across
UK & Ireland; online; and partnering with other
retailers to extend reach.
• UK & Ireland store network is main route
to market.
• Together, our stores and online presence
is unlocking our omnichannel growth
opportunity.
3.
Retailing
8,576
Retail colleagues
1,032
Retail stores
Large-scale print facility in
Baildon, Yorkshire, is a key USP for
cardfactory.
• Produces 70% of all cards we retail
through our store network as well as our
online cards.
• Continued investment ensures lowest
cost to operate print facilities and
maintains quality of product.
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Manufacturing colleagues
245
Distribution colleagues
2.
Manufacturing
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Our production advantage ›
Omnichannel ›
We benefit from our own large-scale Printcraft print facility
in Baildon, Yorkshire, which has the capacity to produce 270
million cards per annum, with new ranges produced in as little
as four weeks and quick selling lines can be remanufactured in
just days.
Our 1,000+ stores across the UK & Ireland are our main route
to market, offering our full range and retail experience to our
customers. Additional access to our range is available from the
online offer and via our UK and international retail partners.
Through the introduction of new omnichannel propositions we
will be able to leverage the scale of our store estate and online
offer to provide a seamless, convenient shopping experience.
Gifts and celebration essentials ›
Transitioning cardfactory from being a store-led card retailer
into a market leading, omnichannel retailer of cards and gifts
was a key priority for FY23. While cards remain the largest part
of our business, we began the process of increasing our focus
on complementary gifting and expanding our product offering.
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CEO'S REVIEW
£463.4m
Revenue
+7.6%
Store revenue growth LFL
Delivering our
strategy
“Having made a strong start on our growth delivery in FY23, we
have good momentum within the business which will enable us
to reach our revenue target of around £650 million in FY27.”
Darcy Willson-Rymer
Chief Executive Officer
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Card Factory plc Annual Report and Accounts 2023
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Dear Shareholder
With sales in FY23 exceeding pre-pandemic
levels and delivery of our ‘Opening Our New
Future’ growth strategy showing early signs of
success, it is clear there is good momentum
within the business.
The return of footfall to the high street and
the unwavering loyalty from our customers
has made a significant contribution to
this success. In addition, the cultural
transformation the business has undergone
and the dedication of colleagues across the
business and their willingness to embrace
change over the past two years, has fuelled
that return of sales and the growth that we
are now enjoying.
cardfactory needed to become customer-
centric in its thinking and approach and to
achieve that we have placed customer data
at the heart of our decision-making. From
product creative in our design studio to the
customer service experience training we are
giving our colleagues in-store, we are now
applying customer data into our thinking and
how we respond to market change. This is
leading to positive, data-led outcomes around
the customer which is being seen across every
part of the business.
FY23 performance
Revenue of £463.4 million reflects the
continued progress across the business
alongside the shift of customer spend back
towards the high street. cardfactory LFL
revenue growth of +6.7% was driven by
strong performance of stores and Everyday
card ranges.
Store sales grew +7.6% on a LFL basis
reflecting a return of customers to the high
street, the success of our new ranges, our
strong value for money proposition, and
selective price increases. It is through the
strength of our store footprint that we will
be able to deliver on our omnichannel
proposition and ambitions.
Revenue of £463.4 million reflects the continued progress
across the business alongside the shift of customer spend
back towards the high street.”
Strong performance in Everyday product
across card, gifts and celebration essentials
supported increased sales across the year.
We also achieved double-digit, LFL growth
in specific card ranges including our fully
refreshed wedding range, as well as life
moments and children’s.
Christmas trading saw increased store
transactions and average basket values,
supported by new ranges, the strength of our
expanding gifting offer, and our strong value
for money offer. These trends have continued
through to Valentine’s Day and Mother’s Day
in Q1 FY24.
We successfully executed our pricing strategy in
FY23 whilst choosing to protect our competitive
entry price point and building greater value into
our pricing architecture. This resulted in minimal
impact on customer switching.
Following expansion of our gifts and
celebration essentials (previously together
referred to under the single ‘complementary
categories’ heading we have now split this
out to conform to industry recognised market
analysis and to enable clearer measurement)
we have continued to grow share in line
with our strategic priorities. By targeting
the gifts and celebration essentials market,
we have also been able to recalculate the
total addressable UK market opportunity for
cardfactory at £13.4 billion.
Customers returning to the high street
and the impact of Royal Mail strikes
during the Christmas trading period saw
cardfactory.co.uk sales decline -18.8% YOY
although this remained significantly up in
comparison to pre-pandemic (+86.4% 3Y
LFL). At -34.7%, gettingpersonal.co.uk was
also impacted by postal strikes as well as a
pause on new product development while
replatforming was undertaken. This is now
complete and will enable the opportunity for
range development and further functionality.
In FY23 we saw a continued robust
performance of existing partnerships during
the year with an 10% increase in sales
compared to the prior year. Considerable
work was undertaken to lay the foundations
for future partnership growth.
Strategy delivery
FY23 was the launch year of our business
transformation as we began delivery of our
strategy and we have achieved significant
milestones across all our areas of focus. By
delivering on our strategy we are confident
we will achieve our growth ambition of
reaching £650 million in FY27.
Within our core business, we will build upon our
leadership in cards within the UK using insight-
led innovation and range development. This
work is well underway and is delivering sales
growth in both Everyday and Seasonal.
Store LFL sales is expected to continue
to grow through our store estate as we
continue with our store location optimisation
programme and expand into under
penetrated markets.
The building blocks of our additional revenue
growth will come from three areas. Already
we are seeing positive growth from our
first area of focus: gifts and celebration
essentials. We saw total sales of Everyday
gifts and celebration essentials through our
stores, on a LFL basis, increase by 11.4% with
confectionery being the largest sales growth
area at +111% and tableware achieving
the largest volume increase at +124%. Our
gifting offer will be further supported by our
Store Evolution Programme which has been
developed from the learnings of our model
store trial. Our Store Evolution Programme is
comprised of three key components: space
realignment that will be applied across 750
stores in FY24; display reorganisation that
will be applied across 50 stores in FY24; and
an updated store design to new stores and a
select number of existing stores in FY24.
We also made significant progress in
delivering on our omnichannel ambition,
rolling out a successful Click & Collect trial
across 87 stores. This was the first of our
omnichannel propositions and UK nationwide
rollout to over 1,000 stores was completed at
the end of April 2023. Further developments
to the service are planned for FY24.
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CEO’S REVIEW CONTINUED
FY23 was the launch
year of our business
transformation as we
began delivery of our
strategy and we have
achieved significant
milestones across all
our areas of focus.”
Finally, for partnerships we are pleased to
have announced our first master franchise
partnership in the Middle East. Our exclusive
franchise partner in the UAE, Liwa Trading
Enterprises, will open c.36 cardfactory
branded stores over the next five years in the
Middle East. We also recently announced
the acquisition of SA Greetings, meaning
we now have our first presence within South
Africa both as a retailer and wholesaler.
This supports our partnerships strategy by
providing access to key wholesale accounts
through the Group’s printing, merchandising
and warehousing capacity. It also provides
us with the opportunity to learn how we can
deliver similar local capability in our other
target international markets. In FY23 we
completed the research of the international
market opportunity for both card and gifting,
validating our seven international markets of
interest. The foundations for our partnership
model have now been scoped and are in
development to support both franchise and
wholesale partnership models.
We also invested in our transformation
capability with a new Transformation Office
which is providing the planning, collaboration
and risk management diligence that will
ensure we deliver at pace, to plan, on time
and on budget.
Responding to headwinds
The successful management of significant
inflationary cost pressures faced in FY23 was
achieved through a combination of proactive
measures including efficient management
of costs and working capital, improved store
efficiencies and targeted price increases,
alongside benefits from hedging policies
across both energy and foreign exchange.
People & Culture
Creating the culture and behaviours that
addresses barriers to transformation and
unlocks the potential of the business is
fundamental for any business which is serious
about a growth agenda. The fact that we
have been able to make such a strong start in
FY23 on the delivery of our strategy is down to
the fact that we have made positive headway
in evolving our culture and behaviours.
As we enter FY24, it is clear that the progress
we have made is already paying dividends.
The business is delivering on the strategy from
a position of strength with a powerful culture
and strong foundations in place.
This change has been recognised not just
in our delivery but also through external
recognition, with cardfactory named as the
number one Best Big Retail Business to Work
For, and the third Best Big Company to Work
For in the UK in Best Companies Q1 2023
awards. We are delighted and very proud to
receive this in recognition of our commitment
to workplace engagement.
In FY23 we also refreshed our brand, placing
customers and their celebrations at its heart.
As part of this work, we have updated our
values to reflect both the natural evolution
of the business and the values we need
to live and breathe if we are going to
successfully deliver our growth strategy.
For the whole team at cardfactory, these
are values we are actively embracing in
everything we do, from the way we make
decisions, interact with our customers
and each other, through to how we are
approaching the delivery of our strategy.
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Card Factory plc Annual Report and Accounts 2023
Our ESG commitment
The delivery of our ambitious ‘Opening Our
New Future’ growth strategy and the business
transformation this requires are underpinned
by our commitment to operate sustainably
across all areas of our business. As such,
work has begun to produce our five-year
ESG strategy and roadmap, starting with
a refreshed materiality assessment and
assessment of our Scope 3 greenhouse gas
emissions which will ensure our priorities
reflect the changing world around us and
remain aligned with those of our stakeholders.
At the same time, we continued to make
positive progress through FY23. One highlight
was the business entering into partnership
with The Woodland Trust to support their
work to protect, restore and create native
woodland in the UK.
Summary
The business has a strengthened balance
sheet now in place and we are clear on our
core business priorities and building blocks
of growth. Having made a strong start on
our growth delivery in FY23, we have good
momentum within the business which will
enable us to reach our revenue target of
around £650 million in FY27.
Darcy Willson-Rymer
Chief Executive Officer
3 May 2023
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The business has a
strengthened balance sheet
now in place and we are clear
on our core business priorities
and building blocks of growth.”
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STRATEGY DELIVERY
Opening our
new future
By delivering on the strategy, cardfactory will
become:
‘Opening Our New Future’ strategy
In FY23 we began delivery of our ‘Opening Our New Future’
strategy.
We achieved significant milestones across our three primary
areas of focus – online and omnichannel, gifting and
partnerships. Our ability to execute on our strategy was
achieved by focusing on the right capabilities, systems and
structures across the business.
As we progress into the second year of our transformation
programme, we are continuing to progress across all growth
opportunities.
the first omnichannel brand helping
customers every day to celebrate life’s
special moments;
the UK’s no. 1 destination for all customers
seeking unrivalled quality, value, choice,
convenience and experience; and
a global competitor putting cards and gifts
in the hands of more customers.
We are targeting revenue of £650 million in FY27. The revenue
mix target remains unchanged with approximately 20%
revenues to be generated from online, omnichannel and retail
partnerships, while creating a business with a low-cost base
and highly scalable business model.
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Card Factory plc Annual Report and Accounts 2023
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As we progress into the second year
of our transformation programme,
we are continuing to progress across
all growth opportunities.”
Delivery on the strategy
There are three guiding principles that drive our strategy
ambition:
‘Opening Our New Future’
1
2
3
Breadth of product offering
Transforming cardfactory to an omnichannel retailer of
cards and gifts with a leadership in cards and increasing
presence in gifts and celebration essentials.
A full omnichannel offer
Improving availability and access to our products,
however customers choose to shop; enhancing
convenience and experience for shoppers.
A robust and scalable central model
Our capacity to design, manufacture and sell our
products continues to provide cardfactory with a
distinct competitive advantage.
To deliver on these principles, the ‘Opening Our New Future’
strategy is structured around providing improved value and
choice, more convenience and an exceptional experience for our
customers. All of this is built upon the foundation of our scalable
central model that drives efficiency across the business.
The leading omnichannel retailer in our sector with an extensive
UK & Ireland footprint and growing international presence
cardfactory
Value & choice
Convenience
Experience
Leadership in
card
Authority in gifts
& celebration
essentials
Digital
experience
innovation
Extensive
UK & Ireland
footprint
Growing
international
presence
Customer &
community
focus
Passionate
colleagues
Scalable central
model, driving
organisational
efficiency
Creative
Manufacturing
Technology
Insight driven product,
design and creative
content publisher at the
heart of cardfactory IP
Ability to scale up
production to meet
increased demand in line
with projections
Enabling greater efficiency,
more agile practices and
the ability to do business
world-wide
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STRATEGY DELIVERY CONTINUED
Convenience
With an extensive, UK-wide store estate, a growing footprint in
the Republic of Ireland, and partnership relations that extend
the availability of our products, we are already able to deliver
convenience for shoppers in-store. Through our ‘Opening Our
New Future’ strategy we will combine this market-leading
physical footprint with our online presence so that our customers
can enjoy a seamless shopping experience anywhere and at any
time they choose.
FY23 delivered milestone: 87 stores went live
with Click & Collect trial.
FY24 planned milestone: Nationwide rollout
by May 2023.
New omnichannel services
2
In addition to Click & Collect, a range of
additional omnichannel services are currently
being developed with initial trials planned
for FY24. These new services will help provide
a seamless shopping experience for our
customers and allow cardfactory to start
collecting, connecting and understanding
customer behaviour.
FY24 planned milestone: Balloon collection
trial, allowing customers to order balloons
online and collect in-store. Event reminders
trial: to understand if event reminders can
be captured in-store to support improved
retention.
Digital experience innovation
In FY23 we began our first omnichannel trial
with the launch of a Click & Collect service
across 87 stores. These stores were selected
from across the UK to both gauge customer
demand and to provide the test and learn
platform we needed for systems, processes
and customer service. This is the first of a
range of new omnichannel propositions that
are being developed for implementation in
the coming years.
cardfactory app. We completed the transition
of both websites to a new eCommerce
platform in March 2023. As well as saving
costs, this unlocks more efficient development
capability, in particular the massive expansion
of the gifting range on cardfactory.co.uk.
Range expansion
3
The phased expansion of our online range as
we create an extended range of products and
categories.
Our digital strategy focuses on the delivery
of four pillars:
1
Click & Collect
FY23 delivered milestone: Five new categories
added (flowers, gift experiences, alcohol,
chocolate and books) generating an 11% uplift
in gifting sales in the second half of FY23.
FY24 planned milestone: Additional new
categories to be added including (but not
limited to) personalised party, clothing and
premium balloons.
Following the success of the trial, we will now
be moving to a nationwide rollout with over
1,000 stores going live by May 2023.
In addition to delivering new omnichannel
experiences that combine the strength of our
physical store estate with a digital experience
that meets customer expectations, we are
also focused on developing our online offer
through our two websites (cardfactory.
co.uk and gettingpersonal.co.uk) and our
The ability for shoppers to Click & Collect
any product from our online or app platforms
for collection in store. Successful FY23 trial
achieved higher than online standard average
order value (AOV) (+16%) and saw over 7% of
customers purchasing an additional item with
a 33% higher AOV than stores.
Positive customer feedback (4.3/5 stars on
Feefo) and no disruption to store processing
of orders in peak time.
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Card Factory plc Annual Report and Accounts 2023
Online and app experience
4
Improving the customer experience is critical
for our long-term success and is a major focus
going forward to ensure we build customers
for life.
FY23 delivered milestone: Conversion Rate
Optimisation (CRO) programme had a
positive impact on sales; major app update
added a range of new features including
product reviews and recommendations, top
selling product badges and ability for app-
only promotions; new machine learnings cross
sell tool successfully trialled, increasing AOV;
Multiship functionality introduced, providing
shoppers with the ability to buy multiple
products and have them delivered to multiple
addresses from a single order.
FY24 planned milestone: Improvements
to include event reminders, easier basket
building to cross sell gifts with orders and
delivery improvements including nominated
day deliveries and Sunday deliveries for
key events.
Technology infrastructure
FY23 saw the continued rollout of a major IT
implementation programme to replace our
legacy ERP system which will underpin the
growth strategy across the entire business,
allowing us to understand and respond
rapidly to changing shopper habits and
preferences. It unlocks the ability to view stock
in all areas of the business, which is essential
for omnichannel operations, and will allow us
to integrate with future partners both in the
UK and internationally.
As an enabler for our omnichannel
programme and to enhance customer
experience and loyalty in store, we are also
embarking on a significant broadband Wi-Fi
upgrade for the store estate. This improved
connectivity will, among many benefits,
enable mobile point of sale (PoS) in store.
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FY23 delivered milestones: Built out enterprise
architecture capability as enabler of the
continued delivery of the second phase of our
ERP implementation.
FY24 planned milestone: Completion of
second phase of ERP implementation;
initiation of final third phase of ERP
implementation delivering enterprise
warehouse management; selection of a
strategic technology partner to accelerate
our delivery, enhance our capabilities, and
achieve our strategic goals more efficiently;
Data analytics investment; broadband Wi-Fi
upgrade across store estate enabling mobile
PoS rollout over FY24 and FY25 as well as
other benefits.
Extensive UK & Ireland footprint
The strategy behind our nationwide store
estate continues to be built upon the core
principles of low cost and flexible leases
that provide the agility we need to adapt to
changing consumer footfall trends. As we
continue to develop our store estate portfolio,
we are focused on accessing underpenetrated
markets, testing a central London format,
and portfolio management. This has included
expansion in the Republic of Ireland and our
first stores in central London.
The trial of our model store format has
provided revenue-driving learnings that we are
now starting to rollout across our wider estate
through our new Store Evolution Programme,
while continuing to expand the format. The
nationwide store estate is the enabler for
unlocking the omnichannel opportunity of
providing customers with the convenience of
shopping anywhere and any way they choose
to meet their celebration needs.
Model store
We trialled the new model store format in ten
stores through FY23 with a further five stores
opened in January 2023 testing an additional
capex-light version of the approach. The stores
were selected so that the format could be
tested in a wide variety of different locations,
demographics and store sizes.
Having now concluded the model store trial,
we are rolling out the learnings through three
programmes: our Store Evolution Programme
which consists of three key components:
1. Space realignment. For the majority of
our stores, we will be reallocating space so
there is slightly more priority for gifts than
before. Having identified which stores will
benefit, we will be applying this change
across 750 stores this year. This is a capex
light initiative with payback within a year.
2. Display reorganisation. This modifies how
we present cards and gifts in our stores
with cards arranged around the perimeter
while gifts will be placed in the central
aisles. This layout not only improves
customer navigation and makes it easier
for them to locate cards but also ensures
proper product adjacencies. We plan to
complete this adjustment in around 50
stores this year as we continue to fine-tune
costs and returns.
3. Updated store design. This applies the new
format that we successfully trailed within
the model store trial to enhance a store’s
overall appearance by setting minimum
standards for our existing locations and
incorporating this aspect into the other
two components of the programme for
new stores or a select number of full
refurbishments. The costs are in line with
existing refit costs and there is no impact
on our store capex forecasts.
FY23 delivered milestones: Initial rollout of ten
trial model stores with five further capex light
stores opened in January 2023.
FY24 planned milestones: Model store
programme learnings taken into two new
ongoing initiatives.
Relocation strategy
The strategy behind our nationwide store
estate continues to be built upon the core
principles of lower cost and flexible leases
with a target three year break clause and
never more than five years. This provides
the agility we need to adapt to changing
consumer footfall trends and ensures that less
than 1% of our stores are loss making.
As we continue to develop our store estate
portfolio, we are focused on accessing
underpenetrated markets, testing a central
London format, and portfolio management.
London & the Republic of Ireland
We are trialling our first stores in central
London with three stores in Fenchurch Street,
Tottenham Court Road and Holborn. Having
enjoyed profitable success with our first
14 stores in the Republic of Ireland we will
continue to open further stores.
FY23 delivered milestones: Open first central
London stores; continued Republic of Ireland
expansion to 27 stores.
FY24 planned milestones: Determine central
London store roadmap; open further Republic
of Ireland stores.
Retail partners
The partnership model allows us to reach
more UK & Ireland shoppers in additional
convenient locations that meet the growing
demand for impulse buying. In the UK, we
have two successful retail partnerships with
Aldi and Matalan, with over 560 points of sale.
Internationally the partnership model allows
us to scale in selective markets primed
for disruption.
In Australia, we have over 370 points of sale
with The Reject Shop, and also have an
existing franchise partnership with an operator
of stores in the Channel Islands and Gibraltar.
FY23 delivered milestones:
• 10% YOY revenue growth for partnerships
delivered in tough trading conditions
coming out of the pandemic.
• 14% YOY revenue growth delivered with
our franchise model in the Channel Islands
and Gibraltar.
FY24 planned milestone:
• Secure further partnership appointments.
Growing international presence
Building on initial successes in attracting
pilot international partners, and with full
international market analysis completed
identifying an addressable international
gifting and card market in excess of
£80 billion, we have identified and are in
active discussions with future partners in
seven priority international markets for
franchise and wholesale partnerships.
FY23 delivered milestones:
• Market opportunity research conducted
across both card and gifting validating our
markets of interest.
• Foundations scoped and in development
to support three partnership models.
• Brand assets created to support franchise
growth and cardfactory branded
wholesale.
• 26% YOY revenue growth delivered with
The Reject Shop in Australia.
FY24 planned milestones:
• Sign up low to mid complexity franchise
and wholesale partners.
• Entry into South Africa, one of our seven
new markets identified for expansion
through the acquisition of SA Greetings,
giving us access to retail stores and key
wholesale accounts.
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STRATEGY DELIVERY CONTINUED
Value and choice
While we continue to develop our cards offer to ensure we retain our
UK leadership position, we have made significant headway in building
sales across our gifts and celebration essentials categories which are
now our fastest growing areas.
Leadership in card
The business remains focused on retaining our
position as the UK’s leading provider of cards
in a stable, low growth market. This will be
achieved through the three pillars of:
• Maintaining our value for money
proposition while stretching the average
selling price and delivering year-round
relevant customer promotions;
• Developing the range to respond to
consumer trends (including diversity,
sustainability and a wider breadth of
celebratory captions) while optimising
customer choice with easy-to-shop curated
card ranges; and
• Simplifying the in-store experience.
The pricing strategy ensured the entry points
remained unchanged while moving the price
point of some cards to match the value
customers apply to the occasion.
FY23 delivered milestones: Pricing strategy
drove revenue growth with a permanent
‘3 for 2’ mechanic on our general card range;
developed new ranges at new price points; entire
Everyday range reviewed and targeted newness
introduced; expanded diversity and inclusion
across card ranges to ensure all of our customers
are included.
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Card Factory plc Annual Report and Accounts 2023
Authority in gifts and celebration essentials
Gifts and celebration essentials is a sizeable
growth opportunity with a combined £12 billion
addressable market in the UK. Significant
progress has been made to expand the range
of gifts both in-store and online. Offering both
value for money own label ranges as well as
well-recognised footfall-driving third-party
brands will enable us to capitalise on the 70%
of all customers looking for gifts to accompany
their card purchase. As we further expand the
offer, we expect continued strong performance
in confectionery, toys and party while exploring
opportunities in other categories, although
we will need to invest in building awareness of
cardfactory as a gifting retailer both in-store
and online.
FY23 delivered milestones:
• Total Everyday gift growth of £15.4 million
(+11.4%) with confectionery as the largest
sales growth area at £3.4 million (+111%)
and tableware achieving the largest volume
+124% (+1.5 million units).
• Broadened categories by introducing third-
party brands and licenced ranges.
• Strong soft toys offering has been
broadened through the introduction of
boxed toys, pocket money and licenced toys.
• Convenient shopping experience was
created by zoning product categories.
• 90% of confectionery ranges have been
sourced and manufactured within the UK
and Europe.
FY24 planned milestones: Gifting expansion
continues across toys, stationery, confectionery,
branded gifts, pet gifts, etc, going to a wider
proportion of the estate to give the customer
greater choice; Seasonal gifting offer
appealing to broader customer base with
introduction of new designs and branded
ranges to offer more choice; party expansion
with broader ranges to meet all celebration
needs across the estate and further enhanced
online; new sustainable party ranges for FY24
with 100% recyclable packaging of which 85%
is non-plastic, alongside replacing plastic
products with paper-based alternatives.
Gifts and celebration
essentials is a sizeable
growth opportunity
with a combined
£12 billion addressable
market in the UK.”
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Experience
We are delivering on our ambition of creating an exceptional
customer experience by using improved data capabilities to provide
the best possible service for our customers. We are developing a
culture of accountability with colleagues empowered to make the
right decisions for the business with a shared understanding of its
identity, strategy, vision and values within a diverse, inclusive and
socially responsible business.
Customer & community focus
In FY23 we updated our brand to reflect
both the evolving cardfactory offer and
the changing needs of our customers.
Underpinning our brand we adopted a new
set of values which will guide the delivery
of our strategy over the next five years. We
have also made a considerable step in our
customer first ambitions by embedding the
application of customer data and insight into
decision making across the business.
We continue to build upon our environmental
social governance (ESG) credentials with our
aim of being recognised as a socially and
environmentally responsible business. We are
working to reduce waste, reduce our carbon
footprint, meet ever bolder recycling targets,
and make our products as sustainable
as possible.
We continue to invest in giving back and
The Card Factory Foundation, combined
with our charity partnerships, makes a
significant contribution to the wellbeing of our
colleagues and communities; something we
care passionately about. For more details, see
pages 36 to 43.
FY23 delivered milestones: Updated brand
and values; customer data and insight
investment; ongoing ESG progress (more
details on pages 36 to 43).
FY24 planned milestones: New five-year
ESG strategy and roadmap; refreshed
materiality assessment; assessment of our
Scope 3 greenhouse gas emissions to provide
foundations for science-based targets.
Passionate colleagues
Delivering on the ‘Opening Our New Future’
strategy involves a people-led business
transformation approach. This entails
developing our core behaviours around the
primary business enablers of customer-
centricity, data-led decision-making, creative
thinking, pace of change and agility of
thinking, and cross-functional alignment and
collaboration.
To succeed we are placing emphasis on
leadership development, upweighting the
leadership talent within the business through
new hires and bringing in specific expertise to
deliver on the strategy.
We are also developing our leadership
capabilities, building upon the principle of
devolved decision-making so that the senior
management team shapes the strategy
and the wider senior leadership team
takes responsibility for its delivery, ensuring
decisions and actions are taken at the
appropriate level to ensure success.
In FY23 we created a Transformation Office to
deliver on the five year transformation plan.
Through the Transformation Office we are:
• placing the right talent in the right roles;
• ensuring plan alignment across the business;
•
fostering team collaboration to ensure every
function is unified around plan delivery;
and
• combining project management and
change management skillsets.
With the Transformation Office in place, we
can constantly course correct as we respond
to circumstances while staying focused on the
end goal. It will help us ensure we have the
right skills and capabilities in place and harness
existing expertise, provide governance across
all aspects of delivery and address barriers to
change so we can deliver at pace. It will also
mean we have the right behaviours to shift
towards customer-centricity and being data-led.
In FY23 we have focused on having the right
pay and benefits to attract and retain talent,
while recognising the challenges all colleagues
face due to the cost-of-living crisis. In early
FY23 we have made the first significant step
as a business towards delivering a pay and
benefits model that we can be proud of. Our
aim is to reward everyone fairly, inclusively and
competitively. While it will take time to achieve
that ambition, we are aiming to reach a place
as quickly as we can where everyone feels that
the hard work and commitment they deliver is
recognised in the financial reward and benefits
they receive.
FY23 delivered milestones:
• As we have reviewed our approach to pay
and benefits for this financial year, we
have recommended a balanced approach
with something for every colleague,
while considering our internal principle
of offering market pay but also thinking
about the external economic environment.
• An ongoing investment in pay ensures our
commitment to reward our colleagues in
line with the market continues – with an
average pay increase of 8.9% and removal
of the lower band of National Minimum
Wage for hourly paid retail colleagues and
‘market median’ pay for all colleagues now
achieved based on benchmarking data.
• Our continuing journey into improving our
benefits brings an introduction of a death in
service benefit to extend to every colleague
in the business as well as a holiday purchase
scheme for those in support centre roles. We
have aligned holiday entitlement across our
supply and support centre colleagues.
FY24 planned milestones: Ongoing review
of our colleague proposition to ensure an
outstanding colleague experience. This
includes pay and benefits but also involves
reviewing our induction and onboarding as
well as redefining our leadership development
and talent offer, including a ‘Women in
Leadership’ programme and early careers.
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OUR STAKEHOLDERS
OUR STAKEHOLDERS –
SHAREHOLDERS
Engaging with our stakeholders
Engaging with our stakeholders is of vital
importance to the Group. This ensures that
our stakeholders’ interests are understood
and accounted for in the Board’s and the
management team’s decision-making
processes, to promote the success of the
Company for the long-term success of
the Group.
This engagement is also supportive of a
Director’s duty under Section 172 of the
Companies Act 2006.
The Board recognises Shareholders,
Customers, Colleagues and Suppliers as
cardfactory’s key stakeholders. The Board
concluded that these stakeholder groups
have a material impact to achieving our
Mission. The Board and the management
team take full account of other stakeholders
as part of decision-making, with other
stakeholder groups including landlords of our
leased retail properties, regulators, HMRC,
our debt funders, our communities and our
environment. Stakeholder impact arising from
relevant decisions are included in papers
submitted for Board decisions, with the Board
and management team debate considering
views of impacted stakeholders.
The impact of key decisions on stakeholder
groups are identified to ensure they are
considered and understood. The Board
takes an active role in engaging with some
stakeholders and receives regular reports from
the management team to keep appraised of
stakeholder interests and issues. The Board
resolved that in respect of a number of
stakeholders (particularly our Suppliers), it is
more appropriate for the senior management
team or their direct reports to undertake
part or most of the stakeholder engagement,
provided insights and feedback are shared
with the Board.
The Board receives monthly updates on
key performance indicators (KPIs) that are
aligned to most stakeholder groups, including
Colleagues, Customers and Shareholders.
The nature and form of KPIs are reviewed
at least annually to ensure the Board and
senior management team receive the most
relevant data to support informed decision-
making and to identify any matters requiring
improvement. Updated KPI reporting includes
increased reliance on current, live data,
particularly in respect of our Customers, as
the business develops a more customer-
centric mindset. This includes monthly data
on customer research, including customer
optimism, switching data, net promoter score
and customer awareness of cardfactory
compared to competitor brands (see page 13).
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Card Factory plc Annual Report and Accounts 2023
Shareholders
The Board takes account of shareholder
sentiment in its decision making, receiving
updates from Directors on their shareholder
base throughout the year, including from AGM
meetings, investor presentations following release
of financial results and other ad-hoc meetings or
correspondence. As owners and investors in Card
Factory plc, the shareholder and prospective
shareholder views are accounted for in decision
making, to seek to realise a long-term return for
this key stakeholder group.
Improved communication with shareholders has
been a focus of the Board over the last year, with
dedicated communication resource recruited
and a focus on improving transparency and
sharing progress on setting and delivering the
strategic plans, in announcements and investor
presentations. The Board will hold a capital
markets strategy update in May 2023 to further
update shareholders on the strategic plans. This
will include particular focus on the opportunities
for investment in cardfactory’s omnichannel
and international ambition, where the Board
recognise shareholders require further insights to
be fully confident in these key components of the
strategy.
The Board undertakes monthly reviews of 16
financial and non-financial key performance
indicators that are important to our stakeholders
and/or provide early indicators of areas of focus,
as part of monthly review.
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Specific KPIs of importance to shareholders
include net sales growth, PBT, operating cash
flow conversion as a percentage of EBITDA
and ROCE, with additional KPIs focused on
operational efficiency. The Board also reviews
the status of key strategic initiatives, many of
which are enablers for sales growth and/or
operational efficiencies.
The experience of shareholders, including the
current restrictions on payment of dividends
whilst CLBILS facilities and Term Loan A
remain in place (to be repaid by 31 January
2024), the historic dividend yield and the
share price movements over the last few
years, is recognised by the Board as it seeks
to reduce debt, recover from the Covid-19
pandemic and address previous under-
investments to realise sustainable growth. The
capital structure and dividend policy adopted
in May 2022 takes into account the short
term need to invest to ensure cardfactory
has the infrastructure to enable sustainable
growth over the medium to longer term, while
ensuring profitable growth is maintained.
Investments on key enabling projects and
those with the highest returns are prioritised,
with some investments deferred to subsequent
years to ensure successful implementation.
The Board is pleased that it has, during the
last year, secured a release from its banking
syndicate from the obligation to raise equity,
which was opposed by the majority of the
shareholder base.
We propose to continue to engage with
our shareholders as we have over the last
12 months, with additional shareholder
engagement being planned in advance of
a proposal of a new Remuneration Policy at
the 2024 AGM. Our next AGM will take place
on 22 June 2023 at the Company’s registered
office at Century House, Brunel Road,
Wakefield 41 Industrial Estate, Wakefield, West
Yorkshire WF2 0XG at 11.00am.
The Board welcomes questions from
shareholders in advance of the AGM and
will endeavour to provide written responses
before the due date for submission of proxy
votes, to facilitate shareholders making
informed voting decisions in advance of the
meeting. Appropriate questions and answers
shall be published on the Company’s investor
website after the AGM.
Shareholder return versus colleague cost-of-living support
The cost-of-living crisis has put colleague reward under the
microscope as the Board has sought to achieve a balance between
the shareholder experience and those of its colleagues, many of
whom are on national living/minimum wage.
This has been effected in parallel with a focus on business change
and requiring additional expertise to enhance our IT infrastructure
and capability to realise our omnichannel and international
ambitions. However, the cost of provision of enhanced remuneration
impacts shareholders directly by reducing profitability.
The Board has not implemented more extensive changes to
remuneration or benefits, which would be to the detriment of
shareholders, with increases funded from efficiency savings.
Key decisions made during the year include:
• Hourly rates for store managers have been replaced by an
enhanced salary structure, improving retention in this key role,
reducing recruitment costs and improving trading performance.
• National living wage/National minimum wage increases, with
equivalent increases to pay grades above these levels. Additional
hours made available to existing colleagues to reduce seasonal
staff requirements.
• Selective recruitment for new roles and expertise required to
support strategic requirements, subject to the business case
being fully assessed.
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OUR STAKEHOLDERS – CUSTOMER
Customer
centricity
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Our newly defined cardfactory brand purpose
is to make sharing in and celebrating life’s
moments special and accessible for everyone.
This purpose affirms the importance of
the steps we are taking to become a fully
customer centric organisation.
Brand
We create clarity on the role we are playing,
inviting customers in by measuring our
brand health alongside key competitors
with a rolling study that speaks to c.90,000
consumers (Savanta BrandVue).
Having further strengthened our customer
marketing team with key appointments,
including extending our insight capabilities,
the focus in FY23 has been on building
foundational insights to direct and underpin
future growth.
We continue to use a range of leading insight
tools to ensure we understand who our
customers and potential customers are. With
this, we are listening and responding to their
needs and making high quality, informed
decisions across the business.
Macro environment
We maintain a detailed understanding of
consumer attitudes and behaviours with
data taken from established sources such
as GlobalData, exploring factors such as
consumer sentiment, along with spend and
discretionary income.
Market context
We leverage in-depth information on the
greeting cards and gifting markets and our
position within it, through a blend of external
data sources (Kantar, GlobalData) and our
bespoke annual survey of 4,501 respondents,
used to size the market and understand key
drivers of behaviour. Our cadence of monthly
and annual reporting enables us to remain
close to changing market and consumer
dynamics and respond at pace.
Experience
We focus on keeping customers coming
back through a multi-faceted approach
to monitoring customer experience and
satisfaction. Net Promoter Score (NPS – the
level of advocacy for cardfactory scored
by those that have been a customer in the
past three months) is a key business KPI
which is continuously tracked along with
overall satisfaction (those who have visited
cardfactory in the last three months rating
their overall satisfaction with their last
experience) across our channel touchpoints.
Our ‘Tell cardfactory’ initiative enables us
to encourage and capture more detailed
feedback at a store level, together with our
ongoing use of Feefo. We supplement this
with frequent mystery shopping audits, a key
KPI for stores, to assess and improve levels
of service. Combined, they have collectively
served to push customer recommendation on,
with NPS improving +1 point YOY.
We continue to invest in our customer
services function and capability. In FY23 we
tested and rolled out our Service Excellence
programme to all stores. This is designed to
further enhance the experience we deliver for
customers, helping them find and choose all
they need to celebrate all life’s moments.
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Bespoke insight studies
In FY23 we carried out multiple bespoke
studies exploring topics including:
• Customer segmentation: We developed
a behavioural and attitudinal ‘celebration
occasions’ segmentation in order to better
understand consumers in the market and
our customers within it; who they are,
how they shop our categories and the key
growth opportunities that exist.
• Store format development: Insight has
helped us to elevate the store proposition
following the opening of ten model
stores in FY23. A blend of qualitative
groups, exit interviews, observations and
biometrics informed new iterations of the
model store format, resulting in improved
customer metrics.
• Sizing international growth opportunities:
Detailed research was undertaken with
GlobalData to look at a comprehensive
range of factors in key international
markets including demand context,
card and gift market size and forecasts,
consumer behaviour and expectations
and the state of the respective competitor
landscape. This has provided quality
insights to inform our strategic planning
and execution.
Working smarter and looking ahead
Across cardfactory, we have refined our
cross-departmental ways of working to ensure
customer insight sits front and centre, driving
our strategic direction, our decision-making and
our culture. Our insight team create and deliver
monthly insight packs for the senior leadership
teams. In addition, insights are shared at key
business updates and quarterly review sessions,
in order to build deep customer understanding
and enable high-quality decision-making
across the organisation. At cardfactory, we go
the extra mile to foster a culture of creativity
and curiosity and encourage all colleagues to
ask questions and build their understanding of
our market, our customer and the opportunities
that lie ahead.
Insight in action
Insight is only as good as the action it
generates, and that relies on how well
it’s shared.
Over the last year, we have significantly
improved the way in which we share
data and insight. A detailed pack, which
recommends actions based on insight
gleaned from the macro environment,
the market, and brand and customer
experience metrics, is delivered monthly
to the Board, the senior management
team, the senior leaders group and is
cascaded to other colleagues where
relevant. In addition, on an annual basis,
insight feeds a detailed strategic review
as part of our strategy update.
An example of the action our data
and insight has generated, comes
from improved customer experience
understanding. Data via new customer
experience programmes identified
opportunities in the store experience,
specifically with colleague interactions,
which led to the rollout of our Service
Excellence programme, training over
6,500 colleagues. Over the subsequent
time period Kantar data revealed
improved customer frequency and
Savanta reported improvements in
customer service perceptions; linked to
this we have also seen movement to top
20 position in Savanta BrandVue Most
Loved UK Retail Brands 2023.
New insights continue to shape and
evolve the Service Excellence programme
with the latest iteration focusing on
a brand-led experience as we look to
meet, and indeed exceed, customer
expectations ongoing.
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OUR STAKEHOLDERS – COLLEAGUES
Passionate
colleagues
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Contents Generation – PageContents Generation – Sub PageContents Generation - Section Our colleagues help customers celebrate
their life moments. We value their
contribution, provide them with development
and career opportunities and strive to
encourage exceptional leadership. The last
12 months saw us emerge from the pandemic:
our teams are fully back to work and our
agenda has focused once more on attracting
and retaining the best talent possible to
support the delivery of our strategy by
transforming our business.
In the post-pandemic environment we
have shifted from scaled down operations
to investing in our people and creating
the teams we need for growth. This means
putting our colleagues at the heart of the
journey and investing in them. We now have
an improved articulation of our culture; who
we are as a company via our values and the
cardfactory brand, marking a journey towards
self-ownership of experience. Our focus will
continue to bring our brand, values and
purpose to life through improving colleague
experience at every part of the colleague
journey using data to help us make valuable,
informed decisions.
Talent acquisition
Talent acquisition has been challenging over
the last 12 months fuelled by the uncertain
economic conditions and an unusual labour
market. In response we’ve focused on our
proposition and our approach to attraction
and retention.
We have created a model for talent
acquisition for our salaried roles based on
networking and direct sourcing – investing in
the candidate experience to tell our unique
story and ensure new hires are on-boarded
and inducted successfully.
In stores our approach is about building a
scalable and efficient model to manage
volume recruitment well and equip our
managers with the right skills and tools to find
the right talent.
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Our store colleagues lead the recruitment of up
to 5,000 seasonal colleagues to maintain high
levels of service over our Christmas period, and
we have focused on process improvements,
upskilling and support to ensure we can
respond well to this annual challenge.
Our culture
We’ve entered the second year of our
DE&I strategy; launched our evolved
cardfactory values; built career pathways;
and continued to enhance our approach to
performance management and our leadership
development offering; all of which articulate
our culture and colleague experience. Our
continual co-design and high-engagement
approach to organisational development,
means colleagues drive change and embody
the culture they’ve created.
We completed the review of our cardfactory
values, following extensive consultation
with colleagues, through our brand strategy
project to determine that we’d got these right;
who we are and what we’re committed to is
articulated with accuracy.
Smart working principles have supported our
culture of agility and recognised the need for
balance in colleagues’ lives – shifting to an
outcome and output focused environment.
Colleagues are given the space to manage
their working days according to their own
requirements via flexibility of shift patterns
and hours.
Colleague wellbeing
Colleague wellbeing and support has been
high on the agenda for FY23. The economic
environment has seen increased costs and
inflation and we have listened to understand
how we can best support our colleagues
during this challenging time. This has been
through our survey, via our colleague forums
and through our leadership teams.
As part of our broad suite of benefits, we
offer financial, mental and physical wellbeing
support in a variety of ways. This includes our
recognition and colleague discount platform
‘Reward Gateway’. Here, colleagues can
access an online GP, mental wellbeing and
health support, hints and tips on managing
physical health and discounts to hundreds of
retailers and providers. Following a recent pay
and benefits review, we introduced a ‘double
discount’ weekend in the run up to Christmas,
where all colleagues were able to shop in
our stores at a reduced rate, helping them
continue to celebrate even in challenging
times. This was followed up in January 2023
with all colleagues receiving a voucher via
Reward Gateway to spend in any way they
chose.
FIKA launched in August. This is an innovative
product that allows users to develop seven
mental fitness skills and has a suite of tools
available to everyone. This introduced a
new way of talking about mental fitness –
a proactive, supportive and empowering
approach to mental wellbeing, helping
colleagues prepare for both big and small
challenges they may face. On top of this, our
Employee Assistance Programme continues
to run and our strong team of Mental Health
First Aiders are a vital and visible support in
the business.
Our wellbeing agenda and the support we
offer will continue into the next financial year
and beyond.
DE&I strategy
Our five year DE&I strategy is made up of five
pillars, which are:
• Leadership;
• Wellbeing;
• Community and connection;
• Brand; and
• Customer.
With our senior management team sponsor,
each pillar is lead by a senior leader,
and owned and driven by communities
of colleagues across the business. The
communities focus on specific objectives each
year, which drive the overall outcomes we aim
to accomplish:
• The creation of a group of colleagues that
is as diverse as the customers we aim to
serve at all levels and in all areas.
• Ensuring everybody is aware of their
strengths, recognises their own value and is
eager to develop.
• To increase colleague engagement and
improve our scoring on our colleague
engagement survey.
• Taking personal responsibility to learn
and grow as a thinking and coaching
organisation.
• Gaining external recognition as a great
place to work, because our colleagues
have said as such.
Increasing colleague retention.
•
• Gaining equal gender representation at
senior leadership level.
In our first year of strategy execution, we had
three topics of focus across all work streams.
These were Mental Health, Women and Pride.
Talent, career planning and
performance management
Performance management supports our
ambition for growth and ensures everyone
knows what is expected of them and
understands both how they fit into the
organisation and the role they play in
delivering our strategy.
As this process is embedded into the
business, we use the term ‘Talent Every Day’
to recognise that performance conversations
are part of daily working life. Our leadership
behaviour framework helps us align to culture
and value the ‘how’ as much as the ‘what’.
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COLLEAGUES CONTINUED
Every colleague takes ownership of their
individual contribution and development,
supported by their line manager with
access to a comprehensive learning toolkit.
Calibration sessions mean that performance
management and assessment is fair and
consistent and that there is a cross functional
view when setting objectives.
Career pathways
Being able to navigate your own career is a
critical way of maximising the talent we have
in the business and encourages upwards
and lateral movement of colleagues. Career
pathways is a framework of possible routes
through our organisation which allows
colleagues to take ownership for their own
development, and continues to be supported
by our apprenticeship offer and our leadership
development proposition and framework.
Colleague KPIs
Using data we measure key performance
indicators which support the aspiration to
recruit, retain and develop our colleagues
and to drive career progression and career
development in cardfactory.
These include measurement of internally filled
vacancies – where we achieved 19%, versus
a target of 21%. Other KPIs include colleague
turnover rates where we were over our target
of 27%, driven largely by high attrition in the
sales assistant population and vacancy per
headcount rate was positive against our target.
While we recognise that we need, at times, to
invest in bringing new skills and experience
into the business, our aspiration is to continue
to encourage career development from within.
Leadership development
Our leadership behaviour framework is now
complete and forms the basis for development
content and focus. It is in use across talent
mapping, career pathways and throughout our
performance management system.
We provide coaching cards for all
managers to support everyday performance
conversations while encouraging feedback
and continual learning.
We have a specific development programme
for our senior leadership team, which includes
the opportunity to undertake a level 5
coaching qualification. In the last 12 months,
ten senior leaders and six HR business
partners completed this qualification having a
direct impact on how we lead at cardfactory.
Moving into FY24 and beyond, we are working
on embedding our new organisational values
and are making both the ‘Leading Self’ and
‘Leading Others’ learning modules available
to all colleagues to foster leadership at all
levels, support self-directed development
and aid managers in developing their
teams. We will also be running targeted and
focused workshops to foster high performing
leadership teams across all functions.
Coming up, we intend to revise the leadership
behaviour framework to include ‘manager
competencies’ and provide learning to support
this, including a ‘new managers’ programme
and ‘inspiring managers’ focus to nurture our
leaders of the future. We are also looking to
improve and increase the senior leadership
group development offer to include a focus on
talent pipeline development.
Approach to compensation and benefits
Our ambition: to have a reward offering that
is in line with market and a differentiator that
supports us in attracting and retaining the
best talent in the industry.
In FY23 our pay principles were clearly
established and all our salaried roles
benchmarked against market data. This
means we have a robust and transparent
framework within which our roles sit and
where benefits are aligned.
In FY23 our pay review was in line with
principles to be a mid-market payer. The
first few months of 2023 brought with them
some challenging economic factors with high
cost-of-living, and although our pay review
for 2023 will continue to follow the principle
of being a median market payer, it will also
recognise the impact of the rising cost-of-
living and we will make a pay award to reflect
that. This means a significant investment in
our colleagues and a pay review of 8.6%.
In FY23 we also made significant investments
in our store manager population. This
included a store manager talent review,
a significant increase to pay rates and
introducing a new sales incentives aligned
to the step up in accountabilities of the
role. This led to a reduction in turnover of
store managers from 9% to 3%, saw our
engagement survey ‘Fair Deal’ score rise to
23% and led to a reduction of Store Manager
vacancies by 50%.
Our journey to become a median market payer
in retail has started with the eradication of
the age related pay for U18s in the National
minimum wage structure.
The roadmap of benefit changes will continue,
with access to a death in service benefit being
extended from senior roles to all in FY24.
With the ambition to be consistent across
the business where possible, we will align our
holiday entitlement with our Printcraft and
property colleagues to further harmonise
terms and conditions for these colleagues,
as well as introducing a holiday purchase
scheme for salaried colleagues.
Colleague policy
Our people policies lay out a framework of how
we work and are a key reference point for our
colleagues. Some of these are a mandatory
requirement and some are optional.
They are in place to ensure we are compliant
but also to support our aspiration to be
inclusive, consistent and fair. Changes this year:
• We’ve improved our family friendly policies
to include enhanced maternity, paternity,
shared leave and adoption pay.
• We’ve made positive changes to our
Absence Policy to support colleagues and
guide managers in taking a more proactive
and supportive approach.
• Our DE&I agenda includes a ‘Brand’ pillar
of work which includes our commitment
to become a leading employer in relation
to equal opportunities and diversity, and
removing bias in recruitment and selection.
• Our recruitment processes guide full and
fair consideration of applications from
disabled applicants, including making
of adjustments for new or existing
colleagues who may become disabled,
through individual needs assessments
and provision of support, training and
additional equipment or software
to support them in their role or their
development. Next year we will launch our
‘Fair Guide to Hiring’, including colleague
development, to incorporate our DE&I
commitments and ensure our consistent
approach to talent acquisition.
Engagement
In Autumn 2022, Best Companies facilitated
our ‘b-Heard’ engagement survey to measure
colleague engagement across all areas of the
business. Following this survey we received
a two-star ‘Outstanding’ accreditation,
improving on our one-star ‘Very good’ status
announced earlier in 2022.
We were also recognised as one of the
Best Big Companies to Work For in the UK,
placing 15th in the list of the UK’s 25 Best Big
Companies at the end of 2022, then placing
third in the same list at the beginning of 2023
moving up the leader board.
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Card Factory plc Annual Report and Accounts 2023
Contents Generation – PageContents Generation – Sub PageContents Generation - Section Overall results and participation improved
compared to the survey completed in January
2022, with store colleague participation being
particularly strong. The final completion rate
was a very high 81%.
The positive results achieved in our ‘b-Heard’
survey demonstrated improvements in the
following key areas:
• commitment to the organisation;
• growth and development opportunities;
• pay and benefits; and
• social and environmental responsibility.
Areas where our results exceeded other two-
star companies were:
• manager support and care;
•
team relationships; and
• wellbeing.
This suggests the work we’re doing in learning
and development, leadership development
and our compensation and benefits roadmap
is taking us in the right direction, but there is
more work to do to continue on this journey
and the action planning from the survey
continues.
Our Colleague Forum also provides an
opportunity for us to listen to our colleagues
and take on board feedback on how
colleagues feel. Key themes that came out
of this group were around fair deal, cost-of-
living and the impact of that on daily lives as
well, as career development. The feedback
from colleagues has been applied to prioritise
the areas of ‘fair deal’ that are important to
the workforce as part of our ongoing reward
enhancement.
As we head into FY24 we will continue to
invest in our colleagues, to attract and
develop our talent and to build a compelling
colleague experience and journey across all of
our business.
We lead
the way
We care
OUR VALUES
We
celebrate
our
differences
We do the
right thing
We make it
happen
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OUR STAKEHOLDERS – SUPPLIERS
Quality
suppliers
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Contents Generation – PageContents Generation – Sub PageContents Generation - Section Our Chief Commercial Officer is
responsible for ensuring we develop
mutually beneficial long-term
relationships with our key product
suppliers and for monitoring and
responding to our suppliers’ concerns to
balance the commercial position, taking
full account of our community and the
environment within which we operate.
Suppliers & social compliance
We continue to ensure suppliers meet our
requirements before they complete our
onboarding process. These are:
• Audit: ethical audit with requirements
relating to child labour, forced labour,
disciplinary practices, health and safety,
discrimination, freedom of association,
collective bargaining, working hours,
remuneration and the environment (more
detail below).
• Sedex Members Ethical Trade Audit
(SMETA) – a globally recognised ethical
audit that is conducted by an affiliate
audit company.
