Card Factory plc

Good morning and welcome to our full year results presentation for FY25. Thank you for joining us today, whether you're here in person at Citibank or joining us online. So I'm Darcy Wilson-Reimer, the CEO of Cardfactory, and joining me today is Matthias Seeger, our CFO. As we are now at the halfway mark for opening our new future growth strategy, we're going to start today by reviewing the progress to date before looking at an overview of highlights from the past year. Matthias will then provide a financial performance update for FY25 and an outlook for the remainder of the year. Following a review of strategic progress we've made in FY25, Matthias and I will then answer any questions that you may have at the end. So I'm pleased to report that progress on our growth journey has continued at pace and is delivering strong revenue growth. As the leading omnichannel retailer of cards, gifts and celebration essentials in the UK and a growing international presence, we are well positioned to capitalize upon the exciting opportunity by presented celebration occasions market across all the countries where we operate in. Our ambition is to become a leading global celebrations group. We are achieving this by reaching more customers in more locations through our channels and markets and increasing our share of wallet in the 13.4 billion UK celebrations occasions market. This is underpinned by a vertically integrated model that drives efficiency and allows us to target the lowest possible operating costs as a value business. By doing so, we continue to make good, profitable progress that is resonating with customers. colleagues across CardFactory continue to focus on our core values, ensuring we put the customer first in our decision-making. And I know we have a large number of colleagues on the call today, so I personally would like to thank each and every one of you for the positive contributions that you have made throughout the last financial year, and of course, over the strategy today. So thank you, colleagues. So having reached the halfway mark for our opening our new future growth strategy, let me summarize the progress to date. As an established brand, we are consistently rated the most trusted in our sector in the UK, and we are focused on delivering our purpose of making sharing in and celebrating life's moments special and accessible for everyone. Since FY23, we've grown our sales by 17%, adding 80 million pounds to our top line, with adjusted PBT increasing by 35% over that same period. This is despite a much higher level of inflation than originally anticipated. Our core stores business has performed strongly as we continue to open new stores in the UK and the Republic of Ireland. Since FY23, our profitable and expanding retail footprint combined with increasing penetration of our gift and celebrations essential offer has delivered a 7.3% store sales compound annual growth rate. We're encouraged by our progress securing new retail partnerships and expanding our relationship with existing partners in the UK and internationally. This is alongside an acceleration of our plans to grow our international footprint by acquiring well-established, accretive businesses, including in the important US market. Turning to digital, we've made progress building our online presence as part of our omnichannel strategy. We've stabilized and improved our online platform and have a fuller understanding of online growth and profit levers. With the foundations for growth now in place, we have confidence in the future growth opportunity for online. So in summary, by combining our market-leading greeting card offer with an expanding range of gift and celebration essentials, we are delivering on our building blocks of growth and achieving growth ahead of the wider celebrations market in the UK with our partnership strategy enabling our international expansion. Turning to FY25, I'm pleased to report that we've continued to effectively execute our strategy, driving revenue growth and profitability. Our highly profitable store estate remains central to our strategy with a strong performance in the last financial year, delivering revenue growth significantly ahead of the retail sector. We continue to grow our share of the celebration occasions market through the expansion of our gift and celebration essentials offer while leveraging our authority and strong customer appeal within the card market. This included further growth internationally through our partnership strategy, supported by targeted acquisitions in the US and the Republic of Ireland. We continue to develop our online offer and omnichannel propositions with cardfactory.co.uk. Like-for-like sales were in line with FY24 as we refined our ranges to support online margin growth. our proven productivity and efficiency program remains key to offsetting inflationary impacts and maintaining profit margins. In FY25, this was further developed into a multi-year simplify and scale program with several key initiatives helping to reduce the cost base to maintain adjusted PBT margins. With robust operating cash flow and the continued strength of our balance sheet, we are well positioned to confidently invest in our growth ambitions. Therefore, the board remains confident in the profitable growth opportunity for the business, which has a clear growth strategy to become a leading global celebrations group, and has recommended a final dividend of 3.6 pence per share, resulting in a total dividend of 4.8 pence per share. So for more details on this and our financial performance for FY25, let me now hand over to Matthias.

