Card Factory plc ($CARD)

Welcome to the Card Factory FY '26 Preliminary Results Presentation. Please welcome to the stage, CEO, Darcy Willson-Rymer.

Good morning, and welcome to our full year results presentation for FY '26. Thank you for joining us today, whether you're here in the room at UBS or whether you're joining us online. I'm Darcy Willson-Rymer, CEO of Card Factory. And joining me today is Matthias Seeger, our CFO. Following an introductory overview of the past year, Matthias will provide the financial performance update for FY '26, and Matthias and I will then provide an update on the celebration occasions market and the progress we have made on our Opening Our New Future strategy. Matthias and I will look forward to answering any questions that you may have at the end. Despite a challenging consumer backdrop in FY '26, we continue to execute our strategy to transform Card Factory into a global celebrations group. While maintaining our position as the U.K.'s leading card specialists, we continue to expand across occasions and categories. And this is reflected in the continued development of our gift and celebration essentials offer as we continue to increase our share of the celebration occasions market. At the same time, our focus on value and quality remains central to our customer proposition, ensuring we remain relevant and in this more challenging environment. On behalf of the Board, I would like to recognize the continued commitments of our colleagues across the group. I know we have a large number of colleagues on the call today, and I'd like to personally thank each and every one of you for your contribution throughout the year and over the course of our strategy today. So thank you, colleagues. FY '26 reinforced that celebrations remain an essential part of everyday life with our customers continuing to prioritize key moments. This was despite a shift in consumer behavior as we approach the key Christmas trading season when we saw customers shopping less frequently but spending more, resulting in more challenging trading conditions as confidence weakened and footfall declined. Against this backdrop, group revenue increased by 7.4% to GBP 582.7 million, supported by new store openings and the annualization of prior year acquisitions. At the same time, we've strengthened our multichannel capability through the acquisition of Funky Pigeon, which has accelerated our digital strategy, provided enhanced capability and expanded our digital customer base contributing GBP 13.5 million of revenue in the year. However, like-for-like store sales were broadly flat at minus 0.2%, with higher average basket values driven by targeted pricing actions and ongoing mix shift, offset by fewer transactions due to low consumer confidence affecting H2 footfall. Our adjusted PBT of GBP 56 million reflects the impact of a weaker H2 trading across U.K. stores alongside ongoing cost inflation, although disciplined execution of our Simplify & Scale program helped mitigate a significant proportion of these pressures and supported strong free cash flow generation of GBP 40.7 million. The celebration occasions market remains resilient with over 99% of the U.K. adults consistently shopping this category. Moreover, our addressable market within gifts and celebration essentials continues the growth seen since our capital market strategy update in May 2023. Through the year, we've continued to invest in the business and strengthen the foundations for growth in celebrations. This continues with robust plans in place for FY '27 to deliver against our strategic priorities and medium-term ambitions, which are focused on increasing participation across more occasions and categories through our channels and markets. Whilst we remain mindful of the potential implications of geopolitical developments on consumer sentiment, we expect to deliver adjusted PBT in FY '27 in line with current market consensus. The Board remains confident in the profitable growth opportunity for the business and has recommended a final dividend of 3.7p per share, resulting in a total dividend of 5p per share. In addition, the Board has concluded that the group has surplus cash at the end of FY '26, supported by our strong free cash generation in the period. And as a result, we will shortly commence a share buyback program with the intention to repurchase up to GBP 15 million worth of shares during FY '27. For more detail on this and our financial performance for FY '26, I'm going to hand over to Matthias.