• Business Social Compliance Initiative
(BSCI) – a globally recognised ethical audit
that is based on the International Labour
Organization (ILO) standards, conducted
by approved audit companies only.
• SA8000 – these widely recognised
standards on ethical audits are set by
Social Accountability International and are
applicable to factories and organisations
worldwide.
• Access to and sharing of information
via the Supplier Ethical Data Exchange
(SEDEX), which assists monitoring human
rights issues in our supply chain.
• Technical audits (based on ISO 9001) on
products and product safety for initial
factory set-up and higher risk areas.
• Requirements that card is Forest
Stewardship Council® (FSC®, licence code
FSC-C128081) certified and compliant with
UK and EU Timber Regulations.
• Requirements in our Modern Slavery Act
compliance (details of steps taken are
available in the modern slavery statements
available on the cardfactory and the
cardfactory Investor websites).
Our ‘No Audit, No Order’ policy remains
a steadfast requirement, necessitating
suppliers to have satisfied our onboarding
processes and to have received satisfactory
technical and ethical audit results before
any order will be placed with them. We have
continued engagement with our Far East
suppliers by video conference which facilitates
more regular contact and we look forward
to resuming supplier visits once all travel
restrictions are lifted.
Supply base
We have increased the number of suppliers
in the past 12 months that are exclusively
UK-based (for card, gifts and celebration
essentials). This supports our strategy of
expanding our ranges, while reducing our
carbon footprint, where possible, and also
allowing a faster turnaround time from product
selection to offers being available in store.
Supplier survey
In December 2022, we completed our third
annual Supplier Viewpoint survey, surveying
our top 30 product suppliers. This allows
us to understand if actions we have taken
following previous feedback have improved
our supplier relationship management. The
most common recurring theme was the need
to increase environmentally friendly practices
and products.
Overall, results remain consistent with
our previous survey with some noticeable
acknowledgement from our supply base (33%)
regarding cardfactory becoming a more
sustainable business as they work with us to
develop more eco friendly products.
Within the results, 55.2% agree and 44.8%
strongly agree with the need to operate
and develop products to help create a
sustainable future.
Product sourcing
During the last quarter of 2022, cardfactory
underwent and passed its sixth FSC audit,
which continues to reflect our commitment to
the ethos of FSC. We are on target to ensure
all our wood-based products are only sourced
from FSC certified suppliers, (currently card,
wrap and party are all from FSC (or PEFC))
certified sources by the end of FY25.
To continue building on the Group’s ESG
commitment, the quality assurance team will
be reviewing packaging to ensure sensible
balance between removing plastic (which has
high recycled content and is fully recyclable)
and employing non-recyclable packaging
(which although is not plastic will end up
in landfill).
Quality assurance team
During 2022, the decision was taken to recruit
two additional junior members to our quality
assurance team, who are in the process being
fully trained using in-house and third-party
training. It was felt that in the long term this
would allow cardfactory to build a team with
the specific skillsets and knowledge to best
support current and future business strategies.
The longer-term goal is to create a first-class
quality assurance department.
The first steps have been taken to complete
a risk based analysis of all products sold by
Getting Personal, this is to allow us to target
the most critical products/suppliers first as
we extend our supply chain standards to
Getting Personal. With the ever changing
requirements from both consumers and
authorities we have started reviewing our
policies and procedures to ensure they
are fit for purpose and where applicable
incorporating the PAS standards being
developed by the Office of Product Safety
and Standards, even where these go above
and beyond defined legislation.
Future considerations
In the coming years there are going to be
changes to legislation with more country-
specific legislation becoming common. This
includes:
• Wales placing draft legislation with the
purpose of putting a total ban on single
use plastic carrier bags.
• The new Deposit Returns Schemes (DRS).
Scotland at present is the only country in
the UK with firm plans and a start date of
August 2023 (now delayed to March 2024).
It has been announced that England,
Wales and Northern Ireland will implement
DRS schemes by October 2025.
• The Extended Producer Responsibilities for
Packaging Waste are due to start in 2023
and we have already made significant
changes to the information gathered
from suppliers to ensure we comply. In
2024 modular fees are to be introduced,
meaning packaging that is non-recyclable
will attract higher fees than packaging
that is readily recyclable; this also aligns
directly with the cardfactory ESG policies
and goals.
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ESG
Driven by our
purpose
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Card Factory plc Annual Report and Accounts 2023
Contents Generation – PageContents Generation – Sub PageContents Generation - Section “cardfactory is a purpose-driven organisation and the way we
do business is fundamental to this. The delivery of our ambitious
‘Opening Our New Future’ growth strategy and the business
transformation this requires are underpinned by our commitment to
operate sustainably across all areas of our business.”
We believe we should have a positive
impact on our people, our customers, our
communities and the environment and we
value this alongside financial performance.
We operate with integrity and transparency
and always strive to do the right thing. As
a result, we are pleased to report progress
made in FY23, delivering on the ESG strategy
and commitments outlined in our FY22 annual
report. These are detailed on pages 38 to 42,
along with our plans for FY24.
Looking ahead
FY24 will see cardfactory take significant
strides forward in addressing the sustainability
challenge. Working with specialist energy
and utility consultants, we will complete and
report on a detailed review of Scope 1, 2 and
3 GHG emissions. This will be used to develop
pathways and publish a science-based Net
Zero target, mitigating risk and improving
environmental performance across
the business.
We continually review our sustainability strategy
to ensure it delivers meaningful impact, aligning
it both to the United Nations Sustainable
Development Goals (SDGs), and to the risks and
issues prioritised by our colleagues, customers,
suppliers and stakeholders in our 2021
materiality assessment.
We are aware these priorities may have
changed given the extraordinary context of
recent months, including a cost-of-living and
energy crisis, and increasing awareness of the
impact of climate change and biodiversity
loss, and so we have engaged a specialist
ESG consultancy to refresh this materiality
assessment in FY24. This will provide us with
an updated view on the most significant
impacts on our business and whether
the views of colleagues, customer and
stakeholders have changed.
This work will inform the consultancy’s
development of an updated five-year ESG
strategy, roadmap and measures, to be
completed in FY24, and a review of our risk
management framework, ensuring that our
priorities reflect the changing world around
us and remain aligned with those of
our stakeholders.
In FY24, we will continue to embed sustainability
across the business. We will incorporate
sustainability into our core ‘Opening Our
New Future’ growth strategy and related
performance metrics with the goal of making
it a core part of day-to-day ways of working
and decision making for all colleagues at all
levels, and will also explore the opportunity for
dedicated sustainability resource.
Read more on pages 38-42
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Our five ESG strategic focus areas:
• Reduction in carbon footprint.
• Waste and sustainability.
• Diversity, equality and inclusion (DE&I).
• Colleague and social mobility.
• Charity and community.
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ESG CONTINUED
Our progress and plans
In FY23 we have made progress against the commitments set out in FY22 and remain
on track to deliver against our FY24 goals. Highlight achievements and plans for the
year ahead against each of our strategic focus areas are outlined over the next five pages.
Strategic focus area: Reduction in carbon footprint
How did we do? ● Achieved ● Partially achieved ● Still to be achieved
UN SDG
Commitments made for FY23
Progress in FY23
Plans for FY24
• Progress with assessment of realistic and achievable
• Full review of Scope 1, 2 and 3 GHG emissions
• Report on emissions assessment and use data to
carbon neutrality targets.
underway. ●
set targets.
• Obtain premier partnership with The Woodland Trust
(including options to carbon-offset) and work towards
a continual reduction in emissions.
• Conduct assessment to provide full clarity on Scope
1, 2 and 3 emissions, including recommendation for
greener energy infrastructure to drive a continual
reduction.
• 50% of company car fleet to be electric/hybrid within
12 months, with the residual 50% converted within the
following 12 months, reducing fleet carbon by 90%.
• Continuously improve our supply chain efficiencies
and increasingly move product manufacturing from
the Far East to the UK and Europe.
• Total Scope 1 and 2 GHG emissions have increased
compared to FY22 as a result of increased business
activity and growth following periods of restricted
trading due to the pandemic in FY22 (and FY21).
However, when compared to FY20 emissions, there
has been a reduction in overall emissions of 31%. ●
• The Woodland Trust partnership planting more
than 12,000 native trees in the UK, with potential to
mitigate 3,200 tonnes of CO2 during trees’ lifetime. ●
• Printcraft manufacturing facility lighting switched
to LED, reducing electricity consumption by 206,589
kilowatt hours per year (equivalent to 39.95t CO2e or
145,612 miles driven by UK average petrol car). ●
• 18% of company car fleet now electric or hybrid, with
18 charging points installed to support rollout; lead
times for electric vehicles slowed the rate of fleet
transition in FY23. ●
• Moved further product manufacturing, including
money wallets, from Far East to UK. ●
• Define and publish science-based Net Zero targets
and pathway.
• Explore opportunities to reduce UK & Ireland logistics
emissions, including electrifying HGVs and increasing
vehicle fuel efficiency.
• Develop targets for moving additional product
manufacturing from Far East to UK.
• Explore further opportunities to protect nature and
biodiversity across our value chain.
• Entire company car fleet to be electric by the end
of FY24, reducing fleet’s carbon footprint from 314.6
tonnes (FY22) to 43 tonnes (end of FY24).
• Incorporate sustainability considerations into
international growth decision making and partnerships.
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Strategic focus area: Waste and sustainability
How did we do? ● Achieved ● Partially achieved ● Still to be achieved
UN SDG
Commitments made for FY23
Progress in FY23
Plans for FY24
Waste reduction
• We will remove single-use plastic from 90% of our
Waste reduction
• On track to remove single use plastic from 90% of
products sold to customers by end of FY24.
products by end of FY24: ●
• Remove single-use plastic packaging from 90% of our
products by year-end:
– Plastic removed from all FY24 Seasonal gifting
• All products will be 100% glitter free by end of FY24.
– All remaining single-use plastic attachments
ranges.
• We will reduce in-store point-of-sale poster volume
removed from Christmas boxed cards.
by 50% across our retail estate by late FY24.
Recycling
• Recycling will be increased in stores, support centre
and distribution centres.
• Continue to improve recyclability of our product and
packaging, while also offering our customers more
recycling opportunities in addition to our foil balloon
and banner recycling service in 500 stores.
• All new cards sold from April 2022 are 100%
recyclable.
• All new wrap sold from the end of FY24 will be 100%
recyclable.
• All 10p plastic bags are 100% recyclable and
manufactured using a minimum of 30% consumer
waste.
Sustainability
• All cards are FSC certified.
• All wrap will be FSC certified by end of FY23 (98.5%
FSC by April 2022).
– All plastic packaging removed from FY24 counter
– Packaging moved to paper across bulk of
party ranges.
• Remove glitter from all products.
• Reduce in-store, point-of-sale poster volume
materials by 50% by year-end.
• All new gift wrap sold to be 100% recyclable.
• Conduct feasibility assessments on identified
opportunities to further reduce environmental impact,
including introducing plastic-free card bonding and
moving all paper-based packaging to FSC-certified.
• Initiate review of all primary and secondary
packaging to identify reduction opportunities.
• All new bags and card boxes to be 100% recyclable
by end of FY25.
• In line with new Extended Producer Responsibility
of Packaging legislation, all primary and secondary
packaging will be labelled to show components and
recyclability of each component by mid-FY25.
• Move all paper party products to be FSC-certified by
end of FY25.
cardfactory foiltastic and trend party products.
– Continued to remove single use plastic from gifting
products.
• Recycled 703.4kg of foil balloons and banners from
stores through TerraCycle. ●
• On track for all products to be glitter-free by end
of FY24: ●
– All new cards now 100% glitter-free.
– Glitter being phased out of non-card products.
• On track to reduce point-of-sale poster volume by
50% by late FY24. ●
Recycling
• Working actively with waste management partner to
understand proportion of waste going to recycling
and recovery versus landfill. A large proportion of
current measurements are based on industry averages
rather than weighing of waste; as more suppliers
develop capacity to measure waste, the ability to
track waste reduction will improve. ●
• ‘Remove attachments first’ wording added onto all
new cards to help facilitate recycling process. ●
• On track for all new gift wrap sold to be 100%
recyclable by end of FY24. ●
Sustainability
• All new gift wrap now FSC certified. ●
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ESG CONTINUED
Strategic focus area: DE&I
UN SDG
Commitments made for FY23
Colleagues
• We will create the right culture within the business
including the adoption of our five-year DE&I strategy.
We are a signatory to the BRC’s Diversity and
Inclusion Charter and have signed up to the DWP
Disability Confident Employer Scheme.
Customers/Communities
• We will demonstrate greater awareness of DE&I within
local communities and customer bases.
Product
• Our products and store environments will be
developed to reflect society and our current and
future customer base.
How did we do? ● Achieved ● Partially achieved ● Still to be achieved
Plans for FY24
• Expand data and insights related to all DE&I streams
across the whole business.
• Drive forward ongoing delivery of the DE&I strategy to
ensure it becomes BAU throughout the business.
• Build recognition programme linked to values.
Progress in FY23
• Relaunched our values to all colleagues. ●
• Refreshed our DE&I strategy with an annual review to
ensure it remains aligned to requirements. ●
• Review has created five strategy pillars, creating
focused workstreams and ensuring DE&I is delivered
across all areas of the business: Leadership,
Wellbeing, Brand, Customer, Community and
Connection. ●
• Delivered three topics of focus for colleagues
in FY23: ●
– Mental Health;
– Women; and
– Pride.
• Initiated work to build our system capability to be
able to capture diversity data and truly understand
our colleague base and take data led action. ●
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Strategic focus area: Colleagues & social mobility
How did we do? ● Achieved ● Partially achieved ● Still to be achieved
UN SDG
Commitments made for FY23
Progress in FY23
Plans for FY24
• We will provide all colleagues with a clear view of
their career progression within the business.
• Clear KPIs set for internal promotions alongside the
completion of business-wide role benchmarking for all
positions and relevant succession planning in place.
• A comprehensive suite of development opportunities
to be made available to all colleagues, including
voluntary learning, in-house training and courses, as
well as the apprenticeship levy being utilised across
select business areas.
• We will embed our leadership behaviour framework
for all leaders and people managers.
• We will continually improve our colleague
engagement survey scores, improve colleague
retention and reduce colleague turnover.
• We will continue to support colleagues’ wellbeing
through initiatives such as mental health first aiders,
our employee assistance programme and online
wellbeing portal.
• We will continue to invest in quality Health & Safety
training to ensure that all colleagues are able to
work safely.
• Launched career pathways, providing a framework
for colleagues to navigate and understand their
career options. ●
• Review of internal recruitment processes and
advertising of vacancies internally to drive interest.
• Ongoing Talent Every Day conversations to encourage
• Set KPIs to fill 19% of roles with internal candidates;
self-leadership and owning development plans.
• Enhancing the induction process to ensure our
purpose is understood across the business.
• Recruit colleague experience manager.
• Ongoing review of benefits and pay to ensure we
can attract and retain the right talent in all parts of
the business.
• Partnership with Macmillan to support colleagues
with cancer.
achieved rate of 21%. ●
• Benchmarked and levelled all our salaried roles in the
organisation, using external market data to progress
on being a median market payer. ●
• Made a comprehensive suite of development
opportunities, including apprenticeships, available to
all colleagues. ●
• 16 colleagues qualified as Level 5 coaches. ●
• Leadership behaviour framework incorporated
into Talent Every Day performance management
programme. ●
• Pulse survey and full survey conducted in October
2022 rated cardfactory as a 2 star ‘Outstanding’
company to work for: ●
– Pulse survey rated us 15th in the 25 Best Big
Companies to Work For.
– Full survey ranked us: 3rd in the Best Big
Companies to Work For; 1st in our market as Best
Retailer; and several placings in regions including
1st in London, in Q1 2023 tables.
• Retail manager colleague retention improved
following the re-organisation of the retail part of our
business through the retail people plan, which ensured
we have the right skills in the right place and reviewed
salary offering. ●
• Developed interventions to support colleague
financial, mental and physical wellbeing: Employee
Assistance Programme accessible to all; Salary
Finance, enabling colleagues to access their
salary early and offering financial advice and a
comprehensive discount platform; A portal with
wellbeing tools covering a number of topics. ●
• Developed team of Mental Health First Aiders
throughout the business. ●
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ESG CONTINUED
Strategic focus area: Charity and community
How did we do? ● Achieved ● Partially achieved ● Still to be achieved
UN SDG
Commitments made for FY23
Progress in FY23
Plans for FY24
• We are committed to continually funding and
• £523,940 raised for Macmillan Cancer Support, taking
• Review community strategy to ensure it remains
supporting The Card Factory Foundation in all its
present endeavours including supporting colleagues
and communities by match funding, family funding
and community grant funding.
• We will continue to identify and support charity
and community partners that align with our values
and business, e.g. our ongoing charity partners for
Christmas boxed cards.
• We will continue to support colleagues who are
engaged with local causes and charities.
total raised since 2006 to £7,808,483.69. ●
• Sale of boxed Christmas cards generated £125,000 in
donations for four UK charities. ●
• For every €1.00 raised in Republic of Ireland,
cardfactory donated €0.10 to Make a Wish Ireland. ●
• cardfactory raised £1.44 million to The Card Factory
Foundation through carrier bag sales contributing to
the Foundation’s Match Fund, Community Fund and
Family Fund. ●
aligned to overall sustainability priorities, and that we
are generating as much positive economic and social
value as possible.
• Review charity partners for Christmas boxed
card beneficiaries, to continue to align to
sustainability priorities.
• Continue to support The Card Factory Foundation.
Governance structures
Underpinning our ESG strategy is good
governance. We have always sought to act
with integrity and to do the right things, in
the right way, and that continues. We comply
with guidelines and best practices and
actively manage ESG considerations and risks
effectively with good governance informing
our decision making.
Sustainability and ESG reporting is the
responsibility of the entire Board rather than
one Board member specifically. However,
the CEO has ultimate accountability for the
Group’s ESG and climate-related priorities,
with the Chief Commercial Officer holding
accountability within the senior management
team and leading sustainability work across
the business.
ESG is incorporated into Group risk
management and when considering specific
business plans, including examples such
as supply routes and product design and
development. The increased understanding
of our emissions generated this year now
provides the Group with additional insight
to inform our overall strategy, plans and
annual budgeting.
The cardfactory Board reviews the Group’s
approach to sustainability and climate-
related risks twice per year; this includes
an overview of the ESG framework and
sustainability strategy, and progress against
goals and targets.
The organisational structure of the governance
framework can be seen on the left. The Chief
Commercial Officer has responsibility to lead
the overall ESG strategy, with those members
of the senior management team responsible
for key elements.
Throughout the year, management
continually reviews progress and deliverables
of each element within our sustainability
strategy, ensuring all risks and opportunities
are captured, and appropriate action taken.
Following our materiality assessment refresh
and sustainability strategy update, we will
review our Governance structures to ensure
they remain fit for purpose.
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CLIMATE CHANGE AND TCFD
Introduction
This section details the Group’s climate-related disclosures, in alignment to the TCFD recommendations. Following a review of last year’s inaugural disclosure, the format has been updated
to clearly demonstrate progress against the TCFD recommendations. The Group recognises this continues to be a work in progress and in order to achieve compliance across all TCFD
recommendations remains actively engaged in initiatives that will enable it to further improve disclosures in subsequent years. TCFD requirements that we consider are met are indicated in green,
with amber indicating the components that are not yet fully achieved, where the description summarises the status.
● TCFD requirements met ● TCFD requirements not yet fully achieved
Governance: Disclose the organisation’s governance around climate-related risks and opportunities.
TCFD recommendation
Current status
Updates and plans for FY24
Describe the Board’s oversight
of climate-related risks and
opportunities ●
Climate-related risks and opportunities are assessed by the Board as part of
the general business risk management described on pages 58 and 59. The
Board reviews the Group’s approach to ESG and climate-related risks twice
per year, which includes an overview of the ESG framework, development of
the Group’s ESG strategy and progression against goals and targets.
Twice yearly ESG reviews will continue, with a refresh of the Group’s
sustainability strategy planned for FY24.
Describe management’s role
in assessing and managing
climate-related risks and
opportunities ●
Sustainability and ESG reporting is the responsibility of the entire Board
rather than one Board member specifically. However, the CEO has ultimate
accountability for the Group’s ESG and climate-related priorities, with
the Chief Commercial Officer holding accountability within the senior
management team, and leading sustainability work across the business.
The ongoing consultancy work and materiality assessment refresh will provide
the Group with an even greater understanding of the Group’s environmental
impact, therefore providing greater consideration in guiding the overall
strategy, major plans and annual budgeting. The first full GHG inventory
covering Scopes 1, 2 and 3 emissions will be finalised early in FY24.
Further information regarding the Group’s approach to managing
climate-related priorities are detailed on pages 47 to 49.
In addition to this, we also have processes in place to ensure developments
on climate-related issues are identified and accounted for, e.g. introduction of
new packaging legislation via the quality assurance team.
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such information is material.
Medium term (3–9 years)
Short term (1–2 years)
Long term (10–15 years)
Risk timeline
TCFD recommendation Current status
Describe the
climate-related
risks and
opportunities the
organisation has
identified over the
short, medium and
long term ●
Risks
Opportunities
Risk timeline
1. cardfactory fails to engage on climate risks to identify and pursue
opportunities for competitive advantage.
1. Presentation of our climate-related credentials is expected to improve brand
reputation which should contribute to sales.
2. cardfactory’s supply chain relies extensively on imports from the Far
East. There are limited opportunities for local supply base for gifting ranges
which could reduce our carbon footprint, whilst maintaining our ‘value’
proposition. Our strategy targets increasing volumes of complementary
product sales, which, without mitigation, will increase our carbon footprint.
2. Our strategy of increasing the proportion of cards produced in the UK, by
increasing card production capacity at Printcraft, will reduce emissions from
transportation for imports from the Far East. UK manufacturing of roll wrap
has created an opportunity to reduce overseas dependency. Growth in UK
manufactured gift products such as confectionery opens new supply routes.
3. cardfactory’s international strategy, aimed at growing the Groups
international presence, will increase our carbon footprint within our own
operations and the associated supply chain.
3. Learnings from the Group’s UK & Ireland energy reduction initiatives, full GHG
inventories and setting a Net Zero target could lead to an accelerated carbon
mitigation programme within the international strategy.
4. Managing legacy stock, where recycling may not be economically viable
and redundancy of stock results in increased waste.
4. Improved processes to minimise legacy stock risk, including improved stock
management and more local, smaller production runs from Printcraft reduces the
risk of such legacy issues arising in the future.
5. Businesses seeking to use ‘green’ raw materials is expected to increase
demand for FSC certified raw materials (to replace plastics and other materials
e.g. in packaging). Long lead times will constrain supply, inflating cost prices.
5. At present, use of recycled card in product ranges is not considered viable, but
innovation in artificially grown pulp may address supply constraints in the future to
address demand and price inflation.
6. Changes to consumer behaviour leading to an increasing desire to
purchase sustainable products from sustainable businesses. A reduction
in revenue and market share may occur if the Group fails to meet and
disclose its ESG targets and strategy.
6. Changes to consumer behaviour leading to an increasing desire to purchase
sustainable products from sustainable businesses. An increase in revenue and
market share may occur if the Group is to successfully meet and disclose its ESG
targets and strategy.
7. Levies and surcharges are to be applied for packaging, Greenhouse
Gas (GHG) emissions, which could increase operating costs and require
investment in alternative solutions.
7. By reducing waste and GHG emissions in advance of such levies applying, cost
increases can be minimised. Opportunity to remove single-use plastic from gifting
range and handmade cards.
8. Energy costs expected to increase over time, particularly with limited
energy security in the UK that could affect availability for cardfactory’s
future needs.
8. Potential opportunity for cardfactory to commit to a long-term power purchase
arrangement which can be used as a basis for investment in additional green
energy capacity.
9. The Group’s business strategy includes sale of balloons, many of which
are helium-filled. Helium is a non-renewable natural element with limited
supply, which may be subject to increased cost as supply reduces.
10. Increased flooding risk from higher water levels from global warming
could impact cardfactory’s key operational sites.
9. Opportunity for cardfactory to innovate on alternative product ranges to
anticipate availability falling and/or helium price increases.
10. Although the support centre and distribution centres are not at any material
risk from flooding, the Printcraft facility is next to a river which would be at risk of
flooding, without appropriate flood defences being adopted. As many stores are
subject to relatively short-term leases, stores can be relocated on lease events, if
flooding is considered to be a material risk.
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CLIMATE CHANGE AND TCFD CONTINUED
TCFD recommendation Current status
Risk timeline
Short term (1–2 years)
Medium term (3–9 years)
Long term (10–15 years)
Describe the
impact of climate-
related risks and
opportunities on
the organisation’s
business, strategy
and financial
planning ●
Implications
Risk timeline
1. Improving our credentials could enhance our profile and opportunity with new trade customers and shoppers. This may also attract new shareholders.
2. Alternative ranges and sources will be constantly reviewed to balance climate risks while maintaining a value offer to our customers.
3. Plans for the international strategy will need to consider country-specific climate-related legislation, property acquisitions, store fit out specifications
along with the impact and location of key suppliers within the international supply chain.
4. Improved stock management significantly reduces exposure to stock wastage. Any disposal of stock is managed through suppliers with green credentials for
waste management avoiding the need for landfill.
5. Development of ‘recycled card’ products could be used as a USP, whilst managing costs and improving cardfactory’s credentials.
6. Increased levels of sustainability into product developments, and increased communication around ESG targets and strategy will broaden customer appeal.
7. Planned levies and surcharges to be monitored and action taken to minimise the implications for such charges on cardfactory.
8. In addition to supporting development of additional green energy generation, this may mitigate future cost increases, whilst reducing the Group’s
GHG emissions.
9. Long-term strategy to be developed to recognise this risk and develop alternative ranges and products to meet customer appetite for party and
celebration events.
10. Plans to increase capacity at Printcraft will require extending the property, which will require an assessment of any flood defence measures to protect
this key production facility in the long term. Design and layout required to minimise risk of equipment damage if extreme flooding is realised.
Describe the
resilience of the
organisation’s
strategy, taking
into consideration
different climate-
related scenarios,
including a 2°C or
lower scenario ●
The initial climate-related risks were considered by the Board as part of the adoption of the ESG strategy and have been incorporated into the risk management framework,
however, the Group is not yet in a position to fully report on its resilience with respect to specific quantified climate scenarios. As part of our continued efforts to build
resilience into the Group’s overall strategy, the completion of the Scope 1, 2 and 3 emission assessment for FY22, due early in FY24, will provide the business with a very clear
understanding of the current emissions status as well as solid recommendations to mitigate further risk. This will also improve the environmental credentials of the business and
establish a pathway to Net Zero.
This includes undertaking a more rigorous climate-related scenario planning assessment, tailored to cardfactory’s business and supply chain, assessment of the Group’s
Scope 3 GHG emissions alongside Scope 1 and 2, development of a strategy to reduce our emissions to allow us to set an informed and realistic target for being a carbon
neutral business. This will assist in facilitating a quantitative approach to the scenario analysis in future years; the results of with will be assessed and considered for the Group’s
strategy developments in respect to resilience to climate change. The transition and physical scenarios that will be explored in further detail are outlined below.
1.5°C scenarios
This is based on low-carbon transition scenario (transition risk) which includes regulatory, technology and policy changes that would be required to limit global warming to
1.5°C. At present it is anticipated that any scenario analysis is to focus on UK policies, UK property, our supply chain and potential changes in consumer behaviour. This will
consider the possibility of new GHG/Carbon taxation measures, increased costs within the supply chain and general operations along with any other relevant factors.
4.0°C scenarios
This is based on the assumption that there is limited regulatory support for global emissions reductions, therefore leading to increasing physical climate impacts (physical
risk). This would include extreme weather events such as flooding and heatwaves. The focus will again be on the UK property portfolio and the oversees supply chain and the
significant risks to retail operations and production.
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Risk Management: Disclose how the organisation identifies, assesses and manages climate-related risks.
TCFD recommendation
Current status
Describe the organisation’s
process for identifying and
assessing climate-related
risks ●
Describe the organisation’s
processes for managing
climate-related risks ●
Describe how processes for
identifying, assessing, and
managing climate-related
risks are integrated into the
organisation’s overall risk
management ●
Climate-related risk is managed in accordance with the overall risk management framework.
This provides for members of the senior management team to be primarily responsible for identifying emerging risks and assessing, managing and mitigating
risks, with support from internal and external specialists, as appropriate.
These risks are reviewed twice per year as part of the risk review process, with an appropriate member of the senior management team nominated to manage
each risk and to lead development and implementation of mitigation including assessing the size and scope of the identified risk.
The Chief Commercial Officer is responsible for the overall management of ESG and climate-related risks.
The Chief Commercial Officer reviews all climate-related risks within the ESG plan ensuring all key points are identified, assessed and incorporated
into the overall risk management process. Updates are provided to the Board and its Audit & Risk Committee.
The climate-related priorities take account of the risks identified and the priorities for our stakeholders, which have been identified from the
materiality assessment.
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CLIMATE CHANGE AND TCFD CONTINUED
Metrics and Targets: Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material
TCFD recommendation
Updates and plans for FY24
Current status
Disclose the
metrics used by the
organisation to assess
climate-related risks
and opportunities in
line with its strategy
and risk management
process ●
In the short term the Board has adopted the metrics and targets outlined in this section, to assess
climate-related risks and expects to adopt new metrics and targets during FY24 following completion
of current assessment of emissions and development of the new ESG strategy described on page 37.
Reduction in carbon footprint
• The Group has measured and disclosed mandatory GHG emissions and in this report a four year
trajectory can be seen; although to date there has been no formal reduction target, an absolute
reduction of 31% in GHG emissions can be observed in FY23 when compared to FY20.
• In relation to the mandatory GHG emissions the Group has also measured and disclosed an intensity
metric of tCO2e per £ million turnover. FY23 shows a reduction of 33% compared to FY20.
• We are at the advanced stages of assessing realistic and achievable carbon neutrality targets in
relation to the Group’s Scope 1, 2 and 3 emissions. These are to be identified through careful exploration
of the British Retail Consortium’s Climate Action Roadmap, which provides a framework for the retail
industry to realise Net Zero in 2040, ahead of the UK Government target of 2050. At present the Group
intends to use the FY22 year as the baseline for comparison for all future targets.
• Working with The Woodland Trust to support the creation of new native woodland across the UK
through the Trust’s Woodland Carbon scheme. Throughout our partnership, we will plant more than
12,000 native trees that have the potential to mitigate 3,200 tonnes of carbon dioxide.
• Complete assessment (using third party experts) to provide full clarity on Scope 1, 2 and 3 emissions for
the FY22 year (baseline assessment), including recommendation for greener energy infrastructure to
drive a continual reduction.
• Within 12 months 50% of company car fleet will be electric/hybrid with the residual 50% converted
• Completion of the Group’s first full GHG inventory
across Scopes 1, 2 and 3 covering the FY22 period. This
will be completed in FY24 and will establish the baseline
against which future targets will be set.
• Assessment of 2040 Net Zero target aligned with the
Science-Based Targets Initiative (SBTi) and further
exploration of the BRC Climate Action Roadmap.
• Maintain The Woodland Trust partnership and explore
further opportunities to protect nature and biodiversity
across our value chain.
• Once the Group understands the extent of the Scope 3
GHG emissions, future strategies will evolve to introduce
metrics and targets for key stakeholders within the
supply chain with the aim of reducing climate impact.
• Entire company car fleet to be electric/hybrid by end of
FY24, reducing fleet’s carbon footprint from 314.6 tonnes
(FY22) to 43 tonnes (end of FY24).
• Develop targets for moving additional product
manufacturing from Far East to UK.
• Remove single-use plastic packaging from 90% of our
products by year-end.
• Plastic removed from all FY24 Seasonal gifting ranges.
• All plastic packaging removed from FY24 counter
within the following 12 months. Once complete, our fleet carbon will be reduced by 90%.
party ranges.
• We will continuously improve our supply chain efficiencies and increasingly move product
manufacturing from the Far East to the UK and Europe whereby there is a clear benefit to the customer
and organisation.
Waste and sustainability
Waste reduction
• Target set to remove single-use plastic from 90% of our products sold to customers by end of FY24.
• All products will be 100% glitter free by end of FY24.
• Target set to reduce point of sale usage by 50% across our retail estate by late FY24.
Recycling
• Recycling will be increased in stores, support centre and distribution centres and we will continue to
improve recyclability of our product and packaging, whilst also offering our customers more recycling
opportunities in addition to our foil balloon and banner recycling service in 500 stores.
• All new cards sold from April 2022 are 100% recyclable.
• All new wrap sold from the end of FY24 will be 100% recyclable.
• All 10p plastic bags are 100% recyclable and manufactured using a minimum of 30% consumer waste.
Sustainability
• All cards are FSC certified.
• All wrap will be FSC certified by end of FY23 (98.5% FSC by April 2022).
• Remove glitter from all products by year-end.
• All new gift wrap sold to be 100% recyclable by
year-end.
• All new bags and card boxes to be 100% recyclable by
end of FY25.
• All new orders of cardfactory gift wrap now FSC
certified.
• Following the completion of the full GHG assessment,
setting of emissions reduction targets and
climate-related scenario analysis, the Group will
consider the relevance and possibility of appropriate
climate-related metrics in relation to other categories
as recommended within the TCFD guidance; transition
risks, physical risks, climate-related opportunities,
capital deployment and remuneration.
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Current status
Disclose Scope 1,
Scope 2 ● and, if
appropriate, Scope 3
greenhouse gas (GHG)
emissions and the
related risks ●
Describe the
targets used by the
organisation to
manage climate-
related risks and
opportunities and
performance against
targets ●
See Scope 1 and Scope 2 emissions on page 50.
The Group has measured and disclosed mandatory GHG emissions and in this report a four year
trajectory can be seen. To date no formal targets have been set, however the Group has taken numerous
active steps to reduce emissions and will continue to do so.
An absolute reduction of 31% in GHG emissions can be observed in FY23 when compared to FY20.
The Group has also measured and disclosed and intensity metric of TCO2e per £ million turnover.
FY23 shows a reduction of 33% compared to FY20.
Assessments are ongoing for with respect to Scope 3 emissions and appropriate Net Zero pathways.
See targets and metrics described on page 48.
Updates and plans for FY24
The full Scope 1, 2 and 3 assessment for FY22 will be
completed in early FY24 with the aim of repeating
the exercise for FY23 during the coming year and the
potential for disclosing all relevant emissions in the
FY24 Annual Report.
The full Scope 1, 2 and 3 assessment for FY22 will be
completed in early FY24. This will facilitate the exploration
of science-based Net Zero pathways, with the aim of
setting a 2040 Net Zero target during FY24 aligned
with SBTi methodology against an FY22 baseline. The
Group has instructed a specialist consultant to assist and
ensure compliance with phase 3 of the Energy Savings
Opportunity Scheme (ESOS). This will require the physical
assessment of a cross section of properties within the
Group, identifying areas for energy saving and carbon
reduction. This exercise will assist with informing potential
Net Zero pathways and investment decisions that may
assist with meeting future reduction targets.
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CLIMATE CHANGE AND TCFD CONTINUED
Green House Gas emissions
Total Scope 1 and 2 GHG emissions have increased compared to last year as a result of increased business activity and growth following periods of restricted trading due to the pandemic in FY22
(and FY21), this is reflected by the reduction in the intensity ratio (tCO2e/£m turnover). However, when compared to the emissions from the FY20 year there has been a reduction in overall emissions
of 31%. This is reflective of the Group’s efforts to reduce energy consumption across the portfolio through efficiencies in the logistics operations and the installation of LED lighting. Further
opportunities to reduce the energy consumption and associated GHG emissions will be explored as part of the pathways to achieve net zero targets.
Energy and Carbon
Scope 1 emissions (combustion of fuel – direct emissions) tCO2e
Scope 2 emissions (purchased energy – indirect emission) tCO2e
Total energy use (kWh)
Country
UK
RoW
Total
UK
RoW
Total
UK
RoW
Total
FY23
tCO2e
724
4
728
4,479
163
4,642
FY23
%
99%
1%
100%
96%
4%
100%
FY22
tCO2e
672
3
675
4,238
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4,283
FY22
%
99.6%
0.4%
100%
99%
1%
100%
FY21
tCO2e
777
3
780
4,245
44
FY21
%
99.6%
0.4%
100%
99%
1%
25,651,206
449,480
98% 22,269,584
2%
225,256
99% 20,476,623
99% 30,130,676
1%
189,524
1%
134,830
26,100,686
100% 22,494,840
100% 20,666,147
100% 30,265,506
4,289
100%
6,788
FY20
tCO2e
FY20
%
1,029
100.0%
0
1,029
6,754
34
0.0%
100%
99%
1%
100%
100%
0%
100%
Intensity Ratio
FY23 tCO2e
FY22 tCO2e
FY21 tCO2e
FY20 tCO2e
Variance(%)
Total emissions
Emissions intensity (tCO2e/£m turnover)
5,370
11.59
4,958
13.61
5,069
17.78
7,817
-31.30%
17.31
-33%
Methodology and emissions data
The above emissions data has been produced in accordance with the Streamlined Energy and Carbon Reporting (SECR) framework, under The Company’s (Directors’ Report) and Limited Liability
Partnerships (Energy and Carbon Report) Regulations 2018. The footprint is calculated in accordance with the Greenhouse Gas (GHG) Protocol and Environmental Reporting Guidelines, including
SECR guidance. DEFRA emission factors have been used for all emission sources to allow an activity to be converted into carbon dioxide equivalent (CO2e).
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CFO'S REVIEW
£52.4m
Profit before tax
£107.8m
Cash from operations
Platform for
growth
“The Group has delivered a strong performance in the
year ended 31 January 2023 (FY23), the first full year of
trading post-pandemic with results ahead of management
expectations set at the start of the year.”
Simon Comer
Interim CFO
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Financial highlights
The Group has delivered a strong performance in the year ended 31 January 2023 (FY23), the
first full year of trading post-pandemic, with results ahead of management expectations set at
the start of the year as follows:
• Encouraging trading performance in stores, with stores like-for-like (LFL) sales +7.6%
compared to the prior year underpinned by growth in Everyday ranges. Sales are now slightly
ahead of pre-pandemic levels.
• Year-on-year improvement in EBITDA to £112.0 million reflects sales growth plus effective
management of inflationary headwinds and targeted investment in people, systems and
infrastructure to support growth.
• Profit before tax of £52.4 million includes £3.5 million of one-off benefits relating to CJRS
settlement and refinancing.
• Cash from operations of £107.8 million, with reduction in net debt to £57.2 million having
cleared £10.8 million of Covid-19 rent deferrals.
• Successful refinancing of banking facilities to September 2025, providing liquidity headroom
to support delivery of the strategy.
Revenue
EBITDA
Profit before tax
Basic earnings per share
Net debt
Cash from operations
Leverage (excl. lease liabilities)
FY23
FY22
£463.4m
£112.0m
£52.4m
£364.4m
£85.6m
£11.1m
12.9 pence
2.4 pence
£57.2m
£107.8m
0.5x
£74.2m
£113.6m
0.9x
For more information regarding the definition and calculation of LFL and other alternative performance measures, go to the glossary
on page 149.
Financial performance
Sales
Stores
cardfactory Online
Getting Personal
Partnerships
Group
Stores
cardfactory Online
cardfactory LFL
Getting Personal
Total Sales
FY23
£m
441.1
8.8
8.5
5.0
FY22
£m
336.0
10.9
12.9
4.6
463.4
364.4
LFL Sales
FY23
+7.6%
-18.8%
+6.7%
-34.7%
FY22
-5.7%
-1.5%
-3.9%
-21.6%
Total Group sales for FY23 were £463.4 million, an increase of £99.0 million compared to the
previous year.
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The Glossary can be found on page 149
Our stores remain the source of a significant majority of our revenues, and therefore a large
part of this increase in total sales reflects that stores were forced to close for approximately
ten weeks in the first quarter of FY22 due to Covid-19-related lockdowns. However, we are
encouraged by the positive stores LFL of +7.6% which reflects an increase in both transactions
and average basket values compared to the prior year when considering just the period where
stores were open in both years.
The increase in basket values was partly driven by targeted price increases; which have helped
to offset the cost of inflationary headwinds, without any significant impact on sales volumes.
We are pleased to see strong performance in our Everyday ranges, and our continued drive to
improve our offer to customers was reflected in double-digit LFL growth across a number of
celebration categories, including wedding, life moments and children’s.
Online sales, across both our cardfactory.co.uk and gettingpersonal.co.uk, were down
compared to the prior year, falling 18.8% and 34.7% respectively compared to FY22, reflecting
the investment phase of these businesses, as well as being impacted by Royal Mail strikes
in the run up to Christmas and customers returning to the high street. However, online
remains an important enabler of store sales and a key part of our omnichannel strategy and
cardfactory.co.uk sales remain significantly ahead of pre-pandemic levels.
Partnership sales increased to £5.0 million (FY22: £4.6 million). FY23 saw a 3% increase in points
of sale and we are now selling through 949 partner locations, and this remains an area where
we expect to see growth in the future supported by the investment we have made in our team to
add capability during this year.
Optimisation of our store portfolio continues to be an important source of sales growth. During
FY23 we opened 33 new stores and closed 21 stores, including five relocations. This resulted
in a net increase in the overall store portfolio of 12 stores. At the end of the financial year, our
store portfolio stood at 1,032 stores, including 27 stores in the Republic of Ireland and three trial
central London stores.
Gross profit
Group Sales
COGs
Product Margin – Constant Currency¹
FX gains/losses
Product Margin
Store & Warehouse Wages
Property Costs
Other Direct Costs
Gross Profit
FY23
£m
463.4
(146.8)
316.6
1.5
318.1
(109.6)
(26.3)
(21.5)
160.7
FY23
% Sales
(31.7%)
68.3%
0.3%
68.6%
(23.7%)
(5.7%)
(4.7%)
34.7%
FY22
£m
364.4
(124.1)
240.3
2.6
242.9
(91.4)
(15.8)
(19.2)
116.5
FY22
% Sales
(34.1%)
65.9%
0.7%
66.6%
(25.1%)
(4.3%)
(5.2%)
32.0%
1. Product margin calculated on a constant currency basis using a consistent GBPUSD exchange rate across both periods.
FX gains and losses reflect conversion from the constant rate to prevailing market rates.
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CFO'S REVIEW CONTINUED
Overall gross profit for the Group increased by £44.2 million to £160.7 million, a 2.7ppts
improvement in gross margin to 34.7%. The overall trend in the year reflects active management
of inflationary pressures, in particular the benefit of our currency and energy hedging and
through targeted price increases, plus efficiency benefits arising from a full-year of trade and
deliberate actions taken to improve productivity and stabilise costs.
Product margins, calculated on a constant currency basis, improved 2.4ppts from 65.9% in FY22
to 68.3% this year. This improvement largely reflects the impact of targeted price increases
on sales, which offset the impact of wage inflation as well as material price inflation. Product
margins include the purchase price of goods, along with inbound freight, carriage and packing.
Product margin also benefitted from a reduction in stock provisions as supply chain and inventory
management challenges that affected FY22 did not recur in FY23, and overall inventory levels
normalised following the pandemic. Changes in the value of stock provisions and other stock
losses had a small negative impact on margin of approximately 0.5ppts in the year.
Within the cost of goods sold, we saw a 0.6ppts increase in the cost of inbound freight, as
market prices for sea freight rose significantly towards the end of 2021 and remained high
through much of the 2022 calendar year. This added over £5 million to the overall cost of goods
sold in FY23. This impact was partially mitigated through optimisation of inbound shipments
where possible.
The Group purchases approximately 50% of its total goods for resale in US Dollars and has a
well-established hedging policy to manage the risk of adverse fluctuations in market GBPUSD
rates. In FY23 we achieved an average GBPUSD rate of approximately 1.32 on US Dollar
purchases, slightly adverse to the rate achieved in FY22 reflecting the weakening of Sterling in
the period, but still significantly ahead of the average market spot rate for the year.
Store and warehouse wages reduced by 1.4ppts year-on-year as a percentage of sales, which
includes a one-off £2.5 million benefit in respect of provisions released following the settlement
of our CJRS position with HMRC. Excluding this credit and making an equivalent adjustment
in the prior period, store wages as a percentage of sales are comparable in both years despite
national living wage increases of 6.6% being applicable from April 2022, due to targeted price
increases and more efficient deployment of labour resources, enabled by stores being open for
the whole year. Employee costs for FY22 are stated net of CJRS support received in that period.
Property costs increased by 1.4ppts as a percentage of sales, reflecting the cessation of
extended business rates reliefs from April 2022. Property costs do not include rents as
the accounting treatment for leases results in these costs being reflected as right-of-use
depreciation and a finance charge on lease liabilities, both below gross profit, a combined
charge of £39.4 million in FY23 (FY22: £40.7 million).
Other direct expenses include warehouse costs, store opening costs, utilities, maintenance, point
of sale and pay-per-click expenditure. A large proportion of costs in this category are variable in
relation only to the size of the store portfolio and available trading days, meaning whilst overall
costs increased, they fell as a percentage of sales given the improved trading performance in the
year. The Group has benefitted from its long-term energy hedge, which fixed commodity costs
at FY22 levels. All of the Group’s UK energy costs will continue to benefit from this hedge until
September 2024.
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Card Factory plc Annual Report and Accounts 2023
EBITDA and operating profit
Group Sales
Gross Profit
Operating Expenses
Other operating income
EBITDA
Depreciation & Amortisation
Right-of-use asset depreciation
Impairment Charges
Operating Profit
FY23
£m
463.4
160.7
(48.7)
–
112.0
(10.3)
(35.1)
(2.8)
63.8
FY23
% Sales
34.7%
(10.5%)
–
24.2%
(2.2%)
(7.5%)
(0.6%)
13.8%
FY22
£m
364.4
116.5
(38.9)
8.0
85.6
(11.6)
(37.4)
(5.0)
31.6
FY22
% Sales
32.0%
(10.7%)
2.2%
23.5%
(3.2%)
(10.3%)
(1.4%)
8.7%
Operating expenses (excluding depreciation and amortisation) include remuneration for central
and regional management, business support functions, design studio costs and business
insurance together with central overheads and administration costs.
Total operating expenses increased by £9.7 million to £48.7 million in FY23, reflecting the
cessation of furlough for central staff alongside investment in our people and strengthening our
IT infrastructure and marketing approach to support our ‘Opening Our New Future’ strategy to
provide a platform for future growth.
As a result, driven by the improved trading performance, effective management of inflationary
pressures and carefully targeted investment for growth, Group EBITDA increased to £112.0
million in FY23.
Total depreciation and amortisation charges reduced by £3.6 million compared to the prior
year. This largely reflects a reduction in depreciation charges on right-of-use assets in relation
to our store portfolio. Store rents, and therefore the related right-of-use assets, have continued
to fall since the pandemic and our dynamic, flexible approach to the store portfolio has enabled
us to continue to capture these reductions as part of lease renewals or relocations.
Impairment charges, net of reversals, in respect of store right-of-use assets reduced from
£5.0 million in FY22 to £1.3 million in FY23, reflecting the improved trading performance and
our future expectations regarding store performance and cost inflation. Impairment charges
for FY23 also includes a one-off £1.5 million impairment charge in respect of online platform
development for gettingpersonal.co.uk. The impairment reflects development work that did not
form part of the final solution, which was deployed shortly after the year end in March 2023.
Contents Generation – PageContents Generation – Sub PageContents Generation - Section Profit before tax
Group Sales
Operating Profit
Finance Costs
Profit Before Tax
FY23
£m
463.4
63.8
(11.4)
52.4
FY23
% Sales
13.8%
(2.5%)
11.3%
FY22
£m
364.4
31.6
(20.5)
11.1
FY22
% Sales
8.7%
(5.7%)
3.0%
Total finance costs reduced significantly compared to the previous year, from £20.5 million
to £11.4 million. This largely reflects a reduction in loan issue costs charged to the income
statement.
Interest on loans
Loan issue cost amortisation
IFRS 16 Leases interest
Total Finance Expenses
FY23
£m
6.0
0.9
4.5
11.4
FY22
£m
6.8
10.4
3.3
20.5
FY22 included £10.4 million of costs associated with the May 2021 refinancing which included
costs related to a potential equity raise, the requirement for which was removed by the
subsequent refinancing in April 2022.
Cash flows
Our updated facilities, described in further detail below and in note 17 to the financial
statements, provide much greater flexibility to the Group, which in combination with continued
delivery of operating cash flows has enabled us to reduce levels of gross debt. Taken in
conjunction with our interest rate hedging programme, which has provided a degree of
protection from increases in market rates during FY23, the interest payable on our debt facilities
reduced compared to the previous year.
As a result, profit before tax for the year was £52.4 million, up £41.3 million from £11.1 million for
the previous year.
Taxation
The Group is committed to being a responsible taxpayer, paying the right amount of tax at the
right time is a fundamental principle of our operation. We aim to maintain an open and honest
relationship with the tax authorities in the jurisdictions where we operate.
During FY23, we underwent a routine review of our business risk rating with HMRC, which was
confirmed in March 2023 as ‘low’.
Our improved trading performance and subsequent increase in profitability, as described
above, means the Group made cash payments in respect of UK corporation tax for the first time
since 2020. Our tax charge for the year was £8.2 million (FY22: £3.0 million). This represents an
effective rate of corporation tax for the year of 15.6%, which is lower than the standard rate of
UK Corporation tax applicable in the period of 19%. This principally reflects the impact of prior
year adjustments, with no tax ultimately payable in respect of FY22 owing to the allocation of
brought-forward tax losses and reliefs to the period, when the tax computations for that period
were finalised, partly offset by the impact of deferred tax balances being accrued at the higher
rate of 25% applicable from 1 April 2023. The Group paid cash taxes of £7.9 million in FY23,
which all relate to the FY23 financial year.
Earnings per share
The net result for the year was a profit after tax of £44.2 million, increased from £8.1 million in
FY22. As a result, basic earnings per share (EPS) for the year was 12.9 pence, with diluted EPS of
12.8 pence.
Profit after tax (£m)
Basic EPS (pence)
Diluted EPS (pence)
Net cash from Operating Activities
Net cash used in Investing Activities
Net cash used in Financing Activities
Net Cash Flow for Year
Operating cash flows less lease repayments¹
Operating cash conversion²
FY23
44.2
FY22
8.1
12.9 pence
12.8 pence
2.4 pence
2.4 pence
FY23
£m
99.9
(18.2)
(110.1)
(28.4)
47.4
96%
FY22
£m
113.7
(6.9)
(81.0)
25.8
59.2
133%
1 Operating cash flows less lease repayments is net cash from operating activities of £99.9 million less lease payments of
£52.5 million.
2 Operating cash conversion is Cash from operations (cash from operating activities before tax payments) of £107.8
million as a percentage of EBITDA. Alternative performance measures are described in further detail in the glossary on
page 149.
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CFO'S REVIEW CONTINUED
The Group continued to deliver positive cash performance in FY23, with cash from operations
(before lease repayments and tax) of £107.8 million (2022: £113.6 million) million contributing to
an overall reduction in net debt (see below).
