Celebrate

life’s moments

Annual Report and Accounts 2022

Card Factory sells more

greeting cards in the UK

thananyone else and is

ranked #1 by shoppers

on“wide range of cards”

and“value for money”.¹

Vision: Card Factory aspires to be

recognised as the world’s best

greetingcard retailer: everywhere,

andfor all occasions, the first choice

forgreetingcards.

Mission: Card Factory’s mission is

helping people celebrate life moments

by making our products affordable

andavailable for everyone.

1 Source: Dynata February 2022.

Card Factory

is the UK’s leading

specialist retailer

of greeting

cards, gifts, wrap

and bags.

Strategic Report

01 FY22 highlights

02 Welcome to Card Factory

04 Investment case

06 Chair’s statement

08 Market overview

10 Business model

12 Chief Executive Officer’s review

16 Our strategy

23 Our stakeholders

32 Chief Financial Officer’s review

38 Risk management

42 ESG strategy

55 Non-financial information statement

Governance

56 Board of Directors

58 Chair’s Letter –

Corporate Governance

59 Corporate Governance Report

68 Chair’s Letter –

Audit & Risk Committee

69 Audit & Risk Committee Report

74 Chair’s Letter –

Remuneration Committee

77 Directors’ Remuneration Report

86 Annual Report on Remuneration

98 Chair’s Letter –

Nomination Committee

99 Nomination Committee Report

100 Directors’ Report

106 Statement of Directors’ Responsibilities

Financial Statements

107 Independent auditor’s report

117 Consolidated income statement

118 Consolidated statement of

comprehensive income

119 Consolidated statement of

financial position

120 Consolidated statement of

changes in equity

121 Consolidated cash flow statement

122 Notes to the financial statements

152 Parent Company statement of

financial position

153 Parent Company statement of

changes in equity

154 Parent Company cash flow statement

155 Notes to the Parent Company

financial statements

Company Information

160 Glossary

161 Advisors and Contacts

Leverage

(excluding lease liabilities)

0.9 x

Operating Cash Flow (£m)

£113.6m

FY22 highlights

Financial highlights

Card Factory plc Annual Report and Accounts 2022

Financial StatementsGovernanceStrategic Report

(4.0)

15.1

15.4

FY21

2.4

FY22

FY20

FY19

0.1

(0.5)

(0.1)

FY22

FY21

FY20

2.9

FY19

(3.9)

FY18

285.1

451.5

436.0

FY22

FY21

FY20

422.1

FY19

364.4

FY18

(16.4)

65.2

68.2

FY21

11.1

FY22

FY20

FY19

79.9

124.8

99.1

FY21

113.6

FY22

FY20

FY19

2.4

1.1

FY21

0.9

FY22

FY20

FY19

Card Factory LFL Sales (%)

(excluding periods of store closure)

-3.9 p pts

Revenue (£m)

£364.4m

Basic EPS

(p)

2.4p

Profit Before Tax

(£m)

£11.1m

Summary of the financial period

• Revenue of £364.4 million is +28% year-on-year (‘YOY’)

driven by growth in store sales following easing of

lockdown restrictions.

• Profits ahead of expectations, despite significant

inflationary and supply chain headwinds, with EBITDA

of£85.6 million and profit before tax of £11.1 million.

• Strong recovery in the run-up to Christmas with LFL

December sales recovering to near pre-pandemic levels

while remaining ahead of high street averages.

• Online sales significantly ahead of pre-pandemic

levels(+23%) reflecting expansion of product range

online and improved customer experience as well as

accelerated shift in consumer behaviour, although -14%

YOY reflecting the easing of lockdown restrictions and

the return of customers to physical stores.

• Tight management of costs and selected price

increases has enabled the business to largely offset

inflationary pressures to date.

1 See the glossary on page 160 for alternative performance measures (‘APMs’) and other explanatory information. Following adoption of IFRS 16 in FY20,

consistent comparatives for periods before FY19 are not available.

FY22 means the financial year to 31 January 2022.

Card Factory plc Annual Report and Accounts 2022

1,020 Card Factory Locations

534 Aldi Locations

11 Matalan Locations

4 CF Franchise Locations

Channel Islands

Gibraltar

Isle of Man

Welcome to

Card Factory

Card Factory is the first

choice for greeting cards.

We are the UK’s leading specialist retailer of greeting cards, gifts, bags and

wrap with an estate of over 1,000 stores across the UK & Ireland and supply

through franchise stores and partner stores mainly in the UK and Australia.

Our products are always high-quality, yet through our vertically integrated

design, production and retail model, can be offered at significantly lower

prices than competitors. There’s no one quite like Card Factory.

Data correct at 31 January 2022

Colleagues

8,800+

Total revenue

£364.4m

Stores

(UK & Ireland)

1,020

Partner retail locations

(UK)

554

Unique visitors in FY22

cardfactory.co.uk

9 .9 m

Franchise stores

Unique visitors in FY22

gettingpersonal.co.uk

9.3m

Online

Partner retail locations

(Australia)

367

Our channels

Card Factory plc Annual Report and Accounts 2022

Financial StatementsGovernanceStrategic Report

Our purpose

Helping people celebrate

life moments.

We design, manufacture and source the products

that help to commemorate every occasion, from

the everyday to the once-in-a-lifetime; yet at

prices that help people keep their money in

theirpockets.

We retail principally through our chain of over

1,000 Card Factory stores in the UK & Ireland, as

well as through our websites, cardfactory.co.uk

and gettingpersonal.co.uk.

Our purpose

Using our unique insight from being the largest

greeting card retailer by volume of cards in the

UK, we help our partners to retail cards in a way

that is right for their locations and customers.

Our partners include franchisees and Aldi, in the

UK, and The Reject Shop, in Australia.

Our value chain

Owned by the Group

Far East suppliers

Printcraft

3rd party suppliers

Happy customers!

Wakefield

distribution

centre

1,000+ Card

Factory stores

Aldi & Matalan

Happy

customers!

The Reject Shop

– Australia

Printcraft

Customer

profiles &

intel

cardfactory.co.uk

card factory app

gettingpersonal.co.uk

Studio 41 &

commercial

teams

Card Factory plc Annual Report and Accounts 2022

At a glance

Investment

case

• Despite periods of non-essential

retail closure, Card Factory

remained the largest card retailer

(in store) by volume share in the UK

in 2021. Having been reduced to

20% in 2020, our market share by

volume of UK greeting cards

returned to 24% in 2021 and

continues to grow towards its

pre-pandemic level (2019: 33%).¹

• This return to growth has

outperformed the market,

provingthe resilience of the

CardFactorybrand.

• Selling more cards than anyone

else, we benefit from more

information, enabling us to

commission the right designs and

innovations from our in-house

teamand in turn order the right

production runs.

• Design: 80% of cards and 75% of

gifts are designed in-house through

our team of 60 creative designers,

verse writers, and creative

management; each year we create

around 3,500 new products from

cards and wrap, to gifts and toys.

• Manufacturing: 168 million cards

and other products manufactured

during the year in Baildon,

Yorkshire(down from 172.5 million

forthepreviousyear).

• Retailing: >1,900 distribution points

including more than 1,000 Card

Factory retail stores.

• Leading retailer of greeting cards,

selling one in three greeting cards

sold in the UK, prior to Covid-19.¹

• Ranked #1 of allUK retail brands for

‘value formoney’.¹

• Ranked #1 in the UK for the

mostimportant criteria used by

customers buying greeting cards:

‘Wide range of cards’, ‘Availability

ofcards’, and ‘Cards available at

different price points’.¹

• Ranked #1 destination for balloons

and party.

Only credible

card specialist

at scale

Virtuous circle

of design,

manufacturing

and retail

provides

barriers

to entry

Established

brand, already

demonstrating

ability to

extend

beyond cards

Strategic Report

Card Factory plc Annual Report and Accounts 2022

Financial Statements

Governance

• High return on investment reflecting

low capex model.

• Pursuing an international

multichannel roll-out and targeting

1,050 Company operated stores in

UK & Ireland.

• Optimising store returns driven by

data insights, maximising returns

from existing store space.

• Targeting wider card-led

opportunities in complementary

gifting categories.

• Measured price increases to

address cost inflation whilst

remaining true to our value and

quality credentials.

• Focus on complementary categories

drives additional footfall and

improved returns.

• Investment in online and

multichannel offer, including

July2020 relaunched website

(cardfactory.co.uk), planned

integration of gettingpersonal.co.uk

to reduce overhead, launch of Card

Factory apps on iOS and Android;

future loyalty offering.

• Scope for generating growth

fromproven success of current

relationship with Aldi and an

ongoing trial with Matalan.

Concessions in 367 The Reject Shop

stores in Australia provides

additional model for further growth.

• Return to shareholder distributions

when prudent, post-Covid-19.

Clear

pathway to

restore sales

and profit

growth in

the core

Identified

and proven

sources

of growth

Cash

generative

model with

diversifying

income

sources

1 Source: Dynata February 2022.

2 Source: Savanta Brand Vue January 2022.

Card Factory plc Annual Report and Accounts 2022

Chair’s statement

“

I am proud of the resilient

performance delivered

bythe Card Factory

leadership team and

colleagues across

thebusiness.”

Paul Moody

Chair

Dear Shareholder

With the impact of Covid-19

lockdowns and personal constraints

still being felt throughout 2021, I am

proud of the resilient performance

delivered by the Card Factory

leadership team and colleagues across

the business. Even though the financial

year was materially impacted by

Covid-19 related restrictions, trading

and profits for FY22 were ahead of

theBoard’s expectations, with overall

performance recovering steadily from

April 2021 as those restrictions eased.

The response from our customers

aslockdowns ended was extremely

positive. As footfall increased but to

levels still below historical norms, our

customers told us how much they had

missed shopping at Card Factory.

Webelieve that this evident loyalty to

our brand and customer proposition

places us in a strong position to grow

the business in line with our strategic

ambition and is testament to both the

strength of the Card Factory offer and

the hard work and commitment of

store colleagues throughout the UK

and Ireland.

I would also like to recognise all

CardFactory colleagues for the

exceptional effort and drive they have

shown through this second year of the

pandemic. Many of our colleagues were

on furlough for much of the first quarter

of the year but they returned to the

business with a passion to reopen

stores and deliver for our customers,

our business and our shareholders. It is

important to recognise the unrelenting

efforts of colleagues who worked

through the lockdowns, continuing

toadapt with agility and pace to

changing circumstances, ensuring the

business was well placed to reopen

stores at, often, short notice.

Group revenue

£364.4m

+28.0%

FY21: £285.1m

Profit before tax

£11.1m

+167.7%

FY21: £16.4m

Platform for

omnichannel

growth

Card Factory plc Annual Report and Accounts 2022

Financial StatementsGovernanceStrategic Report

Year in review

Encouragingly, store sales recovered

steadily through the year after

lockdown restrictions eased, enabling

an improving top-line performance.

Profit for the 12 months to 31 January

2022 was ahead of management’s

expectations despite the external

headwinds facing the wider market,

particularly significant inflationary

headwinds and supply chain pressures

including the increasing cost of freight

and also the impact of inflation on staff

costs and utilities. As Covid-19 related

restrictions eased, we saw a steady

recovery of store sales performance,

with the key Christmas season

approaching pre-pandemic LFL levels.

As customers returned to our stores

following consecutive lockdowns, we

saw our online sales decline slightly

year on year. However, we remain

encouraged by our Card Factory

online sales in the financial year being

significantly ahead of pre-pandemic

levels, reflecting the expansion of

ouronline product range and the

improved customer experience

whilstvisiting the website, as well

asanaccelerated shift in consumer

behaviour, consequent to the extended

periods when our stores were closed.

The Board has remained focused on

building the financial strength of

thebusiness. This resulted in strong

operational cash flow and improved

balance sheet strength.

The Board is pleased to have

successfully refinanced the business,

as announced on 21 April 2022, with

anupdated and amended financing

package with our banking partners.

Aswell as reducing the overall

quantum, the refinancing has

extended the term of the Group’s debt

facilities comprising term loans of

£30million, CLBILS (Coronavirus Large

Business Interruption Loan Scheme)

of£20 million and a Revolving Credit

Facility of £100 million. The revised

agreement removed the obligation on

the Group to use best efforts to raise

further equity to make prepayments

ofthe debt facilities. Further details of

the refinancing are provided within the

CFO statement on pages 32 to 37.

Platform for growth

Under the leadership of Darcy Willson-

Rymer, we have comprehensively

reviewed our future growth strategy,

emphasising the strategic importance

of our digital offer and the opportunity

to develop partnerships with third

parties nationally and internationally.

Launched to our colleagues in October

2021, the ‘Opening Our New Future’

strategy will deliver the key elements

that will realise the potential for

sustainable growth across the

wholeenterprise.

Through this strategy, Card Factory is

well-positioned to become the UK’s

number one destination for all

customers seeking unrivalled quality,

value, choice, convenience and

experience. We are working to

transform Card Factory into the

leading omnichannel brand in our

space to help customers celebrate

eachand every special occasion. It is

our aim to become a global competitor

putting cards and gifts in the hands of

morecustomers.

Outlook and financial headwinds

As previously guided, the Board

expects revenues in FY23 to be

towards FY20 revenue levels.

The Board also expects significant

inflationary headwinds to continue

through FY23. Pre-emptive action

hasalready mitigated a significant

proportion of these pressures

througha combination of efficient

management of costs and working

capital, as well as an increased

number of carefully targeted

priceincreases.

While taking into consideration the

inflationary headwinds mentioned

above as well as the levels of trading

seen in the new financial year, the

Board’s expectations for revenue and

profit for FY23 remain unchanged.

Board appointments during FY22

We were delighted to welcome both

Darcy Willson-Rymer as our new

ChiefExecutive on 8 March 2021

andRobert (Rob) McWilliam as

independent Non-Executive Director,

replacing David Stead who stepped

down on 30 November 2021. Rob

joined the Board on 1 November 2021;

he has been appointed as Chair

ofCard Factory’s Audit & Risk

Committeeand as a member of

theNomination Committee and

theRemuneration Committee.

Summary

After the significant disruption that the

business has faced over the past two

financial years, we ended FY22 in a

robust position. We are also optimistic

about the positive impact that the

‘Opening Our New Future’ strategy will

deliver and the more detailed plans

now in place to enable flawless

execution of those plans. We remain

confident that our store estate remains

a strong, relevant channel within our

longer-term omnichannel proposition.

Colleagues across the business have

shown their strong support and

commitment towards the strategy and

as delivery momentum continues to

build, we look forward to the future

with confidence.

Paul Moody

Chairman

3 May 2022

Card Factory plc Annual Report and Accounts 2022

Market overview

A resilient greeting

cards market

In a year that continued to present unique challenges for retailers the

worldover, the UK greeting cards market proved its resilience once more.

FY22 started with a two-and-a-half-month period

of forced closure for non-essential retail, however

the months which followed have broadly reflected

areturn toward pre-pandemic normality, with

encouraging signs of continued growth.

The number of UK adults purchasing greeting cards in

2021 reached 73%¹, which represents an increase from

71% in 2020 and a return to the same level recorded in

2019. The overall UK greeting card market size has

been estimated at 811 million single cards in 2021¹, a

decrease of 3% from 835 million units in 2020. Some of

this can be attributed to the reduced number of cards

purchased per shopper, which at 20.3, is down against

21.7 in 2020. While fewer events and occasions were

impacted by government restrictions than in 2020, the

impact of Valentine’s Day, Mother’s Day and Easter

taking place during periods of lockdown in 2021 is

notable. Clear evidence of growth accelerating was

observed in the final quarter of the year, influenced

bythe easing of restrictions, increased customer

confidence and the resumption of celebrations

previously put on hold due to government guidelines.

Of particular note was the 44% growth of cards

purchased for weddings in 2021 versus 2020.

Throughout the Covid-19 pandemic we witnessed how

deeply engrained card buying is in UK culture. The act

of buying and sending cards transcends age, gender

and demographic factors and during 2020 and 2021,

when customers were unable to buy cards in specialist

shops, they moved to buying cards online and in

supermarkets. 147 million single cards were sold via

online channels in 2021. While this represents a decline

of 29% from the heights of 206 million units in 2020, it

remains a significant increase from the pre-pandemic

level of 71 million in 2019. Card Factory’s share of the

online market grew in 2021 to 2.7% (cardfactory.co.uk

and gettingpersonal.co.uk), an increase from 2.3%

in2020.

2020 2021¹

Value (£m) Volume (units m) Value (£m) Volume (units m)

Retail 910 629 986 664

Online 515 206 378 147

Total 1,425 835 1,364 811

So far, the gains made by the supermarkets, driven

in part by the periods of forced closure of specialist

card retailers, appear transient. There is clear

indication that distribution of market share has

been steadily reverting to a mix that reflects what

was observed before the pandemic (see graph on

page 9). Trading in the Card Factory store estate

bounced back upon reopening after lockdowns in

2020 and this was replicated in April 2021. Following

the third national lockdown, pent-up demand and

queues were experienced at Card Factory stores

across the UK, demonstrating the strength of our

brand and the wide appeal of our offer.

Customer affection for Card Factory is further

evident in our key brand metrics, which remained

strong in 2021. We have advanced our significant

lead against our nearest competitors and with

theincrease in cost of living at the forefront of

shoppers’ minds, our strong price and value

proposition will be a critical enabler for growth.

Despite periods of non-essential retail closure,

CardFactory remained the largest card retailer

byvolume in the UK in 2021. Having been reduced

to 20% in 2020, our market share by volume of

UKgreeting cards returned to 24% in 2021 and

continues to grow towards its pre-pandemic level

(2019: 33%).

As we look to opportunities that support our

‘Opening Our New Future’ strategy, we have

completed extensive analysis of the UK Gifting

Market. We estimate that there is a c.£5 billion

market opportunity in card attach gifting. Our

leading position in the greeting card market,

alongside being the number one destination for

balloons and party in the UK, means that the

CardFactory business is ideally positioned to

pursue this opportunity and we will continue to

develop our brand and offer in order to win a

sizeable share ofthe market.

UK market size, single greeting cards

1 Source: Card Factory bespoke market research February 2022.

Strategic Report

Card Factory plc Annual Report and Accounts 2022

Financial Statements

Governance

Brand strength drives share recovery

Card Factory is a brand that is loved

by shoppers across the UK & Ireland.

Our strong proposition built around

value and range has meant that we

have successfully defended our

number one position in the market

through two extraordinary years.

Card Factory brand metrics

Card Factory ranks number one more

times than any competitor on key

customer metrics and our brand

awareness and consideration are

bothstrong and growing.

Within the UK greeting cards market,

Card Factory meets all the customers’

identified key needs, while its

competitors deliver a narrower offer.

Discounters – typically offer lower

price points on narrow ranges.

Shoppers must trade off breadth of

choice in exchange for value.

Grocers and convenience – typically

have smaller ranges and serve impulse

or distress missions where cards are

purchased alongside unrelated items.

Other card specialists – serve

destination shoppers where the card

or a related item is the reason for the

shopping trip. They are well-rated

forcard ranges and quality, but

typically at higher price points.

Greeting cards market share

(storeonly) 2021

Card Factory share pattern over

2020and 2021 versus key competitors.

Whilst Card Factory’s volume share

ofgreeting cards fell during closures,

itreturned strongly over the latter

halfof 2021.

+14%

Difference in awareness vs key

competitor average Jan 2022

+19%

Difference in consideration vs key

competitor average Jan2022

+44

Net Promoter Score (‘NPS’)

+6pts vs FY19

Customers rated Card Factory

for

• value for money;

• wide range of cards;

• availability of cards;

• ease of finding the card I want;

• specific range of cards I am

lookingfor; and

• cards available at different

pricepoints.

23 January 2022

November 2021

October 2021

August 2021

June 2021

April 2021

February 2021

December 2020

November 2020

September 2020

July 2020

May 2020

March 2020

January 2020

November 2019

September 2019

July 2019

May 2019

March 2019

Lockdown 2Lockdown 1 Lockdown 3

Card Factory

Brand A Brand B Brand C

Greeting Cards – Market % Share of Volume – Last 3 years 4 weekly data

Card Factory share pattern March 2019 to January 2022 versus key competitors

1 Source: Savanta Brand Vue January 2022.

2 Source: Card Factory bespoke market

researchFebruary 2022.

3 Source: Kantar Worldpanel Plus Physical

RetailJanuary 2022.

Card Factory plc Annual Report and Accounts 2022

Card Factory is the first choice

forgreeting cards.

A vertically

integrated business

Business model

Our proposition

Card Factory is the UK’s leading specialist retailer of

greeting cards, wrap, bags and gifts, with an estate

ofover 1,000 stores across the UK & Ireland; a

growingonline offering through cardfactory.co.uk

andgettingpersonal.co.uk; and supply through a

further four franchise stores and 921 partner stores,

mainly in the UK and Australia.

Our products are always high-quality, yet through

ourvertically integrated design, production and

retailmodel, can be offered at significantly lower

prices than competitors. Such economies of scale

aremaintained through monthly reporting of

productivityKPIs such as pick rates and store

operational efficiency.

Our design insight

As we learn to adapt to a post-Covid-19 era and the

changing needs of consumers, our design studio and

commercial team are using our insights, sales data

and trend analysis to ensure our product offering

remains relevant and current for our loyal shoppers,

aswell as learning how to satisfy new targeted

demographics. This year, through our deeper dive into

our data and further segmentation work, we will be

able to highlight new opportunities both in how we

talk about our brand and develop our product offer.

Examples of how we are responding to changing

trends and consumer preferences includes our range

of cards for new pets with our ‘from the dog’ cards

being a successful incremental pick up last Father’s

Day; and our continued drive to ensure we are

inclusive in our product offering from LGBTQ to

cardsfor the rise of blended families.

Our production advantage

Operating our own large-scale print facility in Baildon,

Yorkshire, which has the capacity to produce 270

million cards per annum, is a key USP for Card

Factory. This Printcraft facility, which primarily serves

the Card Factory business, is capable of printing all of

our UK produced cards and some 70% of all counter

cards we retail through our store network. New ranges

can be produced in four weeks and additional quick

selling lines can be remanufactured in a matter of

days if required. Our online stock cards are also

manufactured through this facility. This flexibility

allows us to operate small print runs to minimise

surplus stock holdings, without the lead times of

upwards of 12 weeks typically encountered for

imported products and also, as we have seen this last

12 months, additional shipping costs and space

constraints. We have continued to invest in state-of-

the-art equipment in this area to not only continue to

be one of the lowest cost to operate print facilities but

to also increase and maintain the outstanding quality

we are well known for.

Our sales channels

Our 1,000+ stores across the UK & Ireland is our main

route to market, offering our full range and retail

experience to our customers. Additional access to

ourrange is available from our online offer (from

cardfactory.co.uk and gettingpersonal.co.uk) and

viaour UK and international retail partners.

Business model

Card Factory plc Annual Report and Accounts 2022

Financial StatementsGovernanceStrategic Report

Introducing

our Model Store

Financial Statements

Governance

Strategic Report

381

Support

Colleagues

•

Manufacturing utilisation can be

optimised ahead of time because

design is done in-house.

•

Low unit costs allow sharp pricing to

the consumer.

Manufacturing

Large-scale, in-house card production and

accordingly low unit costs.

•

Visibility of sales at retail (up to one third

of all cards sold in UK) allows new designs

to be tailored to emerging tastes.

•

Extensive store estate allows large, low-

cost print runs that sell through volume.

Retailing

Own estate of over 1,000 retail stores across

UK & Ireland; online; and now partnering

with other retailers to extend reach.

•

End-to-end control of product

chain allows flexible and rapid

adaptation e.g. to reprint an

unexpectedly popular line.

•

Card designs are planned in line

with the forward price architecture

(‘design to the budget’).

Design &

Publishing

Internal design compatibility that appeals

to the mass market better than traditional

(dated) competitors.

Design

Colleagues

8,068

Retail

Colleagues

238

Distribution

Colleagues

136

Manufacturing

Colleagues

Our virtuous circle

Statistics correct as at 31 January 2022.

Chief Executive

Officer’s review

Foundations for

strategic growth

“

Delivery of our strategy is

now underway and some

significant milestones have

already been achieved.”

Darcy Willson-Rymer

Chief Executive Officer

Introduction

Having now completed my first full

yearas Chief Executive of Card

Factory, I have been impressed by

thepotential from the design, print,

manufacturing and retail capability, as

well as the culture of the business and

am optimistic about our opportunities

for growth. Card Factory is a company

that is loved by both customers and

colleagues, and there is an energy from

our colleagues to do the right thing.

The culture of this business and the

opportunities that are open to every

colleague are as much a growth driver

as anything we do for our customers.

Itis only by working together, as one

team with common goals in a diverse

and inclusive culture, that we can take

this business to the next level.

FY22 performance

The business recovered well through

the year with Group revenue up 28%

driven by growth in store sales following

easing of lockdown restrictions. Store

sales increased 33% year on year

reflecting a 20% increase in the number

of trading days compared to the prior

year and a recovery in market share.

Store LFL sales (versus FY20) were

-5.7%, albeit with steady recovery

post-lockdown as footfall recovered.

The key Christmas trading season

benefited from approaching pre-

pandemic LFL levels.

While online sales across both

cardfactory.co.uk and gettingpersonal.co.uk

for the financial year were ahead of pre-

pandemic levels (+23% versus FY20),

sales were short of target due to delays

to development that should have further

increased the ranges offered online.

Online sales were down-13.5% YOY

(made up of cardfactory.co.uk -1.5%;

gettingpersonal.co.uk -21.6%) which

Card Factory plc Annual Report and Accounts 2022

Card Factory Online

£11.1m

Getting Personal

£16.5m

Retail Partnerships

£5.6m

Stores

£251.9m

reflects the easing of lockdown

restrictions and the return of customers

to physical stores as well as the

focusonhigher margin sales on

gettingpersonal.co.uk.

As expansion of our retail partnerships

both in the UK and internationally is a

key component of our ‘Opening Our

New Future Strategy’, we were delighted

to welcome our Business Development

Director in September 2021. Partnership

sales were down 18% YOY, reflecting an

underlying performance in line with

expectations with the decline relating to

the extended Covid-19 lockdown periods

in Australia, which impacted trading at

our partner, The Reject Shop.

The focus on building the financial

strength of the business was seen

through the strong operating cash

flowwhich was up 42% in FY22 to

£114million. Actions to manage cost

included strong capex control, greater

efficiency in stock management

(including reduced closing stock

YOY)and proactive management of

additional expense costs. Improved

balance sheet strength resulted in

closing Net Debt (excluding lease

liabilities) of £74.2 million (FY21:

£107.7million), with Leverage excluding

lease liabilities of 0.9x (FY21: 2.4x)

belowpre-pandemic levels (FY20: 1.1x).

Inclusive of lease liabilities, Net Debt

was £194.0 million (FY21: £252.6 million)

and Leverage 2.3x (FY21: 5.5x).

Strategy refresh

Since joining the Group, one of my

priorities has been to review the

business and its growth strategy.

Having completed that process,

I remain extremely excited about the

opportunities available to Card Factory.

The delivery of the growth strategy set

out in July 2020 – and the broader retail

environment itself – has obviously been

impacted by Covid-19. However, it is

clearthat the right way forward is to

transition Card Factory from being a

store-led card retailer into a market

leading, omnichannel retailer of cards

and gifts.

FY21 revenue

FY22 revenue

While cards will remain the largest

partof our business in terms of total

contribution, we will substantially

increase our focus on complementary

gifting, enhancing our customer offer

andsignificantly increasing the size of

ouraddressable market. The successful

delivery of our strategy will be achieved

by putting the customer at the heart of

everything we do – ensuring that we

provide outstanding value and quality

across all our products and services,

available however our customers want

toshop.

Card Factory Online

£10.9m

Getting Personal

£12.9m

Retail Partnerships

£4.6m

Stores

£336.0m

Card Factory app

60,000

active users per month

Card Factory plc Annual Report and Accounts 2022

Financial StatementsGovernanceStrategic Report

This will include the continued

expansionof our partnership strategy.

The opportunity for us to sell our

products in areas of the UK where we

have no presence but do have potential

customers is considerable, and there is

additional significant opportunity to

satisfy shopper missions that are not

currently met through our existing store

estate footprint. By further expanding our

brand and offer internationally, we will

leverage the full potential of our design,

production and distribution capability.

Delivery of our strategy is now underway

and some significant milestones have

already been achieved. We have

strengthened our leadership team with

key appointments into the roles of Chief

Information Officer and Digital Director,

recognising the critical role digital has to

play in our business growth. In addition,

we have appointed a new Business

Development Director and appointed

Card Factory’s first Customer Marketing

Director to oversee our new Customer

Marketing function. These appointments

bring significant experience to our

leadership team and will ensure we

havethe right capabilities to drive the

next stage of our growth.

Recent delivery milestones include

opening our first new look ‘model

store’,and we will soon complete the

transitioning of both of our online

stores (cardfactory.co.uk and

gettingpersonal.co.uk) onto a single,

unified platform which unlocks cost

benefits and the ability to significantly

expand the cardfactory.co.uk

giftingrange.

Looking ahead, our focus for the

nextfinancial year is creating growth

opportunities around the store estate

and building out our wider capability.

Key FY23 milestones include:

Stores

• Expand our market share in Stores

in complementary categories – We

are already UK leaders in party and

balloon categories and for stores we

will be looking at expanding our

market share in categories such as

stationery, confectionery and toys.

This will not come at the expense of

cards in-store. It is about making

smarter, more agile choices

aboutthe space dedicated to

complementary categories.

• Complete the roll-out of trial

modelstores – We opened our

firstnew format ‘model store’ in

February 2022. The Coventry store

features better use of store space,

improved customer flow and

navigation through the store,

whilealso improving operational

efficiencies. Results from the store

have been very promising and we

expect that similar results can be

achieved as more trial stores are

opened. Analysis of results will be

used to prepare for wider roll-out

from FY24 while taking learnings

into our existing store estate.

• Open first central London stores;

continue Republic Of Ireland

expansion – We have identified a

profitable route for opening our first

stores in central London. Having

enjoyed profitable success with our

first 14 stores in the Republic of

Ireland, we will continue our

expansion plans with a further

fivestores already identified and

additional openings planned.

Wider capability

• Trialling the ability for shoppers to

Click & Collect any product from

our online or app platforms for

collection in-store – This is the first

step on rolling out our omnichannel

capability which we believe

provides the opportunity to

leverage our brand, store estate,

vertical integration, quality and

value proposition and our

investment in our online channels

tomaterially increase our share

ofthe online market.

• Deliver the second phase of our

ERPimplementation – Already live

across the finance functions, the

new ERP system will underpin the

growth strategy across the entire

business allowing us to understand

and respond rapidly to changing

shopper habits and preferences.

Itwill provide the ability to view

stock in all areas of the business,

which is essential for omnichannel

operations, and will allow us to

integrate with future partners both

in the UK and internationally.

• Pricing strategy – To support

maintaining margins, we have

begun a highly targeted set of

priceincreases across some of

ourproducts. We are carefully

analysing the impact on sales with

further price rises on other SKUs

being actively considered, whilst

maintaining our value proposition.

Responding to headwinds

Continuing to respond to the

inflationary headwinds outlined by

Paul in the Chair’s statement is a

priority area of focus. We have taken

significant pre-emptive measures to

manage costs within the business and

enact sustainable price increases.

People and culture

Investing in the evolution and

development of our people strategy

and culture within Card Factory is a

priority for our senior management

team. Developing Card Factory into

adiverse, inclusive and socially

responsible business is vital for our

growth and prosperity. It creates the

work environment where we can all

prosper and thrive. It attracts new

people and exceptional talent into

thebusiness, and it helps retain the

exceptional talent we already have.

Over the past year, we have been

collecting and listening to feedback

from across the business so that we

understand where our culture is right,

where we are treating colleagues in

the way they expect to be treated,

where we are fostering a leadership

environment that values and

encourages everyone’s contribution,

and how we can best reward

colleagues for the contribution they

make. Having completed a full review

of our pay and rewards policies

including industry benchmarking, we

have introduced a range of significant

improvements. All colleagues now

benefit from a company maternity

andpaternity pay scheme and an

inclusive company sick pay policy,

andwe have made substantial steps

towards making pay for all colleagues

competitive within the market.

Chief Executive

Officer’s review continued

Card Factory plc Annual Report and Accounts 2022

Our ESG commitment

Another area of progress that we are

proud to highlight are the steps the

business is taking to develop and

deliver positive change through our

ESG strategy. We are progressing

wellin terms of reducing our carbon

footprint and becoming a carbon

neutral business. We are on track in our

efforts to reduce waste and improve

the sustainability of our product ranges,

with 90% of our products being free of

single use plastic by the end of FY24,

along with all of our products being

glitter free in the same timeframe.

Our social policies are moving forward

at pace with colleagues working

collaboratively on a range of initiatives

which includes a progressive DE&I

strategy and we continue to have a

positive impact within the communities

we work within and the charities we

support through The Card Factory

Foundation.

At all times we are complying with

guidelines and best practices,

andactively managing our ESG

considerations and risks effectively,

with good governance informing our

decision-making. Further details

around our ESG commitments can

befound on pages 44 to 45.

Summary

We have made a positive start on

ourfive-year growth journey. Through

the course of this year, we aim to

makesignificant headway on all of the

key initiatives that will drive our future

growth, especially omnichannel.

Thestrong return of sales through the

year demonstrated that we remain a

much-loved retail brand with a unique

and scalable business model that is

the ideal platform for achieving our

growth ambitions. Our focus is on

continuing to return same store sales

and delivering the strategic initiatives

that will drive growth at pace.

Darcy Willson-Rymer

Chief Executive Officer

3 May 2022

Card Factory plc Annual Report and Accounts 2022

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Investing in the evolution and development

of our people strategy and culture within

Card Factory is a priority.”

“

‘Opening Our New

Future’ strategy

In FY22, we launched our ‘Opening

OurNew Future’ strategy which has

broadened our ambition and vision

forCard Factory, to build upon our

dominance within the UK card market

with the aim of becoming the leading,

technology-enabled, omnichannel

retailer in our sector, with an extensive

UK& Ireland footprint and a growing

international presence. This is

underpinned by a clear shift in focus

frombeing a product-led business to

acustomer-focused business.

By delivering on the strategy,

CardFactory will become:

• the leading omnichannel brand

helping customers every day to

celebrate life’s special moments;

• the UK’s #1 destination for all

customers seeking unrivalled

quality, value, choice, convenience

and experience; and

• a global competitor putting cards

and gifts in the hands of more

customers.

There are multiple opportunities for

Card Factory to build upon its existing

share of the card market as we work

towards this ambition. These

opportunities include increasing our

ranges in the complementary party

and gift categories; transitioning

intoomnichannel retail to improve

thecustomer experience; further

geographical expansion in the UK

&Ireland and – in due course –

internationally; and broadening the

target market to capture spend from

less price-sensitive customers. All

ofthese opportunities have been

incorporated in the refreshed strategy,

building on the strategy set out in

July2020.

Implementation of the ‘Opening

OurNew Future’ strategy will enable

the Group to adapt effectively to

underlying structural changes in

consumer behaviour that were

accelerated during the Covid-19

pandemic. The majority of customer

spend on cards and gifts across the

market is currently made in-store and

we are highly confident that this trend

will continue. As such, a successful

omnichannel offering not only requires

growth in online distribution channels

and delivery of products to customers,

but a complementary, strong

storeportfolio.

Card Factory is uniquely placed

tocapitalise upon the growth

opportunities available because of its

vertically integrated business model.

This model is fully differentiated,

robust, and highly scalable affording

great flexibility to respond to market

changes and enabling efficient,

high-quality design and production at

attractive margins, supporting online

channel growth and retail partners

with lower costs per unit. This provides

a sustainable business model through

the expansion of Card Factory’s offer

into the larger addressable market

ofgifting and the opportunities

omnichannel provides to drive further

growth both in-store and online.

Delivery of the strategy is expected

todrive an acceleration in revenue

growth and margin expansion, with an

ambition of growing revenues to over

£600 million by FY26. Approximately

20% of revenues will be generated

from online, omnichannel and retail

partnerships, while creating a business

with a low-cost base and highly

scalable business model. We expect

the delivery of the strategy to result in

a shift in product and channel mix,

alongside investment.

Our strategy

Card Factory plc Annual Report and Accounts 2022

Delivering on

the strategy

The strategy remains based around three pillars.

