I think it's the timing of things. Like two years ago they were cheap but the share price was held back by Telieos selling. Once Telieos sold out the shares soared but punters bottled it due to the interims. Now they have delivered on the interims (and they have met or beaten forecasts since 2021 under Darcy), punters are now running scared regarding consumer confidence.
Sometimes life conspires against you but CARD haven't failed at all, sentiment and timing have been the issue. I think at some point they deliver again and if the shares are still this low they go on a flier. They have the yield here now and if they deliver aa I expect, they will look incredibly cheap.
Have you managed to itemise how the company will achieve it's FY26 adjusted PBT forecast?
I can't yet see how the company generates say a 7% increase in adjusted PBT given the £14m wage increase. Inflation maybe accounts for £3m, and I can't see efficiencies saving more than £3m, but we'll still be £12m short.
It does appear in their latest statement that the company will now look more to increase prices going forward to achieve this target. The concern with this, however, is that the company have never had pricing power: revenue has always failed to keep up with costs.
Yes, I think they pass on a lot more than £3m in inflation as they upgrade the cards they sell as well as increase the price so it isn't just waking the price up.
They will be doing a whole year on exclusivity with Aldi with 1200 stores rather than 600.
They have signed a wholesale agreement in the US which will be entirely added sales in 2026.
The acquisition of Garven is totally new business, it did 5% of CARD revenue last year so about £27m sales which should be over £3m additional operating profit just from Garven sales + the extra that CARD can put through of their own products.
Garlanna acquisition should add at least £1m pbt
There looks like there will be an extension to the Reject shop contract in Oz which should add more profit.
While I can't calculate it fully, there's enough there to make me think with organic growth, CARD can do what they say. The CFO said they would do this years numbers in H1, nobody believed them and they delivered. In the presentation they confidently predicted covering all the added costs and still adding high single digit growth. I think based on their history they deserve believing imo, they are not prone to over-promising.
The great thing is the market, unlike many existing investors, know the board as well as investors might, so they are sceptical, and the share-price is unduly depressed imo.
But as I always say, it is your decision and these are just my views.
Got to agree - I estimate that a 2% increase in pricing roughly offsets the NI and min wage increases and as you say of course CARD tend to put those increases through with a little added value in card quality at the same time. So I think they can pass through more like £10m relatively easily.
Perhaps at next results when the CFO puts up his earnings bridge slide that shows the impact of each action taken the market will give him some credibility.
Thanks Richard, what a good account. Its excellent. I , like you I am an avid Zulu Principal follower and similarly have had to review the 5 yr growth criteria as being unrealistic in todays climate. I have done a lot of research/reading on CARD since listening to your recent Podcast with Paul Scott which was also excellent.
One question. You refer to Card factory having reduced net debt from circa £132m to £46.5m in less than 2 years. This is as stated by Darcy. However Stockopedia says TTM net debt is £204m. I appreciate this figure may include lease liabilities ( though not sure?) Stocopedia defines net debt as: "Net Debt is the sum of all Short Term Debt, Notes Payable, Long Term debt and Preferred Equity minus the total cash and equivalents and short term investments for the most recent reporting period."
My problem is that when looking at the fundamentals on Stockopedia one doesn't immediately realise just how good Darcy has been at getting the debt down. Any thoughts much appreciated. All the best Peter.
Tes, the net debt figure is excluding leases. I'm not big on balance sheet stuff but I think I and many others think the leases being included in 'debt' seems a bit daft but they are the new accounting rules. I agree that looking at Stocko you don't see the job that has been done easily but perhaps that's why so many have missed the value and the cashflow here.
Watching the interim presentaion on the website is well worth doing as the CFO points everything out there and you may get a better grasp. I think the cash generation is outstanding personally.
Thanks so much Richard, I will have a good watch of the presentation.
Another company that I have invested in and has been a bagger in recent times is ME International (MEGP). This company meets many of the Zulu criteria though in this instance not a new board as such . But nevertheless an interesting play in a niche field. It's still not expensive on a fundamentals basis. You may already know it .
why not narrow your stocks down to the best of the best, and just have 1-5 ? you must know that the smallest holdings are likely less prosperous than the biggest, so why not ditch them and increase your positions in your best ideas?
Would you now say, 2 years on, that the share price was overvalued back when you posted? Back then, on what did you base your confidence that the company could deal with inflation? Only now does a credible story look to be emerging. And yet the share price is once again 90p.
a very thorough analysis Richard. Fantastic insight in to your investing process. Thanks for sharing. I did hold Card but was shaken out of it a few weeks ago for a tiny profit and was looking to find another, better entry in (today may have been that although I did not yet re-enter).
I think it's the timing of things. Like two years ago they were cheap but the share price was held back by Telieos selling. Once Telieos sold out the shares soared but punters bottled it due to the interims. Now they have delivered on the interims (and they have met or beaten forecasts since 2021 under Darcy), punters are now running scared regarding consumer confidence.