Net Debt
Operating cash flows were slightly lower than in the previous year, which reflects the
normalisation of working capital profiles as we delivered a full year of trading – including an
£11 million increase in inventory levels to support higher sales – partly offset by a net one-time
benefit arising from the realignment of VAT payment quarter ends with our fiscal year. The
position at the end of FY22 was impacted by the protective actions taken to secure cash and
liquidity during and immediately after the pandemic and the impact on inventory balances
as a result of global supply chain issues during that year that did not recur in FY23. Operating
cash conversion (calculated as EBITDA/cash from operations) was 96%, despite the working
capital normalisation.
Capital expenditure increased from £6.9 million to £18.2 million, as investment increased
following the cessation of all but essential spend during the pandemic-affected years and the
commencement of projects to drive future growth.
Current borrowings
Non-current borrowings
Total Borrowings
Add back capitalised debt costs
Gross Bank Debt
Less cash
Net Debt (exc. Leases)
Leverage (exc. Leases)
Lease Liabilities
Net Debt (inc. Leases)
Leverage (inc. Leases)
FY23
Net Debt
£m
FY23
Leverage
FY22
Net Debt
£m
FY22
Leverage
50.1
17.4
67.5
1.4
68.9
(11.7)
57.2
105.4
162.6
25.5
85.5
111.0
1.5
112.5
(38.3)
74.2
119.8
194.0
0.5x
1.4x
0.9x
2.3x
Cash used in financing activities includes £45.1 million of debt facility repayments
(2022: £8.0 million of debt repayments) following the refinancing and subsequent management
of the revolving facility position, and £52.5 million of payments in respect of lease liabilities for
the store portfolio (2022: £54.5 million).
Lease payments were higher than normal, albeit broadly aligned with the prior year, reflecting
the continued settlement of deferred payment plans agreed during the pandemic. The Group
cleared approximately £11 million of deferred rents during FY23 and has no VAT or rent deferrals
outstanding at 31 January 2023.
Balance Sheet
Capital expenditure
Total capital expenditure in FY23 was £18.2 million, increased from £6.9 million in FY22.
Key projects included the continuing development of our Group-wide ERP implementation, with
the next significant functionality updates expected during FY24. We also invested in our new
model stores, in addition to ongoing spend in relation to the expansion and optimisation of the
store portfolio.
eCommerce initiatives to support our omnichannel strategy were another key focus, with the
new platform for our Getting Personal website going live in March 2023.
Looking forward, we expect capital investment to continue to increase to approximately
£24 million per annum, as we invest to deliver our strategy.
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Card Factory plc Annual Report and Accounts 2023
On 21 April 2022, the Group agreed an updated and amended financing package with its
banking partners, which reduced the overall quantum and extended the term of the Group’s
facilities. The new package also provided greater flexibility, with a proportion of the previous
term loans effectively repaid and replaced with a revolving facility.
The revised facilities comprised term loans of £30 million, CLBILS of £20 million and an RCF of
£100 million. The CLBILS are subject to an amortising repayment profile with final maturity in
September 2023. The Term Loans are set in two tranches, both with an amortising repayment
profile. Tranche ‘A’ has a final maturity in January 2024 and Tranche ‘B’ is coterminous with the
RCF in September 2025. The interest rates applicable to each facility are set out in note 17 to
the financial statements.
The Group focuses on net debt excluding lease liabilities, this reflects the way the Group’s
covenants are calculated in its financing facilities. The cash generation trend described above has
contributed to a reduction in both gross and net debt during FY23, with Leverage (calculated as
Net Debt/EBITDA) falling to the bottom end of our target 0.5-1.5x range as a result.
The Group made scheduled repayments in respect of the CLBILs and term loan tranche ‘A’
totalling £6.1 million in January 2023. At 31 January 2023, the Group had undrawn committed
facilities of £75.2 million.
The reduction in lease liabilities reflects the repayment of deferred rentals during FY23 that
remained outstanding at the end of the previous year.
The Group’s cash generation profile typically follows an annualised pattern, with higher cash
outflows in the first half of the year associated with lower seasonal sales and investment in
working capital ahead of the Christmas season. The inverse is then usually true in the second
half, as Christmas sales lead to reduced stock levels and higher cash inflows. As a result, net
debt at the end of the year is usually lower than the intra-year peak, which typically occurs
during the third quarter.
Contents Generation – PageContents Generation – Sub PageContents Generation - Section The Group continues to hold a provision of £7.4 million relating to the potential overpayment of
government support during the pandemic, with reference to subsidy control limits. The Group is
actively taking steps to resolve its position.
Whilst mindful of the ongoing impact of the cost-of-living crisis, we remain confident that
our compelling value for money proposition across a range of products and price points will
resonate with customers.
This approach, together with our clear growth strategy, gives us confidence the Group will
continue to make strategic and financial progress in the year ahead.
In addition, the Board remains confident in the compelling growth opportunity for the business.
As part of our Capital Markets Strategy Update, we will outline a pathway for revenues of
around £650 million and margins of around 14% in FY27, supported by a capital investment plan
of £24 million per annum, over the next three years.
Simon Comer
Interim CFO
3 May 2023
Capital structure and distributions
The Board remains committed to maintaining a capital structure that is conservative yet
efficient in terms of providing long-term returns to shareholders after allowing for investment to
fund ongoing operational requirements and strategic growth.
The Group remains prohibited from making distributions under the terms of its financing
facilities until such time as the CLBILS and Tranche ‘A’ of the term loans are fully repaid.
Accordingly, there were no dividend payments made in either the current or the preceding year.
The final maturity date for tranche ‘A’ of the term loans is 31 January 2024, and accordingly
the earliest that dividend payments will be considered is during the FY25 financial year.
Subject to continued financial performance in line with the strategic plan, the Board envisages
recommencing dividend payments at a level of 2-3x dividend cover based on profit after tax,
subject to a Leverage ratio assessed across the financial year of not more than 1.5x (excluding
lease liabilities) being maintained after the distribution is made.
Acquisition of SA Greetings
Following the year end, on 25 April 2023, the Group acquired a 100% stake in SA Greetings
Corporation (Pty) Ltd (‘SA Greetings’) for fixed cash consideration of £2.5 million, funded from
existing cash reserves and working capital.
SA Greetings is the leading wholesaler of greeting cards and gift packaging in South Africa.
It also operates 24 ‘Cardies’ retail stores, with four further stores operated by franchisees, and
owns and operates a roll-wrap production facility. Its head office and main warehouse are
located in Johannesburg, with sales offices in Durban and Cape Town.
The acquisition gives the Group immediate access to the South African market via an
established, successful business and expands cardfactory’s global presence in line with our
strategy. We expect the acquisition to make a small positive contribution to the Group’s EBITDA
and PBT in FY24 and look forward to exploring the opportunities to support the development
of the SA Greetings business and enhance the Group’s production, wholesale and retail offer in
both South Africa and the UK.
Outlook
Trading in the first weeks of the new financial year is slightly ahead of the Board’s expectations.
Strong performance across both our Everyday ranges and Spring seasons of Valentine’s Day
and Mother’s Day compared to FY23, has seen increased store transactions and average basket
values, driven by effective range development, an expanding gifting offer and our compelling
value for money offer across both cards and gifts.
Based on the current inflationary outlook, we are confident in our ability to withstand these
pressures with a continued focus on productivity and efficiencies whilst also benefitting from
the normalisation of freight costs and annualisation of targeted price increases in FY23. We
have full energy and currency hedging in place for FY24.
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RISK MANAGEMENT
Managing our risks
Risk management is an inherent part of
doing business; it balances risk and reward,
determined through a careful assessment
of both potential outcomes and impact and
risk appetite. Below and on the following
pages is an overview of our risk management
framework, principal risks, ongoing mitigations
and how these align to our strategy.
Risk management approach
cardfactory’s risk management framework
embeds the identification, assessment,
mitigation and monitoring of risks that
threaten the achievement of our objectives.
The framework incorporates both a top-down
approach to identify the Group’s principal
risks and a bottom-up approach to identify
operational risks.
A Group risk register is in place and is
used to assess the gross level of risk to
the business (likelihood and impact), the
extent of any mitigating controls and the
resultant net level of risk. It also details any
further plans to mitigate or reduce risks.
In FY23 we carried out a review of the risk
management framework. On the back of this,
a new risk 5*5 matrix model and the Group’s
approach to risk appetite were approved and
implemented. The approach to setting ‘target
risk’ is currently being developed and will be
rolled out in FY24.
Each risk is assigned to a member of the
senior management team. Critical rated
risks are reviewed and updated where
appropriate twice a year, with all others
being reviewed annually.
Risks are discussed at the monthly meeting
of the senior management team on a rolling
basis.
The Head of Internal Audit and Loss
Prevention provides the Audit & Risk
Committee with a risk management update
at each meeting, which includes an overview
of changes to specific risks reviewed in the
period, along with a summary of the Group
risk register.
Under the oversight of the Board and detailed
scrutiny by the Audit & Risk Committee,
members of the senior management team
are responsible for identifying emerging risks
and implementation of mitigation plans. A
complete review of all the risks and review
of the adequacy of the process to identify
emerging risks was undertaken at the end of
the financial year.
The Audit & Risk Committee supports
the Board in maintaining a robust risk
management framework by approving the
risk management process and reviewing the
Group’s principal risks and risk appetite on
a regular basis. You can read more on risk
governance in the Audit & Risk Committee
Report on pages 75 to 77.
Internal Audit also provide independent
assurance to management and the Audit &
Risk Committee over specific risk areas as
part of their annual audit plan.
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Card Factory plc Annual Report and Accounts 2023
Risk management process
Identify
Monitor
Risk
Management
Framework
Assess
Mitigate
Identify
• Risk registers compiled by each business function.
• Risk mapping to identify emerging issues.
Assess
• Determining the likelihood of risk occurrence.
• Evaluating the potential impact.
Mitigate
• Agreeing actions to manage the identified risks.
• Ensuring control measures are in place.
Monitor
• Reviewing the effectiveness of controls.
• Maintaining continued oversight and tracking.
Contents Generation – PageContents Generation – Sub PageContents Generation - Section
Top down Card Factory
plc Board
Audit & Risk
Committee
Senior
Management
Team
Maintains sound risk management and control systems,
assesses principal risks.
Sets risk management framework, assesses effectiveness
of risk and control systems and maintains oversight of risk
monitoring.
Manages risks within their area of accountability, with
responsibility to mitigate risks (where appropriate). The senior
management team undertakes reviews of and makes updates
to each risk on a rolling monthly basis. This group is also
primarily responsible for monitoring, identifying and reporting
emerging risks as they arise.
Internal Audit
Coordinates risk management activity through review of risk
registers, agreement of risk mitigation plans and preparation
of risk reporting.
Operational
Management
All colleagues are responsible for managing risk, overseen by
each senior management team member, for their operational
areas of responsibility.
Bottom up
Principal risks and uncertainties
The Audit & Risk Committee has performed a detailed review of the risk management
framework throughout the year, which has resulted in an updated risk matrix. Our model has
moved from a 3*3 to a 5*5 model and the impact and likelihood criteria has been updated in
line with this, with all risks having been reviewed and updated accordingly. Additionally, risk
appetite has been developed and each risk has its own assigned risk appetite. Target risk score
is currently being trialled and is to be rolled out in FY24.
The Audit & Risk Committee has performed a robust assessment of the emerging and principal
risks facing the Group and below is a summary of the principal risks and uncertainties the
Group faces.
As noted above, as part of the detailed review of the risk register, a number of changes have
been made, most notably the removal of Covid-19.
Please turn to pages 60 to 62 for more information on our principal risks and uncertainties.
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Impact
IT Infrastructure & security
1
2 Geopolitical instability
3 Brand customer experience
4 ERP implementation
5 ESG compliance & climate
change risks
6 Business continuity
7 Supplier CSR breach
8 Retail partner
9 Adapting to customer
preference
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RISK MANAGEMENT CONTINUED
Risk trend:
Increasing
Stable
Decreasing
Link to strategy:
01
Increasing breadth of product offering
02 Create a full omnichannel offer
03 A robust and scalable central model
Strategic Risks
Description
Mitigation
ESG
compliance and
climate change
risks
Failure to meet requirements of institutional
investors, customers and other stakeholders when
it comes to ESG requirements, including provision
of sustainable products and reducing waste and
plastics (includes climate change risks).
An ESG strategy has been devised with five key work streams. Management will focus on these to achieve the
ambition of growing the business in a socially and environmentally responsible way.
Various actions in environmental and social have been implement. Please refer to the ESG section of this report on
pages 36 to 43 for further actions being taken.
Strategy
01
03
Adapting
to customer
preferences
Strategy
01
02
Brand customer
experience
Strategy
01
02
03
Failure to anticipate and adapt to changes in
customer preferences and shopping habits,
market dynamics and competitor activity-
channel shift.
Broader delivery of the overarching commercial strategy must ensure continual adaptation to changing customer
preferences; in-store online and through our business partners. Historically, the business has had limited access to
meaningful customer and marketing insight to drive improved decision making. The creation of a marketing and
insight function has improved decision making.
The commercial planning process continually reviews and responds to changing customer purchasing behaviour.
As the business becomes fully omnichannel, the customer demands for fulfilment and service will increase as a
connected, seamless experience becomes an expectation rather than a desire. In response, Click & Collect and multi-
ship have been rolled out. Future developments are being scoped.
Failure to manage and promote the brand which
could result in loss of market share.
Brand strategy is in place which fully articulates cardfactory brand proposition and strategic framework to elevate
the brand’s key attributes and to create clarity around the omnichannel proposition with cross channel campaigns
being developed to support awareness and growth including celebrate life’s moments.
We have significantly improved customer insight and data which is shaping our thinking and decision making across
the business and we have invested in, trialled and launched a customer Service Excellence programme, which will
continue to evolve.
Market data shows that cardfactory has been successful in retaining and attracting customers through the strength
and value for money we offer coupled with an increase in range and sales of gifts and celebration essentials.
Additionally, the communication plan has a focus on investor relations with an increased focus on working with
Corporate Affairs agency to proactively tell the cardfactory story.
See the ‘Our brand’ section on pages 12 and 13 for further information on our activities.
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Contents Generation – PageContents Generation – Sub PageContents Generation - Section Operational Risks
Description
Mitigation
Enterprise
Resource
Planning (ERP)
implementation
Strategy
02
IT infrastructure
and security
Strategy
02
03
Business
continuity
Strategy
02
03
Undergoing a design and phased implementation
of a new ERP systems to replace aging core IT
infrastructure. This process carries inherent risks,
including potential business disruption, data loss,
inability to achieve expected benefits, and failure
to provide the necessary foundation for executing
our strategic plan. Key aspects of this plan
include developing an omnichannel customer
experience, enhancing engagement with retail
partners, and driving operational efficiencies in
stores.
Unsupported and legacy software, some of which
is subject to material tailoring, requires ongoing
support to maintain functionality and significant
transactional volumes. There is a reliance on IT
systems to support all operations, which could be
exposed to cyber risk.
Prolonged loss or server disruption to Printcraft
print and production facilities, web fulfilment
centre and supply chain.
To minimise these risks, we have successfully completed the initial implementation phase, which encompassed
finance and master data without any material disruption.
We have also restructured the project to adopt a more incremental approach, which allows for smoother transitions
between phases, reduced reliance on vulnerable legacy systems during peak trading seasons, and enables the
achievement of critical strategic plan components. Furthermore, we have increased our focus on business process
engineering, dedicated resources and change management strategies to support a successful ERP implementation.
The IT strategy implementation includes ongoing specialist support for legacy systems and migration to new
systems, including the ERP implementation with dedicated teams in place to manage the transition.
Cyber expertise is employed within the business and appropriate cyber controls are in place. Plans designed to
continue to address multiple cyber risks, alongside further risk mitigations arising from replacement of legacy
systems, are also in place.
A business continuity and disaster recovery plan is in place, which includes the use of alternative suppliers for any
impacted production processes.
In relation to online fulfilment, any short-term outages can be mitigated by adjustment of delivery times for online
orders. Business continuity plans are in place, which include the use of third parties.
Planning permission has been obtained and groundworks completed on an additional building to create capacity for
online fulfilment, to relieve capacity constraints.
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RISK MANAGEMENT CONTINUED
Risk trend:
Increasing
Stable
Decreasing
Link to strategy:
01
Increasing breadth of product offering
02 Create a full omnichannel offer
03 A robust and scalable central model
Operational Risks (cont.) Description
Mitigation
Supplier
CSR breach
Strategy
01
Supplier CSR breach resulting in a potential
breach of legislation (e.g. Modern Slavery,
Anti Bribery & Corruption) and for products
supplied (e.g. Safety and labelling standards),
which could damage cardfactory’s reputation
and reduce sales.
Processes for suppliers to agree to appropriate standards, which are subject to regular audit and inspection by
cardfactory teams (or receipt of alternative adequate independent report) to validate compliance, with a strict ‘no
audit – no order’ policy adopted. Testing and pre-shipment sampling of production models is being undertaken.
All product testing and quality control inspections are undertaken by authorised accredited providers. A dedicated
quality control team is in place to test pre-shipment sampling of production models.
The risk profile for most suppliers to Getting Personal is significantly lower, with limited supplies from the Far East.
Plans are being developed to extend the quality control and technical teams’ scope to include these suppliers with
adoption of appropriate requirements to mitigate risks.
Retail partner
exposure
Strategy
02
Financial Risks
Geopolitical
instability
Strategy
03
cardfactory may not realise the growth in
profitable revenue from retail partners, which is
a significant component for future growth of the
business and the brand or reputation could be
damaged by the actions of retail partners.
A business development team has been formed to build relationships with existing partners and develop a pipeline
of future partners.
Brand standard requirements are in place to provide a clear framework for partners, with regular reviews adopted.
Enhanced requirements will be incorporated in any future retail partner requirements.
Description
Mitigation
Geopolitical instability leading to restrictions on
trade
Suppliers:
Operating with a supply base whereby we have
the total business or specific categories solely
dependent on one supplier, region or country
carries significant stock supply risk. China
remains our biggest supply route.
Customers:
Restrictions on supply from certain countries may
impact availability and retail selling prices.
Suppliers:
– Diversifying the supply base by bringing more production back to the UK while also exploring other
geographical territories.
– Buyers have extensive industry knowledge, know of alternative suppliers if mitigation needs arise and manage
any supply issues or problems.
Customers:
– Moving supply to new territories and using UK-based suppliers (non-exclusive product) will mitigate the supply
issue at the shelf edge, but could potentially drive increased cost, with price elasticity assessments to provide
insights on consequences of future price increases.
Geographies and governments:
New legislation and import tariffs may force
resourcing decisions.
Geographies and governments:
– Continual review of the import tariff duties and ‘live’ government legislative changes to ensure we are always
sourcing from the best source to support the overall business.
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NON-FINANCIAL INFORMATION STATEMENT
Non-financial information statement
Reporting requirement
Information necessary to understand the Company’s development, performance
and position and the impact of its activity relating to:
Relevant information
Policies and standards
1. Environmental matters (including the impact of the Company’s business on
Pages 36 to 50
Page 35
the environment).
2. The Company’s employees.
3. Social matters.
4. Respect for human rights.
Pages 30 to 33, 40 & 41
Pages 35 & 42
Pages 35 & 62
Page 32
Page 35
Page 35
5. Anti-corruption and anti-bribery matters.
Pages 35, 62, 73 & 75
Pages 35 & 73
Required information
6. Description of the Company’s business model.
7. Description of policies (and any due diligence processes implemented pursuant
to those policies) pursued by the Company in respect of items 1 to 5 above and a
description of the outcome of those policies.
Pages 14 & 15
See the sections
referred to above
8. A clear and reasoned explanation if the Company does not pursue any policies
Not applicable
in respect of the above matters.
9. Description of the principal risks relating to items 1 to 5 above and where relevant
Pages 58 to 62
and proportionate, a description of the business relationships, products and
services which are likely to cause adverse impacts in those areas of risk and a
description of how it manages such risks.
10. Description of the non-financial key performance indicators relevant to the
Company’s business.
11. Where appropriate, references to and additional explanations of amounts
included in the accounts.
Pages 26 to 27, 29, 32
& 33
The accounts
are produced in
accordance with UK-
adopted international
accounting standards
and applicable law. See
page 149 for alternative
performance measures.
The Strategic Report, which was approved by the Board on
2 May 2023 and is set out on pages 1 to 63.
Darcy Willson-Rymer
Chief Executive Officer
3 May 2023
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BOARD OF DIRECTORS
Paul Moody
Non-Executive Chair
Darcy Willson-Rymer
Chief Executive Officer
Roger Whiteside OBE
Senior Independent Non-Executive Director
(SID since 1 February 2023)
Committee membership
Audit & Risk AR Remuneration
R
Nomination N Chair
Date of appointment:
19 October 2018
R
N
Date of appointment:
8 March 2021
Paul has extensive retail experience having
served 20 years at Britvic plc, including
eight years as Chief Executive Officer. Paul
is currently Chair of 4imprint Group plc,
having been appointed in February 2016.
Paul was Chair of Johnson Service Group plc
between May 2014 and August 2018 and was
a Non-Executive Director and Chair of the
Remuneration Committee of Pets at Home
plc from March 2014 until July 2020. Paul
assumed the interim role as Executive Chair
of Card Factory plc from 1 July 2020 to
8 March 2021.
Current external appointments:
Non-Executive Chair of 4imprint Group plc.
Prior to joining the Company, Darcy served
as CEO of Costcutter Supermarkets Group
for eight years and was CEO of Clinton
Cards plc from 2011 to 2012. Before joining
Clinton Cards, Darcy held a range of
roles in international branded businesses,
including Managing Director (UK & Ireland) of
Starbucks Coffee Company, and senior roles
at Yum Restaurants International, including
Operations Director of KFC Great Britain, and
Director of Operations and Franchise, Europe,
KFC and Pizza Hut.
Date of appointment:
4 December 2017
AR
R
N
Roger has extensive retail experience
and recently retired from his role as Chief
Executive Officer of Greggs plc, in May
2022. Prior to this role, Roger served as Chief
Executive of both Thresher Group and Punch
Taverns. Roger was also a founding member
and the Joint Managing Director of Ocado.
Roger spent the early part of his career at
Marks and Spencer where he led the food
division for the business.
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Contents Generation – PageContents Generation – Sub PageContents Generation - Section Nathan (Tripp) Lane
Non-Independent
Non-Executive Director
Robert (Rob) McWilliam
Independent
Non-Executive Director
Indira Thambiah
Independent
Non-Executive Director
Date of appointment:
9 April 2020
Date of appointment:
1 November 2021
AR
R
N
Date of appointment:
1 September 2022
AR
R
N
Tripp is the founder of Delancey Cove LLC,
where he focuses on management and
corporate governance for turnarounds and
special situations. Tripp has significant retail
and consumer sector experience having
invested extensively in the sector via private
equity, public equity and distressed debt.
Tripp served on the board of New Look for
five years and is currently a Non-Executive
Director of Slater & Gordon UK Holdings
Limited, RetailNext Holdings, Inc. (USA), and
CellC Limited (South Africa), and was recently
appointed Chair of LBI ehf (Iceland). Prior
to founding Delancey Cove, Tripp founded
his own financial advisory business, Resegon
Capital Partners, and was an investment
professional for BlueMountain Capital and
Apax Partners.
Current external appointments
Member of Delancey Cove LLC, and Non-
Executive Director of Slater & Gordon UK
Holdings Limited, RetailNext Holdings Inc.,
LBI ehf., and CellC Limited.
Rob was Chief Financial Officer of Asda
from 2018 to 2021; and between 1997 and
2012 held a number of senior roles within
the Asda group including Commercial
Finance & Strategy Director and Business
Change Director. In between his two periods
with Asda, Rob was Vice President, UK,
Finance Director and then Vice President
of Consumables at Amazon UK. Rob was
Independent Director of YPO (from 2017
to September 2021) and was previously a
Non-Executive Director of Ten Entertainment
Group plc where he was also the Chair of the
Risk and Audit Committee.
Current external appointments:
Rob is currently Non-Executive Director
and Trustee of Jisc, Non-Executive Director
of Venture Simulations Limited and Non-
Executive Director of Fruugo plc (all of which
are unlisted). Rob was appointed as a Non-
Executive Director of the Solicitors Regulation
Authority on 1 March 2023.
Indira is an experienced multi-channel retail
executive and consultant, with previous roles
including Head of Multi-Channel for Home
Retail Group (Argos & Homebase) and Vice
President, Europe at online sales marketplace,
Zulily. Indira has successfully managed a
number of private businesses, most recently
Roof-Maker (CEO, 2018 to 2022). Indira has also
been an Independent Non-Executive Director
and member of the Remuneration Committee
at each of Superdry plc (2010 to 2013) and
Yorkshire Building Society (2007 to 2010).
Indira is a qualified Chartered Accountant.
Current external appointments:
Indira is currently Non-Executive Director and
Trustee of Vivibarefoot Limited.
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CORPORATE GOVERNANCE
Chair’s letter
I am extremely pleased by the performance
of the management team, including two profit
upgrades during the year and the material
reduction in debt requirements which have
been instrumental in securing a release of
the undertakings to raise equity. With further
reduction of our debt we look forward to
being able to review payment of dividends
from early 2024.
Yours sincerely
Paul Moody
Chair
3 May 2023
Dear Shareholder
The last financial year has proved to be
a period of recovery for cardfactory, as
we celebrated our 25th anniversary of the
opening of our first store, developed good
momentum post-pandemic and started to
implement our ‘Opening Our New Future’
strategy as we evolve into a customer-centric,
omnichannel retailer.
The Board has revalidated the basis and
foundations for the strategic plan and focused
on reviewing the key priorities to maximise the
opportunities that will provide the best return
for all stakeholders. This includes the enablers
and key investments in technology and
capacity to improve efficiency and increase
sales, development of the omnichannel
ambition and review of the approach to
expand our domestic and international
partnership strategy.
In parallel, progress has been made to
further improve our ESG strategy, including
progress to allow us to understand our Scope
3 greenhouse gas emissions to support
setting appropriate objectives to reduce our
impact on the environment and a significant
improvement in our colleague engagement.
This saw us be awarded a ‘two star’ rating
with Best Companies in 2022 and ranked
third Best Big Company to Work For in Q1 of
2023, which demonstrates actions taken in
previous years are supporting our objective of
becoming a ‘three-star’ company.
I am pleased to welcome Indira Thambiah
to the Board. Indira brings much experience
from other retail and online businesses and
is making valuable contributions to the
Board Committees, including succeeding
Octavia Morley as Chair of the Remuneration
Committee. I look forward to Matthias Seeger
joining the Board in May 2023 as CFO,
following a thorough market search. We are
grateful to Simon Comer for assuming the
non-statutory appointment as interim CFO.
I also wish to recognise the Directors who have
stepped down from the Board in the last year,
including Octavia Morley, who retired at the
end of the financial year and Kris Lee, who
stepped down as CFO on 31 January 2023.
Octavia has been Senior Independent
Director and Chair of the Remuneration
Committee since 2014 and has made a
significant contribution to cardfactory. Kris
has been Chief Financial Officer since 2017
and played a significant role in helping to
guide the Company through the last few
years, particularly during the Covid impacted
period and a series of refinancings. We wish
Octavia and Kris all the best for the future.
Paul Moody
Non-Executive Chair
“With further reduction of
our debt we look forward
to being able to review
payment of dividends from
early 2024.”
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Contents Generation – PageContents Generation – Sub PageContents Generation - Section CORPORATE GOVERNANCE REPORT
Leadership and approach
The Board is committed to the highest
standards of corporate governance. The Board
understands the importance of its leadership
on governance in setting the culture and
values and in the achievement of long-term
sustainable success, while successfully
managing risks for our stakeholders.
We believe that good governance is
demonstrated by applying corporate
governance principles and following the more
detailed provisions and guidance in a way
that enhances or protects the long-term value
of the business. This ensures a pragmatic
governance culture sits alongside the
entrepreneurial and community-minded spirit
which has enabled cardfactory to develop
into the business it is today.
Key governance activities
Key activities during the year included:
• Revalidation of the refreshed five-year
strategy and the budget and annual
operating plan and investment priorities
for the current financial year.
• Management and improvement of the
liquidity position of the Group, including
completion of a refinancing in April 2022,
which included removal of the best efforts
to effect an equity raise.
• Consideration of the refreshed Values
following an extensive consultation with
colleagues.
• Assessment of acquisition opportunities
and alignment with strategic priorities.
• Material progress in further development
of our ESG strategy, including assessment
of our Scope 3 greenhouse gas emissions
to support target setting to reduce our
impact on the environment.
• Refinement of our colleague engagement
forum to improve colleague representation
to ensure the Board hear the collective
colleague voice as part of its stakeholder
engagement.
• Reassessment of updated succession
planning for the senior management team
and their direct reports and identification
of input to be provided by the Board
members to support further development.
• The appointment of Indira Thambiah as
a Non-Executive Director and selection of
Matthias Seeger as Chief Financial Officer.
• The improvement of our colleague
engagement, support and development,
including action to support colleagues
in dealing with the increasing costs of
living and progressive updates to reward
and benefits to support recruitment and
retention despite the challenging
job market.
Code compliance
By the end of the financial year, the Company
is in full compliance with the UK Corporate
Governance Code (2018) published by the
Financial Reporting Council (Code). The
Company intends to continue to comply with
the Code, a copy of which can be obtained
from frc.org.uk.
The Board has focused on ensuring it
provides strategic challenge and direction
to the management team and supports
the management team in the framing
of the strategic priorities, which include
reassessment of values, cultural development
and addressing stakeholder feedback.
Specific examples include undertaking an
annual review of the strategic plan and
reviewing the specific priorities to support
delivery of the strategic plan, with a detailed
operating plan to support achievement of an
ambitious change agenda to the business
to realise long term growth. The Board and
its committees have also adopted detailed
activity schedules to ensure that over the
course of a year, it undertakes the reviews and
assessments required by the Code.
The Code and Listing Rules require the
Company to provide explanation of any
provisions of the Code that are not complied
with during the year. The only exception was
as follows:
• The employer pension contribution paid
to Kris Lee, the former CFO prior to 31
December 2022 (for 11 months of the
year) marginally exceeded the rates
applicable to the workforce, contrary to
Provision 38 of the Code. As described
in the Remuneration Report (page
79), full alignment was effective from 1
January 2023, consistent with Investment
Association guidance. This provision of the
Code has not been complied with due to
historical enhanced pension contribution
terms which had been awarded to the
former CFO, where the Board had resolved
to address this imbalance from the end
of 2022.
TCFD reporting
For the purposes of LR 9.8.6(8) R, please
see pages 44 to 50, which assesses
the consistency of our climate-related
financial disclosures against the TCFD
Recommendations and Recommended
Disclosures and identifies the amber items
where reporting is not yet in full compliance
with TCFD Recommendations.
Board composition, balance and
independence
The Board currently comprises six members
and will increase to seven on 22 May 2023
when Matthias Seeger joins cardfactory as
CFO. During the FY23 financial year, eight
Directors served on the Board: Paul Moody,
Octavia Morley (until 31 January 2023), Roger
Whiteside, Tripp Lane, Rob McWilliam, Indira
Thambiah (from 1 September 2022), Darcy
Willson-Rymer and Kris Lee (until 31 January
2023).
The Code recommends that at least half the
board of directors of a UK-listed company,
excluding the chair, should comprise non-
executive directors, determined by the
board to be independent in character and
judgement and free from relationships or
circumstances which may affect, or could
appear to affect, the director’s judgement.
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CORPORATE GOVERNANCE REPORT CONTINUED
Board attendance
During the year, the Board held 11 scheduled meetings and 12 other ad hoc Board or sub-
committee meetings. The Committees of the Board also convened meetings during the year,
with attendance as follows:
Scheduled
Board
meetings
(11 meetings)
Other Board
or Committee
meetings
Remuneration
Committee
(9 meetings)
Audit & Risk
Committee
(7 meetings)
Nomination
Committee
(7 meetings)
11 of 11
7 of 9
7 of 9
–
6 of 7
11 of 11
6 of 8
8 of 9
7 of 7
6 of 7
11 of 11
7 of 8
8 of 9
6 of 7
7 of 7
11 of 11
6 of 8
–
–
–
11 of 11
8 of 8
9 of 9
7 of 7
7 of 7
5 of 5
2 of 3
4 of 4
4 of 4
2 of 2
Director
Role
Paul Moody Non-Executive
Octavia
Morley
Chair and Chair
of Nomination
Committee
Senior Independent
Director and Chair
of Remuneration
Committee
Roger
Whiteside
Independent
Non-Executive
Director
Nathan
(Tripp) Lane
Non-Independent
Non-Executive
Director
Rob
McWilliam
Indira
Thambiah¹
Darcy
Willson-
Rymer
Independent
Non-Executive
Director
Independent
Non-Executive
Director
Chief Executive
Officer
Kristian Lee Chief Financial
Officer
11 of 11
9 of 11
1
Indira Thambiah was appointed 1 September 2022.
11 of 11
12 of 12
–
–
–
–
–
–
The Board considers all of the current Non-
Executive Directors, with the exception of
Nathan (Tripp) Lane, as independent Non-
Executive Directors (within the meaning of
the Code).
Tripp Lane was appointed to the Board
on 9 April 2020 following constructive
discussions between the Company, Teleios
Capital Partners LLC (‘Teleios’), a long-term
shareholder which held a c.13% interest
in the Company at the time (now 19.96%)
and another major shareholder. Given the
circumstances surrounding his appointment,
including the Board’s understanding that
Teleios agreed to supplement Tripp’s
remuneration with a one-off payment to
secure his candidacy, and following an
agreement for a future payment to Tripp by
Teleios Capital Partners LLC, to be based
on the Card Factory plc share price and
dividends (announced in June 2022) the
Board continues to consider that it is not
appropriate to view Tripp as an independent
Non-Executive Director for the purposes of
the Code, notwithstanding that Tripp is not
a nominated Director of Teleios or acting on
their behalf.
The constitution of the Company’s Board
complies with the Code’s recommendation,
with three members of the Board being
judged to be independent and (excluding
the Chair) two (which will increase to three in
May 2022) being non-independent (i.e. two
Executive Directors and Tripp Lane).
The Board considers the balance of skills and
experience of the Board to be appropriate for
its current requirements and is confident that
it continues to be an effective and efficient
decision-making body that supports the
Group’s strategy and growth.
This is kept under constant review, together
with succession planning for the Board as
a whole.
During the year the Board considered and
approved external appointments with private
companies, including the appointment of
Rob McWilliam as part time, interim CFO
of Rohlik.cz and appointment of Rob as
a Non-Executive Director of the Solicitors
Regulation Authority; and Tripp Lane’s
appointments to the boards of Slater &
Gordon UK Holdings Limited, CellC and
RetailNext. The Board considered that these
appointments gave rise to no conflict of
interest and did not interfere with the time
commitments to the Company.
Board responsibility
The Company has a clear division of
responsibilities between the Non-Executive
Chair and the Chief Executive Officer. In
general terms, the Non-Executive Chair is
responsible for running the Board and the
Chief Executive is responsible for running the
Group’s business on a day-to-day basis.
This clear division of responsibilities, when
taken together with the schedule of matters
that the Board has reserved for its own
consideration, ensures that no one person
has unlimited and unchecked power to
make decisions that may have a material
impact on the Group as a whole. A copy
of the matters reserved for the Board is
available on cardfactory’s investor website
(cardfactoryinvestors.com).
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Contents Generation – PageContents Generation – Sub PageContents Generation - Section Board activities and effectiveness
Board meetings are structured to ensure they focus on key strategic matters that affect the
business and examples of topics reviewed during the year are set out below. Additionally, the
Board considers any decisions that are within the matters reserved for the Board.
All Directors receive papers in advance of
Board meetings including regular reports from
the senior management team covering the
parts of the business they are responsible for.
The Board had in place a schedule of matters that were discussed during the year and a similar
schedule is in place for the current financial year. As part of normal planning, the Board puts
these schedules in place in advance of each financial year.
The Board meetings include a rolling agenda of key strategic, operational, governance and risk
topics, as well as updates on financial and non-financial KPIs, key strategic programmes and
operational and financial performance, which includes periodic presentations from the senior
management team. These ensure that the Non-Executive Directors remain informed of key
developments within the Group and the progress in achieving the strategic objectives.
The key topics discussed by the Board during the year were:
Strategy
• Group strategy
• Group budget
Performance
• Annual results
• Interim results
Governance
• Internally conducted Board
evaluation
• Debt funding and
• Seasonal trading updates
refinancing
• Commercial strategy
and delivery of strategic
projects
• Review of competition;
customer; marketing and
pricing strategies
• Key project updates
• KPIs and Balanced
Scorecard performance
• Capital investment review
• Operational reviews
• Trading reviews
• Retail partner development
• Market performance
including customer data
and insights
strategy
• People strategy, colleague
engagement, recruitment
and retention policy
• Omnichannel strategy
• IT strategy, cyber security
and ERP investment review
• Regular reviews of
performance against
Board objectives
• Director and senior
management
appointments
• Colleague engagement,
culture and values
• Shareholder engagement
• DE&I
• Succession planning
• Sustainability and ESG
policy
• Health and safety
• Governance and legal
updates
• Principal risks reviews
• Investor relations updates
• Audit reviews
• Committee reviews as
required by applicable
terms of reference
Minutes of all Board and Committee meetings
are taken by the Company Secretary.
The minutes record actions, decisions
and resolutions arising out of the topics
discussed and summary resolutions of actions
accompany the minutes which enables the
Board to regularly monitor progress.
Board strategy day
The Board held its annual strategy day,
jointly with the senior management team
in July 2022. This focused primarily on
further developing the opportunities for the
Omnichannel strategy.
Non-Executive Director meetings
The Chair and the other Non-Executive
Directors met on three separate occasions
in the year without Executive Directors being
present. They intend to continue to meet
regularly to ensure that any concerns can be
raised and discussed outside formal Board
meetings. On a separate occasion, as part
of the annual Board effectiveness review, the
Senior Independent Director and the other
Non-Executive Directors met without the
Chair to discuss his performance.
The Chair and the other Non-Executive
Directors regularly have informal meetings
with the Executive Directors and other
members of the senior management team
in the business, at a store location or at the
Group’s support centre.
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cardfactory culture
The Board rely on various indicators to
assess the culture of cardfactory, including
regular presentations from the management
team, the results of colleague engagement
surveys, feedback from the Combined
Colleague Advisory Group (CCAG), which
the Chair attends as Designated Director,
and also ad-hoc discussions with colleagues
as part of store visits and meetings with
the senior management team. The Board
recognises the collegiate culture in the
business, with colleagues commonly referring
to the ‘cardfactory family’. Improvements
have been realised over the last few years
(reflected in the improving colleague
engagement scores from Best Companies
surveys), which evidences progress from
a focus on fair deal for colleagues and
improving benefits and reward in a balanced
way, improving colleague communications
and open engagement and action from
that engagement, including regular
business briefings with open Q&As with the
management team, CCAG consultations and
specific consultations on DE&I and the
Values review.
Board committees
The Board has three Committees:
• an Audit & Risk Committee;
• a Nomination Committee; and
• a Remuneration Committee.
If the need should arise, the Board may
set up additional Committees. Terms of
reference (each of which comply with the
Code) for each of these Committees is
published on cardfactory’s investor website
(cardfactoryinvestors.com).
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CORPORATE GOVERNANCE REPORT CONTINUED
Audit & Risk Committee
The Audit & Risk Committee assists the Board
in discharging its responsibilities required by
DTR 7.1.3 R including responsibility for:
•
• external and internal audits, including
financial reporting;
reviewing and monitoring the integrity of
the Group’s annual and interim financial
statements;
reviewing and monitoring the extent of the
non-audit work undertaken by external
auditors;
•
• advising on the appointment of external
auditors;
• overseeing the Group’s relationship with its
•
external auditors;
reviewing the effectiveness of the external
audit process;
reviewing the effectiveness of the Group’s
internal controls and systems; and
• whistleblowing and loss prevention.
•
The ultimate responsibility for reviewing and
approving the Annual Report and Accounts
and the half-year results remains with the
Board. The Audit & Risk Committee will give
due consideration to laws and regulations, the
provisions of the Code and the requirements
of the Listing Rules. The Code recommends
that an audit committee should comprise at
least three members who are independent
non-executive directors and that at least one
member should have recent and relevant
financial experience. The Audit & Risk
Committee was chaired by Rob McWilliam,
who the Directors consider has recent and
relevant financial experience. The Audit & Risk
Committee’s other members during the period
were Octavia Morley (until 31 January 2023),
Roger Whiteside and Indira Thambiah (since 1
September 2022).
The Audit & Risk Committee met seven times
during the year and, in future, will meet no
fewer than three times per year.
The Audit & Risk Committee has access to
sufficient resources to carry out its duties,
including the services of the Group General
Counsel and Company Secretary and
the Group’s Head of Internal Audit & Loss
Prevention. Independent external legal and
professional advice can also be taken by
the Audit & Risk Committee if it believes it is
necessary to do so.
The Audit & Risk Committee Chair usually
attends the Annual General Meetings of the
Company and is available to respond to
questions from shareholders on the activities
of the Audit & Risk Committee during the
year, a report on which is set out on pages 75
to 79 of the Governance section of this Annual
Report.
Remuneration Committee
The Remuneration Committee assists the
Board in determining its responsibilities in
relation to remuneration, including:
• making recommendations to the Board
on the Company’s policy on executive
remuneration;
• setting the over-arching principles,
parameters and governance framework
of the Group’s remuneration policy and
ensuring incentives and rewards are
aligned with the Group’s culture;
• determining the individual remuneration
and benefits package of each of the
Company’s Executive Directors, its
Company Secretary and other members of
the Group’s senior management team; and
• ensuring appropriate engagement with
shareholders and the workforce takes
place on executive remuneration policy
and its alignment with wider Company
pay policy.
The Remuneration Committee also ensures
compliance with the Code in relation
to remuneration and is responsible for
preparing an annual Remuneration Report
for approval by the Company’s members
at its AGM. The Remuneration Committee
undertook a triennial review of the Company’s
Remuneration Policy which was approved
by shareholders at the 2021 AGM. The
Remuneration Committee considers this
Policy (on pages 80 to 85) is appropriate and
does not propose any changes.
The Code provides that a remuneration
committee should comprise at least three
members who are independent non-executive
directors, free from any relationship or
circumstance which may or would be likely
to, or appear to, affect their judgement
and that the chair of the board of directors
may also be a member provided he is
considered independent on appointment.
The Remuneration Committee during the
period was chaired by Octavia Morley, who
stepped down from the Board at the end of
the financial year. The Committee’s other
members during the period were Paul Moody,
Roger Whiteside, Rob McWilliam and Indira
Thambiah (from 1 September 2022). Indira
assumed the Chair of the Remuneration
Committee from 1 February 2023.
The Remuneration Committee met nine times
during the year. In future, it will meet not less
than twice a year.
The Board and the Remuneration Committee
have employed Korn Ferry (UK) Limited
(Korn Ferry), a professional services business
which specialises in executive remuneration,
to advise and assist in connection with the
Group’s executive remuneration arrangements
and its reporting obligations. Korn Ferry does
not provide any other services to the Group.
A report on the Remuneration Committee’s
activities during the year, together with the
Directors’ Remuneration Report is set out on
pages 78 to 79 and pages 86 to 95 of the
Governance section of this Annual Report.
Nomination Committee
The Nomination Committee assists the Board
in discharging its responsibilities relating to
the composition and make-up of the Board
and any Committees of the Board. It is also
responsible for periodically reviewing the
Board’s structure and identifying potential
candidates to be appointed as Directors or
Committee members as the need may arise.
The Nomination Committee is responsible for
evaluating the balance of skills, knowledge
and experience and the size, structure and
composition of the Board and Committees
of the Board, retirements and appointments
of additional and replacement Directors
and Committee members and will make
appropriate recommendations to the Board
on such matters.
The Code recommends that a majority of the
members of a nomination committee should
be independent non-executive directors. The
Nomination Committee is chaired by Paul
Moody and its other members during the
year were Octavia Morley (until 31 January
2023), Roger Whiteside, Rob McWilliam and
Indira Thambiah (from 1 September 2022).
The Directors therefore consider that the
Company is in compliance with the Code.
The Nomination Committee met seven times
during the year. In future, the Committee will
meet not less than once a year. A report on
the activities of the Nomination Committee
during the year is set out on pages 97 and 98
of the Governance section of this
Annual Report.
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The Chair and Company Secretary undertook
an internal Board evaluation during 2022.
Additional Committee effectiveness reviews
of each of the Audit & Risk Committee and
the Remuneration Committee were also
undertaken. The reviews included surveys of
the Directors, who scored various statements
applicable to the Board and each Committee.
Data and supporting comments were
collated, anonymised and shared with the
Directors, with comparisons to prior year
scores (where available). The conclusions
and recommendations were presented to the
Board for discussion, which were then used to
set new Board objectives.
In addition to reviews of the collective
effectiveness of the Board, the Senior
Independent Director collated views from the
other Directors, to provide similar feedback to
the Chair.
The Board effectiveness review identified the
following strengths:
• The Board has continued to make progress
to improve effectiveness, increasing its
strategic focus, although, on occasion,
being drawn into operational detail.
• Members of the Board share a range of
•
views to provide constructive debate and
challenge.
Improved customer data and insight
is supporting improved understanding
and decision making, with further
improvements to be made in ensure other
stakeholder groups are fully represented in
Board discussions and decision making.
• The Board and its Committees are well
chaired, constituted, with appropriate and
timely information.
• The content, frequency and strategic
vs operational focus for the matters
considered by the Board have been
reviewed to improve effectiveness.
The Board set the following collective
objectives in November 2022, which are
subject to regular reviews:
• Strategic Plans:
– Ensuring longer-term objectives are
incorporated in Annual Bonus targets
for Executive Directors (beyond in-year
outcomes).
– Identify key strategic milestones
for each of the following significant
strategic priorities (Omnichannel, Retail
Partnerships and IT enablement):
– ensuring there is clarity of the
business case for each and
assessment of outcomes against
that business case;
– ensuring the Board consultation for
input happens at appropriate stage
on key decision points for these
strategic projects; and
– ensuring priority projects continue
to align to delivery of five-year
strategic plan.
• CFO: successful induction of new CFO.
• Succession Planning: development of
organisational talent to improve pipeline
for senior management team roles.
In addition to the Board effectiveness review,
the Board reflected on the achievement of
the objectives adopted in January 2022. It
was agreed that the objectives had been
substantially achieved, which included
implementation of a Transformation Office
function to manage business change and
manage strategic projects, substantial range
developments in Gifts and Celebration
Essentials pricing architecture improvements
and recovery of price inflation through
targeted price increases, with ongoing
foundational development to facilitate further
development of the Omnichannel offer.
Progress has been made on increasing the
strategic focus of the Board and on evolving
cardfactory into a customer centric business.
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Improvements in our investor communications
are considered to have made, with further
ongoing progression expected. Finally, the
Board recruited Indira Thambiah during the
year and is satisfied with the appropriate
balance of skills and experience of the Board.
Board evaluation will continue to be
conducted on an annual basis. The Company
will conduct an internally facilitated
evaluation in the financial year ending
31 January 2024, with the next externally
conducted review scheduled to be held during
the year ending 31 January 2025.
Conflicts of interest
The Companies Act 2006 allows the board of
a public company to authorise conflicts and
potential conflicts of interest of individual
directors where the articles of association of
the company contain an enabling provision.
The Company’s Articles of Association
give the Board this authority subject to the
following safeguards:
• Directors who have an interest in matters
under discussion at a Board meeting must
declare that interest and abstain from
voting.
• Only Directors who have no interest in
the matter being considered are able
to authorise a conflict of interest and, in
taking that decision, the Directors must act
in a way they consider, in good faith, would
be most likely to promote the success of
the Company.
The Directors are able to impose limits or
conditions when giving authorisation if they
feel this is appropriate. All Directors are
required to disclose any actual or potential
conflicts to the Board and there are no current
matters disclosed that are considered by the
Board to give rise to a conflict of interest. All
conflicts are considered by the Board and
any authorisations given are recorded in the
Board’s minutes and reviewed annually by
the Board.
The Board considers that its procedures to
authorise conflicts of interest and potential
conflicts of interest are operating effectively.
Appointment and removal of Directors
All Directors have service agreements or
letters of appointment in place and the
details of their terms are set out in the
Directors’ Remuneration Report on pages 84
and 85.
The Articles of Association of the Company
provide that a Director may be appointed
by ordinary resolution of the Company’s
shareholders in general meeting or by the
Board so long as the Director stands down
and offers him or herself for election at the
next AGM of the Company. Consistent with
the Code, the Articles also provide that each
Director must stand down and offer him or
herself for re-election by shareholders at the
AGM every year.
Directors may be removed by a special
resolution of shareholders or by an ordinary
resolution of which special notice has been
given in accordance with the Companies
Act 2006. The Articles of Association of the
Company also provide that the office of
a Director shall be vacated if he or she is
prohibited by law from being a Director or
is bankrupt; and that the Board may resolve
that his or her office be vacated if he or she
is of unsound mind or is absent from Board
meetings without consent for six months or
more. A Director may also resign from the
Board. The Nomination Committee makes
recommendations to the Board on the
appointment and removal of Directors.
Powers of Directors
The business of the Company is managed
by the Board, which may exercise all of
the powers of the Company, subject to the
requirements of the Companies Act 2006, the
Articles of Association of the Company and
any special resolution of the Company.
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CORPORATE GOVERNANCE REPORT CONTINUED
The Board has adopted internal delegations
of authority in accordance with the Code
which incorporate matters which are reserved
to the Board or Committees and the powers
and duties of the Chair and the Chief
Executive Officer, respectively.
At the AGM of the Company, the Board will
seek authority to issue shares and to buy back
and reissue shares. Any shares bought back
would either be held in treasury, cancelled or
sold in accordance with the provisions of the
Companies Act 2006. For further details see
the Notice of Annual General Meeting which
accompanies this Annual Report.
Advice, indemnities and insurance
All Directors have access to the advice
and services of the Company Secretary. In
addition, Directors may seek legal advice at
the Group’s cost if they consider it necessary
in connection with their duties.
Each Director of the Company (and of each
other Group company) has the benefit of a
third-party indemnity provision, as defined by
section 236 of the Companies Act 2006, in the
Company’s Articles of Association. In addition,
Directors and officers of the Company and
its subsidiaries are covered by Directors’
and Officers’ liability insurance. No amount
was paid under any of these indemnities or
insurances during the year other than the
applicable insurance premiums.
Articles of Association
The Company’s Articles of Association can
only be amended by a special resolution
of its shareholders in a general meeting, in
accordance with the Companies Act 2006.
Governance and risk
The Board has adopted the risk management
framework described on pages 58 and 59 of
this Annual Report.
The Board and the Audit & Risk Committee
have reviewed the effectiveness of the Group’s
risk management framework, the Group’s risk
register and their alignment with the Group’s
strategic objectives in accordance with the
Code for the period ended 31 January 2023
and up to the date of approving the Annual
Report and Accounts.
The Board as a whole considered the
principal risks and relevant mitigating actions
and determined that they were acceptable for
a retail business of the size and complexity as
that operated by the Group.