Following the strategy review in FY22, the key initiatives for

delivering the updated strategy have been identified and

the business focused on delivery of those initiatives through

the five-year timeframe of the strategy which has now

been relaunched as the ‘Opening Our New Future’ strategy.

The approach for delivering those strategy initiatives

hasbeen structured around providing for our customers

improved value and choice, more convenience and an

exceptional experience. All of which is built upon the

foundation of our scalable central model that drives

efficiency across the business. To ensure the strategy is

successfully realised, delivery is being led by the Business

Transformation team and senior leaders within the

businessthrough the Annual Operating Plan.

Increasing

breadth of

product offering

Transforming Card Factory

toan omnichannel retailer

ofcards and gifts with a

leadership in cards and

increasing presence in

complementary categories.

Create a full

omnichannel

offer

Improving availability and

access to our products, however

customers choose to shop;

enhancing convenience and

experience for shoppers.

A robust and

scalable central

model

This continues to provide

Card Factory with a distinct

competitive advantage.

‘Opening Our New Future’

The leading technology-enabled, omnichannel retailer in our sector with

an extensive UK & Ireland footprint and growing international presence.

CONVENIENCE

• Digital experience innovation

• Extensive UK & Ireland footprint

• Growing international presence

VALUE & CHOICE

• Leadership in card

• Authority in complementary

categories

EXPERIENCE

• Customer and community focus

• Passionate colleagues

Page

Scalable central

model driving

organisational

efficiency

Creative

Insight-driven product, design

and creative content publisher

at the heart of Card Factory’s

intellectual property.

Manufacturing

Ability to scale up production

to meet increased demand in

linewith projections.

Technology

Enabling greater efficiency,

more agile practices and

the ability to do business

worldwide.

Card Factory plc Annual Report and Accounts 2022

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Convenience

At any time and in any place, a customer will be able to access our

range, whether online, in our stores or through our partners, and so

enjoy a seamless shopping experience.

DIGITAL EXPERIENCE

INNOVATION

If we want to make best use of our

nationwide store estate and respond to

today’s customer needs, then we need

to transform the business from a

predominantly store-driven retail

model to a full omnichannel offer.

Thiswill make best use of our existing

and invested infrastructure to become

the first card and gifting retailer to

provide a seamless physical and online

customer experience. We believe that

omnichannel provides the opportunity

to leverage our brand, store estate,

vertical integration, quality and value

proposition and our investment in our

online channels to materially increase

our share of the online market. The UK

online market for cards peaked at an

estimated £515 million in 2020 due to

the Covid-19 lockdowns, declining to

£378 million in 2021 as stores reopened.

This estimated market size is still over

double the £177 million online market

estimation in 2019. We are targeting

c.10% of Group revenues from online

by FY26, up from 2.7% today.

Our objective is to allow our customers

to have a seamless shopping

experience where they can Click

&Collect our cards, gifts and

personalised products anytime and

anywhere across our stores, online

orapp. By providing an improved

omnichannel service, Card Factory will

enhance the shopper experience and

access to its offer, by being the first

specialised card and gifting brand

tocombine an effective digital

proposition with its store estate.

We will give our customers control

overhow they shop with Card Factory,

with the ability to access our full offer;

in-store or online, with fast delivery to

home or store.

As well as leveraging the scale of our

existing store estate, omnichannel will

unlock our online growth potential.

The Covid-19 driven change in

consumer behaviour drove our online

sales growth to be significantly ahead

of pre-pandemic levels (+23%)

reflecting the expansion of our product

range online and the improvements

wemade to the customer experience.

This provides the platform we need to

drive our omnichannel expansion.

Our digital strategy focuses on the

delivery of five areas of focus:

Click &

Collect

The ability for shoppers to Click &

Collect any product from our online or

app platforms for collection in-store.

FY23 Milestone: on track to deliver

proof of concept trial in c.40 stores

before Christmas 2022.

Range

expansion

The phased expansion of our online

range as we create an ‘endless aisle’

ofproducts and categories. New

categories to include (but not limited

to) flowers, books, experience gifts,

confectionery and alcohol.

FY23 Milestone: new categories being

rolled out through FY23 and into FY24.

Ecommerce platform

integration

We are transitioning our two

ecommerce sites (cardfactory.co.uk

and gettingpersonal.co.uk) onto the

same platform. As well as saving costs,

it unlocks more efficient development

capability, in particular the massive

expansion of the gifting range on

cardfactory.co.uk.

FY23 Milestone: on track to

successfully deliver integration.

Web

experience

Customer experience improvements

tooptimise the conversion rates

onboth cardfactory.co.uk and

gettingpersonal.co.uk.

FY23 Milestone: initiative successfully

launched with agile development put

in place to drive ongoing incremental

improvements.

Our strategy

Card Factory plc Annual Report and Accounts 2022

TECHNOLOGY

INFRASTRUCTURE

Card Factory has completed the first

phase of a major IT implementation

programme to replace its legacy

ERPsystem.

Already live across the finance

functions, the new ERP system will

underpin the growth strategy across

the entire business allowing us to

understand and respond rapidly

tochanging shopper habits and

preferences. It will provide the ability

to view stock in all areas of the

business, which is essential for

omnichannel operations and will allow

us to integrate with future partners

both in the UK and internationally.

We are investigating where to

introduce automation within our

distribution network to further

streamline our current workflow.

Thiswill be focused on the picking

andpacking of customer orders from

the centrally fulfilled operation. With

modest enhancements to our item and

order tracking functionality within our

current systems we will be able to

provide our customers with a better

service and cut-off times.

FY23 Milestone: deliver the second

phase of our ERP implementation.

EXTENSIVE UK

& IRELAND FOOTPRINT

The store portfolio will be optimised to

ensure Card Factory has profitable stores

in high footfall locations.

New store openings will be focused

onunder-penetrated areas, including

central London and areas of high

footfall, including retail parks.

Our stores will remain a vital route

tomarket and are not simply legacy

assets. Store revenues will continue to

grow in their own right but will simply

be a smaller proportion of the mix as

online growth accelerates. Initiatives

such as targeted pricing and an

increased gifting range are expected

to improve in-store sales, increase

average basket value and offset

thestructural trend of minor YOY

footfalldecline.

Model store

We opened our first new format

‘model store’ in February 2022. The

Coventry store features better use of

store space, improved customer flow

and navigation through the store,

while also improving operational

efficiencies. Results from the store

have been very promising and we

expect that similar results can be

achieved as more trial stores

areopened.

FY23 Milestones: complete the roll-out

of trial model stores; analyse results

and prepare for wider roll-out from

FY24 onwards.

Relocation strategy

The store optimisation programme will

continue with locations selected based

on profitability and returns. The low

lease lengths across the store portfolio

provide additional flexibility and

optionality, ensuring an effective

overall store portfolio.

London and the Republic of Ireland

We have identified a profitable route

for opening our first stores in central

London. Having enjoyed profitable

success with our first 14 stores in the

Republic of Ireland, we will continue

our expansion plans with further

storesto be opened in the Republic

ofIreland.

FY23 Milestones: open first central

London stores; continue Republic

ofIreland expansion.

Partners

The partnership model allows us to

reach more UK shoppers for minimal

investment in additional convenient

locations that meet the growing

demand for impulse buying. In the

UK,we have two successful retail

partnerships. We have an ongoing

trialwith Matalan and agreed an

extension to our agreement with Aldi.

We also have an existing franchise

arrangement with an operator of

stores in Gibraltar, Jersey, Guernsey

and the Isle of Man.

FY23 Milestone: further extension of

partner programmes in the UK.

GROWING INTERNATIONAL

PRESENCE

Outside the UK we want to enter selective

scalable markets which we view as being

primed for disruption due to identified

gaps in the market for Card Factory’s

value and quality proposition.

This expansion will be through an

investment-light multichannel model,

where partners in international

markets will help to build our global

brand. We are already enjoying

success with our Australian partner,

The Reject Store, where we have a

fullCard Factory branded offer.

FY23 Milestones: further develop

fulfilment capability.

Card Factory plc Annual Report and Accounts 2022

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Value & Choice

With customers inclined to buy gifts alongside a card purchase,

we can capture a larger addressable market by expanding our

complementary categories offer in-store and online.

LEADERSHIP IN CARD

We will continue to be a card-led value

retailer in a stable market where 73% of

UK adults are card givers.

To offset inflationary pressures, we

have begun a highly targeted set of

price increases across some of our

products. We are carefully analysing

the impact on sales with further price

rises on other shop keeping units

(‘SKUs’) being actively considered. As

price increases are being seen across

the wider UK retail sector, we do not

believe these increases will negatively

impact the attractiveness of Card

Factory to our customers. However, as

a value retailer we are making every

effort to maintain our price point

competitiveness while also

understanding how much price

increase our customers will accept.

Selling more greeting cards than

anyone else in the UK provides us

withunique insight and data to

fullyunderstand the market: what

customers want; what occasions

theybuy for; and what designs and

captions sell well. Analysing our data

to support our range selection, pricing

and promotions allows our design

teams to adjust the offer to reflect

customer behaviours. The card

rangewill be broadened in terms

ofintroducing more modern and

contemporary choice and a clearer

focus on the proposition in-store to

help shoppers. However the SKU

sizewill remain the same.

FY23 Milestone: initiate targeted

price increases.

AUTHORITY IN

COMPLEMENTARY

CATEGORIES

We will meet customer demand by

providing greater choice through

complementary gifting and party ranges,

opening up access to a large market

worth £44 billion per annum in the UK,

capturing more customer spend and

increasing average basket value.

The UK card-attached gift market is

worth c.£31 billion per annum, with

Card Factory targeting an element of

the market worth over £5 billion per

annum which is between four and five

times larger than the card-only market

that Card Factory has historically

addressed.

We are already UK leaders in party

and balloon categories and for stores

we will be looking at expanding our

market share in categories such as

stationery and confectionery. This

willnot come at the expense of cards

in-store. It is about making smarter,

more agile choices about the space

dedicated to complementary

categories. Online will have a

farbroader offer across more

complementary categories, making

best use of the ‘endless aisle’

capability of our online platform.

FY23 Milestone: growth across

stationery, confectionery, toys

andparty.

Our strategy

Card Factory plc Annual Report and Accounts 2022

We will meet customer demand by providing

greater choice through complementary gifting

and party ranges, capturing more customer

spend and increasing average basket value.”

“

£5bn

addressable gift market

Card Factory plc Annual Report and Accounts 2022

Financial StatementsGovernanceStrategic Report

Experience

We will be delivering an exceptional customer experience through improved data

capabilities for understanding the customer, brand investment and ESG investment.

We will develop a culture of accountability with colleagues empowered to make the

right decisions for the business with a shared understanding of its identity, strategy,

vision and values within a diverse, inclusive and socially responsible business.

CUSTOMER &

COMMUNITY FOCUS

We will continue to invest in the Card

Factory brand, with emphasis on our

quality and value focus, to increase

shopper awareness and improve trust.

With a new Customer Marketing function

now in place, we will build upon the

existing strength and awareness of the

Card Factory brand to connect with more

customers both in-store and online.

We will build upon Card Factory’s

ESGcredentials to be recognised as

asocially and environmentally

responsible business. We are working

to reduce waste, reduce our carbon

footprint, meet ever bolder recycling

targets and make our products as

sustainable as possible. We continue

to invest in giving back and The Card

Factory Foundation, combined with

our charity partnerships, makes

asignificant contribution to the

wellbeing of our colleagues and

communities; something we care

passionately about.

FY23 Milestones: new Customer

Marketing function introduced;

updated ESG strategy.

PASSIONATE COLLEAGUES

While our ‘Opening Our New Future’

strategy has the customer at its heart, its

success is reliant upon every colleague

delivering and supporting it.

That means we need an inclusive,

diverse and driven culture where every

colleague feels they can develop

within Card Factory and further their

career should they wish to. We need

todevelop our leadership talent while

at the same time devolve decision-

making so that everyone feels they

areempowered to make the right

decisions for their function and the

Company as a whole.

In early FY23 we have made the first

significant step as a business towards

delivering a pay and benefits model

that we can be proud of. Our aim is to

reward everyone fairly, inclusively and

competitively. While it will take time to

achieve that ambition, we are aiming

to reach a place as quickly as we can

where everyone feels that the hard

work and commitment they deliver is

recognised in the financial reward

andbenefits they receive. We have

therefore made the most substantial

increase to our annual pay and

benefits bill that Card Factory has

ever seen – in total, we have increased

our pay and benefits bill by 7%. A

large proportion of this has been

invested in our benefits, which will

have a significant positive impact for

many of our colleagues, especially

those who are on hourly pay. For all

colleagues throughout the business,

we have made two significant benefit

improvements that are an important

step towards inclusivity. All colleagues

will now receive enhanced company

maternity, paternity and adoption

leave beyond the statutory minimum.

All colleagues will now receive

enhanced paid sick leave, which is

something that was lacking for many

hourly paid colleagues who primarily

work within our stores, distribution

centres and Printcraft. We are proud

to make these investments because,

asa responsible employer, we are

fairly recognising the value of each

colleague by making these core

benefits uniform for all colleagues.

FY23 Milestones: improved benefits;

competitive benchmarking of pay.

Our strategy

Card Factory plc Annual Report and Accounts 2022

Our stakeholders

Our

stakeholder

engagement

Section 172(1) Statement –

Engaging with our stakeholders

Engaging with our stakeholders is of

vital importance to the Group and

ensures that our stakeholders’ interests

are honoured during the Board’s

decision-making process, to promote

the success of the Company, for the

long-term success of the Group.

This engagement is also supportive of

a Director’s duty under Section 172 of

the Companies Act 2006.

The Board continues to recognise Shareholders, Customers,

Colleagues and Suppliers as our key stakeholders, following its

review of the Group’s stakeholders in 2020. The Board concluded

that these stakeholder groups have a material impact to achieving

our Mission. The Board and the management team take full

account of other stakeholders as part of decision-making, with

other stakeholder groups including landlords of our leased retail

properties, regulators, HMRC, our debt funders, our communities

and our environment.

The impact of key decisions on stakeholder groups are identified to

ensure they are considered and understood. The Board takes an

active role in engaging with some stakeholders and receives

regular reports from the management team to keep appraised of

stakeholder interests and issues. The Board resolved that in respect

of a number of stakeholders (particularly our Suppliers), it is more

appropriate for the senior management team or their direct

reports to undertake part or most of the stakeholder engagement,

provided insights and feedback is shared with the Board.

The Board receives monthly updates on key performance

indicators (‘KPIs') that are aligned to most stakeholder groups,

including Colleagues, Customers and Shareholders. The nature

and form of KPIs are reviewed at least annually to ensure the

Board and senior management team receive the most relevant

data to support informed decision-making and to identify any

matters requiring remedy. Updated KPI reporting includes

increased reliance on current, live data, particularly in respect of

our Customers, as the business develops a more customer-centric

mindset. This includes monthly data on market share, net promoter

score, and customer awareness of Card Factory compared to

competitor brands (see pages 9 and 25).

The Board objectives set by the Board following the external Board

effectiveness evaluation in late 2021 includes an objective to

improve the quality of investor communications.

Card Factory plc Annual Report and Accounts 2022

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Shareholders

Our shareholders are a significant stakeholder group for

Card Factory, as owners of the business and as investors

who fund the operations in expectation of a return. The

shareholder experience has been at the front of the Board’s

decision-making. The Board recognise that the moderate

share price recovery over the last 12 months may not realise

an appropriate return on investment for longer-term

shareholders. Reduction of debt from cash generated and

investment for future growth, to address recent under-

investment have been prioritised before returning value to

shareholders. Having evaluated all available options, the

Board considers this short to medium-term approach to

bein the longer-term best interests of all stakeholders

inachieving improved stability for the Group, e.g. in

facilitating recruitment and retention of colleagues with

theskills and experience needed to achieve the strategic

objectives. The Board appreciates all support and feedback

from investors.

We continued to engage with our shareholders on a

regularbasis, through RNS announcements and investor

presentations. An open forum for all shareholders to attend

online investor presentations and to ask questions was

provided when presenting our year-end and half-year

results, as well as returning to holding an in-person

AnnualGeneral Meeting in July 2021.

We regularly hold calls with current and prospective

institutional investors and address ad hoc investor

questions. In accordance with best practice guidance

developed during the Covid-19 pandemic, despite being

able to hold a physical AGM meeting, we saw the benefit in

extending a facility for any shareholders to have questions

answered in advance of our 2021 AGM. This allowed us to

ensure that all shareholders had the opportunity to take

account of responses before submission of their

proxyvotes.

Much of our dialogue with shareholders is two-way, where

we welcome feedback to take account of shareholder

insights, views and experience. Members of the Board,

including the Chair, CEO, CFO and several Non-Executive

Directors have met with shareholders during the year and

share the feedback arising from those shareholder

conversations when the Board next meet. Weaim to

articulate our messages clearly in a way that is easy for

allour shareholders to access and understand.

The Board has regard to our shareholders’ feedback during

its Board meetings, ensuring their voice is considered during

the Board’s decision-making processes. The CEO ensures

the senior management team are appraised of shareholder

views to ensure their insight is accounted for in their

decision-making. Shareholder KPIs (including those on

page 1) are reported monthly to the Board and the senior

management team, to ensure the range of key metrics are

measured, reported on and accounted for in all decision-

making, to ensure focus on realising performance that is

required by shareholders.

We propose to continue to engage with our shareholders

asoutlined above.

Our next AGM will take place on 23 June 2022 at the

Company’s registered office at Century House, Brunel

Road, Wakefield 41 Industrial Estate, Wakefield, West

Yorkshire WF2 0XG at 11.00am. The Board welcomes

questions from shareholders by email in advance of the

meeting and will endeavour to provide written responses

before the due date for submission of proxy votes, to

facilitate shareholders making informed voting decisions

inadvance of the meeting. Appropriate questions and

answers shall be published on the Company’s investor

website after the AGM. We encourage all our shareholders

to vote by proxy on all of the resolutions proposed, to

ensure votes are cast, should there be a change in

regulations that may restrict attendance.

Our stakeholders continued

Card Factory plc Annual Report and Accounts 2022

Customers

Card Factory’s mission of helping people celebrate

lifemoments has always been enabled by a deep

understanding of our customers. As we emerge from a

two-year period of universal disruption, it is now more

important than ever that we continue to robustly

investigate our customers’ needs and behaviours. This is

asignificant driving factor behind our progress towards

beinga truly customer-centric organisation as part of

our‘Opening Our New Future’ strategy.

The appointment to the senior management team in 2021

of a Director of Customer Marketing, who is building

capability in customer insight and data, is reflective of our

commitment to growing an even stronger customer focus

across the organisation. We have adapted resiliently to the

challenges of the pandemic by making smart investments

in our stores, online channels and infrastructure to enhance

the customer experience. Our in-house market insight

function will now lead us towards becoming the number

one UK destination for customers who are seeking value,

range and quality to help them celebrate life moments.

Through our expert market research programme, we

continue to listen and respond to the needs of our

customers and to gain insight into attracting those

customers who have yet to discover Card Factory. We

invest and make extensive use of customer insight tools to

inform our planning and to make informed and meaningful

decisions about all aspects of our brand, including our

product ranges, pricing, services and our in-store and

digital offerings.

Our Market Research programme includes:

• our in-house research tracker of 3,000 respondents:

Anannual survey which has been developed to size the

market, to provide bespoke customer intelligence and to

rate our performance against our customer focused KPIs;

• Kantar panel data, which gives us access to market share

data, contribution to growth and customer switching

activity for Card Factory and the market;

• an ongoing brand health tracker, which allows us to

monitor Card Factory’s brand performance and the

experience we provide;

• ad hoc tailored research into specific initiatives.

Anexample of this is the extensive 2021 study into

thegift attach market opportunity, which was used to

shape our FY23 growth strategy;

• syndicated data, which builds our understanding of key

aspects of our brand, our customers and our market; and

• sophisticated in-house customer segmentation, based

on both attitude and behaviour towards cards and gifts.

This equips us with valuable insight into who our core,

existing and target customers are, how many of them do

and don’t shop with us vs the market and how to serve

them better in order to grow our market share.

Taking an extensive and holistic approach to customer

intelligence affords us a profound understanding of our

customers. This allows us to interrogate and improve the

Card Factory proposition to meet our customers’ needs,

whilst also measuring the success of the experience we

aredelivering.

To fulfil our customer-centric ambition, our commitment

goes beyond market research. Our success relies on every

colleague and every process being focused on delivering

the right products, services, channels and experiences for

our customers. In 2020 we responded quickly to customer

needs during the pandemic by investing in an increased

customer services team, extended customer services hours

and new Live-Chat and social media contact channels.

In2021 we continued to embed customer-focused

frameworks throughout the Card Factory organisation,

including regular business-wide communications

andinsights, specialised training and development

opportunities for colleagues and online focus groups

aspart of our ‘Voice of the Customer’ initiative.

We have invested in the upskilling of our Customer Service

Team to improve the quality and speed of response to

customer contact, online and in-store. Our leadership

teamsare provided with regular visibility of customer

enquiries and key service metrics, in order to ensure that

high standards of response are maintained and that

improvements are made where necessary.

As we look to the future, our strategy to become the UK’s

leading omnichannel retailer in our sector will be enabled

by decision-making driven out of our comprehensive

insights capability. This will enable us to meet customer

needs anywhere, anytime, via a channel and service that

suits them. In support of this we continue to develop and

make improvements to our store environment, with the

completion of our ‘model store’ format development in

2021. This offers an enhanced shopping experience to

customers, elevates the Card Factory brand and offer and

will continue to be rolled out and evaluated as one of the

priorities of our strategic plan. Continued investments in the

Card Factory brand, with improvements and innovations to

our in-store and digital offer, will enable Card Factory to

continue to deliver a unique customer experience.

Card Factory plc Annual Report and Accounts 2022

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Colleagues

Key to helping customers celebrate life moments are our store

colleagues: over 8,000 people working in over 1,000 stores

across the UK & Ireland; joined by an additional 5,000 seasonal

colleagues, during peak trading periods. Supporting them in

their mission are 441 colleagues at our support centre and

374working in fulfilment, production and distribution.

All teams continued to show great resilience and flexibility

aswe adapted to the ever-changing Covid-19 restrictions

throughout the course of FY22. Furlough allowed us to phase

areturn of our colleagues over time after stores reopened.

Weensured that our colleagues were kept safe and felt

supported and we implemented measures to operate in a way

which complied with government restrictions and considered

the health and wellbeing of our customers and our workforce,

whether in a store, an office or a distribution centre.

Our entire business continued to adapt and respond to the

needs of our customers and our colleagues. We maintained our

flexible working arrangements for office-based colleagues, to

allow our colleagues to benefit from working in a way which

suits them and the business. This allows us to attract and retain

talented candidates, as well as addressing the wellbeing and

engagement benefits of being a flexible and agile employer.

Communication and engagement with colleagues continues to

be high on our agenda: frequently two-way, to allow us to listen

and to act on what we hear. Our many channels include video

updates, business roundups and our Company-wide virtual

conference held in January 2022 which allowed us to bring

colleagues together from across the country to hear about our

five-year strategy and to input and feedback on our values.

Finally, the Board’s ability to engage with colleagues on an

informal basis, in our stores and on site visits are now able to

continue as government restrictions ease.

Our regular Best Companies survey gives our colleagues a

voice and creates the opportunity for us to receive feedback in

a quantitative and qualitative way. We commissioned Best

Companies to run a standalone ‘Be Heard’ survey in June 2021.

Some of the key feedback included that colleagues wanted to

see progress in terms of personal growth, leadership and

recognition. This feedback has allowed us to work on our

people plan, to include:

• Values refresh and culture: We have reviewed our

organisational values to ensure they are aspirational in

supporting the business on its strategic journey and as part

of the work to articulate our culture. Our values articulate

what we value most, a set of beliefs and principles that we

commit to, that are brought to life within our Leadership

Behaviour Framework and ways of working. Through high

engagement with colleagues across the whole business we

gathered data on what we appreciate about our current

values and what will make our culture future-fit. The new

values are due to be launched later in 2022.

Our stakeholders continued

• Performance management: To support our ambition for

growth and to achieve our five-year strategy it is critical

that every colleague knows what is expected of them

within their role, owns their personal accountability and

recognises the valuable part they play. This involves

connecting our business-wide objectives to our individual

contributors and being clear on what they need to do as

well as how they need to do it. We capture this through

our newly defined performance management process

which sets measurable and relevant objectives, ensures

regular performance and feedback conversations and

supports personal development plans. We have invested

significantly in developing our leaders through coaching

supported by workshops and toolkits.

• DE&I: Our aim is to build an inclusive workplace where

diversity thrives and to attract a colleague group as

diverse as the customers we serve. Using a colleague-led

approach to gathering data, we have built a five-year

DE&I strategy and plan. This will deliver on five key

pillars: Leadership; Wellbeing; Community and

Connection; Brand; and Customer. Through this plan

wehave identified a set of outcomes that we aim to

achieve and will review annually, both qualitatively

andquantitatively.

• Career pathways: We have begun to define functional

career pathways that provide clear visibility of

opportunities for colleagues to develop their breadth

and depth of skills, as well as mapping progression

routes. This supports managers to support the

development of others, encouraging internal mobility.

Our apprenticeship offer will continue to be embedded

within our career pathways, along with our leadership

development offer; demonstrating our commitment to

social mobility and developing our leadership culture

respectively. Talent pipeline and succession planning has

been undertaken with the senior management team and

the colleague population reporting into them and will

continue to be rolled out beyond this population,

throughout FY23.

Card Factory plc Annual Report and Accounts 2022

Our ‘Be Heard’ colleague survey has been repeated in

January 2022. The response rate is higher than it has ever

been, at 71% of colleague participation and we have

improved our scores on almost all of our categories.

Outputs from the survey enable us to make decisions to

support our longer-term strategy of reducing turnover and

maintaining our excellent customer service offering.

Our Combined Colleague Advisory Group (‘CCAG') provides

a forum to ensure that our colleagues’ voices are heard

directly by our Board and ensures the Board considers

colleagues’ interests during its decision-making. CCAG

consultations were undertaken in May, September and

December 2021 and January 2022. These consultations

included:

• in May 2021 we consulted on the Group’s reward

framework, received feedback on the changes proposed

to our Remuneration Policy (see pages 77 to 81) and

assessed our performance and areas for improvement

inrespect of DE&I;

• in September 2021, we consulted on the Group’s ESG

strategy using colleague feedback to inform progress

moving forward, including trials of a cardboard

alternative to bubble wrap, the removal of plastic slips

from cards being rolled out more widely across ranges

and a proposal to increase the size of TerraCycle boxes

instores;

• in December 2021, we consulted on colleague morale in

the peak trading period; feedback confirmed that

additional lines of communication put in place by the

Group were effective and that colleagues felt well

supported despite challenges with stock and availability;

and

• in January 2022, we consulted on learnings from the

Christmas 2021 trading period to inform plans for

Christmas 2022, including use of the new auto-

replenishment system in distribution centres and

recruitment of temporary colleagues during the peak

trading period.

Paul McCrudden, as designated Non-Executive Director,

stepped down as Chair of the CCAG in January 2022 and

has been replaced by Paul Moody, Chair of the Board.

Our people policies lay out a framework of how we work,

some of these are a mandatory requirement and some are

optional. They are in place to ensure our compliance but

also to support our aspiration to be inclusive, consistent

and fair. An outline of our policies include:

• Family friendly policies including maternity, paternity

and adoption, flexible working and sabbatical policies.

• These policies are designed to ensure that we recognise

the changing nature of colleagues’ lives, to support

effective work-life balance and to encourage flexibility.

These policies are subject to regular review and

benchmarking to other businesses to ensure we consider

the needs of our colleagues as well as to attract and

retain talent.

• Legal and legislative policies including disciplinary,

grievance, anti-bribery and corruption, data protection

and personal information policies.

• These policies are regularly reviewed and updated to

ensure performance, conduct and complaints are dealt

with in line with best practice and legal frameworks,

whilst ensuring consistency and transparency for

colleagues and managers.

• Consistency and inclusivity policies such as anti-bullying

and harassment, equal opportunities, recruitment and

selection.

• We are currently looking to build on the colleague-led

creation and design of a DE&I agenda and policy to add

to our existing policies to become a leading employer in

relation to equal opportunities and diversity.

• These policies include processes for full and fair

consideration of applications from disabled applicants,

including making of adjustments for new or existing

colleagues who may become disabled, through

individual needs assessments and provision of support,

training and additional equipment or software to

support them in their role or their development. We are

also a signatory to the DWP’s Disability Confident

Employerscheme.

Card Factory plc Annual Report and Accounts 2022

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We’re part of the story

Our people are here because they’re excited by

what the business has done so far – and want to

play a part in taking it to the next level.

We’re loyal

Our people are fiercely loyal to the colleagues

they work with every day – and that builds

customer loyalty too.

We’re grafters

Our people are grafters that get things done

– we pull together as a team to make it happen

for our customers.

We lead the way

Our people are proud and passionate about

being first and leading the way – we improve

things every day.

Our Values

Our stakeholders continued

Colleagues continued

We are committed to ensuring that colleagues are

rewarded fairly and consistently and have access to career

progression and continued learning. This has included a

review of our rewards and benefits where all roles in our

organisation have been benchmarked. Further details are

inthe ‘colleague reward’ case study on page 31.

As we work through the year, we have implemented a set

ofKPIs relating to our colleagues that combined with our

wider business KPIs give us a measure of how we are

performing and what actions we need to take to improve.

For FY22 these included:

• Turnover – Our colleague turnover averages at 27%.

Thisrate varies across our business divisions due to the

diversity of employees we have in our business. Our retail

colleagues tend to have the shortest tenure and highest

turnover which is in line with market trends. We are

working on a retail-specific plan to address this

particular group and to review pay and benefits as well

as listening to their feedback in the survey.

• Internal Promotions – We want to be able to promote

and develop from within and to identify transferable

skills and benefit from the great amount of knowledge

we have in the business. In line with good practice, our

internal promotion rate sits at 33%. As the recruitment

market becomes more challenging, we want to look at

ways of how we can access the skills within our business

and create a pipeline of internal talent.

• Headcount – We consistently monitor our headcount to

ensure we have the capacity to deliver on our strategy.

Itis likely that as we move into the next financial year, we

will place more focus on our number of vacancies versus

our budgeted headcount to better understand where we

have resource issues and how to address them.

FY23 brings some challenges as the UK & Ireland is

impacted by a highly active candidate market, with many

people choosing to move companies and find new jobs.

Byfocusing our people activity on the activities we

describe, our aspiration is to differentiate Card Factory

from other employers and to be able to recruit high-quality

talent into our organisation as well as developing and

retaining the colleagues who are already with us.

Gender data

The gender composition of Card Factory’s workforce as at

31 January 2022 was as follows:

Gender

Category Female % Male %

Grand

Total

Board 1 14% 6 86% 7

Senior management 2 22% 7 78% 9

All 7,572 83% 1,580 17% 9,152

The majority of colleagues in our business are female with

many working in stores and distribution centres. However, if

we look at the senior population, we can see that this trend

shifts and that the majority of colleagues in this population

are male.

We continue to be committed to creating a workforce that

isdiverse and inclusive, provides equal opportunities for

everyone to progress and is reflective of the environment we

trade in and the customers we serve. This will continue to be a

priority for Card Factory, demonstrated in 2021 by the launch

of a five-year DE&I strategy.

In 2021 we became a founding signatory to the British Retail

Consortium’s Diversity & Inclusion Charter alongside 50 other

leading retailers. As a result of this pledge, we have:

• appointed a DE&I Executive;

• improved recruitment practices and continue to

reviewthese in order to remove bias from processes

andpractices;

• collected data on inclusivity at Card Factory, including

the addition of DE&I questions to our engagement

survey; and

• launched our new flexible working approach post-

pandemic, that supports all colleagues balancing

personal commitments alongside work.

In addition, we will:

• continue to support female talent through our Women

inLeadership initiative, so that we further create an

inclusive workplace that attracts female talent in

leadership positions and supports equal opportunities

for internal progression and development, particularly in

senior roles where females remain under-represented;

• champion balanced shortlists when recruiting; and

• continue to support flexible working, job shares and

‘smart working’ to support work-life balance and ensure

flexibility is not a hindrance to career progression.

Our stakeholders continued

Card Factory plc Annual Report and Accounts 2022

Suppliers

Our Chief Commercial Officer is responsible for ensuring we

develop mutually beneficial long-term relationships with our

key product suppliers and for monitoring and responding to

our suppliers’ concerns to balance the commercial position,

taking full account of our community and the environment

within which we operate.

We strive to foster effective relationships with a reduced

number of key product and raw material suppliers and

engage constructively to set fair and clear expectations.

This strengthens the transparency of our supply chain and

actively promotes our environmental objectives. These are

drawn to the attention of suppliers before we contract with

them and include clarity on:

• our audit requirements, which include:

– ethical audit with requirements relating to child labour,

forced labour, disciplinary practices, health and safety,

discrimination, freedom of association, collective

bargaining, working hours, remuneration and the

environment, which includes:

• SMETA (Sedex Members Ethical Trade Audit) – a

globally recognised ethical audit that is conducted

by an Affiliate Audit Company;

• BSCI (Business Social Compliance Initiative) –

another globally recognised ethical audit that is

based on the International Labour Organization

(‘ILO') standards, conducted by approved audit

companies only;

• SA8000 – these widely recognised standards on

ethical audits are set by Social Accountability

International and are applicable to factories and

organisations worldwide; and

– access to and sharing of information via SEDEX

(Supplier Ethical Data Exchange), which assists

monitoring human rights issues in our supply chain;

• technical audits (based on ISO 9001) on products and

product safety for initial factory set-up and higher

riskareas;

• requirements that card is Forest Stewardship Council®

(FSC®, Licence code: FSC-C128081) certified and

compliant with the UK and EU Timber Regulations.

Duringthe last quarter of 2021 Card Factory underwent

and passed its five-year FSC renewal audit, which was a

reflection of our commitment to the ethos of FSC. With

the success of moving the majority of cards sold to being

FSC certified, we are now moving rollwrap and bags to

FSC certified suppliers and marking the items accordingly.

Towards the end of 2022 we will start to investigate and

implement the use of FSC certified packaging wherever

practical); and

• requirements in our Modern Slavery Act compliance.

(Details of steps taken are available in the modern slavery

statements available on the Card Factory and the Card

Factory Investor websites.)

We listen to our suppliers through our dedicated

relationship managers, welcoming an open dialogue to

challenge and raising any concerns. During the year we

have recruited an experienced colleague to lead our

qualitycontrol and technical team. This demonstrates

ourcommitment to maintaining excellent supplier

partnerships that drive strength in product development

and to maintaining a supply chain that meets the highest

standards of legal and ethical compliance. Over the next

12months the new quality team will be restructured and

become more involved in all areas of the business in

orderto improve product selection, wherever possible.

Reflectingthe Company’s ESG commitment, this will

include reviewing and reducing current packaging and

investigating alternative materials to make product more

environmentally friendly. In addition to this, the restructure

will better equip the team to support the five-year strategic

plan with the move to omnichannel and international.

The Covid-19 pandemic has not curbed our compliance

requirements: local third-party agents continue to audit

ourFar East suppliers on our mandatory policies on product

quality and sourcing, including FSC certification, anti-

bribery, anti-corruption and anti-exploitation. Our ‘No

Audit, No Order’ policy remains a steadfast requirement,

necessitating suppliers to have satisfied our on-boarding

processes and to have received satisfactory technical

andethical audit results before any order will be placed

withthem.

To date, Getting Personal’s bespoke suppliers, most of

which are UK-based and are perceived to be lower risk

ofnon-compliance, have not been subject to the above

requirements. They will, however, be extended to them over

the next nine to 12 months and we will engage with these

suppliers and account for their specific circumstances as

part of the process.

Card Factory plc Annual Report and Accounts 2022

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Our stakeholders continued

Suppliers continued

Over the next two years there are going to be some

challenging changes to legislation which will have an

impact on all businesses in the UK. These include:

• the Plastic Packaging Tax (starting in April 2022);

• the new Deposit Returns Schemes (‘DRS') (Scotland at

present is the only country in the UK with firm plans and

a start date of Aug 2023);

• the Extended Producer Responsibilities for Packaging,

WEEE and Batteries; and

• the Food (Promotion and Placement) (England)

Regulations 2021.

