Card Factory set for IPO

British greeting card retailer Card Factory announced on Tuesday that it plans to float on the London Stock Exchange in a bid to raise £90 million.

The Card Factory sold more than 285 million single cards in the financial year ended 31 January 2014, achieving revenue growth of 9% to £326.9 million and underlying earnings before interest, taxes, depreciation, and amortisation (EBITDA) growth of 9.2% to £80.4 million.

The company's vertically integrated model, with in-house design, production and retail, is unusual in this market and has allowed it to secure its cost base, keep its product prices down and hasten speed to market, a successful formula that has generated unbroken like-for-like revenue growth in each of its 13 years.

Ahead of the float, Octavia Morley and David Stead will become non-executive directors and Geoff Cooper, who has been working with the board of Card Factory since January, will be formally appointed non-executive chairman.

The 700-store chain was founded in 1997 by Dean Hoyle, owner of Football League Championship team Huddersfield Town, who built up the business with his wife Janet.

Charterhouse took a majority stake in the firm in April 2010 in a deal believed to be worth £350 million.

Despite difficult times on the high street, and competition from online print on demand and social media, the UK greeting card industry is still healthy.

The Greeting Card Association says that £1.37 billion was spent on single cards in the UK last year - more than tea and coffee put together.

The UK is the most successful greeting card market in the world with 31 cards being sent on average per person each year. 85% of all cards are bought by women.

Elsewhere, the greeting cards business is characterised by 800 card publishers in the UK, most of which are small businesses with fewer than five employees.

Growth in the past?

The company has averaged 50 new store openings per annum over the past 10 years, and says it sees potential for further store expansion in the UK and Ireland, as well as the opportunity to gain a greater share of the online card and gift market through its web presence gettingpersonal.co.uk.

However, despite its success to date, most of the growth in this company is behind it. Expansion overseas would be tricky as no other country has such a tradition of card sending or card display in the home.

It is also worth noting that greeting cards are stocked in more types of outlet than any other product, which means one in six retailers are competing for these on-off single purchases.

Hoyle began his retail career selling cards from the back of his van in his native Wakefield in 1993, while Janet heads the design team. The company is perceived as light on retail expertise with the exception of non-executive chairman Keith Pacey, who is executive chairman of Maplin. Managing director Richard Hayes was the Hoyles' former bank manager, until they poached him.

The recession provided opportunities for the business, which gained market share as Birthdays was put into administration by Clinton Cards last year, and snapped up 80 former Celebrations stores in 2008, that name disappeared from the high street.