Thank you, Darcy, and good morning, everyone. I'll take you through our FY '26 financial performance and the outlook for FY '27. The key message is that we delivered good revenue growth, strong cash generation and disciplined capital allocation while managing through a more challenging U.K. consumer backdrop in the second half. For FY '26, revenue grew 7.4% to GBP 582.7 million with continued progress across stores, wholesale partnerships, and digital. We delivered adjusted PBT of GBP 56 million, in line with our updated guidance. With inflation being largely contained through the benefits of the Simplify & Scale program, profitability was impacted by soft footfall in the U.K. due to the challenging consumer environment. Cash was the standout. Adjusted free cash flow of GBP 40.7 million, equivalent to 99% of adjusted earnings. We maintained a strong balance sheet. Net debt closed at GBP 67.9 million and an adjusted leverage was just below 1x at the end of January. Excluding the Funky Pigeon acquisition, debt would have reduced by close to GBP 19 million. We are also returning cash with discipline. 92% of FY '26 free cash is being returned to shareholders with a progressive 5p dividend, the completed GBP 5 million buyback and an intention to commence a GBP 50 million buyback shortly. Turning to revenue in more detail. Group sales increased from GBP 542.5 million to GBP 582.7 million. Stores contributed growth of GBP 7.8 million, supported by state expansion, while like-for-like sales were slightly down at minus 2% for the year, reflecting softer U.K. footfall in the final quarter. The U.K. was impacted by lower consumer confidence and softer footfall, while the Republic of Ireland delivered like-for-like growth of plus 4.8%. Wholesale more than doubled to GBP 47.2 million, supported by organic growth and the annualization of the Garven and Garlanna acquisitions. Digital sales increased to GBP 20.6 million, increasing by more than 50%, reflecting the acquisition of Funky Pigeon, partially offset by the closure of Getting Personal, with a focus now on integration and delivery of synergies. The core store estate continued to grow and our strategic growth channels made a larger contribution through acquisitions and partnerships. That gives us a broader and more diversified growth profile than we had historically. It is important to be clear on the challenging U.K. consumer backdrop in the second half and especially in the last quarter. As consumer sentiment weakened and disposable incomes came under more pressure, footfall and transactions in the U.K. stores softened. Q4 consumer confidence was at minus 11 points and 60% of households were worse off year-on-year on disposable income. December footfall was down 2.9%. As a result, our like-for-like store sales were down 1.7% in H2, leaving total U.K. store sales flat year-on-year in H2. In a store-led model, when sales soften, profits are disproportionately impacted because the business loses operational gearing, while still carrying inflationary pressures. In our case, lower sales reduced our ability to absorb cost inflation through volume by around GBP 4 million. We also saw related noncash accounting provisions for store -- for stock and store impairment charges of around GBP 4 million. Despite PBT declining year-on-year, fewer than 2% of stores made a negative contribution, which underlines the resilience of the estate. Looking ahead, in FY '27, we are focused on growing average basket value by sharpening the value offer, strengthening in-store value communication and continuing to broaden our celebrations range. At group level, the main pressure came from U.K. stores, reflecting the consumer dynamics we saw in the second half. Our strategic growth areas continue to make good progress, benefiting from year-on-year profit improvement for both digital and wholesale partnerships. Digital performance includes the closure of Getting Personal and the acquisition of Funky Pigeon. Profit growth in wholesale partnerships was underpinned by both Garven and Garlanna with both businesses performing in line with acquisition economics. We also maintained close control of operating costs and the benefits of Simplify & Scale help improve operating cost efficiency year-on-year. At the heart of the business remains a highly profitable and cash-generative core store estate. Total store sales increased to GBP 514.6 million, an improvement of 1.5% in FY '26. We added 27 net new store openings, taking the store estate to 1,117 stores. Average basket value increased from GBP 5.7 to GBP 5.26, helped by higher share of gifting and celebration essentials, and targeted pricing actions. The share of gifting and celebration essentials increased to 52.5% from 51.8%, which is further evidence that the broader range is resonating with shoppers and that we are continuing to grow as a celebrations retailer. We have a strong pipeline to sustain net new store growth, supported by our proven low-cost, low capital model. We have also strengthened how we manage the estate with enhanced data capability, enabling segmentation of the full store estate so that ranges and space can be tailored more precisely to shopper behaviors. Initial rollout has shown positive like-for-like sales versus control stores, particularly in gifting and celebration essentials. One of the reasons that our business has remained resilient through a highly inflationary period is the progress on Simplify & Scale . Over the last 3 years, we have absorbed annual inflation of 4% to 5% and offset more than GBP 60 million of cost inflation. In FY '26 alone, we delivered GBP 21 million of actions, mitigating the significant majority of inflationary pressures in the year. These benefits came from store hour optimizations, warehouse efficiencies, restructuring activity and improvements in range and pricing. In FY '26, the program delivered around 9% improvement in store efficiencies through operational optimization alongside broader sourcing and supply chain improvements. Importantly, this is not just about mitigating 1 year inflation. The program continues to structurally lower our cost base into FY '27 and beyond as we expect inflation to be 3% to 4% this financial year. Turning to cash generation. Cash performance was very strong and a standout in FY '26. We converted 99% of adjusted earnings into free cash and generated GBP 40.7 million of free cash, which was a very significant improvement on the prior year due to lower working capital. Capital expenditure in FY '26 was GBP 19.4 million, including investment in new store tilt systems, enhancement to our SAP based ERP platform and store openings. Capital spending in FY '27 is expected to be at the higher end of our guidance range of GBP 20 million to GBP 25 million. FY '27 capital expenditure will include one-off investments to deliver synergies from the acquisition of Funky Pigeon and to deliver cost savings from investments in manufacturing capability. As a result, free cash conversion is therefore expected to be at the lower end of our target range of 70% to 80%. Card Factory's strong free cash generation translates into balance sheet strength and flexibility. Main uses of cash in the year included dividends, the GBP 5 million buyback and the Funky Pigeon acquisition costs. The acquisition of Funky Pigeon was funded from extending existing debt facilities. Net debt, excluding the acquisition of Funky Pigeon, decreased by GBP 18.4 million. Adjusted leverage at the end of January was just below 1x, which remains comfortably inside our 1.5x maximum target range. Total revolving credit facilities now stand at GBP 160 million and available cash and committed headroom in the facilities at the end of January were GBP 92.5 million. Our capital allocation framework remains clear and unchanged. We prioritize maintaining a strong balance sheet, investing to deliver our plans, supporting sustainable and growing dividends, and returning surplus cash to shareholders where appropriate. The guardrails are equally clear. Maximum leverage of 1.5x during the year, investment behind strategy at attractive returns, progressive dividends with cover between 2 and 3x adjusted earnings and disciplined use of surplus cash such that total returns to shareholders do not exceed free cash generated. These principles are underpinned by medium-term targets of mid-single-digit sales growth, free cash conversion of 70% to 80% and mid-to-high single-digit profit per tax growth. Delivery of these targets is supported by store like-for-like growth, new store openings, online and partnership growth, continued benefits