As we see more devolution of product, legislation is

becoming more complex. As differing requirements could

apply in different countries in the UK, for example, Northern

Ireland has increased the single-use carrier bag charge to

25p from April 2022, Scotland is likely to introduce Deposit

Return Schemes before the rest of the UK and Brexit means

the requirements for Northern Ireland are different from

mainland UK, the quality approach has to evolve and

become more dynamic to answer these challenges.

We have continued engagement with our Far East suppliers

by video conference which facilitates more regular contact,

however, we look forward to resuming supplier visits once

all travel restrictions are lifted. In February 2021, we

completed our second annual Supplier Viewpoint survey,

extending the participants to our top 30 product suppliers

(previously top 20 product suppliers). This allows us to

understand if actions we have taken following previous

feedback has improved our supplier relationship

management. We also consulted this supplier base on their

views on our ESG priorities, with a summary of the findings

set out on page 44.

No of colleagues

8,000

across the UK & Ireland

Card Factory plc Annual Report and Accounts 2022

Colleague reward

A colleague reward review was initiated to address increasing colleague turnover rates across the business, with the aim of

attracting and retaining the best talent to facilitate implementation of the revised five-year strategy. Colleague turnover

rates had been steadily rising following the Covid-19 pandemic and due to CardFactory’s existing reward offering have

now fallen below market rate.

A full salary benchmarking exercise was undertaken withWillis Towers Watson, an independent company which provided

significant benchmarking market data specificto the retail sector. The research showed that CardFactory’s salaried

colleagues’ remuneration was generally below market median, with 51% of colleagues remunerated below market rate.

The cost to bring all salaried colleagues to within market rate was £1.5million; or £4.4 million to bring all colleagues to

mid-market median rate. The benefits package for hourly paid colleagues, many of whom receive National Minimum

Wage or National Living Wage, was also noted as being less attractive than comparative retailer offerings. CardFactory

does not pay the real living wage.

The Board needed to balance the conflicting interests of shareholder value and profitability, in the short term, with

theneed to improve pay and benefits to aid recruitment and retention, to ensure a fair deal for colleagues and to be

competitive in the market. Taking into account the statutory requirement to enhance wages in April 2022 in line with

National Living Wage increases, it was decided that further investment in colleagues’ salary and benefits, whilst

impactingshareholder value in the short term, would drive longer-term benefits to support business growth.

To achieve balance between shareholder interests and the need to invest in colleagues, it was decided that a ‘levelling up’

approach be adopted to improve the deal for colleagues progressively over time, alongside efficiency improvements. The

Board ultimately resolved that additional funding of c.£600k (equivalent to 2.5% of the aggregate of salaried colleagues’

pay) be awarded, but with selective allocation to those colleagues with larger variances to benchmarked market rates

fortheir role. In addition to National Living Wage increases to hourly paid staff and further increases to hourly paid

colleagues with greater responsibilities, further enhancements were made to Company sick pay, maternity and paternity

benefits above statutory levels.

Reviews to benefits and wages will be considered in the next few years taking into account the need to balance

shareholder value with the need to further invest in colleagues’ reward offering and the increasing costs of living,

todrivelong-term business growth.

Marketing data and insight investment

During FY22 we made calculated investments in marketing,

data and insight expertise. Our new, dedicated team have

established a strategy rooted in developing the deep,

segmented and robust understanding of our customers that is

required for us to deliver a highly tailored offer. This is a strategy

that allows us to concentrate on the initiatives with the highest

resonance for customers, in order to drive sales and unlock

further growth. Bringing this capability in-house allows us to

better exploit existing data sources, fill knowledge gaps and

willafford us long-term cost saving and efficiency benefits.

As we navigate through a period of globally unprecedented

social, political, environmental and economic change,

reliable customer insights are more valuable than ever

before. New insight sources, including Kantar data, are

allowing us to optimise our range, product, service and

pricing to better meet customers’ needs in-store, and in due

course online and via our retail partnerships, whilst also

shaping opportunities for growth and our understanding

ofour performance within the wider market.

Through better meeting customers’ needs we will continue

to evolve in a way that is fit for the future and mutually

beneficial for all stakeholders, creating excellent career

opportunities for colleagues, attractive investment

opportunities for shareholders and stability for our

suppliers. Despite the initial cost, these investments

balanceour shareholders’ overarching priorities; by talking

to more customers, more often, winning more sales, we will

maximise our profitability for the long term.

Case studies

It is inevitable that the interests of the multiple stakeholder groups conflict and require careful consideration with certain

decisions. The following case studies demonstrate how the Board considered the alternative stakeholder group interests in

decisions during the year:

Card Factory plc Annual Report and Accounts 2022

Financial StatementsGovernanceStrategic Report

Card Factory plc Annual Report and Accounts 2022

Chief Financial

Officer’s review

Resilient

financial

performance

“

Growth in ABV is being driven

by the strength ofour balloon

and party ranges where Card

Factory is the market leader.”

Kris Lee

Chief Financial Officer

The ‘FY22' accounting period refers to the year

ended 31 January 2022 and the comparative period

FY21 refers to the year ended 31 January 2021.

Historically, the Group has presented underlying

profit and earnings measures. During FY22, the

Group has ceased such presentation on the

basisthat the amounts were not material. A full

description of Alternative Performance Measures

used throughout this report and the Group’s

accounts is included on page 160.

Revenue

Total Group revenue during the year increased

by28% to £364.4 million (FY21: £285.1 million),

predominantly due to improving trading

conditions as the UK began to exit and recover

from restrictions associated with the Covid-19

pandemic. Stores were closed for ten weeks due

to lockdown in FY22, compared to five months in

FY21. The steady recovery in sales followed the

end of the last national lockdown in April 2021.

For the financial year overall, an increase in store

average basket values (‘ABV’) (+22%) versus

FY20partially offset lower footfall/transaction

volumes (-23%) versus FY20.

Growth in ABV is being driven by the strength

ofour balloon and party ranges where Card

Factory is the market leader, alongside growth in

complementary categories, therefore our focus

inFY23 will be on expanding these ranges and

responding to customer lifestyle choices.

FY22

£’m

FY21

£’m

Increase/

(decrease)

£’m

Card Factory stores 336.0 251.9 84.1

Card Factory online 10.9 11.1 (0.2)

Getting Personal 12.9 16.5 (3.6)

Retail partnerships 4.6 5.6 (1.0)

Group 346.4 285.1 79.3

The Group’s programme of new store openings

continues to be an important driver of sales

growth. Covid-19 led to a postponement of some

new store openings during FY21 which continued

into FY22. However, despite this, 11 new stores

were opened during FY22, three stores were

relocated, and seven stores closed, giving a net

increase in stores during the year of four. This

brought the total store estate to 1,020 stores at

the end of the year, including 14 stores in the

Republic of Ireland (FY21: 1,016 stores, 14 in the

Republic of Ireland).

Card Factory plc Annual Report and Accounts 2022

Financial StatementsGovernanceStrategic Report

The reduction in lockdown periods during FY22, compared to

the prior period, drove a proportion of sales back to stores

and away from online. As mentioned in the CEO statement,

online sales for both cardfactory.co.uk and gettingpersonal.

co.uk were ahead of pre-pandemic levels although short of

target due to delays to development that should have

further increased the ranges offered online. Continued

growth in online remains a key strategic focus for the Group.

Retail partnerships sales also reduced compared to the

prioryear, largely due to The Reject Shop being affected

byregional lockdown restrictions during the period.

Like-for-like (‘LFL’) sales growth across each division is set

outinthe table below. LFL measures exclude periods where

storeswere closed due to lockdown and for stores are stated

compared to FY20, the last full year of trading unaffected

byCovid-19.

FY22 FY21

Card Factory stores (5.7%) (2.4%)

Card Factory online (1.5%) 135.3%

Card Factory LFL (3.9%) (0.1%)

Getting Personal (21.6%) 12.2%

Ongoing improvements to the depth, quality and

merchandising of our complementary product offering

ledto a continuation of the mix shift to this category.

In addition, the business has placed increased emphasis on its

everyday card offering, to ensure customers have the widest

choice of card type and greeting messages. The full-year mix

for FY22 was 48.4% single cards (FY21: 51.1%), 48.4% non-card

(FY21 46.7%) and 3.2% boxed cards (FY21: 2.2%).

Operating costs

Cost of sales and operating expenses are set out in the tables below.

FY22

£’m

FY22

% of

revenue

(Increase)

/decrease

(Increase)

/decrease

Cost of goods sold¹ 134.1 37.0% 4.4 ppts (13.5%)

Store wages 78.8 21.6% (0.7 ppts) (32.2%)

Store property costs 15.8 4.3% (0.9 ppts) (64.6%)

Other direct expenses 19.2 5.2% 1.2 ppts (4.9%)

Cost of sales 247.9 68.1% 4.0 ppts (21.2%)

Operating expenses² 38.9 10.7% 1.1 ppts (15.8%)

Depreciation, amortisation and impairment 54.0 14.8% 3.9 ppts (1.3%)

Total operating costs 92.9 25.5% 5.0 ppts (6.9%)

FY21

£’m

FY21

% of

revenue

Cost of goods sold¹ 118.1 41.4%

Store wages 59.7 20.9%

Store property costs 9.6 3.4%

Other direct expenses 18.3 6.4%

Cost of sales 205.7 72.1%

Operating expenses² 33.6 11.8%

Depreciation, amortisation and impairment 53.3 18.7%

Total operating costs 86.9 30.5%

1 Cost of goods sold includes FX losses previously described as non-underlying in FY21.

2 Excluding depreciation, amortisation and impairment.

Card Factory plc Annual Report and Accounts 2022

Chief Financial

Officer’s review continued

The overall ratio of cost of sales to revenue decreased

to68.1% (FY21: 71.7%). This decrease was driven by the

following movements in sub-categories and by the

increasein sales compared to the prior year:

• Cost of goods sold (‘COGS'): comprises the direct costs of

goods sold in the period (principally cost of raw materials,

production costs, finished goods purchased from third party

suppliers, import duty, freight costs, carriage costs and

warehouse wages). In addition to the impact from the

increase in sales and improved stock management, product

COGS in FY22 was affected by the global shipping crisis and

a significant increase in freight costs. Whilst the absolute

cost of purchases increased as a result, the knock-on impact

of shipping delays to inventory values contributed to a

reduction in the overall level of provision compared to FY21,

lowering COGS as an overall percentage of revenue.

Provisions as a percentage of the gross inventory balance

remain broadly consistent with the prior year.

• Store wages: comprises all staff costs for store-based staff,

including employer taxes and contributions, and is shown

net of Government support received through the CJRS.

The main driver behind the absolute increase in store

wages year-on-year is the reduction in store closure

periods and associated reduction in CJRS income. The

increase as a percentage of revenue (0.7ppts compared

to FY21) reflects national living wage increases partially

offset through productivity gains.

• Store property costs: principally comprises business rates

and service charges. Property costs for FY22 and FY21

reflect rates reliefs available across the store portfolio in

both periods. Overall property costs increased in FY22 as

a result of a reduction in the amount of business rates

relief available in England from July 2021.

• Other direct expenses: includes store opening costs,

storeutility costs, waste disposal, store maintenance,

point of sale costs, bank charges and pay-per-click

expenditure. This cost category is predominantly

variable in proportion to the number of stores. Other

direct expenses decreased as a percentage of revenue in

FY22 reflecting reduced lockdown periods and increased

trading days, as certain cost categories (such as

insurance and maintenance) do not change in direct

proportion with revenue from store trading.

• Operating expenses: includes remuneration for central and

regional management and business support functions,

design studio costs and business insurance together with

other central overheads and administration costs. Indirect

salary costs increased compared to the prior year, which

reflects investment in people related to future growth,

reduced CJRS claims and also the payment of staff

bonuses for FY22 as a result of the improvement in

financial performance. Total operating expenses

(excluding depreciation and amortisation) increased by

15.8% to £38.9 million, representing a decrease from

11.8%to 10.7% as a percentage of revenue.

Depreciation and amortisation charges include depreciation

and impairment in respect of right-of-use assets, which

predominantly relate to the Group’s store portfolio. In FY22,

depreciation and amortisation includes £5.0 million of

impairment charges in relation to right of use assets (FY21:

£2.6million), predominantly reflecting the effect of the Covid-19

pandemic and continued cost headwinds expected in future

periods, particularly in relation to freight and the impact of

inflation on staff wages and utility costs. As a result, total

depreciation and amortisation charges increased to

£54.0million (FY21: £53.3 million)

In addition to support from CJRS and rates relief described above, the Group recognised £8.0 million of other operating

income in respect of various government grant schemes related to Covid-19 lockdowns.

EBITDA

FY22

£’m

FY21

£’m

(Increase)

/decrease

EBITDA 85.6 45.8 £39.8m

EBITDA margin 23.5% 16.1% 7.4ppts

The increase in EBITDA (defined as earnings before interest,

tax, depreciation, amortisation and impairment charges)

reflects, in particular, the improvement in trading

performance described above due to the reduction in

non-essential retail closure periods in FY22, compared

tothe prior year. The business has continued to focus

ondelivering close control over its cost base, with

approximately 2% of the store portfolio marginally loss-

making on a variable contribution basis, reflecting the

subdued footfall during the year.

The cessation of all restrictions in relation to Covid-19 in the

UK gives cause for optimism going forward; however, we

anticipate ongoing inflationary headwinds through FY23 –

a significant proportion of which has been pre-emptively

mitigated through a combination of efficient management

of costs and working capital, as well as targeted price

increases – including the increasing cost of freight and

alsothe impact of inflation on staff costs and utilities; plus

investment in headcount, IT and development of the online

platform to support the delivery of the Group’s ‘Opening

Our New Future’ strategy.

Net financing expense

The interest charge pertaining to the Group’s loan facilities

increased to £6.8 million (FY21: £5.1 million) reflecting an

increase to the Group’s average effective interest rate

following the refinancing of the Group’s facilities in May 2021.

In addition, the Group recorded a £10.4 million charge in

respect of loan issue costs amortised to the income statement

in the period. This represented a significant increase from

similar fees in prior periods owing to the fees associated with

Card Factory plc Annual Report and Accounts 2022

Financial StatementsGovernanceStrategic Report

the May 2021 refinancing, which included costs associated with the potential equity raise, since removed in the April 2022

refinancing, and an accelerated amortisation profile that reflected our expectation of a further refinancing in the first quarter of

FY23. See note 6 on page 133 and note 17 on pages 141 and 142. Net finance costs are expected to normalise to historical levels

in FY23.

Including IFRS 16 Leases interest charges, the total net financing expense increased to £20.5 million (FY21: £8.9 million).

FY22

£’m

FY21

£’m

(Increase)/

decrease

Finance expense

Interest on loans 6.8 5.1 (1.7)

Loan issue cost amortisation 10.4 0.4 (10.0)

IFRS 16 Leases interest 3.3 3.4 0.1

Net finance expense 20.5 8.9 (11.6)

Profit before tax and tax charge

As a result of all of the factors described above, the profit before tax for the financial year amounted to £11.1 million (FY21:

Loss before tax of £16.4 million).

The tax charge for FY22 of £3.0 million reflects an effective tax rate (‘ETR’) of 27.0% (FY21: Tax credit of £2.8 million and

anETR of 17.1%). The ETR is higher than the standard rate of corporation tax in the UK of 19%, reflecting the impact on

deferred tax balances of the budget announcement in March 2021 that the Corporation tax rate will increase to 25% from

1 April 2023.

Earnings per share

Basic and diluted earnings per share for the year were 2.4 pence (FY21: Loss per share of 4.0 pence).

FY22

pence

FY21

pence

(Increase)/

decrease

pence

Basic and Diluted EPS 2.4p (4.0p) 6.4p

Capital expenditure

Capital expenditure, excluding IFRS 16 right–of-use assets, amounted to £6.9 million (FY21: £7.5 million), principally in

relation to new stores, online investment and ERP implementation. Additions to right of use assets, reflecting new and

renewed leases in the store portfolio in the period, were £29.8 million (FY21 £22.8 million).

Capital expenditure in FY22 continued to be tightly controlled as the business emerged from Covid-19 restrictions.

TheGroup remains subject to restrictions under its banking facilities, which limit the total value of capital expenditure

thatcan be incurred over the next two years. Whilst operating within these limits, we anticipate continuing to support

our‘Opening Our New Future’ strategy in FY23 by investing £23 million across key initiatives, including the next phase

ofour ERP implementation, continuing the roll out of new stores, and building our e-commerce, omnichannel and

manufacturingcapabilities.

Foreign exchange

Approximately half of the Group’s annual cost of goods sold expense relates to products that are purchased from overseas

suppliers denominated in US dollars.

The Group has an established approach to hedging the risk of exchange rate fluctuations, which adopts a conservative

approach to risk but retains flexibility to respond to both business and market events. The Board-approved policy permits

the use of a combination of vanilla forwards and structured options to hedge the exposure over a rolling three-year period.

The Group has used structured options and similar instruments to good effect for a number of years and the Board

continues to view such instruments to be commercially attractive as part of a balanced portfolio approach to exchange

rate risk management, even if cash flow hedge accounting may not be achievable or permitted in some instances.

At the year end, the Group had commercial hedges in place giving significant coverage for both FY23 and FY24 with

anticipated average delivered rates of c.$1.35, although this remains subject to future variation in the value of sterling,

which could impact the structured trades that form part of the hedging portfolio, and the impact of future trading

conditions on hedged cash flows. Structured trades represent approximately one third of hedges that are yet to mature.

Card Factory plc Annual Report and Accounts 2022

Cash generation

In the year, the Group remained cash generative, driven by improved trading performance, favourable working capital

movements and close control of operating costs and capital expenditure.

Net Debt and covenants

FY22

Net Debt

£’m

FY22

Leverage

Multiple

FY21

Net Debt

£’m

FY21

Leverage

Multiple

Borrowings

Current liabilities 25.5 0.2

Non-current liabilities 85.5 118.8

Total borrowings 111.0 119.0

Lease liabilities 119.8 144.9

Capitalised debt costs 1.5 1.2

Gross debt 232.3 265.1

Less cash (38.3) (12.5)

Net Debt (inc. leases) 194.0 252.6

Leverage (inc. leases) 2.3x 5.5x

Remove lease liabilities (119.8) (144.9)

Net Debt (exc. leases) 74.2 107.7

Leverage (exc. leases) 0.9x 2.4x

The Group focuses on Net Debt calculated to exclude lease liabilities, as this reflects the way the Group’s covenants are

calculated within its financing facilities.

Net Debt excluding lease liabilities was £74.2 million at 31 January 2022 (FY21: £107.7 million), the improvement reflecting

careful cash and working capital management through continued Covid-19 restrictions.

Leverage, calculated as Net Debt excluding lease liabilities divided by EBITDA and expressed as a multiple, was 0.9 times at

31 January 2022 (FY21: 2.4 times). The Group expects Leverage to increase slightly as it returns to normal trading patterns.

In May 2021, the Group renewed its financing facilities with its banking partners, which at the balance sheet date

comprised a £75 million Term Loan, £50 million CLBILS and a Revolving Credit Facility of £100 million. Under the revised

covenant terms, the Group was required to achieve defined quarterly covenant tests of Interest Cover and Leverage,

alongside customary reporting requirements which are considered to be administrative in nature.

In addition to financial covenants, under the terms of the CLBILS facility the Group is prohibited from making distributions

to shareholders until the CLBILS facility has been repaid. The terms of the facilities require the term loan and CLBILS

facility to be repaid pro-rata.

The facilities have an expiry date of 24 September 2023 (unchanged from the previous arrangement). The Group

concluded a further refinancing of its debt facilities on 21 April 2022, described in further detail below. The Group

expectsto operate within the restrictions of its financing facilities and meet its covenant tests for the foreseeable future.

Post-balance sheet refinancing

Subsequent to the year end, on 21 April 2022, the Group agreed revised terms on its financing package with its existing

banking syndicate, which reduced the overall quantum but extended the term of the Group’s debt facilities. Following this

refinancing, the Group’s facilities comprise term loans of £30 million, CLBILS of £20 million and a Revolving Credit Facility

of £100 million.

The CLBILS and £11.25 million of the term loans are subject to an amortising repayment profile to September 2023, and

January 2024 (respectively), with the Revolving Credit Facility and remaining term loan repayable by September 2025. The

revised agreement removed the obligation on the Group to use best efforts to raise further equity to make prepayments of

the debt facilities. The dividend restrictions under the CLBILS facilities continue to apply.

The Group’s strategic plan has been updated to reflect the new facilities and is subject to scenario testing. The Board

believes that the Group has access to sufficient liquidity to execute its strategy under a range of different scenarios.

Chief Financial

Officer’s review continued

Card Factory plc Annual Report and Accounts 2022

Financial StatementsGovernanceStrategic Report

Dividends and capital structure

Dividends

Historically, the Board has adopted a progressive ordinary dividend policy for the Company, reflecting its strong earnings

potential and cash flow characteristics, while allowing it to retain sufficient capital to fund ongoing operating

requirements and to invest in the Company’s long-term growth and profitability.

Following the outbreak of the Covid-19 pandemic the Board ceased payment of dividends, and as noted above the terms

of the Group’s financing facilities now prohibit dividend payments until certain elements of the Group’s facilities are

repaid.

As a result, no dividends were paid in FY21 nor FY22. The Board does not propose payment of a final dividend in respect

ofFY22.

Capital structure

The Board is focused on maintaining a capital structure that is conservative yet efficient in terms of providing long-term

returns to shareholders.

Looking forward, the Board intends to maintain a leverage ratio (calculated as Net Debt excluding lease liabilities to

EBITDA) of between 0.5 and 1.5 times, targeting the lower end of this range in the medium term. Provided leverage

remains in this range, the Board envisages considering dividends at the year-end of FY24, at which point the CLBILS

facilities and £11.25 million of the term loan facilities will have been fully repaid. It is the Board’s intention, subject to these

conditions, maintaining an appropriate Leverage ratio and achieving financial performance in line with the strategic plan,

to pay ordinary annual dividends from this point.

It should be noted that Net Debt at the half and full year period ends is lower than intra-year peaks, reflecting usual

trading patterns and working capital movements.

Kristian Lee

Chief Financial Officer

3 May 2022

Card Factory plc Annual Report and Accounts 2022

Risk management

Risk management framework

Card Factory’s risk management framework embeds the identification, assessment, management and mitigation of

risks,under the oversight of the Board and detailed scrutiny by the Audit & Risk Committee. Members of the senior

management team are responsible for identifying emerging risks and implementation of mitigation plans. Each risk is

subject to regular review on a rolling basis by the senior management team. A complete review of all the risks and review

of adequacy of process to identify emerging risks has been undertaken at the end of the financial year.

Risk register and review processes

Card Factory plc Board Audit & Risk Committee Senior management team Operations

The Board has overall

responsibility for

identification, evaluation

and management of

risks, that may affect the

achievement of strategic

and operational

objectives, with monthly

oversight through

KPIreporting.

The Audit and Risk

Committee oversees the

Group’s risks, with regular

reviews (at least 3 times

pa), and engagement of

the Internal Audit

function to assess and

report on areas of

concern which support

risk mitigation. See

pages 69 to 73 – Audit &

Risk Committee report.

The senior management team

manage risks within their area

of accountability, with

responsibility to mitigate risks

(where appropriate). The senior

management team undertake

reviews of and updates to each

risk on a rolling monthly basis.

This group is also primarily

responsible for monitoring,

identifying and reporting

emerging risks as they arise.

All colleagues are

responsible for managing

risk, overseen by each

senior management

team member, for their

operational areas of

responsibility, supported

by the Health & Safety

team, the People team

and the Loss Prevention

team.

The CEO, CFO and Company Secretary are engaged on risk across the key governance forums.

The risk register is updated monthly as risks are monitored, reviewed and reassessed and emerging risks are identified.

Risk management and mitigation are embedded within the operations of the Card Factory Group. The external Board

effectiveness review undertaken in late 2021 recognised that risk is more firmly on the agenda, with the Board fulfilling its

duties with thoughtful scrutiny and assurance as to risk materiality. It recommended further clarity on risk appetite/risk

tolerance which is currently under review.

1 Shipping

2 ERP implementation

3 IT infrastructure & security

4 Investor relations

5 Geopolitical instability

6 Business continuity

7 Loss of key personnel & organisational culture

8 ESG compliance & climate change risks

9 Supplier CSR breach

10 Retail partner

11 Impact of coronavirus

12 Finance & Treasury

13 Adapting to customer preference

14 Brand customer experience

PROBABILITY

>50%

20 to 50%

<20%

Share Price impact <1% 1% to 5% >5%

PBT impact <£250k £250k to £2m >£2m

IMPACT

Pending the outcome of the current risk appetite review, the Board currently requires the red and amber items to be

subject to mitigation, to the extent reasonably and commercially proportionate. The Board reviews the principal risks,

for example, in respect of Shipping, IT infrastructure and ERP implementation, as part of the day-to-day management of

the business, the subject of separate and regular detailed discussions at Board meetings and meetings of the senior

management team.

Card Factory plc Annual Report and Accounts 2022

Financial StatementsGovernanceStrategic Report

Financial Description Mitigation

Shipping

NEW

Link

Shipping delays: Delays realised on incoming stock

from the Far East arising from capacity constraints,

delaying supply of stock to customers.

Shipping costs: Significant increase in container

importation costs (from c.USD2,000 to current

average of USD12,000) impacts profitability.

Shipping delays: Stock orders brought forward to

address anticipated delays and use of multiple

shipping partners to secure shipping capacity.

Shipping costs: Retail pricing increases applied and

being planned, with ongoing review of country of

supply (including on-shoring supply), container

volumes and fill to reduce overall costs.

Geopolitical

instability

Risk

Link

Suppliers: Specific categories of product rely on one

supplier, region or country. China remains as a

substantial source of supply.

Customers: Restricted supply may impact

availability or require price increases for the

consumer. Profitability could be impacted from lost

or reduced sales.

Tariffs: Duties and tariffs could force need for

alternative supply.

Suppliers: Diversification of supply base, including

on-shoring supply to the UK. No product exposure to

Russia or Ukraine. Planned global review of supply

chain to identify alternatives.

Customers: Diversification of supply mitigates

availability, with price increases being implemented

with analysis on price elasticity.

Tariffs: Ongoing identification of changes to duties

and tariffs to respond as required.

Impact of Covid-19

Risk

Link

New variants or outbreaks may require mandatory

store closure or reduce store footfall, impacting

revenue and profitability, however, risk of

furthergovernment restriction is considered

increasinglyremote.

Processes, training, signage and PPE capable of being

deployed as required. Planned omnichannel and

growth of retail partnerships will provide additional

revenue outside of our store estate. Headroom in

banking covenants provides some scope to absorb

impact of mandatory store closures.

Finance & Treasury

Risk

Link

Bank facilities: Future lockdowns or restrictions on

trade causing underperformance could cause cash

flow constraints or risk breach of banking covenants.

FX/Commodities: The Group is exposed to foreign

currency exchange rate fluctuations and commodity

pricing (including wood pulp and energy).

Margin pressure: Inflation and price increases may

impact operating margins for the business.

Bank facilities: Headroom in banking covenants and

cash flow forecasts are kept under review, with

contingency planning to address any identified issues.

FX/Commodities: Hedging for US Dollars currency

requirements and energy effected for up to three

years.

Margin pressure: Regular review of retail pricing and

maintain margins and efficiency improvements and

cost controls adopted to manage overheads.

Operational

Description Mitigation

ERP

implementation

Risk

Link

Ongoing design and phased implementation of ERP

systems (Enterprise Resource Planning) to replace

end-of-life core IT infrastructure. Significant risk of

business disruption, data loss or inefficiencies if

design, planning, testing and transition are not

successful. Risks that the solution may not fully

realise the expected benefits and provide the

required platform to realise the strategic plan,

including development of the omnichannel offer

tocustomers, improvement of engagement with

retail partners and operational efficiencies in our

retail stores.

Initial phase implementation (including finance and

master data) completed without any material disruption.

Re-phasing to include incremental implementation

phases has been undertaken to reduce risks on cut-over

and to reduce reliance on legacy systems at risk of failure

in advance of peak trading seasons and to enable

realisation of key components of the strategic plan.

Additional focus on business process engineering,

resourcing and change management being deployed

support successful implementation.

Link to strategy:

Increasing breadth of product offering

Create a full omnichannel offer

A robust and scalable central model

Increasing

Stable

Decreasing

Risk trend:

Card Factory plc Annual Report and Accounts 2022

Risk management continued

IT infrastructure

and security

Risk

Link

IT infrastructure: Unsupported and legacy software,

some of which is subject to material tailoring,

requires ongoing support to maintain functionality

and significant transactional volumes. Realisation of

strategic objectives is partially restricted by current

system limitations.

IT security: Reliance on IT systems to support all

operations could be exposed to cyber risks.

IT infrastructure: The IT strategy implementation is

ongoing, which includes ongoing specialist support

for legacy systems and migration to new systems,

including the ERP implementation (see above).

IT security: Cyber expertise is employed within the

business, with appropriate measures and future plans

to continue to address multiple cyber risks, alongside

further risk mitigations arising from replacement of

legacy systems.

Business

continuity

Risk

Link

Production failure: The business places significant

reliance on its Printcraft (single site) facility which

prints 70% of cards and a significant proportion of

personalised online orders. If this site is unable to

operate, there could be a significant impact on

operations.

Online fulfilment: Online orders are primarily

fulfilled from the same Printcraft single site, with

reliance on specialist packaging equipment.

Capacity limitations, if not addressed, may limit

sales opportunities in peak seasons.

Production failure: Business Continuity and Disaster

Recovery plans have been fully assessed and updated

with scenario planning and training scheduled. This

includes identification of alternative suppliers for

impacted production processes, although outsourcing

will impact profitability. Insurance is also maintained.

Online fulfilment: Short-term outages can be

mitigated by adjustment of delivery times for online

orders. Business Continuity plans include use of third

parties, with the ongoing IT infrastructure

improvements and ERP implementation expected to

further improve IT resilience and functionality.

Planning permission has been obtained to construct

an additional building to create capacity for online

fulfilment, to relieve capacity constraints.

Loss of key

personnel

and organisational

culture

Risk

Link

Loss of key personnel: Risk that the business doesn’t

have the expertise and capacity to meet the

requirements of the business, in particular to deliver

complex change to realise the strategic targets.

Organisational culture: Failure to maintain and

develop a cohesive culture capable of realising the

Group’s strategic objectives.

Loss of key personnel: A number of changes to

themanagement team have been effected with

additional capacity constraints having been identified

and appropriate appointments prioritised.

Organisational culture: Improvements to pay and

benefits, values review, leadership framework and

DE&I consultations and strategy developments,

demonstrate progress against colleague engagement

feedback.

Supplier CSR

breach

Risk

Link

Supply base audits: Risk of failure by suppliers to

maintain compliance standards in their supply chains

(e.g. Modern Slavery, Anti Bribery & Corruption) and for

products supplied (e.g. safety and labelling standards)

which could damage Card Factory’s reputation.

Getting personal: Suppliers to the Getting Personal

business (who do not also supply Card Factory) have

not been subject to the same supply base requirements

adopted by Card Factory brands.

Supply base audits: Processes adopted for suppliers to

agree to appropriate standards, which are subject to

regular audit to validate compliance, with a strict ‘no

audit – no order’ policy in place.

Getting personal: The risk profile for most suppliers to

Getting Personal is significantly lower, with limited

supplies from the Far East. Plans are in development

to extend the quality control and technical team’s

scope to include these suppliers with adoption of

appropriate requirements to mitigate risks.

Retail partner

exposure

NEW

Link

Underperformance: Card Factory may not realise

the growth in profitable revenue from retail

partners, which is a significant component for

futuregrowth of the business.

Brand impact: Card Factory’s brand or reputation

could be damaged by actions by retail partners.

Underperformance: Following a period of transition, a

Business Development team is being formed to build

relationships with existing partners and develop a

pipeline of future partners.

Brand impact: Brand standard requirements are being

developed to provide a clear framework for partners,

with regular reviews adopted. Enhanced requirements

will be incorporated in any future retail partner

requirements.

Operational continued

Description Mitigation

Card Factory plc Annual Report and Accounts 2022

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Strategic

Description Mitigation

Investor relations

Risk

Link

Risk that investor regard for Card Factory

investment is restricted, with limited conviction that

the strategy and targets can be achieved.

Additional investor relations expertise recruited to

improve investor communications, to ensure clearer

articulation of the strategy and to demonstrate

progress made and to share additional data and

insight in respect of the card and gifting markets.

ESG compliance

& climate change

risks

Risk

Link

Investors: Failure to develop sufficiently ambitious

targets and demonstrate progress could result in

reduced investment appetite in Card Factory,

depressing share price.

Customers: Customer demand may be impacted if

ESG brand perceptions are not realised, impacting

long-term prospects.

Energy and GHG emissions: Availability, reliability of

energy supply and increased costs could impact

trade.

Investors: Ongoing development of ESG planning and

target setting, including material progress on DE&I

strategy.

Customers: Ongoing brand strategy development will

include articulation of ESG policy and developments

to customers.

Energy and GHG emissions: Electricity prices fixed for

a number of years with specialist third party expertise

engaged to assess and develop a trajectory towards

being carbon neutral.

Adapting to

customer

preferences

Risk

Link

Product and range development: Realisation of

strategic targets relies upon successful adaptation to

changing customer preferences for purchase via our

developing sales channels, including increased focus

on omnichannel and retail partners.

Customer and marketing insight: Card Factory has

historically adopted no meaningful customer and

marketing insight to drive empirical decision making.

Customer service and fulfilment: Realisation of a true

omnichannel experience for customers will require

enhanced fulfilment and service expectations, which

must be achieved for successful ongoing growth.

Product and range development: Design, buying and

merchandising teams are using increased insight and

data analysis to inform product and range decisions,

with greater customer and competitor analysis.

Customer and marketing insight: Marketing and

insight capabilities are being developed, with support

from partners such as Kantar and Brandvue Savanta

to improve understanding of our customers and to

embed customer insight into decision making.

Customer service and fulfilment: Development of

systems and capabilities is in progress to launch click

and collect during FY23, with further enhancements

scheduled thereafter.

Brand customer

experience

NEW

Link

Brand perception: Card Factory’s brand recognition

has fallen since 2019. If not addressed it could lead

to transactional decline.

VFM proposition: Card Factory’s strength in its value

offering has been impacted by Covid-19 and

increased competition from supermarkets. Price

increases may also impact the value proposition to

customers.

LFL declines: The UK card market is realising

reduced volume demand, and if not addressed,

growth targets may not be achieved.

Brand perception: A customer marketing function is in

development to develop and implement a brand

strategy to elevate the brand’s key attributes.

VFM proposition: The newly formed customer

marketing team will increase marketing activity, to

elevate the VFM messaging and perception.

LFL declines: Implementation of the strategic plan is

designed to address LFL declines, including an

increase in range and sales of complementary

categories, increasing customer retention and use of

marketing to extend brand appeal to new customers.

Link to strategy:

Increasing breadth of product offering

Create a full omnichannel offer

A robust and scalable central model

Increasing

Stable

Decreasing

Risk trend:

Card Factory plc Annual Report and Accounts 2022

Environmental and

social governance

ESG strategy

In a year that has reinforced the necessity

of contributing to global solutions, we

have continued to make progress to

becoming an increasingly sustainable

and responsible organisation.

Card Factory’s ESG strategy reflects our ongoing commitment to

delivering more than just profit and our ambitious plans for future

growth and evolution are mirrored in our sustainability plans. We

are aligned behind specific objectives which seek toaddress the

challenges where we can make long-term, meaningful impacts

for our stakeholders, our communities and the environment.

These objectives reflect the risks and issues prioritised by our

colleagues, customers and suppliers in our FY21 commissioned

materiality assessment and align with the ambitions of United

Nations Sustainable Development Goals (‘SDGs').