Sometimes life conspires against you but CARD haven't failed at all, sentiment and timing have been the issue. I think at some point they deliver again and if the shares are still this low they go on a flier. They have the yield here now and if they deliver aa I expect, they will look incredibly cheap.
Have you managed to itemise how the company will achieve it's FY26 adjusted PBT forecast?
I can't yet see how the company generates say a 7% increase in adjusted PBT given the £14m wage increase. Inflation maybe accounts for £3m, and I can't see efficiencies saving more than £3m, but we'll still be £12m short.
It does appear in their latest statement that the company will now look more to increase prices going forward to achieve this target. The concern with this, however, is that the company have never had pricing power: revenue has always failed to keep up with costs.
Yes, I think they pass on a lot more than £3m in inflation as they upgrade the cards they sell as well as increase the price so it isn't just waking the price up.
They will be doing a whole year on exclusivity with Aldi with 1200 stores rather than 600.
They have signed a wholesale agreement in the US which will be entirely added sales in 2026.
The acquisition of Garven is totally new business, it did 5% of CARD revenue last year so about £27m sales which should be over £3m additional operating profit just from Garven sales + the extra that CARD can put through of their own products.
Garlanna acquisition should add at least £1m pbt
There looks like there will be an extension to the Reject shop contract in Oz which should add more profit.
While I can't calculate it fully, there's enough there to make me think with organic growth, CARD can do what they say. The CFO said they would do this years numbers in H1, nobody believed them and they delivered. In the presentation they confidently predicted covering all the added costs and still adding high single digit growth. I think based on their history they deserve believing imo, they are not prone to over-promising.
The great thing is the market, unlike many existing investors, know the board as well as investors might, so they are sceptical, and the share-price is unduly depressed imo.
But as I always say, it is your decision and these are just my views.
Got to agree - I estimate that a 2% increase in pricing roughly offsets the NI and min wage increases and as you say of course CARD tend to put those increases through with a little added value in card quality at the same time. So I think they can pass through more like £10m relatively easily.
Perhaps at next results when the CFO puts up his earnings bridge slide that shows the impact of each action taken the market will give him some credibility.
Ah yes, the Garlanna and Garven acquisitions - accounting for say £3m PBT.
The FY26 forecast did look to me to be a bit racey, but I'm warming to it now. Thanks Richard.
Thanks Richard, what a good account. Its excellent. I , like you I am an avid Zulu Principal follower and similarly have had to review the 5 yr growth criteria as being unrealistic in todays climate. I have done a lot of research/reading on CARD since listening to your recent Podcast with Paul Scott which was also excellent.
One question. You refer to Card factory having reduced net debt from circa £132m to £46.5m in less than 2 years. This is as stated by Darcy. However Stockopedia says TTM net debt is £204m. I appreciate this figure may include lease liabilities ( though not sure?) Stocopedia defines net debt as: "Net Debt is the sum of all Short Term Debt, Notes Payable, Long Term debt and Preferred Equity minus the total cash and equivalents and short term investments for the most recent reporting period."
My problem is that when looking at the fundamentals on Stockopedia one doesn't immediately realise just how good Darcy has been at getting the debt down. Any thoughts much appreciated. All the best Peter.
Hi Peter
Tes, the net debt figure is excluding leases. I'm not big on balance sheet stuff but I think I and many others think the leases being included in 'debt' seems a bit daft but they are the new accounting rules. I agree that looking at Stocko you don't see the job that has been done easily but perhaps that's why so many have missed the value and the cashflow here.
Watching the interim presentaion on the website is well worth doing as the CFO points everything out there and you may get a better grasp. I think the cash generation is outstanding personally.
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https://webcasting.brrmedia.co.uk/broadcast/5f47c726b14d87262643d3e5
Richard
Thanks so much Richard, I will have a good watch of the presentation.
Another company that I have invested in and has been a bagger in recent times is ME International (MEGP). This company meets many of the Zulu criteria though in this instance not a new board as such . But nevertheless an interesting play in a niche field. It's still not expensive on a fundamentals basis. You may already know it .
Yes, followed for some time. Sadly I am trying to limit myself to 15 stocks so unable to buy everything but I know a few good investors in there.
why not narrow your stocks down to the best of the best, and just have 1-5 ? you must know that the smallest holdings are likely less prosperous than the biggest, so why not ditch them and increase your positions in your best ideas?
Would you now say, 2 years on, that the share price was overvalued back when you posted? Back then, on what did you base your confidence that the company could deal with inflation? Only now does a credible story look to be emerging. And yet the share price is once again 90p.
Regards Colin
Cracking analysis, thanks, CR
Thank you Paul
a very thorough analysis Richard. Fantastic insight in to your investing process. Thanks for sharing. I did hold Card but was shaken out of it a few weeks ago for a tiny profit and was looking to find another, better entry in (today may have been that although I did not yet re-enter).
sub 90p is certainly fine, just don't sell !!