NewBill1703
25 Jan 2020
86.9p TX2: It’s all about the £170 million or so net debt… an accident waiting to happen as I pointed several times over recent years. It is a decent business… doing quite well in a very difficult market;but is running on the spot to maintain business which is probably a better performance than many other retailers can manage but it is going to have to pay back its loans;which means a big chunk of its profits are going to lower debt which leaves little for dividends. The answer, Games, is it’s a good buy… for anyone with any kind of medium to long term perspective. IMHO of course, etc, etc. In terms of balance sheet, still only c.2x net debt / EBITDA, even on reduced profit expectations - and it remains a very cash generative business model. Sure, special dividends are off the agenda for now - but they were only ever temporary, the clue is in the “special†bit. And that debt can be paid down steadily, even with a reasonable level of ordinary dividend and investing in the existing estate plus new stores. It’s on c.6-7x P/E, maybe 6x EV/EBITDA, on lowered profits which can still grow decently medium-term - don’t forget, while some of their issues are structural, quite a few are cyclical and/or transitory in nature. Most compellingly, the FCF yield is above 20% on historic figures, and still probably c.15% on current profitability - there is your signal for very good returns, even on flattish near-term earnings and cash flow levels. This could double in the next year or so from here and it still wouldn’t look expensive - 10-11x P/E, high single digit FCF yield, supporting a sustainable divi yield of at least 5% and growing from there. For a (still) high margin, high cash flow proposition - buy it now before the Private Equity guys start sniffing around, as I suspect they will do.
TX2
22 Jan 2020
86.9p It’s all about the £170 million or so net debt;Cards crazy balance sheet funded totally with borrowed money plus more borrowing on top was always an accident waiting to happen as I pointed several times over recent years. It is a decent business & doing quite well in a very difficult market;but is running on the spot to maintain business which is probably a better performance than many other retailers can manage but it is going to have to pay back its loans;which means a big chunk of its profits are going to lower debt which leaves little for dividends.
Gamesinvestor1
22 Jan 2020
86.9p Who’d have thunk it would sink so low? Is it a good buy or a goodbye bye? Games
NewBill1703
12 Jan 2020
Wrong hand Gamesinvestor1: My card has been truly marked in retail investment. This and MKS are my two biggest basket cases for 2018-19. I am right there with you, Games! Fortunately I am patient - and with quite a few decent performers elsewhere to keep me on an even keel, at least. Even if some of these have probably had it too good, for too long… with any luck, by the time the market takes them to task, the dogs such as M&S will begin to show meaningful progress. Here’s hoping…
NewBill1703
12 Jan 2020
Clintons Cards about to collapse marktime1231: Total disaster. This year’s gross profit of £82M sounds healthy but the outlook is miserable. Gross profit likely to shrink by £5-10M next year because of falling sales, increasing staff costs, exchange rate pressures etc outdoing any attempt to improve efficiency … ? Not much mention of how retailing through 440 Aldi stores is performing… Clearly the strategy … is a total loser. If (surely it is) the strategy is wrong then the master strategist CEO and the board who approved it must go in the face of a share price which has plunged. Marktime - not good at all, clearly. But a “total disaster� Not for me - I know what these look like, have been on the wrong end of a few of them, and this is well short of them. Even on the revised guidance, for this year and next, it remains a business generating very good margins (in retail world) and very decent cashflows. The combined pressures of falling footfall, depressed GBP and upward movement in NLW, etc, have quite a big impact - but none of this is new, it has been the case for over 3 years now. There IS now an acceptance that these are longer term headwinds than they (and we) had perhaps hoped at one point - but the fact remains that while the first is a structural issue which is not going away, the second should still turnaround in due course (exactly when, we don’t know) and the third, while unlikely to reverse, will at least level off, in relative terms. I have said (on these pages) that the “special†dividend should always have been seen as just that - but people are greedy (as well as lazy, when it comes to actually listening to what’s being said). Nor is the evidenced there that the market for buying and exchanging cards is fundamentally broken - it ain’t growing, but it is more flat than in any material decline, and as long as it is, then CARD and its clear (still) competitive advantages will have a reason to exist. I will have to run the numbers in detail when I get the chance, but post-revisions, you are looking at a stock trading on P/E and EV/EBITDA of something around 6x, and (most importantly) a still-attractive FCF yield - certainly double-digit. Who knows about dividend yield, as that is a management decision, and management are clearly low in confidence - but whatever they cut it to, there is scope for at least some recovery medium-term, as they roll out a few more stores (perhaps at a slower pace) and as at least some of the various headwinds abate and perhaps level off, at least. So these metrics are simply too cheap, for me - albeit I accept we remain in a UK market where you can say that of quite a large group of stocks. I won’t be selling - though it is possible anyone who does will get a chance to get back in at a better price, in the very short term.
marktime1231
09 Jan 2020
Clintons Cards about to collapse In case you were wondering I have taken my medicine and sold all my holdings at a serious loss this morning. Enough is enough. Will I learn my lesson though. Probably not. Aaaaagh!