Internal control and audit
Overall responsibility for the system of internal control and reviewing its effectiveness lies with
the Board. In its day-to-day operations, the Group continuously assesses the performance of
its internal controls and, where necessary, looks to enhance its control environments. A Head
of Internal Audit & Loss Prevention has been appointed to coordinate the Group’s programme
of internal audit, supported by an independent accounting firm and/or other advisors where
appropriate. Details of the internal audit reviews carried out during the last year are set out in
the report of the Audit & Risk Committee on page 76.
The Group’s system of internal control can be summarised as follows:
Board
Audit & Risk Committee
Senior Management Team
• Takes collective
• Oversees effectiveness of
• Responsible for operating
responsibility for internal
control.
internal control framework.
• Receives reports from
within the control
framework.
• Reserves certain matters
external auditor.
for the Board.
• Approves internal audit
• Oversees the control
programme.
• Receives internal audit
reports.
framework and
responsibility for it.
• Approves key policies and
procedures.
• Monitors development
of performance.
• Monitors compliance with
policies and procedures.
• Recommends changes to
controls where needed.
• Monitors performance.
Internal Audit
Compliance and safety risk assessors
Loss Prevention Team
• The internal audit function
during the period was
overseen by the Head
of Internal Audit &
Loss Prevention.
• Reviews compliance with
internal procedures to
ensure that good health
and safety standards
are observed.
• Focuses on cash losses,
theft and fraud in stores.
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We recognise that a culture of openness
and accountability is essential in order
to prevent such situations occurring or
to address them when they do occur. We
provide a whistleblowing line and maintain
a whistleblowing policy that is designed
to encourage colleagues to report such
situations without fear of repercussions or
recriminations provided that they are acting
in good faith. By having early knowledge
of any wrongdoing or illegal or unethical
behaviour, we improve our ability to intervene
and stop it. The policy sets out how any
concerns can be raised and the response
that can be expected from the Company
and provides colleagues with the assurance
that they can do this in complete confidence.
Our loss prevention team, in its day-to-day
activities, seeks to reinforce this message
and, in addition, the Group periodically uses
communication campaigns to supplement
this. The Audit & Risk Committee is notified of
any whistleblowing reports.
This report was reviewed and approved by the
Board on 2 May 2023.
Paul Moody
Chair
3 May 2023
Specific elements of the current internal
control framework include:
• a list of matters specifically reserved for
Board approval;
• a clear framework for delegated
responsibilities, mandating escalation of
decisions to more senior colleagues within
the business, or ultimately the Board,
where appropriate;
• clear structures and accountabilities for
colleagues, well understood policies and
procedures, all of which the Executive
Directors are closely involved with;
• every member of the senior management
team having clear responsibilities and
operating within defined policies and
procedures covering such areas as capital
expenditure, treasury operations, financial
targets, human resources management,
customer service and health and safety;
the Executive Directors and the senior
management team monitoring compliance
with these policies and procedures and, in
addition, regularly reviewing performance
against budget, analysis of variances,
major business issues, key performance
indicators and the accuracy of business
forecasting; and
•
• a continuous review programme of store
compliance by the loss prevention team in
relation to financial procedures in stores,
and by risk assessors working in the health
and safety team and by other teams within
the Group.
The Audit & Risk Committee has responsibility
for overseeing the Group’s system of internal
controls and the programme of activities
performed by internal audit and receives
the report of the external auditor as part
of the annual statutory audit. Additional
information on the activities of the Audit &
Risk Committee can be seen in the report of
the Audit & Risk Committee seen on pages
74 to 77.
The Board and the Audit & Risk Committee
have monitored and reviewed the
effectiveness of the Group’s internal control
systems in accordance with the Code for
the period ended 31 January 2023 and up
to the date of approving the Annual Report
and Accounts and confirmed that they are
satisfactory. Internal control systems such
as this are designed to manage rather than
eliminate the risk of failure to achieve business
objectives and can provide only reasonable
and not absolute assurance against material
accounting misstatement or loss. Where
any significant failures or weaknesses are
identified from the systems of internal control,
action is taken to remedy these.
Disclosures under DTR 7.2.6 R
The disclosures the Company is required to
make pursuant to DTR 7.2.6 R are contained in
the Directors’ Report on pages 98 to 102.
Anti-bribery
The Group has implemented internal
procedures, colleague training and measures
(including the provision of an Anti-Corruption
and Bribery Policy) with the aim of ensuring
compliance with UK Bribery Act 2010 (as
amended) by the Company and other
members of the Group.
Whistleblowing
The Group is committed to conducting its
business with honesty and integrity, with high
standards of corporate governance and in
compliance with legislation and appropriate
codes of practice. We expect all colleagues to
maintain such high standards but recognise
that all organisations face the risk of
things going wrong from time to time or of
unknowingly harbouring illegal or unethical
conduct.
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AUDIT & RISK COMMITTEE
Chair’s letter
The report that follows provides further detail
on the Committee’s activities during the year.
I look forward to addressing any questions
in respect of the work of the Audit & Risk
Committee in advance of the AGM in
June 2023.
Yours sincerely
Rob McWilliam
Chair of the Audit & Risk Committee
3 May 2023
Dear Shareholder
I am pleased to present this year’s Audit
& Risk Committee (Committee) Report.
The Report outlines how the Committee
discharged its responsibilities over the past
year and the key areas it considered in
doing so.
The Committee fulfils a vital role in the
Company’s governance framework, providing
valuable independent challenge and oversight
across all financial reporting and internal
control procedures. Ultimately, it ensures
our shareholders’ interests are protected.
The Committee has continued to assess
and review existing and emerging issues to
ensure cardfactory has appropriate controls
in place to underpin its resilience, recognising
the challenging global macro-economic
environment and its potential impact on our
supply chains, customers and colleagues.
The Committee approved a retender of the
audit this year. An extensive and detailed
tender exercise has been performed, resulting
in the appointment of Mazars LLP who will
be proposed for appointment at the AGM
to be held on 22 June 2023 in advance of
the interim results review for the first half of
FY24 and the audit for the financial year to 31
January 2024 (see page 77).
The Committee has allocated a significant
proportion of its time during the year to
the management of our principal risks,
including business continuity, IT and cyber
risk and inventory management, as well as
the enhancement of the risk management
framework including risk appetite. It has
confidence in the Group’s overall control
environment and in management’s
commitment to identifying and improving
areas where the Group’s systems and
processes need modernisation.
The Committee understands the proposals
for the reform of UK corporate reporting
and audit regime and the potential impact
this may have on the future work of the
Committee. It supports management’s
current review of the internal controls over the
financial reporting environment to assess its
readiness in advance of future requirements.
The Committee will ensure compliance with
any new requirements.
Over the course of the next 12 months, the
Committee will continue to develop its work
on the effectiveness of the risk management
process. It will also continue to ensure that its
activities are focused on business issues that
add to or preserve value and that it remains
aligned with the strategic goals of the Group.
Rob McWilliam
Chair of the Audit & Risk Committee
Committee members:
Rob McWilliam (Chair)
Roger Whiteside
Indira Thambiah
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This report provides details of the role of the
Audit & Risk Committee and the work it has
undertaken during the year.
Role of the Audit & Risk Committee
The principal responsibilities of the
Committee, which has received delegated
authority from the Board, are to:
• oversee the integrity of the Group’s
financial statements and public
announcements relating to financial
performance;
• oversee the Group’s external audit process
including its scope, the extent of the non-
audit services provided by our auditor
and our auditor’s independence and
effectiveness;
• monitor the effectiveness of financial
controls;
• evaluate the process for identifying and
managing risk throughout the Group;
• ensure the effectiveness and independence
of the Group’s internal audit function; and
• ensure that the Annual Report and
Accounts are fair, balanced and
understandable.
A more detailed explanation of the Audit &
Risk Committee’s role, its meeting frequency,
attendance and membership (both during the
period and as at the date of this report) are
set out in the Corporate Governance Report
on pages 68 and 70.
The Chief Executive Officer, the Chief
Financial Officer, the Chair of the Board,
the Head of Internal Audit & Loss Prevention
and the Financial Controller usually attend
meetings of the Committee by invitation,
along with representatives from our auditor,
KPMG LLP. In addition, subject matter experts
and external accounting firms engaged to
support internal audit reviews are also invited
to attend meetings of the Committee where
required. The General Counsel & Company
Secretary acts as secretary to the Committee.
Activities during the year
During the year, the work of the Committee
has principally fallen under the following areas:
• Reviewing the integrity of the draft
financial statements for the year ending
January 2022, the appropriateness of
accounting policies with a particular
focus on stock provisions, going concern
and viability statements and the auditor’s
report regarding its findings on the annual
results.
• Assessing whether the Annual Report and
Accounts for the year ending January
2022, taken as a whole, were fair, balanced
and understandable and provided the
information necessary for shareholders to
assess the Company’s strategy, business
model and performance.
• Reviewing the systems and controls that
the Group has in place to enable the
Board to make proper judgements on a
continuing basis as to the financial position
and prospects of the Group.
• Verifying the independence of the Group’s
auditor, approving their audit plan
and audit fee and setting performance
expectations.
• Approval of the Group’s half-year results
statements published in September 2022.
• Overseeing the Group’s approach to risk
management including setting of risk
appetite and target risk as well as ensuring
that the principal risks are regularly
reviewed by the senior management team.
• Reviewing the Group’s risk register in
March, September, November and January.
• Monitoring developments in legislation,
reporting and practice which affect
matters for which the Committee is
responsible.
• Approval of the FY23 internal audit
plan, reviewing the findings of, and the
implementation of, actions arising from
internal audit reviews undertaken.
• Reviewing the Company’s procedures for
detecting fraud and systems and controls
for the prevention of bribery.
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• Reviewing the outcome and actions taken
• The performance, effectiveness,
relating to whistleblowing cases.
• Reviewing the activity of the Group’s loss
independence and qualifications of the
external auditor.
prevention team.
• Reviewing the Group’s tax strategy.
• Undertaking a formal audit tender,
culminating in the selection of Mazars LLP
as the auditor to undertake the audit of
the Card Factory plc Group accounts for
the financial year ended 31 January 2024
(see page 77 for further information).
• Assessing its own performance against its
terms of reference.
Activities after the year-end
In the period following the year-end, the
Committee met in March, April and May 2023
and reviewed the following:
• The Group’s risk register including an
assessment of how risks are assessed, how
risk appetite and target risk are assigned,
and a review of the emerging risks
identified by the management team, as
supplemented by the Committee.
• The principal risks facing the Group
including those that would threaten its
business model, future performance,
solvency or liquidity.
• The process undertaken by management
to support the Group’s going concern
statement (which is set out on pages
119 and 120) including the time period
assessed and the principal risks and
combinations of risks modelled.
• The integrity of the draft financial
statements for the year ended January
2023, including the appropriateness of
accounting policies and going concern
assumptions.
• The external auditor’s report.
• Whether this Annual Report and Accounts,
taken as a whole, are fair, balanced
and understandable and provide the
information necessary for shareholders
to assess the Company’s position and
performance, business model and strategy.
Significant areas of judgement
Within its terms of reference, the Committee
monitors the integrity of the Group’s annual
and half-year results, including a review of
the significant financial reporting matters,
judgements and estimates contained in them.
At its meetings in April and May 2023, the
Committee reviewed the FY23 financial
year and considered a paper prepared
by management regarding the significant
accounting policies, disclosures, estimates and
judgements affecting the financial statements
for the year. The Committee also reviewed the
report of the external auditor, which included
comments on the matters prepared and
presented by management, plus other matters
insofar as relevant to the audit opinion.
The significant accounting issues discussed in
respect of FY23 were:
•
•
• Grant income provisions.
Inventory valuation and provisioning.
Impairment reviews (including goodwill).
Inventory
The Group has significant volumes, and a
broad range, of inventory. The Group makes
use of technology, such as hand-held terminal
devices, to support stock control processes
and reduce the risk of manual error in stock
counts, which are a key control in respect of
the inventory balance. A full inventory count is
undertaken at both the half-year and the year
end. The Committee reviewed the process by
which the year-end inventory valuation had
been prepared, and challenged management
to ensure key risk areas had been given due
consideration.
The Group continues to hold material
inventory provisions which, by their nature,
involve a significant degree of estimation.
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AUDIT & RISK COMMITTEE REPORT CONTINUED
The provision is calculated with reference
to the Group’s merchandising plans and
considers the age and turn of inventory
on a line-by-line basis. Lines that are old,
not on plan for future sales, or where the
Group holds large volumes of inventory
compared to recent sales data are provided
against either in part or in full. The partial-
provisioning percentages are set based on
the Group’s expectations of likely sell-through
rates based on historical experience and
are adjusted where necessary to reflect
changes in sell-through levels. The nature
of this estimation is such that the range of
reasonable outcomes is material and, as a
result, inventory provisioning is considered a
source of significant estimation uncertainty
for the financial statements.
As part of its review, the Committee
considered the calculation of the provision
and challenged management’s assumptions.
As part of the review, it was noted that
supply chain challenges in the prior year
had contributed to both an increase in the
provision level at the FY22 year end and,
combined with the strong sales performance
in FY23, a higher level of stock sell-through
than had been expected. As a result, some
of the partial-provisioning percentages
were reduced for FY23. The Committee also
reviewed stock sell-through rates for the
period after the balance sheet date prior to
the accounts being signed.
Having considered these matters, and the
views of the external auditor, the Committee
concluded that the inventory valuation,
provision and associated disclosures
included in the financial statements were
materially appropriate.
Grant income
In the prior year, the Group received
significant values of income from government
schemes intended to support businesses
affected by national and regional Covid-19
lockdown restrictions.
Under IAS 20, the Group is only permitted
to recognise government grant income
when there is reasonable assurance that
any conditions attached to the grant will be
complied with. The grant income received
by the Group is subject to UK subsidy control
conditions, as well as specific conditions
attached to the grants themselves. The
unprecedented nature of Covid-19 support
funding means application of these conditions
is open to a degree of interpretation.
The Group recognised grant income of
£8.0 million in the prior year and recorded a
provision of £7.4 million in respect of amounts
that may need to ultimately be repaid. In
FY23, the Group has sought professional
advice regarding potential repayment, the
value and timing of which remains uncertain.
The Group is not aware of any information or
updates that would change its assessment
of the amount of such income that can be
retained, and accordingly the value of the
provision remains unchanged.
The Committee reviewed management’s
assessment of the provision value and
challenged the assumptions made around
retention of both the amounts recognised
and not recognised. Having considered the
view of the external auditor, and noting the
independent advice received, the Committee
concluded that the position adopted was
based on a conservative interpretation of
available guidance but appropriate in light
of the inherent uncertainty. In reaching its
conclusion, the Committee noted that the
estimation uncertainty had been disclosed in
the notes to the accounts.
Impairment reviews
Impairment reviews are an area of
management and audit focus; however
the Group’s assessment of whether or
not impairment is considered a source of
significant estimation uncertainty depends
upon the results of the reviews and the level
of headroom and associated sensitivity to
changes in key assumptions. Accordingly,
noting the material value of goodwill on the
balance sheet, existence of intangible assets
that are not yet available for use, and the
reduction in sales performance of certain of
the Group’s cash generating units (CGUs).
The Committee considered the impairment
reviews prepared by management.
The reviews concluded that no impairment
charges were required in respect of the
group of CGUs that make up the cardfactory
stores business, to which the Group’s
goodwill balance is allocated, nor for the
cardfactory.co.uk CGU. However, impairment
charges were recorded in respect of individual
stores (£1.3 million net of reversals of
impairments recorded in prior periods) and
the Getting Personal CGU (£1.5 million).
The Committee considered the key
assumptions used in preparing the
impairment reviews and the sensitivity of the
results to changes in those assumptions. The
Committee also considered the recoverability
of the Parent Company investments as
part of their review. Having challenged
management regarding the application of
those assumptions, and considered the views
of the auditor, the Committee concluded
that the reviews had been prepared on a
reasonable and appropriate basis. Having
considered the level of headroom and the
relative sensitivity to key assumptions, the
Committee concurred with management’s
view that reasonably possible changes in
the key assumptions would not result in
an impairment charge where one had not
been recorded, nor materially change the
impairment charges that had been recorded.
Accordingly, the Committee considered that
the disclosure of the estimation uncertainty as
not significant was appropriate and balanced
the inherent complexity and due focus of the
reviews against the lack of sensitivity of the
estimates to changes.
Assessment of Annual Report
and Accounts
The Committee confirmed to the Board
that it considered this Annual Report and
Accounts as a whole to be fair, balanced and
understandable, to the extent possible, while
complying with all applicable legal, regulatory
and reporting requirements.
Internal audit
A Head of Internal Audit & Loss Prevention
was appointed in March 2022 to further
enhance the Group’s approach towards
internal audit. The Head of Internal Audit &
Loss Prevention is responsible for devising
and coordinating the agreed programme of
internal audit reviews and is supported by an
independent accounting firm in the delivery of
the annual plan. The main areas covered by
the internal audit programme during the last
year were:
• a review to assess the design and
operating effectiveness of processes and
controls relating to the quality assurance
of products being sold in-store and online;
• payroll, focusing on the processing and
•
payment of variable pay; and
the closure of internal audit actions from
the previous year.
Internal audit reports are shared with KPMG
LLP, who are also invited to attend the Audit &
Risk Committee’s meetings, ensuring external
auditors have full disclosure to allow them
to account for internal audit findings in their
audit scope.
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supported by the Head of Internal Audit
and Loss Prevention will continue to assess
its approach to internal audit to ensure it
supports a rigorous control framework across
the Group.
Loss prevention
The loss prevention team and its programme
of activities are embedded in the business.
Direct engagement and regular communication
with colleagues across the business remain
critical to the team’s effectiveness and the
team’s core fraud and theft detection
activities are supplemented by a programme
of data reviews, store audits, colleague
education, training and development.
The Committee receives regular reports on
the activities of the loss prevention team
and during the period the Head of Internal
Audit & Loss Prevention attended the
Committee meetings.
External auditor
KPMG LLP have conducted the statutory
audit for the financial year ended 31 January
2023 and have attended six of the seven
Committee meetings held during that
financial year, as well as the Committee
meetings held in March and April 2023
(excluding the meetings (or parts of meetings)
that related to the audit tender, which
KPMG participated in). The Committee had
the opportunity to meet privately with the
auditors during the period.
The Audit Committee discussed and agreed
the scope of the audit with KPMG in January
2023 and have since agreed their audit fees.
The Committee reviewed the audit quality
and the effectiveness of the external audit
in line with the Financial Reporting Council’s
‘Practice aid for audit committees’ (December
2019). It considered the results of external
quality inspections by the Audit Quality
Inspection Team on other KPMG clients. It
also surveyed colleagues who were engaged
in the audit process to receive feedback on
how the audit was conducted, to allow it to
make its own assessment of the effectiveness
of the audit process with particular reference
to audit planning, design and execution of
the audit.
The Committee also considered the
effectiveness of the audit through the
reporting from and communications with the
auditor and an assessment of the auditor’s
approach to key areas of judgement and
any errors identified during the course of the
audit. The Committee concluded that the
audit was effective.
The fee paid to KPMG LLP for the statutory
audit of the Group and Company financial
statements and the audit of Group
subsidiaries pursuant to legislation was
£650,000. A breakdown of fees paid to KPMG
LLP during the financial year is set out in note
3 of the financial statements on page 127.
The Committee considers that KPMG LLP is
sufficiently independent, as it is only engaged
in audit and there are no conflicts of interest
effective in auditing the Group.
The Committee has taken appropriate steps
to ensure that KPMG LLP is independent
of the Company and has obtained written
confirmation that it complies with guidelines
on independence issued by the relevant
accountancy and auditing bodies. The
Committee took account of the auditor
approach to the prior year and current year
audit, the proposed audit strategy and the
fact that the current audit is being led by the
Audit Partner for his fourth year, within the
five years provided for in FRC guidance. The
Committee recognises that audit regulation
has increased in recent years, to improve
audit process and independence, which it
recognises has been adopted by KPMG LLP,
which includes greater independence of audit
practices within accounting practices.
The Group has no contractual arrangements
(for example, within borrowing arrangements)
that restrict its choice of auditor.
Use of auditors for non-audit work
The Committee recognises that the use
of audit firms for non-audit services can
potentially give rise to conflicts of interest.
The Group has a formal policy regarding
its use of audit firms for non-audit services
and the Committee, in addition to being
responsible for the oversight of our auditor on
behalf of the Board, also has responsibility for
monitoring how this policy is implemented.
During FY23, KPMG LLP did not provide any
non-audit services to the Group, other than
its review of the half-year interim report and
financial statements, which is considered
closely related to the audit.
The aggregate fees paid to KPMG LLP for
services closely related to the audit during the
year were £50,000 (equivalent to 7.7% of the
audit fee).
Further details are given in note 3 to the
financial statements on page 127.
The Committee is satisfied that the overall
levels of audit-related and non-audit fees
and the nature of the services provided,
are such that they will not compromise the
objectivity and independence of our auditor.
A copy of our current policy regarding the
use of audit firms for non-audit services is
available on cardfactory’s investor website
(cardfactoryinvestors.com).
External audit tender
As reported in the FY22 Annual Report and
accounts, cardfactory proposed to carry out
the external audit tender one year earlier than
the mandatory requirement.
Following the FRC’s audit tenders notes on
best practice, in May 2023 a shortlist of eight
external audit firms to invite to the tender
process was discussed with the Chair of the
Audit & Risk Committee. This longlist, which
included the Big Four accountancy firms and
four mid-tier firms was agreed and an invite to
tender was issued.
A request for proposal was issued to three
shortlisted firms which covered, but was not
limited to, their ways of working, the firm’s
quality assurance processes, any conflicts or
potential conflicts of interest, the proposal
and presentation scoring criteria and the
selection panel.
On receipt of the three proposals these
were assessed against pre-defined and
communicated scoring criteria with the
results being discussed with the Audit & Risk
Committee. Two firms were invited to a
presentation with a pre-agreed interview
panel and the result was that Mazars LLP
were appointed.
Following the selection of Mazars LLP as
proposed auditor, a resolution to appoint
Mazars LLP as auditor and to authorise the
Directors to agree their remuneration will be
put to shareholders at the 2023 AGM.
This report was reviewed and approved by the
Audit & Risk Committee on 2 May 2023.
Rob McWilliam
Chair of the Audit & Risk Committee
3 May 2023
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77
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REMUNERATION COMMITTEE
Chair’s letter
Indira Thambiah
Chair of the Remuneration Committee
Committee members:
Indira Thambiah (Chair)
Paul Moody
Roger Whiteside
Rob McWilliam
Dear Shareholder
I am pleased to have taken over the Chair of
the Remuneration Committee since 1 February
2023 and am extremely grateful to Octavia
Morley for her support and insight on the
recent activities of the Committee. I welcome
the opportunity to present our Directors’
Remuneration Report for the financial year
ended 31 January 2023 (FY23).
Introduction
This Directors’ Remuneration Report is divided
into three sections: this Letter (pages 78
and 79; the Directors’ Remuneration Policy
(pages 80 to 85); and the Annual Report on
Remuneration for the year to 31 January 2023
(pages 86 to 95).
This Letter and the Annual Report on
Remuneration will be put to shareholders
for approval at the AGM on 22 June 2023,
although the vote is advisory.
The Remuneration Committee is pleased
with the performance of the Executive
Directors and the senior management team
during FY23. The Committee consider that
they have made good progress to grow
sales to pre-pandemic levels in parallel with
implementation of the early phases of the
strategic plan to support the development of
cardfactory into an omnichannel retailer, to
unlock future growth for all stakeholders.
Remuneration Policy
Following adoption of the Remuneration
Policy at the 2021 AGM, with 94.98% of
shareholder votes supporting the revised
Remuneration Policy, the Remuneration
Committee considers that this policy
continues to support the business strategy
and operates as intended, with no changes
required prior to the next triennial vote
scheduled to be proposed at the 2024 AGM.
Within the current policy framework, the
Committee has included ESG criteria within
the performance underpin condition to RSP
awards granted in 2022.
Application of the Remuneration Policy
during FY23
The Committee recognises the progress made
in trading performance during the year, which
resulted in two profit upgrades (November
2022 and January 2023) as cardfactory
recovered to pre-pandemic level of sales, with
positive momentum in foundations needed to
support sales growth for the online business,
and to support retail partnership growth.
The Committee agreed to payment of the
annual bonus for FY23 that was earned,
which amounted to 80% of maximum for the
CEO and the former CFO (who worked for
the entire financial year), as EBITDA stretch
targets were achieved (70% of maximum
bonus), after reduction of the actual EBITDA
by £2.5 million on account of one-off
improvements to EBITDA arising from a partial
release of a provision for CJRS repayments to
HMRC and the stretch strategic objective of
driving sales growth from strategic initiatives
being exceeded (10% of maximum bonus).
The other two strategic objectives of sales
growth for online and retail partnerships (each
10% of maximum bonus) were not achieved.
The Committee considered whether the
outcome was appropriate, taking account
of the colleague, shareholder and other
stakeholder experience and resolved no
exercise of discretion was required: a large
proportion of colleagues will receive bonus
payments for the same period, including
some realising up to 100% of their maximum
bonus potential. The Committee recognise
the improvement in liquidity and material
reduction in net debt places the Company in
a position to continue to repay debt to remove
restrictions on dividends in January 2024.
Restricted Share awards granted in 2020
are scheduled to vest from October 2023,
subject to the performance underpin and any
discretion the Committee may exercise. The
measurement period for the performance
underpin for these awards was February
2020 to January 2023, which includes the
period which was severely impacted by
Covid-19 and mandatory store closures,
followed by a period of recovery in sales to
exceed pre-pandemic levels. The Committee
considered whether it is appropriate to
exercise discretion, including taking account
of the share price prior to the decision being
made to voluntarily close our stores, the
share price at the time awards were made
and the recovery of the share price since and
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Contents Generation – PageContents Generation – Sub PageContents Generation - Section the performance underpin conditions which
include the progress made with the strategic
plan and the platform for sustainable growth.
The Committee recognised that Restricted
Share awards were scaled back at the time of
grant by 40% for Executive Directors. On this
basis the Committee was comfortable that
the award should vest in full and that there
have not been any windfall gains due to the
increase to the share price. The Committee
consider that through management action
over the performance period, cardfactory is
now well positioned with a strong leadership
team, to realise the strategic growth for the
benefit of all stakeholders. Therefore the
Committee resolved to approve vesting of
the 2020 RSP awards and determined that
it was not necessary to exercise any discretion
in respect of the awards. Only Kris Lee
held awards under the 2020 Restricted
Share award.
Board changes
During the period, the Committee agreed
the terms upon which Kris Lee, former CFO
would leave the business and approved the
remuneration package for Matthias Seeger,
who will be appointed as CFO on 22 May
2023. Kris Lee left on terms that are consistent
with the Remuneration Policy, which included
payment of salary, benefits and FY23 bonus
up to 31 January 2023, the date he left the
Company; a one-off payment of £40,000 as
compensation for loss of office; payment in
lieu of unused annual leave; and treatment
as a good leaver for RSP and SAYE awards,
which results in pro-rating the number of
shares that vest to take account of the
proportion of the performance period that
Kris was engaged in the business. It was
agreed that any discretion exercised by
the Committee in respect of Kris Lee’s RSP
awards vesting would be consistent with
any discretion applied to the CEO. Kris Lee’s
pension contributions were also reduced to
align with contributions for the workforce
from 1 January 2023.
The remuneration package approved for
Matthias Seeger includes a basic annual
salary of £345,000, pension scheme
contributions aligned with the workforce,
and participation in the annual bonus
plan and share awards consistent with
the Remuneration Policy. The Committee
approved, in accordance with the
Remuneration Policy, a buy-out of Matthias’
incentive arrangement with his current
employer, which provides for payment of up
to the amount of the annual bonus earned by
Matthias for their financial year to 31 March
2023 which isn’t paid by that employer.
The Company has capped its obligation
under this arrangement to £200,000. This
buy-out award is to be paid by the Company
in June 2023. In addition, all of this buy-out
payment is subject to clawback if Matthias
is not employed or is working his notice on
the second anniversary of the start of his
employment with the Company.
How we intend to apply the Remuneration
Policy in FY24
Executive Directors’ remuneration for FY24 will
be as follows:
• The Committee reviewed the annual salary
for the CEO, with any increase to take
effect on 1 April 2023. In determining the
salary increase for the CEO, the Committee
took into market benchmarking data and
took account the average salary increase
across the workforce of 8.6%, noting the
majority of colleagues had received an
increase of 5%, however some higher
increases had been awarded to taking
account the increases in National Living
Wage and National Minimum Wage
for example. As a result, the Committee
determined the CEO would receive a salary
increase of 5% for FY24.
• The Committee undertook a review of the
Chair’s fees, taking into account market
data for companies in the retail sector, and
companies of a similar size, and resolved
to increase the Chair’s fee from £146,880
to £175,000, which, although greater than
the percentage increase applied to the
workforce, reflects the number of years
during which no increases have been
applied and ensures the Chair receives
median market rate. The increased
fee accounts for the increased time
commitment and valuable contribution of
the Chair, and the increased duties with
this role. The Board also reviewed NED
fees, adopting the same principles, details
of which are set out on page 94.
• Pension entitlements will be maintained
at current levels, which align with the
current 3% of salary rate applicable to the
majority of colleagues.
• The maximum annual bonus entitlement
will be maintained at 125% and 100%
of basic salary for the CEO and CFO
(respectively). The FY24 annual bonus
entitlement will be assessed based on
achievement of threshold, target and
stretch targets for (a) PBT realised over the
financial year (for 70% of the maximum
entitlement) and (b) the remaining 30%
of total bonus will be determined by the
following strategic objectives, aligned to
the strategy:
– cardfactory.co.uk sales growth (12.5%
of maximum bonus entitlement);
– retail partnership sales growth (12.5%
of maximum bonus entitlement); and
– improvement in NPS score over
the year (5% of maximum bonus
entitlement).
• The Committee proposes to proceed to
award Restricted Shares after publication
of the results for FY23. The awards will
be subject to the same performance
underpin adopted in previous years and
will include assessment of improvement to
the business’s impact on society and the
environment. We propose to retain
the additional discretion to scale back
awards on vesting, if necessary, to avoid
excessive returns.
Conclusion
The Committee is comfortable that the
Remuneration Policy continues to provide
a strong link to the business strategy and
provides an appropriate link between reward
and performance. Future objectives and
outcomes will be closely aligned, ensuring
they support the delivery of the Group’s
strategy. The Committee will continue to take
account of investor guidelines and the wider
shareholder and other stakeholder experience
in determining the operation of the Policy and
remuneration outcomes each year.
I look forward to addressing any questions
from shareholders in respect of this Report at
or in advance of the AGM and look forward to
your support on the resolution to approve the
Annual Report on Remuneration.
Yours sincerely
Indira Thambiah
Chair of the Remuneration Committee
3 May 2023
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DIRECTORS’ REMUNERATION REPORT
Introduction
The Directors’ Remuneration Policy section (pages 80 to 85) sets out the Remuneration Policy which was approved by shareholders at the 2021 AGM, which is intended to operate for the full three-
year period as permitted under the regulations. A review is to be conducted during FY24 which will result in proposal of a new Remuneration Policy to shareholders at the 2024 AGM.
Directors’ Remuneration Policy
cardfactory’s policy for Executive Directors’ remuneration aims to provide a competitive package of fixed and performance-linked pay, which supports the long-term strategic objectives of the
business. The policy has been tested against the six factors listed in Provision 40 of the UK Corporate Governance Code:
• Clarity – the policy is as clear as possible and is described in straightforward concise terms to shareholders and the workforce in this report.
• Simplicity – remuneration structures are as simple and Restricted Shares are significantly simpler than long-term incentive plans operated in most other UK-listed companies.
• Risk – the remuneration policy has been shaped to discourage inappropriate risk taking through a weighting of incentive pay towards shares, an appropriate balance between financial and
non-financial measures in the annual bonus, recovery provisions and in-employment and post-employment shareholding requirements.
• Predictability – elements of the policy are subject to caps and the Restricted Shares are significantly more predictable than long-term incentive plans operated in most other UK-listed
companies. The Committee may exercise its discretion to adjust Directors’ remuneration if a formula-driven incentive pay-out is inappropriate in the circumstances.
• Proportionality – there is a sensible balance between fixed pay and variable pay and incentive pay is weighted to shares rather than cash.
• Alignment to culture – there will be a strong emphasis on consistency of approach and fairness of remuneration outcomes across the workforce.
Policy table for Executive Director remuneration
The key components of Executive Directors’ remuneration are as follows:
Purpose and link to strategy
Operation
Maximum opportunity
Performance metrics
FIXED PAY
Base salary
To attract and retain
talent by ensuring base
salaries are competitive
in the relevant talent
market and to reflect
an Executive’s skills and
experience.
Base salaries are reviewed annually, with reference to
scope of role, individual performance, experience, market
competitiveness of total remuneration, inflation and salary
increases across the Group.
While there is no maximum salary, Executive
Directors’ salary increases will normally be in line
with the average percentage increase for the
wider employee population.
Business and individual performance are both
considerations in setting base salary.
Increases were normally effective from 1 May. In 2022,
the Committee agreed to align annual pay reviews of the
Executive Directors with the annual pay reviews for the
majority of colleagues with effect from 1 April 2022.
In certain circumstances (including, but not
limited to, a material increase in job size
or complexity, promotion, recruitment or
development of the individual in the role or a
significant misalignment with the market) the
Committee has discretion to make appropriate
adjustments to salary levels to ensure they
remain fair and competitive.
Pension
To provide post-retirement
benefits.
Executive Directors may receive a Company contribution
into a pension plan or a cash allowance in lieu of pension.
The maximum Company contribution or cash
allowance is the percentage rate available to the
majority of the workforce (currently 3% of salary).
None
This will apply to current and new Executive
Directors.
Kris Lee, former CFO received a pension
contribution of 3.37% of basic salary until 31
December 2022, following which it was reduced
to 3% of salary to align with the percentage
rate available to the majority of the workforce.
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Contents Generation – PageContents Generation – Sub PageContents Generation - Section Purpose and link to strategy
Operation
Maximum opportunity
Benefits
To provide Executive
Directors with a
reasonable level of
benefits.
Benefits include private medical insurance, life
insurance, income protection and the provision of
a car or car allowance.
Where appropriate, other benefits may be offered,
for example including, but not limited to, relocation
allowances.
There is no maximum opportunity for benefits,
as there may be factors outside of the
Company’s control which change the cost to the
Company (e.g. increases in insurance premiums).
The cost of providing benefits for the year
under review are disclosed in the Annual Report
on Remuneration.
Performance metrics
None
VARIABLE PAY
Annual bonus
To focus Executives on
delivery of year-on-year
financial and non-
financial performance.
The part of the bonus
invested in shares helps
towards achieving an
appropriate balance
between year-on-year
financial performance and
longer-term value creation
and contributes to higher
executive shareholdings.
Restricted Shares
To align the interests
of Executives with
shareholders in growing
the value of the business
over the long term.
Bonus payments will be determined based on
performance in a single financial year and payment may
be made in cash or in shares.
125% of salary.
If participants have not met the minimum shareholding
requirement, one third of any bonus (after payment of tax)
must be used to acquire shares in the Company, which
must be held for three years.
Robust clawback and malus provisions apply. The
Committee has discretion to reduce the amount of any
bonus potential and require repayment of any bonus
paid within two years of payment, in the event of material
misstatement, error, misconduct, company failure or
reputational damage.
The Committee may grant annual awards of Restricted
Shares, structured as conditional awards or nil-cost options.
87.5% of salary face value at grant.
50% of an award vests after three years, 25% after four
years and 25% after five years, subject to service.
All shares will be held for at least five years from grant (except
for sales to meet tax on vesting). The holding period and
vesting period will continue post cessation of employment to
the extent that awards do not lapse on cessation.
An additional benefit is provided in cash or shares equal
to dividends that would have been paid over the vesting
period or holding period on awards that vest.
Robust clawback and malus provisions apply. The
Committee has discretion to reduce the amount of any
unvested award and repayment of any vested award within
two years of vesting, in the event of material misstatement,
error, misconduct, company failure or reputational damage.
The Remuneration Committee may exercise its discretion
to override a formula-driven incentive plan outturn if this is
inappropriate in the circumstances.
Performance measures and targets are set by
the Committee and the Committee determines
the extent to which the targets have been
achieved at the year-end.
A majority of bonus will be based on financial
measures.
The Committee may scale back the bonus if it
considers the outcome is not representative of
the underlying performance of the Company or is
otherwise not appropriate in the circumstances.
For achievement of threshold performance for
any financial measure, up to 15% of the maximum
financial target element of the bonus is earned.
In order for Restricted Shares to be capable of
vesting, the Committee must be satisfied that
business performance is robust and sustainable
and that management has strengthened the
business over three financial years commencing
with the year in which the award is made. In
assessing performance, the Committee will
consider financial and non-financial KPIs of the
business as well as delivery against strategic
priorities. To the extent it is not satisfied with
performance or that the award would not
reflect the shareholder and other stakeholder
experience, the Committee may scale back the
level of vested awards including to zero. Full
disclosure of the Committee’s assessment will be
made in the Annual Report on Remuneration for
the year in which the assessment is made.
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DIRECTORS’ REMUNERATION REPORT CONTINUED
Purpose and link to strategy
Operation
Maximum opportunity
SAYE
To encourage share
ownership across
the workforce.
A UK tax-qualified scheme under which eligible
employees (including Executive Directors) may save up
to the maximum monthly savings limit (as determined by
prevailing legislation) over a period of three or five years.
Savings are capped at the prevailing HMRC
limit at the time eligible employees are invited
to participate or such lower limit as determined
by the Remuneration Committee.
Performance metrics
None
Participants are granted an option to acquire shares at up
to a 20% discount to the price on grant. The number of
shares under option is that which can be acquired at that
price using savings made.
Requirement to build up and maintain a beneficial
holding of shares in the Company defined as a
percentage of salary.
Details of the current guidelines and Executive
Director shareholdings are included in the
Annual Report on Remuneration
None
Executive Directors will be required to retain shares that
vest from future Bonus and Restricted Share awards.
Shareholding guidelines
To encourage share
ownership and ensure
alignment of Executive
interests with those
of shareholders, both
while they are in service
and after cessation of
employment (see page 85).
Performance measure selection and approach to target setting
The measures used in the annual bonus are selected to reflect the Company’s main financial KPIs and other strategic objectives for the year. Performance targets are set to be stretching but
achievable, considering the Company’s strategic priorities and the economic environment in which the Company operates. Financial targets are set taking into account a range of both internal
and external reference points including the Group’s strategic and operating plan.
Adjustments and use of Remuneration Committee discretion
The Remuneration Committee will review formulaic annual bonus outcomes and may adjust these to ensure alignment of pay with the underlying performance of the business. The Remuneration
Committee may also adjust the calculation of short- and long-term performance measures for outstanding LTIP (Restricted Share) awards in specific circumstances and within the limits of
applicable plan rules. Such circumstances include changes in accounting standards, major corporate events such as rights issues, share buybacks, special dividends, corporate restructurings,
mergers, acquisitions and disposals.
Differences in remuneration policy operated for other employees
The policy and practice with regard to the remuneration of the senior management team below the Board will be consistent with that of the CEO. The senior management team will participate in
the same annual bonus scheme and will receive Restricted Share awards alongside the Executive Directors.
The Policy for our Executive Directors is considered alongside the remuneration philosophy and principles that underpin remuneration for the wider Group. The remuneration arrangements for other
employees reflect the seniority of each role. As a result, the levels and structure of remuneration for different groups of employees will differ from the policy for Executives as set out above, but with the
common intention that remuneration arrangements for all groups are fair.
Reward scenarios
The graphs opposite provide estimates of the potential future reward opportunities for Executive Directors and the potential split between the different elements of remuneration under three different
performance scenarios: ‘Minimum’, ‘Mid’ and ‘Maximum’. The projected value for Restricted Shares excludes the impact of any dividend accrual. The following reflects annual entitlements (in respect of
the CFO, reflecting the terms of appointment agreed with Matthias Seeger, who is to be appointed on 22 May 2023, without adjustment to reflect he will be appointed for a proportion of the financial
year) and assumes that future Restricted Share awards are not scaled back:
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Contents Generation – PageContents Generation – Sub PageContents Generation - Section Chief Executive Officer
Chief Executive Officer
Chief Financial Officer
29.6%
34.3%
24%
12%
32.6%
31.7%
23.8%
11.9%
Total £1,514k
Total £959k
Maximum
£1,720k
Maximum
£1,088k
41.8%
24.2%
33.9%
45.2%
21.9%
32.9%
Mid
100%
£1,218k
Mid
100%
£786k
Minimum
£509k
Minimum
£355k
0
400
800
1200
1600
2000
0
200
400
600
800
1000
1200
Fixed Pay
Annual Bonus
Restricted Shares
Restricted Shares with 50% share price growth
In illustrating potential reward opportunities, the following assumptions are made:
Fixed pay
Annual bonus
Restricted shares
No annual bonus
payable.
Assumes no restricted shares
vest.
On-target annual
bonus payable.
(50% of maximum).
Maximum annual
bonus payable of
125% and 100% of
base salary for the
Chief Executive and
Chief Financial Officer,
respectively.
The Committee anticipates
granting awards of Restricted
Shares worth 87.5% and 75%
of base salary for the Chief
Executive and Chief Financial
Officer, respectively.
In the maximum scenario the
chart additionally shows the
value of the Restricted Shares
and total remuneration, if the
share price increases by 50%.
Minimum Salary as at 1 April 2023.
The CEO & CFO each receive
a pension contribution of 3%
on income exceeding
£6,240 p.a.
Mid
Maximum Benefits paid for the most
recent financial year and an
estimate of benefits for the
new CFO.
Annualised salary and
benefits (assuming
appointment on 1 February
2023) applied for the new
CFO (actual start date
22 May 2023).
Approach to remuneration for new Director appointments
In determining appropriate remuneration for a new Director, the Committee will take into
consideration all relevant factors to ensure that arrangements are in the best interests of
both cardfactory and its shareholders and will be mindful not to overpay on recruitment. The
Remuneration Committee will seek to ensure that the remuneration arrangements will be in line
with those outlined in the policy table above, other than as follows:
Component
Annual bonus
Maximum opportunity
125% of salary.
Approach
In line with the policy, albeit
with the relevant maximum
normally being prorated
to reflect the proportion of
employment over the year.
The Committee may make an award in respect of a new appointment to ‘buy out’ incentive
arrangements forfeited on leaving a previous employer. In doing so, the Committee will take
account of relevant factors including any performance conditions attached to these awards,
the likelihood of those conditions being met and the proportion of the vesting period remaining.
The total value of any such ‘buy out’ incentive arrangements will not exceed that of awards
forfeited on leaving the previous employer and time to vesting will be matched.
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Contents Generation – PageContents Generation – Sub PageContents Generation – Section
DIRECTORS’ REMUNERATION REPORT CONTINUED
In cases of appointing a new Executive Director by way of internal promotion, the approach
will be consistent with the policy for external appointees detailed above (save for ‘buy outs’).
Where an individual has contractual commitments made prior to their promotion to the Board,
the Company will continue to honour these arrangements. Measures used for below Board
employees may be different from those used for Executive Directors to tailor incentives to a
particular division, role or individual.
Service contracts and exit payment policy
Executive Directors
The Committee sets notice periods for the Executive Directors of no more than 12 months. The
Executive Directors may be put on garden leave during their notice period (for up to six months)
and the Company can elect to terminate their employment by making a payment in lieu of
notice equivalent to basic salary and benefits (including pension contributions). Any payment
in lieu will be made on a monthly basis and subject to mitigation. Executive Directors’ service
contracts are available to view at the Company’s registered office and at the forthcoming AGM.
Executive Director
Darcy Willson-Rymer
Matthias Seeger
Date of service contract
18 December 2020
12 December 2022
Notice period
9 months
9 months
Shares acquired by
Directors with annual
bonus.
Plan
Scenario
Timing of vesting
Calculation of vesting/
payment
Annual bonus
Default treatment
No bonus is paid
n/a
Death, injury, ill-
health or disability,
retirement or any
other reason the
Committee may
determine.
Normal payment
date, although
the Committee
has discretion to
accelerate.
The Committee will
determine the bonus
outcome based on
circumstances and
the date of leaving.
Performance against
targets is typically
assessed at the end
of the year in the
normal way and any
resulting bonus will
be prorated for time
served during the
year.
Not applicable as
shares are purchased
and owned outright
by the Executive.
If employment is terminated by the Company, the departing Executive Director may have a
legal entitlement (under statute or otherwise) to additional amounts, which would need to be
met. In addition, the Committee may:
• settle any claims by or on behalf of the Executive Director in return for making an
appropriate payment; and
• contribute to the legal fees incurred by the Executive Director in connection with the
termination of employment, where the Company wishes to enter into a settlement
agreement (as provided for below) and the individual must seek independent legal advice.
In certain circumstances, the Committee may approve new contractual arrangements
with departing Executive Directors including (but not limited to) settlement, confidentiality,
outplacement services, restrictive covenants and/or consultancy arrangements. These will be
used sparingly and only entered into where the Committee believes that it is in the best interests
of the Company and its shareholders to do so.
The Company’s policy on termination payments is to consider the circumstances on a case-
by-case basis, considering the Executive’s contractual terms, the circumstances of termination
and any duty to mitigate. The table opposite summarises how incentives are typically treated in
different circumstances:
Restricted Shares
Default treatment
Awards lapse
n/a
Death, injury or
disability, redundancy,
retirement, the sale
of the employing
company or business
out of the Group or
any other reason as
the Committee may
determine.
Normal vesting
date and holding
period would
normally continue
to apply, although
the Committee
has discretion to
accelerate vesting
and remove the
holding requirement
in exceptional
circumstances.
Any outstanding
awards will normally
be prorated for
service over the
three financial years
starting with the year
in which the award
is made and over
which the underlying
performance of
the Company will
be reviewed to
determine vesting.
The Committee may
disapply time prorating
in exceptional
circumstances.
SAYE
Treated in line with
HMRC rules.
Any payments to Directors in excess of payments permitted by the Remuneration Policy in force
from time to time may only be made with prior shareholder approval.
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Contents Generation – PageContents Generation – Sub PageContents Generation - Section Post-employment shareholding
Executive Directors are required to hold the lower of:
• The number of shares held by the Director on the date their employment ends, where such
shares had been (or are subsequently) acquired from Company share plan awards and
investment of bonuses received before or after the termination of employment, other than
permitted sales to meet tax liabilities (but excluding shares otherwise purchased in the
market); and
• For each of the following periods following termination of the employment:
– during the first 12-month period: such number of shares that had, on the date their
employment ends, the value required to be held in accordance with the shareholding
guideline applicable to that former Executive Director; and
– for the subsequent 12-month period: 50% of the value of the number of shares that had,
on the date their employment ends, the value required to be held in accordance with the
shareholding guideline applicable to that former Executive Director; and
– after 24 months: no shareholding requirement shall apply.
Non-Executive Directors
The Chair and Non-Executive Directors were appointed on the dates set out in the table below.
Their letters of appointment set out the terms of their appointment and are available for
inspection at the Group’s registered office and at the AGM. Appointments are initially for three
years (subject to annual re-election at the AGM) and unless agreed by the Board, they may not
remain in office for a period longer than six years or two terms in office, whichever is shorter.
The Chair and the Non-Executive Directors may resign from their positions but must serve the
Board six and one months’ written notice, respectively.
Non-Executive Director
Paul Moody
Roger Whiteside
Nathan (Tripp) Lane
Rob McWilliam
Indira Thambiah
Letter of appointment date
19 October 2018
27 November 2017
9 April 2020
11 October 2021
22 August 2022
Non-Executive Directors are not eligible to participate in the annual bonus or any equity
schemes, do not receive any additional pension or benefits on top of their fees and are not
entitled to a termination payment.
Consideration of employee remuneration and employment conditions in the Group
The Committee considers the remuneration and employment conditions elsewhere in the Group
when determining remuneration for Executive Directors. The Combined Colleague Advisory
Committee was consulted on the draft of this Remuneration Policy in May 2021 and considered
the changes to align Executive Directors with the workforce to be appropriate.
Consideration of shareholder views
The Company is committed to engaging with significant investors on remuneration matters
and consulted with 11 of its largest shareholders and three recognised investor bodies to receive
their feedback and reflect their comments prior to proposal of this Remuneration Policy to
shareholders at the 2021 AGM. The majority of those consulted were supportive of the proposals,
as proposed. A small number of consultees suggested adjustments to the post-employment
shareholding requirements which were considered by the Committee but were considered not
to be incorporated in the current Remuneration Policy, taking account of guidance and other
shareholder views. When determining remuneration policy and its application, the Committee
considers the guidelines of shareholder bodies and shareholders’ views. The Committee is open to
feedback from shareholders on remuneration policy and arrangements and commits to consult
in advance of any significant changes to remuneration policy or its operation. The Committee
continues to monitor trends and developments in corporate governance and market practice to
ensure the structure of Executive remuneration remains appropriate.
External directorships
The Committee acknowledges that Executive Directors may be invited to become Independent
Non-Executive Directors of other quoted companies which have no business relationship with
the Company and that these duties can broaden their experience and knowledge to the benefit
of the Company.
Executive Directors are permitted to accept such appointments with the prior approval of the
Chair. Approval will only be given where the appointment does not present a conflict of interest
with the Group’s activities and the wider exposure gained will be beneficial to the development
of the individual. Where fees are payable in respect of such appointments, these would be
retained by the Executive Director.
Policy table for Non-Executive Director remuneration
The key components of Non-Executive Directors’ remuneration are as follows:
Purpose and link to strategy
Operation
Maximum opportunity
Performance metrics
Non-Executive
Directors’ fees
To attract Directors
with the appropriate
skills and experience,
and to reflect the
time commitment
in preparing for
and attending
meetings, the duties
and responsibilities
of the role and
the contribution
expected from the
Non-Executive
Directors.
Annual fee for Chair and
Non-Executive Directors.
Additional fees paid
for additional roles
or time commitment,
e.g. chairing Board
Committees.
Any increases
to NED fees will
be considered
following a thorough
review process and
considering wider
market factors, e.g.
inflation.
Performance of
the Board as a
whole will be
reviewed regularly
as part of a
Board evaluation
process.
Non-Executive Directors
do not participate in any
incentive schemes or
receive any other benefits
(other than travel
expenses, which may be
grossed up for tax).
The maximum
aggregate annual
fee for all Directors
provided in the
Company’s Articles
of Association is
£1,000,000 pa.
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Contents Generation – PageContents Generation – Sub PageContents Generation – Section
DIRECTORS’ REMUNERATION REPORT CONTINUED
Annual Report on Remuneration
This is the Annual Report on Remuneration for the financial year ended 31 January 2023. This report sets out how the Remuneration Policy has been applied in the financial year being reported on
and how it will be applied in the coming year.