The initial climate-related risks were considered by the Board

aspart of the adoption of the ESG strategy and have been

incorporated into the risk management framework described

onpage 38. The completion of the planned Scope 1, 2 and 3

emission assessment will provide the business with a very clear

understanding of the current emissions status as well as solid

recommendation to mitigate further risk and improve the

environmental credentials of the business. Card Factory has

engaged a specialist consultancy to further assess the Group’s

environmental impact and advise on opportunities to reduce its

impact, taking account of the British Retail Consortium’s Climate

Action Roadmap. This includes undertaking a more rigorous

climate-related scenario planning assessment, tailored to Card

Factory’s business and supply chain, assessment of the Group’s

Scope 3 Greenhouse Gas (GHG) emissions alongside Scope 1 and

2, development of a strategy to reduce our emissions to allow us

to set an informed and realistic target for being a carbon neutral

business. Alongside the improved understanding of emissions,

this specific piece of work will also identify systems and processes

to make improvements, engagement plans across the

organisation and clear timeframes for implementation

underpinned by a continuous review process.

The Card Factory approach to ESG is managed through the

sustainability governance framework outlined on page 49

and is led by the Chief Commercial Officer. Additionally,

ESGis discussed as part of the regular colleague forums

throughout the organisation, comprising colleagues from

across the business, at all levels.

UNITED NATIONS SUSTAINABLE

DEVELOPMENT GOALS

Card Factory recognises the UN’s Sustainable Development

Goals as a helpful tool to develop the Group’s sustainability

objectives. The key Goals relevant to Card Factory are:

In addition to these above key goals, Card Factory has

identified the following supporting goals:

Card Factory plc Annual Report and Accounts 2022

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Card Factory’s policy is to pursue and grow its business responsibly to minimise its impact on the environment and

have a positive impact on society:

• We act with integrity at all times in all our dealings.

• We always comply with both the letter and the spirit of the law.

• ‘No Audit, No Order’ policy prevails for our product supply base – technical, ethical and legal sources only shall be

engaged, which must meet high compliance standards.

• Our supply chain must be free from child labour, modern slavery and other exploitation.

• No bribery or corruption is acceptable in any of our dealings.

• Always be non-discriminatory (whether on grounds of gender, race or disability) and adopt equality and diversity in

our employment practices and support social mobility. We target internal promotion and career progression within

the Group.

• We act responsibly with respect to the environment, aiming for a sustainable approach to the use of resources,

avoiding irresponsible disposal of products and unnecessary waste.

• We ensure that our management structures and policies reflect the need for transparency, accountability, equality

and probity in the management of our businesses.

• We comply with and inform industry standard ESG guidelines and best practices and actively manage ESG

considerations and risks effectively.

• We have a positive impact on our communities, including support via The Card Factory Foundation.

• Our targets for ESG activity are clear and measurable and we report on them at least annually.

Our core principles

Card Factory plc Annual Report and Accounts 2022

It is a priority to engage with all Card

Factory colleagues on ESG matters,

to promote the ESG strategy and to

develop opportunities for further

improvements.

Our FY21 commissioned materiality

assessment allowed us to hear

directly from customers, colleagues

and suppliers about the ESG issues

that are most important and

relevant to them.

A total of 18 priorities were

identified, grouped under five areas

of importance:

(1) Employee Health & Wellbeing

(2) Good Governance

(3) Environment & Climate Change

(4) Communities

(5) Ethical Supply Chain

Environment and climate change

priorities were of peak priority for

customers and suppliers, with

sustainable packaging and waste

concerns ranking most highly.

Colleagues’ greatest concerns fall

within employee health & wellbeing,

particularly regarding mental

health, and health and safety.

The output of the materiality

assessment has helped to drive the

decision making within the overall

ESG plan ensuring a balance that

reflects the needs of the business,

suppliers, colleagues and customers.

ESG strategic objectives

The insights delivered by the

materiality assessment have been

used to form the basis of our ESG

strategy and its specific short-term

objectives and commitments,

pending development of a longer-

term roadmap to being carbon

neutral. We have identified five

workstreams in which to focus our

efforts and resources. This approach

is key to ensuring that we move

forward in a socially and

environmentally responsible

way,that is meaningful for

ourstakeholders.

1. Reduction in

carbon footprint

a. We are progressing with assessment

ofrealistic and achievable carbon

neutrality targets.

These are to be identified through

careful exploration of the British

Retail Consortium’s Climate Action

Roadmap, which provides a

framework for the retail industry to

realise Net Zero in 2040, ahead of

the UK Government target of 2050.

See page 42.

b. We will obtain premier partnership

with the Woodland Trust (including

options to carbon-offset) and work

towards a continual reduction in

emissions.

Within this partnership we will

consider and agree options to

support the creation, protection

andrestoration of woodlands.

c. Assessment (using third party experts)

to provide full clarity onScope 1, 2 and

3 emissions, including recommendation

for greener energy infrastructure to

drive a continual reduction.

d. Within 12 months 50% of company car

fleet will be electric/hybrid with the

residual 50% converted within the

following 12 months.

Once complete our fleet carbon will

be reduced by90%.

e. We will continuously improve our

supply chain efficiencies and

increasingly move product

manufacturing from the Far East to

theUK and Europe whereby there is

aclear benefit to the customer and

organisation.

2. Waste and

sustainability

a. Waste reduction

i. We will remove single-use plastic

from 90% of our products sold to

customers by end of FY24.

ii. All products will be 100% glitter

free by end of FY24.

iii. We will reduce point of sale

usage by 50% across our retail

estate by late FY24.

b. Recycling

i. Recycling will be increased

instores, support centre and

distribution centres and we will

continue to improve recyclability

of our product and packaging,

whilst also offering our customers

more recycling opportunities in

addition to our foil balloon

andbanner recycling service

in500 stores.

ii. All new cards sold from April

2022 are 100% recyclable.

iii. All new wrap sold from the end

ofFY24 will be 100% recyclable.

iv. All 10p plastic bags are 100%

recyclable and manufactured

using a minimum of 30%

consumer waste.

c. Sustainability

i. All cards are FSC certified.

ii. All wrap will be FSC certified

by end of FY23 (98.5% FSC by

April 2022).

ESG strategy continued

ESG strategy and objectives

Environmental

Card Factory plc Annual Report and Accounts 2022

Financial StatementsGovernanceStrategic Report

3. DE&I

a. Colleagues

i. We will create the right culture

within the business including

theadoption of our five-year

DE&I strategy.

ii. We are a signatory to the BRC’s

Diversity and Inclusion Charter

and have signed up to the

DWPDisability Confident

Employer Scheme.

b. Customers/Communities

We will demonstrate greater

awareness of DE&I within local

communities and customer bases.

c. Product

Our products and store

environments will be developed to

reflect society and our current and

future customer base.

4. Colleagues &

social mobility

a. Career pathways & talent mapping:

We will provide all colleagues

withaclear view of their career

progression within the business.

b. Performance management/KPIs.

Clear KPIs set for internal

promotions alongside the

completion of business-wide role

benchmarking for all positions and

relevant succession planning in

place.

c. Development

i. A comprehensive suite of

development opportunities

willbe made available to all

colleagues, including voluntary

learning, in-house training

andcourses as well as the

apprenticeship levy being utilised

across select business areas.

ii. We will embed our leadership

behaviour framework for all

leaders and people managers.

d. Colleague engagement

We will continually improve

ourcolleague engagement

survey scores, improve

colleagueretention and

reducecolleague turnover.

e. Employee health and wellbeing

i. We will continue to support

colleagues’ wellbeing through

initiatives such as mental health

first aiders, our employee

assistance programme and

online wellbeing portal.

ii. We will continue to invest in

quality Health & Safety training

toensure that all colleagues are

able to worksafely.

5. Charity &

community

a. Internal charity:

We are committed to continually

funding and supporting The Card

Factory Foundation in all its present

endeavours including supporting

colleagues and communities by

match funding, family funding and

community grant funding.

b. Our external partners:

i. We will continue to identify and

support charity and community

partners that align with our

values and business, e.g. our

ongoing charity partners for

Christmas boxed cards.

ii. We will continue to support

colleagues who are engaged

with local causes and charities.

Social

Card Factory plc Annual Report and Accounts 2022

Governance

Underpinning our ESG strategy is good

governance. We have always sought

to act with integrity and to do the right

things, in the right way, and that

continues. We comply with guidelines

and best practices and actively

manage ESG considerations and risks

effectively with good governance

informing our decision making.

Improved social impact

Card Factory’s social impact arises

through a diverse range of its operations,

from how it sources products (requiring

suppliers to adopt ethical, legally

compliant practices and treat their

employees fairly), to how Card Factory

treats its colleagues and engages its

local communities, including supporting

The Card Factory Foundation, which

supports our colleagues, communities

and a range of charities.

ESG strategy continued

During the year, Card Factory’s social

priorities included:

• Committing, where possible,

tousingour product ranges to

supportcharities which resonate

with our shoppers.

• Raising £125,000 to be split equally

between Macmillan Cancer Support,

Teenage Cancer Trust, Mind and

Alzheimer’s Society, from the sale

ofChristmas cards.

• Raising over £1,371,887.11 for

TheCard Factory Foundation

fromplastic carrier bag sales.

• Raising £368,468 for Macmillan

fromcoffee mornings, raffles and

in-store donations.

• Supporting career development

opportunities for our colleagues

including:

– 25% of vacancies during FY22

(excluding seasonal roles) were

filled by internal candidates.

– Five colleagues completed

apprenticeships during FY22.

Underpinning our ESG strategy is good

governance. We have always sought to act with

integrity and to do the right things, in the right

way, and that continues.”

“

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Card Factory plc Annual Report and Accounts 2022

We recognise the importance of

being responsible members of

the communities in which we

operate and we work hard to

support charitable causes that

can benefit from ourgrowth.

The Card Factory Foundation: Supporting causes close to our

hearts through three core funds: Match Fund; Community Fund;

and Helping Hand.

Match Fund

Government restrictions limited

opportunities for our colleagues to

participate in fundraising events,

especially in the first half of the

financial year. The Card Factory

Foundation has provided match

funding to support 31 charity

fundraising initiatives during FY22.

Helping Hand

The Card Factory Foundation’s

‘Helping Hand’ Hardship Fund helped

colleagues through one-off grant

payments to relieve the stress and

burden that having no income can

bring whilst being impacted by

life-changing events. We contributed

over £18,000 towards home

adaptations to help colleagues and

their families return home following

life-changing illness or injury, specialist

wheelchairs and mobility equipment,

contributed towards funeral costs in

the event of unexpected loss, and

supported colleagues escaping

domestic violence situations.

Card Factory’s partnership with

Macmillan Cancer Support reached

£399,718 during the financial year.

£7,265,378

Raised to date in support of Macmillan

Cancer Support since 2006.

ESG strategy continued

Charity

Our Charity Partners

We continued supporting our

charitypartners through the sale

ofour boxed Christmas cards,

donating over £125,000 during the

financial year to four UK charities

and for every €1.00 raised in ROI

Card Factory donated €0.10 to

MakeaWish Ireland.

Community Fund

Our Community Grant Fund funded

over 25 grants in the financial year,

despite the fund being closed since

November 2020 due to a backlog

ofapplications.

Covid-19 Fund

The Foundation launched the ‘Covid-19’

Fund to help those colleagues who

were directly impacted by Covid-19

through grants of up to £500. The

Covid-19 Fund closed in September

2021 and we continue to support our

colleagues through the Hardship Fund.

The Foundation established a

partnership with the Wakefield Hospice

in 2019 through its sponsorship of the

Wakefield 10k. As the event was unable

to take place for the last two years, we

provided alternative support through

thepurchase of a catering truck in 2021.

The proceeds from which were used

bythe hospice to provide symptom

management and care for people

whohave advanced active, progressive

and life-threatening illnesses.

Card Factory plc Annual Report and Accounts 2022

Financial StatementsGovernanceStrategic Report

Climate-related risks

and opportunities

Governance

Climate-related risks and opportunities are assessed by the Board as part of the general business risk management

described on page 38. The Board review the Group’s approach to ESG and climate-related risks twice per year, which

include an overview of the ESG framework, development of the Group’s ESG strategy and progression against goals and

targets. The Board has resolved not to nominate a Board member with key responsibility for ESG or climate-related

responsibilities, which is the responsibility of the entire Board, however, the CEO is required to oversee the Group’s ESG

and climate-related priorities and the Chief Commercial Officer leads ESG within the senior management team. The

organisational structure of the governance framework can be seen below.

The Chief Commercial Officer has the key responsibility to lead the overall ESG strategy with members of the senior

management team taking lead responsibility for aspects within their area of responsibility forming the overall ESG

steering group. Throughout the year, management continually review the progress and deliverables of each element within

our ESG strategy ensuring all risks and opportunities are captured and appropriate action taken. ESG is a consideration

when building specific business plans, including examples such as route of supply and product development. The

completion of the planned consultancy work (see page 42) will provide the group with an even greater understanding of

the Group’s environmental impact, therefore providing greater consideration in guiding the overall strategy, major plans

and annual budgeting. In addition to the information being provided through the completion of the planned consultancy

work, we also have processes in place to ensure developments on climate-related issues are identified and accounted for,

e.g. introduction of new packaging legislation via the Quality Control team. ESG remains a key part of the overall business

wide risk management process described from page 38. The Board effectiveness review conducted in 2021 acknowledged

the progress made against ESG matters and the need for prioritisation across the organisation.

Strategy

Climate-related risks and opportunities identified to date, pending the more extensive impact assessment referred to

onpage 42 being completed, are set out on pages 50 and 51. To date, these have not had any signifiant impact on the

Group’s business or strategy. As the financial implications in the shorter term are de minimus, they are not a material

consideration in financial planning to date.

Board

Audit & Risk

Committee

Remuneration

Committee

Senior management

team

ESG Steering Group

Card Factory plc Annual Report and Accounts 2022

ESG strategy continued

Climate-related risks Climate-related opportunities Implication for Card Factory

Short-term

(1-2 years)

Card Factory fails to engage on

climate risks to identify and

pursue opportunities for

competitive advantage.

Presentation of our climate-related

credentials is expected to improve

brand reputation which should assist in

improving sales.

Improving our credentials could

improve our profile and

opportunity with new customers.

This may also attract new

shareholders.

Card Factory’s supply chain relies

extensively on imports from the

Far East. There are limited

opportunities for local supply

base for gifting ranges which

could reduce our carbon

footprint, whilst maintaining our

‘value’ proposition. Our strategy

targets increasing volumes of

complementary product sales,

which without mitigation will

increase our carbon footprint.

Our strategy of increasing the

proportion of cards produced in the UK,

by increasing card production capacity

at Printcraft, will reduce emissions from

transportation for imports from the Far

East. UK manufacturing of roll wrap has

created an opportunity to reduce

overseas dependency. Growth in UK

manufactured gift products such as

confectionery opens new supply routes.

Alternative ranges and sources

will be constantly reviewed to

balance climate risks with

maintaining a value offer to

ourcustomers.

Managing legacy stock,

whererecycling may not be

economically viable and

redundancy of stock results in

increased waste.

Improved processes to minimise legacy

stock risk, including improved stock

management and more local, smaller

production runs from Printcraft reduces

the risk of such legacy issues arising in

the future.

Improved stock management

significantly reduces exposure

to stock wastage. Any disposal

of stock is managed through

suppliers with green credentials

for waste management

avoiding the need for landfill.

Businesses seeking to use ‘green’

raw materials is expected to

increase demand for FSC

certified raw materials (to

replace plastics and other

materials e.g. in packaging).

Long lead times will constrain

supply, inflating cost prices.

At present, use of recycled card in

product ranges is not considered

viable, but innovation in artificially

grown pulp may address supply

constraints in the future to address

demand and price inflation.

Development of ‘recycled card’

products could be used as a

USP, whist managing costs

andimproving Card Factory’s

credentials.

Levies and surcharges are to

beapplied for packaging,

Greenhouse Gas (‘GHG') emissions,

which could increase operating

costs and require investment in

alternativesolutions.

By reducing waste and GHG emissions

in advance of such levies applying, cost

increases can be minimised.

Opportunity to remove single-use

plastic from gifting range and

handmade cards.

Planned levies and surcharges

to be monitored and action

taken to minimise the

implications for such charges

onCard Factory.

Card Factory plc Annual Report and Accounts 2022

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Climate-related risks Climate-related opportunities Implication for Card Factory

Energy costs expected to

increase over time, particularly

with limited energy security in the

UK that could affect availability

for Card Factory’s futureneeds.

Potential opportunity for Card Factory

to commit to a long-term power

purchase arrangement which can be

used as a basis for investment in

additional green energy capacity.

In addition to supporting

development of additional green

energy generation, this may

mitigate future cost increases,

whilst reducing the Group’s

GHGemissions.

The Group’s business strategy

includes sale of balloons, many

of which are helium-filled. Helium

is a non-renewable natural

element with limited supply,

which may be subject to

increased cost as supply reduces.

Opportunity for Card Factory to

innovate on alternative product ranges

to anticipate availability falling and/or

Helium price increases.

Long-term strategy to be

developed to recognise this risk

and develop alternative ranges

and products to meet customer

appetite for party and

celebration events.

Long-term

(10-15 years)

Increased flooding risk from

higher water levels from global

warming could impact Card

Factory’s key operational sites.

Although the support centre and

distribution centres are not at any

material risk from flooding, the

Printcraft facility is next to a river which

would be at risk of flooding, without

appropriate flood defences being

adopted. As many store leases are

subject to relatively short-term leases,

stores can be relocated on lease

events, if flood risk is considered to be

a material risk.

Plans to increase capacity at

Printcraft will require extending

the property, which will require

an assessment of any flood

defence measures to protect

this key production facility in

the long term. Design and

layout required to minimise

riskof equipment damage if

extreme flooding is realised.

Risk management

Climate-related risk is managed in accordance with the overall risk management framework described on page 38, which

provides for members of the senior management team being primarily responsible for identifying emerging risks and

assessing, managing and mitigating risks, with support from internal and external specialists, as appropriate. These risks

arereviewed twice per year as part of the risk review process, with an appropriate member of the senior management team

being nominated to manage each risk and to lead development and implementation of mitigation including assessing the

size and scope of the identified risk. The Chief Commercial Officer is responsible for the overall risk management of ESG and

climate-related risks. The ESG steering group review all climate-related risks within the ESG plan ensuring all key points are

identified, assessed and incorporated into the overall risk management process. Updates are provided to the Board and its

Audit & Risk Committee.

The climate-related priorities take account of the risks identified and the priorities for our stakeholders, which have been

identified from the materiality assessment referenced on page 44.

The scheduled assessment of the Group’s Scope 1, 2 and 3 emissions by a specialist consultancy (see page 42) will provide

the business with a very clear understanding of the current emissions status. The assessment will make strong

recommendations to the business, improving understanding and driving decisions whereby choices to mitigate, transfer,

accept or control the particular element of risk can be taken. This specific piece of work will:

1. Allow us to understand the scope of emissions associated with the business.

2. Identify the types of systems/processes in place/needed to make improvements.

3. Set a credible target in line with Net Zero and identify the associated costs.

4. Drive engagement of the target plan across the wider business.

5. Implement the plan from new processes/technology/training.

6. Provide a basis for continual review of progress against the pathway to identify at any necessary mitigation.

Card Factory plc Annual Report and Accounts 2022

ESG strategy continued

Metrics and targets

Card Factory’s key ESG targets relating to waste reduction and reduction of carbon footprint are described at page 44.

Inrespect of waste reduction, an annual target is proposed to be set at the start of each financial year, to target particular

aspects for improvement, which could vary from reducing plastics, to reducing glitter, to increasing the proportion of

certain products that are recyclable. All targets will be clear and objectively measurable. Objectives set in previous years

will continue to be measured to ensure improvements are sustained. The Greenhouse Gas emissions target for the next

financial year, to 31 January 2023, is not to exceed total CO

emissions generated in FY20 (i.e. Scope 1 and Scope 2

emissions not to exceed 7,817t CO

). The FY21 and FY22 GHG emissions data isn’t representative of a full year of trade due

to periods of suspended operations across our store estate. We have maximised much of our opportunities to reduce GHG

emissions through adoption of low energy solutions, including LED lighting, voltage optimisation technology across stores,

support centre and distribution facilities and efficiencies in our logistics operations. Our review of options for further

reduction of GHG emissions, (such as commissioning additional renewable energy capacity to meet Card Factory’s needs),

are not capable of realising improvements during the current financial year.

Greenhouse Gas emissions

During FY22, the Card Factory Group’s Greenhouse Gas (‘GHG') emissions (with comparison for FY21) have been as follows:

FY22

tCO

FY22

FY21

tCO

FY21

Scope 1 emissions (combustion of fuel – direct emissions) UK 672 99.6 777 99.6

RoW 3 0.4 3 0.4

Total 675 100 780 100

Scope 2 emissions (purchased energy – indirect emissions) UK 4,238 99.0 4,245 99.0

RoW 45 1.0 44 1.0

Total 4,283 100 4,289 100

Total energy use (kWh) UK 22,269,584 99.0 20,476,623 99.1

RoW 225,256 1.0 189,524 0.9

Total 22,494,840 100 20,666,147 100

Intensity metric

Consistent with previous periods, Card Factory has chosen to report against previous year GHG emissions using the intensity

metric of total emissions (tonnes of CO

) per £m of turnover:

FY22

tCO

FY21

tCO

Reduction

(increase)

Total emissions 4,958 5,069 2.19%

Emissions intensity (tCO

e/£m turnover) 13.61 17.78 25%

As the period commenced with all of the store estate subject to mandatory closure, followed by a period of relaxation of

government restrictions, the opportunities for introduction of further energy efficiency measures was limited, particularly

taking account of the progress made in prior years. Details of future energy efficiency measures are set out on page 44.

Methodology and emissions data

The above emissions data has been produced in accordance with the Streamlined Energy and Carbon Reporting (‘SECR')

framework, under the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report)

Regulations 2018. The footprint is calculated in accordance with the Greenhouse Gas (‘GHG') Protocol and Environmental

Reporting Guidelines, including SECR guidance. DEFRA emission factors have been used for all emission sources to allow

an activity to be converted into carbon dioxide equivalent (CO

e).

Card Factory plc Annual Report and Accounts 2022

Financial StatementsGovernanceStrategic Report

Climate change and TCFD disclosures

Card Factory has made climate-related disclosures consistent with eight of the 11 recommendations of the TCFD listed

below. Card Factory is not compliant in respect of three of the 11 recommendations and the recommendation (if

appropriate) to report Scope 3 GHG emissions on a fourth recommendation and is actively engaged in initiatives that will

enable it to address these remaining TCFD recommendations and to further improve disclosures in subsequent years, as

noted in the final column of the table below:

TCFD

Recommendation

satisfied

Status of progress to address

the recommendation

Governance: Disclose the organisation’s governance around climate-related risks and opportunities.

a. Describe the Board’s oversight of climate-related

risks and opportunities.

See ‘Governance’ section on

page 49.

b. Describe management’s role in assessing and

managing climate-related risks and opportunities.

See ‘Governance’ section on

page 49.

Strategy: Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s

business, strategy and financial planning where such information is material.

a. Describe the climate-related risks and

opportunities the organisation has identified over

the short, medium and long term.

See pages 50 and 51.

b. Describe the impact of climate-related risks and

opportunities on the organisation’s business,

strategy and financial planning.

See pages 50 and 51.

c. Describe the resilience of the organisation’s

strategy, taking into consideration different

climate-related scenarios, including a 2°C or lower

scenario.

See page 42 and page 51

(‘RiskManagement’) in respect

of consultancy appointment to

accelerate future compliance.

Risk Management: Disclose how the organisation identifies, assesses and manages climate-related risks.

a. Describe the organisation’s process for identifying

and assessing climate-related risks.

See ‘Risk Management’

section on page 51.

b. Describe the organisation’s processes for

managing climate-related risks.

See ‘Risk Management’

section on pages 51.

c. Describe how processes for identifying, assessing

and managing climate-related risks are

integrated into the organisation’s overall risk

management.

See ‘Risk Management’

section on pages 51.

Card Factory plc Annual Report and Accounts 2022

TCFD

Recommendation

satisfied

Status of progress to address

the recommendation

Metrics and Targets: Disclose the metrics and targets used to assess and manage relevant climate-related risks and

opportunities where such information is material.

a. Disclose the metrics used by the organisation to

assess climate-related risks and opportunities in

line with its strategy and risk management

process.

Targets and metrics for

short- term objectives are set

out on pages 44 and 45.

Aligned to our strategy and

risk management, additional

metrics and targets to assess

climate-related risks and

opportunities will be

developed as part of the

consultancy work referred to

on page 42 and the ‘Risk

Management’ section of

page51.

b. Disclose Scope 1, Scope 2 and, if appropriate,

Scope 3 greenhouse gas (‘GHG') emissions and

the related risks.

See Scope 1 and Scope 2

emissions on page 52.

In respect of Scope 3, see

page 42 and page 51 (‘Risk

Management’) in respect of

consultancy appointment to

accelerate future compliance.

c. Describe the targets used by the organisation to

manage climate-related risks and opportunities

and performance against targets.

Targets to be adopted to

manage climate-related risks

and performance against

them are to be developed in

conjunction with the

consultancy work referred to

on page 42 and the ‘Risk

Management’ section of

page51.

Climate change and TCFD Disclosures continued

ESG strategy continued

Card Factory plc Annual Report and Accounts 2022

Financial StatementsGovernanceStrategic Report

Non-financial information statement

Reporting requirement Relevant information Policies and standards

Information necessary to understand the Company’s development, performance and position and the impact of its

activity relating to:

1. Environmental matters (including the

impact of the Company’s business on

the environment).

• Pages 42 to 54 Page 43

2. The Company’s employees. • Pages 26 to 28 Page 27

3. Social matters. • Pages 42 to 48 Pages 43, 46

4. Respect for human rights. • Page 29 Pages 26 to 29, 43

5. Anti-corruption and anti-bribery

matters.

• Pages 28 and 29 Pages 26 to 29, 43

Required information

6. Description of the Company’s

business model.

See pages 10 and 11

7. Description of policies (and any due

diligence processes implemented

pursuant to those policies) pursued

by the Company in respect of items

1 to 5 above and a description of the

outcome of those policies.

See the sections referred to above

8. A clear and reasoned explanation if

the Company does not pursue any

policies in respect of the above

matters.

Not applicable

9. Description of the principal risks

relating to items 1 to 5 above and

where relevant and proportionate,

a description of the business

relationships, products and services

which are likely to cause adverse

impacts in those areas of risk and

a description of how it manages

such risks.

See pages 39 to 41

10. Description of the non-financial key

performance indicators relevant to

the Company’s business.

See pages 1, 9, 23, 25 to 28 and 44 to 45

11. Where appropriate, references to and

additional explanations of amounts

included in the accounts.

The accounts are produced in accordance with UK-adopted international

accounting standards and applicable law. See page 160 for alternative

performance measures.

The Strategic Report, which was approved by the Board on 2 May 2022 and is set out on pages 1 to 55, was approved by

Darcy Willson-Rymer

Chief Executive Officer

3 May 2022

Card Factory plc Annual Report and Accounts 2022

Prior to joining the Company, Darcy served as CEO of

Costcutter Supermarkets Group for eight years. Prior to this,

Darcy was CEO of Clinton Cards plc from 2011 to 2012. Before

joining Clinton Cards, Darcy held a range of roles in

international branded businesses, including Managing

Director (UK & Ireland) of Starbucks Coffee Company, and

senior roles at Yum Restaurants International, including

Operations Director of KFC Great Britain, and Director of

Operations and Franchise, Europe, KFC and Pizza Hut.

Current external appointments:

Non-Executive Director of international

anti-people trafficking charity, Stop The Traffik.

Before joining the Company, Kris served as Finance Director of

the Edinburgh Woollen Mill Group and prior to this held

Finance Director and other senior finance positions at

Brighthouse, Phones4U, JD Sports, all:sports, BMI Healthcare,

20:20 Mobile Logistics, Barclays and 3663 Distribution. He is a

Chartered Accountant and has a Bachelor of Arts in

Accountancy Studies.

Date of appointment:

8 March 2021

Date of appointment:

3 July 2017

Board of Directors

Darcy

Willson-Rymer

Chief Executive Officer

Kris Lee

Chief Financial Officer

Paul has extensive retail experience having served 20 years

at Britvic plc, including eight years as Chief Executive Officer.

Paul is currently Chair of 4imprint Group plc, having been

appointed in February 2016. Paul was Chair of Johnson

Service Group plc between May 2014 and August 2018 and

was a Non-Executive Director and Chair of the Remuneration

Committee of Pets at Home plc from March 2014 until July

2020. Paul assumed the interim role of Executive Chair from

1 July 2020 to 8 March 2021.

Current external appointments:

Non-Executive Chair of 4imprint Group plc.

Date of appointment:

19 October 2018

Paul Moody

Non-Executive Chair

R N

Octavia has extensive retail experience and significant experience

of serving on boards of UK public companies. Prior to serving as a

Non-Executive Director of John Menzies plc and Chair of The

Spicers-Officeteam Group, Octavia was the Chief Executive of

Oka Direct Limited and the Managing Director of Crew Clothing

Co. Limited. Octavia also served as Chief Executive Officer and

latterly as Chair of LighterLife UK Limited. Octavia was the

Commercial Director of Woolworths plc, the Managing Director

ofE-Commerce at Asda Stores Limited and the Buying and

Merchandising Director at Laura Ashley plc.

Current external appointments:

Senior Independent Non-Executive Director of Crest

Nicholson Holdings plc and Senior Independent

Non-Executive Director of Marston’s plc. Chair of

Banner Group and Non-Executive Director of

Ascensos Limited (both unlisted).

Date of appointment:

30 April 2014

Octavia Morley

Senior Independent

Non-Executive Director

AR R N

Financial StatementsGovernanceStrategic Report

Card Factory plc Annual Report and Accounts 2022

Roger has extensive retail experience and is currently the Chief

Executive Officer of Greggs plc, a role he will step down from on

17 May 2022. Prior to this role, Roger served as Chief Executive

of both Thresher Group and Punch Taverns. Roger was also a

founding member and the Joint Managing Director of Ocado.

Roger spent the early part of his career at Marks and Spencer

where he led the food division for the business.

Current external appointments:

Chief Executive Officer of Greggs plc and

a Member of the Women’s Business Council.

Date of appointment:

4 December 2017

Roger Whiteside

OBE

Independent

Non-Executive Director

Committee membership

Audit & Risk

Remuneration

Nomination

Chair

Tripp is the founder of Resegon Capital Partners, where he

focuses on investing in and managing investments in private

and public markets. Tripp has significant retail and consumer

sector experience having invested extensively in the sector

via private equity, public equity and distressed debt. In

addition, Tripp served on the board of New Look for five

years and is currently serving on the board of Vivarte. Prior

to founding Resegon, Tripp was an investment professional

for BlueMountain Capital and Apax Partners.

Current external appointments:

Member of Resegon Capital Partners

and Director of Vivarte.

Rob was Chief Financial Officer of Asda from 2018 to 2021;

and between 1997 and 2012, held a number of senior roles

within the Asda group including Commercial Finance &

Strategy Director and Business Change Director. In between

his two periods with Asda, Rob was Vice President, UK,

Finance Director and then Vice President of Consumables at

Amazon UK. Rob was Independent Director of YPO (from

2017 to September 2021) and was previously a Non-Executive

Director of Ten Entertainment Group plc where he was also

the Chair of the Risk and Audit Committee.

Current external appointments:

Rob is currently Non-Executive Director and Trustee of Jisc,

Non-Executive Director of Venture Simulations Limited

andNon-Executive Director of Fruugo plc (all of which

areunlisted).

Date of appointment:

9 April 2020

Date of appointment:

1 November 2021

Nathan Lane

(Tripp)

Non-Independent

Non-Executive Director

Robert McWilliam

(Rob)

Independent

Non-Executive Director

AR NR

AR R

Card Factory plc Annual Report and Accounts 2022

Chair’s Letter –

Corporate Governance

The last financial year has

been a period of stabilisation

for the Card Factory business.

It has also been an important

period to establish the

foundations of future growth.

Paul Moody

Chair

Dear Shareholder

The last financial year has been a period of stabilisation

for the Card Factory business, particularly since

reopening of non-essential retail from April 2021. It

hasalso been an important period to establish the

foundations of future growth. Following Darcy Willson-

Rymer’s appointment in March 2021, his subsequent

full-scale review of the strategy for growth has ensured

the plan comprehensively reflects the latest view on the

impacts of the pandemic.

The Board has been able to re-engage in normal

activities following reopening, including progressing

many initiatives and opportunities that were deferred

orde-prioritised. We have also had more opportunity

toengage with our many stakeholders.

The Board has made progress on many key areas over

the year, including development of a DE&I policy with

extensive colleague consultation and input, developing

aclear understanding of succession for the senior teams

and making notable progress in developing its ESG

strategy. Several significant appointments have been

made over the year to support realisation of the Group’s

strategy, including a Business Development Director, a

Customer Marketing Director, a new Chief Information

Officer and a Digital Director.

I am pleased to welcome Rob McWilliam to the Board.

Robbrings insights from other retail and online

businesses and has significant financial experience

toensure he is equipped to Chair the Audit and

Remuneration Committee.

I also wish to recognise the Directors who have stepped

down from the Board in the last year, including David

Stead, who retired in November 2021 and Paul

McCrudden who served until the end of the financial

year. Both David and Paul have served the Board since

2014 and have made significant contributions to the

business. We are actively recruiting an independent

Non-Executive Director to support the Company as it

pursues its strategic objective ofbecoming the UK’s first

truly omnichannel card and gift retailer. We wish David

and Paulall the best for the future.

I am extremely pleased by the performance of the

management team, including the material reduction

indebt requirements which have been instrumental in

securing a release of the undertakings to raise equity.

With further reduction of our debt we look forward

tobeing able to review payment of dividends from

early2024.

Yours sincerely

Paul Moody

Chair

3 May 2022

Financial StatementsGovernanceStrategic Report

Card Factory plc Annual Report and Accounts 2022

Corporate Governance Report

Leadership and approach

The Board is committed to the highest standards of

corporate governance. The Board understands the

importance of its leadership on governance in setting the

culture and values and in the achievement of long-term

sustainable success, whilst successfully managing risks for

our stakeholders.

We believe that good governance is demonstrated by

applying corporate governance principles and following

themore detailed provisions and guidance in a way that

enhances or protects the long-term value of the business.

This ensures a pragmatic governance culture sits alongside

the entrepreneurial and community-minded spirit which has

enabled Card Factory to develop into the business it istoday.

Key governance activities

Key activities during the year included:

• reassessment of the five-year strategy to account for

theknown impact of the Covid-19 pandemic, which is

supported by a more detailed implementation plan;

• management and improvement of the liquidity position

of the Group, including completion of a refinancing in

May 2021, in addition to securing appropriate

government support, where available;

• substantial progress in satisfying the Company's

undertakings to its banking syndicate to use the best

efforts to raise equity or secure alternative funding,

including consultation with certain stakeholders;

• the recruitment of additional expertise into the Group

including a Business Development Director, a Customer

Marketing Director, a Chief Information Officer, a Digital

Director and development of a marketing team, to

further align the customer at the heart of our business;

• the refining and enhancing of key performance

indicators that are aligned to the refreshed strategy,

adopted to monitor performance and drive colleague

objectives;

• the further development of our ESG policy and

advancement of our key environmental, social

governance objectives, including colleague engagement

in a number of strategic priorities, such as DE&I and a

review of our values;

• the undertaking of a full succession planning review

across the senior management team and their direct

reports to understand skill gaps to support further

development needs, with initial skills training via the

learning and development team and external consultants;

• the successful induction of Darcy Willson-Rymer as CEO,

to lead the Group to the next stage of its development;

• the appointment of Rob McWilliam as a Non-Executive

Director;

• the improvement of our colleague engagement, support

and development to aid retention, including benchmarking

of job roles to start to address improvements and fairness

in reward across the Group; and

• maximising the Group’s liquidity position in response

tothe Covid-19 pandemic by open dialogue with our

banking partners and use of additional government

support where possible.

Code compliance

The Board has substantially complied with and intends

tocontinue to comply with the requirements of the UK

Corporate Governance Code published in September 2018

by the Financial Reporting Council (‘Code’) a copy of which

can be obtained from frc.org.uk.

The Board has focused on ensuring it provides strategic

challenge and direction to the management team and

supports the management team in the framing of the

strategic priorities, which include reassessment of values,

cultural development and addressing stakeholder feedback.

Specific examples include progress being made on investor

relations and engagement, and improving colleague

engagement and terms and conditions of employment

toimprove recruitment and retention.