from Simplify & Scale , and disciplined capital investment as well as strong working capital management. Turning to shareholder returns. Our objective remains a sustainable and progressive approach. Total cash return to shareholders for FY '26 is GBP 37.5 million. That includes a total progressive dividend of 5p per share for FY '26 equivalent to GBP 17.5 million. This dividend is up from 4.8p from last year and is equivalent to a dividend yield of 7% to 8% at the current share price. Dividend cover on adjusted EPS moves from 3x to 2.4x. In addition, we completed a GBP 5 million share purchase program in December with 5.7 million shares. These shares are held in treasury to settle future employee share scheme issuances and offset dilution. In addition, we will return a further GBP 15 million surplus cash to shareholders through a share buyback. This buyback will commence shortly and the purchased shares will be canceled, subject to the usual approvals at this year's AGM. Total group sales through the first 3 months have been in line with prior year in the same period. This excludes the incremental benefit of Funky Pigeon. We remain mindful of the Middle East conflict and its potential impact on input costs, inflation and consumer sentiment. For FY '27, the Board expects adjusted PBT to be in line with current market consensus. This reflects anticipated sales growth, further simplifying scale benefits to offset wage growth and general inflation and our assessment of the possible impact of incremental costs arising from the ongoing conflict in the Middle East. Our FX requirements are 100% hedged and our energy requirements are 80% hedged for the remainder of the year. As in recent years, profit delivery is expected to be weighted towards the second half. We remain confident in Card Factory's ability to deliver mid-to-high single-digit percentage adjusted PBT growth year-on-year over the medium term. Let me turn the page and talk about our strategy update. We would like to update you on progress that we have made on our Opening Our New Future strategy. It has been 3 years since the launch of our strategy. We have made significant progress building our market share and expanding across all our growth channels. We therefore felt that it was the right time to discuss in more depth the markets we operate in, reflect on the progress we have made and outline how our strategy will continue to deliver growth over the medium term. For nearly 3 decades, Card Factory has helped millions of customers celebrate life's moments, initially through great value greeting cards and increasingly through a broader offer spanning celebration essentials and gifts. As customer expectations have evolved, so has the scope of the U.K. celebrations occasions market, now consisting of 3 core categories. First, greeting cards, which includes the traditional everyday occasions of birthdays and anniversaries as well as an increasingly diverse range of milestones, including graduations and pet birthdays. Seasonal occasions remain a key focus with Christmas, Valentine's Day, Mother's Day and Father's Day remaining dominant, while other seasons such as Halloween continue to grow in popularity. Increasingly, customers look to mark an occasion with a gift either alone or alongside a card. This includes stationary, craft, small toys, books, candles, mugs, glassware, homewares, novelty gifts and other small keepsakes. And finally, there are a broad range of celebration essential products that turn a moment into a celebration, including balloons, party ranges, gift wrap and gift bags. It is a robust market. Even at times when consumer confidence weakens, the desire to celebrate remains consistent with data from last year showing that over 99% of shoppers continue to participate in celebration occasions. As such, we continue to see market growth at a steady compound annual growth rate of around 2% since 2022. Together, celebration occasions form a large, mature, and resilient market. Following updated market analysis, we estimate the U.K. celebration occasions market totaled GBP 22.3 billion in 2025, growing by GBP 370 million versus the prior year. Looking in more detail at each category, gifting represents the largest component of the celebration occasions market at GBP 19.2 billion with nearly 1/3 purchased online. This category demonstrated robust growth of 1.5%, driven by both seasonal events where Christmas remains dominant at 39% of seasonal spend and everyday occasions with birthdays accounting for 24% of everyday gift sales. Within that total market, we have an addressable market of GBP 11.8 billion, defined by gifts that are predominantly card attached. It's a growing segment seeing 1.8% year-on-year growth in 2025. The U.K. celebration essentials market was estimated at GBP 1.5 billion in 2025, with 26% purchased online. This entire market sits within our addressable market. Like gifts, the category is strongly seasonal and grew by GBP 28 million in 2025. Party products form the largest subsegment at 42%, followed by gift wrap at 36% and balloons at 22%. Finally, the U.K. greetings card market reached GBP 1.6 billion in 2025, representing 7% of total celebration occasion spend. As outlined in our capital market strategy update in May 2023, our strategy expands Card Factory's role across the entire celebration occasions market. Progress has been consistent and robust with good growth in initial target categories, meaning that today, we have outright leadership in cards, gift bags, wrap and balloons with a growing presence in adjacent categories. This breadth is [ enabling ] us to progressively capture a greater share of consumers' annual celebration spend. Since FY '23, when we launched our Opening Our New Future strategy, we have grown our like-for-like sales at a combined annual growth rate of 4% to 5%, which is consistently ahead of the market. Looking ahead, we expect the celebration occasions market to continually grow at a consistent rate of around 1% to 2%. As we continue to develop a broader celebration offer, we expect Card Factory to maintain a similar level of growth to the past 3 years, increasing our share and growing ahead of the market at between 4% and 5%. We are well placed to unlock this opportunity. Today, we serve over 24 million customers each year and around 60% of U.K. adults, who buy cards and celebration essentials shop with us. We have the reach, which will translate into greater spend. At the moment, we capture around GBP 22 per customer in celebration occasions. Yet we know that those same customers are spending closer to GBP 258 in total across the category. So today, we are capturing actually less than 1/10 of their total celebration spend, and that is the opportunity. On this slide, you can see the strong progress we have made executing on our strategy across all areas of focus. Our core growth engine remains our nationwide store estate in the U.K. and the Republic of Ireland. Since FY '23, we have added 85 net new stores, bringing our total store estate to 1,117 stores at the end of last year. This has increased our total sales by 6.6% over the 3 years as we bring our enhanced celebrations occasion offer to more people in more locations. You can see from the central chart, the progress we have been making transforming Card Factory into a celebration occasions destination. From just 50% of our sales being non-cards 3 years ago, today it stands at approaching 53%. With this sales shift, our average basket value has increased from GBP 4.27 to GBP 5.26 in FY '26. At the same time, our strategy unlocks channel growth, allowing us to reach more customers with greater convenience, both in the U.K. and internationally. Combined, our digital and international channels have grown by GBP 63 million over 3 years, accounting for more than half of our sales growth. Over the 3 years, since the launch of our strategy, we have grown our sales by 26%, in line with our strategic priorities. While profit growth in FY '26 was impacted by external macroeconomic factors, we have made good progress over the 3 years against the backdrop of consistent year-on-year inflation totaling GBP 16 million, as I mentioned earlier. Cash generation has been strong behind our robust business model with nearly GBP 100 million of free cash generated. This, in turn, has enabled consistent cash returns to shareholders through a progressive dividend and buyback while reducing net debt and investing in business growth. We are well placed to continue this growth over the medium term. I will now hand over to Darcy, who will talk you through our strategy.