Thank you, Darcy. Over the next 20 minutes, I'm going to take you through the results for FY25, provide some additional perspective, what's driving that performance and what lies ahead as we look to FY26. We've got a strong story to tell, one of resilience, disciplined growth and confidence in our strategy. FY25 was another year of strong revenue and profit growth achieved despite a challenging economic environment. Total group revenue increased by 6.2% to 542.5 billion, marking our fourth consecutive year of growth. Profit grew in line with revenue. We successfully offset inflationary pressures through decisive management actions, enabling us to maintain margins and deliver strong performance. Adjusted profit before tax rose by 6.3% to 66 million, with adjusted EPS up 5.9%. This outcome was consistent with our guidance at the Interims in September. Cash generation was robust, and while net debt increased, this was due to one-off items and not underlying business performance. We also completed two targeted acquisitions to support our long-term strategy and continued to reward shareholders by growing progressive dividend, all while maintaining a strong balance sheet. Total group revenue increased by 6.2% from 510.9 million to 542.5 million. Our core business, stores in the UK and Republic of Ireland, which account for 94% of sales, delivered total store-based growth of 5.8%. Strong like-for-like growth was at 3.4%, well ahead of the wider retail market. This growth was underpinned by a compelling customer proposition, a powerful combination of product range, value for money, and consistently great in-store experience. Our strategic growth categories, gift and celebration essentials, led the way with 5.6% growth. Greeting card sales remained robust with 0.9% sales growth as we gained share in that segment. We added 32 net new stores to our network, offering more customers access to our stores and products in more locations. Over the period, new store openings contributed 2.4 percentage points to our total store-based growth. We are progressing with investments in our digital platform to unlock our future omnichannel proposition. Card factory online sales were flat year on year. Getting personal sales declined further and we made the difficult but necessary decision to close getting personal at the end of January, ensuring we stay focused on profitable growth. Our partnership business grew 30.6%, helped by both organic expansion and through acquisitions. PBT margins remained flat year on year at 12.2%. We absorbed cost increases through a combination of efficiencies, productivity gains, and range development, including targeted pricing actions. Product margin of 69.7% was maintained, even with freight costs increasing and a higher share of non-card sales, which were offset by lower costs and targeted pricing. Wage costs increased by 10 million year on year. We mainly mitigated this through streamlined labor management, reducing non-core store hours and limiting temporary labor without compromising service. In H1, we annualized prior year investments in operating costs, which negatively impacted the margin by 0.3 percentage points. PBT margin in half two was 17% compared to 6% in half one. As in previous years, our half two margin rate was four to six percentage points higher than in half one due to operational scale benefits from higher sales in the second half. In addition, our half-to-performance benefited from systemic efficiency gains, removing non-value-added activities across the value chain and enhancing our margin-aggregative product ranges. These changes are structural, not one-offs, and they support our sustainable growth. Turning to cash and debt. Underlying free cash generation of 29 million was strong. Capital expenditure of 18.4 million was down nearly 10 million versus the prior year. We invested in new store openings, store refits and upgrading store layouts, point of sales tilt system upgrades and enhancements to the online experience. Corporate tax payments increased to the higher corporate tax rate that came into effect in March last year. Debt service costs remained broadly consistent with prior periods. We paid $19.8 million in dividends, reflecting both FI24's final and full dividend and FI25's interim payout. Over the 12-month period to 31 January 2025, net debt increased, mostly due to one-offs unrelated to FY25 business performance. These one-off items of about $11 million included repayment of a $3.3 million COVID grant, $1.6 million in refinancing costs, and a $6 million adverse timing impact on payments. Our leverage remains low at 0.7 at the end of January, well below our target leverage range of 1.5. Seasonal peak net debt leverage reached 1.3 in October during the ramp up to Christmas. At period end, the group had 50 million of headroom in its debt facilities, with 75 million accordion option. We are committed to creating value for our shareholders in the long term by delivering on our business growth strategy and plans. Our capital allocation policy has four guiding principles. We maintain a strong balance sheet with clearly defined debt leverage range. We invest in disciplined, financially sound way to support our growth strategy. We provide regular, progressive returns through interim and final dividend