The Code and Listing Rules require the Company to provide

explanation of any provisions of the Code that are not complied

with during the year. The relevant exceptions are as follows:

• During the first five weeks of the financial year, Paul Moody

retained the interim role as Executive Chair, pending

appointment as Darcy Willson-Rymer as CEO on 8 March

2021. During this period, the roles of Chair and Chief Executive

were temporarily exercised by the same person, which was

inconsistent with Provision 9 of the Code. This was an interim

arrangement that was required following the resignation of

the previous CEO. As the Chair had good knowledge and

understanding of the business and was immediately available

and willing to provide temporary executive leadership, his

interim appointment was considered by the other Board

members to best provide continuity pending recruitment of

apermanent replacement. During this period, the Senior

Independent Director provided additional support in the

absence of a Non-Executive Chair. Such a temporary

exerciseof the Chair and the Chief Executive roles by one

person was considered acceptable. As this was not a

permanent arrangement, on advice, it was not discussed

withshareholders in advance.

• Prior to adoption of the updated Remuneration Policy at

theCompany’s Annual General Meeting on 27 July 2021, no

formal policy for post-employment shareholding requirements

had been adopted as the previous Remuneration Policy,

adopted in 2018, had been issued for adoption prior to

publication by the FRC of the UK Corporate Governance

Code 2018. Provision 36 of the Code requires development of

a policy to address this. The Remuneration Policy (set out on

pages 77 to 85) adopted at the 2021 AGM introduced the

post-employment shareholding policy in accordance with this

Code provision.

• The current employer pension contribution to the CFO

marginally exceeds the rates applicable to the workforce,

contrary to Provision 38 of the Code. As described in the

Remuneration Report (page 75), full alignment will be effective

from the end of 2022, consistent with Investment Association

guidance. This provision of the Code has not been complied

with due to historical enhanced pension contribution terms

which had been awarded to the CFO, where the Board had

resolved to address this imbalance from the end of 2022 in

accordance with Investment Association guidance.

Card Factory plc Annual Report and Accounts 2022

TCFD reporting

For the purposes of LR 9.8.6, please see pages 53 and 54

which assesses the consistency of our climate-related

financial disclosures against the TCFD Recommendations

and Recommended Disclosures and identifies the items

where reporting is not yet in compliance with TCFD

Recommendations.

Role of the Board

The strategy for the growth of the business is determined

bythe Board in a manner that facilitates the development,

growth and sustainability of the Group over the long term

inthe interests of all its key stakeholders.

Board composition, balance and independence

The Board currently comprises seven members. The Code

recommends that at least half the board of directors of a

UK-listed company, excluding the chair, should comprise

non-executive directors, determined by the board to be

independent in character and judgement and free from

relationships or circumstances which may affect or could

appear to affect, the director’s judgement.

The Board considers all of the current Non-Executive

Directors, with the exception of Nathan (Tripp) Lane, as

independent Non-Executive Directors (within the meaning

of the Code).

Tripp Lane was appointed to the Board on 9 April 2020

following constructive discussions between the Company,

Teleios Capital Partners LLC (‘Teleios’), a long-term

shareholder which held a c. 13% interest in the Company

atthe time (now c.20.01%) and another major shareholder.

Given the circumstances surrounding his appointment,

including the Board’s understanding that Teleios agreed to

supplement Tripp’s remuneration with a one-off payment

tosecure his candidacy, the Board decided that it would

not be appropriate to view Tripp as an independent

Non-Executive Director for the purposes of the Code,

notwithstanding that Tripp is not a nominated Director of

Teleios or acting on their behalf. Tripp’s appointment was

recommended to the Board by the Nomination Committee

following a number of meetings between Tripp and

members of the Board, who were confident he had relevant

skills and experience that could add value to the Company.

The constitution of the Company’s Board complies with the

Code’s recommendation, with three members of the Board

being judged to be independent and (excluding the Chair)

three being non-independent (i.e. two Executive Directors

and Tripp Lane, as a non-independent Non-Executive

Director). As reported on 20 December 2021, the Board has

begun a process to appoint an independent non-executive

director to support the Company as it pursues its strategic

objective of developing Card Factory into the UK’s first truly

omnichannel card and gift retailer.

Corporate Governance Report continued

The Board is confident that, as currently constituted, it

continues to be an effective and efficient decision-making

body that supports the Group’s strategy and growth. This is

kept under constant review, together with succession

planning for the Board as a whole.

During the year the Board considered and approved additional

external appointments, with the appointment of David Stead

on 12 November 2021 as a Non-Executive Director of ProCook

Group plc and the appointment of Rob McWilliam as a

Non-Executive Director of Fruugo plc (unlisted). The Board

considered that these appointments gave rise to no conflict of

interest and did not interfere with the time commitments to the

Company. It was noted that in respect of David Stead’s external

appointment, there was a minimal period of four weeks when

David Stead remained on the Board of the Company and held

the additional role with ProCook Groupplc.

Chair – Paul Moody

The Code recommends that, on appointment, the chair of a

company with a premium listing on the Official List should

meet the independence criteria set out in the Code.

On appointment, the Board considered Paul Moody to be

independent and his appointment is subject to the terms of

a letter of appointment dated 15 October 2018. The Board

has considered whether the Chair’s independence may

have been compromised as a result of his interim role as

Executive Chairman, but concurred that he remains

appropriately independent, but with additional insights

tosupport his challenge of the management team.

Senior Independent Director – Octavia Morley

The Code recommends that the board of directors of a

company with a premium listing should appoint one of the

non-executive directors as a senior independent director

toprovide a sounding board for the chair and to serve as

anintermediary for the other directors when necessary.

Thesenior independent director should be available to

shareholders if they have concerns, which contact through the

normal channels of the chief executive officer have failed to

resolve or for which such contact is inappropriate. Octavia

Morley has been appointed as the Senior Independent

Director of the Company and has considerable experience

ofacting as an Independent Non-Executive Director.

Board responsibility

The Company has a clear division of responsibilities between

the Non-Executive Chair and the Chief Executive Officer.

Ingeneral terms, the Non-Executive Chair is responsible

forrunning the Board and the Chief Executive is responsible

for running the Group’s business on a day-to-day basis.

This clear division of responsibilities, when taken together

with the schedule of matters which the Board has reserved

for its own consideration, ensures that no one person has

unlimited and unchecked power to make decisions that

may have a material impact on the Group as a whole. A

copy of the matters reserved for the Board is available on

Card Factory’s investor website (cardfactoryinvestors.com).

Financial StatementsGovernanceStrategic Report

Card Factory plc Annual Report and Accounts 2022

Board attendance

During the year, the Board held 11 scheduled meetings and 22 other ad hoc Board or Committee meetings.

TheCommittees of the Board also convened meetings during the year, with attendance as follows:

Director Role

Scheduled

Board

meetings

(11 meetings)

Other

Board or

Committee

meetings

Remuneration

Committee

(6 meetings)

Audit

& Risk

Committee

(6 meetings)

Nomination

Committee

(3 meetings)

Paul Moody

Non-Executive Chair and

Chair of Nomination Committee

11 of 11 20 of 20 6 of 6 – 3 of 3

Octavia Morley

Senior Independent Director and

Chair of Remuneration Committee

11 of 11 15 of 15 6 of 6 6 of 6 3 of 3

David Stead

Independent Non-Executive Director and

Chair of Audit & Risk Committee

9 of 10 14 of 19 4 of 5 5 of 5 2 of 3

Paul McCrudden² Independent Non-Executive Director 11 of 11 12 of 15 5 of 6 5 of 6 3 of 3

Roger Whiteside Independent Non-Executive Director 10 of 11 12 of 15 5 of 6 5 of 6 3 of 3

Nathan (Tripp) Lane Non-Independent Non-Executive Director 10 of 11 18 of 19 – – –

Rob McWilliam³ Independent Non-Executive Director 3 of 3 1 of 1 1 of 1 1 of 1 1 of 1

Darcy Willson-Rymer

Chief Executive Officer 10 of 10 17 of 17 – – –

Kristian Lee Chief Financial Officer 11 of 11 21 of 21 – – –

1 David Stead stepped down from the Board on 30 November 2021.

2 Paul McCrudden stepped down from the Board on 31 January 2022.

3 Rob McWilliam was appointed 1 November 2021.

4 Darcy Willson-Rymer was appointed 8 March 2021.

Board activities and effectiveness

Board meetings are structured to ensure they focus on key strategic matters that affect the business and examples of

topics reviewed during the year are set out below. Additionally, the Board considers any decisions that are within the

matters reserved for the Board.

The Board had in place a schedule of matters that were discussed during the year and a similar schedule is in place for the

current financial year. As part of normal planning, the Board puts these schedules in place in advance of each financial year.

The Board meetings include a rolling agenda of key strategic, operational, governance and risk topics, as well as

updateson key strategic programmes, operational and financial performance, which includes periodic presentations

fromseniormanagement team members. These ensure that the Group’s Non-Executive Directors remain informed of key

developments within the Group and the progress in achieving the strategic objectives. The Board regularly reflects on

thisrolling agenda to ensure it is responding to the strategic and operational challenges faced by the business.

The key topics discussed by the Board during the year were:

Strategy Performance Governance

• Group strategy

• Group budget

• Covid-19 response and business protection

• Debt funding, refinancing and compliance

with undertakings given to the banking

syndicate

• Commercial strategy and delivery of

strategic projects

• Review of competition and customer

preferences and opportunities

• Business development strategy

• HR strategy, colleague engagement and

jobrole benchmarking

• Online strategy

• Capex review

• IT strategy, cyber security and ERP

investment review

• Annual results

• Interim results

• Seasonal trading updates

• Key project updates

• KPIs and Balanced Scorecard

performance

• Capital investment review

• Operational reviews

• Online trading reviews

• Externally conducted Board evaluation

• Regular reviews of performance against

Board objectives

• Director and senior management

appointments

• People strategy review, colleague

engagement, culture and values and

jobprotection

• Shareholder engagement

• DE&I

• Succession planning

• Sustainability and ESG policy

• Health and safety

• Governance and legal updates

• Non-Executive Director reports

• Principal risks review

• Investor relations updates

• Board and Committee planner

• Audit review

Card Factory plc Annual Report and Accounts 2022

Corporate Governance Report continued

All Directors receive papers in advance of Board meetings

including regular reports from the senior management

team covering the parts of the business they are

responsible for and which monitor achievement against the

Group’s KPIs, both financial and strategic. As part of these

papers, the Board also receives progress updates on key

business programmes. The Board will continue to receive

performance updates against our agreed strategic KPIs.

Minutes of all Board and Committee meetings are taken

bythe Company Secretary. The minutes record actions,

decisions and resolutions arising out of the topics discussed

and summary resolutions of actions accompany the minutes

which enables the Board to regularly monitor progress.

Board strategy day

In addition to the review of performance against the

strategic plan and the development of the strategy to

account for the Covid-19 impact, the Board held its annual

strategy day in July 2021. This focused primarily on

furthering understanding of the customer proposition and

the competitors and opportunities to enhance the customer

offering, particularly through data, insights and available

technology solutions to develop a true omnichannel offer.

Investor relations

The Board recognises the importance of explaining

financialresults and key strategic and operational

developments in the business to the Company’s shareholders

and of understanding any shareholder concerns. The Board

regularly communicates and meets with shareholders and

analysts and the Board will continue to adopt this approach.

The Chief Executive Officer and Chief Financial Officer have

overall responsibility for investor relations. They are currently

supported by the Company’s financial PR advisors, Tulchan,

and its joint corporate brokers, UBS and Investec, who help

organise presentations and advise on investor engagement.

The formal reporting of the Group’s full and half-yearly

results has been and will continue to be a combination of

presentations, group calls and meetings and one-to-one

meetings, the majority of which were held virtually during

the last year. We have continued to broadcast results

presentations online, making them accessible to all current

and prospective shareholders. We facilitate the pre-

submission of attendees’ questions to allow answers to be

provided live, thereby affording greater interaction with

retail investors. We propose to continue to adopt these

technological solutions.

Updates are provided to the other members of the Board

after any investor-related events and it is also ensured that

the Board is kept informed of feedback from analysts and

shareholders. The Chair and the Non-Executive Directors

occasionally meet or speak with shareholders separately to

discuss the Group’s approach to governance and other

developments which affect the Group. The Group’s brokers

also provide feedback after the full and half-year results

announcements and, as appropriate, after other investor-

related events to inform the Board about investor views.

All the Non-Executive Directors and, in particular, the Chair

and Senior Independent Director are available to meet or

speak with major shareholders if they wish, to raise issues

separately from the arrangements described above.

The Board was pleased to have been able to hold its 2021

AGM in person whilst also facilitating submission of questions

and provision of responses before shareholder proxy votes

were required to be submitted.

Card Factory’s investor website is also updated with news

and information including this Annual Report, setting out our

strategy and performance together with our plans for future

growth (cardfactoryinvestors.com).

Non-Executive Director meetings

The Chair and the other Non-Executive Directors met on

three separate occasions in the year without Executive

Directors being present. They intend to continue to meet

regularly to ensure that any concerns can be raised and

discussed outside formal Board meetings. On a separate

occasion, as part of the annual Board effectiveness review,

the Senior Independent Director and the other Non-

Executive Directors met without the Chair to discuss

hisperformance.

The Chair and the other Non-Executive Directors

regularlyhave informal meetings with the Executive

Directors and other members of the senior management

team in the business, at a store location or at the Group’s

support centre.

Board committees

The Board has three Committees:

• an Audit & Risk Committee;

• a Nomination Committee; and

• a Remuneration Committee.

If the need should arise, the Board may set up additional

Committees.

Financial StatementsGovernanceStrategic Report

Card Factory plc Annual Report and Accounts 2022

Audit & Risk Committee

The Audit & Risk Committee assists the Board in

discharging its responsibilities required by DTR 7.1.3 R

including responsibility for:

• financial reporting;

• external and internal audits and controls, including

reviewing and monitoring the integrity of the Group’s

annual and interim financial statements;

• reviewing and monitoring the extent of the non-audit

work undertaken by external auditors;

• advising on the appointment of external auditors;

• overseeing the Group’s relationship with its external

auditors;

• reviewing the effectiveness of the external audit process;

• reviewing the effectiveness of the Group’s internal

controls and systems; and

• whistleblowing and loss prevention.

The ultimate responsibility for reviewing and approving

theAnnual Report and Accounts and the half-year results

remains with the Board. The Audit & Risk Committee

willgive due consideration to laws and regulations, the

provisions of the Code and the requirements of the Listing

Rules. The Code recommends that an audit committee

should comprise at least three members who are

independent non-executive directors and that at least

onemember should have recent and relevant financial

experience. The Audit & Risk Committee was chaired

byDavid Stead prior to 30 November 2021, with Rob

McWilliam, who joined the Board and the Committee

on1 November 2021, assuming the role of Chair of this

Committee from 1 December 2021. The Audit & Risk

Committee’s other members are Octavia Morley, Paul

McCrudden (until 31 January 2022) and Roger Whiteside.

The Directors consider that each of David Stead and Rob

McWilliam has recent and relevant financial experience.

The Audit & Risk Committee met six times during the year

and, in future, will meet no fewer than three times per year.

The Audit & Risk Committee has access to sufficient

resources to carry out its duties, including the services of

the Group General Counsel and Company Secretary and

the Group’s loss prevention team. Independent external

legal and professional advice can also be taken by the

Audit & Risk Committee if it believes it is necessary to doso.

The Audit & Risk Committee Chair usually attends the

Annual General Meetings of the Company and is available

to respond to questions from shareholders on the activities

of the Audit & Risk Committee during the year, a report on

which is set out on pages 68 to 73 of the Governance

section of this Annual Report.

The Audit & Risk Committee’s terms of reference, which

arepublished on Card Factory’s investor website

(cardfactoryinvestors.com), comply with the Code.

Remuneration Committee

The Remuneration Committee assists the Board in determining

its responsibilities in relation to remuneration, including:

• making recommendations to the Board on the

Company’s policy on executive remuneration;

• setting the over-arching principles, parameters and

governance framework of the Group’s remuneration

policy and ensuring incentives and rewards are aligned

with the Group’s culture;

• determining the individual remuneration and benefits

package of each of the Company’s Executive Directors,

its Company Secretary and other members of the

Group’s senior management team; and

• ensuring appropriate engagement with shareholders and

the workforce takes place on executive remuneration

policy and its alignment with wider Company pay policy.

The Remuneration Committee also ensures compliance

with the Code in relation to remuneration and is responsible

for preparing an annual Remuneration Report for approval

by the Company’s members at its AGM. The Remuneration

Committee undertook a triennial review of the Company’s

Remuneration Policy which was approved by shareholders

at the 2021 AGM. The Remuneration Committee considers

this Policy (on pages 77 to 85) is appropriate and does not

propose any changes.

Non-Executive Directors’ and the Chair’s fees are

determined by the full Board.

The Code provides that a remuneration committee should

comprise at least three members who are independent

non-executive directors, free from any relationship or

circumstance which may or would be likely to, or appear to,

affect their judgement and that the chair of the board of

directors may also be a member provided he is considered

independent on appointment. The Remuneration Committee

is chaired by Octavia Morley, who had served more than

12months on a remuneration committee prior to her

appointment. The Committee’s other members are Paul

Moody (from 8 March 2021), David Stead (until 30 November

2021), Paul McCrudden (until 31 January 2022), Roger

Whiteside and Rob McWilliam (from 1 November 2021).

The Remuneration Committee met six times during the

year. In future, it will meet not less than twice a year.

The Board and the Remuneration Committee have employed

Korn Ferry (UK) Limited (‘Korn Ferry’), a professional services

business which specialises in executive remuneration, to

advise and assist in connection with the Group’s executive

remuneration arrangements and its reporting obligations.

Korn Ferry does not provide any other services to the Group.

A report on the Remuneration Committee’s activities during

the year, together with the Directors’ Remuneration Report

is set out on pages 74 to 76 and pages 86 to 97 of the

Governance section of this Annual Report.

Card Factory plc Annual Report and Accounts 2022

The Remuneration Committee’s terms of reference,

whichare published on Card Factory’s investor website

(cardfactoryinvestors.com), comply with the Code.

Nomination Committee

The Nomination Committee assists the Board in discharging its

responsibilities relating to the composition and make-up of the

Board and any Committees of the Board. It is also responsible

for periodically reviewing the Board’s structure and identifying

potential candidates to be appointed as Directors or

Committee members as the need may arise. The Nomination

Committee is responsible for evaluating the balance of skills,

knowledge and experience and the size, structure and

composition of the Board and Committees of the Board,

retirements and appointments of additional and replacement

Directors and Committee members and will make appropriate

recommendations to the Board on such matters.

The Code recommends that a majority of the members

ofanomination committee should be independent non-

executive directors. The Nomination Committee is chaired

by Paul Moody and its other members are Octavia Morley,

David Stead (until 30 November 2021), Paul McCrudden

(until 31 January 2022), Roger Whiteside and Rob McWilliam

(from 1 November 2021). The Directors therefore believe that

the Company is in compliance with the Code.

The Nomination Committee met three times during the

year. In future, the Committee will meet not less than

oncea year. A report on the activities of the Nomination

Committee during the year is set out on pages 98 and 99

ofthe Governance section of this Annual Report.

The Nomination Committee’s terms of reference, which

arepublished on Card Factory’s investor website

(cardfactoryinvestors.com), comply with the Code.

Training and induction

It is important to the Board that all Directors have the

ability to influence and challenge appropriately so that the

Board and the Group, as a whole, can maximise the benefit

they derive from their business knowledge and experience.

The refreshed Board induction programme was implemented

for the inductions of Darcy Willson-Rymer (CEO) and Rob

McWilliam (Independent Non-Executive Director). New

Directors receive a full, formal and tailored induction on joining

the Board, including meetings with each member of the Board,

with each member of the senior management team, other key

team members and the Group’s advisors. The typical induction

process includes visits to the Group’s stores, support centre, its

design studio and Printcraft (the Group’s print facility).

Since stores were able to reopen and trade from April 2021,

andwith relaxation of government restrictions, Non-Executive

Directors were able to undertake site visits and face-to-face

meetings with members of the senior management team, to

build on their day-to-day knowledge of specific areas of the

business and support the team in sustaining and developing

our strategy.

Corporate Governance Report continued

New Directors are also given the opportunity to review

information about the Group including Board and

Committee papers, strategy documentation, market

research, colleague and other stakeholder feedback,

whichthey may find useful in preparing for their role.

The Group’s General Counsel and Company Secretary

regularly reports to the Board on any new legal, regulatory

and governance developments that affect the Group.

Board evaluation

The Board undertook an externally conducted Board

evaluation during 2021, deferred from 2020, in accordance

with guidance, partly due to Covid-19. The Board effectiveness

review was undertaken by Toby Lapage-Norris of Trusted

Advisors Partnership Limited (‘TAP'). TAP's review included

assessment of prior year internally conducted reviews and

conclusions, objective setting and reviews of performance by

the Board and answers to a bespoke detailed questionnaire

addressing how the Board and its Committees operate and

their effectiveness, followed up by one-to-one interviews

witheach Director and some other regular attendees at

Boardmeetings. TAP presented their conclusions and

recommendations to the Board for discussion, which

werethen used to set new Board objectives.

In addition to reviews of the collective effectiveness of

theBoard, the Chair undertook reviews on the individual

performance and contribution of each Director and the

Senior Independent Director collated views from the other

Directors, to provide similar feedback to the Chair.

The external evaluation identified the following areas of

strength:

• The Board has embraced its commitment to continually

improve and has made sound progress on many of the

themes identified in prior internal reviews and is keen to

ensure observations from TAP's independent review, to

help to reset the Board for the future.

• The Board is collectively self-aware and recognises that

lessons have been learned which it is keen to prevent

from reoccurring.

• The quality of Board discussion is generally regarded as

strong and with an appropriate focus on the strategic

priorities. While views, on occasion, may be diverse, the

depth of experience that supports opinion is well respected.

• The CEO’s transition into the business has gone

exceptionally well.

• The Board remains very conscious of the need to apply

focus and energy on shareholder and stakeholder

engagement.

• The Board is constituted with a cohort of experienced,

capable and engaged Non-Executive Directors able and

willing to fulfil their responsibilities, without any conflict of

interest; the Board Committees operate well and the Board

is also well Chaired. The Board is constructive, respectful

and allows for open and honest discussion and debate.

• The relationship between the Board and management

has evolved with changes in executive leadership and

appears suitably strong and highly supportive.

Financial StatementsGovernanceStrategic Report

Card Factory plc Annual Report and Accounts 2022

The Board set the following collective objectives in January

2021, which are subject to regular reviews:

• Strategic Priorities: Provide leadership and mentoring

tosupport the management team to realise the key

strategic priorities for FY23 including:

— Implementation of the transformation programme

required to deliver the strategic plan and to be

capable of implementing scheduled changes in

subsequent periods.

— Development of Complementary Categories, in

conjunction with ‘card first’.

— Successful implementation of pricing architecture

and increases to address inflationary pressure.

— Supporting development of the online business

platforms and capability to realise the targeted

strategic growth.

• Challenge members of the management team to adopt

amore strategic perspective and challenge in their

decision making.

• Support the evolution from product to a customer-centric

business, encouraging greater innovation, pace and

energy in the way the Board thinks, acts and applies

scrutiny and challenge.

• Support the management team in refinancing the Group.

• Investor Communications: Board to support the

management team in a more efficient, streamlined

process to allow Board to input into strategic narrative in

key investor announcements and other communications.

• Board Composition: Use recruitment following current

Board/NED vacancy to increase the diversity of the Board.

In addition to the external evaluation, the Board reflected on

the achievement of the objectives adopted in November 2020

and refreshed in February 2021, as a result of the previous year’s

internal evaluation. It was agreed that the priority objectives

had been achieved, which included the successful refinancing

effected in May 2021, successful reopening of stores in April

2021 when restrictions were lifted and implementation of Phase

1 of the ERP system, however, with hindsight, planning for

subsequent phases in parallel with that implementation would

have facilitated earlier implementation of subsequent phases.

As reported in the externally moderated Board effectiveness

review, the induction of Darcy Willson-Rymer has gone

exceptionally well. Succession planing for the Board, the senior

management team and their direct reports has been

undertaken, with opportunities to address gaps identified.

Finally, progress has been made to develop a clear and focused

ESG strategy (see pages 42 to 54).

Board evaluation will continue to be conducted on an annual

basis. The Company will conduct an internally facilitated

evaluation in the financial year ending 31 January 2023, with

the next externally conducted review scheduled to be held

during the year ending 31 January 2025.

Conflicts of interest

The Companies Act 2006 allows the board of a public

company to authorise conflicts and potential conflicts of

interest of individual directors where the articles of

association of the company contain an enabling provision.

The Company’s Articles of Association give the Board this

authority subject to the following safeguards:

• Directors who have an interest in matters under

discussion at a Board meeting must declare that interest

and abstain from voting; and

• only Directors who have no interest in the matter being

considered are able to authorise a conflict of interest

and, in taking that decision, the Directors must act in a

way they consider, in good faith, would be most likely to

promote the success of the Company.

The Directors are able to impose limits or conditions when

giving authorisation if they feel this is appropriate. All

Directors are required to disclose any actual or potential

conflicts to the Board and there are no current matters

disclosed that are considered by the Board to give rise to a

conflict of interest. All conflicts are considered by the Board

and any authorisations given are recorded in the Board

minutes and reviewed annually by the Board. The Board

considers that its procedures to authorise conflicts of interest

and potential conflicts of interest are operating effectively.

Appointment and removal of Directors

All Directors have service agreements or letters of

appointment in place and the details of their terms are set

out in the Directors’ Remuneration Report on pages 83 and

85. The service agreements and letters of appointment are

available for inspection at the Company’s registered office

during normal business hours.

The Articles of Association of the Company provide that a

Director may be appointed by ordinary resolution of the

Company’s shareholders in general meeting or by the

Board so long as the Director stands down and offers him

or herself for election at the next AGM of the Company. The

Articles also provide that each Director must stand down

and offer him or herself for re-election by shareholders

atthe AGM every year. The Code recommends that

alldirectors should be subject to annual re-election.

TheCompany complies with this recommendation.

Directors may be removed by a special resolution of

shareholders or by an ordinary resolution of which special

notice has been given in accordance with the Companies

Act 2006. The Articles of Association of the Company

alsoprovide that the office of a Director shall be vacated

ifhe or she is prohibited by law from being a Director or is

bankrupt; and that the Board may resolve that his or her

office be vacated if he or she is of unsound mind or is

absent from Board meetings without consent for six months

or more. A Director may also resign from the Board. The

Nomination Committee makes recommendations to the

Board on the appointment and removal of Directors.

Powers of Directors

The business of the Company is managed by the Board,

which may exercise all of the powers of the Company,

subject to the requirements of the Companies Act 2006,

theArticles of Association of the Company and any special

resolution of the Company.

Card Factory plc Annual Report and Accounts 2022

Corporate Governance Report continued

The Board has adopted internal delegations of authority in

accordance with the Code which incorporate matters which

are reserved to the Board or Committees and the powers

and duties of the Chair and the Chief Executive Officer,

respectively.

At the AGM of the Company, the Board will seek authority to

issue shares and to buy back and reissue shares. Any shares

bought back would either be held in treasury, cancelled or

sold in accordance with the provisions of the Companies Act

2006. For further details see the Notice of Annual General

Meeting which accompanies this Annual Report.

Advice, indemnities and insurance

All Directors have access to the advice and services of the

Company Secretary. In addition, Directors may seek legal

advice at the Group’s cost if they consider it necessary in

connection with their duties.

Each Director of the Company (and of each other Group

company) has (and those appointed as Directors during

FY22, had) the benefit of a third-party indemnity provision,

as defined by section 236 of the Companies Act 2006, in

the Company’s Articles of Association. In addition, Directors

and officers of the Company and its subsidiaries are

covered by Directors’ and Officers’ liability insurance.

Noamount was paid under any of these indemnities or

insurances during the year other than the applicable

insurance premiums.

Articles of Association

The Company’s Articles of Association can only be

amended by a special resolution of its shareholders in a

general meeting, in accordance with the Companies

Act2006.

Governance and risk

The Board has adopted the risk management framework

described on page 38 of this Annual Report.

The Board collectively recognises that the continuous robust

assessment and control of risk are fundamental to the Group

achieving its strategic and operational objectives and the

Audit & Risk Committee seeks to ensure that the risk

management framework evolves with the business and the

trading environment in which the Group operates.

The risk management framework is designed to manage,

rather than eliminate, the risk of failing to achieve strategic

objectives and can provide only reasonable and not

absolute, assurance against material misstatement or loss.

The Board and the Audit & Risk Committee have reviewed

the effectiveness of the Group’s risk management

framework, the Company’s risk register and their alignment

with the Company’s strategic objectives in accordance with

the Code for the period ended 31 January 2022 and up to the

date of approving the Annual Report and Accounts.

The Board as a whole considered the principal risks and

relevant mitigating actions and determined that they were

acceptable for a retail business of the size and complexity as

that operated by the Group, however, enhancements and

investment are required to business continuity planning

across a number of aspects of the Group’s operations.

Internal control and audit

Overall responsibility for the system of internal control and

reviewing its effectiveness lies with the Board. In its day-to-

day operations, the Group continuously assesses the

performance of its internal controls and, where necessary,

looks to enhance its control environments. Since the

financial year end, a Head of Internal Audit has been

appointed to coordinate the Group’s programme of internal

audit reviews with the support of relevant experts in each

area of investigation and use of an independent accounting

firm or other advisor to provide specialist internal audit

reviews, if appropriate. Prior to this appointment, the

General Counsel & Company Secretary undertook a

coordination role of internal audit projects. Details of the

investigations carried out during the last year are set out in

the report of the Audit & Risk Committee on page 71.

The Group’s system of internal control can be summarised

as follows:

Board

Takes collective responsibility for internal control

Reserves certain matters for the Board

Oversees the control framework and responsibility for it

Approves key policies and procedures

Monitors development of performance

Audit & Risk Committee

Oversees effectiveness of internal control framework

Receives reports from external auditor

Approves internal audit programme

Receives internal audit reports

Senior management team

Responsible for operating within the control framework

Monitors compliance with policies and procedures

Recommends changes to controls where needed

Monitors performance

Loss prevention team

Focuses on cash losses, theft and fraud in stores

Compliance and safety risk assessors

Reviews compliance with internal procedures that ensure

good health and safety standards are observed

Internal audit function

The internal audit function during the period was overseen

by the General Counsel & Company Secretary.

Financial StatementsGovernanceStrategic Report

Card Factory plc Annual Report and Accounts 2022

Specific elements of the current internal control framework

include:

• a list of matters specifically reserved for Board approval;

• a clear framework for delegated responsibilities,

mandating escalation of decisions to more senior

colleagues within the business or ultimately the Board,

where appropriate;

• clear structures and accountabilities for colleagues, well

understood policies and procedures and budgeting and

review processes, all of which the Executive Directors are

closely involved with;

• every member of the senior management team having

clear responsibilities and operating within defined

policies and procedures covering such areas as capital

expenditure, treasury operations, financial targets,

human resources management, customer service, and

health and safety;

• the Executive Directors and the senior management

team monitoring compliance with these policies and

procedures and, in addition, regularly reviewing

performance against budget, analysis of variances,

major business issues, key performance indicators and

the accuracy of business forecasting; and

• a continuous review programme of store compliance by

the loss prevention team (as regards financial procedures

in stores), by risk assessors working in the health and

safety team and by other teams within the Group.

The Audit & Risk Committee has responsibility for

overseeing the Group’s system of internal controls and of

the internal audit programme and receives the report of the

external auditor as part of the annual statutory audit, in

addition to reports from the independent accounting firm

(or appropriate third party expert) engaged to undertake

specific internal audit reviews.

The Board and the Audit & Risk Committee have monitored

and reviewed the effectiveness of the Group’s internal

control systems in accordance with the Code for the period

ended 31 January 2022 and up to the date of approving the

Annual Report and Accounts and confirmed that they are

satisfactory. Internal control systems such as this are

designed to manage rather than eliminate the risk of failure

to achieve business objectives and can provide only

reasonable and not absolute assurance against material

accounting misstatement or loss. Where any significant

failures or weaknesses are identified from the systems of

internal control, action is taken to remedy these.

Since the year end, the Group has engaged a Head of

Internal Audit to provide dedicated expertise to provide

enhanced assurance and regular review of internal controls.

Disclosures under DTR 7.2.6R

The disclosures the Company is required to make pursuant

to DTR 7.2.6R are contained in the Directors’ Report on

pages 100 to 105.

Share dealing code

The Company’s share dealing code was adopted in 2016

and incorporates the requirements of the EU Market Abuse

Regulation which came into force in 2016 and continues to

be adopted without adjustment following departure from

the EU, where UK Market Abuse Regulations substantially

mirror the EU terms. The code adopted applies to the

Directors, members of the senior management team and

toother relevant employees of the Group.

Anti-bribery

The Company has implemented internal procedures,

colleague training and measures (including the provision

ofan Anti-Corruption and Bribery Policy) with the aim of

ensuring compliance with UK Bribery Act 2010 (as amended)

by the Company and other members of the Group.

Whistleblowing

The Group is committed to conducting its business with

honesty and integrity, with high standards of corporate

governance and in compliance with legislation and

appropriate codes of practice. We expect all colleagues

tomaintain such high standards but recognise that all

organisations face the risk of things going wrong from

timeto time or of unknowingly harbouring illegal or

unethical conduct.

We recognise that a culture of openness and accountability

is essential in order to prevent such situations occurring or

to address them when they do occur. We provide a

whistleblowing line and maintain a whistleblowing policy

that is designed to encourage colleagues to report such

situations without fear of repercussions or recriminations

provided that they are acting in good faith. By having early

knowledge of any wrongdoing or illegal or unethical

behaviour, we improve our ability to intervene and stop it.

The policy sets out how any concerns can be raised and the

response that can be expected from the Company and

provides colleagues with the assurance that they can do

this in complete confidence. Our loss prevention team, in its

day-to-day activities, seeks to reinforce this message and,

in addition, the Group periodically uses communication

campaigns to supplement this. The Audit & Risk Committee

is notified of any whistleblowing reports.

This report was reviewed and approved by the Board on

2 May 2022.

Paul Moody

Chair

3 May 2022

Card Factory plc Annual Report and Accounts 2022

Dear Shareholder

I am pleased to take over the Chair of the Audit & Risk

Committee from 1 December 2021 and am extremely

grateful to David Stead for his guidance and direction,

having chaired this Committee since IPO in 2014.

The Audit & Risk Committee has continued to assess

andreview existing and emerging issues to ensure

CardFactory has appropriate controls in place which

underpin its resilience, recognising the further challenges

arising from the Covid-19 pandemic and the escalating

importance of compliance within supply chains.

The Committee has allocated a significant proportion

ofits time to the management of our principal risks,

including business continuity, disaster recovery, IT and

cyber risk, inventory management, HR and payroll,

within certain higher risk areas of the business. It has

confidence in the Group’s overall control environment

and in management’s commitment to identifying and

improving areas where the Group’s systems and

processes are in need of modernisation.

The Committee remains satisfied with the performance

of KPMG LLP as our external auditor. The Committee

notes that the retender of the audit will be required for

the FY25 audit, assuming the Company is not in the

FTSE 350 before that date. Card Factory proposes

toeffect the audit tender one year earlier than the

mandatory requirement, following which the successful

firm will be proposed for appointment at the AGM to be

held in 2023 in advance of the audit for the financial

year to 31 January 2024.

The Committee continues to carefully monitor audit

reforms, significant additional guidance issued during

the year to respond to the Covid-19 pandemic, including

a significant focus on liquidity, going concern and

viability, arising due to the period of mandatory closure

of the store estate over the year.

The Committee will continue to ensure that its activities

are focused on business issues that add to or preserve

value and that they remain aligned with the strategic

goals of the Group.

The report that follows provides further detail on the

Committee’s activities during the year.

I look forward to addressing any questions in respect of

the work of the Audit Committee in advance of the AGM

in June 2022.

Yours sincerely

Rob McWilliam

Chair of the Audit & Risk Committee

3 May 2022

The Audit & Risk

Committee has

continued to assess

and review existing

and emerging issues to

ensure Card Factory

has appropriate

controls in place which

underpin its resilience.