Single figure total remuneration paid to Executive Directors – audited
The table below sets out the total remuneration received by each Executive Director providing services to the Company for the year ended 31 January 2023 (FY23) and the prior year:
FY23 (£)
Darcy Willson-Rymer8
Kris Lee7
FY22 (£)
Darcy Willson-Rymer8
Kris Lee9
Paul Moody10
Salary
450,000
355,311
Salary
406,154
371,726
22,020
Benefits1
26,996
15,639
Benefits1
27,276
16,638
–
Pension2
13,313
11,849
Pension2
12,016
11,302
–
Other3
–
40,000
FY23 earned
Bonus4
Restricted
Share value5
SAYE Value6
Total
Remuneration
Total Fixed
Remuneration
Total Variable
Remuneration
450,000
268,580
–
2,250
942,559
356,224
398
1,048,031
490,309
422,799
452,250
625,202
Other3
FY22 earned
Bonus4
Restricted
Share value5
SAYE Value6
Total
Remuneration
Total Fixed
Remuneration
Total Variable
Remuneration
–
–
–
334,634
243,828
–
–
87,774
–
961
961
–
781,041
732,229
22,020
445,446
399,666
22,020
335,595
332,563
–
1
Benefits comprise car or car allowance and family private medical insurance (both of which are taxable) and also the value of insurance premiums paid (a non-taxable benefit) under the Group Life Assurance and Income Protection Schemes.
2 Pension benefit comprises payments to a stakeholder pension scheme (defined contribution) and/or a cash payment in lieu of pension contributions.
3 Compensation for loss of office of £40,000 was paid to Kris Lee in February 2023 following termination of his appointment on 31 January 2023.
4 See details of FY23 bonus payments in the Remuneration Committee Chair’s letter and below.
5
The value for FY23 is the value of all Restricted Share awards granted in 2020, with a performance period that ended on 31 January 2023, which vest from 12 October 2023, applying the closing share price on 31 January 2023 of 95.0 pence. The value includes a dividend
equivalent of nil and a nominal bonus award of 1 pence per share to fund the Companies Act requirement for payment of nominal value on allotment of the shares. The value for FY22 is the value of all Restricted Share awards granted in 2019, with a performance period
that ended on 31 January 2022, which commenced vesting from 14 May 2022, applying the closing share price on 31 January 2022 of 58.5 pence. The value includes the dividend equivalent entitlement of 7.9 pence per share and a nominal bonus award of 1 pence per
share to fund the Companies Act 2006 requirement for payment of nominal value on allotment of the shares.
6 Embedded value of SAYE options at grant. There are no performance conditions. The value of Kris Lee’s SAYE award in FY23 reflects only those shares purchased in March 2023 following exercise of his option as a good leaver under the SAYE rules.
7 Payments to Kris Lee in January 2023 included £20,918.66 additional salary payment and £627.56 additional pension contribution as pay in lieu of accrued annual leave.
8 Darcy Willson-Rymer was appointed as an Executive Director (CEO) on 8 March 2021. Darcy Willson-Rymer did not have any Restricted Share awards eligible to vest for FY22 and FY23 due to his date of appointment in March 2021.
9 Kris Lee received a salary supplement of £4,000 per month until 31 December 2021 on account of additional responsibilities assumed in the absence of a permanent CEO and during Darcy Willson-Rymer’s induction period.
10 Paul Moody held the position as Interim Executive Chair between 1 February 2021 and 8 March 2021 (FY22). During this period he was entitled to his Non-Executive Chair fee of £144,000 pa plus £30,000 per month supplement for assuming the Interim Executive Chair role,
however, he waived his entitlement to this additional fee (£30,000 per month) as Executive Chair for the period from 1 January 2021 to 28 February 2021. Details of fees paid after 8 March 2021 are set out in the table ‘Single figure total fees paid to Non-Executive Directors
– audited’. The above table reports all fees paid to Paul Moody for the period of his interim appointment as Executive Chair, from 1 February 2021 to 8 March 2021.
Annual bonus payments and link to performance
Bonus opportunities for FY23 were 125% of salary for Darcy Willson-Rymer and 100% of
salary for Kris Lee. The bonus was subject to achieving a range of EBITDA targets (70% of the
opportunity) and Strategic Objectives (30% of the opportunity). As a result of strong financial
performance and partial achievement of the strategic objectives, the total bonus payout for
FY23 was 80% of maximum. This resulted in total bonus payments of £450,000 for the CEO and
£268,580 for the CFO. In line with policy, one-third of the bonus (after payment of tax) must be
used to acquire Card Factory plc shares which must be held for three years.
EBITDA (70% of bonus opportunity) - audited
The EBITDA (post-IFRS 16 adjustment for Leases) performance targets for the year and final
performance achieved against this element are as set out of the chart on the right. The
Committee reduced the actual EBITDA realised during FY23 by a further £2.5 million (for the
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purpose of determining the bonus payable) to remove the benefit from release of a provision in
respect of a repayment of CJRS support received from HMRC.
Performance level
Threshold
Target
Maximum
Percentage of
total EBITDA
bonus pool
available if
performance
level achieved
15%
50%
100%
FY23
EBITDA
target range
£90.033m
£95.033m
£100.033m
EBITDA
realised (after
adjustments)
Percentage of
total bonus pool
payable (% of
maximum)
£109.6m 70% of 70%
Contents Generation – PageContents Generation – Sub PageContents Generation - Section Achievement against strategic objectives (30% of bonus opportunity) – audited
The strategic objectives for the CEO and CFO were set at the start of the year and outlined in last year’s report. The strategic objectives have been reviewed in detail with one objective being
achieved and two objectives not being achieved, giving an achievement of 10% of the maximum 30% of the total bonus opportunity. The specific outcomes for each objective were as follows:
Strategic objective
Link to strategy
Target and Stretch performance set
Omnichannel is one
of the key strategic
sales channels
targeting sales
and market share
growth.
Threshold: cardfactory.co.uk sales of £13.33 million (i.e. +22.3% from FY22) (for 15% of maximum
potential bonus opportunity).
Target: cardfactory.co.uk sales to achieve £14.42 million (i.e. +32.3% from FY22) (for 50% of
maximum potential bonus opportunity).
Stretch: cardfactory.co.uk sales to achieve £15.51 million (i.e. +42.3% from FY22) (for 100% of
maximum potential bonus opportunity).
Straight-line adjustment applies between Threshold, Target and Stretch.
Outcome
Bonus achieved (% of
maximum)
£8.8 million.
nil of 15%
Development of
retail partnerships is
a key growth sales
channel.
Threshold: One partner launched (for 15% of maximum potential bonus opportunity).
Target: Two partners launched (for 50% of maximum potential bonus opportunity).
Stretch: Two partners launched plus one signed (for 100% of maximum potential bonus opportunity).
Launched requires opening of the first location; signed requires heads of terms, trial exceeding three
months or full agreement to be signed.
No new partners
were launched
during the period.
nil% of 5%
Realisation of key
strategic priorities:
model store trials,
pricing changes and
gifts and celebration
essentials (both in
stores and online).
Threshold: £19.6 million sales from four strategic initiatives (for 15% of maximum potential bonus
opportunity).
Target: £20.6 million sales from four strategic initiatives (for 50% of maximum potential bonus
opportunity).
Stretch: £21.6 million sales from four strategic initiatives (for 100% of maximum potential bonus
opportunity). Straight-line adjustment applies between Threshold, Target and Stretch.
10% of 10%
The strategic
projects generated
incremental sales of
£29.4 million.
cardfactory.co.uk
growth.
Retail partnership
growth.
Realisation of
sales growth from
strategic initiatives.
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Grants of Restricted Shares FY23 – audited
Conditional awards of Restricted Shares were granted to the Executive Directors on 12 May
2022. The Remuneration Policy provides for awards of shares worth 87.5% of basic salary for
a CEO and 75% of salary for the CFO. The Remuneration Committee included an additional
criteria in the performance underpin relating to an improved impact on society and the
environment over the measurement period for the performance underpin.
Executive Director
Darcy Willson-Rymer
Kris Lee
Number of
Restricted
Shares
awarded1
780,197
498,9192
Face value of
award value as
a % of salary
Face/maximum
value of
Restricted
Shares at
grant date1
Measurement
period for
performance
underpin
87.5%
£393,750 1.2.22–31.1.25
75%
£251,795 1.2.22–31.1.25
1
2
Based on the average share price for the three months to and including 11 May 2022 of 50.468 pence.
The number of shares capable of vesting was reduced to 166,306 shares following Kris Lee’s cessation of employment on
31 January 2023.
For Restricted Shares to vest, the Committee must be satisfied that business performance
over the three years commencing 1 February 2022 is robust and sustainable, that the business
improved its impact on society and the environment and that management has strengthened
the business. In assessing performance, the Committee will consider financial and non-financial
KPIs of the business as well as delivery against strategic priorities. To the extent it is not satisfied
with performance the Committee may scale back the level of vested awards including to zero.
An additional discretion allows scale back on vesting to minimise excess gains from share price
increases between grant and vesting. There will be full disclosure in the Annual Report and
Accounts of the Committee’s determination of this ‘performance underpin’.
Upon determination by the Company’s Remuneration Committee of the full or partial
satisfaction of the performance underpin condition, any Restricted Shares will vest as follows:
• 50% of the Restricted Shares on the third anniversary of the date of grant;
• 25% of the Restricted Shares on the fourth anniversary of the date of grant; and
• 25% of the Restricted Shares on the fifth anniversary of the date of grant.
100% of the vested Restricted Shares will be subject to a holding period which (save for
permitted sales to meet tax liabilities from vesting) will normally end on the fifth anniversary of
the date of grant.
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DIRECTORS’ REMUNERATION REPORT CONTINUED
Single figure total fees paid to Non-Executive Directors – audited
The table below sets out a single figure for the total remuneration received by each Non-
Executive Director for the year ended 31 January 2023 and the prior year.
Base fee paid
Additional fees
Total
Non-Executive Director
FY23
FY22
Paul Moody1 (Chair)
£146,400
£128,903
Octavia Morley (SID)²
Roger Whiteside
Nathan (Tripp) Lane
Rob McWilliam3
Indira Thambiah4
£49,817
£45,750
£45,750
£45,750
£19,125
£48,183
£44,250
£45,000
£11,250
FY23
£0
£8,133
£0
£0
FY22
FY23
FY22
£0 £146,400
£57,950
£7,867
£0
£0
£45,750
£45,750
£53,883
£19,125
£128,903
£56,050
£44,250
£45,000
£13,250
–
£8,133
£2,000
–
£0
–
1
The figures report only the fees paid to Paul Moody in his capacity as a Non-Executive Director after 8 March 2021. Additional
fees paid in respect of his interim executive role are reported above on page 86 (Total remuneration paid to Executive Directors –
audited).
2 Octavia Morley stepped down from the Board on 31 January 2023.
3
4
Rob McWilliam was appointed on 1 November 2021.
Indira Thambiah was appointed on 1 September 2022 and assumed the role as Chair of the Remuneration Committee from 1
February 2023.
Payments to former Directors – audited
No payments were made to former Directors during the year. However, the Board and Kris Lee
agreed to Kris’ leaving the Company following a transition period (announced in July 2022)
following which Kris elected to terminate his employment on 31 January 2023. Since the year
end, in February 2023, Kris was paid £40,000 as compensation for loss of office. Kris will be
entitled to payment of the annual bonus for FY23 of £268,580 (details of which are set out
on pages 86 and 87), one third of which (after tax) is required to be applied in purchasing
Card Factory plc shares. The Committee has also agreed to treat Kris as a good leaver in
respect of Restricted Share awards granted under the Company’s Long Term Incentive Plan
and options under the SAYE plan. Kris shall be entitled to awards subject to the terms of the
schemes, which will include scale back to reflect the proportion of the measurement period for
the performance underpin for restricted share awards during which Kris was employed by the
Company. Details of the share awards that remain subject to vesting are set out on page 92.
No other payments for loss of office have been paid.
2020 LTIP Restricted Share award vesting – audited
Restricted Share awards granted in October 2020 under the LTIP were subject to substantially
the same performance underpin summarised above in respect of the FY23 Restricted Shares, for
the three financial years to and including FY23, save that the performance underpin relating to
society and the environment did not apply, and the further discretion on vesting to scale back
to avoid excessive returns did not apply. Under the terms of the awards, 50% of any award
that vests will vest on the third anniversary of grant (i.e. on 12 October 2023), 25% on the fourth
anniversary and 25% on the fifth anniversary.
The Committee recognises the improvement in the business performance over the period, which
has developed from extended periods of mandatory store closure in 2020 and 2021, which
required extensive management action to manage liquidity and protect the business and its
many stakeholders, including securing a series of refinancings with its banks, to substantially
recover revenues to pre-pandemic levels by the end of the period to trading performance prior
to the pandemic, with an improved net debt position and encouraging evidence that the revised
strategy that has been adopted is beginning to realise the stated objectives. The Committee
recognises that sales growth from two strategic growth channels: retail partnerships and
online, are not yet realising the growth expected, but sees material progress in building
the infrastructure, expertise and relationships to realise the sales growth targeted in the
outer years of the strategic plan. On this basis, the Committee approved the vesting of the
2020 RSP awards.
Darcy Willson-Rymer did not receive a 2020 Restricted Share award due to his appointment in
March 2021. Kris Lee did however receive a 2020 Restricted Share award grant and this award
will vest in full on the third, fourth and fifth anniversary of grant. The Chair’s statement sets
out further detail of the Committee’s assessment of the performance underpin and the overall
vesting level.
SAYE – audited
Awards under the HMRC-approved SAYE plan were granted to all participating employees on
8 June 2022. Options were granted at a discount of 20% to the share price on grant and vest
after three years subject to continued employment.
Executive Director
Darcy Willson-Rymer
Kris Lee2
Number of
SAYE options
awarded
Face/maximum
value of awards
at grant date1
% of award
vesting at
threshold
Performance
period
18,419
14,662
£2,250
£1,791
n/a
n/a
n/a
n/a
1
2
Value stated is the value of the 20% discount to the exercise price based on the share value determined over the three days to and
including 11 May 2022, of 61.07 pence.
Following Kris Lee’s resignation on 31 January 2023, the number of shares included in the 2022 SAYE award capable of being
exercised (and exercised in March 2023) was reduced to 3,258 shares.
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Card Factory plc Annual Report and Accounts 2023
Contents Generation – PageContents Generation – Sub PageContents Generation - Section Historical TSR performance and CEO remuneration
The graph below illustrates the total shareholder return (TSR) of Card Factory against the FTSE
250 Index and FTSE Small Cap Index over the period since the Group listed on 20 May 2014.
These indices have been chosen as they are recognised, broad-equity market indices of which
the Group has been a member for this period.
£100 Invested TSR
Card Factory
FTSE 250
FTSE SmallCap
31 Jan
2015
31 Jan
2016
31 Jan
2017
31 Jan
2018
31 Jan
2019
31 Jan
2020
31 Jan
2021
31 Jan
2022
31 Jan
2023
250
200
150
100
50
0
20 May
2014
CEO
Single figure of
remuneration
(£’000)
Annual bonus
outcome
(% of max)
LTIP vesting
(% of max)
2022/23
(FY23)
2021/221
(FY22)
2020/212
(FY21)
2019/20
(FY20)
2018/19
(FY19)
2017/18
(FY18)
2016/173
(FY17)
2015/16
(FY16)
2014/15
(FY15)
943
829
525
593
611
496
1,005
951
884
80% 66%
–
10% 15%
–
20% 79% 77%
n/a
n/a
50%
–
–
n/a 46.6%
n/a
n/a
1
2
3
For FY22, the amounts set out in the single figure table on page 86 are grossed up, on a pro rata basis to show the position for
comparison purposes assuming Darcy Willson-Rymer had been appointed from 1 February 2021 rather than 8 March 2021 (the date
of his actual appointment).
For FY21 this represents all remuneration paid to Karen Hubbard to 30 June 2020 (the date of her resignation) and payments to
Karen Hubbard during her period of garden leave to 31 December 2020 and the proportion of the pro rata Restricted Share award
that vested in July 2021.
For FY17 this represents the aggregate single figure for Karen Hubbard (from date of appointment as CEO) and Richard Hayes (to
date of stepping down as CEO).
Percentage change in remuneration of Directors and all employees
The table below shows the change each year for each Director’s salary/fees, benefits and bonus, for each of the last three financial periods, as compared to the salary change for all employees
(excluding such Directors), based on a total full-time equivalent reward for the relevant financial year. Where a Director was appointed or resigned part way through the financial year, their salary/
fees, benefits and bonus are grossed up to reflect as full-year equivalent to provide for meaningful reflection for the year-on-year change:
Year-on-Year change %
FY23 compared to FY22
Salary/Fees
Bonus
Benefits4
FY22 compared to FY21
Salary/Fees
Bonus
Benefits
FY21 compared to FY20
Salary/Fees
Bonus
Benefits
Executive Directors
Non-Executive Directors
Average
employee1
Darcy
Willson-Rymer²
Kristian
Lee
Paul
Moody
Octavia
Morley
Roger
Nathan
Rob
Whiteside
(Tripp) Lane
McWilliam
Indira
Thambiah
13.25%
46.57%
-15%
4.7%
45.9%
-35%
5.3%
-64.3%
12.8%
0%
34.5%
5.7%
1.0%
100%
-60.8%
–
–
–
-4.41%
10.15%
263.5%
4.5%
100%
77%
9.07%
-100%
91.83%
-3.0%
n/a
n/a
-54.0%
n/a
n/a
3.4%
n/a
n/a
0%
n/a
n/a
3.4%
n/a
n/a
0%
n/a
n/a
127.88%
-1.67%³
-1.67%³
n/a
n/a
n/a
n/a
n/a
n/a
1.7%
n/a
n/a
0%
n/a
n/a
n/a
n/a
n/a
1.7%
n/a
n/a
n/a
n/a
n/a
–
–
–
n/a
n/a
n/a
–
–
–
–
–
–
1
2
The Average Employee is the FTE for all UK Group employees.
Darcy Willson-Rymer’s remuneration information change for FY22 compared to FY21 reflects the annualised salary and benefit for Darcy (who was appointed 8 March 2021) compared to the annualised data for the former CEO, Karen Hubbard, for FY21, on the basis
stated in note 2 to the preceding table.
3
Reduction in fees received during FY21 (compared to FY20) is attributable to waivers of fees by Directors over the periods of lockdown due to the Covid-19 pandemic.
4 Benefits includes all income in the Single Figure tables excluding Salary/Fees and Bonus.
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Contents Generation – PageContents Generation – Sub PageContents Generation – Section
DIRECTORS’ REMUNERATION REPORT CONTINUED
CEO to employee pay ratio
FY23
Ratio
Employee salary
Employee total remuneration
FY22 ratio (restated)
FY21 ratio
Method
Option A
Option A
Option A
25th percentile
pay ratio
Median
pay ratio
75th percentile
pay ratio
44.7 : 1
£20,288
£21,096
51.9 : 1
31.4 : 1
43.6 : 1
£20,995
£21,625
40.3 : 1
30.6 : 1
42.1 : 1
£21,724
£22,376
38.2 : 1
29.5 : 1
are being implemented alongside business efficiencies and take account of colleague priorities
based on ongoing consultation. Although the FY23 ratios for median and upper percentile
colleagues have increased, these ratios are impacted by a higher CEO bonus in FY23 and the
Committee places emphasis on the increases to salary and remuneration for employees, where
employee total remuneration is £6,051 higher at the 25th percentile; £2,261 higher at the median
level; and £1,941 higher at the 75th percentile, than the equivalent total remuneration in the
prior year.
Distribution statement
The charts below illustrate the year-on-year change in total remuneration for all employees and
total shareholder distributions (‘TSD’).
cardfactory has chosen Option A (pursuant to the Large and Medium-sized Companies and
Groups (Accounts and Reports) Regulations 2008 (as amended)), which provides a comparison
of the Company’s full-time equivalent total remuneration for all UK employees against the CEO
for the FY23 financial year as the most appropriate methodology to report the ratio, in line with
the recommendation from the UK Government Department for Business, Energy and Industrial
Strategy and shareholder and proxy-voting bodies.
The CEO pay ratio for FY22 has been restated this year to adopt the CEO remuneration from the
single figure table on page 86. The CEO pay ratio reported in last year’s report was calculated
using the actual payments received by the CEO during FY22, which did not include the FY22
annual bonus payment which was paid after the end of FY22, but was included in the single
figure table. We have therefore restated this figure and the ratios. Employee remuneration as at
31 January 2023 was used for determination of the FY23 pay ratio information reported above.
The Committee considers pay ratios as one of many reference points when considering
remuneration. Throughout the Group, pay is aligned with our pay principles, is structured to be
as consistent as possible and is market-competitive in the context of the sector in which we
operate. The Committee notes the limited comparability of pay ratios across companies and
sectors, given the diverse range of business models and employee population profiles which
exist across the market. A significant proportion of the CEO’s potential pay is delivered in
variable remuneration which may therefore fluctuate significantly on a year-to-year basis. The
ratios have moved slightly year-on-year, primarily due to changes in incentive plan pay-outs for
the CEO. The Committee recognises the reduction in the CEO pay ratio from FY22 (restated) to
FY23 for the lowest earners in the business (as represented by the lower quartile), which reflects
the increase in National Minimum Wage and National Living Wages applicable from April 2022
and the further enhancements to pay and benefits that are part of an ongoing programme to
provide a fair deal for colleagues on our journey to becoming a median market payer, which
Total remuneration
(up 21.7%)
£132.2m
£108.6m
£m
60
50
40
30
20
10
£m
140
120
100
80
60
40
20
0
Total Shareholder Distributions
(no change)
£0m
£0m
2022/2023
2021/2022
2022/2023
2021/2022
Statement of shareholder voting
The following table shows the results of the shareholder votes on the Annual Report on
Remuneration at the 2022 AGM and for the Directors’ Remuneration Policy at the 2021 AGM:
Remuneration Policy
2021
Annual Report on Remuneration
2022
Total number
of votes
% of
votes cast
Total number
of votes
% of
votes cast
For (including discretionary)
189,960,737
94.98 169,968,698
Against
10,033,932
5.02
34,070,430
Total votes cast (excluding withheld votes)
199,994,669
Total votes withheld
29,676
Total votes cast1 (including withheld votes) 200,024,345
– 204,039,128
–
2,113,595
– 206,152,723
83.3
16.7
–
–
–
1
A withheld vote is not a vote in law and is not counted in the calculation of the proportion of votes cast for and against a resolution.
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Contents Generation – PageContents Generation – Sub PageContents Generation - Section The Committee acknowledges the notable vote against the Remuneration Report in 2022 is primarily attributed to the decision to pay reduced annual bonus to the Executive Directors for the FY22
year. The Committee’s evaluation of the Director and business performance over this period, and balance of stakeholder interests in the long term, were considered at length by the Committee and are
documented in detail in the 2022 Annual Report. The Committee will continue to exercise discretion, where appropriate, taking account of all stakeholder interests and guidance available.
Directors’ shareholdings and interest in shares – audited
The Committee sets shareholding guidelines for Executive Directors. Executive Directors are required to retain shares that vest from future Restricted Share awards and acquire shares with one-
third of any bonus (after payment of tax) under the shareholding requirement is met. The current guideline is to build and maintain, over time, a holding of shares in the Company equivalent in
value to at least 250% and 200% of base salary for the CEO and CFO, respectively. The Executive Directors have not yet met the shareholding guideline.
Director
Executive Directors
Darcy Willson-Rymer
Kris Lee3
Non-Executive Directors
Paul Moody
Octavia Morley3
Roger Whiteside
Nathan (Tripp) Lane
Rob McWilliam
Indira Thambiah
Shares held
Options held
Owned outright1
Unvested and
not subject to
performance
Unvested and
subject to
performance
Vested but not
exercised
178,188
174,439
–
371,067
514,436
380,394
200,000
13,333
22,520
200,000
32,578
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Unvested
and subject
to continued
employment
31,945
–
–
–
–
–
–
–
Current
shareholding (%
of salary/fee2)
Shareholding
requirement (%
of salary/fee)
Guideline met?
35.8%
49.4%
250%
200%
No
No
1
2
3
Including shares owned by connected persons.
Calculated using the closing share price of the Company on Friday 31 January 2023 of 95.0 pence.
Kris Lee and Octavia Morley stepped down from the Board on 31 January 2023.
During the year, no share options under the SAYE plan were exercised by the Directors. Since the end of the year, Kris Lee exercised options under the SAYE Plan pursuant to which he acquired 20,337
shares on 17 March 2023. Otherwise, there have been no changes in the numbers of shares owned by the Directors and their connected persons between the end of the year and the date of this report.
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Contents Generation – PageContents Generation – Sub PageContents Generation – Section
DIRECTORS’ REMUNERATION REPORT CONTINUED
Details of Directors’ interests in shares in incentive plans – audited
Darcy Willson-Rymer
Restricted shares¹
Restricted shares¹
SAYE
SAYE
Kris Lee 6
Restricted shares¹
Restricted shares¹
Restricted shares¹ ²
Restricted shares¹ ³
Restricted shares¹ 4
Date of grant
Share price
at grant
Exercise price7
Number of
shares awarded
Face value
at grant
Performance period
Exercise period
12.05.22
50.468p
14.06.21
08.06.22
08.07.21
76.54p
61.07p
66.87p
n/a
n/a
48.86p
53.496p
780,197
514,436
18,419
13,526
£393,750 01.02.22 – 31.01.25
£393,750 01.02.21 – 31.01.24
n/a
n/a
£2,249
£1,814
– 01.07.25 – 31.12.25
– 01.08.24 – 31.01.25
12.05.22
50.468p
14.06.21
12.10.20
14.05.19
11.07.18
76.54p
39.74p
188.74p
214.1p
n/a
n/a
n/a
n/a
n/a
498,9195 £251,794.50 01.02.22 – 31.01.25
321,1325
371,067
65,115
13,794
£245,794 01.02.21 – 31.01.24
£147,475² 01.02.20 – 31.01.23
£122,898 01.02.19 - 31.01.22
£29,533 01.02.18 – 31.01.21
n/a
n/a
n/a
n/a
n/a
1
The number of shares comprising each RSP award was calculated based on the average, middle-market quotation of a share in the capital of the Company over the three months prior to the date of grant.
2
Restricted Share award to Kris Lee made in 2020 was scaled back by 40% of the policy level, following exercise of discretion by the Remuneration Committee, having regard to the change in share price as a result of the then current market environment.
3 Kris Lee’s original award in 2019 was granted over 130,229 shares. 50% of this award vested on 14 May 2022 with the balance subject to future vesting.
4
5
Kris Lee’s original award in 2018 was granted over 110,346 shares. This award was reduced to 55,173 following the Remuneration Committee’s decision to permit only 50% of the award to vest. 50% of the award vested 11 July 2021, and a further 25% vested on 11 July 2022
with the balance indicated subject to future vesting on 11 July 2023.
Following termination of Kris Lee’s employment with the Company on 31 January 2023, as a result of Kris Lee being deemed to be a “good leaver”, the number of Restricted Shares capable of vesting has been reduced pro-rata based on the proportion of the performance
period that he was employed by the business. Consequently, the maximum number of shares capable of vesting in respect of the grant in 2021 was reduced from 321,132 to 214,088 shares; and for the award granted in 2022 was reduced from 498,919 shares to 166,306 shares.
6 Following termination of Kris Lee’s employment on 31 January 2023, he has exercised his options to acquire ordinary shares pursuant to the SAYE scheme, as a good leaver, by applying savings under the SAYE plan, at the option price. In aggregate, 20,337 shares were
issued on 17 March 2023. No SAYE options remain exercisable by Kris Lee as at the date of this report.
7
In respect of Restricted share awards, the employer pays a nominal bonus of 1 pence per share at the time of vesting. This nominal bonus is applied to pay the subscription price to meet the Companies Act requirements for payment of nominal value on allotment.
How the Policy will be applied in FY24
Salary
The salaries of the Executive Directors with effect from 1 April 2023 are as follows:
Benefits and pension
These will be paid in line with the Policy.
Executive Director
Darcy Willson-Rymer
Matthias Seeger
1 April 2023
1 April 2022
£472,500
£450,000¹
£345,000²
n/a
Annual bonus
The annual bonus for FY24 is capped at 125% and 100% of salary for the CEO and CFO
(respectively), up to 70% of which can be realised if financial target of Group PBT is achieved
and the remaining 30% can be realised from achievement of strategic objectives.
1
2
Darcy Willson-Rymer declined a 2% increase to basic salary which was approved by the Committee for the period commencing 1
April 2022.
Salary from 1 April 2023 is the annual salary that will be paid to Matthias Seeger who is to be appointed as CFO from 22 May 2023.
For comparison purposes, the annual salary payable to the former CFO from 1 April 2022 was £335,725.
The financial targets have been set by the Committee and will require Executive Directors
to deliver significant stretch performance compared to market expectations at the start
of the financial year and the financial performance realised in FY23. Given the close link
between these targets and cardfactory’s competitive strategy, financial targets are considered
commercially sensitive but will be published in next year’s Annual Report on Remuneration.
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Contents Generation – PageContents Generation – Sub PageContents Generation - Section The objectives set for both the CEO and CFO for FY24, which are shared by all of the senior management team are as follows:
Objective
Link to strategy
Target and Stretch performance set¹
Bonus potential (% of
maximum bonus opportunity)
Financial objectives
PBT based target
Strategic objectives
cardfactory.co.uk
sales growth
Group financial performance and improvement
in profitability.
15% of full opportunity if Threshold is achieved;
50% of opportunity if Target is achieved; and
100% of opportunity if Stretch is achieved.
Straight-line adjustment for results between Threshold, Target and Stretch.
Online sales (including certain omnichannel
initiatives) is one of the key strategic sales
channels targeting sales growth.
Retail partnership
sales growth
Development of retail partnerships is a key
growth sales channel.
Net Promoter Score
improvement in FY24
compared to FY23
Realisation of key strategic priorities to make
the business customer centric.
Net sales targets for cardfactory.co.uk:
15% of full opportunity if Threshold is achieved;
50% of opportunity if Target is achieved; and
100% of opportunity if Stretch is achieved.
Straight-line adjustment for sales between Threshold, Target and Stretch.
Net sales targets for retail partnerships:
15% of full opportunity if Threshold is achieved;
50% of opportunity if Target is achieved; and
100% of opportunity if Stretch is achieved.
Straight line adjustment for sales between Threshold, Target and Stretch.
Average monthly NPS score (as assessed by Savanta Brand Vue:
15% of opportunity if Threshold is achieved;
50% of opportunity if Target is achieved; and
100% of opportunity if Stretch is achieved.
Straight line adjustment for sales between Threshold, Target and Stretch.
1
Quantums for Target and Stretch for each objective are commercially sensitive and will be published in the Annual Report on Remuneration for the year to 31 January 2024.
70% total
70%
30% total
12.5%
12.5%
5%
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DIRECTORS’ REMUNERATION REPORT CONTINUED
Restricted Shares
The precise grant levels have not yet been finalised, but we anticipate that Restricted Shares
will be granted over shares with a value at the time of grant of up to 87.5% of salary and 75%
of salary for the Chief Executive and Chief Financial Officer, respectively, after Matthias Seeger
joins the Board on 22 May 2023.
In order for Restricted Shares to vest, the Committee must be satisfied that business performance
is robust, sustainable, that the business has improved its impact on society and the environment
and that management has strengthened the business. In assessing performance, the Committee
will consider financial and non-financial KPIs of the business as well as delivery against its
strategic priorities. To the extent it is not satisfied with performance, or to address any excessive
gains from share price increases, the Committee may scale back the level of vested awards.
There will be full disclosure in the Annual Report and Accounts of the Committee’s determination
of the performance underpin.
Non-Executive Director fees
As explained in the Remuneration Committee’s letter, the Chair and NED fees have fallen
behind market levels significantly and, having considered the increase to scope and complexity
of the NED roles and the importance of being able to attract and retain NEDs of sufficient
calibre, the fee levels have been reviewed for FY24 resulting in a correctional increase to
fee levels.
Going forwards, the Company proposes to review all fees on an annual basis to ensure market
median rates are maintained, whilst taking account of colleague and other stakeholder
experience. The agreed Chair and Non-Executive Director fees are set out below.
Base fees
Chair
Senior Independent Director
Non-Executive Director
Additional fees
Chair of the Remuneration Committee
Chair of the Audit & Risk Committee
From
1 April 2023
Prior to
1 April 2023
£175,000
£146,880
£60,000
£50,000
£49,980
£45,900
£10,000
£10,000
£8,160
£8,160
Remuneration Committee membership and advisors
The Remuneration Committee membership during the period is set out in the Corporate
Governance Report on page 70.
The Committee fulfils its duties with a combination of both formal meetings and informal
consultation with relevant parties, both internal and external. Its principal external advisors
are Korn Ferry, who were appointed by the Committee following a tender process during 2018.
Korn Ferry does not provide any other services to the Company. Korn Ferry is a signatory to the
Code of Conduct for Remuneration Consultants in the UK, details of which can be found on the
Remuneration Consultants Group’s website at remunerationconsultantsgroup.com. Accordingly,
the Committee is satisfied that the advice received is objective and independent. Fees of
£27,006 (inc. VAT) were paid to Korn Ferry during the financial year.
Committee activities
During FY23 and up to the approval of this Report, the Committee met to consider the following
remuneration matters:
• Review the operation of the Remuneration Policy in FY23 and assess appropriateness of
the policy.
• Consider performance against targets and resulting bonus payments for FY22 and vesting of
the 2019 Restricted Share awards under the Long Term Incentive Plan.
• Finalise the financial targets and (since the year-end) consider the performance against the
targets and resulting bonus payments and consideration of the exercise of discretion for
the FY23 annual executive bonus plan and to agree the measures and targets for the FY24
annual executive bonus.
• Approve the terms of Kris Lee’s departure from the Company.
• Consider the remuneration package for the appointment of Matthias Seeger as the
new CFO.
• Consider and approve annual salary increases for the senior management team, the
CEO and the Chair, and the wider workforce salary and benefit reviews.
• Assess good leaver designations and approval of terms for certain leavers.
• Review developing trends in remuneration market practice, investor guidelines
and governance.
• Review and consider wider Group remuneration policies and practices and the approach to
employee engagement as it relates to remuneration matters.
• Undertake various other reviews and approvals (as appropriate) in accordance with the
terms of reference for the Committee adopted by the Company.
• Formally approve the Directors’ Remuneration Report as set out in this Annual Report.
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Contents Generation – PageContents Generation – Sub PageContents Generation - Section The work of the Remuneration Committee
Set out below are those areas of the Committee’s work that it is required to report under
the Code and reporting regulations and which are not covered elsewhere in this Directors’
Remuneration Report.
Engagement with stakeholders
The Committee completed its consultation with shareholders on the changes proposed to be
made to the Directors’ Remuneration Policy that was approved by shareholders at the 2021
AGM. Support for the Directors’ Remuneration Policy, that was adopted at the 2021 AGM,
was almost 95% and the FY22 Directors’ Remuneration Report at the 2022 AGM received
support from shareholders holding 83.3% of the votes cast. There were no material concerns
for the Committee to consider from the AGM voting outcomes. Encouragingly our employee
engagement scores increased significantly during the year, as assessed using a ‘b-Heard’ survey,
assessed by Best Companies Limited (see pages 32 and 33). cardfactory continues to work
on some of the key themes and outputs from the survey and we continue with the Combined
Colleague Advisory Group (CCAG) which complements existing forms of employee engagement.
It also forms the basis of engagement on those matters specifically required under the Code,
including to explain the alignment of the Executive Directors’ Remuneration Policy to the wider
Group. Paul Moody is the Designated Director to lead the Board’s consultation of colleagues via
the CCAG. Further details of stakeholder engagement are set out on pages 26 to 35.
There were no matters arising during the year that required consultation by the Remuneration
Committee with shareholders.
Determining Executive Director remuneration
The Committee considers the appropriateness of the Executive Directors’ remuneration, not
only in the context of overall business performance and environmental, governance and
social matters, but also in the context of wider workforce pay conditions (taking into account
workforce policies and practices as well as the ratio of CEO pay to all-employee pay) and
external market data, to ensure that it is fair and appropriate for the role, experience of the
individual, responsibilities and performance delivered.
More specifically the Committee will continue to consider the application of discretion in
application of the Directors’ Remuneration Policy to adjust for any excessive returns from
general market changes, and to account for wider stakeholder experience, in particular in
respect of the exercise of discretion in respect of bonus and share awards and in setting any
new targets for future annual bonus schemes.
Wider workforce matters
The Committee, as part of its wider remit under the Code, considers workforce remuneration
policy and practices. This includes our Gender Pay statistics, which are published on our investor
relations website (cardfactoryinvestors.com) and our DE&I strategy (see pages 31 to 33) and our
DE&I policy which is summarised on page 97. The Committee has also considered the Group’s
wider review of remuneration across the entire workforce following an extensive grading of roles
and benchmarking of remuneration and benefits associated with each role.
This report was reviewed and approved by the Remuneration Committee on 2 May 2023.
Indira Thambiah
Chair of the Remuneration Committee
3 May 2023
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NOMINATION COMMITTEE
Chair’s letter
Dear Shareholder
The Nomination Committee’s activities during
the year have focused on:
• appointment of Indira Thambiah
as a Non-Executive Director, with
relevant remuneration experience to
succeed Octavia Morley as Chair of the
Remuneration Committee;
• appointment of Matthias Seeger as Chief
Paul Moody
Chair of the Nomination Committee
Committee members:
Paul Moody (Chair)
Roger Whiteside
Rob McWilliam
Indira Thambiah
•
•
Financial Officer of the Company, who will
take up this post on 22 May 2023;
review of recent and proposed senior
appointments;
review of succession planning for the
Board, the senior management team
and their direct reports and approach
to succession plans being undertaken
throughout the business;
review of the size and skills of the Board,
resulting in the decision not to seek to
appoint a Non-Executive Director following
the resignation of Octavia Morley;
• approval of appointments of Roger
•
Whiteside as Senior Independent Director
and of Indira Thambiah as Chair of the
Remuneration Committee; and
• effecting the internally moderated annual
Board effectiveness review, setting
new Board objectives and review of
performance against prior year objectives.
The Committee has been active over the last
year with a number of senior appointments,
succession planning and with an internal
Board effectiveness review.
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The Committee recognises the importance
of ensuring cardfactory is a truly diverse and
inclusive employer and supports customers
of all backgrounds to celebrate all occasions
that are important to them. The Board
aspires to achieve the gender and ethnic
minority diversity targets set by the FCA
in April 2022, despite these rules not being
directly applicable to the Company (as a
FTSE AllShare company). The Company has
elected to voluntarily disclose in its report,
the Board and the senior management team
diversity as at the year end, in addition to the
gender data at the year end. As two Directors
left the Board on this date, the data is also
disclosed as at the latest practicable date
prior to publication of this Report, to ensure
full transparency.
The Company retained Odgers Berndtson to
undertake a market search to recommend
candidates for the role of Non-Executive
Director and potential Chair of the
Remuneration Committee. The Committee
reviewed a range of candidates and
undertook multiple interviews of those
shortlisted which resulted in the unanimous
resolution to appoint Indira Thambiah.
Ridgeway Partners Limited, trading as
Teneo, were appointed to undertake a
comprehensive market search for a Chief
Financial Officer candidate. Following a
rigorous selection process, including multiple
interviews, presentations and psychometric
testing, the Committee unanimously agreed
the appointment of Matthias Seeger who
will join the Board on 22 May 2023. Neither
Odgers Berndtson nor Teneo have any
connection to the Company or any of the
Directors.
In addition to further progressing the Group’s
DE&I strategy, the Committee will focus on
addressing further supporting development
opportunities identified from the succession
planning undertaken for the senior
management team and their direct reports.
An internally conducted Board effectiveness
review will also be undertaken.
There remains much to be done throughout
the organisation, but the Committee is
pleased with progress to date and we will
further update shareholders in next year’s
Annual Report.
Yours sincerely
Paul Moody
Chair
3 May 2023
Contents Generation – PageContents Generation – Sub PageContents Generation - Section Nomination Committee Report
This report provides details of the role of
the Nomination Committee, the work it has
undertaken during the year and details of
how it intends to carry out its responsibilities
going forward.
Role of the Nomination Committee
The purpose of the Committee is to:
• Assist the Board by keeping the
composition and performance of
the Board and its Committees under
continuous review to ensure it has the
necessary balance of skills and experience
to fulfil its purpose.
• Ensure a thorough and transparent process
is adopted for making new appointments
to the Board.
• Oversee diversity, inclusion and succession,
not only within the Board but across the
Group’s senior management team.
A more detailed explanation of the
Nomination Committee’s role, membership,
meeting frequency and terms of reference are
set out in the Corporate Governance Report
on pages 68 and 70.
Committee activity
The Committee’s main activity during the
year, and its plans for the year ahead, are as
described in more detail in the introductory
letter to this report.
DE&I Policy
Our policy is that the Board and the Group’s
senior management team should always
be diverse, with selection being made
irrespective of personal attributes, but we
feel that quotas are not appropriate as they
are likely to lead to compromised decisions
on Board and senior management team
membership, quality and size.
We will, however, seek to ensure that specific
effort is made, both at Board and senior
management team level, to bring forward
female candidates and those from a range
of ethnic and social backgrounds
for appointments.
We are committed to providing equal opportunities for all our colleagues and to having a diverse workforce of gender, age, nationality, education
and background. We are a founding signatory, alongside 50 other leading retailers, to the British Retail Consortium’s Diversity and Inclusion
Charter. Details of some of our commitments and progress during the year can be found in the ESG Report from page 36.
We published our Gender Pay Gap Report in April 2023, which reports on the gender pay gap as at 5 April 2022. A copy of the report has been
published on cardfactory’s investor website (cardfactoryinvestors.com).
Our latest data on gender and (for the Board and senior management team) ethnicity is as follows:
Gender composition:
Men
Women
Ethnic diversity:
Number of Board members
31 Jan 2023
2 May 2023
Percentage of the Board
2 May 2023
31 Jan 2023
Number of senior positions
on the Board (CEO, CFO,
SID, Chair)
Number in
executive management
(excl. Board members)
Percentage of
executive management
(excl. Board members)
31 Jan 2023
2 May 2023
31 Jan 2023
2 May 2023
31 Jan 2023
2 May 2023
6
2
5
1
75% 83.3%
25%
16.7%
3
1
3
0
7
2
6
2
77.7%
22.2%
75%
25%
Number of Board members
Percentage of the Board
Number of senior positions
on the Board (CEO, CFO,
SID, Chair)
Number in
executive management
Percentage of
executive management
31 Jan 2023
2 May 2023
31 Jan 2023
2 May 2023
31 Jan 2023
2May 2023
31 Jan 2023
2 May 2023
31 Jan 2023
2 May 2023
White British or other White
(including minority-white groups)
Mixed/Multiple Ethnic Groups
Asian/Asian British
Black/African/Caribbean/Black
British
Other ethnic group, including Arab
Not specified/prefer not to say
7
0
1
0
0
0
5
0
1
0
0
0
87.5% 83.3%
0
0
12.5%
16.7%
0
0
0
0
0
0
4
0
0
0
0
0
3
0
0
0
0
0
9
0
1
1
0
0
8
0
1
1
0
0
81.8%
0
9.1%
80%
0
10%
9.1%
10%
0
0
0
0
For the 48 direct reports to the executive management team as at 31 January 2023, 50% (24 individuals) are women 50% (24 individuals) are male.
Of the entire workforce of 9433 as at 31 January 2023, 82.5% (7,778 individuals) are women and 17.5% (1,655 individuals) are male.
Board evaluation
The Company undertook an internal Board effectiveness evaluation (having completed an external review in 2021). Further details are set out in
the Corporate Governance Report on page 71. Board evaluation will continue to be conducted on an annual basis, with an internally facilitated
evaluation scheduled to be completed during the financial year to 31 January 2024.
Tenure and re-election of Directors
In accordance with the UK Corporate Governance Code, all the Directors will seek election or re-election (as appropriate) at the next AGM on
22 June 2023.
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Chair of the Nomination Committee
3 May 2023
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DIRECTORS’ REPORT
The Company is domiciled in the United
Kingdom and its registered office is at Century
House, Brunel Road, Wakefield 41 Industrial
Estate, Wakefield, West Yorkshire, WF2 0XG.
The telephone number of the Company’s
registered office is +44 1924 839150.
This Directors’ Report should be read in
conjunction with the Strategic Report, which
also contains details of the principal activities
of the Group during the year. When taken
together, the Strategic Report and this
Directors’ Report constitute the management
report for the purposes of DTR 4.1.8 R.
The Directors present their report together
with the audited financial statements for the
year ended 31 January 2023.
Introduction
This section of the Annual Report and
Accounts includes additional information
required to be disclosed under the Companies
Act 2006 (‘the Companies Act’), the UK
Corporate Governance Code 2018 (the ‘Code’
or the ‘UK Corporate Governance Code’), the
Disclosure Guidance and Transparency Rules
(the ‘DTRs’) and the Listing Rules (the ‘Listing
Rules’) of the Financial Conduct Authority.
Some of the information we are required to
include in the Directors’ Report is included
in other sections of this Annual Report and
Accounts and is referred to below. Where
reference is made to these other sections, they
are incorporated into this report by reference.
Incorporation, listing and structure
The Company was incorporated and
registered in England and Wales on 17
April 2014 under the Companies Act with
registration number 9002747.
The entire issued ordinary share capital of the
Company is admitted to the premium listing
segment of the Official List of the Financial
Conduct Authority and to trading on the
London Stock Exchange main market for
listed securities. The liability of the members
of the Company is limited.
Strategic Report
The Strategic Report, which was approved
by the Board on 2 May 2023 and is set out
on pages 1 to 63, contains a fair review of
the Group’s business, a description of the
emerging and principal risks and uncertainties
facing the Group and an indication of the
likely future developments of the Group.
The review is intended to be a balanced and
comprehensive analysis of the development
and performance of the Group’s business
during the financial year and the position
of the Group’s business at the end of that
year. The report includes, to the extent
necessary for an understanding of the
development, performance or position of the
Group’s business, analysis using financial key
performance indicators.
The Strategic Report also includes the main
trends and factors likely to affect the future
development, performance and position
of the Group’s business. It also includes
information about environmental matters
(including reporting in accordance with the
Task Force on Climate-Related Financial
Disclosures (TCFD)), the Group’s employees,
social and community issues and about how
we engage with our stakeholders.
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Share capital, shareholders and
restrictions on transfers of shares
The Company has only one class of shares:
ordinary shares of 1 pence each.
Further details of the Company’s share
capital, including changes in the issued share
capital in the year under review, are set out in
note 19 to the financial statements which form
part of this report on page 135. On 17 March
2023 the Company issued 20.337 shares to
satisfy entitlements under the Company’s
SAYE plan. Save for this issue, no additional
shares have been issued between the end of
the financial year under review and the date
of approval of this Report. The total issued
share capital of the Company as at 2 May
2023 (being the latest practical date before
publication of this report) is 342,656,427. No
shares are held in treasury.
Results and dividends
The consolidated profit/(loss) for the Group
for the year after taxation was £44.2 million
(FY22: £8.1 million). The results are discussed in
greater detail in the Chief Financial Officer’s
Review on pages 52 to 57.
No final dividend is proposed in respect of
the period ended 31 January 2023 (FY22
final dividend: nil). No interim dividend has
been paid in respect of the period ended 31
January 2023 (FY22: nil).
Post year-end events
Following the year end, on 25 April 2023, the
Group acquired a 100% stake in SA Greetings
Corporation (Pty) Ltd (‘SA Greetings’) for fixed
cash consideration of £2.5 million, funded
from existing cash reserves and working
capital.
Details of awards outstanding under share-
based incentive schemes are given in note
25 to the financial statements which form
part of this report on page 141. Details of
the share-based incentive schemes in place
are provided in the Directors’ Remuneration
Report on pages 81 and 82.
Otherwise, there have been no other
significant post year-end events.
The rights and obligations attaching to the
ordinary share capital of the Company are
contained within the Company’s Articles of
Association (‘Articles’) which were adopted on
28 July 2021.
Contents Generation – PageContents Generation – Sub PageContents Generation - Section The Articles do not contain any restrictions on the transfer of ordinary shares in the Company
other than the usual restrictions applicable where any amount is unpaid on a share. Certain
restrictions are also imposed by laws and regulations (such as insider trading and marketing
requirements) and requirements of the Listing Rules whereby Directors and certain employees of
the Company require approval of the Company in order to deal in the Company’s shares.
Transactions with related parties
The only material transactions with
related parties during the year were those
transactions detailed in note 28 on page 142
of the Annual Report and Accounts.
Greenhouse gas emissions
The TCFD Report on page 50 sets out the
greenhouse gas emissions disclosures required
by the Companies Act 2006 (Strategic Report
and Directors’ Report) Regulations 2013.
Shareholder and voting rights
All members who hold ordinary shares are entitled to attend and vote at the AGM. On a show
of hands at a general meeting every member present in person shall have one vote and on a
poll every member present in person or by proxy shall have one vote for every ordinary share
held. No shareholder holds ordinary shares carrying special rights relating to the control of the
Company.
Substantial shareholders
At 2 May 2023 the following had notified the Company of a disclosable interest of 3% or more
of the nominal value of the Company’s ordinary shares:
Shareholder
Teleios Capital Partners LLC
Artemis Investment Management LLP
Aberforth Partners LLP
Mr Stuart Middleton
Jupiter Asset Management
Majedie Asset Management Limited
The Wellcome Trust
No. of
ordinary shares
Percentage
of issued
share capital
68,397,212
29,731,077
22,753,964
18,035,477
17,133,053
16,819,832
10,733,554
19.96
8.68
6.64
5.26
5.00
4.91
3.13
The shareholdings noted above reflect the notifications received as at 31 January 2023.
Change of control
There are no agreements between the Company and its Directors or employees providing
for additional compensation for loss of office or employment (whether through resignation,
redundancy or otherwise) that occurs because of a takeover bid.
The only significant agreement to which the Company is a party that takes effect, alters or
terminates upon a change of control of the Company following a takeover bid, and the effect
thereof, is the Company’s committed bank facilities dated 17 April 2014 (as amended and
restated) and the Coronavirus Large Business Interruption Loans, which contain a provision such
that, in the event of a change of control, the facilities may be cancelled and all outstanding
amounts, together with accrued interest, will become repayable on the date falling 30 days
following written notice being given by the lenders that the facility has been cancelled.
Directors
The Directors of the Company and their
biographies are set out on pages 64 and
65. Details of changes to the Board during
the period are set out in the Corporate
Governance Report on page 67. Details of
how Directors are appointed and/or removed
are set out in the Corporate Governance
Report on page 71.
Powers of Directors
Specific powers of the Directors in relation
to shares and the Company’s Articles of
Association are referred to in the Corporate
Governance Report on pages 71 and 72.
As at 31 January 2023, the Directors had
shareholder authority, granted at the AGM in
2022, to effect a purchase by the Company
of up to 34,187,834 of its own shares. None of
this authority had been used during FY23. This
authority is proposed to be renewed at the
AGM to be held in 2023.
Directors’ indemnities and insurance
Information relating to Directors’ indemnities
and the Directors’ and Officers’ liability
insurance that the Company has purchased is
set out in the Corporate Governance Report
on page 72.