payments. And finally, we fund dividends from free cash flow, managing surplus cash transparently and turning it to shareholders where appropriate. Over the past two years, we have generated $56 million in free cash flow. We've invested $25 million in acquisitions to accelerate our strategy. Anticipated returns from these investments are well above cost of capital. We returned $32 million to shareholders via progressive dividends, representing a 4-5% dividend yield. In December, we paid an interim dividend of 1.2p per share. We've recommended a final FY25 dividend of 3.6p per share. The FY25 full-year dividend of 4.8p per share is up 6.7% year-on-year, maintaining a coverage ratio of 3.0. There is no further surplus cash currently available for additional returns. In the future, the Board will consider all options for returning surplus cash, including a share buyback. Let's take a step back and look at the last two years. Macroeconomic conditions have been challenging. Consumer sentiment has been weak. Inflation has put pressure on both household wallets and business bottom lines. Despite this, we grew our business by 17%, adding $80 million in sales. Our core store business has been the engine with resilient annual same-store sales growth of 5.5%. Gift and celebration essential sales increased by 7.6% and cart sales by 3.3% over the two-year period. We opened 58 net new stores growing our footprint from 1,032 to 1,090 locations. Online and partnership sales increased 47% driven by both organic and inorganic growth. This growth is robust and sustainable underpinned by our strategy. The average annual inflation of 4.4 to 5% was nearly double historic levels and beyond what any company could have anticipated. PBT, however, increased by 35% over the two years, a reflection of our ability to grow while absorbing more than 35 million in inflationary cost pressure. Allow me to expand on two key success factors behind this performance. We have a unique retail business in the UK and Republic of Ireland. The heart of our success is a business model built for resilience and long-term profitability. We help people celebrate life's occasions at affordable prices, backed by a strong value proposition. Our strategy is working. We are strengthening our leadership in greeting cards while scaling up gifting and celebration essentials, delivering resilient growth. Like-for-like sales have outpaced the wider retail market. Our share of gift and celebration essentials has increased steadily to 51%, up from 47%. An average basket value rose from £4.37 to £5.06 over the period. Our store network continues to grow. Every new store extends our reach to more customers in more locations and delivers high returns. Our brand is not only loved and preferred, it is supported by an efficient high return business model. Our end-to-end value chain enables us to consistently offer quality products at low prices. We operate a highly profitable portfolio of stores with agility and discipline. We expand our footprint using a low capital model. Each store must pay back within two years. And they do. Return on investment is strong with stores typically operating successfully well beyond 10 years. We cannot control inflation. But we can control how we respond. As a low-cost operator, it is in our DNA to work in a disciplined, structured way to mitigate the impact of inflation. Inflation has added about 35 million to our cost base over the last two years. This annual cost increase of 4-5% is double historic levels. In FY26, we face further inflationary headwinds of 4-5%, equating to around 20 million additional costs. And we anticipate 3-4% beyond that. Now, over the past two years, we have proven we can mitigate inflation. We do this through a combination of efficiencies, productivity, and range development, including pricing. As Darcy mentioned, we have formalized this approach with our structured multi-year simplifying scale program. Simplify and scale focus on eliminating non-value-added and manual activities, reducing duplication, streamlining operations and delivering sustainable and profitable growth. For FY26, focus areas include further optimization of store hours, streamlining front and back office activities with our new point-of-sale system, insourcing of third-party manufacturing, optimization of procurement, and elimination of manual processes in the support center. All plans to offset FY26 inflation are in motion. As with last year, most benefits will materialize in the second half. In summary, card factory sales performance was strong and resilient despite challenging market conditions. Profit increased in line with sales as we mitigated inflation. We had an encouraging start to FY26 with strong momentum across Valentine's Day and Mother's Day. Trading is in line with expectations. We are well positioned to continue growing, underpinned by our strong value proposition and strategic focus areas. Our simplified scale program continues our proven structured approach to offsetting inflation. We expect profit margins to remain in line with FY25. PBT will be again weighted towards half 2, as in FY25. The Board reconfirms expectations of mid- to single-digit percentage adjusted PBT growth in FY26. And with that, I'll hand back to Darcy for the strategy update. Thank you.