Chair’s Letter –

Audit & Risk Committee

Rob McWilliam

Chair of the Audit & Risk Committee

Committee members

Rob McWilliam (Chair)

Octavia Morley

Roger Whiteside

Financial StatementsGovernanceStrategic Report

Card Factory plc Annual Report and Accounts 2022

This report provides details of the role of the Audit & Risk

Committee and the work it has undertaken during the year.

Role of the Audit & Risk Committee

The principal responsibilities of the Committee,

which has received delegated authority from the

Board, are to:

• oversee the integrity of the Group’s financial

statements and public announcements relating to

financial performance;

• oversee the Group’s external audit process

including its scope, the extent of the non-audit

services provided by our auditor and our auditor’s

independence and effectiveness;

• monitor the effectiveness of financial controls;

• evaluate the process for identifying and managing

risk throughout the Group;

• ensure the effectiveness and independence of the

Group’s internal audit programme; and

• ensure that the Annual Report and Accounts are

fair, balanced and understandable.

A more detailed explanation of the Audit & Risk Committee’s

role is set out in the Corporate Governance Report on

page63.

Membership

The Audit & Risk Committee was chaired by David Stead

until 30 November 2021, at which stage Rob McWilliam,

who joined the Board and the Audit & Risk Committee on

1 November 2021, assumed the role as Committee Chair.

The Committee’s other members during the period were

Octavia Morley, Paul McCrudden and Roger Whiteside.

David Stead is a chartered accountant and was the Chief

Financial Officer of Dunelm Group plc from 2003 to 2015,

and Interim Chief Financial Officer in 2018. Rob McWilliam

is a qualified chartered management accountant, having

previously been Chief Financial Officer of Asda between

2018 and 2021.

The Board considers that each of David Stead and Rob

McWilliam have both recent and relevant financial

experience in accordance with the requirements of the

Code. Within the Committee as a whole there is significant

experience of the retail sector in which the Group operates.

The Chief Executive Officer, the Chief Financial Officer and

the Chair of the Board usually attend meetings of the

Committee by invitation, along with representatives from

our auditor, KPMG LLP. In addition, subject matter experts

and external accounting firms engaged to support internal

audit reviews also attend meetings of the Committee by

invitation. The General Counsel & Company Secretary acts

as secretary to the Committee.

Meetings

The Committee met six times during the year with details of

attendance at these meetings set out in the Corporate

Governance Report on page 61.

Activities during the year

During the year, the work of the Committee has principally

fallen under the following areas:

• Reviewing the integrity of the draft financial statements

for the year ended January 2021, the appropriateness of

accounting policies with a particular focus on stock

provisions, going concern and viability statements and

assumptions to account for the uncertainty arising from

the Covid-19 pandemic and the auditor’s report

regarding its findings on the annual results.

• Assessing whether the Annual Report and Accounts for

the year ended January 2021, taken as a whole, were fair,

balanced and understandable and provide the

information necessary for shareholders to assess the

Company’s strategy, business model and performance.

• Approval of the Group’s half-year results statements

published in September 2021.

• Verifying the independence of the Group’s auditor,

approving their audit plan and audit fee and setting

performance expectations.

• Shortlisting of priority projects for internal audit review,

reviewing the findings of, and the implementation of

actions arising from, the internal audit projects

undertaken.

• Reviewing the systems and controls which the Group has

in place to enable the Board to make proper judgements

on a continuing basis as to the financial position and

prospects of the Group.

• Overseeing the Group’s approach to risk management,

ensuring that effective and robust risk management is an

integral part of the Group’s business planning and

decision-making processes with the principal risks being

regularly reviewed by the senior management team, the

Committee and the Board.

• Reviewing the Group’s risk register in June, September

and January.

• Approving the appointment of KPMG LLP on certain

non-audit related engagements, in respect of projects

that ultimately did not complete.

• Reviewing the activity by the Group’s loss prevention

team, with a particular emphasis on the team’s work

analysing and mitigating cash and stockloss.

Audit & Risk Committee Report

Card Factory plc Annual Report and Accounts 2022

• The Group received a letter on 16 December 2021 from

the Financial Reporting Council (‘FRC') noting it had

reviewed the Company’s Annual Report and Accounts

forthe year ended 31 January 2021. The FRC requested

responses to a number of questions in respect of the

accounting policies applied in respect of IFRS 16 (Leases)

and provided some further observations where they

considered users of the accounts would benefit from

improvements to existing disclosures in connections

withKPIs, alternative performance measures, leases,

inventory, financial instruments and corporate

governance. As a result, the Company has sought to

improve the disclosures in respect of IFRS 16 (Leases)

andthe other areas noted by the FRC. The Company

recognises that the FRC’s review was solely based on a

review of its Annual Report and Accounts for the year

ended 31 January 2021 and did not benefit from

detailedknowledge of the Company’s business or an

understanding of the underlying transactions entered

into. As a result, the review did not provide any assurance

that the Company’s Annual Report and Accounts are

correct in all material respects.

• Monitoring the Group’s compliance with its policy for use

of our auditor for non-audit work.

• Reviewing the Group’s tax strategy and tax risk register.

• With the support of KPMG LLP, monitoring developments

in legislation, reporting and practice which affect

matters for which the Committee is responsible.

Activities after the year-end

In the period following the year-end, the Committee met in

March and April 2022 and reviewed the following:

• The Group’s risk register, including a review of the

emerging risks identified by the management team, as

supplemented by the Committee and review of how risks

are assessed and the potential adoption of a risk

appetite/tolerance framework.

• The principal risks facing the Group including those that

would threaten its business model, future performance,

solvency or liquidity.

• The process undertaken by management to support the

Group’s going concern statement (which is set out on

pages 102 and 103) including the time period assessed

and the principal risks and combinations of risks

modelled.

• The integrity of the draft financial statements for the

year ended January 2022, including the appropriateness

of accounting policies and going concern assumptions.

• The external auditor’s report.

• Whether this Annual Report and Accounts, taken as a

whole, are fair, balanced and understandable and

provide the information necessary for shareholders to

assess the Company’s position and performance,

business model and strategy.

• The performance, effectiveness, independence

andqualifications of the external auditor and

recommendation for their reappointment.

Significant areas of judgement

Within its terms of reference, the Committee monitors

theintegrity of the Group’s annual and half-year results,

including a review of the significant financial reporting

matters, judgements and estimates contained in them.

At its meeting in April 2022, the Committee reviewed the

FY22 financial year, considered a paper prepared by KPMG

LLP, the external auditor, which included comments on

significant accounting and reporting matters relevant to

the year under review, and received papers from the

ChiefFinancial Officer to support the Directors’ going

concern statement.

The major accounting issues discussed by the Committee

inrespect of FY22 were:

• inventory valuation and provisioning;

• accounting for grant income;

• goodwill recoverability and impairment;

• store asset recoverability and impairment; and

• going concern.

Inventory

The Group holds significant volumes, and a broad range,

ofinventory. The Group makes use of technology, such as

hand-held terminal devices, to support stock control

processes; however the process still relies upon manual

elements. A full inventory count process is undertaken at

both the half-year end the year-end. The Committee

reviewed the process by which the year end inventory

valuation had been prepared, and challenged

management to ensure key risk areas had been

givendueconsideration.

The Group continues to hold material inventory provisions

which, by their nature, involve a significant degree of

estimation. The provision is calculated with reference to the

Group’s merchandising plans and considers the age and

turn of inventory on a line-by-line basis. Lines that are old,

not on-plan for future sales, or where the Group holds large

volumes of inventory compared to recent sales data are

provided against either in part or in full. The nature of this

estimation is such that the range of reasonable outcomes

ismaterial and, as a result, inventory provisioning is

considered a source of significant estimation uncertainty

for the financial statements.

Audit and Risk Committee Report continued

Financial StatementsGovernanceStrategic Report

Card Factory plc Annual Report and Accounts 2022

As part of its review, the Committee considered the

calculation of the provision and challenged management’s

assumptions. As part of the review, it was noted that global

shipping challenges during the year had a material impact

on both the sale of stock that was previously considered

obsolete, and late delivery of seasonal stock, particularly

for the FY22 Christmas season.

Having considered these matters, and the views of the

external auditor, the Committee concluded that the

inventory valuation, and the provision, included in the

financial statements was materially appropriate.

Grant income

During the period, the Group received significant values of

income from government schemes intended to support

businesses affected by national and regional Covid-19

lockdown restrictions.

Under IAS 20, the Group is only permitted to recognise

government grant income when there is reasonable certainty

that any conditions attached to the grant will be complied

with. The grant income received by the Group is subject to

UKsubsidy control conditions, as well as specific conditions

attached to the grants themselves. The unprecedented nature

of Covid-19 support funding means application of these

conditions is open to a degree of interpretation.

The Group has recognised grant income in the period of £8.0

million, as other operating income in the income statement.

The Committee reviewed management’s calculation of the

value of grant income recognised in the year and challenged

the assumptions made around retention of both the amounts

recognised and not recognised. Having considered the view of

the external auditor, the Committee concluded that the

position adopted was based on a conservative interpretation

of available guidance but appropriate in light of the inherent

uncertainty. In reaching its conclusion, the Committee noted

that the estimation uncertainty had been disclosed in the

notes to the accounts.

Impairment reviews

Whilst not considered an area of significant estimation

uncertainty, the Committee noted that the continuing

uncertainty in respect of Covid-19 recovery and the Group’s

market capitalisation being below the carrying amount of the

Group’s net assets represented indicators of potential

impairment. Accordingly, the Committee considered both the

goodwill and store impairment reviews.

The reviews concluded that no impairment was required in

respect of the Card Factory goodwill; however impairment

charges totalling £5.0 million were required in respect of store

right-of-use assets.

The Committee considered the key assumptions made in

performing the impairment reviews and the sensitivity of

theresults to those key assumptions. Having challenged

management regarding the application of those assumptions,

the Committee was satisfied the review performed was

appropriate and had been satisfactorily disclosed in the

financial statements.

Going concern

The Board’s consideration of going concern is set out in the

Directors’ report on pages 102 and 103.

Assessment of Annual Report and Accounts

The Committee confirmed to the Board that it considered

this Annual Report and Accounts as a whole to be fair,

balanced and understandable, to the extent possible,

whilstcomplying with all applicable legal, regulatory and

reporting requirements.

Internal audit

The Group did not have its own dedicated internal audit

function during the financial year to which these accounts

relate, as the Board had previously considered that the size

and complexity of the Group’s business did not justify such

dedicated resource. During the financial year, the Group

engaged appropriate third-party experts. At the direction

of the Committee, the main areas covered by the internal

audit programme during the last year were:

• the closure of internal audit actions from the previous

year, including stock management processes, cyber risks

and National Living/Minimum Wage requirements;

• reviews of substantial upgrades to the Group’s business

continuity and disaster recovery planning;

• review of payroll processes and risks; and

• the identification of risks arising from changes to

operations and ways of working due to the Covid-19

pandemic, which included detailed reviews of claims for

Coronavirus Job Retention Support and Covid-19 grants

and rates allowances in respect of the retail store estate.

Internal audit reports are shared with KPMG LLP, who also

attend the Audit & Risk Committee’s meetings, ensuring

external auditors have full disclosure to allow them to

account for internal audit findings in their audit scope.

In line with good practice, the Committee continuously

assesses whether the approach to internal audit adopted

by the Group remains optimal and will make any

adjustments it feels necessary to ensure it supports a

rigorous control framework across the Group. The Group

has decided to enhance the approach to internal audit,

with the appointment of an experienced internal auditor,

since the year-end. This Head of Internal Audit and Loss

Prevention is invited to attend Committee meetings.

Card Factory plc Annual Report and Accounts 2022

Loss prevention

The loss prevention team and its programme of activities

are embedded in the business. Direct engagement and

regular communication with colleagues across the business

remain critical to the team’s effectiveness and the team’s

core fraud and theft detection activities are supplemented

by a programme of store audits, colleague education,

training and development.

The Committee receives regular reports on the activities of

the loss prevention team and during the period, the head of

loss prevention attended the Committee meetings.

External auditor

KPMG LLP have conducted the statutory audit for the

financial year ended 31 January 2022 and they attended all

six of the Committee meetings held during that year, as well

as the Committee meetings held in March and April 2022.

The Committee had the opportunity to meet privately with

them during the period.

The Audit Committee discussed and agreed the scope of

theaudit with the external auditor and agreed their fees in

respect of the audit. The Committee reviewed the audit

quality and the effectiveness of the external audit in line

withthe Financial Reporting Council’s ‘Practice aid for audit

committees’ (December 2019). It considered the results of

external quality inspections by the Audit Quality Inspection

Team on other KPMG clients. It also surveyed colleagues who

were engaged in the audit process to receive feedback on

how the audit was conducted, to allow it to make its own

assessment of the effectiveness of the audit process with

particular reference to audit planning, design and execution

of the audit.

The Committee also considered the effectiveness of the

audit through the reporting from and communications with

the auditor and an assessment of the auditor’s approach to

key areas of judgement and any errors identified during the

course of the audit. The Committee concluded that the audit

was effective.

The fee paid to KPMG LLP for the statutory audit of the

Group and Company financial statements and the audit of

Group subsidiaries pursuant to legislation was £370,000.

Abreakdown of fees paid to KPMG LLP during the financial

year is set out in note 3 of the financial statements on

page132.

Resolutions to reappoint KPMG LLP as auditor and to

authorise the Directors to agree their remuneration will be

put to shareholders at the AGM.

Our policy had been to tender the statutory audit at least

every ten years in accordance with applicable legislation.

AsKPMG LLP first audited the Company’s accounts as a

public interest entity for the financial year to 31 January

2015, KPMG are permitted to audit the accounts for the

period to 31 January 2024. We propose to commence a

formal retender during 2022, one year earlier than required

(for the appointee’s first audit following the retender to be

the audit for the period to 31 January 2024).

Whilst we have not conducted a competitive tender for the

audit for over ten years, the Committee and the Board continue

to believe this is in the best interests of shareholders as KPMG

LLP have developed an extensive knowledge of the Group.

KPMG appointed a new audit partner to manage the Group’s

audit process for 2019/20. The Committee considers that KPMG

LLP is sufficiently independent, as it is only engaged in audit

and there are no conflicts of interest effective in auditing

theGroup.

Audit and Risk Committee Report continued

Financial StatementsGovernanceStrategic Report

Card Factory plc Annual Report and Accounts 2022

The Committee has taken appropriate steps to ensure that

KPMG LLP is independent of the Company and has obtained

written confirmation that it complies with guidelines on

independence issued by the relevant accountancy and

auditing bodies. The Committee took account of the auditor

approach to the prior year and current year audit, the

proposed audit strategy and the fact that the current audit is

being led by the Audit Partner for only his third year, well

within the five years provided for in FRC guidance. The

Committee recognises that audit regulation has increased in

recent years, to improve audit process and independence,

which it recognises has been adopted by KPMG LLP, which

includes greater independence of audit practices within

accounting practices. Although, during the year, the Company

engaged KPMG LLP in respect of certain audit-related,

non-audit services, the fact the FRC had given its prior waivers

to KPMG LLP undertaking such non-audit engagements and

taking account of the other safeguards applied, the

Committee concluded KPMG LLP remain independent to

provide objectivity in the conduct of the current audit.

The Group has no contractual arrangements (for example,

within borrowing arrangements) that restrict its choice

ofauditor.

Use of auditors for non-audit work

The Committee recognises that the use of audit firms for

non-audit services can potentially give rise to conflicts of

interest. The Group has a formal policy regarding its use of

audit firms for non-audit services and the Committee, in

addition to being responsible for the oversight of our

auditor on behalf of the Board, also has responsibility

formonitoring how this policy is implemented.

KPMG LLP no longer provide the Company any non-audit

services other than those closely related to the audit.

The aggregate fees paid to KPMG LLP for services closely

related to the audit during the year were:

• £45,000 (equivalent to 12.2% of the audit fee).

Thisrelated to the half-year review; and

• £288,000 (equivalent to 77.8% of the audit fee). This

related to provision of audit-related assurance services in

accordance with the Company’s policy on external

auditors supplying non-audit services. The appointments

were made to provide assurance services in connection

with the Company’s financial information for the

reregistration of CF Bidco Limited as a public limited

company and transactions that did not proceed. The

Audit & Risk Committee concluded that the appointment

of KPMG LLP to undertake such non-audit services

would not compromise audit quality or threaten auditor

independence, prior to approving such appointments.

The Committee, in reaching that decision, noted that the

nature of the appointment (which was undertaken by a

different team within KPMG) was in accordance with

standard practice and the FRC had given its express

approval to KPMG’s role on these specific engagements.

Further details are given in note 3 to the financial

statements on page 132.

The Committee is satisfied that the overall levels of audit-

related and non-audit fees and the nature of services

provided, are such that they will not compromise the

objectivity and independence of our auditor. A copy of our

current policy regarding the use of audit firms for non-audit

services is available on Card Factory’s investor website

(cardfactoryinvestors.com).

This report was reviewed and approved by the Audit & Risk

Committee on 2 May 2022.

Rob McWilliam

Chair of the Audit & Risk Committee

3 May 2022

Card Factory plc Annual Report and Accounts 2022

Dear Shareholder

I am pleased to present our Directors’ Remuneration Report

for the financial year ended 31 January 2022(FY22).

Introduction

This Directors’ Remuneration Report is divided into

threesections: this Letter (pages 74 to 76; the Directors’

Remuneration Policy (pages 77 to 85); and the Annual

Report on Remuneration for the year to 31 January 2022

(pages 86 to 97).

This Letter and the Annual Report on Remuneration will

be put to shareholders for approval at the AGM on

23 June 2022, although the vote is advisory.

The Remuneration Committee is pleased with the

performance of the Executive Directors and the senior

management team during FY22, having steered the

business following an initial period of mandatory store

closures, to reopen the retail estate and deliver a

financial performance that significantly exceeded

original expectations, which has allowed the Group to

significantly reduce its net debt and bank facilities.

Thishas allowed, since the period end, release of

undertakings to use best efforts to raise equity or prepay

bank facilities from other sources of debt. In parallel

withsuccessful trading, the team have undertaken a full

review of our strategy and developed a comprehensive

plan to ensure phasing and effective implementation

torealise key strategic objectives, which includes

recruitment of new expertise to support realising these

targets. Over the period our colleague engagement

hasimproved, with significant progress made on

development of our people, with introduction of a

leadership framework, review of our culture and

valuesand further enhancement to our ESG strategy.

The Committee has concluded that the actions of

management during the year have been instrumental

inlaying solid foundations for future growth and

development. The financial performance achieved

during the year significantly exceeded expectations,

which was not funded by government support, but

through management action significantly above and

beyond what the Board expected.

Remuneration Policy

Following adoption of the Remuneration Policy at the 2021

AGM, with 94.98% of shareholder votes supporting the

revised Remuneration Policy, the Remuneration Committee

considers that this policy continues to support the business

strategy and operates as intended, with no changes

required prior to the next triennial vote expected at the

2024AGM. Within the current policy framework, the

Committee intends to introduce ESG metrics to annual

bonus targets in FY24 and will include ESG within the

performance underpin condition to RSP awards to be

granted after release of the FY22 results.

The Committee is pleased

with the performance of

the senior management

team...having delivered

a financial performance

that significantly exceeded

original expectations;

significantly reducing net

debt...securing release of

undertakings to use best

efforts to raise equity.

Chair’s Letter –

Remuneration Committee

Octavia Morley

Chair of the Remuneration Committee

Committee members

Octavia Morley (Chair)

Paul Moody¹

Roger Whiteside

Rob McWilliam

1 Paul Moody stepped down from the Remuneration Committee whilst

heundertook the interim role of Executive Chair, between 1 July 2020

and8 March 2021 to ensure compliance with the Corporate Governance

Code2018.

Financial StatementsGovernanceStrategic Report

Card Factory plc Annual Report and Accounts 2022

Application of the Remuneration Policy during FY22

The Covid-19 pandemic continued to impact the Group

through store closures for the first ten weeks of the

financialperiod, with government support taken in the

formof furlough payments and business rates relief and

grants. The Committee recognises the investor guidance

onexercise of discretion where government support is

received. It applied discretion in FY21 to reduce variable

pay entitlements (including withholding earned annual

bonus awards, reduction in the Restricted Share Awards

onvesting by 50% and introduction of additional discretion

for scale back on the grant of new RSP awards). The

Committee also recognised that the budget for the period,

(which was achieved and exceeded), had been set taking

account of the expected government support for a

relatively short initial part of the financialyear.

The Committee has deliberated at length to balance

shareholders’ interests, the interests of other stakeholders,

including colleagues and the public purse in the exercise

ofdiscretion for making variable pay decisions. The

considerations fully recognise the investor guidelines on

executive remuneration, whilst also considering the long-

term interests of investors and other stakeholders, including

the strong performance of the management team over the

period. Although government support was taken in respect

of the initial part of the financial year, the Committee

cannot disregard the excellent performance over the

remainder of the year, with cash flow from operating

activities exceeding the stretch target by £65 million and

pre-IFRS 16 EBITDA double the stretch target: an increase

of£20.3 million, where the stretch thresholds had been set

taking account of the expected government support.

Totalgovernment support for the period amounted to

£38million. This government support comprised

Coronavirus Job Retention Scheme (‘CJRS') funding (all of

which was passed on to colleagues) and business rates

relief and grants for the retail store estate. The Group also

accessed CLBILS loan facilities, which are part supported

by the government. The amount of the CLBILS facilities

have been materially reduced after the period end

following refinancing of the Group in April 2022.

Although the government support has not been repaid,

theCommittee did not think it appropriate to reduce the

Directors’ bonus payments to zero given the fact that the

bonus targets were originally set taking into account the

support received. The Committee exercised downward

discretion by disregarding the benefit of the government

support received by the Group during the period, in

assessing whether the financial targets had been achieved.

As a result of this downward discretion, for the 30% of

bonus based on pre-IFRS 16 EBITDA, the pay-out was

reduced from the full 30% to 9.4%. For the 30% of bonus

based on Cash Flow from Operating Activities the

performance exceeded the stretch target, even following

the adjustment to remove the benefit of government

support, and so the Committee was comfortable to pay at

the full 30%. In relation to the 40% of the bonus based on

the achievement of strategic objectives, the Committee

recognised that the CEO and CFO had delivered strongly

on the performance and the consequent pay-out was

26.25% and 35% out of 40% (respectively). Overall the total

bonus payable to the CEO and CFO was 66.07% and 74.4%

of maximum, respectively. The Committee is satisfied that

the consequence of applying this adjustment achieves a

proportionate outcome, recognising the interests of our

shareholders, whilst rewarding the exceptional performance

and significant outperformance after stores were able to

reopen, to ensure appropriate incentivisation and reward of

the Executive Directors, in the longer-term interests of all

stakeholders. This level of outcome is marginally below the

percentage of maximum bonus potential paid to colleagues

throughout the business.

In accordance with the Remuneration Policy, the Executive

Directors are required to reinvest one third of bonuses

received (after tax) to acquire Card Factory shares, which

ensures that these Directors are incentivised to build

longer-term shareholder value.

The Committee also assessed whether the performance

underpin had been achieved in respect of the RSP awards

granted in 2019, due to vest from 14 May 2022, in respect

ofthe three-year period to (and including) FY22. The

Committee recognised that this period was significantly

impacted by the Covid-19 pandemic, with material

improvement made in the last financial year, with net debt

and leverage at its lowest levels at the end of the period.

TheCommittee, recognising the foundations that have been

implemented which provide a solid platform for futuregrowth

and development, has resolved to approve vesting of the

RSPawards, as it considered the business performance over

the three-year period was robust, sustainable and was

strengthened by management’s actions.

How we intend to apply the proposed Remuneration Policy

in FY23

The Committee proposes to proceed as follows:

• The Committee reviewed annual salaries for Executive

Directors, for any increases to take effect on 1 April 2022,

to align pay awards with the majority of the workforce.

Following an extensive benchmarking exercise against

all roles within the Group, average wage increases

amounted to 6.3%, which is largely attributable to

increases in National Living Wage and National

Minimum Wage rates. Greater pay awards were made to

colleagues whose pay deviated most from market rates.

The Committee resolved to award the Executive

Directors a 2% increase to basic salary and commend

Darcy Willson-Rymer’s decision to decline such an

increase, despite current salary being below

benchmarked rates.

• Pension entitlements will be maintained at current levels,

with downward adjustment required to Kris Lee’s pension

contributions (3.37% of basic salary from 1 April 2022)

from the end of 2022 to fully align with the current 3% of

salary rate applicable to the majority of colleagues.

Card Factory plc Annual Report and Accounts 2022

• The maximum annual bonus entitlement will be

maintained at 125% and 100% of basic salary for the

CEO and CFO (respectively). As the Covid-19 restrictions

have been removed, with reduced onus on cash flow, the

Committee has elected to revert from a 60:40 to 70:30

apportionment between financial and strategic

objectives and to revert to adopting a single financial

EBITDA measure. The remaining 30% of total bonus will

be determined by the following strategic objectives,

aligned to the strategy:

— cardfactory.co.uk sales growth;

— growth of the retail partnership business; and

— sales growth generated from a number of strategic

initiatives.

• These objectives and achievements against them will be

reported in the next Annual Report on Remuneration

in2023.

• The Committee proposes to proceed to award Restricted

Shares after publication of the results for FY22. We will

consider the grant levels carefully in light of the

prevailing share price at the time of grant. Any awards

are proposed to adopt the performance underpin

adopted in previous years and to include assessment of

improvement to the business’s impact on society and the

environment and we propose to retain the additional

discretion to scale back awards on vesting, if necessary,

to avoid excessive returns.

Conclusion

The Committee is comfortable that the proposed

Remuneration Policy will continue to provide a strong link

tothe business strategy and provides an appropriate link

between reward and performance. Future objectives and

outcomes will be closely aligned, ensuring they support the

delivery of the Group’s strategy. The Committee will continue

to exercise its discretion, taking account of investor

guidelines, to assess benefits and reward, taking account of

the wider shareholder and other stakeholder experience.

I look forward to addressing any questions from shareholders

in respect of this Report at or in advance of the AGM and

look forward to your support on the resolutions to approve

the Annual Report on Remuneration and adopt the proposed

Remuneration Policy.

Yours sincerely

Octavia Morley

Chair of the Remuneration Committee

3 May 2022

Chair’s Letter –

Remuneration Committee continued

Financial StatementsGovernanceStrategic Report

Card Factory plc Annual Report and Accounts 2022

Introduction

The Directors’ Remuneration Policy section (pages 77 to 85)

sets out the policy which was approved by shareholders at

the 2021 AGM, which is intended to operate for the full

three-year period as permitted under the regulations.

Directors’ Remuneration Policy

Card Factory’s policy for Executive Directors’ remuneration

aims to provide a competitive package of fixed and

performance-linked pay, which supports the long-term

strategic objectives of the business. The policy has been

tested against the six factors listed in Provision 40 of the

UKCorporate Governance Code:

• Clarity – the policy is as clear as possible and is

described in straightforward concise terms to

shareholders and the workforce in this report.

• Simplicity – remuneration structures are as simple and

Restricted Shares are significantly simpler than long-term

incentive plans operated in most other UK-listed companies.

• Risk – the remuneration policy has been shaped to

discourage inappropriate risk taking through a weighting

of incentive pay towards shares, an appropriate balance

between financial and non-financial measures in the

annual bonus, recovery provisions and in-employment

and post-employment shareholding requirements.

• Predictability – elements of the policy are subject to

caps and the Restricted Shares are significantly more

predictable than long-term incentive plans operated in

most other UK-listed companies. The Committee may

exercise its discretion to adjust Directors’ remuneration if

a formula-driven incentive pay-out is inappropriate in

the circumstances.

• Proportionality – there is a sensible balance between

fixed pay and variable pay and incentive pay is weighted

to shares rather than cash.

• Alignment to culture – There will be a strong emphasis

on consistency of approach and fairness of remuneration

outcomes across the workforce.

Directors’ Remuneration Report

Policy table for Executive Director remuneration

The key components of Executive Directors’ remuneration are as follows:

Purpose and link to strategy Operation Maximum opportunity Performance metrics

FIXED PAY

Base salary

To attract and retain talent

by ensuring base salaries are

competitive in the relevant

talent market and to

reflectan Executive’s

skillsandexperience.

Base salaries are reviewed

annually, with reference to

scopeof role, individual

performance, experience,

market competitiveness of

totalremuneration, inflation

andsalary increases across

theGroup.

Increases will normally be

effective from 1 May. The

Committee have since agreed

toalign annual pay reviews of

the Executive Directors with

theannual pay reviews for the

majority of colleagues to 1 April,

effective from 1 April 2022.

Whilst there is no maximum

salary, Executive Directors’

salary increases will

normally be in line with the

average percentage

increase for the wider

employee population.

In certain circumstances

(including, but not limited

to, a material increase in

job size or complexity,

promotion, recruitment

ordevelopment of the

individual in the role or a

significant misalignment

with the market) the

Committee has discretion

to make appropriate

adjustments to salary

levelsto ensure they remain

fair and competitive.

Business and individual

performance are both

considerations in setting

base salary.

Card Factory plc Annual Report and Accounts 2022

Directors’ Remuneration Report continued

Purpose and link to strategy Operation Maximum opportunity Performance metrics

Pension

To provide post-retirement

benefits.

Executive Directors may receive

a Company contribution into

apension plan or a cash

allowance in lieu of pension.

The maximum Company

contribution or cash

allowance is the

percentage rate available

to the majority of the

workforce (currently 3%

ofsalary).

This will apply to current

and new Executive

Directors, other than

KrisLee.

Kris Lee will receive

anannual pension

contribution of c. £943 per

month (3.37% of basic

salary) until 31 December

2022, when it will align to

the percentage rate

available to the majority of

the workforce, at that time.

None

Benefits

To provide Executive

Directors with a reasonable

level of benefits.

Benefits include private medical

insurance, life insurance, income

protection and the provision of

acar or car allowance.

Where appropriate, other

benefits may be offered, for

example including, but not

limited to, relocation allowances.

There is no maximum

opportunity for benefits, as

there may be factors

outside of the Company’s

control which change the

cost to the Company (e.g.

increases in insurance

premiums).

The cost of providing

benefits for the year under

review are disclosed in the

Annual Report on

Remuneration.

None

Financial StatementsGovernanceStrategic Report

Card Factory plc Annual Report and Accounts 2022

Purpose and link to strategy Operation Maximum opportunity Performance metrics

VARIABLE PAY

Annual bonus

To focus Executives on

delivery of year-on-year

financial and non-financial

performance.

The part of the bonus

invested in shares helps

towards achieving an

appropriate balance

between year-on-year

financial performance and

longer-term value creation

and contributes to higher

executive shareholdings.

Bonus payments will be

determined based on

performance in a single financial

year and payment may be

madein cash or in shares.

If participants have not met

theminimum shareholding

requirement, one-third of any

bonus (after payment of tax)

must be used to acquire shares

in the Company, which must be

held for three years.

Robust clawback and malus

provisions apply. The Committee

has discretion to reduce the

amount of any bonus potential

and require repayment of any

bonus paid within two years

ofpayment, in the event of

material misstatement, error,

misconduct, company failure

orreputational damage.

125% of salary. Performance measures

andtargets are set by

theCommittee and the

Committee determines the

extent to which the targets

have been achieved at the

year-end.

A majority of bonus

willbebased on

financialmeasures.

The Committee may scale

back the bonus if it

considers the outcome is

not representative of the

underlying performance

ofthe Company or is

otherwise not appropriate

in the circumstances.

For achievement of

threshold performance for

any financial measure, up

to 15% of the maximum

financial target element of

the bonus is earned.

Card Factory plc Annual Report and Accounts 2022

Purpose and link to strategy Operation Maximum opportunity Performance metrics

Restricted Shares

To align the interests of

Executives with shareholders

in growing the value of the

business over the longterm.

The Committee may grant annual

awards of Restricted Shares,

structured as conditional awards

or nil-cost options.

50% of an award vests after three

years, 25% after four years and

25% after five years, subject

toservice.

All shares will be held for at least

five years from grant (except for

sales to meet tax on vesting). The

holding period and vesting period

will continue post cessation of

employment to the extent that

awards do not lapse on cessation.

An additional benefit is provided in

cash or shares equal to dividends

that would have been paid over

the vesting period or holding

period on awards that vest.

Robust clawback and malus

provisions apply. The Committee

has discretion to reduce the

amount of any unvested award

and repayment of any vested

award within two years of

vesting,in the event of material

misstatement, error, misconduct,

company failure or reputational

damage.

The Remuneration Committee

may exercise its discretion to

override a formula-driven incentive

plan outturn if this is inappropriate

in the circumstances.

87.5% of salary face

value at grant.

In order for Restricted

Shares to be capable of

vesting, the Committee

must be satisfied that

business performance is

robust and sustainable and

that management has

strengthened the business

over three financial years

commencing with the year

in which the award is

made. In assessing

performance, the

Committee will consider

financial and non-financial

KPIs of the business as well

as delivery against

strategic priorities. To the

extent it is not satisfied

with performance or that

the award would not reflect

the shareholder and other

stakeholder experience,

theCommittee may scale

backthe level of vested

awardsincluding to zero.

Fulldisclosure of the

Committee’s assessment

will be made in the Annual

Report on Remuneration

for the year in which the

assessment is made.

Directors’ Remuneration Report continued

Financial StatementsGovernanceStrategic Report

Card Factory plc Annual Report and Accounts 2022

Purpose and link to strategy Operation Maximum opportunity Performance metrics

SAYE

To encourage share

ownership across the

workforce.

A UK tax-qualified scheme

under which eligible employees

(including Executive Directors)

may save up to the maximum

monthly savings limit (as

determined by prevailing

legislation) over a period

of three or five years.

Participants are granted an

option to acquire shares at up to

a 20% discount to the price on

grant. The number of shares

under option is that which can

be acquired at that price using

savings made.

Savings are capped at the

prevailing HMRC limit at

the time eligible employees

are invited to participate or

such lower limit as

determined by the

Remuneration Committee.

None

Shareholding guidelines

To encourage share

ownership and ensure

alignment of Executive

interests with those of

shareholders, both while

they are in service and after

cessation of employment

(see below).

Requirement to build up and

maintain a beneficial holding of

shares in the Company defined

as a percentage of salary.

Executive Directors will be

required to retain shares that

vest from future Bonus and

Restricted Share awards.

Details of the current

guidelines and Executive

Director shareholdings are

included in the Annual

Report on Remuneration.

None

Performance measure selection and approach to target setting

The measures used in the annual bonus are selected to reflect the Company’s main financial KPIs and other strategic

objectives for the year. Performance targets are set to be stretching but achievable, considering the Company’s strategic

priorities and the economic environment in which the Company operates. Financial targets are set taking into account a

range of both internal and external reference points including the Group’s strategic and operating plan.

Adjustments and use of Remuneration Committee discretion

The Remuneration Committee will review formulaic annual bonus outcomes and may adjust these to ensure alignment of

pay with the underlying performance of the business. The Remuneration Committee may also adjust the calculation of

short- and long-term performance measures for outstanding LTIP (Restricted Share) awards in specific circumstances and

within the limits of applicable plan rules. Such circumstances include changes in accounting standards, major corporate

events such as rights issues, share buybacks, special dividends, corporate restructurings, mergers, acquisitions

anddisposals.

Card Factory plc Annual Report and Accounts 2022

Differences in remuneration policy operated for other employees

The policy and practice with regard to the remuneration of the senior management team below the Board will be

consistent with that of the CEO. The senior management team will participate in the same annual bonus scheme and will

receive Restricted Share awards alongside the Executive Directors.

The Policy for our Executive Directors is considered alongside the remuneration philosophy and principles that underpin

remuneration for the wider Group. The remuneration arrangements for other employees reflect the seniority of each role.

As a result, the levels and structure of remuneration for different groups of employees will differ from the policy for

Executives as set out above, but with the common intention that remuneration arrangements for all groups are fair.

Reward scenarios

The graphs below provide estimates of the potential future reward opportunities for Executive Directors and the potential split

between the different elements of remuneration under three different performance scenarios: ‘Minimum’, ‘Mid’ and ‘Maximum’.

The projected value for Restricted Shares excludes the impact of dividend accrual. The following reflects annual entitlements

and assumes that future Restricted Share awards are not scaled back (as per the Restricted Share awards granted in 2020):

Chief Executive Officer Chief Financial Officer

In illustrating potential reward opportunities, the following assumptions are made:

Fixed pay Annual bonus Restricted shares

Minimum Salary as at 1 April 2022.