Employees
Information relating to employees of the
Group is set out on pages 31 to 33. Share
incentive schemes in which employees
participate are described in the Directors’
Remuneration Report on pages 81 and 82
and in note 25 to the financial statements on
page 141.
Political donations
The Group has not made any political
donations in the past and does not intend to
make any in the future.
Treasury and risk management and
financial instruments
The Group’s approach to treasury and
financial risk management is explained in
note 23 to the accounts on page 137. These
risks are managed in accordance with the risk
management framework described on pages
58 to 62, which includes a list of the principal
risks and uncertainties that affect or are likely
to affect the Group. The financial position of
the Group, its cash flow, liquidity position and
borrowing facilities are described in the CFO’s
review on pages 52 to 57.
Tax
The Group pays corporation tax on its
operations in the United Kingdom and does
not operate in any tax havens or use any tax
avoidance schemes. A copy of the Group’s tax
strategy is available on cardfactory’s investor
website (cardfactoryinvestors.com).
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DIRECTORS’ REPORT CONTINUED
Disclosures required under Listing Rule 9.8.4 R
In accordance with Listing Rule 9.8.4C, the information required to be disclosed in the Annual
Report by Listing Rule 9.8.4 R is detailed in the following sections:
Disclosure
Amount of interest capitalised by the Group
during FY23 and the amount and treatment
of any related tax relief.
Any information required by Listing Rule
9.2.18 R (publication of unaudited financial
information).
Cross reference
Not Applicable
Not Applicable
Details of any long-term incentive schemes.
Page 81
Details of any arrangements under which
any Director has waived or agreed to waive
any emoluments for FY23 or any future
emoluments.
Details of cash allotments of shares by
Card Factory plc or any major subsidiary
undertaking, during FY23.
Details of any contract of significance
subsisting during FY23.
Details of any contract for the provision
of services to the Group by a controlling
shareholder subsisting during FY23.
Details of any arrangement under which a
shareholder has waived or agreed to waive
any dividends.
A statement by the Board in respect of any
agreement with a controlling shareholder.
Not Applicable
See note 7 to the notes to the Parent
Company financial statements on page 148
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Disclosure required under Listing Rule 7 (Corporate Governance)
The Corporate Governance Report on pages 67 to 73 contains disclosures required under Listing
Rules 7.2.2, 7.2.3, 7.2.5, 7.2.6 and 7.2.7, which form part of this Directors’ Report.
Disclosure required under Listing Rule 9.8.6(8) R
The Company has included climate-related disclosures consistent with the TCFD
recommendations and recommended disclosures (dated June 2017) as updated by the Task
Force’s 2021 Annex, on pages 44 to 49 of this Annual Report. The Company’s compliance with
the TCFD reporting and identification of the matters which the Company is not yet compliant
with are set out on pages 44 to 49. The sections identified in green or amber in the table on
pages 44 to 49 explain the status of the Company’s progress to be able to fully report against
the TCFD requirements in future years.
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Going concern
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.
More information in respect of going concern,
including the factors considered in reaching
this conclusion, is provided in note 1 to the
consolidated financial statements in pages 119
and 120.
Longer-term viability
In accordance with the UK Corporate
Governance Code, the Directors have
assessed the viability of the Group over a
period longer than that required in respect
of going concern. The assessment has been
made taking into account the Group’s current
position, business plan, and the principal risks
and uncertainties described in the Strategic
Report on pages 58 to 62.
In making this statement, the Board has
carried out a robust assessment of the
emerging and principal risks facing the
Group, including those that would threaten its
business model, future performance, solvency
or liquidity.
Viability period
The Directors have determined that the five
years to 31 January 2028 is an appropriate
period over which to provide its viability
statement, being the timeframe used by the
Board in its strategic planning process and
consistent with the Group’s investment cycles.
Five years extends beyond the period covered
by the Group’s existing financing facilities;
however at present the Board have no reason
to believe that the Group’s existing facilities
would not be renewed or replaced on broadly
similar terms at that time.
Board assessment
The Board has reviewed the Group’s detailed
five-year strategic plan (the ‘Plan’), including
an assessment of the key operational and
financial assumptions, and considered
downside scenarios and stress testing.
The Plan was updated to reflect the positive
trading performance in FY23 and assumes
a conservative model of sales growth across
the five year horizon that reflects delivery of
key strategic projects to support growth in
online and partnerships. In addition, the Plan
includes expected cost headwinds arising, in
particular, from material and wage inflation,
lower GBPUSD exchange rates that may
be applicable from the end of the Group’s
existing hedge, and the impact of rising prices
on energy and utility costs from the end of
the Group’s exiting price fix in September
2024. The plan indicates that the Group will
remain profitable, cash generative, maintain
adequate liquidity headroom against its
available financing facilities, and, to the
extent applicable, be compliant with the
financial covenants set out in its facilities
agreed in April 2022 across the five-year
viability horizon.
In assessing viability, the Board has
considered a variety of downside scenarios
arising from the Group’s principal risks and
uncertainties (see pages 60 to 62). These
downside risks included severe, but plausible,
scenarios with the ability to reduce the
Group’s sales, profitability and cash flow both
over sustained periods and, in particular, over
the Christmas season which still delivers a
higher proportion of the Group’s sales and
profits compared to other periods in the
year. Reverse stress test scenarios were also
considered that considered the extent to
which such a scenario would need to persist
or extend in order to result in a breach. In all
cases, the review concluded that the extent of
scenario required to result in a breach was of
such severity such that the scenario was not
considered reasonable plausible.
Contents Generation – PageContents Generation – Sub PageContents Generation - Section Whilst these reviews do not consider all the
possible scenarios that the Group might face,
the Directors consider that this assessment of
the Group’s prospects is reasonable in light of
the particular uncertainties facing the Group
at this time.
In particular, the Directors noted that in all
of the scenarios considered, a reasonable
degree of further actions would be available
to the Group to mitigate the effects of
downside risks. Such mitigating actions could
include further curtailing of discretionary
operating and capital expenditure. It was
noted that the Group has successfully taken
significant mitigating actions to preserve
liquidity during the Covid-19 pandemic.
Whilst there continue to be inherent risks and
uncertainties in the Group’s wider operating
environment, the Board is confident that the
Group continues to have access to sufficient
liquidity to meet its liabilities as they fall
due and manage reasonably foreseeable
downside scenarios if they should arise. This
assessment is based upon the Group’s current
financial position and the headroom in the
Group’s financing facilities.
Accordingly, the Board confirms that it has a
reasonable expectation that the Group will
be able to continue in operation and meet its
liabilities as they fall due in the period to 31
January 2028.
Assumption
Assumption limitations
The key limitation in respect of financing
relates to the ability of the Group to meet its
covenant requirements in order to continue
to access available facilities. The Board is
satisfied that, under the current facilities,
the Group should have sufficient headroom
to meet covenant requirements across
the viability period, including in downside
scenarios. Liquidity and covenant headroom
is at its tightest during the first 12-18 months
of the plan, with cash inflows across the five-
year term gradually increasing headroom
over time.
Capital investment is entirely within the
control of the Board. Reducing capital
expenditure, if required, reflects a key
mitigation in severe downside scenarios.
The Board undertakes a full review of
principal risks, uncertainties and downside
scenarios taking into account the impact of
the Group’s ability to deliver its strategy are
reviewed.
Capital management is entirely within the
control of the Board and accordingly there
are no limitations to these assumptions.
Available funding
The Group renegotiated its financing facilities
with its banking syndicate in April 2022 (see
page 135), with the overall size of facilities
reduced to £150 million over an extended
term to September 2025. The strategic plan
assumes that these facilities are maintained
on similar terms throughout the five-year
horizon; however is not highly sensitive to the
renewal terms from September 2025. There
are no new facilities assumed in the plan.
Capital investment
The Group’s capital investment plans
remain focused on supporting key strategic
initiatives to deliver the Plan. Capital
investment increases in FY24 and then
remains at broadly similar levels across the
plan duration.
Strategic initiatives
The Plan reflects the Group’s strategic
initiatives and assumes gradual revenue
growth across the five-year term.
Distributions to shareholders
The Group is currently prohibited from
making distributions to shareholders until
such time as its CLBILS facilities are fully
repaid. The strategic plan was prepared on
the basis that no dividends are paid, with
a sensitivity considered to reflect possible
distribution values in line with the Board’s
current view on capital management policy
should distributions be permitted in line
with the expected timetable (See page
57 for more information regarding future
distribution expectations).
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Contents Generation – PageContents Generation – Sub PageContents Generation – Section
Responsibility statement of the
Directors in respect of the Annual
Report and Accounts
This statement is set out on page 103.
Approval of the Annual Report
The Strategic Report and the Corporate
Governance Report were approved by the
Board on 2 May 2023.
Ciaran Stone
Company Secretary
3 May 2023
DIRECTORS’ REPORT CONTINUED
Disclosure of information and
appointment of auditors
So far as each Director is aware, there is
no relevant audit information of which the
Company’s auditor is unaware and the
Directors have taken all the steps which
they ought to have taken as Directors to
make themselves aware of any relevant
audit information and to establish that
the Company’s auditor is aware of that
information.
This confirmation is given and should be
interpreted in accordance with the provisions
of Section 418 of the Companies Act.
On behalf of the Board, the Audit & Risk
Committee has reviewed the effectiveness,
performance, independence and objectivity
of the existing external auditor, KPMG LLP,
for the year ended 31 January 2023 and
concluded that the external auditor was in
all respects effective, as explained on page
77. Following completion of an audit tender
described on page 77, the Company has
selected Mazars LLP as its proposed auditor.
Mazars LLP has expressed its willingness
to be appointed as auditor. Accordingly,
and in accordance with Section 489 of the
Companies Act, resolutions to appoint Mazars
LLP as auditor and to authorise the Directors
to determine its remuneration will be proposed
at the forthcoming AGM of the Company.
Information regarding forward-looking
statements
The reports and financial statements
contained in this Annual Report and Accounts
contain 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
and forecasts. Nothing in this Annual Report
and Accounts should be construed as a
profit forecast.
AGM
The AGM of the Company will be held at
11.00am on 22 June 2023 at the Company’s
registered office at Century House, Brunel
Road, Wakefield 41 Industrial Estate, Wakefield
WF2 0XG. A formal notice of meeting,
explanatory circular and a form of proxy will
accompany this Annual Report and Accounts.
Shareholders are encouraged to submit their
questions in advance and to submit their votes
by proxy in accordance with the instructions in
the enclosed documents.
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Card Factory plc Annual Report and Accounts 2023
Contents Generation – PageContents Generation – Sub PageContents Generation - Section The Directors are responsible for the
maintenance and integrity of the corporate
and financial information included on the
Company’s website. Legislation in the UK
governing the preparation and dissemination
of financial statements may differ from
legislation in other jurisdictions.
In accordance with Disclosure Guidance
and Transparency Rule 4.1.14 R, the financial
statements will form part of the annual
financial report prepared using the single
electronic reporting format under the TD ESEF
Regulation. The auditor’s report on these
financial statements provides no assurance
over the ESEF format.
We consider the Annual Report and Accounts,
taken as a whole, is fair, balanced and
understandable and provides the information
necessary for shareholders to assess the
Group’s position and performance, business
model and strategy.
By order of the Board
Darcy Willson-Rymer
Chief Executive Officer
3 May 2023
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing
the Annual Report and the Group and Parent
Company financial statements in accordance
with applicable law and regulations.
Company law requires the Directors to
prepare Group and Parent Company financial
statements for each financial year. Under that
law they are required to prepare the Group
financial statements in accordance with UK-
adopted international accounting standards
and applicable law and have elected to
prepare the Parent Company financial
statements on the same basis.
Under company law the Directors must not
approve the financial statements unless they
are satisfied that they give a true and fair
view of the state of affairs of the Group and
Parent Company and of the Group’s profit
or loss for that period. In preparing each of
the Group and Parent Company financial
statements, the Directors are required to:
• select suitable accounting policies and
then apply them consistently;
• make judgements and estimates that are
reasonable, relevant and reliable;
• state whether they have been prepared in
accordance with UK-adopted international
accounting standards;
• assess the Group and Parent Company’s
ability to continue as a going concern,
disclosing, as applicable, matters related
to going concern; and
• use the going concern basis of accounting
unless they either intend to liquidate the
Group or the Parent Company or to cease
operations or have no realistic alternative
but to do so.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Parent
Company’s transactions and disclose with
reasonable accuracy at any time the financial
position of the Parent Company and enable
them to ensure that its financial statements
comply with the Companies Act 2006. They
are responsible for such internal control as
they determine is necessary to enable the
preparation of financial statements that are
free from material misstatement, whether
due to fraud or error, and have general
responsibility for taking such steps as are
reasonably open to them to safeguard the
assets of the Group and to prevent and detect
fraud and other irregularities.
Under applicable law and regulations, the
Directors are also responsible for preparing a
Strategic Report, Directors’ Report, Directors’
Remuneration Report and Corporate
Governance Statement that complies with
that law and those regulations.
•
Responsibility statement of the
Directors in respect of the Annual
Report and Accounts
We confirm that to the best of our knowledge:
•
the financial statements, prepared in
accordance with the applicable set of
accounting standards, give a true and
fair view of the assets, liabilities, financial
position and profit or loss of the Company
and the undertakings included in the
consolidation taken as a whole; and
the Strategic Report includes a fair review
of the development and performance of
the business and the position of the issuer
and the undertakings included in the
consolidation taken as a whole, together
with a description of the principal risks and
uncertainties that they face.
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Contents Generation – PageContents Generation – Sub PageContents Generation – Section
Overview
Materiality: group financial statements as a whole
£2.4 million (2022:£2.3 million)
Coverage
Key audit matters
Recurring risks
5.0% of normalised PBTCO
(2022: 4.9% of averaged PBTCO)
96% (2022: 98%)
of total profits and losses that
made up Group profit before tax
vs 2022
Inventory costing and store inventory quantities
Net realisable value of inventories
Provision for repayment of government grant
support relating to Covid-19
Recoverability of Group goodwill
Recoverability of Parent’s investment in
subsidiaries
INDEPENDENT AUDITOR’S REPORT
to the members of Card Factory plc
1. Our opinion is unmodified
We have audited the financial statements of Card Factory plc (“the Company”) for the year
ended 31 January 2023 which comprise the Consolidated income statement, Consolidated
statement of comprehensive income, Consolidated statement of financial position, Consolidated
statement of changes in equity, Consolidated cash flow statement, Parent Company statement
of financial position, Parent Company statement of changes in equity, Parent Company cash
flow statement and the related notes, including the accounting policies in note 1 to both the
Group and Parent Company financial statements.
In our opinion:
•
the financial statements give a true and fair view of the state of the Group’s and of the
parent Company’s affairs as at 31 January 2023 and of the Group’s profit for the year then
ended;
the Group financial statements have been properly prepared in accordance with UK-
adopted international accounting standards;
the parent Company financial statements have been properly prepared in accordance with
UK-adopted international accounting standards and as applied in accordance with the
provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the
Companies Act 2006.
•
•
•
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs
(UK)”) and applicable law. Our responsibilities are described below. We believe that the audit
evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit
opinion is consistent with our report to the audit committee.
We were first appointed as auditor by the shareholders on 30 April 2014. The period of total
uninterrupted engagement is for the 9 financial years ended 31 January 2023. We have fulfilled
our ethical responsibilities under, and we remain independent of the Group in accordance with,
UK ethical requirements including the FRC Ethical Standard as applied to listed public interest
entities. No non-audit services prohibited by that standard were provided.
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Contents Generation – PageContents Generation – Sub PageContents Generation - Section 2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. We summarise below the key audit matters (unchanged from 2022), in decreasing order of audit significance, in arriving at our audit opinion above,
together with our key audit procedures to address those matters and, as required for public interest entities, our results from those procedures. These matters were addressed, and our results
are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial statements as a whole, and in forming our opinion thereon, and consequently are
incidental to that opinion, and we do not provide a separate opinion on these matters.
Inventory costing and store
inventory quantities
(Stock: £45.3 million;
2022: £33.1 million)
Refer to page 75 (Audit Committee
Report), page 118 (key sources of
estimation uncertainty, page 124
(accounting policy) and page 133
(financial disclosures).
The risk
Our response
Physical quantities of store stock:
Store inventory quantities held at the year end are
determined by year end physical counts. Controls over
the year end counts of store inventory are manual in
nature. Given the high volume and broad range of inventory
held, there is a risk that quantities of store inventory could
be incorrectly recorded.
Calculation error:
The inventory costing calculations across both store and
warehouse stock are manual in nature. Given the high
volume and broad range of inventory held there is a risk
that cost could be incorrectly recorded.
Our procedures included:
• Count design and attendance: Assessed the design and implementation of the store count
procedures through attendance at a sample of store inventory counts.
• Physical inspection: Physically inspected stock on a sample basis, through attendance at
all warehouse counts and a sample of store stock counts at year end.
• Test of details – Quantities: Selected a sample of stock lines to assess whether the counted
quantities on the Hand Held Terminals (HHT’s) agreed to the stock system and followed up
on how variances (if any) within our sample were resolved.
• Test of details – completeness: For a sample of counts that we did not attend, we assessed
whether the results of these counts have been appropriately captured within the year end
stock listing by agreeing the quantities back to submitted count results.
• Re-performance: For a sample of inventory lines held in stores and in warehouses,
reperformed the standard cost calculations and agreed each input to invoice or other
supporting documentation.
We performed the detailed tests above rather than seeking to rely on operating effectiveness
of any of the Group’s controls because our knowledge of these controls indicated that we
would be unable to obtain the required evidence to support reliance on controls.
Our results
• The results of our procedures were satisfactory (2022: satisfactory).
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Contents Generation – PageContents Generation – Sub PageContents Generation – Section
INDEPENDENT AUDITOR’S REPORT
to the members of Card Factory plc
The risk
Our response
Net realisable value of Inventories
(Stock: £45.3 million; 2022: £33.1
million, total provision £16.1 million;
2022: £20.7 million)
Refer to page 75 (Audit Committee
Report), page 118 (key sources of
estimation uncertainty, page 124
(accounting policy) and page 133
(financial disclosures).
Subjective estimate
The Group has significant levels of inventory and estimates
are made in the valuation of slow moving and discontinuing
inventory. The Group applies judgement in determining
classification of stock into various groups in order to apply
a provision percentage estimate.
The effect of these matters is that we determined that
the net realisable value of inventory has a high degree of
estimation uncertainty with a potential range of reasonable
outcomes greater than our materiality for the financial
statements as a whole.
The financial statements (page 118) disclose the sensitivity
of the Group’s estimate.
Our procedures included:
• Our sector experience: Assessed the appropriateness of the Group’s inventory provisioning
policies based on our understanding of the business.
• Retrospective evaluation: Critically assessed the in-year sell through of stock lines provided
against to evaluate the historical accuracy of the inventory provision estimate.
• Re-performance: Reperformed the provision calculations based on the Group’s provisioning
policy and for a sample of stock lines, agreed the categorisation of each line to underlying
documentation.
• Expectation vs. outcome: We formed our own expectation of the inventory provision using
our own view of the key assumptions and compared our expectation to the actual provision
amount. This included consideration of historical experience, post year end sales data and
any changes in the Group’s stock holding strategy.
• Test of detail: Compared, by product, for a sample of inventory lines, inventory levels
to sales data in the period leading up to the year end to assess whether slow moving
and discontinued inventories, with a focus on those with a limited shelf life, had been
appropriately identified and provided for by the Group based on the provisioning policy.
• Assessing transparency: Assessed the adequacy of the Group’s disclosures about the degree
of estimation involved in arriving at the net realisable value of inventories.
We performed an assessment of whether an overstatement of the provision identified through
these procedures was material.
We performed the tests above rather than seeking to rely on any of the Group’s controls
because the nature of the balance is such that we would expect to obtain audit evidence
primarily through the detailed procedures described.
Our results
• We consider the inventory provision to be acceptable (2022: acceptable).
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Provision for repayment of
government grant support related
to Covid 19
(2022: £7.4 million; 2021:£12.2 million)
Refer to page 76 (Audit Committee
Report), page 118 (key sources of
estimation uncertainty, page 121
(accounting policy) and page 136
(financial disclosures).
The risk
Our response
Subjective estimate
The Group continues to hold a provision of £7.4 million in
relation to COVID-19 related grant support, reflecting the
Group’s best estimate of support grants received in excess
of relevant subsidy control thresholds. The reduction from
£12.2 million in prior year reflects settlement of the element
in relation to CJRS. The remaining £7.4 million relates to
other covid related support received and the government
eligibility guidance in this area remains complex.
In response to the outperformance of the current year’s
profit target, and considering the complexity of government
eligibility guidance, we identified a fraud risk related
to overstatement of the provision for repayment of
government grant support related to Covid-19.
Our procedures included:
• Our sector experience: Assessed Group’s position against our interpretation of the available
external guidance, with the assistance of our internal subject matter experts.
• Methodology implementation: Critically assessed the directors’ calculation of possible
outcomes and directors’ point estimate to determine whether these aligned with the
available external guidance.
• Re-performance: Independently prepared our best estimate, through consultation with
our internal subject matter experts, using our interpretation of the guidance in place and
compared our expectation to the actual provision amount.
Inquiry of lawyers: Independently obtained a confirmation from the Group’s external lawyers
in relation to the legal advice provided to the Group.
•
• Assessment of Group’s experts: We assessed the competence, capabilities and objectivity of
the external lawyers engaged by the Group.
• Assessing transparency: Assessed the adequacy of the Group’s disclosures about the degree
of estimation involved in arriving at the provision for lockdown grants related to Covid 19 to
be recognised in the financial statements.
The effect of these matters is that we determined that the
range of possible outcomes, with respect to the amounts the
Group will be eligible to keep, exceeds our materiality for the
financial statements as a whole. The financial statements
(page 121) disclose the sensitivity of the Group’s estimate.
Our results
• We performed the tests above rather than seeking to rely on any of the group’s controls
because the nature of the balance is such that we would expect to obtain audit evidence
primarily through the detailed procedures described.
• We found the amounts provided in respect of excess government grant support received to
Recoverability of group goodwill
(Group goodwill: £313.8 million;
2022: £313.8 million)
Refer to page 76 (Audit Committee
Report), page 118 (accounting policy)
and page 129 (financial disclosures).
Forecast-based assessment:
Goodwill in the group is significant. There is a risk that
the business may not meet expected growth projections
in order to support the carrying value of the goodwill.
Forecasting future levels sales and costs is challenging in
the current economic environment.
The directors considered the recoverability of the goodwill
balance through a value in use calculation that had
underlying assumptions of varying sensitivity. The estimated
recoverable amount is subjective due to the inherent
uncertainty involved in forecasting and discounting future
cash flows.
The effect of these matters is that, a part of our risk
assessment, we determined that the value in use of
goodwill has a high degree of estimation uncertainty, with
a potential range of reasonable outcomes greater than
our materiality for the financial statement as a whole. In
conducting our final audit work, we reassessed the degree
of estimation uncertainty to be less than materiality.
be acceptable (2022: acceptable).
Our procedures included:
• Historical Comparisons: We assessed the reasonableness of the forecast cash flows
considering the historical accuracy of previous forecasts by comparing to actual financial
information.
• Our sector experience: Evaluating assumptions used, in particular those relating to the
discount rate using our own valuation tool by comparing the Group’s assumptions to
externally derived data, including comparable companies’ earnings multiples.
• Benchmarking assumptions: Challenged and compared the Group’s assumptions, on EBIT
growth to, externally derived data such as projections of economic growth and inflation,
sector analyses, and analysts’ reports. For the terminal value assumption, we compared to
external inflation projections.
• Sensitivity analysis: Performed breakeven analysis on the key assumptions.
• Comparing valuations: Compared the sum of the discounted cash flows to the Group’s
market capitalisation to assess the reasonableness of those cashflows.
We performed the tests above rather than seeking to rely on any of the Group’s controls
because the nature of the balances are such that we would expect to obtain audit evidence
primarily through the detailed procedures described.
Our results
• We found the Group’s conclusion that there is no impairment of goodwill to be acceptable
(2022: acceptable).
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INDEPENDENT AUDITOR’S REPORT
to the members of Card Factory plc
Recoverability of Parent
Company’s investment in
subsidiaries
(Parent Company Investment in
subsidiaries: £316.2 million; 2022:
£316.2 million)
Refer to page 76 (Audit Committee
Report), page 145 (accounting policy)
and page 146 (financial disclosures).
The risk
Our response
Forecast-based assessment:
The carrying amount of the parent Company’s investment
in subsidiaries represents 98.7% (2022: 99.1%) of the
Company’s total assets. There is a risk that the business
may not meet expected growth projections in order to
support the carrying value of the investments. Forecasting
future levels sales and costs is challenging in the current
economic environment.
The directors considered the recoverability of the
investment balance through a value in use calculation
that had underlying assumptions of varying sensitivity.
The estimated recoverable amount is subjective due to
the inherent uncertainty involved in forecasting and
discounting future cash flows.
The effect of these matters is that, a part of our risk
assessment, we determined that the value in use of the
investments has a high degree of estimation uncertainty,
with a potential range of reasonable outcomes greater than
our materiality for the financial statement as a whole. In
conducting our final audit work, we reassessed the degree
of estimation uncertainty to be less than materiality.
Our procedures included:
• Tests of detail: Comparing the carrying amount of the investments, with the relevant
subsidiaries’ draft balance sheet to identify whether their net assets, being an
approximation of their minimum recoverable amount, were in excess of their carrying
amount.
• Comparing valuations: For the investments where the carrying amount exceeded the net
asset value, comparing the carrying amount of the investment with the value in
use prepared by the Group in relation to the goodwill impairment. We also assessed
whether any adjustments were required to this value in use estimate to reflect the
subsidiary’ equity value.
• Sensitivity analysis: Performed breakeven analysis on the key assumptions.
We performed the tests above rather than seeking to rely on any of the Company’s controls
because the nature of the balance is such that we would expect to obtain audit evidence
primarily through the detailed procedures described.
Our results
• We found the Company’s conclusion that there is no impairment of its investments in
subsidiaries to be acceptable (2022: acceptable).
3. Our application of materiality and an overview of the scope of our audit
Materiality for the Group financial statements as a whole was set at £2.4 million
(2022: £2.3 million), determined with reference to a benchmark of normalised Group profit
before tax of £49.1 million (2022: £47.4 million), of which it represents 5.0% (2022: 4.9%). We
normalised Group profit before tax in current year by adding back this year’s CJRS release of
£2.5 million and VAT settlement of £0.8 million. We adjusted for these items because they do
not represent the normal, continuing operations of the Group. In 2022 we normalised Group
profit before tax by averaging over the previous five years mainly due to volatility caused by the
Covid-19 pandemic, which did not exist in the current year.
Materiality for the Parent Company financial statements as a whole was set at £1.2 million
(2022: £1.4 million), determined with reference to a benchmark of Parent Company total assets,
of which it represents 0.38% (2022: 0.4%).
In line with our audit methodology, our procedures on individual account balances and
disclosures were performed to a lower threshold, performance materiality, so as to reduce to
an acceptable level the risk that individually immaterial misstatements in individual account
balances add up to a material amount across the financial statements as a whole.
Performance materiality was set at 75% (2022: 75%) of materiality for the financial statements
as a whole, which equates to £1.8 million (2022: £1.7 million) for the Group and £0.9 million (2022:
£1.05 million) for the Parent Company. We applied this percentage in our determination of
performance materiality because we did not identify any factors indicating an elevated level of
risk.
We agreed to report to the Audit Committee any corrected or uncorrected identified
misstatements exceeding £0.12 million (2022: £0.115 million), in addition to other identified
misstatements that warranted reporting on qualitative grounds.
Of the Group’s 6 (2022: 6) reporting components, we subjected 4 (2022: 4) to full scope audits
for group purposes.
108
Card Factory plc Annual Report and Accounts 2023
Contents Generation – PageContents Generation – Sub PageContents Generation - Section 3. Our application of materiality and an overview of the scope of
our audit continued
The components within the scope of our work accounted for the percentages illustrated
opposite.
Normalised Group
profit before tax
£49.1m (2022: £47.4m)
Group materiality
£2.4m (2022: £2.3m)
The remaining 4% (2022: 5%) of total Group revenue, 4% (2022: 2%) of total profits and losses
that made up Group profit before tax and 2% (2022: 1%) of total Group assets is represented by
2 (2022: 2) reporting components, none of which individually represented more than 4% (2022:
5%) of any of total Group revenue, total profits and losses that made up Group profit before tax
or total Group assets. For these components, we performed analysis at an aggregated group
level to re-examine our assessment that there were no significant risks of material misstatement
within these.
The work on all components subject to full scope audits for Group purposes, including the audit
of the parent Company, was performed by the Group team.
The Group team set the component materialities, which ranged from £0.4 million to £1.9 million
(2022: £0.4 million to £1.8 million), having regard to the mix of size and risk profile of the Group
across the components.
£2.4m
Whole financial statements
materiality (2022: £2.3m)
£1.8m
Whole financial statements
performance materiality
(2022: £1.7m)
£1.9m
Range of materiality at
4 components (£0.4m– £1.9m)
(2022: £0.4m to £1.8m)
The scope of the audit work performed was predominately substantive as we placed limited
reliance upon the Group’s internal control over financial reporting.
Normalised PBT
Group materiality
£0.12m
Misstatements reported to the
audit committee (2022: £0.115m)
Group revenue
Total profits and losses
that made up group
profit before tax
Group total assets
96%
(2022: 95%)
95
96
96%
(2022: 98%)
98
96
98
98%
(2022: 99%)
99
98
Full scope for group audit purposes 2023
Full scope for group audit purposes 2022
Residual components
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Contents Generation – PageContents Generation – Sub PageContents Generation – Section
INDEPENDENT AUDITOR’S REPORT
to the members of Card Factory plc
4. Going concern
The directors have prepared the financial statements on the going concern basis as they do not
intend to liquidate the Group or the Company or to cease their operations, and as they have
concluded that the Group’s and the Parent Company’s financial position means that this is
realistic. They have also concluded that there are no material uncertainties that could have
cast significant doubt over their ability to continue as a going concern for at least a year from
the date of approval of the financial statements (“the going concern period”).
We used our knowledge of the Group, its industry, and the general economic environment to
identify the inherent risks to its business model and analysed how those risks might affect the
Group’s and Parent Company’s financial resources or ability to continue operations over the
going concern period. The risks that we considered most likely to adversely affect the Group’s
and Parent Company’s available financial resources and metrics relevant to debt covenants
over this period were:
• The impact of continued uncertainty in economic conditions and consumer confidence.
We considered whether this risk could plausibly affect the liquidity or covenant compliance
in the going concern period by assessing the directors’ sensitivities over the level of available
financial resources and covenant thresholds indicated by the Group’s financial forecasts taking
account of severe, but plausible adverse effects that could arise from these risks individually
and collectively.
In particular, our procedures included:
• Critically assessing the reasonableness of the Group’s budgets and forecasts, evaluating
future trading assumptions by comparing to external projections of economic growth
and inflation, sector analyses, and analysts’ reports, and assessing whether the downside
scenarios reflect plausible impacts of the cost of living crisis and the inflationary environment
on the business. We also compared past budgets to actual results to assess the directors’
track record of budgeting accurately.
• Considering the availability and sufficiency of the financing arrangements in place at the
Group, including the headroom on financial covenants in place on the Group’s financing
facility.
We considered whether the going concern disclosure in note 1 to the financial statements gives
a full and accurate description of the directors’ assessment of going concern, including the
identified risks and dependencies.
Our conclusions based on this work:
• we consider that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate;
• we have not identified, and concur with the directors’ assessment that there is not, a material
uncertainty related to events or conditions that, individually or collectively, may cast
significant doubt on the Group’s or Company’s ability to continue as a going concern for the
going concern period;
• we have nothing material to add or draw attention to in relation to the directors’ statement
in note 1 to the financial statements on the use of the going concern basis of accounting with
no material uncertainties that may cast significant doubt over the Group and Company’s
use of that basis for the going concern period, and we found the going concern disclosure in
note 1 to be acceptable; and
the related statement under the Listing Rules set out on pages 119 and 120 is materially
consistent with the financial statements and our audit knowledge.
•
However, as we cannot predict all future events or conditions and as subsequent events may
result in outcomes that are inconsistent with judgements that were reasonable at the time they
were made, the above conclusions are not a guarantee that the Group or the Company will
continue in operation.
110
Card Factory plc Annual Report and Accounts 2023
Contents Generation – PageContents Generation – Sub PageContents Generation - Section 5. Fraud and breaches of laws and regulations – ability to detect
Identifying and responding to risks of material misstatement due to fraud
To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events
or conditions that could indicate an incentive or pressure to commit fraud or provide an
opportunity to commit fraud. Our risk assessment procedures included:
• Enquiring of directors, management and inspection of policy documentation as to the
Group’s high-level policies and procedures to prevent and detect fraud, including the internal
audit function, and the Group’s channel for “whistleblowing”, as well as whether they have
knowledge of any actual, suspected or alleged fraud.
• Reading Board and audit committee meeting minutes.
• Considering remuneration incentive schemes and performance targets for management
and directors.
• Using analytical procedures to identify any unusual or unexpected relationships.
We communicated identified fraud risks throughout the audit team and remained alert to any
indications of fraud throughout the audit.
As required by auditing standards, we perform procedures to address the risk of management
override of controls, in particular the risk that Group and component management may be in a
position to make inappropriate accounting entries and the risk of bias in accounting estimates
such as the provision related to the repayment of government grants.
Further detail in respect of the provision related to the repayment of government grants are
set out in the key audit matter disclosures in section 2 of the report.
On this audit we do not believe there is a fraud risk related to revenue recognition because
revenue transactions have low individual value with high volume, are routine and process
driven and do not involve significant judgement or estimation. This reduces the opportunities
for fraudulent activity.
We performed procedures including:
•
Identifying journal entries and other adjustments to test for all full scope components, based
on risk criteria and comparing the identified entries to supporting documentation. These
included those posted with unusual account combinations (for cash and loans), rounded
amounts to stock provision and rounded amounts to expenses close to year end.
• Assessing whether the judgements made in making accounting estimates are indicative
of a potential bias.
Identifying and responding to risks of material misstatement related to compliance
with laws and regulations
We identified areas of laws and regulations that could reasonably be expected to have a
material effect on the financial statements from our general commercial and sector experience,
and through discussion with the directors and other management (as required by auditing
standards), and from inspection of the Group’s regulatory and legal correspondence and
discussed with the directors and other management the policies and procedures regarding
compliance with laws and regulations.
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As the Group is regulated, our assessment of risks involved gaining an understanding of
the control environment including the entity’s procedures for complying with regulatory
requirements.
We communicated identified laws and regulations throughout our team and remained alert
to any indications of non-compliance throughout the audit.
The potential effect of these laws and regulations on the financial statements varies
considerably.
Firstly, the Group is subject to laws and regulations that directly affect the financial statements
including financial reporting legislation (including related companies legislation), distributable
profits legislation and taxation legislation and we assessed the extent of compliance with these
laws and regulations as part of our procedures on the related financial statement items.
Secondly, the Group is subject to many other laws and regulations where the consequences
of non-compliance could have a material effect on amounts or disclosures in the financial
statements, for instance through the imposition of fines or litigation.
We identified the following areas as those most likely to have such an effect: health and safety,
data protection laws, anti-bribery and employment law, recognising the nature of the Group’s
activities. Auditing standards limit the required audit procedures to identify non-compliance
with these laws and regulations to enquiry of the directors and other management and
inspection of regulatory and legal correspondence, if any. Therefore if a breach of operational
regulations is not disclosed to us or evident from relevant correspondence, an audit will not
detect that breach.
Context of the ability of the audit to detect fraud or breaches of law or regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not
have detected some material misstatements in the financial statements, even though we
have properly planned and performed our audit in accordance with auditing standards. For
example, the further removed non-compliance with laws and regulations is from the events
and transactions reflected in the financial statements, the less likely the inherently limited
procedures required by auditing standards would identify it.
In addition, as with any audit, there remained a higher risk of non-detection of fraud, as fraud
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal controls. Our audit procedures are designed to detect material misstatement. We are
not responsible for preventing non-compliance or fraud and cannot be expected to detect
non-compliance with all laws and regulations.
111
Contents Generation – PageContents Generation – Sub PageContents Generation – Section
INDEPENDENT AUDITOR’S REPORT
to the members of Card Factory plc
6. We have nothing to report on the other information in the Annual Report
The directors are responsible for the other information presented in the Annual Report together
with the financial statements. Our opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion or, except as explicitly stated
below, any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether, based
on our financial statements audit work, the information therein is materially misstated or
inconsistent with the financial statements or our audit knowledge. Based solely on that work
we have not identified material misstatements in the other information.
Strategic report and directors’ report
Based solely on our work on the other information:
• we have not identified material misstatements in the strategic report and the directors’
•
•
report;
in our opinion the information given in those reports for the financial year is consistent
with the financial statements; and
in our opinion those reports have been prepared in accordance with the Companies Act
2006.
Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration Report to be audited has been properly
prepared in accordance with the Companies Act 2006.
•
•
are materially consistent with the financial statements and our audit knowledge.
Our work is limited to assessing these matters in the context of only the knowledge acquired
during our financial statements audit. As we cannot predict all future events or conditions and
as subsequent events may result in outcomes that are inconsistent with judgements that were
reasonable at the time they were made, the absence of anything to report on these statements
is not a guarantee as to the Group’s and Company’s longer-term viability.
Corporate governance disclosures
We are required to perform procedures to identify whether there is a material inconsistency
between the directors’ corporate governance disclosures and the financial statements and our
audit knowledge.
Based on those procedures, we have concluded that each of the following is materially
consistent with the financial statements and our audit knowledge:
•
the directors’ statement that they consider that the annual report and financial statements
taken as a whole is fair, balanced and understandable, and provides the information
necessary for shareholders to assess the Group’s position and performance, business model
and strategy;
the section of the annual report describing the work of the Audit Committee, including the
significant issues that the audit committee considered in relation to the financial statements,
and how these issues were addressed; and
the section of the annual report that describes the review of the effectiveness of the Group’s
risk management and internal control systems.
Disclosures of emerging and principal risks and longer-term viability
We are required to perform procedures to identify whether there is a material inconsistency
between the directors’ disclosures in respect of emerging and principal risks and the viability
statement, and the financial statements and our audit knowledge.
We are required to review the part of the Corporate Governance Statement relating to the
Group’s compliance with the provisions of the UK Corporate Governance Code specified by
the Listing Rules for our review. We have nothing to report in this respect.
Based on those procedures, we have nothing material to add or draw attention to in relation to:
•
the directors’ confirmation within the viability statement on pages 110 and 111 that they
have carried out a robust assessment of the emerging and principal risks facing the Group,
including those that would threaten its business model, future performance, solvency and
liquidity;
the Principal Risks disclosures describing these risks and how emerging risks are identified,
and explaining how they are being managed and mitigated; and
the directors’ explanation in the viability statement of how they have assessed the prospects
of the Group, over what period they have done so and why they considered that period to
be appropriate, and their statement as to whether they have a reasonable expectation that
the Group will be able to continue in operation and meet its liabilities as they fall due over
the period of their assessment, including any related disclosures drawing attention to any
necessary qualifications or assumptions.
•
•
We are also required to review the viability statement, set out on pages 110 and 111 under the
Listing Rules. Based on the above procedures, we have concluded that the above disclosures
112
Card Factory plc Annual Report and Accounts 2023
7. We have nothing to report on the other matters on which we are required to
report by exception
Under the Companies Act 2006, we are required to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent Company, or returns
adequate for our audit have not been received from branches not visited by us; or
the parent Company financial statements and the part of the Directors’ Remuneration
Report to be audited are not in agreement with the accounting records and returns; or
•
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
We have nothing to report in these respects.
Contents Generation – PageContents Generation – Sub PageContents Generation - Section 8. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 113, the directors are responsible
for: the preparation of the financial statements including being satisfied that they give a true
and fair view; such internal control as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error;
assessing the Group and parent Company’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern; and using the going concern basis of accounting
unless they either intend to liquidate the Group or the parent Company or to cease operations,
or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue our
opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not
guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/
auditorsresponsibilities.
The Company is required to include these financial statements in an annual financial report
prepared using the single electronic reporting format specified in the TD ESEF Regulation.
This auditor’s report provides no assurance over whether the annual financial report has been
prepared in accordance with that format.
9. The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company’s members, as a body, in accordance with Chapter
3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might
state to the Company’s members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company and the Company’s members, as a
body, for our audit work, for this report, or for the opinions we have formed.
Nick Plumb (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 Sovereign Square
Sovereign Street
Leeds
LS1 4DA
2 May 2023
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113
Contents Generation – PageContents Generation – Sub PageContents Generation – Section
CONSOLIDATED INCOME STATEMENT
For the year ended 31 January 2023
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 January 2023
Revenue
Cost of sales
Gross profit
Other operating income
Operating expenses
Operating profit
Finance expense
Profit before tax
Taxation
Profit for the year
Earnings per share
– Basic
– Diluted
All activities relate to continuing operations.
Note
3
3
6
7
9
9
2023
£m
463.4
(302.7)
160.7
–
(96.9)
63.8
(11.4)
52.4
(8.2)
44.2
pence
12.9
12.8
2022
£m
364.4
(247.9)
116.5
8.0
(92.9)
31.6
(20.5)
11.1
(3.0)
8.1
pence
2.4
2.4
Profit for the year
Items that may be recycled subsequently into profit or loss:
Exchange differences on translation of foreign operations
Cash flow hedges – changes in fair value
Cost of hedging reserve – changes in fair value
Tax relating to components of other comprehensive income
(note 13)
Other comprehensive income for the period, net of income tax
2023
£m
44.2
(0.2)
8.2
(0.2)
(1.2)
6.6
2022
£m
8.1
–
4.1
–
(0.6)
3.5
Total comprehensive income for the period attributable to equity
shareholders of the Parent
50.8
11.6
114
Card Factory plc Annual Report and Accounts 2023
Contents Generation – PageContents Generation – Sub PageContents Generation - Section CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 January 2023
Non-current assets
Intangible assets
Property, plant and equipment
Right of use assets
Deferred tax assets
Derivative financial instruments
Current assets
Inventories
Trade and other receivables
Derivative financial instruments
Cash at bank and in hand
Total assets
Current liabilities
Borrowings
Lease liabilities
Trade and other payables
Provisions
Tax payable
Derivative financial instruments
Non-current liabilities
Borrowings
Lease liabilities
Derivative financial instruments
Total liabilities
Net assets
Note
10
11
12
13
24
14
15
24
16
17
12
18
22
24
17
12
24
2023
£m
326.3
32.2
100.5
2.1
0.5
461.6
45.3
13.3
5.3
11.7
75.6
537.2
(50.1)
(27.3)
(84.7)
(9.5)
–
(1.4)
2022
£m
320.7
31.6
98.5
3.6
1.3
Equity
Share capital
Share premium
Hedging reserve
Cost of hedging reserve
Reverse acquisition reserve
455.7
Merger reserve
Retained earnings
Note
19
19
2023
£m
3.4
202.2
3.5
(0.1)
(0.5)
2.7
57.0
2022
£m
3.4
202.2
1.3
–
(0.5)
2.7
10.5
Equity attributable to equity holders of the Parent
268.2
219.6
The financial statements on pages 114 to 142 were approved by the Board of Directors on
2 May 2023 and were signed on its behalf by
Darcy Willson-Rymer
Chief Executive Officer
33.1
8.1
0.8
38.3
80.3
536.0
(25.5)
(41.1)
(71.7)
(12.2)
(1.5)
(0.2)
(173.0)
(152.2)
(17.4)
(78.1)
(0.5)
(96.0)
(269.0)
(85.5)
(78.7)
–
(164.2)
(316.4)
268.2
219.6
115
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Contents Generation – PageContents Generation – Sub PageContents Generation – Section
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 January 2023
At 31 January 2021
Total comprehensive income for the period
Profit or loss
Other comprehensive income
Hedging gains/(losses) and costs of hedging transferred to the cost of inventory
Deferred tax on transfers to inventory
Transactions with owners, recorded directly in equity
Share-based payment charges (note 25)
Dividends (note 8)
Total contributions by and distributions to owners
At 31 January 2022
Total comprehensive income for the period
Profit or loss
Other comprehensive income
Hedging gains/(losses) and costs of hedging transferred to the cost of inventory
Deferred tax on transfers to inventory
Transactions with owners, recorded directly in equity
Share-based payment charges (note 25)
Dividends (note 8)
Total contributions by and distributions to owners
Share
capital
£m
3.4
Share
premium
£m
202.2
Hedging
reserve
£m
Cost of hedging
reserve
£m
Reverse
acquisition
reserve
£m
(3.1)
0.4
(0.5)
Merger
reserve
£m
2.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3.4
202.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3.3
3.3
1.4
(0.3)
–
–
–
1.3
–
6.1
6.1
(5.2)
1.3
–
–
–
–
–
–
(0.5)
0.1
–
–
–
–
–
(0.1)
(0.1)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.5)
2.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Retained
earnings
£m
1.4
8.1
0.2
8.3
–
–
0.8
–
0.8
10.5
44.2
0.6
44.8
–
–
1.7
–
1.7
Total
equity
£m
206.5
8.1
3.5
11.6
0.9
(0.2)
0.8
–
0.8
219.6
44.2
6.6
50.8
(5.2)
1.3
1.7
–
1.7
At 31 January 2023
3.4
202.2
3.5
(0.1)
(0.5)
2.7
57.0
268.2
116
Card Factory plc Annual Report and Accounts 2023
Contents Generation – PageContents Generation – Sub PageContents Generation - Section CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 January 2023
NOTES TO THE FINANCIAL STATEMENTS
Note
20
11
10
Cash from operations
Corporation tax paid
Net cash inflow from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Net cash outflow from investing activities
Cash flows from financing activities
Interest paid on bank borrowings
Proceeds from bank borrowings
Repayment of bank borrowings
Other financing costs paid
Payment of lease liabilities
Interest in respect of lease liabilities
Net cash outflow from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Closing cash and cash equivalents
16
2023
£m
107.8
(7.9)
99.9
(8.8)
(9.4)
(18.2)
(6.2)
27.8
(72.9)
(1.8)
(52.5)
(4.5)
(110.1)
(28.4)
38.3
9.9
2022
£m
113.6
0.1
113.7
(3.6)
(3.3)
(6.9)
(6.5)
57.0
(65.0)
(8.7)
(54.5)
(3.3)
(81.0)
25.8
12.5
38.3
1 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, Wakefield 41 Industrial Estate, Wakefield WF2 0XG.
These consolidated financial statements consolidate the financial statements of the Company
and its subsidiaries (together referred to as ‘the Group’). A full list of the Group’s subsidiaries is
provided in note 4 to the Parent Company accounts.
Throughout these financial statements, references to ‘FY23’ refer to the financial year ending
31 January 2023, and references to ‘FY22’ refer to the financial year ending 31 January 2022.
Basis of preparation
These financial statements have been prepared in accordance with UK-adopted International
Financial Reporting Standards (‘UK IFRS’) and applicable law.
The financial statements have been prepared on a going concern basis under the historical cost
convention, except for certain assets and liabilities that are measured at fair value (principally
derivative financial instruments).
Accounting judgements and estimates
The preparation of financial statements in conformity with UK IFRS requires judgement to be
applied in forming the Group’s accounting policies. It also requires the use of estimates and
assumptions that affect the reported amount of assets, liabilities, income and expenses. Actual
results may subsequently differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates
are recognised prospectively in the period in which the estimate is revised.
The Group does not consider there to be any judgements made in the current period that have
had a significant effect on the amounts recognised in the financial statements.
Key sources of estimation uncertainty
The key sources of estimation uncertainty, being those estimates and assumptions that carry
the most significant risk of a material adjustment to the carrying amounts of assets and
liabilities in the next financial year, are set out below.
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1 Accounting policies continued
Inventories
The Group holds significant volumes, and a broad range of inventory. The inventory provision
is calculated in accordance with a documented policy, that is based on historical experience
and the Group’s stock management strategy, which determines the range of product that
will be available for sale in-store and online. The Group provides against the carrying value
of inventories where it is anticipated the amount realised may be below the cost recognised.
Provision is made in full where there are no current plans to trade prior season stock through
stores, and partial provision is made against seasonal stock from prior seasons or where certain
ranges do not perform as anticipated. The amounts provided for partial provisions are adjusted
annually to reflect experience.
The Group applied a consistent inventory provisioning policy with that applied in the prior
year, making only small amendments to partial provisioning percentages based on the Group’s
experience of stock sell through rates for partially provided product lines. These changes are
not considered to have had a material impact on the overall value of the provision, although
reduced the value of the provision compared to the prior year.
At the end of FY23, the total inventory provision was £16.1 million (FY22: £20.7 million), comprised
of fully-provided stock lines of £4.3 million and partially provided lines of £11.8 million. The
reduction in the value of the provision year-on-year generally reflects the normalisation of
stock levels following the Covid-19 pandemic and supply chain challenges experienced in the
prior year (which have resulted in a reduction in the value of stock lines provided for in full), as
well as the reduction due to changes in provisioning percentages described above. As a result,
the overall proportion of gross inventory provided for reduced compared to the prior year.
The full range of reasonably possible outcomes in respect of the provision is difficult to calculate
at the balance sheet date as it is dependent on the accuracy of forecasts for sales volumes and
future decisions we may take on aged, discontinued and potentially excess stock in response
to market and supply developments. The Group believes it has taken a cautious approach
in determining the provision. It has considered the nature of the estimates involved and has
concluded that it is possible, on the basis of existing knowledge, that outcomes within the next
financial year may be different from the Group’s assumptions applied as at 31 January 2023,
and could require a material adjustment to the carrying amount of the provision in the next
financial year.
The two elements of the provision which are most sensitive to judgement are:
• A £8.5 million provision for aged and discontinued stock, the gross value of which is
£10.1 million, which assumes limited sell-through and is consistent with the current
merchandising plan; and
• A further £7.9 million provision, which represents 50% of a gross carrying amount of
£15.7 million), reflecting our current estimates of future sell-through of stock lines with high
forecast sales cover, or which are carried forward from prior seasons, and our expectations of
product life.
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Grant income
During the previous financial year, the Group received financial assistance under various
Government schemes intended to support businesses affected by local and national restrictions
during the Covid-19 pandemic, including CJRS payments, business rates relief and lockdown
grant payments. IAS 20 requires that the Group has reasonable assurance that the various
conditions attached to Government grants will be complied with before recognising the income
in its financial statements. Income received under the lockdown grant schemes is subject to
conditions applied by the UK’s subsidy control regime, in addition to the rules and conditions
attached to each individual grant. The most material of these conditions relate to determining
the eligible period for grant receipts and the calculation of the Group’s ‘uncovered fixed costs’
in the eligible period, upon which the value of permitted relief is based. The nature of the
grants received, and the unprecedented nature of the pandemic and the support mechanisms
available, means the conditions and rules attached to each payment are complex and open
to a degree of interpretation at the balance sheet date. Accordingly, the Group had to make
certain assumptions regarding which of the payments received it is reasonably certain to have
met all of the conditions, and thus that the grants are unlikely to be repaid in a future period.