Thank you, Matthias. I would now like to provide an update on the continued progress we've made delivering on our opening our new future strategy in FY25 and our priorities for this financial year. Our strategy is transforming Card Factory into a leading global celebrations group. We are achieving this by delivering on our key drivers of growth. Stores, where we will continue to leverage and grow our profitable store estate in the UK and Republic of Ireland. Cards, gifts and celebration essentials, where we are making good progress in expanding across the 13.4 billion UK celebration occasions market. Online and Omnichannel, where we are seeking to deliver a seamless celebration experience for our customers. and partnerships where we continue to build on the positive progress we have made in the UK and internationally. Looking first at stores, at the end of our financial year, we had a store estate in the UK and Ireland of 1,090 stores. This was an increase of 32 net new stores in FY25. And as we look ahead to FY26, we will continue to grow our store network at similar rates achieved in FY24 and FY25. Previous work on our space optimization program allowed further in-store innovations in FY25, such as stationary and kid zones, which helped contribute to strong growth seen from expanded categories, including confectionery, which saw like-for-like growth of 25%, soft toys, which was up 22%, and stationary, which was up 18%. This approach is allowing us to further unlock gift celebration essentials range expansion whilst maintaining our authority and choice for card. The other driver of store revenue growth was the targeted pricing action we took through FY25, which drove around one third of the like for like improvement. Looking at categories, the like for like growth of 5.7% in FY25 across gift and celebration essentials reflects the success of our expanded proposition with 70% of the gift ranges being new in FY25. This included new baby, toy gifts, new baby toys, gift food, and confectionery ranges, as well as an updated and expanded party range and balloon offer where we remain the UK market leader. Card Factory continues to build upon its authority within the card market in the UK, with positive like-for-like growth of 0.7% across seasonal and everyday cards. And this reflects our trend-focused range development, as well as our strong value credentials, which continue to resonate with customers who remain price sensitive. Through FY25, we were able to increase the retail pricing on gifts through range development, which contributed to a 6.7% increase year on year in average basket value. Approximately half of all baskets at FY25 included gifts or celebration essential items. In FY26, we'll continue to leverage our leadership in CARD to underpin celebration and gift attachment rates as we make progress in our evolution to become a celebrations destination. Work is underway to deliver further card range curation in store, which will allow us to optimize choice and release space for new and expanded gift and celebration essential ranges, including new milestone age range and new party range by 26. Internationally, we accelerated our plans to create an international footprint through the acquisition of Garlana in the Republic of Ireland in September 2024 and Garvin in the US in December 2024. Progress with existing partners has been positive. Full service partnership model capability is now in place and delivery success with UK partners leading to international rollout for our partners in FY26. Full rollout to the Aldi UK and Republic of Ireland estate was completed in September 24. And we also secured an extension of our partnership with a reject shop in Australia, where we signed a new multi-year agreement, including seasonal rain supply for the first time. We were also pleased to sign our first wholesale supply agreement with a nationwide US retailer covering 1,100 stores. This was initially for a curated Christmas card range that was extended to Valentine's Day and Mother's Day in Q1 of this year. And we're building on the initial learnings from the Christmas and spring seasons card range with a rollout of a curated everyday card in celebration essential range launched in April 2025 to 93 stores. We're working at pace to complete the integration of our newly acquired businesses and identifying growth opportunities. A particular focus is expanding our card offer in North America through our existing Garvan customer base. At the same time, we'll continue to have positive discussions with new prospective partners in the UK, the Republic of Ireland and other international markets of interest. Building on our experience in the Middle East and wholesale success in other markets, we've taken the decision to refocus our partnership model in the Middle East in the near term. We've chosen to pause the low-cost franchise trial and focus on wholesale agreements. This has led to the decision to close the existing four franchise stores by the end of June this year. North America is the key target region for us, which is why we're working at pace to complete the integration of our newly acquired Garvin business and identifying growth opportunities. The acquisition of Garvin provides us with in-market experience and expertise in the largest celebration occasions market worth 65 billion pounds in targetable opportunity. In addition, we're leveraging learnings from the introduction of our proven wholesale model in the US market, while at the same time looking at how we can expand our card offer in North America through the existing Garvin customer base. Looking ahead, we will realize the annualized benefit from existing government revenue and profitability, and to support this, taking a proactive approach to navigating uncertain geopolitical backdrop, and we do not currently expect there to be material impact from