The CEO receives a pension

contribution of 3% and the

CFO receives a contribution of

just over 3% of base salary

until 31 December 2022.

Benefits paid for the most

recent financial year.

No annual bonus payable. The Committee anticipates granting

new awards of Restricted Shares

worth 87.5% and 75% of base salary

for the Chief Executive and Chief

Financial Officer, respectively.

In the maximum scenario the chart

additionally shows the value of

theRestricted Shares and total

remuneration, if the share price

increases by 50%.

Mid On-target annual bonus payable

(50% of maximum).

Maximum Maximum annual bonus payable

of 125% and 100% of base

salary for the Chief Executive

and Chief Financial Officer,

respectively.

0 400 800 1200 1600 2000

Minimum

Mid

Maximum

Fixed Pay

Annual Bonus

0 200 400 600 800 1000 1200

Minimum

Mid

Maximum

29.7% 34.3% 24% 12% 11.8%

£1,639k

£1,161k

£486k

41.9%

100%

24.2% 33.9%

£1,068k

£774k

£354k

33.2% 31.4% 23.6%

45.8%

100%

22.7% 32.5%

Restricted Shares Restricted Shares with 50% share price growth

Total £942kTotal £1,443k

Chief Executive Officer

Directors’ Remuneration Report continued

Financial StatementsGovernanceStrategic Report

Card Factory plc Annual Report and Accounts 2022

Approach to remuneration for new Director appointments

In determining appropriate remuneration for a new Director, the Committee will take into consideration all relevant factors

to ensure that arrangements are in the best interests of both Card Factory and its shareholders and will be mindful not to

overpay on recruitment. The Remuneration Committee will seek to ensure that the remuneration arrangements will be in

line with those outlined in the policy table above, other than as follows:

Component Approach Maximum opportunity

Annual bonus In line with the policy, albeit with the relevant maximum normally

being prorated to reflect the proportion of employment over the year.

125% of salary

The Committee may make an award in respect of a new appointment to ‘buy out’ incentive arrangements forfeited on

leaving a previous employer. In doing so, the Committee will take account of relevant factors including any performance

conditions attached to these awards, the likelihood of those conditions being met and the proportion of the vesting period

remaining. The total value of any such ‘buy out’ incentive arrangements will not exceed that of awards forfeited on leaving

the previous employer and time to vesting will be matched.

In cases of appointing a new Executive Director by way of internal promotion, the approach will be consistent with the

policy for external appointees detailed above (save for ‘buy outs’). Where an individual has contractual commitments

made prior to their promotion to the Board, the Company will continue to honour these arrangements. Measures used for

below Board employees may be different from those used for Executive Directors to tailor incentives to a particular

division, role or individual.

Service contracts and exit payment policy

Executive Directors

The Committee sets notice periods for the Executive Directors of no more than 12 months. The Executive Directors

maybeput on garden leave during their notice period (for up to six months) and the Company can elect to terminate

theiremployment by making a payment in lieu of notice equivalent to basic salary and benefits (including pension

contributions). Any payment in lieu will be made on a monthly basis and subject to mitigation. Executive Directors’

servicecontracts are available to view at the Company’s registered office and at the forthcoming AGM.

Executive Director Date of service contract Notice period

Darcy Willson-Rymer 18 December 2020 9 months

Kris Lee 19 April 2017 9 months

If employment is terminated by the Company, the departing Executive Director may have a legal entitlement (under

statute or otherwise) to additional amounts, which would need to be met. In addition, the Committee may:

• settle any claims by or on behalf of the Executive Director in return for making an appropriate payment; and

• contribute to the legal fees incurred by the Executive Director in connection with the termination of employment,

wherethe Company wishes to enter into a settlement agreement (as provided for below) and the individual must seek

independent legal advice.

In certain circumstances, the Committee may approve new contractual arrangements with departing Executive Directors

including (but not limited to) settlement, confidentiality, outplacement services, restrictive covenants and/or consultancy

arrangements. These will be used sparingly and only entered into where the Committee believes that it is in the best

interests of the Company and its shareholders to do so.

Card Factory plc Annual Report and Accounts 2022

The Company’s policy on termination payments is to consider the circumstances on a case-by-case basis, considering the

Executive’s contractual terms, the circumstances of termination and any duty to mitigate. The table below summarises

how incentives are typically treated in different circumstances:

Plan Scenario Timing of vesting Calculation of vesting/payment

Annual bonus Default treatment No bonus is paid n/a

Death, injury, ill-health or

disability, retirement or any

other reason the Committee

may determine.

Normal payment date,

although the Committee

has discretion to accelerate.

The Committee will determine

thebonus outcome based on

circumstances and the date of

leaving. Performance against

targets is typically assessed at the

end of the year in the normal way

and any resulting bonus will be

prorated for time served during

theyear.

Shares acquired

by Directors with

annual bonus

Not applicable as shares are

purchased and owned outright by

the Executive.

Restricted Shares Default treatment Awards lapse n/a

Death, injury or disability,

redundancy, retirement, the sale

of the employing company or

business out of the Group or

any other reason as the

Committee may determine.

Normal vesting date and

holding period would

normally continue to apply,

although the Committee

has discretion to accelerate

vesting and remove the

holding requirement in

exceptional circumstances.

Any outstanding awards will

normally be prorated for service

over the three financial years

starting with the year in which the

award is made and over which the

underlying performance of the

Company will be reviewed to

determine vesting. The Committee

may disapply time prorating in

exceptional circumstances.

SAYE Treated in line with HMRC rules.

Any payments to Directors in excess of payments permitted by the Remuneration Policy in force from time to time may

only be made with prior shareholder approval.

Post-employment shareholding

Executive Directors are required to hold the lower of:

• The number of shares held by the Director on the date their employment ends, where such shares had been (or are

subsequently) acquired from Company share plan awards and investment of bonuses received before or after the

termination of employment, other than permitted sales to meet tax liabilities (but excluding shares otherwise purchased

in the market); and

• For each of the following periods following termination of the employment:

• during the first 12-month period: such number of shares that had, on the date their employment ends, the value

required to be held in accordance with the shareholding guideline applicable to that former Executive Director; and

• for the subsequent 12-month period: 50% of the value of the number of shares that had, on the date their

employment ends, the value required to be held in accordance with the shareholding guideline applicable to that

former Executive Director; and

• after 24 months: no shareholding requirement shall apply.

Non-Executive Directors

The Chair and Non-Executive Directors were appointed on the dates set out in the table below. Their letters of appointment

set out the terms of their appointment and are available for inspection at the Group’s registered office and at the AGM.

Appointments are initially for three years (subject to annual re-election at the AGM) and unless agreed by the Board, they

may not remain in office for a period longer than six years or two terms in office, whichever is shorter. The Chair and the Non-

Executive Directors may resign from their positions but must serve the Board six and one months’ written notice, respectively.

Directors’ Remuneration Report continued

Financial StatementsGovernanceStrategic Report

Card Factory plc Annual Report and Accounts 2022

Non-Executive Director Letter of appointment date

Paul Moody 19 October 2018

Octavia Morley 30 April 2014

Roger Whiteside 27 November 2017

Nathan (Tripp) Lane 9 April 2020

Rob McWilliam 11 October 2021

Non-Executive Directors are not eligible to participate in the annual bonus or any equity schemes, do not receive any

additional pension or benefits on top of their fees and are not entitled to a termination payment.

Consideration of employee remuneration and employment conditions in the Group

The Committee considers the remuneration and employment conditions elsewhere in the Group when determining

remuneration for Executive Directors. The Combined Colleague Advisory Committee was consulted on the draft of this

Remuneration Policy in May 2021 and considered the changes to align Executive Directors with the workforce to be

appropriate.

Consideration of shareholder views

The Company is committed to engaging with significant investors on remuneration matters and consulted with 11 of its

largest shareholders and three recognised investor bodies to receive their feedback and reflect their comments prior to

proposal of this Remuneration Policy to shareholders at the 2021 AGM. The majority of those consulted were supportive of

the proposals, as proposed. A small number of consultees suggested adjustments to the post-employment shareholding

requirements which were considered by the Committee but were considered not to be incorporated in the current

Remuneration Policy, taking account of guidance and other shareholder views. When determining remuneration policy and

its application, the Committee considers the guidelines of shareholder bodies and shareholders’ views. The Committee is

open to feedback from shareholders on remuneration policy and arrangements and commits to consult in advance of any

significant changes to remuneration policy or its operation. The Committee continues to monitor trends and developments in

corporate governance and market practice to ensure the structure of Executive remuneration remains appropriate.

External directorships

The Committee acknowledges that Executive Directors may be invited to become Independent Non-Executive Directors of

other quoted companies which have no business relationship with the Company and that these duties can broaden their

experience and knowledge to the benefit of the Company.

Executive Directors are permitted to accept such appointments with the prior approval of the Chair. Approval will only be

given where the appointment does not present a conflict of interest with the Group’s activities and the wider exposure

gained will be beneficial to the development of the individual. Where fees are payable in respect of such appointments,

these would be retained by the Executive Director.

Policy table for Non-Executive Director remuneration

The key components of Non-Executive Directors’ remuneration are as follows:

Purpose and link to strategy Operation Maximum opportunity Performance metrics

Non-Executive Directors’ fees

To attract Directors with

theappropriate skills and

experience, and to reflect

thetime commitment in

preparing for and attending

meetings, the duties and

responsibilities of the role

and the contribution

expected from the Non-

Executive Directors.

Annual fee for Chair and Non-

Executive Directors.

Additional fees paid for additional

roles or time commitment, e.g.

chairing Board Committees.

Non-Executive Directors do not

participate in any incentive

schemes or receive any other

benefits (other than travel

expenses, which may be

grossedup for tax).

Any increases to NED fees

will be considered following

a thorough review process

and considering wider

market factors, e.g. inflation.

The maximum aggregate

annual fee for all Directors

provided in the Company’s

Articles of Association is

£1,000,000 pa.

Performance of the

Board as a whole will

be reviewed regularly

as part of a Board

evaluation process.

Card Factory plc Annual Report and Accounts 2022

Annual Report on Remuneration

This is the Annual Report on Remuneration for the financial year ended 31 January 2022. This report sets out how the

Remuneration Policy has been applied in the financial year being reported on and how it will be applied in the coming year.

Single figure total remuneration paid to Executive Directors – audited

The table below sets out the total remuneration received by each Executive Director providing services to the Company for

the year ended 31 January 2022 and the prior year:

Paul Moody

Darcy Willson-Rymer

Kris Lee

2021/22 2020/21 2021/22 2020/21 2021/22 2020/21

Salary £22,020 £268,154 £406,154 – £327,726 £327,726

Salary supplement

– – – – £44,000 £28,000

Pension benefit

– – £12,016 – £11,302 £11,313

Taxable benefits

– – £20,759 – £12,440 £8,401

Non-taxable benefits

– – £6,517 – £4,198 £1,816

Total Fixed Remuneration £22,020 £268,154 £445,446 – £399,666 £377,256

Annual bonus

– – £334,634 – £243,828 –

LTIP (Restricted Shares)

– – – – £87,774 £32,580

SAYE

– – £961 – £961 £1,099

Total Variable Remuneration £nil £nil £335,595 – £332,563 £33,679

Total Remuneration £22,020 £268,154 £781,041 – £732,229 £410,935

1 Paul Moody held the position as Interim Executive Chair from 1 July 2020 until 8 March 2021. During this period he was entitled to his Non-Executive Chair fee of

£144,000 pa plus £30,000 per month supplement for assuming the Interim Executive Chair role. Paul Moody waived his entitlement to his additional fee (£30,000

per month) as Executive Chair for the period from 1 January 2021 to 28 February 2021. Details of fees paid before 1 July 2020 and after 8 March 2021 are set out in

the table ‘Single figure total fees paid to Non-Executive Directors – audited’. The table reports all fees paid to Paul Moody for the period of his interim appointment

as Executive Chair, from 1 July 2020 to 8 March 2021.

2 Darcy Willson-Rymer was appointed as an Executive Director (CEO) on 8 March 2021.

3 Kris Lee received a salary supplement of £4,000 per month until 31 December 2021 on account of additional responsibilities assumed in the absence of a

permanent CEO and during the new CEO’s induction period.

4 Pension benefit comprises payments to a stakeholder pension scheme (defined contribution) and/or a cash payment in lieu of pension contributions.

5 Taxable benefits comprise car or car allowance and family private medical insurance.

6 Darcy Willson-Rymer and Kris Lee are members of the Group Life Assurance and Income Protection Schemes. The amounts stated relate to insurance premiums

paid by the Group.

7 See details of 2021/22 bonus payments in the Remuneration Committee Chair’s letter and below.

8 The value for 2021/22 is the value of all Restricted Share awards granted in 2019, with a performance period that ends on 31 January 2022, which vest from 14 May

2022, applying the closing share price on 31 January 2022 of 58.5 pence. The value includes the dividend equivalent entitlement of 7.9 pence per share and a

nominal bonus award of 1 pence per share to fund the Companies Act 2006 requirement for payment of nominal value on allotment of the shares. The value for

2020/21 is the value of all Restricted Share awards granted in 2018, with a performance period that ended on 31 January 2021, which vest from 11 July 2021,

applying the closing share price on 31 January 2021 of 35.85 pence. The value includes the dividend equivalent entitlement of 22.2 pence per share and a nominal

bonus award of 1 pence per share to fund the Companies Act requirement for payment of nominal value on allotment of the shares.

9 Embedded value of SAYE options at grant. There are no performance conditions.

10 The value of SAYE awards made in 2020/21 was stated as being £2,203 in the FY21 Annual Remuneration Report, however, the actual value was £1,099.

Directors’ Remuneration Report continued

Financial StatementsGovernanceStrategic Report

Card Factory plc Annual Report and Accounts 2022

Annual bonus payments and link to performance

Bonus opportunities for 2021/22 were 125% of salary for Darcy Willson-Rymer (prorated for the proportion of the period when

appointed) and 100% of salary for Kris Lee.

The bonus was subject to achieving a range of Cash Flow from Operating Activities targets (30% of total maximum bonus

opportunity); EBITDA targets (pre-IFRS 16 adjustment for Leases) (30% of the opportunity) and Strategic Objectives (40% of

the opportunity). These bonus targets were set when the period of mandatory store closures was ascertained and accounted

for subdued footfall recovery following staged removal of government restrictions. As noted in further detail on page 75, the

bonus earned (after further adjustment applied in the exercise of discretion) were reduced to 66.07% of maximum to the CEO

and 74.4% of maximum to the CFO.

Cash Flow from Operating Activities (30% of bonus opportunity)

The Cash Flow from Operating Activities performance targets for the year and performance achieved against this element

are as set out below. The performance achieved reported below reflects a reduction in the Cash Flow from Operating

Activities by the amount of the government support received by the Group during the financial year, as explained by

application of a downward adjustment by the Remuneration Committee, as noted on page 75. This remains significantly in

excess of the stretch target even after this downward adjustment.

Performance level

2020/21 cash flow from

operating activities

target range

Percentage of total cash

flow from operating

activities bonus pool

available if performance

level achieved

Cash flow from operating

activities realised (after

adjustments)

Percentage of total bonus

pool payable (% of

maximum)

Threshold £(32.7)m 15%

£14.3m 30% of 30%Target £(22.7)m 50%

Maximum £(12.7)m 100%

EBITDA (30% of bonus opportunity)

The EBITDA (pre-IFRS 16 adjustment for Leases) performance targets for the year and final performance achieved against

this element are as set out below. The performance achieved reported below reflects a reduction in the EBITDA by the

amount of the government support received by the Group during the financial year, as explained by application of a

downward adjustment by the Remuneration Committee, as noted on page 75.

Performance level

2020/21 EBITDA (pre-IFRS

16) target range

Percentage of total

EBITDA (pre-IFRS 16)

bonus pool available if

performance level

achieved

EBITDA (pre-IFRS 16)

realised (after

adjustments)

Percentage of total bonus

pool payable

(% of maximum)

Threshold £9.6m 15%

£11.9m 9.4% of 30%Target £14.6m 50%

Maximum £19.6m 100%

Achievement against strategic objectives (40% of bonus opportunity)

The strategic objectives for the CEO and CFO were set at the start of the year and outlined in last year’s report.

The strategic objectives have been reviewed in detail with one objective not being achieved and three objectives being

partly or fully realised, giving a potential achievement for 26.67% of the maximum 40% of the total bonus opportunity for

the CEO and 35% of the maximum 40% of the total bonus opportunity for the CFO.

Card Factory plc Annual Report and Accounts 2022

The specific outcomes for each objective were as follows:

Strategic objective Link to strategy Target and stretch performance set Outcome

Bonus achieved (% of

maximum)

cardfactory.co.uk

sales growth

Multichannel is one

of the key strategic

sales channels

targeting sales and

market

sharegrowth

Threshold: cardfactory.co.uk

sales to exceed £11.875 million

Target: cardfactory.co.uk sales to

achieve £12.5 million (for 50% of

maximum potential bonus

opportunity)

Stretch: cardfactory.co.uk sales

to achieve £13.125 million (for

100% of maximum potential

bonus opportunity)

Straight-line adjustment applies

between Threshold, Target

andStretch.

£10.9 million

Reopening of stores

resulted in a reduction in

demand online as

customers returned to the

high street. Delays to

implementation of

upgrades to increase

online ranges was the

primary cause of financial

targets not being

achieved.

CEO: nil of

13.33%

CFO: nil of 5%

Refinancing Priority liquidity

situation to be

resolved following

Covid-19 to enable

the Group to

stabilise and

implement its

strategy.

Implementation of the

refinancing (no Stretch target

potential).

The Group effected a

refinancing on 21 May

2021, which included an

increase of total available

debt facilities from £200

million to £225 million,

securing increased

liquidity, if required, and

avoiding shareholder

dilution.

CEO: 13.33%

of 13.33%

CFO: 15% of

15%

Raising funding to

part prepay bank

debt by July 2022

Compliance with

obligation to banks

and stabilising the

business further to

pursue strategic

objectives.

Raising funds to part prepay

bank debt (no Stretch target

potential).

As a result of substantial

progress during the

period, after the year end,

the undertaking to the

banks to raise equity to

reduce borrowings was

successfully removed.

Profits and cash flow from

trade during the period (in

excess of original

expectations) was used to

reduce debt requirements.

This preserves shareholder

value by removing a

dilutive share issuance.

CFO: 15% of

15%

Enhance employee

engagement

Engagement is a

key component in

the advantaged,

robust and scalable

central model

strategic plan.

Threshold: FY22 ‘Be Heard’

colleague engagement score of

650 points.

Target: FY22 ‘Be Heard’ colleague

engagement score of 675 points.

Stretch: FY22 ‘Be Heard’

colleague engagement score of

681 points.

Straight-line adjustment between

Threshold, Target and Stretch.

Colleague Engagement

score of 692.8 achieved in

January 2022, a 5.6%

increase from 655.7 in

June 2021 and up 7.3%

from 645.4, pre-

pandemic. This shows

material progress towards

achieving a three-star

employer, as assessed by

Best Companies.

CEO: 13.33%

of 13.33%

CFO: 5% of

Directors’ Remuneration Report continued

Financial StatementsGovernanceStrategic Report

Card Factory plc Annual Report and Accounts 2022

Grants of Restricted Shares 2021/22 – audited

Awards of Restricted Shares were granted to the Executive Directors on 14 June 2021. The Remuneration Policy provides

for awards of shares worth 87.5% of basic salary for a CEO and 75% of salary for the CFO. The Remuneration Committee

included a further condition to the Restricted Shares, providing the Committee with an additional discretion on vesting to

permit further scale back, if necessary, to avoid excessive returns.

Executive Director

Number of

Restricted Shares

awarded

Face value

of award value

as a % of salary

Face/maximum

value of

Restricted Shares

at grant date

Measurement

period for

performance

underpin

Darcy Willson-Rymer 514,436 87.5% £393,750 1.2.21–31.1.24

Kris Lee 321,132 75% £245,795 1.2.21–31.1.24

1 Based on the average share price for the three months to and including 11 June 2021 of 76.54 pence.

For Restricted Shares to vest, the Committee must be satisfied that business performance over the three years

commencing 1 February 2021 is robust and sustainable and that management has strengthened the business. In assessing

performance, the Committee will consider financial and non-financial KPIs of the business as well as delivery against

strategic priorities. To the extent it is not satisfied with performance the Committee may scale back the level of vested

awards including to zero. There will be full disclosure in the Annual Report and Accounts of the Committee’s determination

of this ‘performance underpin’.

Upon determination by the Company’s Remuneration Committee of the full or partial satisfaction of the performance

underpin condition, any Restricted Shares will vest as follows:

• 50% of the Restricted Shares on the third anniversary of the date of grant;

• 25% of the Restricted Shares on the fourth anniversary of the date of grant; and

• 25% of the Restricted Shares on the fifth anniversary of the date of grant.

100% of the vested Restricted Shares will be subject to a holding period which (save for permitted sales to meet tax

liabilities from vesting) will normally end on the fifth anniversary of the date of grant.

2019 LTIP Restricted Share award vesting – audited

Restricted Share awards granted in May 2019 under the LTIP were subject to substantially the same performance underpin

summarised above in respect of the 2021/22 Restricted Shares, for the three financial years to and including FY22, save

that the further discretion on vesting to scale back to avoid excessive returns did not apply. Under the terms of the awards,

50% of any award that vests will vest on the third anniversary of grant (i.e. on 14 May 2022), 25% on the fourth anniversary

and 25% on the fifth anniversary.

The Committee recognised that the business performance over the period had marginally declined prior to Covid-19,

andperformance had then been significantly impacted by the Covid-19 pandemic, which was outside the control of the

management team. A material improvement was made in the last financial year, with trading performance exceeding

expectations, demonstrating exceptional performance, with net debt and leverage at its lowest levels at the end of the

period. The Committee also recognised the solid platform for future growth and development from material management

team actions. The Committee took account of the investor guidance on executive pay, with a full review of stakeholder

interests, including the interests of shareholders, colleagues, the public purse and the longer-term interests of all

stakeholders, including customers, from rewarding the exceptional performance realised in the most recent year to retain

and incentivise executives. The Committee noted that the value of the awards on vesting is nil for the CEO and £87,774 for

the CFO (applying the share price at the end of the period of 58.5 pence per share, and including the value of the dividend

equivalent and nominal bonus). On this basis, the Committee resolved to approve vesting of the RSP awards as they

considered the business performance over the three-year period was robust, sustainable and was strengthened by

management’s actions.

Card Factory plc Annual Report and Accounts 2022

SAYE – audited

Awards under the HMRC-approved SAYE plan were granted to all participating employees on 8 July 2021. Options were

granted at a discount of 20% to the share price on grant and vest after three years subject to continued employment.

As the annual award was oversubscribed, monthly savings reduced from the £250 maximum, to £201.

Executive Director

Number of SAYE

options awarded

Face/maximum

value of

awards at

grant date

% of award

vesting at

threshold

Performance

period

Darcy Willson-Rymer 13,526 £2,261 n/a n/a

Kris Lee 13,526 £2,261 n/a n/a

1 Value stated is the value of the 20% discount to the exercise price based on the share value determined over the three days to and including 11 June 2021, of 66.87

pence.

Single figure total fees paid to Non-Executive Directors – audited

The table below sets out a single figure for the total remuneration received by each Non-Executive Director for the year

ended 31 January 2022 and the prior year. Each of Octavia Morley, Paul McCrudden and Roger Whiteside waived 20% of

their fee from 1 January 2021 until 28 February 2021 and David Stead waived 100% of his fee for this period. In respect of

the first lockdown period (in 2020/21), each of the following Directors directed that the following fees be donated to The

Card Factory Foundation Covid-19 Hardship Fund: David Stead: 100% of two months’ fees; Paul Moody and Octavia

Morley: 20% of two months’ fees; Paul McCrudden and Roger Whiteside: 20% of one month’s fees.

Committee membership

Base fee paid Additional fees Total

Non-Executive Director

2021/22 2020/21 2021/22 2020/21 2021/22 2020/21

Paul Moody

(Chair) R N* £128,903 £60,000 £0 £0 £128,903 £60,000

Octavia Morley (SID) R* AR N £48,183 £48,183 £7,867 £7,867 £56,050 £56,050

David Stead

R AR* N £33,750 £37,500 £6,000 £6,667 £39,750 £44,167

Paul McCrudden R AR N £44,250 £44,250 £0 £0 £44,250 £44,250

Roger Whiteside R AR N £44,250 £44,250 £0 £0 £44,250 £44,250

Nathan (Tripp) Lane £45,000 £35,389 £0 £0 £45,000 £35,389

Rob McWilliam

R AR* N £11,250 - £2,000 £0 £13,250 -

1 The figures report only the fees paid to Paul Moody in his capacity as a Non-Executive Director prior to 30 June 2020 and after 8 March 2021. Additional fees paid

in respect of his interim executive role are reported above on page 86 (Total remuneration paid to Executive Directors – audited).

2 David Stead stepped down from the Board on 30 November 2021.

3 Rob McWilliam was appointed on 1 November 2021.

4 Committee Memberships are R=Remuneration Committee; AR=Audit & Risk Committee; N=Nomination Committee.

* Indicates the individual chairs the relevant Committee. Paul Moody stepped down from the Remuneration Committee whilst he held the interim position of

Executive Chair.

Payments to former Directors – audited

During the year, certain agreed payments were made to former CEO, Karen Hubbard, in accordance with the terms

reported in the FY21 Annual Report. Following assessment of the performance underpin for the three-year period to

31 January 2022 in respect of the Restricted Shares granted in May 2019, as Karen Hubbard was deemed a good leaver,

after scale back of awards to account for the part of the performance period to 30 June 2021, during which she was

involved in the business, a maximum of 143,985 shares were capable of vesting, in aggregate, of which 71,992 shall vest

from 14 May 2022; 35,996 shall vest from 14 May 2023; and 35,997 shall vest from 14 May 2024, subject to the rules of the

Long Term Incentive Plan and the terms of grant.

The Company also paid, in aggregate, £81,590.86 to former CEO, Karen Hubbard on account of salary and contractual

benefits to 26 March 2021, as payments in lieu of notice. No other payments for loss of office have been paid.

Directors’ Remuneration Report continued

Financial StatementsGovernanceStrategic Report

Card Factory plc Annual Report and Accounts 2022

Historical TSR performance and CEO remuneration

The graph below illustrates the total shareholder return (‘TSR') of Card Factory against the FTSE 250 Index and FTSE

Small Cap Index over the period since the Group listed on 20 May 2014. These indices have been chosen as they are

recognised, broad-equity market indices of which the Group has been a member for this period.

CEO 2021/22

2020/21

2019/20 2018/19 2017/18 2016/17

2015/16 2014/15

Single figure of remuneration (£’000) 829 525 593 611 496 1,005 951 884

Annual bonus outcome (% of max) 66% – 10% 15% – 20% 79% 77%

LTIP vesting (% of max) n/a 50% – – n/a 46.6% n/a n/a

1 For 2021/22, the amounts set out in the single figure table on page 86 are grossed up, on a pro rata basis to show the position for comparison purposes assuming

Darcy Willson-Rymer had been appointed from 1 February 2021 rather than 8 March 2021 (the date of his actual appointment).

2 For 2020/21 this represents all remuneration paid to Karen Hubbard to 30 June 2020 (the date of her resignation) and payments to Karen Hubbard during her period of

garden leave to 31 December 2020 and the proportion of the pro rata Restricted Share award that vested in July 2021.

3 For 2016/17 this represents the aggregate single figure for Karen Hubbard (from date of appointment as CEO) and Richard Hayes (to date of stepping down as CEO).

Percentage change in remuneration of Directors and all employees

The table below shows the change each year for each Director’s salary/fees, benefits and bonus, for each of the last two

financial periods, as compared to the salary change for all employees (excluding such Directors), based on a total full-time

equivalent reward for the relevant financial year. Where a Director was appointed or resigned part way through the

financial year, their salary/fees, benefits and bonus are grossed up to reflect as full-year equivalent to provide for

meaningful reflection for the year-on-year change:

Executive Directors Non-Executive Directors

Year-on-Year change %

Average

employee

Darcy

Willson-

Rymer

Karen

Hubbard²

Kristian

Lee

Paul

Moody

Octavia

Morley

David

Stead

Paul

McCrudden

Roger

Whiteside

Nathan

(Tripp) Lane

Rob

McWilliam

FY22 compared to FY21

Salary/Fees 4.7% 1.0% – 4.5% -54.0% 0% 0% 0% 0% 0% n/a

Bonus 45.9% 100% – 100% n/a n/a n/a n/a n/a n/a n/a

Benefits -35% -60.8% – 77% n/a n/a n/a n/a n/a n/a n/a

FY21 compared to FY20

Salary/Fees 5.3% – -7.9% 9.07% 127.88% -1.67%³ -16.67%

-1.67%³ -1.67%³ n/a –

Bonus -64.3% – -100% -100% n/a n/a n/a n/a n/a n/a –

Benefits 12.8% – 58.53% 91.83% n/a n/a n/a n/a n/a n/a –

1 The Average Employee is the FTE for all UK Group employees.

2 Darcy Willson-Rymer’s remuneration information stated is on the basis of the details in note 1 to the preceding table, with comparison to the total salary paid to

Karen Hubbard, former CEO, on the basis stated in note 2 to the preceding table.

3 Reduction in fees received is attributable to waivers of fees by Directors.

100

150

200

250

31 January

2022

31 January

2021

31 January

2020

31 January

2019

31 January

2018

31 January

2017

31 January

2016

31 January

2015

20 May

2014

Value of £100 invested at IPO (£)

Card Factory

FTSE 250

FTSE SmallCap

£100 Invested TSR

Card Factory plc Annual Report and Accounts 2022

CEO to employee pay ratio

FY22 Method

25th percentile

pay ratio

Median

pay ratio

75th percentile

pay ratio

Ratio Option A 31.9 : 1 24.8 : 1 23.5 : 1

Employee salary £14,607 £18,765 £19,840

Employee total remuneration £15,045 £19,364 £20,435

2020/21 ratio Option A 31.4 : 1 30.6 : 1 29.5 : 1

Card Factory has chosen Option A (pursuant to the Large and Medium-sized Companies and Groups (Accounts and

Reports) Regulations 2008 (as amended)), which provides a comparison of the Company’s full-time equivalent total

remuneration for all UK employees against the CEO for the FY22 financial year) as the most appropriate methodology to

report the ratio, in line with the recommendation from the UK Government Department for Business, Energy and Industrial

Strategy and shareholder and proxy-voting bodies. For the purposes of this comparison, the remuneration package of the

CEO has been used, with an assumption that they had been appointed from the start of the financial year and the ratio

for 2020/21 was produced on the basis set out in note 2 to the CEO pay table on page 91. As for the CEO pay ratio for the

prior year, furlough payments (at 80% of pay) were grossed up to 100% to to ensure consistent basis for comparison

purposes. Employee remuneration as at 31 January 2022 was used for determination of the FY22 pay ratio information

reported above.

The Committee considers pay ratios as one of many reference points when considering remuneration. Throughout the Group,

pay is aligned with our pay principles, is structured to be as consistent as possible and is market-competitive in the context of the

sector in which we operate. The Committee notes the limited comparability of pay ratios across companies and sectors, given

the diverse range of business models and employee population profiles which exist across the market. A significant proportion of

the CEO’s potential pay is delivered in variable remuneration which may therefore fluctuate significantly on a year-to-year basis.

The ratios have moved slightly year-on-year, primarily due to changes in incentive plan pay-outs for the CEO.

Distribution statement

The charts below illustrate the year-on-year change in total remuneration for all employees and total shareholder distributions

(‘TSD'). The materially reduced total remuneration for 2020/21 is partly attributed to the fact that remuneration includes

payments made to colleagues receiving reduced wages on furlough, pursuant to the Coronavirus Job Retention Scheme (and

equivalent schemes in Ireland), where there were extended periods of reduced wage payments during 2020/21 as mandatory

store closures applied for a larger proportion of the period.

100

120

140

2020/212021/22

£84.1m

£108.6m

Total remuneration

(up 29.2%)

£m

£0m £0m

Total Shareholder Distributions

(no change)

2021/22 2020/21 Dividend

£m

Directors’ Remuneration Report continued

Financial StatementsGovernanceStrategic Report

Card Factory plc Annual Report and Accounts 2022

Statement of shareholder voting

The following table shows the results of the shareholder votes on the Annual Report on Remuneration and for the

Directors’ Remuneration Policy at the 2021 Annual General Meeting:

Remuneration Policy

2021

Annual Report on Remuneration

2021

Total number

of votes % of votes cast

Total number

of votes % of votes cast

For (including discretionary) 189,960,737 94.98 196,343,511 98.19

Against 10,033,932 5.02 3,618,099 1.81

Total votes cast (excluding withheld votes) 199,994,669 – 199,961,610 –

Total votes withheld

29,676 – 62,735 –

Total votes cast (including withheld votes) 200,024,345 – 200,024,345 –

1 A withheld vote is not a vote in law and is not counted in the calculation of the proportion of votes cast for and against a resolution.

Directors’ shareholdings and interest in shares – audited

The Committee sets shareholding guidelines for Executive Directors. The current guideline is to build and maintain, over

time, a holding of shares in the Company equivalent in value to at least 250% and 200% of base salary for the CEO and

CFO, respectively. The Executive Directors have not yet met the shareholding guideline.

Director

Shares held Options held

Owned

outright

Unvested

and not

subject to

performance

Unvested

and

subject to

performance

Vested

but not

exercised

Unvested

and subject

to continued

employment

Current

shareholding

(% of salary/

fee

)

Shareholding

requirement

(% of salary/

fee)

Guideline

met?

Executive Directors

Darcy Willson-Rymer 84,112 – 514,436 – 13,526 10.9% 250% No

Kris Lee 35,046 157,816 692,199 – 26,780 6.1% 200% No

Non-Executive Directors

Paul Moody 200,000 – – – –

Octavia Morley 13,333 – – – –

Roger Whiteside 22,520 – – – –

Nathan (Tripp) Lane 200,000 – – – –

Rob McWilliam 357 – – – –

Paul McCrudden ³ – – – – –

1 Including shares owned by connected persons.

2 Calculated using the closing share price of the Company on Friday 31 January 2022 of 58.5 pence.

3 Paul McCrudden stepped down from the Board on 31 January 2022.

There have been no changes in the numbers of shares owned by the Directors and their connected persons between the

end of the year and the date of this report.

During the year, no share options under the SAYE plan were exercised by the Directors.

Card Factory plc Annual Report and Accounts 2022

Details of Directors’ interests in shares in incentive plans – audited

Date of

grant

Share price

at grant

Exercise

price

Number

of shares

awarded

Face value

at grant Performance period Exercise period

Darcy Willson-Rymer

Restricted shares¹ 14.06.21 76.54p n/a 514,436 £393,750 01.02.21 – 31.01.24 n/a

SAYE 08.07.21 66.87p 53.496p 13,526 £9,044 – 01.08.24 – 31.01.25

Kris Lee

Restricted shares¹ 14.06.21 76.54p n/a 321,132 £245,794 01.02.21 – 31.01.24 n/a

Restricted Shares¹ 12.10.20 39.74p n/a 371,067 £147,475² 01.02.20 – 31.01.23 n/a

Restricted Shares¹ 14.05.19 188.74p n/a 130,229 £245,795 01.02.19 – 31.01.22 n/a

Restricted Shares¹ ³ 11.07.18 214.1p n/a 27,587 £59,064 01.02.18 – 31.01.21 n/a

SAYE

08.07.21 66.87p 53.496p 13,526 £9,044 – 01.08.24 – 31.01.25

SAYE 27.10.20 33.95p 27.16p 13,254 £4,500 – 01.12.23 – 31.05.24

1 The number of shares comprising each RSP award was calculated based on the average, middle-market quotation of a share in the capital of the Company over

the three months prior to the date of grant.

2 Restricted Share award to Kris Lee made in 2020 was scaled back by 40% of the policy level, following exercise of discretion by the Remuneration Committee,

having regard to the change in share price as a result of the then current market environment.

3 Kris Lee’s original award in 2018 was granted over 110,346 shares. This award was reduced to 55,173 following the Remuneration Committee’s decision to permit

only 50% of the award to vest. 50% of the award vested 11 July 2021, with the balance subject to future vesting.