Yes. Thank you, Matthias. As a successful value retailer, we continue disciplined cost control with targeted growth initiatives that expands customer relevance without eroding margins. Our Opening Our New Future strategy reflects these principles, strengthening our position as a leading celebrations brand while delivering sustainable, profitable growth over the medium term. In FY '26, we operated in a complex trading environment but remain focused on progressing the core drivers of our strategy, refining execution where required and investing in the capabilities, channels and efficiency that underpin the long-term opportunity. As such, we remain confident in our strategic direction, the components of which I've talked through before and can be summarized as follows: firstly, increasing our share of the celebrations market by strengthening our category performance, optimizing space within our stores and delivering product innovation across cards, gift, celebration essential ranges. Secondly, by reaching more customers through targeted store expansion, a growing wholesale partnerships footprint and continued development of our digital proposition, including the integration of Funky Pigeon with a focus on scalability and effectiveness. And finally, unlocking international opportunity by taking a selective and measured approach to international growth, prioritizing opportunities that align with our differentiated capabilities, value credentials and disciplined capital allocation. Let me start by taking you through how we're going to continue to unlock the celebration occasions market in the U.K. and Republic of Ireland. The opportunity is clear. Firstly, whilst we have 24 million store customers, our share of their wallet for celebration occasions is currently below 10%. And at the same time, our customers tell us that they want Card Factory to be their celebration occasions destination. Secondly, we continue to reach more customers. There are up to 300 locations across the U.K. and Ireland where we can viably open profitable new stores. And at the same time, we can make better use of the existing store estate to optimize our return on space. So our strategy will see us both continue to grow share, both in card, where we will build on our existing leadership through a continual focus on value and by evolving our ranges to meet changing customer trends and for gift and celebration essentials, where we will build upon the existing range, which we have developed extensively over the past 3 years. Within our store estate, we've developed an opportunity to introduce customer base segmentation that will drive relevance while continuing our successful space optimization program to maximize the benefits of our evolving product offer. Our Simplify & Scale program continues to underpin the strategy by strengthening productivity, efficiency and cost discipline across the business, including our core stores business. By simplifying our ways of working, scaling proven processes, we're improving operational execution and removing non-value-added tasks to ensure the business remains resilient, efficient and able to invest in our growth priorities. At the same time, as a vertically integrated operator, we're able to maintain lowest cost to operate by controlling multiple stages of the value chain, minimizing our reliance on third parties and improving visibility over costs, availability and margin. Over the last 3 years, we've continued to expand our physical store footprint, delivering an average of 28 net new openings each year. At the same time, we have materially evolved our product mix. In FY '26, this range evolution included the introduction of new and more diverse ranges. In cards, we've driven more tailored ranges, faster and more agile range management and the rollout of a premium offer. And this is all underpinned by our clear value leadership. And in gift and celebration essentials, we've continued to evolve the offer to improve relevance, increase attachment, and strengthen value perception with clear architecture targeting category expansion and a disciplined test-and-learn approach. That includes new growth drivers such as back-to-school stationery and expanded Halloween range and the introduction of Secret Santa., which is all helping us capture more occasions and increasing share of spend. Looking ahead to FY '27, focus is on building from existing success. We will continue to expand the store network at a similar pace while driving like-for-like growth through further expansion of non-card categories. In particular, we see strong opportunity in kids, our licensed ranges and the relaunch of wedding and party, which are all areas where we can increase relevance and share of spend. At the same time, we will continue to optimize our store estate through targeted space optimization and the multiyear rollout of our customer segmentation program, ensuring each store is tailored to its local customer mission. Operationally, we will further strengthen our model with additional in-sourcing of production capability and the introduction of enhanced customer listening and feedback programs to better understand and engage our customers. Looking beyond FY '27, our ambition is to deliver consistent compounding growth. We will continue to expand our store estate into underpenetrated locations at a similar rate, unlocking further reach across the U.K. and the Republic of Ireland. At the same time, we're targeting growth of 2% to 3% per year like-for-like over the medium term, driven by continued outperformance of our non-card categories. We will build leadership in additional categories, particularly in areas such as party, where we see a clear right to win and significant headroom for growth. And across the estate, we will adopt a mission-led approach, optimizing stores around key celebration occasions to drive greater relevance, engagement and spend. While Card Factory is the U.K.'s leading specialist physical card retailer, we see clear headroom to grow our online market share. In particular, we're well placed to drive growth through a compelling card and gift attachment offer online that leverages our existing market strength. The digital channel represents around 10% of cards purchased in the U.K. and about 15% of value at GBP 200 million, with the attached gifting market representing GBP 6.3 billion of sales. As online card shopping missions are complementary to our existing offer through both direct to recipients and through personalization, there is a clear growth opportunity. The larger opportunity is the 7.1 billion online gifting and celebrations market, which is 1/3 of the total celebration occasions market. And we continue to broaden our celebrations offer, the opportunities to extend our store-based party and celebration range. This will enable both in-store and online customers to seamlessly access an extended offer through our omnichannel services. Therefore, our ambition is to evolve Card Factory into a fully omnichannel retailer. And central to this is growing our digital business through 2 distinct but complementary brands. Funky Pigeon will focus on cards and attached gifting where personalization and direct to recipient missions are key. And cardfactory.co.uk will focus on the broader celebrations proposition, including party and celebration essentials. Critically, we have a unique advantage in our 24 million store customers, which gives us a significant opportunity to drive digital growth by leveraging that existing customer base. And to support this, we are continuing to build our in-house technology capability while partnering with best-in-class data analytics providers, ensuring we can better understand, target and serve our customers across channels. Having completed the acquisition of Funky Pigeon in August last year, we have been focused on completing the initial transitional service period and developing the future target operating model. This brings together the best of both Funky Pigeon and cardfactory.co.uk. and our focus for this year is completing the creation of one digital business, setting up a single supply chain, operating one digital platform and creating a one team culture. Our plans will see us reconfigure the manufacturing and fulfillment approach to make best use of our manufacturing facility in Yorkshire alongside the existing Funky Pigeon fulfillment facility in Guernsey. This will provide the flexibility required to offer direct delivery or an in-store collection service for our customers at advantageous cost for our business. We're also undertaking an extensive product review and planning so that we are offering the right range. By doing so, we will be well positioned to deliver the GBP 5 million of synergies as of FY '28 and to unlock growth by creating the foundations and capability to acquire new digital customers. Looking ahead, we're targeting double-digit growth over the medium term from FY '28, growing our market share of the digital card and attached gift market while also increasing the number of digital customers served by Card Factory for each shopper mission. Wholesale partnerships provide a scalable and capital-efficient way to reach new customers beyond our own store estates, both in the U.K. and internationally. As previously stated, the global addressable market for Card Factory for celebration occasions is GBP 80 billion. By leveraging our expertise, range and U.K. assets, we'll be able to capture significant white space sales by using a capital-light approach as already demonstrated through our existing relationships. Our strategy will see us partner with retailers such as The Reject Shop in Australia, acting as a wholesale supplier of cards and other celebration products. This will be built around a flexible business model, ranging from either distributor-only approach to a full-service provider, which includes in-store merchandising and logistics. We're being highly selective in the countries that we target, having already made headway in South Africa, Republic of Ireland and the United States through targeted acquisitions as well as building on existing inroads made within Australia. Within the U.K. and Ireland, we have cornerstone partnerships with Aldi and Matalan and we'll focus -- our focus will remain on complementary infill for impulse and distressed missions that complement our existing and expanding store footprint. During FY '26, we delivered the first phase of the new Reject Shop contract in Australia. The second phase is now complete and our new third-party logistics provider is delivering high levels of on-shelf availability, like-for-like sales are improved, including across the Christmas period. The successful development of our international model has also seen us expand into New Zealand via an easy low-cost distributor model. In the U.K. and Republic of Ireland, our everyday range continues to perform robustly in Aldi through our full-service model. While at Christmas, we expanded the offer to include gift bags, cards and box cards with sales ahead of expectations. Alongside this, we've embedded and strengthened our international operations. This includes realization of synergies and additional sales opportunity within Garven and Garlanna and the completing of an internal restructure at SA Greetings to improve operational efficiency through upgraded IT and logistics systems and the development of capability within Garven to support our North America card strategy. Finally, let me turn to how we will unlock the North American opportunity. The U.S. is the largest greeting card market in the world. It's worth around $7 billion with over 2 billion cards sold annually, and it is also the largest celebrations market globally. It is a large market with a population of over 340 million people. And at the same time, our experience and our research has shown that there is a clear customer dissatisfaction with over 60% of U.S. shoppers believing cards are overpriced. And importantly, there's a significant partnership opportunity for Card Factory with around 1 million retail outlets in the U.S., of which nearly half sell greeting cards. So this is a large accessible market with clear structural opportunity for a value-led leader. Our progress to unlock this opportunity began in December 2024 when we completed the acquisition of Garven, a Minnesota-based specialist wholesaler for gifts, bag and wrap. And this has given us the local expertise and capability we need in the celebration occasions category. And over the past year, we've successfully tested our proposition with a major U.S. retailer across everyday, seasonal cards and gift bags. And this has validated both our wholesale model and that the U.S. consumer is ready for a credible alternative to the established players. Alongside this, we've built out the foundations for scale and developed new SKUs tailored specifically for this market. And we've moved from concept to proof of viability. Looking ahead to FY '27, the focus is moving from test and learn into activation. We will develop a broader product portfolio across value and premium ranges to support our card strategy and wider partnership opportunities. And we will continue to progress multiple discussions with U.S. retailers, building the pipeline for growth. From FY '28 onwards, our ambition is to capture a 1% to 2% share of the addressable wholesale market by the end of the decade. And we will offer a full celebration solution for retailers spanning cards, bags, wrap, gifts and party with particular focus on segments that are underserved by the major incumbents. And we will scale the model in a very disciplined way, gradually and selectively increasing the number of retail partners. So overall, this is about taking a proven differentiated proposition and scaling it into a long-term growth opportunity. So stepping back, this is a compelling opportunity on 3 fronts. First, it's about extending our reach by putting Card Factory in front of more customers in more places and through more channels. Second, it's about deepening our relationship with those customers that we are capturing a greater share of their overall celebration spend. And third, it's about doing this efficiently by leveraging our vertically integrated model to operate at the lowest cost while maintaining the value and quality our customers expect. Taken together, this gives us a clear path to scalable, profitable growth. So let me summarize the progress we've made in our path for growth. Against a challenging backdrop, we've continued to deliver top line growth and clear strategic progress. We've strengthened the business for the future, not least through the acquisition of Funky Pigeon, which will accelerate our digital strategy. We have remained disciplined with strong cash performance and Simplify & Scale largely offsets inflation and protecting our model. And we have demonstrated our commitment to progressive shareholder returns through a full year total dividend announcement and the announcement of our share buyback program. Importantly, as we look ahead, the core opportunity in celebrations remain both resilient and compelling with clear plans in place to grow our share. We're building momentum and remain confident in our plans for FY '27 to continue delivering against our strategic priorities and medium-term ambition. So thank you once again for attending our results presentation. Matthias and I will now be happy to take any questions that you have. We will start with questions in the room and then turn to questions being submitted online. For the benefit of those joining us online, if you're asking a question in this room, please use the microphone at the side of your seat so that everybody can hear you. So thank you.