tariffs in FY26. I'm also pleased to report that we're progressing positive discussions with potential new owners, albeit there are longer lead times in the North American market. Turning to online, this is an area of considerable focus for the business as we recognize the need to make further progress. In FY25, we continue to develop our online offer and we're clear now on the levers for profitable growth, allowing us to confidently invest in the future of this channel for CardFactory. This is why the decision was taken to close getting personal.co.uk as of the 31st of January, 2025, so that we can focus on driving efficient, profitable online growth at cardfactory.co.uk. Moving forward, our focus will be on a direct to recipient offer and experience, and this will drive card attached gifting, offering greater value for our customers compared to the competition. Range development is in progress to support this approach. Omnichannel remains a key differentiator for CardFactory and is central to our digital strategy as it will allow us to capture the online spend of our 24 million unique in-store customers. We've continued to develop our omnichannel propositions with improvements made to our nationwide click and collect service. And in FY26, a new balloon appointment omnichannel trial has recently gone live in a number of stores, enabling customers to pre-order inflated balloon arrangements online and collect them in store. In FY25, we continued the process of embedding sustainability considerations across the business, with key focus areas including waste reduction through product design and operational changes. We progressed our greenhouse gas emissions reduction initiatives, including a successful AI energy management system trial across approximately 200 stores, with a further rollout to 800 stores planned this year. This forms part of our Net Zero Pathway activity, which in FY26 will also include the transition of our diesel fleet to plug-in hybrid electrics. We evolved our Giving Something Back program, facilitating more opportunities for colleagues to support local charities and launching a new donation scheme for discontinued stock. For FY26, at the strategic level, we've begun a full supply chain climate risk review. Operationally, we'll continue our plastic reduction work, eliminating bubble wrap use at print craft and cellophane wrap from all own label roll wrap. So looking ahead, I'd like to start by summarizing our FY25 performance. In FY25, we achieved strong and top and bottom line growth that was driven by the effective execution of our strategy. Our revenue growth reflects the strength of our profitable store estate and our evolving celebrations offer. The targeted acquisitions we have made are accelerating international routes to market, and we continue to take a disciplined approach to our financial performance with our Simplify and Scale efficiency and productivity program, alongside strong sales growth successfully offsetting inflationary impacts. We have maintained the strength of our balance sheet and delivered a progressive approach to shareholder returns. As we look ahead, we expect to deliver mid to high single digit percentage increases in adjusted PBT in FY26. Our strategic progress to date, together with focused delivery through our drivers of growth, means the card factory investment case remains compelling. We are reaching more customers in more locations and will continue to do this by building our store estate footprint, opening new stores at a similar rate to the past two years across the UK and Ireland, and by targeting under-penetrated markets. In addition, we have significant opportunity through our retail partnership strategy to address an £80bn global celebrations market, the largest of which is in North America, where we now have an established presence and opportunity to create a credible card-led celebration offer. We are progressively increasing our share of the £13.4bn UK celebration occasions market, As a leading omnichannel retailer with nationwide presence of cards, gift and celebration essentials in the UK, we are building upon our strength and authority within the card market to grow our gift and celebration essential ranges. This is allowing us to progressively capture more of our 24 million unique customers' annual celebration spend, with share of wallet increasing one percentage point over the past two years, and we're targeting further growth at a similar rate. We continue to leverage our leadership in card to underpin celebration and gift attachment rates as we progress in our evolution to become a celebrations destination. Finally, we're leveraging our vertically integrated model of design, manufacturing, and retail to support our credentials as a value retailer with a quality offer. It allows us to respond rapidly to changes in customer tastes and needs while driving efficiency and lowest costs to operate. Our simplify and scale efficiency and productivity program will continue to deliver a structural reduction in our underlying cost base. By delivering on these growth drivers, we will deliver sustainable, progressive returns underpinned by profitable cash-generative growth, which beyond FY26 will target mid-single-digit percentage sales growth each year, adjusted profit before tax growing in the mid- to half-single-digit percentage range. free cash generation of 70 to 80% of earnings underpinned by disciplined investment and sustainable progressive dividend based on a two to three times dividend cover ratio on adjusted earnings. So thank you once again for attending our results presentation. And Matthias and I will now be happy to take any questions that you may have. But before we begin, our Zoom operator will give a quick reminder on the Q&A process. As usual, we'll take questions from the room first and then turn to the questions online.

