Card Factory delivers disappointing dividend

25th Mar 2015 07:52

Retailer Card Factory signed, sealed and delivered its full year results with few surprises, although demanding investors were seemingly disappointed with the generous dividend as it was not quite the bigger present of a special dividend that they had been wishing for.However, management indicated such a payout was not too far away, saying it expects to maintain debt leverage at 1.0-2.0, which it expects should pave the way for capital returns in the future. "To the extent there is surplus capital within the business, the board expects to return that capital to shareholders." Remaining in line with indications at January's 11-month trading statement, annual revenues were 8.1% higher than the prior year at £353.3m, with like-for-like (LFL) sales up 1.8%, slower than the previous year but both in line .Underlying earnings before interest, tax, depreciation and amortisation grew 9.6% to £88.2m, as the industry-leading EBITDA margin strengthened to 25% from 24.6% a year before, notwithstanding increased costs of being a public company, with group gross margin flat.Underlying profit before tax was almost doubled to £65.5m, before taking into account costs and £22.8m of non-underlying expenses principally relating to charges associated with May's initial public offer and senior debt refinancing. Statutory PBT and EPS were both up roughly 42% to £42.7m and 10.6p respectively.Management proposed a final dividend of 4.5p per share, making for a total dividend of 6.8p per share, which was calculated as if the IPO and senior debt refinancing had completed on 31 January 2014, that is paying a dividend for a whole year.The IPO on 20 May and the senior debt refinancing on 30 May left the company with net senior debt of approximately £160m, consisting of £180m senior debt and approximately £20m of cash.Thanks to strong cash generation, net nebt had reduced to £103.6m by 31 January 2015, of which £69m was cash.Management commented that current trading is in line with expectations and on outlook expects to open 50 new stores in the new financial year, after the 51 net new openings last year that took its total estate to 764 stores as at 31 January 2015.In the long term, there is confidence this can be expanded to up to 1,200 stores in a market that remains highly fragmented.Broker Canaccord said analysts' calculation of PBT of £73.6m was a touch ahead of its own £72.5m estimate and consensus of £73.2m.Prior to Wednesday's announcement full year consensus PBT forecasts pointed to circa £80.1m and with the results largely in line no major changes are expected, albeit the broker said there may be scope for its own estimates to move up towards the consensus level.