Card Factory shares skyrocket as retailer declares new refinancing deal

Shares in Card Factory soared on Thursday after the retailer declared it had slashed its debt pile and successfully renegotiated better terms with lenders.

Card Factory shares jumped 31.9 per cent to 59.7p on late Thursday afternoon, making it the second-highest riser on the FTSE All-Share Index, behind Anglo-Russian gold miner Petropavlovsk.

Nonetheless, their value remains significantly below their pre-pandemic levels due to a plunge in sales caused by Covid-related restrictions forcing the group’s shops to temporarily close.

This created major financial problems for the Yorkshire-based company, which warned in January last year that it could contravene its banking covenants and clambered to raise emergency funding.

It eventually agreed to a £225million refinancing package, with one-third of the amount comprising a term loan, and the rest via a revolving credit or Coronavirus Large Business Interruption Loan Scheme (CLBILS) facilities.

Since then, the card seller has seen trade roar back as customers returned to its outlets in droves following the loosening of lockdown rules, especially over the critical Christmas trading period.

At the same time, the group’s cash flow has improved, and it has used some of the proceeds to lower its net debts, which stood at £79million, when not including lease liabilities, at the end of March.

Subsequently, the firm has managed to agree a new £150million refinancing deal, which includes a £100million revolving credit facility, and £20million in CBILS borrowings that must be paid back by September next year.

This also included two term loans worth £30million between them, one of which must be repaid in the 12 months succeeding January 2023, while the other will be handed back in six instalments of £1.75million each from April 2024.

Card Factory’s chief executive Darcy Wilson-Clymer called the refinancing agreement ‘an important milestone’, which ensures the company has ‘the financial foundations in place to capitalise on the opportunities ahead’.

He added: ‘We are now well-positioned to continue our strategic transition from a store-led card retailer to a market-leading omnichannel retailer of cards and gifts. I look forward to updating you on our progress at our full-year results next month.’

The firm’s announcement comes less than a fortnight before it is due to report its full-year results for the 12 months to January 2022, where it is expected to reveal that trading surpassed the board’s forecasts.

It expects to post revenues of more than £360million, underlying earnings growth of around 50 per cent, and pre-tax profits of £7million to £10million, compared to a £16.4million loss in the previous 12 months.

Looking ahead to this year, the group anticipates its revenues continuing to grow, although it expects margins to be hit by higher freight, employee and utility costs, as well as investment in its online platform.