Thank you, Darcy. As Darcy just said, if you do have a question in the room, then please raise your hand and wait for a microphone to come to you so everyone can hear your question. If you're joining us on Zoom, then please use the Q&A icon on your screen and type your question.

I'm assuming, therefore, that the Zoom operator has made the announcement. Russell's got the mic, so I'll come to you next, Kate. Go on, Russell.

Morning, Darcy, Mathias. Three questions, if that's OK. First one. In terms of the online offer, you talk in the release about removal of, I think they're called stock cards. Could you just talk about what's driven that from a customer behaviour and the relative economics of that, and then also perhaps move on to how you see the offer evolving online given the change in emphasis? The second question is, Matthias referred to bringing third-party sourcing in-house. Could you just give some idea of what products that is and perhaps where that's coming from, whether it's related to tariffs, that kind of thing? And thirdly, is there much happening from an M&A perspective? Thanks.

So thanks for the question. So if I start with online, effectively, when Historically, when carfactory.co.uk was set up many years ago, they set it up like a big store, where primarily it was selling store stock products as well as some personalisation on the side. Going forward, as we focus on the two propositions of direct to recipient with attached gift, and the omni channel offer we will over time discontinue any stock uh store stock range we won't sell store stock online and it will become for personalization and celebrations um as as its uh main drivers of of growth do you want to take the

Yes, I mean, as you're aware, we produce the vast majority of our greeting cards up in Yorkshire. And what we don't produce in Yorkshire, we always assess for bringing into our manufacturing facility. So that's one continuous process but we're looking at several other processes. In the last year we have brought in in-house the production manufacturing of point of sales materials as another example and we continue to evaluate other options of bringing things in-house.

And then I think just on your third point on M&A, I mean, effectively, our approach has been when an opportunity comes that helps us accelerate our strategy and is accretive to shareholders, then we will evaluate it and make a decision on a case-by-case basis. And that approach hasn't changed. Kate, we've got the...

Kay Calvert from Vestec. Three for me, please. First is a store question. You mentioned that you're looking to release more space from cards in store. Can you give an idea of the scale of the opportunity there? And also, could you give an idea of the scale of the opportunity in terms of, or what you're doing, to be honest, in terms of innovation this year? Because last year, I think 70% of the ranges were new. So just wanting to get an idea there. The second question is, was cardfactory.co.uk profitable last year? And the third question is, could you give an update on the performance of the London stalls? Are you now happy with the format from the trials you've been doing? Thank you.

thank you for thank you for the question so in terms of um space optimization so we um continue so i think the work that we did over the last two years uh there was quite a bit of catch-up work because no that that the whole range space display hadn't been looked at for some time so i think we're much more now into a continuous uh improvement cycle the next The next opportunity for us is really about segmentation and understanding certain stores perform in certain ways. So some stores sell more celebration essentials, other stores are more card led stores. So the opportunity for us is to segment stores and start allocating space based on that differentiation as opposed to a one-size-fits-all. So that's the next phase of things that we're working for. In terms of newness, I don't have an exact percentage but it's going to be roughly about 50% of the product. So we continue that.

And that's the rate of innovation that we've had in the previous year. We'll continue to have that. The highest level of newness is on gifting, where indeed we'll have another 70% of newness.

Do you want to do .co.uk in London?

Sure. So we are still in an investment phase with our online proposition. As we commented on previously, we closed getting personal because behind declining sales, as well as it becoming a distraction for our key focus area of becoming an online channel retailer, Cardfactory.co.uk, it was the right decision to close it. That business was unprofitable, and as I said, Cardfract.UK is still in an investment phase. And we continue to expect investment in Cardfract.UK, but we also expect an improvement of the overall profitability as we go into FY26. With respect to London stores, we operate... actually about 20 stores in Greater London. We operate about four stores in Central London. We started opening them two, three years ago, as most of us remember. And the objective was to understand what would need to be true to operate these stores profitably as cost of occupancy are significantly higher and the customer needs are somewhat different from other areas. We now understand what it takes to operate these stores profitably. And we will continue to assess opportunities in London to open stores as we see opportunities as part of our overall store portfolio expansion.

Great. Thanks so much.

Thanks. Adam Tomlinson from Berenberg. First question is just on pricing. So you mentioned about a third of that light for light growth coming from pricing. Can you maybe just recap on your pricing architecture now, where you think you sit versus the competition, and perhaps any changes you've seen competitors Put through in the marketplace second question is on the us you talked about some learnings there so any additional color you can give around that in terms of Just what you've seen either sort of customer preferences how the customer likes to shop anything interesting coming out of those trials and Third question, just on partnerships as well, the Middle East, just noting that switch from franchise to wholesale. As a general question, just around the franchise model, is there anything in there perhaps you've seen that's proving more difficult or just something about that particular approach which perhaps doesn't make it as something you might use going forward?

Thanks for the questions Adam. So in terms of pricing architecture, there's actually very little change to the actual architecture itself of cards starting at 29 pence, going to 49 and then going up in 50p increments and largely exiting card. at £399, so that continues to be so. We have done quite a bit of design on some more sort of design focus, more premium to the card, so you will see in not all stores, in some stores a higher mix of those sort of higher quality cards and that came out of the learning of the London trial where we put some premium cars to drive ASP. They did well. We then tested that in about 100 stores. That performed well. We then backed that type of car into the design studio, which we're now putting in more stores. We will also be, when we've historically done our promotion a number of times a year of 10 cards for a pound or 15 pence each. We are going to run some tests to see if we can integrate that into the range as opposed to just being at a gondola end. So we'll just continue with some tests on that.