After making a provision for amounts the Group does not believe meet the above criteria (see
note 22), the Group recognised £8.0 million of other operating income in relation to such grants
received during FY22.
During FY23, the Group formally settled its CJRS position with HMRC utilising £2.3 million and
releasing £2.5 million from the provision. The Group has received no new substantive evidence
regarding its position in respect of other support received and accordingly has not changed
its position. A provision of £7.4 million continues to be held in respect of potential repayment
of support received in excess of subsidy control thresholds, consistent with the provision held
in the prior year for the same purpose. The minimum provision requirement is expected to be
£4.5 million. Subject to interpretation of the guidance relating to individual support schemes
and subsidy control thresholds, the Group believes a range of reasonably possible outcomes
remains and that the Group’s provision reflects a cautious assessment of the amount that may
be repayable.
Other sources of estimation uncertainty
Impairment testing
An impairment review is conducted annually in respect of goodwill, and as required for other
assets and cash-generating units (‘CGUs’) where an indicator of potential impairment exists.
The carrying amounts of the assets involved and the level of estimation uncertainty inherent
in determining appropriate assumptions for the calculation of the assets’ recoverable amounts
means impairment reviews are an area of significant management focus. However, whether that
estimation uncertainty is significant to the financial statements is not known until the analysis is
concluded. The Group generally considers the estimation uncertainty in impairment reviews to
be significant if a reasonably possible change in the key assumptions would lead to a material
change in the accounting outcome. In FY23, the Group conducted an impairment review in
respect of goodwill. The carrying amount of goodwill in the consolidated balance sheet of
£313.8 million is allocated in its entirety to the group of CGUs, shared assets and functions that
comprise the Group’s stores business.
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In addition, the Group conducted a store-level impairment review specifically covering right-of-
use assets and property, plant and equipment insofar as directly allocable to stores. The Group
assesses indicators of impairment for the store portfolio on the basis of whether a material
impairment charge (or reversal) could arise in respect of the store portfolio as a whole in the
period. Due to the challenging macro-economic environment, existence of a material carried
forward impairment charge, and an ongoing expectation that up to 1-2% of the store portfolio
can be loss-making at any time, the Group concluded this condition was met for FY23.
Due to the existence of intangible assets that are not yet ready for use, the Group also
conducted an impairment test of each of the Card Factory Online and Getting Personal CGUs.
The Group assessed the recoverable amount of all CGUs on a value in use basis, using
consistent assumptions across all reviews where applicable, with estimates of future cash
flows derived from forecasts included within the Group’s approved budget adjusted to exclude
cash flows from new stores and initiatives so as to assess the assets in their current state and
condition. Where impairment reviews are prepared in respect of assets not yet ready for use,
future development costs and revenues are not excluded so as to fairly reflect the value of
the assets being developed and costs to complete. The assessment of future cash flows that
underpin such impairment reviews inherently require the use of estimates, notably in respect of
future revenues, operating costs including material, freight, wage and energy inflation, terminal
growth rates, foreign currency exchange rates and discount rates.
The results of the impairment tests are set out in note 10 (goodwill and intangible assets) and
note 12 (stores). The impairment tests in respect of the stores business and Card Factory Online
had significant headroom and accordingly, having undertaken scenario analysis on the key
assumptions, the Group does not believe there are any reasonably possible changes in those
key assumptions that would lead to an impairment.
The Group booked a net impairment charge in respect of stores of £1.3 million, which is
comprised of £3.7 million of impairment charges and £2.4 million of impairment charge
reversals. The reversals reflect those stores where an impairment charge made in a prior period
has been reversed due to improved trading. Having considered scenarios consistent with those
reviewed in respect of goodwill impairment testing, the Group is satisfied that reasonable
changes in the key assumptions would not materially change the impairment charge for stores.
Climate change
The Group has reviewed the potential impact of climate change and ESG-related risks and
uncertainties on the consolidated financial statements. Given the nature of the Group’s business
and operations, the exposure to both physical and transitional risks associated with climate
change is considered to be low.
In particular, the Group has considered climate change in respect of impairment testing
(potential impact of climate and ESG risks on estimates of future cash flows, notes 10 and 11),
going concern (note 1, below), and inventory provisions (impact of customer preferences and
ESG considerations on potential stock obsolescence, note 14 and above) and concluded in each
case that there is no material impact in each area at 31 January 2023.
Going concern basis of accounting
The Board continues to have a reasonable expectation that both the Group and the Parent
Company have adequate resources to continue in operation for at least the next 12 months and
that the going concern basis of accounting remains appropriate.
The Group has delivered a strong financial performance in the current financial year, with
encouraging sales momentum in the first full year of trading after two consecutive years that
were materially affected by the Covid-19 pandemic. LFL sales have been positive and broadly in
line when compared to pre-pandemic, and as a result the Group has delivered robust operating
cash flows, cleared deferred VAT and rent payments, and reduced net debt and leverage year-
on-year. Trading since the balance sheet date has remained in line with expectations and there
have been no material events that have affected the Group’s liquidity headroom.
The Group renewed its financing facilities with its banking partners in April 2022, reducing the
quantum of the Group’s term loan facilities to £150 million and extending the tenure of the
Group’s debt to September 2025 (see note 17). The first scheduled repayments under these
facilities were made in January 2023, with full repayment of the Coronavirus Large Business
Interruption Loan Scheme (‘CLBILS’) facilities by September 2023. Following the final repayment
of the CLBILs facilities, the Group does not expect to utilise further government backed support
going forward, other than those schemes that are generally available in the ordinary course
of business (such as rates reliefs). The Board believes the renewed facilities provide adequate
liquidity and headroom for the Group to execute its strategic plan. At 31 January 2023, net debt
excluding lease liabilities was £57.2 million.
The Group booked an impairment charge in respect of intangible assets in Getting Personal
of £1.5 million, reflecting costs incurred in developing a new Online Platform that will not form
part of the final solution once deployed and will thus not be supported by future cash flows.
The remaining carrying amount of the Getting Personal CGU is not material, and therefore no
change in assumptions would result in a material additional impairment charge.
The UK Corporate Governance Code requires that an assessment is made of the Group’s
ability to continue as a going concern for a period of at least 12 months from the signing of
these financial statements; however it is not specified how far beyond 12 months should be
considered.
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For the purpose of assessing the going concern assumption, the Group has prepared cash
flow forecasts for the 12 month period following the date of approval of these accounts, which
incorporate the updated debt facilities and related covenant measures. These forecasts are
extracted from the Group’s approved budget and strategic plan which covers a period of five
years. Within the 12-month period, the Group has considered qualitative scenarios and the
Group’s ability to operate within its existing banking facilities and meet covenant requirements.
Beyond the 12-month period, the Group has qualitatively considered whether any factors (for
example the timing of debt repayments, or longer-term trading assumptions) indicate a longer
period warrants consideration.
The results of this analysis were:
• The Group’s base case forecasts indicate that the Group will continue to trade profitably,
generate positive operating cash flows and make scheduled debt repayments whilst
retaining substantial liquidity headroom against current facility limits and meet all covenant
requirements on the relevant test dates (see note 17 for more information in respect of
covenant requirements) in the 12 month period.
• Whilst debt repayments continue in the period following the going concern assessment, they
are much lower in the 12 months immediately following (c.£9 million) than those occurring in
the going concern period itself (c.£27 million).
In the Board’s view, there are no other factors arising in the period immediately following
12 months from the date of these accounts that warrant further consideration.
•
• Scenario analysis, which considered a reduction in sales, profitability and cash flows on both
a permanent basis of circa 10%, or a significant one-off event affecting the Christmas period
and reducing sales by 20%, indicated that the Group would maintain liquidity headroom
and covenant compliance throughout the 12 month period. The analysis did not consider any
potential upside from mitigating actions that could be taken to reduce discretionary costs
and provide further headroom.
In addition, the Group conducted a reverse stress test analysis which considered the extent of
sales loss or cost increase that would be required to result in either a complete loss of liquidity
headroom, or a covenant breach during the period. Seasonality of the Group’s cash flows,
with higher purchases and cash outflows over the summer to build stock for Christmas, means
liquidity headroom is at its lowest in September and October ahead of the Christmas season.
Conversely, covenant compliance is most sensitive early in the year.
The reverse stress test analysis demonstrated that the level of sales loss or cost increase
required (either on a sustained basis or as a significant one-off downside event) to result in
a breach would require circumstances akin to a pandemic lockdown for a period of several
weeks, or other events with a similar quantum of effect that would be unprecedented in nature.
Accordingly, such scenarios are not considered to be reasonably likely to occur. As with the
scenario analysis above, the stress test was conducted before considering any potential benefit
from available mitigating actions.
Over the preceding two years, the business has demonstrated a significant degree of resilience
and a proven ability to manage cash flows and liquidity during a period of unprecedented
economic downturn. Accordingly the Board retains confidence that, were such a level of
downturn to reoccur in the assessment period, the Group would be able to take action to
mitigate its effects.
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 principal accounting policies, set out below, have been applied consistently to all periods
presented in these consolidated financial statements.
Changes in significant accounting policies
The following new standards and amendments to IFRS were effective for the first time in the
current financial year:
• Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41 – Annual Improvements to IFRS 2018-2020
• Amendments to IAS 37 – Onerous contracts – cost of fulfilling a contract
• Amendments to IAS 16 – Property, plant & equipment – proceeds before intended use
• Amendments to IFRS 3 – Reference to the conceptual framework
• Amendment to IFRS 16 – Covid-19-related rent concessions beyond 30 June 2021
New standards and amendments to existing standards effective in the period have not had a
material effect on the Group’s financial statements.
UK endorsed standards and amendments issued but not yet effective
The following new standards and amendments to IFRS have been issued but are not yet
effective.
•
• Amendments to IFRS 17 – Initial application of IFRS 17 and IFRS 9 – comparative
IFRS 17 – Insurance Contracts1,
information1,
• Amendments to IFRS 4 – Extension to the temporary exemption from applying IFRS 91
• Amendments to IAS 1 – Disclosure of accounting policies1
• Amendments to IAS 12 – Deferred tax related to assets and liabilities arising from a single
transaction1,
• Amendments to IAS 8 – Definition of accounting estimates2
1 Effective for annual periods starting on or after 1 January 2023.
2 Effective for annual periods starting on or after 1 January 2024.
The application of these standards and amendments in future periods is not currently expected
to have a material impact on the Group’s financial statements.
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Basis of consolidation
These consolidated financial statements incorporate the financial results of the Company and
all of its subsidiaries made up to 31 January each year. Subsidiaries are entities controlled by
the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability to direct the activities that affect those
returns through its power over the entity. The financial statements of subsidiaries are included in
the consolidated financial statements from the date on which control commences until the date
on which control ceases. Intercompany transactions and balances between Group companies
are eliminated upon consolidation.
Business combinations
Subject to the transitional relief in IFRS 1, all business combinations have historically been
accounted for by applying the acquisition method as at the acquisition date, which is the date
on which control is transferred to the Group, as set out in IFRS 3.
The Group measures goodwill at the acquisition date as the fair value of the consideration
transferred less the fair value of identifiable assets acquired and liabilities assumed. Any
contingent consideration payable is recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration are recognised in profit or loss. Costs
related to the acquisition are expensed to the income statement as incurred.
Acquisitions prior to 1 February 2011 (date of transition to IFRS)
IFRS 1 grants certain exemptions from the full requirements of IFRS in the transition period.
The Group and Company elected not to restate business combinations that took place prior
to 1 February 2011. In respect of acquisitions prior to the transition date, goodwill is included
at 1 February 2011 on the basis of its deemed cost at that date, which represents the amount
recorded under UK GAAP.
Government grants
Income associated with Government support initiatives is recognised where there is reasonable
assurance that the grant will be received and the Group will comply with all attached
conditions. Grants are recognised in the income statement over the period necessary to match
them with the related costs for which they are to compensate. If costs have already been
incurred, the grant income is recognised immediately at the point the above criteria are met.
Government support received by the Group in the previous year principally reflect amounts
received under Covid-19 support initiatives, including the CJRS, business rates relief, and various
other grants available to non-essential retailers that were forced to close during periods of
local and national lockdown (collectively referred to in these financial statements as ‘lockdown
grants’). When considering its entitlement to grant income, the Group has considered the extent
to which the amount received is within the limits imposed by relevant state aid and subsidy
control rules.
Employee costs and business rates charges in the income statement are presented net of CJRS
support and rates relief received respectively. Grant income received in relation to Covid-19
lockdown grants is presented separately as other operating income.
Where the Group has received income in connection with government grants but does not
believe it will comply with all of the attached conditions, a provision is made for the Group’s
best estimate of amounts that will be repaid.
In addition, Group has accessed, and continues to benefit from, financing facilities under
the CLBILS. The CLBILS facilities are backed by a government guarantee. As this guarantee
cannot reasonably have a value placed upon it, the Group considers the guarantee a form
of government assistance under IAS 20. The Group has accounted for its CLBILS facilities in
accordance with its usual policy for bank borrowings, described below under ‘non-derivative
financial liabilities’. The key terms of the CLBILS facilities are described in note 17.
Revenue
Group revenue is principally attributable to the retail sale of cards, dressings and gifts subject
to a single performance obligation fulfilled by receipt of goods at the point of payment with
minimal returns and refunds. Revenue is recognised at the point the customer is deemed to
have taken delivery of the goods.
Finance expense
Finance expense comprises interest charges, including interest on leases under IFRS 16, and
losses on interest rate derivative financial instruments. Borrowing costs that are directly
attributable to the acquisition, construction or production of an asset that takes a substantial
time to be prepared for use, are capitalised as part of the cost of that asset.
Revenue attributable to retail partners and non-retail customers currently represents a small
percentage of Group Revenue and is typically characterised by single performance obligations
and standard Group products.
Certain contracts with retail partners may be subject to a cost of entering into the contract
along with a minimum order quantity and/or volume related rebate for an initial period of the
contract. Revenue subject to potential rebate is deferred as a contract liability to the extent the
volume related terms are yet to be satisfied. Costs of entering into a contract are treated as a
contract asset and expensed to the income statement as performance obligations are fulfilled
for goods subject to the minimum order quantity. These amounts are not material in the current
year reflecting the small proportion of revenue arising under such contracts.
Interest expense is recognised in the income statement as it accrues, using the effective
interest method. The effective interest method takes into account fees, commissions or other
incremental transaction costs integral to the yield. Accounting policies for leases are detailed
separately.
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Foreign currencies
Functional and presentation currency
The consolidated financial statements are presented in pound Sterling, which is the functional
currency of the Company.
Foreign operations
The Group has one foreign subsidiary with a Euro functional currency. On consolidation,
assets and liabilities of foreign operations are translated into Sterling at the prevailing market
exchange rate on the balance sheet date. The results of foreign operations are translated into
Sterling at average rates of exchange for the year.
Transactions and balances
The Group has currency transactions in respect of inventory purchases and certain sales to retail
partners that are denominated in US Dollars. Transactions in foreign currencies are recorded
at the exchange rate on the transaction date. Foreign exchange gains and losses resulting
from the settlement of such transactions and from the translation at year-end exchange rates
of monetary assets and liabilities denominated in foreign currencies are recognised in the
income statement within cost of sales, except when deferred in other comprehensive income as
qualifying cash flow hedges. Foreign currency gains and losses are reported on a net basis.
Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in
the income statement except to the extent that it relates to items recognised directly in equity
or through other comprehensive income, in which case it is recognised in equity or other
comprehensive income respectively.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year,
using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment
to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes. The
following temporary differences are not provided for: the initial recognition of goodwill; the initial
recognition of assets or liabilities that affect neither accounting nor taxable profit other than in
a business combination, and differences relating to investments in subsidiaries to the extent that
they will probably not reverse in the foreseeable future. The amount of deferred tax provided is
based on the expected manner of realisation or settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will
be available against which the temporary difference can be utilised.
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Dividends
Dividends are recognised as a liability in the period in which they are approved.
Financial instruments
Non-derivative financial assets
Non-derivative financial assets comprise trade and other receivables and cash and cash
equivalents. The Group classifies all its non-derivative financial assets as financial assets at
amortised cost. Financial assets at amortised cost are initially measured at fair value plus
directly attributable transaction costs, except for trade and other receivables without a
significant financing component that are initially measured at transaction price. Subsequent to
initial recognition non-derivative financial assets are carried at amortised cost less allowances
for expected credit losses.
Cash and cash equivalents comprise cash in hand, at bank and on short-term deposit for less
than three months. Bank overdrafts, within borrowings, that are repayable on demand and form
an integral part of the Group’s cash management are included as a component of cash and
cash equivalents for the purpose of the cash flow statement.
Non-derivative financial liabilities
Non-derivative financial liabilities comprise bank borrowings and trade and other payables.
Non-derivative financial liabilities are initially recognised at fair value, less any directly
attributable transaction costs and subsequently stated at amortised cost using the effective
interest method. Accounting policies for lease liabilities are detailed separately.
Where bank borrowings are refinanced, the Group assesses whether the transaction results
in new facilities or a modification of the previous facilities. Where the transaction results in a
modification of the facilities, the Group assesses whether that modification is substantial by
reference to whether the present value of the cash flows of the new facilities is more than 10%
different to the present value of the cash flows of the previous facilities. Where a modification
is substantial, the Group derecognises the original liability and recognises a new liability for the
modified facilities with any transaction costs expensed to the income statement. Where the
modification is non-substantial, the Group amends the carrying amount of the liability to reflect
the updated cash flows and amends the effective interest rate from the modification date.
The modification of the Group’s borrowings as a result of the refinancing in April 2022 was
assessed to be non-substantial.
Derivative financial instruments
Derivative financial instruments are mandatorily categorised as fair value through profit or loss
(‘FVTPL’) except to the extent they are part of a designated hedging relationship and classified
as cash flow hedging instruments.
The Group utilises foreign currency derivative contracts and US Dollar denominated cash
balances 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.
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Derivative financial instruments not designated as an effective hedging relationship principally
relate to structured foreign exchange options that form part of the foreign exchange risk
management policy detailed in note 23 of the financial statements. Gains and losses in respect
of foreign exchange and interest rate derivative financial instruments that are not part of an
effective hedging relationship are recognised within cost of sales and net finance expense.
If the hedged future cash flows are no longer expected to occur, then the amounts that have
been accumulated in the hedging reserve and the cost of hedging reserve are immediately
reclassified to profit or loss.
Fair value estimation
The techniques applied in determining the fair values of financial assets and liabilities are
disclosed in note 24.
Cash flow hedges
The Group applies cash flow hedge accounting in respect of certain derivative financial
instruments for the forward purchase of foreign currency, and interest rate swaps. The Group’s
hedging activities are described in further detail in note 23.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and
accumulated impairment losses.
When a derivative is designated as a cash flow hedging instrument, the effective portion of
changes in the fair value of the derivative is recognised in other comprehensive income (‘OCI’)
and accumulated in the hedging reserve. The effective portion of changes in the fair value of
the derivative that is recognised in OCI is limited to the cumulative change in fair value of the
hedged item, determined on a present value basis, from inception of the hedge. Any ineffective
portion of changes in the fair value of the derivative is recognised immediately in profit or loss.
The Group determines the existence of an economic relationship between the hedging
instrument and hedged item based on the currency, amount and timing of their respective cash
flows, applying a hedge ratio of 1:1. The Group assesses whether the derivative designated in
each hedging relationship is expected to be and has been effective in offsetting changes in
cash flows of the hedged item using the hypothetical derivative method.
In these hedge relationships, the main sources of ineffectiveness are:
• changes in the timing of the hedged transactions; and
•
the effect of the counterparties’ and the Group’s own credit risk on the fair value of derivative
contracts, which is not reflected in the change in the fair value of the hedged cash flows.
The Group designates only the change in fair value of the spot element of forward exchange
contracts as the hedging instrument in cash flow hedging relationships. The change in fair value
of the forward element of forward exchange contracts (‘forward points’) is separately accounted
for as a cost of hedging and recognised in a costs of hedging reserve within equity.
When foreign exchange hedged forecast transactions subsequently result in the recognition of
inventory, the amount accumulated in the hedging reserve and the cost of hedging reserve is
included directly in the initial cost of the inventory.
If the hedge no longer meets the criteria for hedge accounting or the hedging instrument is
sold, expires, is terminated or is exercised, then hedge accounting is discontinued prospectively.
When hedge accounting for cash flow hedges is discontinued, the amount that has been
accumulated in the hedging reserve remains in equity until it is included in the cost of inventory
on its initial recognition or, for interest cash flow hedges, it is reclassified to profit or loss in the
same period or periods as the hedged interest future cash flows affect profit or loss.
Depreciation is charged to the income statement on a straight-line basis over the estimated
useful lives as follows:
• buildings
•
• plant and equipment
•
fixtures and fittings
• motor vehicles
leasehold improvements shorter of 5 years and lease term
3–10 years
5 years
4 years
25–50 years
Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.
Intangible assets and goodwill
Goodwill
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to
CGUs (as described in note 10) and is not amortised but is tested annually for impairment.
Software
Computer software is carried at cost less accumulated amortisation and any provision
for impairment. Costs relating to development of computer software are capitalised if the
recognition criteria of IAS 38 ‘Intangible Assets’ are met or expensed as incurred otherwise.
Other intangible assets
Other intangible assets that are acquired by the Group are stated at cost less accumulated
amortisation and less accumulated impairment losses.
Amortisation
Amortisation is charged to the income statement on a straight-line basis over the estimated
useful lives of intangible assets unless such lives are indefinite. Intangible assets with an
indefinite useful life and goodwill are systematically tested for impairment at each balance
sheet date. Other intangible assets are amortised from the date they are available for use. The
estimated useful life of software is three to five years.
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
1 Accounting policies continued
Impairment of non-financial assets
The carrying values of non-financial assets are reviewed for impairment where there is
an indication of impairment. If an impairment loss arises, the asset value is adjusted to its
estimated recoverable amount and the impairment loss is recognised in the income statement.
Merger reserve
On 30 April 2014 Card Factory plc acquired 100% of the share capital of CF Topco Limited in
a share for share exchange, thereby inserting Card Factory plc as the Parent Company of the
Group. The shareholders of CF Topco Limited became 100% owners of the enlarged share
capital of Card Factory plc. The premium arising on the issue of shares is recognised in the
merger reserve.
Goodwill and intangible assets not yet ready for use or with an indefinite useful economic life
are reviewed for impairment annually.
Provisions
A provision is recognised where the Group has a present legal or constructive obligation as a
result of a past event, which will more likely than not result in the Group being required to make
a payment (or other outflow of economic benefits) in order to settle the obligation.
Provisions are valued at the Group’s best estimate of the amount that will be required to settle
the obligation.
Specific information in respect of the provisions recorded in each financial year covered by
these accounts is provided in the provisions note.
Inventories
Inventories are stated at the lower of cost and net realisable value.
For inventories manufactured by the Group, cost is based on the first-in first-out principle and
includes expenditure incurred in acquiring the inventories, production costs and other costs in
bringing them to their existing location and condition. For manufactured inventories and work in
progress, cost includes an appropriate share of overheads based on normal operating capacity.
Given the significant volumes involved, for inventories held in and for retail stores the Group
applies a standard costing methodology. Standard costs are based on agreed costs with
suppliers (or the Group’s internal cost of production) and are updated frequently. Where
components of the standard are based on market prices, such as for freight, the Group reviews
and updates the standard at least annually at the balance sheet date.
Provisions are made for obsolete, slow-moving and discontinued inventories, based on
experience and the Group’s merchandising plans for current and future seasons.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of
new shares are shown in equity as a deduction from the proceeds.
Share-based payments
The Company issues equity-settled share-based payments to employees within the Group
through the Card Factory Restricted Share Awards Scheme (‘RSA’) (previously through the
(‘LTIP’)) and the Card Factory SAYE Scheme (‘SAYE’), see note 25 for further details. The cost of
equity-settled share awards is measured as the fair value of the award at the grant date using
the Black-Scholes model.
The cost of the awards is expensed to the income statement, together with a corresponding
adjustment to equity, on a straight-line basis over the vesting period of the award. The total
income statement charge is based on the Group’s estimate of the number of share awards
that will eventually vest in accordance with the vesting conditions. The awards do not include
market-based vesting conditions. At each balance sheet date, the Group revises its estimate of
the number of awards that are expected to vest. Any revision to estimates is recognised in the
income statement, with a corresponding adjustment to equity.
Leases
Definition of a lease
Under IFRS 16, a contract is, or contains, a lease if the contract conveys a right to control the
use of an identified asset for a period of time in exchange for consideration. On transition to
IFRS 16, the Group elected to apply the practical expedient to grandfather the assessment of
which transactions are leases. Contracts that were not identified as leases under IAS 17 and
IFRC 4 were not reassessed. Therefore, the definition of a lease under IFRS 16 has been applied
only to contracts entered into or changed on or after 1 February 2019.
The Group has assessed that its entire store lease portfolio, some warehousing locations, an
office location and motor vehicles are lease contracts. Other contracts assessed, 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. The Group recognises the lease payments associated with these leases as an
expense on a straight-line basis over the lease term.
For property leases containing a non-lease component (for instance a lease inclusive of rates
and service charge), the Group has elected to apply the practical expedient not to separate
the non-lease component from the lease component and treat the whole contract as a lease.
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. The Group does
not have any significant lessor contracts.
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1 Accounting policies continued
Accounting as a lessee
The Group recognises a right-of-use asset and a lease liability at the lease commencement
date. The right-of-use asset is initially measured at cost, which comprises the initial amount of
the lease liability adjusted for any lease payments made at or before the commencement date,
plus any initial direct costs incurred, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the
commencement date to the end of the lease term. The right-of-use asset is periodically reduced
by any impairment losses, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not
paid at the commencement date, discounted using the interest rate implicit in the lease or, if that
rate cannot be readily determined, the Group’s incremental borrowing rate. Typically, the Group
uses its incremental borrowing rate, at the date of lease commencement, as the discount rate.
The Group determines its incremental borrowing rate by reference to its own funding
arrangements, which are subject to leverage margin ratchets, variable three-month SONIA
interest rates and periodic refinancing, thereby ensuring they remain a reasonable reflection
of the Group’s current borrowing costs. The Group’s leases are predominantly in respect of its
store portfolio, which represent the majority of the Group’s revenue and therefore the Group’s
borrowing costs, as at the date of lease commencement, are deemed to be representative of the
incremental borrowing costs for additions to right-of-use assets. The Group does not believe there
are significant differences between the risk margins that would apply across its lease portfolio.
The term and payment profile are reflected in the discount rate applied to each individual lease
by virtue of the variable interest-curve component of the incremental borrowing rate.
The assessment of lease term may include the application of judgement, particularly in respect
of options to break often included in the Group’s property leases. The Group assesses lease term
as the non-cancellable period of the lease plus an assessment of reasonably certain continued
tenancy in respect of tenant options to break or renew. This period usually equates to the full
term of the lease. The Group considers that lease renewal is reasonably certain when it has
determined whether the store meets its strategic requirements, and is confident the landlord is
supportive of lease renewal and on terms acceptable to the Group. This typically occurs in the
latter stages of an existing lease.
After initial recognition, the lease liability is measured at amortised cost using the effective
interest method. It is remeasured when there is a change in future lease payments arising from
a change in an index, rate or contractual market rent review or if there is a significant event or
change in circumstances as a result of which the Group changes its assessment of whether it
will exercise a break option. When the lease liability is remeasured in this way, a corresponding
adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or
loss if the carrying amount of the right-of-use asset has been reduced to zero.
From time to time, a lease may expire without a new lease being agreed. In such circumstances,
if the Group has not served or received notice under the terms of the lease, it may continue to
occupy the store whilst a new lease is agreed, referred to as a ‘holdover arrangement’. Most of
the store portfolio is protected by the Landlord and Tenant Act (1954), under which as tenant the
Group has an automatic right to a new lease subject to certain specific grounds under which the
landlord can cancel. Under a holdover arrangement, the lease typically continues on a rolling
basis on the same financial terms as the previous lease until new terms are formally agreed. The
Group accounts for holdover arrangements by assuming a new five-year lease with payments
equivalent to those previously agreed. Five years represents the average term of a lease
across the Group’s store portfolio, inclusive of break periods considered reasonably likely not
to be exercised. In rare circumstances, the holdover lease may be calculated using alternative
assumptions that better reflect the Group’s expectations regarding the likely cost and term of
the new lease being negotiated. When new terms are agreed, the holdover lease is modified
according to the Group’s normal accounting policy for lease modifications, as described above.
Where a lease expires at the end of its contractual term, including where the store in question
enters a holdover arrangement, the right-of-use asset cost and accumulated depreciation
associated with that lease is treated as a disposal.
2 Segmental reporting
Following investment in the Group’s people, systems and infrastructure to support its strategy,
the Group is organised into five main business areas which meet the definition of an Operating
segment under IFRS, those being cardfactory stores, cardfactory Online, Getting Personal,
Partnerships and Printcraft. Each of these business areas has a dedicated management team
and reports discrete financial information to the Board for the purpose of decision making.
• cardfactory stores retail greeting cards, celebration essentials, and gifts principally through
an extensive UK store network, with a small number of stores in the Republic of Ireland.
• cardfactory Online retails greeting cards, celebration essentials, and gifts via its
online platform.
• Getting Personal is an online retailer of personalised cards and gifts.
• Partnerships sells greeting cards, celebration essentials, and gifts via a network of third party
retail partners both in the UK and overseas.
• Printcraft is a manufacturer of greeting cards and personalised gifts, and sells the majority of
its output intra-group to the stores and online businesses.
The accounting policies applied in preparing financial information for each of the Group’s
segments are consistent with those applied in the preparation of the consolidated financial
statements. The Group’s support centre and administrative functions are run by the cardfactory
stores segment, with operating costs recharged to other segments where they are directly
attributable to the operations of that segment.
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2 Segmental reporting continued
The Board reviews revenue and EBITDA by segment, with the exception of Printcraft by virtue of
its operations being predominantly intra-group in nature. Whilst only cardfactory stores meets
the quantitative thresholds in IFRS to require disclosure, the Group’s other trading segments
are reported below as the Group considers that this information is useful to stakeholders in the
context of the Group’s ‘Opening Our New Future’ strategy.
Revenue and EBITDA for each segment, and a reconciliation to the consolidated operating
profit per the financial statements, is provided in the table below:
2023 – £m
Segment Revenue
Segment EBITDA
Depreciation,
amortisation &
impairment
Consolidated
Operating Profit
2022 – £m
Segment Revenue
Segment EBITDA
Depreciation,
amortisation &
impairment
Consolidated
Operating Profit
cardfactory
stores
cardfactory
Online
Getting
Personal
Partnerships
440.4
116.1
8.8
(2.2)
8.5
(1.5)
5.0
1.4
Other
0.7
(1.8)
Group
463.4
112.0
cardfactory
stores
cardfactory
Online
Getting
Personal
Partnerships
Other
335.1
82.0
10.9
0.6
12.9
1.0
4.6
2.3
0.9
(0.3)
(48.2)
63.8
Group
364.4
85.6
(54.0)
31.6
The ‘Other’ column principally reflects central overheads and Printcraft sales to third parties.
In the prior year, the Group disclosed a ‘Card Factory’ segment which was effectively an
aggregation of the cardfactory stores, cardfactory Online and Partnerships segments
disclosed above. The disclosure has been updated this year to reflect changes in the Group’s
organisational structure and internal reporting.
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 as, by segment, revenues are subject to substantially the same economic factors that
impact the nature, amount, timing and uncertainty of revenue and cash flows.
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Card Factory plc Annual Report and Accounts 2023
The table below sets out a geographical analysis of revenues for the current and prior year:
Revenue derived from customers in the UK
Revenue derived from customers overseas
Consolidated revenue
2023
£m
451.6
11.8
463.4
2022
£m
357.5
6.9
364.4
Revenue from overseas reflects revenues earned from the Group’s stores in the Republic of
Ireland and from retail partners based outside of the UK.
Of the Group’s non-current assets, £5.0 million (2022: £2.1 million) relates to assets based outside
of the UK, principally in relation to the Group’s stores in the Republic of Ireland. The increase
compared to the prior year reflects the impact of the increase in the store portfolio on the value
of right-of-use assets.
3 Operating profit
Operating profit is stated after charging/(crediting) the following items:
Staff costs (note 5)
Government grant income
Depreciation expense
– owned fixed assets (note 11)
– right of use assets (note 12)
Amortisation expense (note 10)
Impairment of right-of-use assets (note 12)
Impairment of intangible assets (note 10)
Profit on disposal of fixed assets
Foreign exchange gain
2023
£m
138.2
–
8.0
35.7
2.3
1.3
1.5
(0.6)
1.5
2022
£m
113.8
(8.0)
8.8
37.4
2.9
5.0
–
–
2.6
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3 Operating profit continued
The total fees payable by the Group to KPMG LLP and their associates during the period was as
follows:
Audit of the consolidated and Company financial statements
Amounts receivable by the Company’s auditor and its associates
in respect of:
Audit of financial statements of subsidiaries of the Company
Audit-related assurance services
Other assurance services
Total fees
2023
£’000
30
620
50
–
700
2022
£’000
30
340
45
288
703
Other assurance services provided in the prior year were in respect of assurance services in
connection with the Group’s financial statements for transactions that did not proceed. The
appointment of KPMG LLP to provide such services was made in accordance with the Group’s
policy on external auditors supplying non-audit services.
4 EBITDA
EBITDA represents profit for the period before net finance expense, taxation, gains or losses on
disposal, depreciation, amortisation and impairment charges.
Operating profit
Depreciation, amortisation and impairment
EBITDA
2023
£m
63.8
48.2
112.0
2022
£m
31.6
54.0
85.6
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:
Management and administration
Operations
2023
Number
482
9,367
9,849
2022
Number
434
8,736
9,170
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The aggregate payroll costs of all employees including Directors were as follows:
Employee wages and salaries
Equity-settled share-based payment expense
Social security costs
Defined contribution pension costs
Total employee costs
Agency labour costs
Total staff costs
2023
£m
120.5
1.7
8.2
1.8
132.2
6.0
138.2
2022
£m
99.8
0.8
6.5
1.5
108.6
5.2
113.8
Total employee costs are presented net of £nil (2022: £9.4 million) recovered through the CJRS.
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:
Salaries and short-term benefits
Equity-settled share-based payment expense
Social security costs
Defined contribution pension costs
Remuneration of Directors
Directors’ remuneration
Amounts receivable under long-term incentive schemes
Company contributions to defined contribution pension plans
2023
£m
6.1
1.4
0.8
0.2
8.5
2023
£m
1.9
0.1
–
2.0
2022
£m
4.4
0.6
0.6
0.1
5.7
2022
£m
1.8
0.1
–
1.9
The table above includes the remuneration of Directors in each year. Director’s remuneration for
the period includes £40k in respect of compensation for loss of office for Kris Lee following his
resignation on 31 January 2023. Amounts receivable under long-term incentive schemes reflects
the value of options exercised during the year. Further details of the remuneration of the current
Directors are disclosed in the Directors’ Remuneration Report on pages 80 to 95. The basis of
calculation for certain items described in the Directors’ Remuneration Report may differ to that
used in this note, reflecting differences in the relevant regulations.
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
6 Finance expense
Finance expense
Interest on bank loans and overdrafts
Amortisation of loan issue costs
Lease interest
2023
£m
6.0
0.9
4.5
11.4
2022
£m
6.8
10.4
3.3
20.5
7 Taxation
The tax charge includes both current and deferred tax. The tax charge reflects the estimated
effective tax on the profit before tax for the Group for the year ending 31 January 2023 and the
movement in the deferred tax balance in the year, so far as it relates to items recognised in the
income statement.
Taxable profit or loss differs from profit or loss before tax as reported in the income statement,
because it excludes items of income or expenditure that are either taxable or deductible in
other years or never taxable or deductible.
Recognised in the income statement
Current tax charge/(credit)
Current year
Adjustments in respect of prior periods
Total current tax charge
Deferred tax charge/(credit)
Origination and reversal of temporary differences
Adjustments in respect of prior periods
Effect of change in tax rate
Total deferred tax charge
Total income tax charge
2023
£m
8.3
(1.6)
6.7
2.5
(1.8)
0.8
1.5
8.2
2022
£m
1.2
0.8
2.0
1.2
(0.7)
0.5
1.0
3.0
The effective tax rate of 15.6% (2022: 27.0%) on the profit before taxation for the year is lower
than (2022: higher than) the average rate of mainstream corporation tax in the UK of 19% (2022:
19%). The lower effective tax rate is principally due to adjustments in respect of prior periods
following the allocation of brought-forward losses and reliefs when the tax computations
for that period were finalised subsequent to the publication of the consolidated financial
statements for the FY22 financial year, partially offset by the effect of higher rates applicable
to deferred tax balances (see note 13).
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The tax charge is reconciled to the standard rate of UK corporation tax as follows:
Profit before tax
Tax at the standard UK corporation tax rate of 19% (2022: 19.0%)
Tax effects of:
Expenses not deductible for tax purposes
Adjustments in respect of prior periods
Effect of change in tax rate
Total income tax charge
2023
£m
52.4
10.0
0.7
(3.3)
0.8
8.2
2022
£m
11.1
2.1
0.3
0.1
0.5
3.0
Total taxation recognised through the income statement, other comprehensive income and
through equity are as follows:
Income statement
Other comprehensive
income
Equity
Total tax
Current
£m
6.7
–
–
6.7
2023
Deferred
£m
1.5
1.2
(1.3)
1.4
Total
£m
8.2
1.2
(1.3)
8.1
Current
£m
2.0
–
–
2.0
2022
Deferred
£m
1.0
0.6
0.2
1.8
Total
£m
3.0
0.6
0.2
3.8
8 Dividends
There were no dividends paid in either the current or the previous year. The Board is not
recommending a final dividend in respect of the financial year ended 31 January 2023 (2022:
no final dividend). Whilst the Group’s CLBILS and tranche A of the term loan facilities remain
outstanding (see note 17), the Group is prohibited from making distributions under the terms of
its financing arrangements.
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
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.
During the year, the Group recognised an impairment charge of £1.5 million in respect of work
performed in respect of a new online platform for Getting Personal. The charge reflects work on
functionality which was ultimately not part of the platform when it went live in March 2023.
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.
2023
(Number)
2022
(Number)
Weighted average number of shares in issue
Weighted average number of dilutive share options
1,604,107
Weighted average number of shares for diluted earnings per share 343,932,729
343,614,116
342,328,622 341,770,579
1,843,537
Cost
At 1 February 2021
Additions
Disposals
At 31 January 2022
Amortisation/impairment
At 1 February 2021
Amortisation in the period
Amortisation on disposals
At 31 January 2022
Net book value
At 31 January 2022
At 31 January 2021
Goodwill
£m
Software
£m
Total
£m
328.2
–
–
328.2
14.4
–
–
14.4
313.8
313.8
13.7
3.3
–
17.0
7.2
2.9
–
10.1
6.9
6.5
341.9
3.3
–
345.2
21.6
2.9
–
24.5
320.7
320.3
£m
44.2
pence
12.9
12.8
£m
8.1
pence
2.4
2.4
Goodwill
£m
Software
£m
Total
£m
Impairment Testing: Goodwill
Goodwill arising on the acquisition of Getting Personal in 2011 of £14.4 million was allocated to
the Getting Personal CGU, which corresponds to the Getting Personal operating segment (see
note 2). Goodwill in respect of the Getting Personal CGU was fully written down in 2020.
328.2
–
–
328.2
14.4
–
–
–
14.4
313.8
313.8
17.0
9.4
(0.4)
26.0
10.1
2.3
1.5
(0.4)
13.5
12.5
6.9
345.2
9.4
(0.4)
354.2
24.5
2.3
1.5
(0.4)
27.9
326.3
320.7
All remaining goodwill is in respect of the cardfactory stores business, which is comprised of all
of the cardfactory stores (each an individual CGU for impairment testing purposes), associated
central functions and shared assets. cardfactory stores is the lowest level at which the Group’s
management monitors goodwill internally.
As described in note 2, the Group updated its view of operating segments in the period. The
cardfactory stores business previously formed part of the ‘Card Factory’ operating segment,
which has been divided into ‘cardfactory stores’, ‘cardfactory Online’ and ‘Partnerships’
segments in FY23. The cardfactory stores business is comparable to the ‘cardfactory stores’
operating segment. Within the previous, aggregated segment, the assets attributable to each of
these lines of business was clearly identifiable given the different nature of the sales platforms
and customers to each. Goodwill of £313.8 million was previously allocated to the cardfactory
business within the ‘Card Factory’ segment. Accordingly, upon amending the segmental
analysis, the allocation of assets to each CGU has not changed as the assets attributable to the
cardfactory stores business were identifiable within the previous Card Factory segment.
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Profit for the financial period
Basic earnings per share
Diluted earnings per share
10 Intangible assets
Cost
At 1 February 2022
Additions
Disposals
At 31 January 2023
Amortisation/impairment
At 1 February 2022
Amortisation in the period
Impairment in the period
Amortisation on disposals
At 31 January 2023
Net book value
At 31 January 2023
At 31 January 2022
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10 Intangible assets continued
The total carrying amount of the cardfactory stores group of CGUs for impairment testing
purposes, inclusive of liabilities that are necessarily considered in determining the recoverable
amount, at 31 January 2023 was £315.5 million (2022: £295.0 million).
The total carrying amount of the Getting Personal and cardfactory Online CGUs for impairment
testing purposes, inclusive of liabilities that are necessarily considered in determining the
recoverable amount, at 31 January 2023 was not material either individually or in aggregate.
The value of intangible assets not yet available for use included in the carrying amount was
£3.5 million.
The recoverable amount has been determined based on a value-in-use calculation. This value-
in-use calculation is based on the Group’s most recent approved five-year strategic plan, to
exclude any value from planned new stores or initiatives, so as to assess the valuation of the
assets in their current state and condition.
The key assumptions used in determining the recoverable amount are:
• Future trading performance including sales growth, product mix, material and operating
costs;
• Foreign exchange rates applicable to the Group’s purchases of goods for resale;
• The terminal growth rate applied; and
• The discount rate.
The values assigned to the variables that underpin the Group’s expectations of future trading
performance were determined based on historical performance and the Group’s expectations
with regard to future trends. Where applicable, amounts take into account the Group’s hedges
and fixed contracts, changes in market prices and rates, and relevant industry and consumer
data to inform expectations around future trends.
The Group assumes a long-term GBPUSD exchange rate in line with published forward curves
at the balance sheet date, adjusted to reflect the value of forward contracts in place. The fair
value of these contracts is included in the carrying amount.
A 0% (2022: 0%) terminal growth rate is applied beyond the five-year term of the plan,
representing a sensitised view of the Group’s estimate of the long-term growth rate of the
sector. Whilst such long-term rates are inherently difficult to benchmark using independent
data, the Group’s reverse stress-testing of the goodwill impairment model indicated a significant
negative terminal decline would be required in order to eliminate the headroom completely.
Cost
At 1 February 2022
Additions
Disposals
At 31 January 2023
Depreciation
At 1 February 2022
The forecast cash flows are discounted at a pre-tax rate of 12.0% (2022: 12.0%). The discount
rate is derived from a calculation using the capital asset pricing model to calculate cost of
equity utilising available market data. The discount rate is compared to the published discount
rates of comparable businesses and relevant industry data prior to being adopted.
Depreciation in the period
Depreciation on disposals
At 31 January 2023
No impairment loss was identified. The valuation indicates sufficient headroom such that any
reasonably possible change to the key assumptions would not result in an impairment of the
related goodwill.
Net book value
At 31 January 2023
At 31 January 2022
Impairment Testing: Intangible assets not yet available for use
Both the Getting Personal and cardfactory Online CGUs include intangible assets that are not
yet available for use. Accordingly, an impairment test in respect of these CGUs was carried out
at 31 January 2023.
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The key assumptions are consistent with those set out above in respect of the goodwill
impairment review, with the exception of foreign exchange rates which are not significant to
the analysis for these CGUs. To ensure the analysis fairly reflected the expected value in use of
the assets within each CGU, the estimated future cash flows included all costs to complete the
assets under development and sales associated with those assets once deployed into use.
No impairment loss above that already recorded (above) in respect of either CGU was
identified. The cardfactory Online valuation indicated sufficient headroom such that any
reasonably possible change in assumptions would not result in an impairment charge. The
Getting Personal valuation headroom was limited, reflecting the impairment charge recorded
in respect of intangible assets; however given the immaterial remaining carrying amount, any
change in assumptions would not materially change the impairment charge for the period.
11 Property, plant and equipment
Freehold
property
£m
Leasehold
improvements
£m
Plant,
equipment,
fixtures &
vehicles
£m
17.9
0.9
(0.2)
18.6
4.4
0.5
–
4.9
13.7
13.5
40.8
–
–
40.8
37.3
1.7
–
39.0
1.8
3.5
70.3
7.9
–
78.2
55.7
5.8
–
61.5
16.1
14.6
Total
£m
129.0
8.8
(0.2)
137.6
97.4
8.0
–
105.4
32.2
31.6
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11 Property, plant and equipment continued
Cost
At 1 February 2021
Additions
Disposals
At 31 January 2022
Depreciation
At 1 February 2021
Depreciation in the period
Depreciation on disposals
At 31 January 2022
Net book value
At 31 January 2022
At 31 January 2021
Freehold
property
£m
Leasehold
improvements
£m
Plant,
equipment,
fixtures &
vehicles
£m
17.8
0.1
–
17.9
3.9
0.5
–
4.4
13.5
13.9
40.2
0.7
(0.1)
40.8
34.8
2.6
(0.1)
37.3
3.5
5.4
67.6
2.8
(0.1)
70.3
50.1
5.7
(0.1)
55.7
14.6
17.5
Total
£m
125.6
3.6
(0.2)
129.0
88.8
8.8
(0.2)
97.4
31.6
36.8
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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. Accounting policies for leases are detailed in note 1.
Assets, liabilities and the income statement expense in relation to leases are detailed below.
Right-of-use assets
Cost
At 1 February 2022
Additions
Disposals
Effect of foreign exchange rates
At 31 January 2023
Depreciation and impairment
At 1 February 2022
Depreciation in the period
Impairment charges in the period
Impairment reversed in the period
Depreciation on disposals
Impairment on disposals
Effect of foreign exchange rates
At 31 January 2023
Net book value
At 31 January 2023
At 31 January 2022
Buildings
£m
Motor vehicles
£m
Total
£m
300.6
39.4
(60.7)
–
279.3
202.5
35.3
3.7
(2.4)
(59.4)
(0.7)
–
179.0
100.3
98.1
1.3
0.2
(0.7)
–
0.8
0.9
0.4
–
–
(0.7)
–
–
0.6
0.2
0.4
301.9
39.6
(61.4)
–
280.1
203.4
35.7
3.7
(2.4)
(60.1)
(0.7)
–
179.6
100.5
98.5
131
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
12 Leases continued
Cost
At 1 February 2021
Additions
Disposals
Effect of foreign exchange rates
At 31 January 2022
Depreciation and impairment
At 1 February 2021
Depreciation in the period
Impairment in the period
Depreciation on disposals
Impairment on disposals
Effect of foreign exchange rates
At 31 January 2022
Net book value
At 31 January 2022
At 31 January 2021
Buildings
£m
Motor vehicles
£m
316.3
29.7
(45.2)
(0.2)
300.6
205.7
37.0
5.0
(44.3)
(0.8)
(0.1)
202.5
98.1
110.6
1.6
0.1
(0.4)
–
1.3
0.8
0.4
–
(0.3)
–
–
0.9
0.4
0.8
Total
£m
317.9
29.8
(45.6)
(0.2)
301.9
206.5
37.4
5.0
(44.6)
(0.8)
(0.1)
Disposals and depreciation/impairment on disposals includes fully depreciated right-of-use
assets where the lease term has expired, including amounts in respect of leases that have
expired but the asset remained in use whilst a new lease was negotiated. The Group’s full
accounting policy in respect of leases and right-of-use assets is set out in note 1.
Impairment testing: Store assets
Reflecting continued macro-economic uncertainty, cost inflation and the existence of
loss making stores within the portfolio, the Group considers that an indicator of potential
impairment exists in respect of the store portfolio and, accordingly, an impairment review
of the Group’s store assets was undertaken in the 2023 financial year.
For this purpose, each of the Group’s stores is considered to be a CGU, with each store’s
carrying amount determined by assessing the value of right-of-use assets and property, plant
and equipment insofar as they are directly allocable to an individual store. The assessment of
whether an indicator of impairment may exist in respect of store assets is considered across
the store portfolio and not on a store-by-store basis. Accordingly, the store impairment review
considers all stores in the portfolio.
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The recoverable amount of each store was determined based on the expected future cash flows
applicable to each store, assessed using a basis consistent with the future cash flows used in
the goodwill impairment test described in note 10, but limited to the term of the current lease
as assessed under IFRS 16. As a result, the key assumptions are also considered to be consistent
with those described in note 10, in addition to the allocation of central and shared costs to
individual stores insofar as such an allocation can be made on a reasonable and consistent
basis. Most such costs are allocated on the basis of the relative sales of each individual store.
Application of these assumptions resulted in a net impairment charge of £1.3 million (2022: £5.0
million), comprised of impairment charges of £3.7 million (2022: £5.0 million) and the reversal of
previous impairment charges of £2.4 million (2022: £nil).
Having conducted scenario analysis, the Group does not consider any reasonably possible
change in the key assumptions would result in a material change to the impairment charge.
Lease liabilities
Current lease liabilities
203.4
Non-current lease liabilities
Total lease liabilities (note 21)
Lease expense:
98.5
111.4
Total lease-related expenses
Depreciation expense on right-of-use assets
Impairment of right-of-use assets
Profit on disposal of fixed assets
Lease interest
Expense relating to short-term and low value leases1
Expense relating to variable lease payments2
Total lease-related income statement expense
2023
£m
(27.3)
(78.1)
(105.4)
2023
£m
35.7
1.3
(0.5)
4.5
–
0.2
41.2
2022
£m
(41.1)
(78.7)
(119.8)
2022
£m
37.4
5.0
–
3.3
–
0.2
45.9
1 Contracts subject to the election not to apply the requirements of IFRS 16 to short-term or low value leases.
2 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.
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13 Deferred tax assets and liabilities
Deferred tax is the tax expected to be payable or recoverable on differences between the
carrying amount of an asset or liability in the financial statements and the corresponding tax
bases used in the computation of taxable profit/loss.
The Finance Act 2021 contained legislation to increase the mainstream corporation tax rate
in the UK from 19% to 25%, which came into effect from 1 April 2023. The Group has therefore
measured deferred tax assets and liabilities at this higher rate of tax. The impact of deferred tax
items expected to unwind between the balance sheet date and 1 April 2023 at the lower rate of
19% is not material.