Hai Huynh from UBS. I have 3, if you don't mind. The first one is on the first 3 months of FY '27. You said that it's stable versus this time last year. Within that, could you give me a bit of color between the months on February, March, April? Have you seen any changes in April in terms of footfall? And in the flat first 3 months, how is the U.K. store dynamic within that? That's number one. Number two is on the pricing and basket last year. You said the basket growth is plus 3.5%. How much of that is due to pricing and how much of that is mix? And given the cost inflation ahead, do you expect similar sort of price increases? Or do you think there's not much room in this environment for large increases anymore, and you need to offset through cost actions? And then finally, on Funky Pigeon. So I saw on the slide in FY '28, you -- or medium term, you expect double-digit growth in online. Your largest competitor in the online space is growing slightly less than that. So assuming you're trying to gain share. How are you planning to compete with them? What's the strategy here that's different from the previous ownership?

Thank you very much. Matthias, do you want to take the first one? I'll take the other two.

Trading in the first 3 months has been in line with previous years as we discussed. I think everybody has been watching what happens currently with the U.K. consumer sentiment and how that translates into footfall. January and February, I think we all started off on the front foot. We saw the footfall rebounding slightly once the conflict in the Middle East took shape, we saw that, that had a significant impact on consumer sentiment. March data had been reported as being, I think, the worst in a 3-year period. So soft footfall is the backdrop. On the back of that, transactions have been also down, but our strategy, as we articulated several times is growing our average basket value, which then helps us to mitigate transactions even in an adverse environment. And that has happened. So we have been able to consistently grow average basket value in line with previous, which helped us to be largely in line with last year, having compounded the impact of the new store openings.