marktime1231
09 Jan 2020
Clintons Cards about to collapse Total disaster. This year’s gross profit of £82M sounds healthy but the outlook is miserable. Gross profit likely to shrink to just £5-10M next year because of falling sales, increasing staff costs, exchange rate pressures etc outdoing any attempt to improve efficiency … oh, and now the strategy is under review, and that always leads to exceptional spending doesn’t it for example settling lease liabilities and staff compensation to close the least profitable 50 stores? Not much mention of how retailing through 440 Aldi stores is performing, the “as expected†no help whatsoever. No more special dividends. It is no comfort that Hubbard bought 10,000 shares this morning after the share price slumped 20% to 109p. Clearly the strategy of expanding own retail outlet estate, ramping debt while maintaining the dividends from cash, and hyper staffing costs while unable to raise prices in the face of falling consumption … everyone has been scratching heads wondering why CARD is swimming against the tide … is a total loser. If (surely it is) the strategy is wrong then the master strategist CEO and the board who approved it must go in the face of a share price which has plunged. CARD added to the list of things I do not understand alongside quantum theory, religion, young people and women.
Gamesinvestor1
09 Jan 2020
Wrong hand Walloped this morning after reporting a drop in like for like. Painfully selling at 16X for a substantial loss seems less painful this morning after a 17% drop. My card has been truly marked in retail investment. This and MKS are my two biggest basket cases for 2018-19. Games
marktime1231
07 Jan 2020
Clintons Cards about to collapse Double blast, sunk all the way to 140p from my add at 169p. Am I just compounding my error, am I still looking too positively after three years of sinking sp hoping for a brighter future. The people in charge of the sp clearly hate CARD to drive it this low ahead of what I am (still !!!) expecting to be a postive trading report on Thursday. Are major shareholders or market makers sending the signal to Karen Hubbard and the Board that the current business model and strategy must change … losing sales to pop-up me-too look-alikes at seasonal peaks because the High St is full of empty stores, because there are no real barriers to replicating the cheap-and-cheerful Card Factory offering, and yet the prime thrust of CARD is to continue expanding its own retail outlet estate while High St footfall is in decline. What would you do (different) Bill? Despite a dominant market share we have not been able to see off the competition and raise prices, the internet is probably not the future for this type of business, so … If the net debt / liability position including store lease obligations has grown materially again while pretty much all the surplus free cashflow goes into sustaining the dividend I suspect the market may be worried more by that even if gross sales and profits have risen another 5-6%.
Gamesinvestor1
02 Jan 2020
Joker The Card is falling in a rising market – perhaps poor Christmas results are anticipated here? Can it get any cheaper, or is it heading for total collapse? Maybe like De La Rue and cash, they are suffering from the same future irrelevancy? Games
marktime1231
23 Dec 2019
Clintons Cards about to collapse Blast, CARD progress reversed because GBP is declining rather than gaining. How come, surely UK is now a stronger prospect. Hopefully a temporary set back then, but grrr.
marktime1231
17 Dec 2019
Clintons Cards about to collapse And showing a bit of belief in my own analysis I also added a chunk at just under 169p to my recovery holding, which is still deeply in the red, to reduce the average price a bit.
marktime1231
17 Dec 2019
Clintons Cards about to collapse Well I have surprised myself this morning and added a chunk of CARD to my long term income portfolio at 169p. Figuring … … a sp recovery to 200-220p … the dividend on Thursday sometimes adds buying momentum … a good trading update expected on 9 Jan … exchange rate direction in favour … profit improvement as well as sales growth ahead … the quintet of rising sales, profit, eps, cash flow, dividend? … so a progressive 6% yield from here is a tick tick tick tick tick A better bet than PFC anyway which I trimmed to find the cash for CARD.
marktime1231
16 Dec 2019
Clintons Cards about to collapse More progress today, CARD tipped by Liberum as being still a bargain which has yet to feel the full joy of the stock market recovery. Indeed, if HSBC are correct in their view that GBP:USD will recover to $1.45 during 2020 we are due a major upswing. A red herring story seen elsewhere that Hallmark is in trouble with Mums for promoting non-hetero greetings and with the LGBT community for pulling the promotion in response. How to alienate two niche consumer groups at a stroke, way to go Hallmark. Except that Hallmark doesn’t really have a UK brand presence, it sells products through channels like M&S where the customers probably don’t even look at where the card was made. Unless of course it makes the BBC evening news this will not affect people outside the USA.
marktime1231
13 Dec 2019
Clintons Cards about to collapse Pleased to see Card Factory sp starting to make a strong recovery this afternoon, as the effect of £ recovery to $1.34 sinks in. The supply costs are all in dollars, so every cent adds millions straight to profit. Or we can start paying down some of the accumulated debt, but Hubbard knows how important the dividend is and would love the chance to improve returns. Last time the exchange rate was steady at this level was early 2018, CARD was a smaller business but the sp settled around 200p. Since then topline has grown around 6% and structural cost savings have been made. I reckon eps might now return to the 18-20p range. And the stores are busy as ever. Except for the me-too pop ups which appear at peak times Card has this market.