If I may add, our average sales price last year for cards was 128. And that compares with a market average excluding hard factory of well above 180. So that is the backbone of our strong value proposition. But as you can appreciate, we have some room here.

So in terms of US learnings, I would say, I mean, effectively, we dipped our toe in the water. What we did is we basically developed a range of about 50 Christmas cards that we put into a cardboard freestanding display unit. And we shipped that to the US and then shipped that out to 1,100 stores. And we took a ton of learning in terms of producing in the UK, shipping to the UK, working with three PLs, getting the distances of 1100 stores. When you arrive at the back door of a big box retail, how that process sort of needs to work, in addition to which cars were selling, which cars not. So it was extremely rich in learning. We continued that. through Valentine's Day, Mother's Day. But actually within what we've said in partnerships, the really exciting thing is the trial of every day where this is now a much more expanded range and where it's every day, it's birthdays and kind of all of that. I was out in the US once it had launched and went and we've got some stores where It's only our range and other stores where we're side-by-side competitors. I was really pleased with the work. The range looks really strong. The pricing is great. And if you're interested in another time, I actually went and physically bought Shop Cards, R's End, and competitors. So I'll happily show you that. So some really good learnings. In terms of the Middle East, I think if I take a step back not only from the Middle East and say, when we wrote the strategy for partnerships, we did a lot of testing. So we tested a wholesale model. We tested white label, franchise, et cetera. And on the franchise trial, what we've learnt is that in order to build your brand from scratch in a new market where it's gift-led as opposed to card-led, there's going to be quite a lot of work to be able to roll that and scale that, and would frankly be pretty expensive. And we think that having done all of the learnings we do, the best way to scale our partnerships programme is through the wholesale model. That's the one we think is the best. Very good, should we turn to some questions online? So one for you Matthias, can you discuss capex spend and what the continued investment will be?

Well we have spent last year 18 million in capex in FY24, so the prior fiscal year we spent 28 million. As you might recall, we indicated that our capex spending is roughly 25 million, so we are in that range. And going forward, we believe that we'll continue to be in that range. That capex spending covers everything from our new stores, store refits, change of store layouts. but also an investment in our digital platform as well as investment into efficiency and productivity savings.

Great, thank you. What percentage of space is devoted to store to card and non-card respectively? Clearly that's going to differ store to store depending on the size, the shape and the layout. But roughly across the estate it's about 47% of the space is to card and the rest is to gift. And then what was inflation in non-card in FY25? Do you have that?

inflation in non-car that is the ASP. If that's meant the ASP, it So what I can tell you is that in the total portfolio, the ASP increased from 136 to 146. But that is a mix between pure range development and some pricing.

Yes, so Jonathan, I think if it was a different question that we answered, just feel free to clarify. Please can you talk to me how lower transactions is impacting the business? We calculate around 3% to 4% lower. Why so much lower than the decline in the card market? So if I start with that first. So overall transactions were down last year by 3%. Our overall volume was flat and that was offset by a 6.7% increase in basically ASP. and the trend in the average basket value. Thank you. And the reason for transactions being slightly ahead of the card market is due to the dynamics on the high street and footfall on the high street.

But just for the avoidance of doubt, we were actually building market share in the card market segment.

Then slide 13 gave some data for this first time, but where will we get the stats to hit your guidance ambitions? Why does the group not provide KPIs aligned with its ambition to the target, the $13.4 billion gifting celebrations market? I think when your question is about in terms of aligning to our KPI, aligning to our ambitions of the $13.4 billion gifting market, we have never set market share targets because I think market share is an output. And what we're focused on is delivering effectively the sales, the profits, and effectively the cash that comes from that. No data or info on the US partner, why nothing seems odd as a key plank to the strategy. Again, I think this is about, if I understood the question, this is about we don't name the partner. It's a really simple answer. We're a supplier, they're the customer. They've asked us not to mention us publicly in our presentations and we respect that. So then just on tariffs on Garvin, just given it's a really small part of the business, so the US is going to be about 6%. So we think that it's not going to have a material impact on this year. So please discuss buybacks at this valuation level. How can dividends be justified? Sorry, the iPad's jumped. How can dividends be justified versus buybacks at a 6.5 PE?

Well, I think our capital allocation policy is very clear. And one of the key fundamental principles of our capital allocation policy is that we provide predictable, progressive dividends to our shareholders. And this is a commitment, and we stand for predictability. We have income investors. and that's part of our identity. If we have surplus cash, we do assess all options for returning cash to shareholder or further investment opportunities. As I mentioned earlier, over the last two years, we did not generate any surplus cash versus the free cash flow that we generated.