Yes. I think in terms of pricing last year, it was a mixture of price and range development. We talk here often about because of our seasonal business and the range change process in any one given year, a lot of our products is basically different. As we look to this year, we see less scope for price increases and much more scope around really communicating value to the consumer given the current backdrop. So a lot of our focus will be on productivity and efficiency. In terms of Funky Pigeon, I think -- or in terms of online, I think we've been very clear about the 2 missions that we're going after, direct to recipient with attached gift and the broader celebration space. We don't yet -- or we believe our ambition is to take our fair share of the market, which we don't have today. And so therefore, we will need to grow ahead of the market as you pointed out. And I think that is a combination of basically how we deliver value, but it's also about how we focus on the broader celebrations market. But most importantly, the thing that is different about Card Factory is the 24 million unique customers that we have and the work that we're doing to be able to capture data and over the long term, be able to market directly to those consumers.

Adam Tomlinson from Berenberg. Three questions, please. First one is just on the U.K. stores. So you mentioned some of those initiatives around growing like-for-likes there. Aside from the range improvements, can you talk a little bit about the space optimization and the store segmentation as well, how you're progressing on those, how much you expect those to contribute going forward? Second question also on stores. So you're continuing with that guidance of 27 new openings for the year ahead. I'm just wondering with the softer footfall you saw in H2, just how you came to the conclusion and your thinking around why that's the right number going forward if footfall is proving slightly more of a headwind? And then third question, just on the U.S. opportunity. So it sounds like you're ready to start ramping that up a little bit. So perhaps some of the learnings that you've had, what gives you confidence that your proposition in place is now the right one? And then without giving away too many details, just the discussions you're having with retailers, you mentioned the opportunities there. So you've seen this big opportunity. I'm just wondering the signs you're getting from them in terms of are they aligned with you in your thinking and how much they're buying into that as well?

Thank you. So I think in terms of space and segmentation, the work we did last year, which we talked about very briefly, which is using the detailed basket analysis, what is clear to us is there's 5 really different store types in the U.K. And therefore, the work we're doing is around making sure that we get the space allocation and the product allocation right in each of those stores. I would say we're about halfway through the process of identifying exactly what needs to be done in each of those segments. So an example would be if you take a retail park where there's parking outside, customers will disproportionately use that type of store for celebrations and celebration essentials. So in those stores, you will see more space allocated and more stock availability of those types of products. Equally, if you take a downtown city center store, that tends to be much more card-led. So that will be about making sure that we have the right breadth of range. We've finished Segment 1 around gifting and celebrations. We're now working on the rollout of Segment 2. We're in the testing process for the rest of that -- for the rest of those. So decent progress. I think in terms of new store openings, our new store openings continue to be successful, and that's because we're targeting specific locations. So again, if I use the retail park example where we're underpenetrated largely because of space availability, but we would target those higher footfall areas or places where people want to buy, quite frankly. But because of our history and the number of stores we have, our ability to predict the sales is actually pretty good.

I just may add to that. Obviously, we have a history -- successful history of adding net new stores to our portfolio. As you know, that means we are opening a certain number of stores and then closing or relocating stores to make sure that we manage our product store portfolio actively. Darcy mentioned that we have up to -- identified up to 300 locations for new store openings. And when we open new stores, we very thoroughly assess their viability in terms of catchment area and potential cannibalization with our own stores as our store network expanding. And the cannibalization with our own stores is in the single digit. So it is not that significant. We're also focusing on a quick cash payback. And as you asked, does it still make sense to open new stores? Well, if you get a quick payback within a reasonable period of time around 2 years, but you know you operate your store for an average duration of 12 years, this is really good return on cash for the shareholder. Separately, of course, we're also making sure that with the segmentation that's going on, we look at store standards. And while we are very clear in when we move a certain store to a certain segment, we also ensure that the store segments are up to the customers' expectation.

In terms of your last question, in terms of the U.S. opportunity and learnings, I think I mean, effectively, through a combination of the work that we've done in selling into retail. So a significant amount of operational learning. So how to distribute across 50 states gets stores in out of the back of big box retail onto shelves, merchandising, et cetera. So it's done there, but also from a consumer perspective, what sells, what resonates and ultimately, what needs to be -- from a card perspective, what needs to be done in terms of the range, in terms of design and sentiment. And so we've made good progress on what we need to do to range. And I think one of the other learnings is different retailers have different needs. So our initial hypothesis will go in with card only. And then over time, we'll do some of the other products. Basically, different retailers have different needs. And this particular retailer, their big need is card, but somebody else wants to make more progress on celebrations or -- so it's about us needing to have a breadth of offer and to tailor range. And I think the final bit, which is what we're working on now is the U.S. market needs to be served by the U.S. team, not by the U.K. team. And so we're in the process of backing card expertise into Garven, and that will be complete this year.

Jonathan Pritchard at Peel Hunt. Just to go another level of granularity on Funky Pigeon. What am I going to see as a Funky Pigeon customer that is different, is new, is going to make me want to spend more, that is going to make me want to tell my mate to stop using Moonpig and can we use Funky Pigeon? What are the more specific items that just looking at a Moonpig presentation, there'll be 20 minutes on things like AI, things like that. So without putting words into your mouth, what have you got coming there? And then on the value communication front, just a little bit more on that, perhaps what types of marketing, et cetera, what are you going to do in store and out to enhance that?

Yes. So Jon, I think in terms of Funky Pigeon from the consumer, I think the opportunity for us, as I talked about today is, I think, to sharpen up on value also the product range is, quite a bit of range enhancement that kind of needs to be done there. But it's also the ability to market to more people. So there are Card Factory customers today that shop on Moonpig. So how can we target those particular customers because they already know us. I think what you will see for the balance of this year is us really organizing everything, getting to that one platform, realizing the synergies and improving the range. That's what you -- that's what I would expect you to notice this year. In terms of value, so you'll -- over the coming months, you'll see a number of things. So first of all, we have -- we'll move our opening price point from 29p to 15p. We were doing GBP 10 per pound or 50p each a couple of times a year on a gondola end. We will now move those cards or some of those cards basically into the range. So you'll see the opening price point. The second thing what will be more noticeable is how we communicate about value in store, both in terms of how the range is displayed. So not necessarily opening up with premium products, but opening up with core range. Also the number of cards in each of the -- so other than the 15p, we won't change the architecture, but you might see more 99p cards or more value basically within the range and it being communicated inside posted significantly better.