Movement in deferred tax during the year:
Fixed
assets
£m
0.3
0.5
–
–
0.8
(0.2)
–
–
0.6
Share–
based
payments
£m
0.1
0.2
0.2
–
0.5
–
0.9
–
1.4
At 1 February 2021
Credit/(charge) to
income statement
Credit/(charge)
to other
comprehensive
income
Charge to equity
At 31 January 2022
Credit/(charge) to
income statement
Credit/(charge)
to other
comprehensive
income
Charge to equity
At 31 January 2023
Derivative
financial
instruments
and hedge
accounting
£m
0.6
IFRS 16
Leases
£m
1.4
–
(1.4)
Tax losses
£m
1.7
0.5
14 Inventories
Other
timing
differences
£m
1.2
Total
£m
5.3
Finished goods
Work in progress
(0.8)
(1.0)
2023
£m
44.7
0.6
45.3
2022
£m
32.7
0.4
33.1
(0.8)
(0.2)
(0.3)
–
(2.1)
1.3
(1.1)
–
–
–
–
–
–
–
–
–
2.2
(2.2)
–
–
–
–
–
0.4
0.8
–
–
1.2
(0.6)
(0.2)
3.6
(1.6)
(1.2)
1.3
2.1
Inventories are stated net of provisions totalling £16.1 million (2022: £20.7 million). The value of
inventories written down in the period was £14.0 million (2022: £11.6 million).
The cost of inventories recognised as an expense and charged to cost of sales in the year, net of
movements in provisions, was £145.3 million (2022: £121.6 million).
15 Trade and other receivables
Current
Trade receivables
Prepaid property costs
Other prepayments
2023
£m
2.0
2.9
8.4
13.3
2022
£m
3.0
2.3
2.8
8.1
Deferred tax assets and liabilities are offset to the extent they are levied by the same tax
authority and the Group has a legally enforceable right to do so, otherwise they are shown
separately in the balance sheet.
Deferred tax assets and liabilities are offset as follows:
Deferred tax assets
Deferred tax liabilities
Net deferred tax asset
2023
£m
3.2
(1.1)
2.1
2022
£m
3.9
(0.3)
3.6
The Group has net US Dollar denominated trade and other receivables of £0.8 million (2022:
£1.0 million).
Group revenue is principally attributable to the retail sale of cards, dressings and gifts.
Revenue is subject to a single performance obligation fulfilled by receipt of goods at the point
of payment with minimal returns and refunds. Trade receivables are attributable to retail
partnerships and non-retail sales which generated revenue of £5.6 million (2022: £5.6 million) in
the year. No significant impairment loss has been recorded against trade receivables.
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
16 Cash and cash equivalents
Cash at bank and in hand
Cash presented as current assets in the balance sheet
Unsecured bank overdraft
Overdraft presented as current liabilities in the balance sheet
Net cash and cash equivalents
2023
£m
11.7
11.7
(1.8)
(1.8)
9.9
2022
£m
38.3
38.3
–
–
38.3
The Group manages its liquidity requirements on a Group-wide basis and regularly sweeps
and pools cash in order to optimise returns and/or ensure the most efficient deployment of
borrowing facilities in order to minimise fees whilst maintaining sufficient short-term liquidity
to meet its liabilities as they fall due.
Cash in bank accounts and overdrafts are presented net where the Group has a legal right
to offset amounts – such as those with the same banking provider or included in netting
arrangements under its financing facilities.
The Group’s cash and cash equivalents are denominated in the following currencies:
2023
£m
0.2
4.8
4.9
9.9
2023
£m
48.3
1.8
50.1
2022
£m
21.5
1.4
15.4
38.3
2022
£m
25.5
–
25.5
Sterling
Euro
US Dollar
17 Borrowings
Current liabilities
Bank loans and accrued interest
Bank overdraft
Total current liabilities
Non-current liabilities
Bank loans
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Current liabilities includes bank loans where the liability is due to be settled in the next 12
months (such as scheduled repayments in respect of secured term loans and CLBILs) or where
the Group does not have an unconditional right to defer repayment beyond 12 months (such as
revolving facilities subject to covenant requirements).
Bank loans
Bank borrowings as at 31 January 2023 are summarised as follows:
31 January 2023
Secured term loans –
Tranche ‘A’
Secured term loans –
Tranche ‘B’
Secured CLBILs
Secured revolving
credit facility
Accrued interest
Bank overdraft
Debt issue costs
31 January 2022
Secured term loans
Secured CLBILs
Secured revolving
credit facility
Accrued interest
Debt issue costs
Interest rate
%
Interest margin
ratchet range
%
–
–
–
2.75–4.50
Total facility size
= £100 million
Liability
£m
9.0
18.8
5.00 + SONIA
5.50 +SONIA
See note
16.1
23.0 Margin + SONIA
0.2
1.8
(1.4)
67.5
67.2
4.50 + SONIA
44.8
See note.
–
–
– Margin + SONIA
2.75–4.50
Interest rate
increases 1.00%
every six months
Total facility size
= £100 million
0.5
(1.5)
111.0
On 21 April 2022, the Group agreed an updated and amended financing package with its banking
partners, which reduced the overall quantum and extended the term of the Group’s facilities.
17.4
85.5
The revised facilities comprised term loans of £30 million, CLBILS of £20 million and an RCF of
£100 million. The CLBILS are subject to an amortising repayment profile with final maturity in
September 2023. The Term Loans are set in two tranches, both with an amortising repayment
profile. Tranche ‘A’ has a final maturity in January 2024 and Tranche ‘B’ is coterminous with the
RCF in September 2025.
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17 Borrowings continued
The Term Loan ‘A’ interest rate margin was 5.0% over SONIA, and the Term Loan ‘B’ interest
rate margin was 5.5% over SONIA. The CLBILS facilities attract interest rates of between 3.1%
and 3.75% over SONIA or the Bank of England Base Rate. The RCF, when drawn, is subject
to an interest rate ratchet of between 2.75% and 4.5% over SONIA based upon the Group’s
leverage position.
The revised Term Loan and CLBILS facilities were drawn in full from the refinancing date, with
the RCF drawn to replace the existing term loans and CLBILs that were paid down. The RCF
was subsequently drawn during the period to support liquidity when needed and includes up to
£17.5 million that can be utilised as an overdraft facility on certain of the Group’s bank accounts.
The full RCF remains available to draw on if required, with £75.2 million of undrawn committed
facilities available to the Group at the balance sheet date.
Total repayments in respect of the revised Term Loan and CLBILS facilities during FY23 were
£6.1 million.
At the balance sheet date, the Group remained subject to two financial covenants, tested
quarterly, in relation to leverage (ratio of net debt to EBITDA) and interest cover (ratio of interest
and rent costs to EBITDA). Covenant thresholds are phased to return to 2.5x leverage and
1.75x interest cover by January 2024. In addition, the terms of the facilities prevent the Group
from making any distributions to shareholders whilst the CLBILS and Term Loan ‘A’ remain
outstanding and places a limit on the total value of capital expenditure the Group can make
in each financial year to FY25. The Group expects to be able to operate and have sufficient
headroom within these covenants to deliver its strategy.
Debt issue costs in respect of the April 2022 refinancing totalled £1.8 million and are being
amortised to the income statement over the duration of the revised facilities.
18 Trade and other payables
Current
Trade payables
Other taxation and social security
Contract liabilities
Property accruals
Payroll accruals
Other accruals
2023
£m
29.2
20.6
–
7.8
13.9
13.2
84.7
2022
£m
31.1
4.6
2.4
4.9
15.8
12.9
71.7
The Group has net US Dollar denominated trade and other payables of £10.1 million
(2022: £8.5 million).
During FY23, the Group aligned its UK VAT quarters with its financial year, resulting in the final
payment in respect of each year moving from January to February. As a result, payables in
respect of other taxation and social security significantly increased in FY23, owing to inclusion
of the full quarterly payment made in February 2023.
19 Share capital and share premium
Share capital
Allotted, called up and fully paid ordinary shares of one pence:
At the start of the period
Issued in the period (note 25)
At the end of the period
Share capital
At the start of the period
Issued in the period (note 25)
At the end of the period
Share premium
At the start of the period
Issued in the period (note 25)
At the end of the period
2023
(Number)
2022
(Number)
341,878,341 341,626,396
251,945
342,636,090 341,878,341
757,749
£m
3.4
–
3.4
£m
202.2
–
202.2
£m
3.4
–
3.4
£m
202.2
–
202.2
Shares issued in the period relate entirely to those issued upon vesting of employee share
schemes. See note 25.
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
20 Notes to the cash flow statement
Reconciliation of operating profit to cash generated from operations:
Profit before tax
Net finance expense
Operating profit
Adjusted for:
Depreciation and amortisation
Impairment of right-of-use assets
Impairment of intangible assets
Gain on disposal of fixed assets
Cash flow hedging foreign currency movements
Share-based payments charge
Operating cash flows before changes in working capital
(Increase)/decrease in receivables
(Increase)/decrease in inventories
Increase/(decrease) in payables
Movement in provisions
Cash inflow from operating activities
21 Analysis of net debt
2023
£m
52.4
11.4
63.8
46.0
1.3
1.5
(0.5)
0.8
1.7
114.6
(5.2)
(12.2)
13.3
(2.7)
107.8
2022
£m
11.1
20.5
31.6
49.1
5.0
–
–
(1.4)
0.8
85.1
1.1
3.3
11.9
12.2
113.6
Secured bank loans and accrued interest (note 17)
Lease liabilities
Total debt
Add: debt costs capitalised
Add: bank overdraft
Less: cash and cash equivalents (note 16)
Net debt
Lease liabilities
Net debt excluding lease liabilities
At 1 February
2022
£m
Cash flow
£m
(111.0)
(119.8)
51.4
57.0
(230.8)
108.4
(1.5)
–
38.3
(194.0)
119.8
(74.2)
(1.8)
(1.8)
(26.6)
78.2
(57.0)
21.2
Non-cash
changes
£m
At 31 January
2023
£m
(6.1)
(42.6)
(48.7)
1.9
–
–
(46.8)
42.6
(4.2)
(65.7)
(105.4)
(171.1)
(1.4)
(1.8)
11.7
(162.6)
105.4
(57.2)
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At 1 February
2021
£m
Cash flow
£m
Non-cash
changes
£m
Secured bank loans and accrued interest (note 17)
Lease liabilities
Total debt
Add: debt costs capitalised
Less: cash and cash equivalents (note 16)
Net debt
Lease liabilities
Net debt excluding lease liabilities
(119.0)
(144.9)
(263.9)
(1.2)
12.5
(252.6)
144.9
(107.7)
8.0
57.8
65.8
(8.7)
25.8
82.9
(57.8)
25.1
At 31
January
2022
£m
(111.0)
(119.8)
(230.8)
(1.5)
38.3
–
(32.7)
(32.7)
8.4
–
(24.3)
(194.0)
32.7
8.4
119.8
(74.2)
Non-cash changes in respect of lease liabilities reflect changes in the carrying amount of leases
arising from additions, disposals and modifications.
22 Provisions
At 1 February 2021
Provisions made during the year
At 31 January 2022
Transfer from contract liabilities
Provisions utilised during the year
Provisions released during the year
Provisions provided during the year
At 31 January 2023
Covid-19-
related support
£m
Property
provisions
£m
–
12.2
12.2
–
(2.3)
(2.5)
–
7.4
–
–
–
2.5
(0.9)
(0.9)
1.4
2.1
Total
£m
–
12.2
12.2
2.5
(3.2)
(3.4)
1.4
9.5
Covid-19-related support provisions reflect amounts received under one-off schemes designed
to provide support to businesses affected by Covid-19 restrictions, including lockdown grants
and CJRS, in excess of the value the Group reasonably believes it is entitled to retain under
the terms and conditions of those schemes. The provisions have been estimated based on
the Group’s interpretation of the terms and conditions of the respective schemes and, where
applicable, independent professional advice. However, the actual amount that will be repaid is
not certain.
In July 2022, following an unprompted disclosure to HMRC and resulting investigation, the
Group made a payment of £2.3 million in final settlement of its CJRS position. As a result of
this settlement, the Group released a further £2.5 million from the provision that is no longer
expected to be required, as the matter is now closed. This release has been recognised as a
one-off benefit in the income statement in the period.
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22 Provisions continued
The remaining provision relates to covid-related lockdown grants and similar support schemes.
The Group is taking steps to confirm amounts repayable and settle its positions. This exercise is
expected to conclude within the next financial year.
The table below analyses the contractual cash flows of the Group’s non-derivative financial
liabilities as at the balance sheet date. The amounts disclosed in the tables are the contractual
undiscounted cash flows, including contractual interest. Where amounts are not yet fixed,
principally in respect of interest payments linked to SONIA in the Group’s bank facilities, the
values have been determined with reference to forward curves at the balance sheet date.
The Group maintains provisions in respect of its store portfolio to cover both the estimated cost
of restoring properties to their original condition upon exit of the property and any non-lease
components of lease contracts (such as service charges) that may be onerous. Despite the size of
the Group’s store portfolio, such provisions are generally small, which is consistent with the Group’s
experience of actual dilapidations and restoration costs. Such provisions are usually made where
the Group has a reasonable expectation that the related property may be exited, or is at a higher
risk of exiting, in the near future. Accordingly such provisions are generally expected to be utilised
in the short-term. Amounts relating to property provisions, previously recognised and presented
within contract liabilities, have been reclassified to provisions in the year. Comparative balances
have not been reclassified as the amounts are not considered material.
23 Financial risk management
The principal financial risks faced by the Group are liquidity, foreign currency, interest rate and
counterparty credit risk.
The Board have overall responsibility for managing risks and uncertainties across the Group.
The principal financial risks and uncertainties and the actions taken to mitigate them are
reviewed on an ongoing basis. Further details of the Group’s approach to managing risk are
included in the Principal Risks and Uncertainties section of the Strategic Report on pages 58 to
62 and in the Corporate Governance Report on pages 67 to 73.
Liquidity risk
The Group has continued to generate significant operating cash inflows. Cash flow forecasts
are prepared to assist management in identifying future liquidity requirements. At the balance
sheet date, the Group had net debt (note 21) of £57.2 million (2022: £74.2 million) and undrawn
RCF facility of £75.2 million (see note 17).
On 21 April 2022, the Group agreed an updated and amended financing package with
its banking partners, which reduced the overall quantum and extended the term of the
Group’s facilities.
The revised facilities comprised term loans of £30 million, CLBILS of £20 million and an RCF of
£100 million. The CLBILS are subject to an amortising repayment profile with final maturity in
September 2023. The Term Loans are set in two tranches, both with an amortising repayment
profile. Tranche ‘A’ has a final maturity in January 2024 and Tranche ‘B’ is coterminous with the
RCF in September 2025.
Until the business has no outstanding CLBILS or Term Loan ‘A’, there will be a prohibition of any
payment to shareholders by way of dividend or share buy-back.
At 31 January 2023
Bank loans
Lease liabilities
Trade and other payables
At 31 January 2022
Bank loans
Lease liabilities
Trade and other payables
Less than
one year
£m
One to
two years
£m
Two to
five years
£m
More than
five years
£m
52.4
32.7
84.7
169.8
31.7
46.8
71.7
150.2
18.8
31.3
–
50.1
88.9
32.0
–
120.9
–
47.9
–
47.9
–
44.7
–
44.7
–
7.8
–
7.8
–
6.7
–
6.7
Total
£m
71.2
119.7
84.7
275.6
120.6
130.2
71.7
322.5
The table below analyses the contractual cash flows of the Group’s derivative financial
instruments as at the balance sheet date. The amounts disclosed represent the total contractual
undiscounted cash flows at the balance sheet date exchange and interest rates.
At 31 January 2023
Foreign exchange contracts
– Inflow
– Outflow
Interest rate contracts
– Inflow
– Outflow
At 31 January 2022
Foreign exchange contracts
– Inflow
– Outflow
Interest rate contracts
– Outflow
Less than
one year
£m
One to
two years
£m
Two to
five years
£m
More than
five years
£m
Total
£m
76.4
(72.6)
1.1
–
21.9
(21.2)
–
(0.2)
60.4
(59.7)
37.3
(36.4)
0.4
0.6
–
–
–
(0.2)
–
–
–
–
–
–
–
–
–
–
98.3
(93.8)
1.1
(0.4)
97.7
(96.1)
1.0
137
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
23 Financial risk management continued
Foreign currency risk
The Group has an exposure to foreign currency risk due to a significant proportion of the
Group’s retail products being procured from overseas suppliers with purchases denominated in
US Dollars. The Group has an established currency hedging policy which aims to mitigate the
risk of adverse currency movements whilst providing sufficient flexibility and available credit
lines to act when markets are volatile.
The Group’s policy requires forward cover, using a combination of currency on hand, expected
receipts and derivative contracts, of between 50% and 100% of the next 12 months’ rolling
forecast US Dollar requirements, between 20% and 80% forward cover for the period 12 to 24
months, and up to 40% for the period 24 to 36 months. The policy permits a proportion of each
year’s US Dollar requirement to be covered by structured options and similar instruments.
The table below analyses the sensitivity of the Group’s US Dollar denominated financial
instruments to a 10 cent movement in the USD to GBP exchange rate at the balance sheet date,
holding all other assumptions constant.
10 cent increase
10 cent decrease
2023
2022
Impact on profit
after tax
£m
Impact on cash
flow hedging
reserve
£m
Impact on profit
after tax
£m
Impact on cash
flow hedging
reserve
£m
(2.9)
2.1
(3.3)
4.0
(1.2)
1.6
(5.3)
6.3
The Group generates a small proportion of its total revenue in Euros as a result of its operations
in the Republic of Ireland. Euro receipts are used to settle obligations denominated in Euros, or
are converted to GBP using either spot or forward contracts to manage liquidity.
The table below shows the impact on the reported results of a 50 basis point increase or
decrease in the interest rate for the year.
2023
2022
Impact on profit
after tax
£m
Impact on cash
flow hedging
reserve
£m
Impact on profit
after tax
£m
Impact on cash
flow hedging
reserve
£m
50 basis point interest rate increase
50 basis point interest rate decrease
(0.2)
0.2
0.3
(0.3)
(0.3)
0.3
0.3
(0.3)
Counterparty credit risk
The Group is exposed to counterparty credit risk on its holdings of cash and cash equivalents and
derivative financial assets. To mitigate the risk, counterparties are limited to high credit-quality
financial institutions and exposures are monitored on a monthly basis. Sterling cash balances
have historically been maintained at near zero or overdrawn within the facility to minimise interest
expense on the RCF, thereby reducing counterparty credit risk on cash balances.
The Group is also exposed to counterparty credit risk in relation to certain payments in advance
of goods to overseas suppliers. To limit this exposure, goods from overseas suppliers are not
paid until after shipment, except for a limited number of deposit payments in prepayments.
Credit risk in respect of trade receivables on revenues from retail partners and non-retail
customers, and other receivables and prepayments, is not significant to the Group. Revenues
from retail partners and non-retail customers represented £5.6 million in the year (2022: £4.6
million) and trade receivables at 31 January 2023 were £2.4 million (2022: £3.0 million). Total
trade and other receivables at 31 January 2023 are £13.3 million (FY22: £8.1 million). The Group
considers expected credit losses as not material and no impairment allowances have been
recognised in respect of credit risk.
Interest rate risk
The Group’s principal interest rate risk arises from its long-term borrowings. Bank borrowings
are denominated in Sterling and are borrowed at floating interest rates (see note 17). The Group
has an established policy that permits the use of interest rate derivative financial instruments
to mitigate the interest rate risk on an element of these borrowing costs. Current Group policy
requires between 25% and 75% of forecast floating interest rate borrowings to be hedged
for the next 24 months, up to 50% for the period 24 to 36 months and up to 25% for periods
greater than 36 months.
Capital management
The Group’s capital management policy is to maintain a capital structure that is conservative
yet efficient in terms of providing long-term returns to shareholders. The Board monitors
the Group’s capital structure principally through reviewing leverage – the ratio of net debt
(excluding lease liabilities) to EBITDA. The Group’s long-term target is to maintain leverage
between 0.5 to 1.5 times.
The Group defines capital as equity attributable to the equity holders of the Parent plus net
debt. Net debt is shown in note 21.
The Group has prioritised de-levering the business during and since the Covid-19 pandemic,
protecting liquidity to ensure it can continue to meet the needs of all stakeholders in the longer
term. Alongside the restrictions imposed by the Group’s financing facilities (see note 17), this has
resulted in no distributions to shareholders being made during FY22 and FY23.
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23 Financial risk management continued
Whilst the CLBILs and term loan tranche ‘A’ remain outstanding, the Group is prohibited
from making distributions. Following the refinancing of the Group’s facilities in April 2022, the
remaining CLBILs facilities are due to be repaid over the period to September 2023 and term
loan tranche ‘A’ over the period to January 2024. Therefore, the Board envisages the earliest
point for dividend payments to be considered will be the end of FY24. Providing leverage
remains within the range above, it is the Board’s intention to pay annual ordinary dividends
based on a targeted dividend cover of between 2.0 and 3.0 times the Group’s consolidated
post-tax profit.
Details on Group borrowings are set out in notes 17 and 29 of the consolidated financial
statements. The Group has a continued focus on free cash flow generation. The Board monitors
a range of financial metrics together with banking covenant ratios, maintaining suitable
headroom to ensure that the Group’s financing requirements continue to be serviceable. Further
detail regarding covenant restrictions and liquidity forecasts are provided on pages 119 to 120
and pages 134 to 135.
24 Financial instruments
Fair value
IFRS 13 requires categorisation of the Group’s financial instruments, where measured at fair
value, in accordance with the fair value hierarchy to illustrate the basis upon which the fair
value has been determined:
• Level 1: fair value measurements are derived from quoted prices in active markets for
identical assets or liabilities;
• Level 2: fair value measurements are based on inputs other than quoted prices included
within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and
• Level 3: fair value measurements derived from valuation techniques that use inputs that
are not based on observable market data (unobservable inputs).
The fair value of the Group’s foreign currency and interest rate derivative financial instruments
are largely determined by comparison between forward market prices and the contract price;
therefore, these contracts are categorised as Level 2.
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Derivative financial instruments
The balance sheet date fair value of derivative financial instruments is as follows:
Derivative assets
Non-current
Interest rate contracts
Foreign exchange contracts
Current
Interest rate contracts
Foreign exchange contracts
Derivative liabilities
Current
Interest rate contracts
Foreign exchange contracts
Non-current
Interest rate contracts
Foreign exchange contracts
Net derivative financial instruments
Interest rate contracts
Foreign exchange contracts
2023
£m
0.2
0.3
0.5
1.1
4.2
5.3
–
(1.4)
(1.4)
(0.2)
(0.3)
(0.5)
1.1
2.8
3.9
2022
£m
0.3
1.0
1.3
0.2
0.6
0.8
–
(0.2)
(0.2)
–
–
–
0.5
1.4
1.9
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
24 Financial instruments continued
Interest rate contracts
At 31 January 2023 the Group held fixed for floating SONIA interest rate swaps to hedge a
portion of the variable interest rate risk on bank borrowings. Notional principal amounts for
interest hedges totalled £50.0 million for the period to October 2023 at an average fixed rate of
0.9%, then reducing to £20.0 million for the period to October 2024 at an average fixed rate of
3.95%, then reducing to £10 million for the period to October 2025 at an average fixed rate of
5.1% (2022: £60.0 million for the period to October 2022, reducing to £40.0 million for the period
to October 2023).
Unhedged fair value movements of £nil (2022: £nil) were expensed to the income statement
within financial expense.
Foreign exchange contracts
At 31 January 2023 the Group held a portfolio of foreign currency derivative contracts with
notional principal amounts in GBP totalling £93.8 million (2022: £97.7 million) to mitigate the
exchange risk on future US Dollar denominated trade purchases.
Foreign currency derivatives with a notional value of £47.0 million were designated in cash flow
hedging relationships at 31 January 2023 (2022: £74.6 million). Of this amount, £37.2 million is
expected to unwind in the next 12 months with an average strike price of 1.34 and £9.8 million is
expected to unwind between 13 and 24 months at an average strike price of 1.23. The average
strike prices reflect only those derivatives designated into hedging relationships, and not the
Group’s whole portfolio of currency purchase contracts.
Classification of financial instruments
The table below shows the classification of financial assets and liabilities at the balance sheet
date. Fair value disclosures in respect of lease liabilities are not required.
At 31 January 2023
Financial assets measured at fair value
Derivative financial instruments
Financial assets not measured at fair value
Trade and other receivables
Cash and cash equivalents
Financial liabilities measured at fair value
Derivative financial instruments
Financial liabilities not measured at fair value
Secured bank loans
Unsecured bank overdrafts
Trade and other payables
Mandatorily
at FVTPL
£m
Cash flow
hedging
instruments
£m
Financial
assets at
amortised
cost
£m
Other
financial
liabilities
£m
0.5
5.3
–
–
–
–
–
13.3
11.7
(0.9)
(1.0)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(65.7)
(1.8)
(84.7)
(0.4)
4.3
25.0
(152.2)
Mandatorily
at FVTPL
£m
Cash flow
hedging
instruments
£m
Financial
assets at
amortised
costs
£m
Other
financial
liabilities
£m
Foreign currency derivative contracts with a notional value of £46.8 million representing a fair
value liability of £0.4 million (2022: £23.1 million representing a fair value asset of £0.1 million)
were not designated as hedging relationships.
At 31 January 2022
Financial assets measured at fair value
Fair value movements in foreign currency derivatives are recognised in other comprehensive
income to the extent the contract is part of an effective hedging relationship. The fair value
movements of £0.5 million that do not form part of an effective hedging relationship have been
charged to the income statement (2022: £1.3 million) within cost of sales.
Derivative financial instruments
0.1
2.0
–
Financial assets not measured at fair value
Trade and other receivables
Cash and cash equivalents
Financial liabilities measured at fair value
Derivative financial instruments
Financial liabilities not measured at fair value
Unsecured bank loans
Trade and other payables
–
–
–
–
–
0.1
–
–
(0.2)
–
–
1.8
8.1
38.3
–
–
–
46.4
–
–
–
–
(111.0)
(71.7)
(182.7)
The fair values of financial instruments have been assessed as approximating to their carrying
values. Derivative financial instruments are utilised to mitigate foreign exchange risk on the
requisition of inventory and interest rate risk on borrowings. Derivatives not designated as a
hedging relationship are mandatorily classified at FVTPL.
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25 Equity-settled share-based payment arrangements
Card Factory Restricted Share Awards and Long Term Incentive Plan
The Company grants restricted share awards (‘RSAs’) to the Executive Directors, members of
the senior management team and senior employees within the Group under the terms of the
Group’s LTIP. Grants are made annually under the scheme, subject to approval by the Board.
The award comprises a right to receive free shares or nil cost options. The shares are to be
issued within 30 days, or as soon as practicable, after the vesting date. Grants awarded in the
year to Executive Directors and senior management vest in stages over three, four and five years
and vested shares may not be sold (other than to pay taxes due on vesting) until the end of the
five-year period. Grants awarded in the year to senior employees are subject to a three-year
vesting period. All restricted share awards are subject to a performance underpin through which
the Remuneration Committee can exercise discretion to reduce the number of awards that will
vest based on certain defined criteria.
Grants awarded prior to 31 January 2018 under the LTIP were subject to a three-year vesting
period with performance conditions and a two-year holding period for awards in favour of
senior management. Further details on Executive Director share awards are provided in the
Remuneration Report on pages 86 to 95.
Card Factory SAYE Scheme (‘SAYE’)
The SAYE scheme is open to all employees (in years prior to FY19 length of service eligibility
applied). Grants are made annually under the scheme, subject to approval by the Board.
Options may be exercised under the scheme within six months of the completion of the three-
year savings contract. There is provision for early exercise in certain circumstances such as
death, disability, redundancy and retirement.
Reconciliation of outstanding awards
Fair value of awards
The fair value of awards granted during the year has been measured using the Black-Scholes
model assuming the inputs below.
Granted during the year
Fair value at grant date
Share price at grant date*
Exercise price*
Expected volatility
Expected term (years)
Expected dividend yield
Risk free interest rate
2023
2022
RSA/LTIP (1)
RSA/LTIP (2)
SAYE
RSA/LTIP (1)
SAYE
3,417,583
382,272
2,267,990
1,911,815
1,499,150
£0.62
£0.62
£0.01
72%
2.5 to 5
£0.64
£0.64
£0.01
72%
3 to 5
N/A**
N/A**
£0.34
£0.63
£0.49
72%
3
0%
£0.68
£0.68
£0.01
66%
3 to 5
N/A**
£0.29
£0.61
£0.54
67%
3
0%
1.20%
1.69%
1.81%
0.16%
0.16%
* The exercise price for SAYE awards is set at a 20% discount to an average market price determined in accordance with scheme
rules. The share price at the grant date is the closing price on the grant date.
** RSA/LTIP awards have a £0.01 exercise price (covered via a nominal bonus award from the Group) and accrue dividend equivalents
over the vesting period, consequently the fair value at grant date is equal to the grant date share price.
The expected volatility is based on historical volatility of the Company over the expected term
at the grant date.
Impact on the income statement
The total expense recognised in the income statement arising from share-based payments
is as follows:
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SAYE
Number of
options
Weighted
average
exercise
price
Number of
options
Weighted
average
exercise
price
Outstanding at 1 February 2021
3,681,075
£0.01 3,961,409
Granted during the year
Exercised during the year
Forfeited during the year
Outstanding at 31 January 2022
Granted during the year
Exercised during the year
Forfeited during the year
1,911,815
£0.01
1,499,150
(239,943)
(903,945)
4,449,002
3,799,855
(736,764)
(664,953)
£0.01
(12,002)
£0.01 (1,324,356)
£0.01
4,124,201
£0.01
2,267,990
£0.01
(20,985)
£0.01
(1,178,977)
Outstanding at 31 January 2023
6,847,140
£0.01
5,192,229
£0.40
£0.29
£0.27
£0.48
£0.37
£0.49
£0.27
£0.56
£0.42
All amounts exclude national insurance costs
RSA or LTIP
SAYE
Total share-based payment expense
2023
£m
1.4
0.3
1.7
2022
£m
0.6
0.2
0.8
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
26 Capital commitments
The Group had capital commitments at 31 January 2023 of £2.3 million (2022: £nil).
27 Contingent liabilities
There were no material contingent liabilities at 31 January 2023 (2022: £nil).
28 Related party transactions
The Group has taken advantage of the exemptions contained within IAS 24 ‘Related Party
Disclosures’ from the requirement to disclose transactions between Group companies as these
have been eliminated on consolidation.
A full listing of the Group’s subsidiary undertakings is provided in the notes to the Company
accounts on page 147.
Transactions with 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. Disclosures relating to remuneration of key
management personnel are included in note 5 of the financial statements. Further details of
Directors’ remuneration are set out in the Directors’ Remuneration Report on pages 78 to 95.
Directors of the Company and their immediate families control 0.02% of the ordinary shares of
the Company.
There were no other related party transactions in the year.
29 Subsequent events
Acquisition of SA Greetings Corporation (Pty) Limited
On 25 April 2023, the Group acquired 100% of the issued share capital of SA Greetings
Corporation (Pty) Ltd (‘SA Greetings’) a wholesaler and retailer of greeting cards and gift
packaging based in South Africa, for fixed cash consideration of £2.5 million.
The acquisition enables the Group to access the South African card and gifts market and
is aligned with the Group’s strategy to expand internationally. In the future, we expect the
acquisition to provide opportunities to develop the Group’s retail partnerships business,
alongside the Group’s production capability and retail offer both in South Africa and the UK.
Given the short time between the acquisition date and the approval of these financial
statements, the initial acquisition accounting has not been completed and accordingly the full
disclosures required by IFRS 3 are not provided in these financial statements. The Group expects
to initially conclude the accounting in time to include these disclosures in its half year report
for FY24.
In its unaudited management accounts for the year ended 28 February 2023, SA Greetings
reported revenue of £9.4 million, profit before tax of £0.2 million and net assets of £5.8 million
(all figures converted using a GBPZAR rate of 20:1).
Acquisition-related costs have been expensed to the income statement as incurred, the value of
such costs recognised in the year-ended 31 January 2023 was immaterial.
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As at 31 January 2023
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 January 2023
Non-current assets
Investments
Deferred tax assets
Current assets
Trade and other receivables
Total assets
Current liabilities
Trade and other payables
Net assets
Equity
Share capital
Share premium
Merger reserve
Retained earnings
Equity attributable to equity holders of the Parent
Note
4
5
6
7
7
2023
£m
316.2
1.3
317.5
2.9
320.4
2022
£m
316.2
0.5
316.7
2.5
319.2
(3.8)
316.6
(4.2)
315.0
3.4
202.2
2.7
108.3
316.6
3.4
202.2
2.7
106.7
315.0
At 31 January 2021
Total comprehensive
income for the year
Profit or loss
Transactions with owners,
recorded directly in equity
Share-based payments
At 31 January 2022
Total comprehensive
income for the year
Profit or loss
Transactions with owners,
recorded directly in equity
Share-based payments
At 31 January 2023
Share
capital
£m
3.4
Share
premium
£m
202.2
Merger
reserve
£m
2.7
Retained
earnings
£m
106.7
Total
equity
£m
315.0
–
–
3.4
–
–
3.4
–
–
202.2
–
–
202.2
–
(0.8)
(0.8)
–
2.7
0.8
106.7
0.8
315.0
–
(0.2)
(0.2)
–
2.7
1.8
108.3
1.8
316.6
The notes that accompany these financial statements are included on pages 145 to 148.
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The financial statements on pages 143 to 148 were approved by the Board of Directors on 2 May
2023 and were signed on its behalf by
Darcy Willson-Rymer
Chief Executive Officer
Company number 09002747
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PARENT COMPANY CASH FLOW STATEMENT
For the year ended 31 January 2023
Cash (outflow)/inflow from operating activities
Corporation tax paid
Net cash (outflow)/inflow from operating activities
Cash flows from investing activities
Dividends received
Net cash inflow from investing activities
Cash flows from financing activities
Dividends paid
Net cash outflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the
year
Closing cash and cash equivalents
Note
10
3
2023
£m
2022
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
The notes that accompany these financial statements are included on pages 145 to 148.
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Card Factory plc Annual Report and Accounts 2023
Contents Generation – PageContents Generation – Sub PageContents Generation - Section NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
1 Accounting policies
Basis of preparation
These financial statements have been prepared in accordance with UK-adopted International
Financial Reporting Standards (‘UK IFRS’) and applicable law.
The financial statements have been prepared under the historical cost convention and on the
going concern basis. The Directors’ assessment of going concern is set out on pages 119 and 120
of the consolidated financial statements.
The adoption of these standards and amendments in future periods is not expected to have a
material impact on the Company’s financial statements.
Income statement
The Company made a loss after tax of £0.1 million for the year ended 31 January 2023 (2022:
£0.8 million loss), including £nil dividends received from subsidiary undertakings (2022: £nil). As
permitted by section 408 of the Companies Act 2006, the income statement of the Company is
not presented as part of the financial statements.
Significant judgements and estimates
The preparation of financial statements in conformity with UK IFRS requires the use of
judgements, estimates and assumptions that affect the application of the Company’s
accounting policies and reported amounts of assets and liabilities, income and expenses. Actual
results may differ from these estimates. Estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to estimates are recognised prospectively.
The Company has not identified any significant judgements or areas of significant estimation
uncertainty in the current year. However, reflecting the degree of management focus, notes the
following in respect of impairment testing:
Investment in subsidiaries impairment testing
The impairment testing of investment in subsidiaries requires judgement in determining the
assumptions to be used to estimate the value-in-use, including estimates of future revenues,
operating costs, terminal value growth rates, and the pre-tax discount rate to be applied.
Whether or not the estimation used in determining these assumptions is significant depends
upon the outcome of the assessment and the level of headroom in the analysis and sensitivity
to changes in those assumptions.
Further detail is provided in note 4 to the Company financial statements. There were no
reasonably possible changes in key assumptions in the impairment test performed that would
result in an impairment charge.
Principal accounting policies
The principal accounting policies set out below have been applied consistently to all periods
presented in these financial statements.
Changes in significant accounting policies
New standards and amendments to existing standards effective in the period, which are set out
in full on page 120 of the consolidated financial statements, have not had a material effect on
the Company’s financial statements.
UK endorsed standards and amendments issued but not yet effective
A full list of standards and amendments that are in issue but not yet effective is provided on
page 120 of the consolidated financial statements.
Investments
Investments in subsidiary undertakings are held at cost less any provision for impairment.
Financial instruments
Non-derivative financial assets
Non-derivative financial assets comprise trade and other receivables classified as financial
assets at amortised cost. The trade and other receivables do not have a significant financing
component and are initially measured at transaction price. At each reporting date, the
Company assesses whether financial assets carried at amortised cost are credit-impaired. A
financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on
the estimated future cash flows of the financial asset have occurred. The Company measures
loss allowances at an amount equal to lifetime expected credit loss.
Non-derivative financial liabilities
Non-derivative financial liabilities comprise trade and other payables. Trade and other
payables are initially recognised at fair value, less any directly attributable transaction costs
and subsequently stated at amortised cost using the effective interest method.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of
new shares are shown in equity as a deduction from the proceeds.
Merger reserve
On 30 April 2014 Card Factory plc acquired 100% of the share capital of CF Topco Limited in a
share for share exchange, thereby inserting Card Factory plc as the Parent Company of the Group.
The shareholders of CF Topco Limited became 100% owners of the enlarged share capital of Card
Factory plc. The premium arising on the issue of shares is recognised in the merger reserve.
Share-based payments
The Company issues equity-settled share-based payments to employees within the Group
through the Card Factory Restricted Share Awards Scheme (‘RSA’) and the Card Factory SAYE
Scheme (‘SAYE’), see note 25 of the consolidated financial statements for further details. The
cost of equity-settled share awards is measured as the fair value of the award at the grant date
using the Black–Scholes model.
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NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED
2 Employee costs
The Company has no employees other than the Board of Directors. Full details of Directors’
remuneration are set out in the Directors’ Remuneration Report on pages 78 to 95.
3 Dividends
No dividends were paid during either the current or the previous financial year. The Board is not
recommending a final dividend in respect of the financial year ended 31 January 2023 (2022: no
final dividend).
4 Investments in subsidiaries
At 31 January 2022 and 31 January 2023
£m
316.2
The recoverable amount of the Company’s investments in its subsidiaries have been determined
based on value-in-use calculations which require the use of estimates. Management has
prepared discounted cash flows based on the latest approved budget and five-year strategic
plan. The Directors are satisfied that there is no impairment of the investment in subsidiaries.
The key assumptions and sensitivity to those assumptions are consistent with those described
in note 10 to the consolidated financial statements, adjusted as appropriate to determine an
equity valuation of the Company’s investments.
1 Accounting policies continued
The cost of awards to employees of the Company is expensed to the income statement,
together with a corresponding adjustment to equity, on a straight-line basis over the vesting
period of the award. The cost of awards to employees of subsidiary undertakings is recognised
as a capital contribution, immediately reimbursed by the subsidiary. The total cost of the
awards is based on the Company’s estimate of the number of share awards that will eventually
vest in accordance with the vesting conditions. The awards do not include market-based
vesting conditions. At each balance sheet date, the Company revises its estimate of the number
of awards that are expected to vest. Any revision to estimates is recognised in the income
statement, with a corresponding adjustment to equity. The expense recognised in the Company
income statement is subsequently charged to subsidiary entities to the extent that management
services are provided to those subsidiary entities.
Dividends
Dividends are recognised as a liability in the period in which they are approved such that the
Company is obliged to pay the dividend.
Taxation
Tax on the profit or loss for the period comprises current and deferred tax. Tax is recognised
in the income statement except to the extent that it relates to items recognised directly in
equity or through other comprehensive income, in which case it is recognised in equity or other
comprehensive income respectively.
Current tax is the expected tax payable or receivable on the taxable income or loss for the
period, using tax rates enacted or substantively enacted at the balance sheet date. Deferred
tax is provided on temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for taxation purposes. The following
temporary differences are not provided for: the initial recognition of goodwill; the initial
recognition of assets or liabilities that affect neither accounting nor taxable profit other than in
a business combination and differences relating to investments in subsidiaries to the extent that
they will probably not reverse in the foreseeable future. The amount of deferred tax provided
is based on the expected manner of realisation or settlement of the carrying amount of assets
and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will
be available against which the temporary difference can be utilised.
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Contents Generation – PageContents Generation – Sub PageContents Generation - Section NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED
4 Investments in subsidiaries continued
Subsidiary undertakings
At 31 January 2023 the Company controlled 100% of the issued ordinary share capital of the
following subsidiaries, all of which are included in the consolidated financial statements. All
subsidiaries are registered in England and Wales with the exception of Card Factory Ireland
Limited which is registered in the Republic of Ireland. The registered office of the Company is
Century House, Brunel Road, Wakefield 41 Industrial Estate, Wakefield, West Yorkshire, WF2 0XG.
5 Trade and other receivables
Amounts owed by Group undertakings
VAT recoverable
Prepayments and other debtors
2023
£m
2.7
–
0.2
2.9
2022
£m
1.9
0.1
0.5
2.5
Trade and other receivables of the Company principally relate to balances due on demand
from subsidiary undertakings. The Company has assessed the expected credit loss as very low
and has made no provision for impairment.
6 Trade and other payables
Amounts owed to Group undertakings
Trade payables
Accruals
2023
£m
1.0
2.0
0.8
3.8
2022
£m
2.9
1.0
0.3
4.2
Subsidiary undertaking
Nature of business
Registered office
CF Bidco Limited*
Sportswift Limited
Printcraft Limited
Getting Personal Limited
Intermediate holding company Same as the Company
Sale of greeting cards and gifts Same as the Company
Printers
Online sale of personalised
products and gifts
Same as the Company
Same as the Company
Card Factory Ireland Limited
Sale of greeting cards and gifts **
CF Topco Limited*
CF Interco Limited
Short Rhyme Limited
Heavy Distance Limited
Dormant
Dormant
Dormant
Dormant
Getting Personal Group Limited Dormant
Getting Personal (UK) Limited Dormant
Lupfaw 221 Limited
Dormant
Sportswift Properties Limited Dormant
CF Midco Limited
Century Cards Limited
Rose Card Limited
Celebration Cards Limited
Sportswift Trading Limited
CF Newco Limited
321 Cards Limited
Card Concepts Limited
Excelsior Graphics Limited
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Card Factory stores Limited
Dormant
Card Factory Retail Limited
Dormant
Card Factory Online Limited
Dormant
Card Factory Greetings
Limited
Dormant
Same as the Company
Same as the Company
Same as the Company
Same as the Company
Same as the Company
Same as the Company
Same as the Company
Same as the Company
Same as the Company
Same as the Company
Same as the Company
Same as the Company
Same as the Company
Same as the Company
Same as the Company
Same as the Company
Same as the Company
Same as the Company
Same as the Company
Same as the Company
Same as the Company
* Shares held directly. All other subsidiaries shares are held indirectly through subsidiary undertakings.
** 6th Floor, 2 Grand Canal Square, Dublin 2, Dublin, Republic of Ireland.
147
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Contents Generation – PageContents Generation – Sub PageContents Generation – Section
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED
7 Share capital and share premium
Share capital
Allotted, called up and fully paid ordinary shares of one pence:
At the start of the period
Shares issued in the year
At the end of the period
Share capital
At the start of the period
Shares Issued in the year
At the end of the period
Share premium
At the start of the period
Shares issued in the year
At the end of the period
2023
(Number)
2022
(Number)
341,878,341 341,626,396
251,945
342,636,090 341,878,341
757,749
£m
3.4
–
3.4
£m
202.2
–
202.2
£m
3.4
–
3.4
£m
202.2
–
202.2
The company has only one class of shares, which are ordinary shares of 1 pence each, carrying
no right to a fixed income. No shareholders have waived their rights to dividends.
During the 2023 financial year, 757,749 shares (2022: 251,945 shares) were issued in satisfaction of
options vesting in accordance with the rules of the Group’s employee share schemes. Full details
in respect of the Group’s employee share schemes, including remaining options outstanding, are
included in note 25 to the consolidated financial statements.
8 Financial risk management
The financial risk management strategy of the Company is consistent with the Group strategy
detailed in note 23 of the consolidated financial statements. Company exposure to liquidity,
interest rate, foreign exchange and credit risk are principally to the extent they impact the trade
of its subsidiary investments. Trade and other receivables of the Company principally comprise
amounts due from Group undertakings.
9 Financial instruments
Classification of financial instruments
Financial assets have all been classified as financial assets at amortised cost. Financial
liabilities have all been classified as other financial liabilities.
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Card Factory plc Annual Report and Accounts 2023
Maturity analysis
All financial instrument assets and liabilities fall due in less than one year.
Fair values
The fair values of financial instruments have been assessed as approximating to their carrying
values.
10 Notes to the cash flow statement
Loss before tax
Dividends received
Operating loss
Adjusted for:
Share-based payment charge
Operating cash flows before changes in working capital
(Increase)/decrease in receivables
Increase in payables
Cash inflow/(outflow) from operating activities
2023
£m
(0.6)
–
(0.6)
0.4
(0.2)
(0.4)
0.6
–
2022
£m
(1.2)
–
(1.2)
0.2
(1.0)
0.3
0.7
–
The increase in payables stated above is adjusted to reflect amounts analysed elsewhere in
the cash flow statement, which are included within amounts owed to Group undertakings in the
statement of financial position.
11 Related party transactions
Amounts due to and from Group undertakings are set out in notes 5 and 6 of the financial
statements. Transactions between the Company and its subsidiaries were as follows:
Management services
Dividends received from Group undertakings
Inter-company working capital cash flows from Group undertakings
2023
£m
2.1
–
2.1
2022
£m
1.1
–
1.1
Transactions with key management personnel
The key management personnel of the Company comprise the Card Factory plc Board of
Directors. Disclosures relating to Directors’ remuneration are set out in the Remuneration
Report on pages 78 to 95. Directors of the Company control 0.02% of the ordinary shares
of the Company.
Contents Generation – PageContents Generation – Sub PageContents Generation - Section GLOSSARY
Alternative Performance Measures (‘APMs’) and other explanatory information
Introduction
In the reporting of the financial statements, the Directors have adopted various APMs of
financial performance, position or cash flows other than those defined or specified under
International Financial Reporting Standards (‘IFRS’). These measures are not defined by IFRS
and therefore may not be directly comparable with other companies’ APMs, including those
in the Group’s industry. APMs should be considered in addition to IFRS measures and are not
intended to be a substitute for IFRS measurements.
‘like-for-like’ or ‘LFL’ calculates the growth or decline in gross sales in the current period versus
a prior comparative period. For stores, LFL measures exclude any sales earned from new stores
opened in the current period or closed since the comparative period and only consider the time
period where stores were open and trading in both the current and prior period (hence any
periods of lockdown in either period are excluded from both periods).
LFL measures for product lines or categories, where quoted, are calculated using the
same principles.
Purpose
The Directors believe that these APMs provide additional useful information on the performance
and position of the Group and are intended to aid the user in understanding the Group’s results.
LFL measures for our online businesses (cardfactory.co.uk and gettingpersonal.co.uk)
compare gross sales for the current and comparative period made through the respective
online platform.
The APMs presented in the Annual Report and Accounts are consistent with measures used
internally by the Board and management for performance analysis, planning, reporting and
incentive setting purposes.
Definitions of the APMs used in this report are as follows:
‘EBITDA’ is earnings before interest, tax, gains or losses on disposal, depreciation, amortisation
and impairment charges. Earnings is equivalent to profit after tax calculated in accordance
with IFRS and each adjusting item is calculated in accordance with the relevant IFRS. A
reconciliation of EBITDA to operating profit is provided in note 3 to the consolidated financial
statements. The Group uses EBITDA as a measure of trading performance, as it usually closely
correlates to the Group’s operating cash generation.
‘Leverage’ is the ratio of Net Debt to EBITDA for the previous 12 months. The Group monitors
and reports leverage as a key measure of its financing position and performance. Leverage is
also a key covenant defined within the Group’s financing facilities. A calculation of Leverage
(both inclusive and exclusive of lease liabilities) is provided in the financial review on page 56 of
this report.
All LFL measures in this report compare FY23 to FY22, unless otherwise stated. A ‘3Y LFL’
compares FY23 to FY20.
In addition, the Group reports combined like-for-Iike sales measures for certain components of
the business as follows:
•
‘cardfactory LFL’ is defined as like-for-like sales in stores plus like-for-like sales from the
cardfactory website www.cardfactory.co.uk; and
‘Online’: like-for-like sales for cardfactory.co.uk and gettingpersonal.co.uk combined.
•
Sales by Printcraft, the Group’s printing division, to external third-party customers are excluded
from any LFL sales measure.
‘Net Debt’ is calculated by subtracting the Group’s cash and cash equivalents from its
borrowings. Net Debt is a key measure of the Group’s balance sheet strength, and is also a
covenant in the Group’s financing facilities. The Group presents Net Debt both inclusive and
exclusive of lease liabilities, but focuses upon the value exclusive of lease liabilities, which is
consistent with the calculation used for covenant purposes.
‘Operating cash conversion’ is cash from operations (calculated as cash from operating
activities before corporation tax payments) per the cash flow statement prepared in
accordance with IFRS divided by EBITDA and expressed as a percentage.
Percentage movements have been calculated before figures were rounded to £0.1 million.
149
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Contents Generation – PageContents Generation – Sub PageContents Generation – Section
ADVISORS AND CONTACTS
Corporate brokers
UBS Limited
5 Broadgate
London EC2M 2QS
Tel: 020 7567 8000
Investec Bank plc
2 Gresham Street
London
EC2V 7QP
Tel: 020 7597 4000
Auditor
KPMG LLP
1 Sovereign Square,
Sovereign St,
Leeds LS1 4DA
Tel: 0113 231 3000
Principal bankers
Royal Bank of Scotland Group plc
Leeds Corporate Office
3rd Floor
2 Whitehall Quay
Leeds LS1 4HR
Tel: 0113 307 8564
Registrars
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Tel: 0371 384 20301
Investor relations
Tulchan Group
85 Fleet Street
London EC4Y 1AE
Tel: +44 020 7353 4200
Registered office
Century House
Brunel Road
Wakefield 41 Industrial Estate
Wakefield West Yorkshire WF2 0XG
Company Registration No: 9002747
1
Lines are open 8.30am to 5.30pm (UK time), Monday to
Friday, excluding English public holidays.
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Card Factory plc Annual Report and Accounts 2023
Contents Generation – PageContents Generation – Sub PageContents Generation - Section FSC LOGO TBC
Printed by a carbon balanced, FSC®-recognised printer, certified to ISO 14001 environmental management
system using 100% renewable energy. This product has been made of material from well-managed, FSC®-
certified forests and other controlled sources. Both paper and production are measured and carbon balanced,
based on a third party, audited, calculation.
100% of the inks used are HP Indigo ElectroInk which complies with RoHS legislation and meets the chemical
requirements of the Nordic Ecolabel (Nordic Swan) for printing companies, 95% of press chemicals are recycled
for further use and, on average 99% of any waste associated with this production will be recycled and the
remaining 1% used to generate energy.
The printer contributes to the World Land Trust’s ‘Conservation Coast’ project in Guatemala. This scheme
supports many landowners and local communities to register and obtain their own land and thereby protect
thousands of acres of threatened coastal forest. The local organisation FUNDAECO works with over 3000
families to help transform local livelihoods through job creation and ecotourism.
Card Factory plc
Century House
Brunel Road
Wakefield 41 Industrial Estate
Wakefield West Yorkshire WF2 0XG
www.cardfactoryinvestors.com