If I can just add, look, the capital allocation policy that we launched last year, that was after extensive consultation with shareholders. And we totally understand that there are different schools of thought. We have some shareholders that say, don't do any buybacks. We have some shareholders that want us to do only buybacks and actually everything in between. So we consulted on the policy, we sort of published that widely and And that is what we're doing. We are not against dividends, but at this moment in the cycle, we've concluded when we published the capital allocation policy that the priority for cash returns at the outset was reinstating the dividend. But I completely appreciate, understand and get that there are different points of view and different schools of thought.

I think we have a few questions on working capital and the dynamic around working capital. Yes, working capital is increasing as our business is growing. Our working capital is increasing behind our store sales growth. We have a higher level of inventory just because we have more stores, but also our partnership business has a longer supply chain and therefore we will see an increase in working capital going forward. This is all factored in into our guidance of cash flow productivity of 70 to 80%. Great.

There's a couple of questions just around ROI on recent acquisitions.

Well, I think Acquisitions is not something that we target as a course of regular business, but we look at opportunities when they come along and we assess the opportunities in the spirit of how do they accelerate our strategies and what is the return for the shareholder on this acceleration of strategy. And the recent acquisitions have an anticipated return on investment well above the cost of capital, significantly above the cost of capital. And therefore, the board decided that this was the right step forward for the business in the long term.

How much of a diversion is trying to grow markets so far away from home in Australia and the US? So I think just as we become a mature business in the US and when we wrote the strategy a couple of years ago, the opportunity then is do we then sort of double down and and run the business for cash, or actually do we continue to grow? And then do you look for adjacencies or do you look for additional geography? But given the vertically integrated model that we have here in the UK, what we're doing is we're leveraging that model. And frankly, whether we're shipping to Australia or shipping to the US, I don't actually think it matters that much. But what we do have is we have a dedicated, it's a small dedicated team to building the partnership business that is not a distraction to the main business of running stores. And I think that's evident from the results.

There is a question about providing some more colour about the weighing of profit towards the second half. And I just want to reiterate what we mentioned earlier. Over the past three years, including this year, we have experienced a level of inflation that is above historic level and I guess nobody could have anticipated. In the last two years, that put 35 million of additional costs in our business. This year, it's another 20 million. We are committed to growing our business long term. We are committed to providing a great value proposition to our consumers at affordable prices. And we are committing to increase our returns to shareholders through progressive dividends. That all is underpinned by our Simplify and Scale programme, which is a multi-year programme to deliver savings. Now, structure, systemic, requires time, and therefore we are not driven by fiscal year timings, but to do the right thing for the business. The second half has a higher share of our business. Therefore, it has higher cost and provides us with the opportunity to take more costs out of our business. The second half is where we mostly bring the higher level of newness to our business, which enables us to evolve our range, including pricing. These are the fundamental reasons why at this moment our profitability is skewed more towards the second half than it has been in the past.

So given we're coming up to time, I'll just take the last couple of questions. If there's any questions we haven't got to, we're committed to coming back to people and making sure that we've answered your questions fully. Given that FY25 card factory stores EBITDA margin is lower for partnerships, is the plan to leverage the partnership to develop the distribution channels in these international markets and then capitalise by opening our own stores eventually? or to try to incrementally improve margin for partnerships. I think that I mean fundamentally the partnerships is a lower margin because effectively we have to share that with the partner but it also is significantly less capital intensive so from a returns perspective it is you know it's a creative and it is very interesting. At this point in the cycle we don't have any plans to then say, OK, we've built wholesale in that country and therefore we will come and open stores. We want to make sure the international business that we develop, it's a capital light model, so that we manage our risk appropriately of doing business in other markets. So I'll just take this as the last question. So the increase in energy hedge costs as a result of the expiry two thirds throughout the year, is this a material additional cost expected FY26?

We annualise the cost increases in FY25. Yes, there might be some inflation coming through energy prices, but we would consider that inflation as usual, which we will offset and mitigate through the tools and the program that I talked about earlier.

So very good. So thank you, everybody, for attending. Thanks for those that have attended online. And thank you all for your questions. Again, we'll just go through and make sure that we've answered anything. Anything that we haven't answered, we're happy to get back to everybody that asked. And I wish everybody a pleasant onward journey. Thank you so much.

Thank you.