Kate Calvert from Investec. Three for me, please. Just on the U.K. range optimization and localization opportunity, how different will the space allocation be this autumn versus last autumn between the sort of non-card and card offering? My second question is, given where your valuation is, did the Board consider reducing the level of dividend payout and looking at a higher buyback? And my final question is to unlock North America and the opportunity there. Do you need to invest in any further manufacturing infrastructure at some point?

So Kate, I think this autumn, what we will see differently is on a like-for-like stores, we'll have more stores into the segmentations and therefore, their product compared to the same time prior will be different with some stores having more parties, some having more gifts, some having more cards. So it will be dependent on each of the segments, but we will be about halfway through doing the whole estate. And then in addition to that, any newness that we were planning in any case. So you will see new ranges in kids toys and wedding and other categories. I think in terms of the dividend payment, I think our capital allocation policy is uber clear, and we've been very consistent in that with the progressive dividend. The investment into the business, maintaining the balance sheet and then returning surplus cash. And I think we have done that. We have followed exactly what we've said we were going to do. And as we said we would, the Board would consider all uses of the available cash and the conclusion was to return through a buyback at this time was the best use of that. Anything?

You have a third question...

Yes. Okay. Then North America, now, in terms of manufacturing capacity, we've got sufficient manufacturing capacity to meet certainly several years of demand. We'll take one more in the room.

[ Berman Lurtart ] from Panmure Liberum. I've got 3 as well. Firstly, looking at cards as a category, you saw like-for-like revenue decline in cards and I guess volumes probably were down more than the revenue like-for-like decline. And it's clear, you're giving more space in the stores to celebrations to gifting. But when I think in terms of more the nature of card and how consistent that category is generally in terms of volumes, I know it's declining like 1% on average. Do you think you're losing some market share in cards specifically to others? And when you think about consumer missions on when they come to Card Factory, is cards a primary mission when they come to Card Factory? And have you thought about that if you may be losing some -- because of reduction of ranges, some customers coming in, in that category and as a result, overall losing momentum in other categories as well? So that's the first one. Second one on the PBT guidance for 2027. Maybe can you break the contribution of the roughly 4% growth and consider the consensus where it lands at the moment? How would that break down between growth coming from stores, wholesale and from the Funky Pigeon acquisition? And then thirdly, of the 24 million customers you have at -- the unique customers you have, how many are you currently able to reach out to in terms of -- you have permission to reach out to them on e-mails?

Okay. So I think on your first question, there was a bit I missed in the second bit, but let me go ahead and answer it if I missed anything, then we'll make sure we answer that. So I think overall, in terms of the card market, the overall trend for last year was the same as previous years, where it was broadly flat market. What we saw was an acceleration of decline in the fourth quarter. So Card Factory also declined, but we declined significantly less than the rest of the market. So we continue to grow our market share basically last year and in that quarter 4 period. So no, so we're not losing share at all. But I think as we've -- as our research and analysis have highlighted is we just had the opportunity to move from a one-size-fits-all to a much more segmented approach, and that's where we expect to get some new growth. Did that -- did I miss any part of that question? Is that okay? Do you want to talk to the profit guidance question?

Yes. I just want add. I mean, we are the destination for cards in the U.K. and we see that particularly during seasons like Christmas, where our market share is higher than the rest of the year. And we were able to translate that despite all the negatives of the economic backdrop into share gain. On the PBT guidance for FY '27, let me just reiterate, we are in line with our -- with the analyst consensus, which means we expect year-on-year growth, being mindful of the backdrop. But what we have done, I think, as I pointed out, we have quantified the impact of the Middle East conflict in terms of costs of container rates, cost on helium and are assuming that these costs will be at the current level, have baked that into our guidance. So that is part of the overall guidance. You, I think, asked on stores and the different business units. We would expect to see progress across all business units. The digital is, of course, in a transition, as Darcy mentioned, to come together as one business unit, one digital supply chain, one digital platform and then one digital team culture. We'll see the full benefit as of FY '28. This year is all about the transition. Wholesale is expected to continue to grow, continuing the good trajectory path that we have seen last year. And as I said, we expect positive contribution from the store business as well. Last question was on the 24 million customers. And if we are able to communicate to them directly.

Yes. So it's a -- we're basically on a journey. So we did -- and we talked about this last year that we would for -- in time for the holiday period, we would get the technical capability to be able to collect customer data. We did that, and we were sort of tested and learning about how to do that. We're in the second phase now, which is once you have that data, how do you analyze it and how do you then communicate back. So we're basically in a phased approach and making good progress. Let's go. Go on Russell. Last one.

Russell from Edison. A couple of questions. First on online, could you just give a bit more granularity on the performance of the businesses, please? Because it looks cardfactory.co.uk dropped a bit. So I appreciate there may have been some disruption in the second half. And second, with respect following the current share buyback, is it reasonable to assume that all adjusted free cash flow will be distributed to shareholders? Because looking at the international aspirations, there seems to be less appetite for M&A than there perhaps was a few years ago.

Yes. I think in terms of the online business, I think there's 2 things. So cardfactory.co.uk, sales did go backwards, but that was off the back of the deliberate strategy of removing store stock products and moving to 100% personalization. So we saw sales go down and ultimately, basically margin improve off the back of that as we now focus that team on the celebrations. I think with Funky Pigeon, also there was -- versus previous ownership, when W.H. Smith owned the business, they pulled all of the marketing activity in order to -- well, they just stopped all of the marketing activity. We understood that. That was all part of the due diligence and the pricing process. So we restarted the marketing basically in time for the holiday period last year and continue that into this year. And we see that on an improving trajectory, and we expect that to basically get into growth. I think on your specific question on buybacks versus M&A, I think it's at the risk of being very dull and going back to the capital allocation policy, which is investing in the business. And at this moment in time, we're focused on embedding the acquisition. And I think the acquisitions were all done for a particular purpose about delivering on the strategy, and it's about embedding that, making that all work and basically delivering on that. And at this time, the conclusion by the Board was it was best to return it to shareholders.

But just to reiterate that, we generate GBP 40.7 million of free cash flow. The guardrails of our policy says that's the maximum that we can return to the shareholders during a year. The Board has concluded that we will return GBP 37.5 million, so 92% for the progressive dividend, GBP 17.5 million, GBP 5 million share buyback and now the additional GBP 15 million share buyback. We -- as I also mentioned, for FY '27, we'll continue to invest to execute our strategy, which means that CapEx is slightly higher in FY '27, where we ensure that we bring the digital business together. That's a onetime spending, but also invest in manufacturing capability that will, in turn, translate into cost savings. And Darcy already commented on M&A.

Now let's go online.

Yes. So we have a number of questions submitted online this morning. So we'll group these together to get through as many as we can in the time we've got left. So firstly, Darcy, one on returns on investment and buybacks. So the questioner recalls that you've made some previous comments, Darcy, regarding expansion and the comments on expansion were the partnerships look to provide such a high return that buybacks were unlikely to be appealing. So firstly, has the expected return of buybacks increased sufficiently to offset this? Secondly, has the expected return from partnerships reduced? And finally, how does Funky Pigeon play into this investment decision-making?

Yes.

So partnerships is a different model than our existing model. And our store-based model, we invest into store outfit. We invest about GBP 90,000 to GBP 100,000. And we know that we will get a return in about 2 years, and we will open -- keep a store open for 12 years. So that represents good return on investment. On partnerships, the investment is lower because we don't invest in store outfit. There is a minor investment in fixtures. And the contracts are obviously over a certain period of time with wholesalers. It is a different model and the benefit for us that we have a broader, more diversified portfolio with different investment thesis. So we see, as Darcy mentioned, ourselves confirmed in the approach that we are taking, looking at different business model, different models from a pure distributor to a full wholesale model. And again, our expectation to expected returns on this or the store base business have not changed.

And next question online is regarding the U.S. strategy. So firstly, if the total card addressable market in the U.S. is worth $8.5 billion, does that mean Card Factory has a specific target of an $85 million revenue?

Yes. So overall, it's -- the card market, I think, is about $7 billion, albeit there are different people have different numbers. But yes, overall, our long-term ambition is to get 1% to 2% share of that market. And --

Just for the avoidance of doubt, the $7 billion is retail sales. We're operating in the wholesale market. So -- and we expect to get 1% to 2% of the wholesale market by the end of the decade.

So the next question online is around future profitability. So regarding future PBT growth, what is the plan to return the business to PBT in the GBP 65 million to GBP 70 million range? And will this be achieved this year or next year?

Well, I think we articulated our target and ambition is to grow mid-single digits on the top line and mid-single to high digits on the bottom line, i.e., PBT. This is our long-term trajectory. We outlined the levers that we will use to get there from like-for-like growth behind our celebration to the broader celebrations market, new store openings and then growing in digital and partnership disproportionately. We expect progress in FY '27 in line with the consensus. And we will building on that continue to go forward and provide a target a sustainable profitable growth for the business.

The next one is relating to the CMD targets. So at the CMD 3 years ago, you said you would achieve revenue of GBP 650 million and a 14% PBT margin by January 2027. It appears that you will miss this profitability target by around 40% based on the current FY '27 consensus. So why should we believe the guidance when you've got a history of missing the forecast?

So yes, so we -- I think would have been about this time last year, we reset the targeting around this point that Matthias made around mid-single-digit sales growth and mid to high single-digit profit growth. I think the thing that fundamentally changed was when we built the CMD, inflation was running at 2%, 2% to 3%. And as we've seen over the last several years, how inflation has grown significantly beyond that. And effectively, the market changed as a result of that. I think over the -- since the CMD, we continue to make progress at driving top line and improving profitability. There was this challenge that we've talked about and addressed last year. But I think we've outlined the plans on how we grow from here.

And last couple of questions. So there's one that's come in regarding the impact of the share price on management's compensation and benefits. So how is leadership compensation aligned to share price recovery and investor returns?

Well, it's actually very much -- described in very much detail in our annual report. Management is bonusable on achievement of certain targets and share price is not one of the targets.

Look, I think I'll also go as far as to say is we are committed to delivering shareholder returns. We are both shareholders in the company and -- but even despite that is we believe passionately in that we want to make sure the experience for our customers that come to Card Factory is the absolute right experience that we balance the quality and value. We want to make sure that colleagues that work at Card Factory that their lives are better and they have more life skills as a result of working for Card Factory. And we want our shareholders to be proud owners of Card Factory, and we want to do everything that we can to make sure that, that happens. And our interests are always -- our interest will always be to make sure that we're delivering for shareholders, and we do it balanced basically across the entire company.

Our focus is on delivering sustainable, profitable growth in the company, delivering our strategies and our plans. And that, in turn, will create shareholder value as we have demonstrated in FY '26. And as Darcy said, we are, as a team and organization is committed to deliver that.

So final 2 questions. And this one on availability. So there's been a comment online that someone has observed reduced card stock availability around some of the key seasons, Valentine's Day and Mother's Day. Do you see this as a problem -- yes, do you see this as a problem is the question.

Look, I think generally, if you go to stores today, you'll see very good availability. There were some challenges in the early stages of Valentine's Day, Mother's Day had really good availability. What we are doing, though, is part of our CapEx program this year is investing in better stock systems and better allocation processes. And we think there is an opportunity for us to continuously improve both how we allocate stock and how we manage stock in its full life cycle.

And final question regarding omnichannel. Are there any plans to put digital kiosks in stores, for example, to drive more business for Funky Pigeon?

Yes. So as we sit here today, we don't have any plans to put digital kiosks in. We've had a look at all the current technology available, and it doesn't meet -- and it doesn't come anywhere close to the standard you can get by going online to Funky Pigeon or cardfactory.co.uk and getting a high-quality card delivered tomorrow or the day after. But we will continue to watch the technology and see how it evolves. Very good. Thank you very much once again for everybody's time and coming and joining us UBS and joining us online. And we look forward to continuing the conversations in our meetings.