4 As announced on 6 July 2021, on 6 July 2021 Kris Lee cancelled his option granted under the SAYE plan in July 2019 to acquire 5,844 shares at an option price of

£1.54 per share, which was capable of exercise from 1 August 2022.

How the Policy will be applied in FY23

Covid-19 and exercise of discretion

The Committee is optimistic that the Covid-19 pandemic will have a diminishing impact on the Group during FY23, with

targets set for variable pay in the expectation that footfall will continue to recover and trading performance will improve,

with inflationary pressures believed to be fully accounted for the year ahead. The Committee recognises the need to

consider whether any discretion should be exercised in respect of variable remuneration, in particular in connection with

any excessive reward that may arise from recovery of share price, in respect of share awards. The Committee will report on

this in next year’s Annual Report and Accounts but will act reasonably and proportionately, taking into account the

interests and experiences of all of the business’s key stakeholders and mitigating actions taken by the business throughout

the pandemic.

Salary

The salaries of the Executive Directors with effect from 1 April 2022 are as follows:

Executive Director 1 April 2022¹ 1 May 2021

Darcy Willson-Rymer £450,000² £450,000

Kris Lee £335,726 £359,726³

1 The Committee has aligned timing for annual pay awards for the majority of all colleagues, including the Executive Directors, from 1 May to 1 April in each year,

with effect from 1 April 2022.

2 Darcy Willson-Rymer declined a 2% increase to basic salary which was approved by the Committee.

3 Kris Lee’s basic salary from 1 May 2021 was £327,726 p.a. The salary stated for the 12- month period from 1 May 2021 (which was the date annual pay awards were

subject to review in 2021, took effect, includes a supplemental sum of £4,000 per month that was paid to 31 December 2021 as noted in note 3 to the single figure

remuneration table on page 86.

Benefits and pension

These will be paid in line with the Policy.

Directors’ Remuneration Report continued

Financial StatementsGovernanceStrategic Report

Card Factory plc Annual Report and Accounts 2022

Annual bonus

The annual bonus for the current financial year (FY23) is capped at 125% and 100% of salary for the CEO and CFO

(respectively), up to 70% of which can be realised if financial target of Group EBITDA (post IFRS 16) is achieved and the

remaining 30% can be realised from achievement of strategic objectives.

The financial targets have been set by the Committee and will require Executive Directors to deliver significant stretch

performance compared to the budget approved by the Board for the financial year. Given the close link between these

targets and Card Factory’s competitive strategy, financial targets are considered commercially sensitive but will be

published in next year’s Annual Report on Remuneration.

The objectives set for both the CEO and CFO for 2022/23, which are substantially shared (as appropriate) by all of the

senior management team, with the proportion of each individual’s bonus in respect of the strategic objectives adjusted to

reflect their influence on each objective, are as follows:

Objective Link to strategy Target and Stretch performance set

Bonus potential

(% of maximum

bonus opportunity)

Financial objectives 70% total

EBITDA (post IFRS 16)

based target

Group financial performance

and improvement in profitability.

15% of full opportunity if Threshold is

achieved; 50% of opportunity if Target

isachieved; and 100% of full opportunity

ifStretch is achieved. Straight-line

adjustment for results between

Threshold, Target and Stretch.

70%

Strategic objectives 30% total

cardfactory.co.uk growth Omnichannel is one of the

keystrategic sales channels

targeting sales and market

sharegrowth.

Net sales targets for cardfactory.co.uk.

15% of full opportunity if Threshold is

achieved; 50% of opportunity if Target

isachieved; and 100% of full opportunity

if Stretch is achieved. Straight-line

adjustment for sales between Threshold,

Target and Stretch.

15%

Retail partnership growth Development of retail

partnerships is a key growth

sales channel.

Threshold, Target and Stretch targets

have been set based on developing retail

partnerships and building foundations

for further expansion of retail

partnerships in FY24.

Realisation of sales growth

from strategic initiatives

Realisation of key strategic

priorities.

Achievement of incremental sales during

FY23 from core strategic initiatives: price

increases; growth in complementary

categories and Model Stores. 15% of full

opportunity if Threshold is achieved;

50% of opportunity if Target is achieved;

and 100% of full opportunity if Stretch is

achieved. Straight line adjustment for

sales between Threshold, Target

andStretch.

10%

1 Quantums for Target and Stretch for each objective are commercially sensitive and will be published in the Annual Report on Remuneration for the year to

31 January 2023.

Card Factory plc Annual Report and Accounts 2022

Restricted Shares

The precise grant levels have not yet been finalised, but we anticipate that Restricted Shares will be granted over shares with

avalue at the time of grant of up to 87.5% of salary and 75% of salary for the Chief Executive and Chief Financial Officer,

respectively.

In order for Restricted Shares to vest, the Committee must be satisfied that business performance is robust and sustainable

andthat management has strengthened the business. The Committee has resolved to include an additional criterion to the

performance underpin for new RSP awards granted from 2022, requiring the business to improves it impact on society and the

environment. In assessing performance, the Committee will consider financial and non-financial KPIs of the business as well as

delivery against its strategic priorities. To the extent it is not satisfied with performance the Committee may scale back the level

of vested awards including to zero. The Remuneration Committee expects to include a further condition to the Restricted

Shares, providing the Committee with an additional discretion on vesting to permit further scale back to avoid excessive returns.

There will be full disclosure in the Annual Report and Accounts of the Committee’s determination of the performance underpin

and/or scale back on vesting to address windfalls.

Shareholding requirement

The level of shareholding required to be built and maintained is equivalent to 250% and 200% of salary for the CEO and

CFO, respectively.

Non-Executive Director fees

The agreed Non-Executive Director fees are set out below. The Board resolved, and in respect of the Chair, the

Remuneration Committee resolved, each having taken advice from Korn Ferry, and taking account of comparative data

for similar companies, to increase the Non-Executive Director fees and the Chair’s fees by 2% with effect from 1 April 2022.

From 1 April 2022

Prior to 1 April

2022

Base fees

Chair £146,880 £144,000

Senior Independent Director £49,980 £49,000

Non-Executive Director £45,900 £45,000

Additional fees

Chair of the Remuneration Committee £8,160 £8,000

Chair of the Audit & Risk Committee £8,160 £8,000

Remuneration Committee membership and advisors

The Remuneration Committee during the period comprised between four and six Non-Executive Directors, all of whom

were independent before appointment: Octavia Morley (Chair), David Stead (prior to 30 November 2021), Paul McCrudden

(prior to 31 January 2022), Roger Whiteside, Rob McWilliam (from 1 November 2021) and (save when he assumed an

executive role) the Non-Executive Chair, Paul Moody. A more detailed explanation of the Remuneration Committee’s

roleisset out in the Corporate Governance Report on pages 63 and 64 and a copy of its terms of reference,

whichcomplywith the UK Corporate Governance Code, is available on Card Factory’s investor relations website

(cardfactoryinvestors.com).

The Committee fulfils its duties with a combination of both formal meetings and informal consultation with relevant

parties, both internal and external. Its principal external advisors are Korn Ferry, who were appointed by the Committee

following a tender process during 2018. Korn Ferry does not provide any other services to the Company. Korn Ferry is

asignatory to the Code of Conduct for Remuneration Consultants in the UK, details of which can be found on the

Remuneration Consultants Group’s website at remunerationconsultantsgroup.com. Accordingly, the Committee is

satisfiedthat the advice received is objective and independent. Fees of £14,967 (inc. VAT) were paid to Korn Ferry

duringthe financial year.

Directors’ Remuneration Report continued

Financial StatementsGovernanceStrategic Report

Card Factory plc Annual Report and Accounts 2022

Committee activities

During 2021/22, up to the approval of this Report, the Committee met to consider the following remuneration matters:

• to complete the consultation with shareholders and representative bodies on the proposed changes to the

Remuneration Policy which was approved by shareholders at the 2021 AGM;

• to review the operation of the remuneration policy in 2021/22 and assess appropriateness of the policy;

• to consider performance against targets and resulting bonus payments for 2020/21 and vesting of the 2019 Restricted

Share awards under the Long Term Incentive Plan;

• to finalise the financial targets for the 2021/22 annual executive bonus plan (after mandatory store closure periods were

ascertained) and to consider measures and targets for the 2022/23 annual executive bonus;

• to review the recruitment and remuneration for several senior management roles;

• assessment of good leaver designations and approval of terms for certain senior leavers;

• to review developing trends in remuneration market practice, investor guidelines and governance including various

Covid-19 related guidance;

• to review and consider wider Group remuneration policies and practices and the approach to employee engagement as

it relates to remuneration matters; and

• to formally approve the Directors’ Remuneration Report as set out in this Annual Report.

The work of the Remuneration Committee

Set out below are those areas of the Committee’s work that it is required to report under the Code and reporting

regulations and which are not covered elsewhere in this Directors’ Remuneration Report.

Engagement with stakeholders

The Committee completed its consultation with shareholders on the changes proposed to be made to the Directors’

Remuneration Policy that was approved by shareholders at the 2021 AGM. Support for the Directors’ Remuneration Policy

that was adopted at the 2021 AGM was almost 95% and the 2020/21 Directors’ Remuneration Report at the 2021 AGM

received support from shareholders holding more than 98% of the votes cast and there were no material concerns for the

Committee to consider from the AGM voting outcomes. Encouragingly our employee engagement scores increased

significantly during the year, as assessed using a pulse survey from ‘Be Heard’, assessed by Best Companies Limited.

Details are set out in the annual executive bonus outcomes for 2021/22, above. Card Factory continues to work on some of

the key themes and outputs from the survey and we continue with the Combined Colleague Advisory Group (‘CCAG’)which

complements existing forms of employee engagement. It also forms the basis of engagement on those matters specifically

required under the Code, including to explain the alignment of the Executive Directors’ Remuneration Policy to the wider

Group. Following Paul McCrudden’s resignation at the end of the financial year, Paul Moody has been appointed as

Designated Director to lead the Board’s consultation of colleagues via the CCAG. Further details of stakeholder

engagement are set out on pages 23 to 31.

Determining Executive Director remuneration

The Committee considers the appropriateness of the Executive Directors’ remuneration, not only in the context of overall

business performance and environmental, governance and social matters, but also in the context of wider workforce pay

conditions (taking into account workforce policies and practices as well as the ratio of CEO pay to all-employee pay) and

external market data, to ensure that it is fair and appropriate for the role, experience of the individual, responsibilities

andperformance delivered.

More specifically the Committee will continue to give consideration to the impact of Covid-19 on the operation of

theDirectors’ Remuneration Policy given its significant impact on the Group’s performance during the current year, in

particular in respect of the exercise of discretion in respect of bonus and share awards and in setting any new targets

forfuture annual bonus schemes.

Wider workforce matters

The Committee, as part of its wider remit under the Code, considers workforce remuneration policy and practices.

Thisincludes our Gender Pay statistics, which are published on our investor relations website (cardfactoryinvestors.com)

and our DE&I policy which is summarised on page 27 and in the Nomination Committee Report. TheCommittee has also

considered the Group’s wider review of remuneration across the entire workforce following an extensive grading of roles

and benchmarking of remuneration and benefits associated with each role.

Approved by the Board of Card Factory plc on 2 May 2022 and signed on its behalf by

Octavia Morley

Chair of the Remuneration Committee

3 May 2022

Card Factory plc Annual Report and Accounts 2022

The Committee has been active over the last year with a

number of senior appointments, significant progress on

DE&I, succession planning and values review, with an

external Board effectiveness review.

The Committee recognises the importance of ensuring

CardFactory is a truly diverse and inclusive employer and

supports customers of all backgrounds to celebrate all

occasions that are important to them. The Committee

recognises that the Board is not representative of the

diversity in our workforce or communities and aims to further

address this in its current recruitment of a Non-Executive

Director. The female representation on the Board currently

comprises 14%, with 25% of the executive board being

female. The Board recognises the need to improve on this.

The Company retained Spencer Stuart to undertake a

market search to recommend candidates for the role of

Non-Executive Director and Chair of the Audit & Risk

Committee. The Committee reviewed a range of

candidatesand undertook multiple interviews of those

shortlisted which resulted in the unanimous resolution to

appoint Rob McWilliam. Odgers Berndtson have been

retained to identify Non-Executive Director candidates

following Paul McCrudden’s decision to step down from

theBoard.

Neither Spencer Stuart, nor Odgers Berndtson have any

connection to the Company or any of the Directors.

The succession planning undertaken to date has identified

development opportunities and potential gaps for

succession planning. The business continues to further

develop the people offer, which includes focus on non-

financial benefits, including learning and development

opportunities to support career progression, which is also

regularly reviewed as internal promotion data is constantly

reviewed as a KPI.

In addition to further progressing the Group’s DE&I strategy,

the Committee will focus on addressing development

opportunities identified from the succession planning

undertaken for the senior management team and to

progress succession planning for the direct reports to this

team. An internally conducted Board effectiveness review

will also be undertaken.

There remains much to be done throughout the

organisation, but the Committee is pleased with progress

todate and we will further update shareholders in next

year’s Annual Report.

Yours sincerely

Paul Moody

Chair of the Nomination Committee

3 May 2022

The Committee has been active

over the last year with a number

of senior appointments, significant

progress on DE&I, succession

planning and values review,

with an external board

effectiveness review.

Chair’s Letter –

Nomination Committee

Paul Moody

Chair of the Nomination

Committee

Committee members

Paul Moody (Chair)

Octavia Morley

Roger Whiteside

Rob McWilliam

Dear Shareholder

The Nomination Committee’s activities during the year

have focused on:

• Appointment of Rob McWilliam as a Non-Executive

Director, with relevant financial experience to succeed

David Stead as Chair of the Audit & Risk Committee;

• Initial engagement to commence a search to appoint

an additional Non-Executive Director to address the

vacancy arising from Paul McCrudden’s decision to

step down from the Board at the end of the financial

year. This search is ongoing;

• Review of relevant experience and recommendation

that Paul Moody be appointed as the Designated

Director (for the purpose of engagement with the

workforce), following Paul McCrudden’s resignation;

• Review of recent and proposed appointments to the

senior management team, including a Business

Development Director, Customer Marketing Director,

Chief Information Officer and a Digital Director;

• Review of succession planning for the Board, the

senior management team and their direct reports

andapproach to succession plans being undertaken

throughout the business;

• Overseeing the extensive colleague consultation

leading to development of the DE&I strategy and

arefresh of the Group’s values; and

• Effecting the externally moderated annual Board

effectiveness review.

Financial StatementsGovernanceStrategic Report

Card Factory plc Annual Report and Accounts 2022

This report provides details of the role of the Nomination

Committee, the work it has undertaken during the year and

details of how it intends to carry out its responsibilities

going forward.

Role of the Nomination Committee

The purpose of the Committee is to:

• assist the Board by keeping the composition and

performance of the Board and its Committees

under continuous review to ensure it has the

necessary balance of skills and experience to fulfil

its purpose;

• ensure a thorough and transparent process is

adopted for making new appointments to the

Board; and

• oversee diversity, inclusion and succession, not

only within the Board but across the Group’s

senior management team.

A more detailed explanation of the Nomination

Committee’s role is set out in the Corporate Governance

Report on page 64 and the Committee’s terms of reference,

which are published on Card Factory’s investor website

(cardfactoryinvestors.com), comply with the UK Corporate

Governance Code.

Membership

The Nomination Committee is chaired by Paul Moody and

its other members during the year were Octavia Morley,

David Stead (until 30 November 2021), Paul McCrudden

(until 31 January 2022), Roger Whiteside and (from

1 November 2021) Rob McWilliam. The Company Secretary

acts as secretary to the Committee.

Meetings

The Committee met three times during the year with details

of attendance set out in the Corporate Governance Report

on page 61. In addition to formal meetings, the Chair has,

where necessary, consulted with Committee members on

an ad hoc basis during the year.

Committee activity

The Committee’s main activity during the year and its plans

for the year ahead, are as described in more detail in the

introductory letter to this report.

DE&I Policy

Our policy is that the Board and the Group’s senior

management team should always be diverse, with selection

being made irrespective of personal attributes, but we feel

that quotas are not appropriate as they are likely to lead to

compromised decisions on Board and senior management

team membership, quality and size.

We will, however, seek to ensure that specific effort is made,

both at Board and senior management team level, to bring

forward female candidates and those from a range of

ethnicand social backgrounds for appointments. We are

committed to providing equal opportunities for all our

colleagues and to having a diverse workforce of gender, age,

nationality, education and background. We are a founding

signatory, alongside 50 other leading retailers, to the British

Retail Consortium’s Diversity and Inclusion Charter, launched

in March 2021. Details of some of our commitments can be

found in the ESG Report from page 42.

We published our Gender Pay Gap Report in April 2022,

which reports on the gender pay gap as at 5 April 2021.

Thisreport does not reflect the Group’s entire workforce as

colleagues on furlough were required to be excluded from

the calculations. Consequently, pay data for only 3.9% of

colleagues was used in calculating the gap, the majority of

which were roles based in the support centre where males

hold more senior roles than females. The report highlights

anissue of gender imbalance in senior roles. A copy of the

report has been published on Card Factory’s investor website

(cardfactoryinvestors.com).

Details of the gender balance as at 31 January 2022 within

the Group are set out on page 28.

Board evaluation

The Company engaged Trusted Advisory Partnership Ltd

(Toby Lapage-Norris) to conduct an independent

evaluation of the Board’s effectiveness. Neither Trusted

Advisory Partnership Ltd nor Toby Lapage-Norris had

anyprior connection with the Company or any individual

Director. Further details are set out in the Corporate

Governance Report on page 64. Board evaluation will

continue to be conducted on an annual basis, with an

internally facilitated evaluation scheduled to be completed

during the financial year to 31 January 2023.

Tenure and re-election of Directors

In accordance with the UK Corporate Governance Code,

allthe Directors will seek election or re-election (as

appropriate) at the next AGM on 23 June 2022.

Paul Moody

Chair of the Nomination Committee

3 May 2022

Nomination Committee Report

100

Card Factory plc Annual Report and Accounts 2022

The Directors present their report together

with the audited financial statements for

the year ended 31 January 2022.

Introduction

This section of the Annual Report and Accounts includes

additional information required to be disclosed under

theCompanies Act 2006 (‘the Companies Act’), the UK

Corporate Governance Code 2018 (‘the Code’ or ‘the UK

Corporate Governance Code’), the Disclosure Guidance

andTransparency Rules (‘the DTRs’) and the Listing Rules

(‘the Listing Rules’) of the Financial Conduct Authority.

Some of the information we are required to include in

theDirectors’ Report is included in other sections of this

AnnualReport and Accounts and is referred to below.

Where reference is made to these other sections, they

areincorporated into this report by reference.

Incorporation, listing and structure

The Company was incorporated and registered in England

and Wales on 17 April 2014 under the Companies Act with

registration number 9002747.

The entire issued ordinary share capital of the Company is

admitted to the premium listing segment of the Official List

of the Financial Conduct Authority and to trading on the

London Stock Exchange main market for listed securities.

The liability of the members of the Company is limited.

The Company is domiciled in the United Kingdom and

itsregistered office is at Century House, Brunel Road,

Wakefield 41 Industrial Estate, Wakefield, West Yorkshire,

WF2 0XG. Thetelephone number of the Company’s

registered office is +44 1924 839150.

Strategic Report

The Strategic Report, which was approved by the Board on

2 May 2022 and is set out on pages 1 to 55, contains a fair

review of the Group’s business, a description of the Group’s

emerging and principal risks and uncertainties facing the

Group and an indication of the likely future developments

of the Group.

The review is intended to be a balanced and comprehensive

analysis of the development and performance of the

Group’s business during the financial year and the position

of the Group’s business at the end of that year. The report

includes, to the extent necessary for an understanding of

the development, performance or position of the Group’s

business, analysis using financial key performance

indicators.

The Strategic Report also includes the main trends and

factors likely to affect the future development, performance

and position of the Group’s business. It also includes

information about environmental matters (including

reporting in accordance with the Task Force on Climate-

Related Financial Disclosures (‘TCFD')), the Group’s

employees, social and community issues and about

howweengage with our stakeholders.

This Directors’ Report should be read in conjunction with

the Strategic Report, which also contains details of the

principal activities of the Group during the year. When

taken together, the Strategic Report and this Directors’

Report constitute the management report for the purposes

of DTR 4.1.8 R.

Results and dividends

The consolidated profit/(loss) for the Group for the year

after taxation was £8.1 million (FY21: £(13.6) million).

Theresults are discussed in greater detail in the Chief

Financial Officer’s Review on pages 32 to 37.

No final dividend is proposed in respect of the period

ended 31 January 2022 (FY21 final dividend: nil). No interim

dividend has been paid in respect of the period ended

31 January 2022 (FY21: nil).

Post year-end events

We completed a refinancing of the Group on 21 April 2022,

details of which are set out in the Chief Financial Officer’s

Review on page 36.

Otherwise, there have been no other significant post

year-end events.

Share capital, shareholders and restrictions on transfers

of shares

The Company has only one class of shares: ordinary shares

of 1 pence each.

Further details of the Company’s share capital, including

changes in the issued share capital in the year under review,

are set out in note 19 to the financial statements which form

part of this report on page 143. No additional shares have

been issued between the end of the financial year under

review and the date of approval of this report. As such, the

total issued share capital of the Company as at2 May 2022

(being the latest practical date before publication of this

report) is 341,878,341. No shares are held in treasury.

Details of awards outstanding under share-based incentive

schemes are given in note 25 to the financial statements

which form part of this report on pages 149 and 150. Details

of the share-based incentive schemes in place areprovided

in the Directors’ Remuneration Report on pages 80 and 81.

Directors’ Report

101

Financial StatementsGovernanceStrategic Report

Card Factory plc Annual Report and Accounts 2022

The rights and obligations attaching to the ordinary

sharecapital of the Company are contained within the

Company’s Articles of Association (‘Articles’) which were

adopted on 28 July 2021.

The Articles do not contain any restrictions on the transfer

of ordinary shares in the Company other than the usual

restrictions applicable where any amount is unpaid on

ashare. Certain restrictions are also imposed by laws

andregulations (such as insider trading and marketing

requirements) and requirements of the Listing Rules

whereby Directors and certain employees of the Company

require approval of the Company in order to deal in the

Company’s shares.

Shareholder and voting rights

All members who hold ordinary shares are entitled to

attend and vote at the AGM. On a show of hands at a

general meeting every member present in person shall have

one vote and on a poll, every member present in person or

by proxy shall have one vote for every ordinary share held.

No shareholder holds ordinary shares carrying special

rights relating to the control of the Company.

Substantial shareholders

At 2 May 2022 the following had notified the Company of a

disclosable interest of 3% or more of the nominal value of

the Company’s ordinary shares:

Shareholder

No. of

ordinary shares

Percentage of

issued share capital

Teleios Capital Partners LLC

68,397,212 20.01

Artemis Investment

Management LLP

34,575,569 10.01

Mr Stuart Middleton

18,035,477 5.28

Majedie Asset

Management Limited

16,819,832 4.92

The Wellcome Trust 10,733,554 3.14

The shareholdings noted above reflect the notifications

received as at 31 January 2022.

Change of control

There are no agreements between the Company and its

Directors or employees providing for additional compensation

for loss of office or employment (whether through resignation,

redundancy or otherwise) that occurs because of a

takeoverbid.

The only significant agreement to which the Company is a

party that takes effect, alters or terminates upon a change of

control of the Company following a takeover bid, and the

effect thereof, is the Company’s committed bank facilities

dated 17 April 2014 (as amended and restated) and the

Coronavirus Large Business Interruption Loans, which contain

a provision such that, in the event of a change of control, the

facilities may be cancelled and all outstanding amounts,

together with accrued interest, will become repayable on the

date falling 30 days following written notice being given by

the lenders that the facility has been cancelled.

Transactions with related parties

The only material transactions with related parties during

the year were those transactions detailed in note 28 on

page 151 of the Annual Report and Accounts.

Directors

The Directors of the Company and their biographies are

setout on pages 56 and 57. Details of changes to the Board

during the period are set out in the Corporate Governance

Report on page 58. Details of how Directors are appointed

and/or removed are set out in the Corporate Governance

Report on page 65.

Powers of Directors

Specific powers of the Directors in relation to shares and

the Company’s Articles of Association are referred to in the

Corporate Governance Report on pages 65 and 66.

As at 31 January 2022, the Directors had shareholder

authority, granted at the AGM in 2021, to effect a purchase

by the Company of up to 34,167,993 of its own shares. None

of this authority had been used during FY22. This authority

is proposed to be renewed at the AGM to be held in 2022.

Directors’ indemnities and insurance

Information relating to Directors’ indemnities and the Directors’

and Officers’ liability insurance that the Company has

purchased is set out in the Corporate Governance Report on

page 66.

Employees

Information relating to employees of the Group is set out on

pages 26 to 28.

Share incentive schemes in which employees participate

are described in the Directors’ Remuneration Report on

pages 80 and 81 and in note 25 to the financial statements

on pages 149 and 150.

Greenhouse gas emissions

The ESG Report on page 52 sets out the greenhouse gas

emissions disclosures required by the Companies Act 2006

(Strategic Report and Directors’ Report) Regulations 2013.

Political donations

The Group has not made any political donations in the past

and does not intend to make any in the future.

Treasury and risk management and financial instruments

The Group’s approach to treasury and financial risk

management is explained in the Principal Risks and

Uncertainties section on page 39. In that section, beginning

on page 38, there is also a list of the principal risks and

uncertainties that affect or are likely to affect the Group.

The financial position of the Group, its cash flow, liquidity

position and borrowing facilities are described in the CFO’s

review on pages 32 to 37.

102

Card Factory plc Annual Report and Accounts 2022

Tax

The Group pays corporation tax on its operations in the United Kingdom and does not operate in any tax havens or

useany tax avoidance schemes. A copy of the Group’s tax strategy is available on Card Factory’s investor website

(cardfactoryinvestors.com).

Disclosures required under Listing Rule 9.8.4R

In accordance with Listing Rule 9.8.4C, the information required to be disclosed in the Annual Report by Listing Rule 9.8.4R

isdetailed in the following sections:

Disclosure Cross reference

Amount of interest capitalised by the Group during FY22

andthe amount and treatment of any related tax relief.

Not Applicable

Any information required by Listing Rule 9.2.18R

(publicationof unaudited financial information).

Not Applicable

Details of any long-term incentive schemes. Page 80

Details of any arrangements under which any Director has

waived or agreed to waive any emoluments for FY22 or any

future emoluments.

Pages 86 and 90

Details of cash allotments of shares by Card Factory plc or

any major subsidiary undertaking, during FY22.

See note 7 to the notes to the Parent Company financial

statements on page 158

Details of any contract of significance subsisting during FY22. Not Applicable

Details of any contract for the provision of services to the

Group by a controlling shareholder subsisting during FY22.

Not Applicable

Details of any arrangement under which a shareholder has

waived or agreed to waive any dividends.

Not Applicable

A statement by the Board in respect of any agreement with

acontrolling shareholder.

Not Applicable

Disclosure required under Listing Rule 7 (Corporate Governance)

The Corporate Governance Report on pages 59 to 67 contains disclosures required under Listing Rules 7.2.2, 7.2.3, 7.2.5,

7.2.6 and 7.2.7, which form part of this Directors’ Report.

Disclosure required under Listing Rule 9.8.6(8)R

The Company has included climate-related disclosures consistent with the TCFD recommendations and recommended

disclosures (dated June 2017) as updated by the Task Force’s 2021 Annex, on pages 53 and 54 of this Annual Report. The

Company’s compliance with the TCFD reporting and identification of the matters which the Company is not yet compliant

with, are set out on pages 53 and 54. The sections referenced in the final column of the table on pages 53 and 54 explain

the status of the Company’s progress to be able to fully report against the TCFD requirements in future years.

Going concern

The Board continues to have a reasonable expectation that the Group has adequate resources to continue in operation

for at least the next 12 months and that the going concern basis of accounting remains appropriate.

The Covid-19 pandemic and associated restrictions imposed by governments in the jurisdictions in which the Group

operates, which required the Group’s retail outlets to close for approximately eight months during the FY21 and FY22

financial years, have had a significant impact on the Group’s financial performance. During this time, the Board has

focused on careful management of cash flow and de-leveraging the business.

The Group has prepared cash flow forecasts for the 12 months following the date of approval of these accounts which

incorporate the updated debt facility and related covenant measures. These forecasts are based on the approved budget

and business plan and include the Board’s assumptions on trading performance, including the extent and speed of the

recovery of store sales following reopening, and the timing of cash flows including amounts where payment was deferred

due to Covid-19.

Directors’ Report continued

103

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Card Factory plc Annual Report and Accounts 2022

The Board’s trading assumptions are cautious compared to

the Group’s actual experience since stores reopened and

model a gradual recovery to pre-Covid-19 levels, with

negative overall LFL sales forecast in FY23 when compared

to FY20.

These forecasts indicate that the Group would have

significant headroom within its agreed financing

arrangements and would comfortably meet all covenant

tests within those arrangements, and would be able to settle

its liabilities as they fall due for the duration of the forecasts.

Whilst the current outlook is positive, the pandemic is not

over. Accordingly, the Group has therefore modelled a

number of severe, but plausible, downside scenarios

involving further closures of its stores, including scenarios

where government imposed lockdowns require a two-

month closure during the winter period. The Group’s

assumptions regarding trading in lockdown periods and the

impact on fixed and variable overheads was based on the

Group’s actual experience in FY21 and FY22 and included

assumptions regarding government support, particularly

inrespect of salary costs and business rates, consistent

withthe support received during previous lockdowns.

Theprojections did not assume any further grant income,

nor additional discretionary cost savings.

In all cases, the scenario analysis indicated that, whilst

theimpact would be severe, the Group would meet the

covenant thresholds in its financing facilities and maintain

sufficient liquidity to meet its liabilities as they fall due.

The Group also modelled more extreme scenarios, beyond

those considered reasonably foreseeable. The analysis

demonstrated that the Group had additional headroom in

its forecasts and the existence of further mitigations that

could be taken, if required.

Based on these factors, the Board has a reasonable

expectation that the Group has adequate resources and

sufficient loan facility headroom and accordingly the

accounts are prepared on a going concern basis.

Longer-term viability

In accordance with the UK Corporate Governance Code,

the Directors have assessed the viability of the Group over

a period longer than that required in respect of going

concern. The assessment has been made taking into

account the Group’s current position, business plan, and

theprincipal risks and uncertainties described in the

Strategic Report on pages 39 to 41.

In making this statement, the Board has carried out a

robust assessment of the emerging and principal risks

facing the Group, including those that would threaten its

business model, future performance, solvency, or liquidity.

Viability period

The Directors have determined that the five years to

31 January 2027 is an appropriate period over which to

provide its viability statement, being the timeframe used by

the Board in its strategic planning process, consistent with

the Group’s investment cycles, and covers the period over

which the Group’s available financing facilities extend to.

Board assessment

The Board has reviewed the Group’s detailed five-year

strategic plan (the ‘Plan’), including an assessment of the

key operational and financial assumptions, and considered

downside scenarios and stress testing.

The Plan was updated to reflect the impact of the new

financing facilities agreed in April 2022. See page 36 for

further details.

The Plan assumes a conservative growth model as the Group

emerges and recovers from the impact of the Covid-19

pandemic. In addition, the Plan includes expected cost

headwinds arising from global freight costs, wage inflation,

and the impact of rising prices on energy and utility costs.

The plan indicates that the Group will remain profitable, cash

generative, maintain adequate liquidity headroom against

its available financing facilities, and be compliant with the

financial covenants set out in its new facilities agreed in April

2022 across the five-year viability horizon.

In assessing viability, the Board has considered a variety of

downside scenarios arising from the Group’s principal risks

and uncertainties. These downside risks included severe,

but plausible, scenarios arising from further outbreaks of

Covid-19 that require significant restrictions to be re-

imposed. Whilst these reviews do not consider all the

possible scenarios that the Group might face, the Directors

consider that this assessment of the Group’s prospects is

reasonable in light of the particular uncertainties facing the

Group at this time.

In particular, the Directors noted that in the scenarios

considered and in more severe, less plausible, scenarios, a

reasonable degree of further actions would be available to

the Group to mitigate the effects of downside risks. Such

mitigating actions could include further curtailing of

discretionary operating and capital expenditure.

Whilst there continue to be inherent risks and uncertainties

in the Group’s wider operating environment, the Board is

confident that the Group continues to have access to

sufficient liquidity to meet its liabilities as they fall due and

manage reasonably foreseeable downside scenarios if they

should arise. This assessment is based upon the Group’s

current financial position, supported by cash management

and de-leveraging action taken over the preceding two

years, and the headroom in the Group’s newly agreed

financing facilities. Accordingly, the Board confirms that it

has a reasonable expectation that the Group will be able to

continue in operation and meet its liabilities as they fall due

in the period to 31 January 2027.

104

Card Factory plc Annual Report and Accounts 2022

Assumption Assumption limitations

Available funding

The Group renegotiated its financing facilities with its

banking syndicate in April 2022 (see page 36), with the

overall size of facilities reduced to £150 million over an

extended term to September 2025.

The key limitation in respect of financing relates to the ability

of the Group to meet its covenant requirements in order to

continue to access available facilities. The Board is satisfied

that, under the newly agreed facilities, the Group should have

sufficient headroom to meet covenant requirements across

the viability period, including in downside scenarios. Scenario

analysis included consideration of a two-month lockdown

scenario during FY23, when covenant headroom is expected

to be at its tightest.

Store sales recovery

The Plan assumes a gradual build-back to pre-Covid-19

levelsof trade following lower revenues as a result of

thepandemicin FY21 and FY22. The Board is mindful of

continued uncertainty over how consumers will choose

toshop post-pandemic; however this is reflected in the

Group’s omnichannel strategy.

Downside scenarios considered include considering the

pace or extent of recovery and shopping habits as the

wider economy emerges from the pandemic, reflected in

consideration of lower than expected like-for-like sales.

Capital investment

The Group’s capital investment plans remain focused on

supporting key strategic initiatives to deliver the Plan.

Capital investment is entirely within the control of the

Board. Reducing capital expenditure, if required, reflects

akey mitigation in severe downside scenarios.

Strategic initiatives

The Plan reflects the Group’s strategic initiatives and

reflectsthe stated ambition to reach revenues of

£600million by FY26.

The Board undertakes a full review of principal risks and

uncertainties, and downside scenarios taking into account

the impact of the Group’s ability to deliver its strategy

arereviewed.

Distributions to shareholders

The Group is currently prohibited from making distributions

to shareholders until such time as its CLBILS facilities are

fully repaid. The Board has considered the Group’s capital

management policy going forwards and expects to consider

return to payment of dividends after repayment of the

CLBILS and £11.25 million term loan facility (expected by

January 2024), subject to the Leverage ratio being 1.5x

orless.

Capital management is entirely within the control of

theBoard and accordingly there are no limitations to

theseassumptions.

Directors’ Report continued

105

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Card Factory plc Annual Report and Accounts 2022

Disclosure of information and appointment of auditors

So far as each Director is aware, there is no relevant audit

information of which the Company’s auditor is unaware and

the Directors have taken all the steps which they ought to

have taken as Directors to make themselves aware of any

relevant audit information and to establish that the

Company’s auditor is aware of that information.

This confirmation is given and should be interpreted in

accordance with the provisions of Section 418 of the

Companies Act. On behalf of the Board, the Audit & Risk

Committee has reviewed the effectiveness, performance,

independence and objectivity of the existing external

auditor, KPMG LLP, for the year ended 31 January 2022 and

concluded that the external auditor was in all respects

effective, as explained on pages 72 and 73. KPMG LLP has

expressed its willingness to continue in office as auditor.

Accordingly, and in accordance with Section 489 of the

Companies Act, resolutions to reappoint KPMG LLP as

auditor and to authorise the Directors to determine its

remuneration will be proposed at the forthcoming AGM

ofthe Company.

Information regarding forward-looking statements

The reports and financial statements contained in this

Annual Report and Accounts contain certain forward-

looking statements with respect to the financial condition,

results of operations and businesses of Card Factory plc.

These statements and forecasts involve risk, uncertainty

and assumptions because they relate to events and depend

upon circumstances that will occur in the future. There are

anumber of factors that could cause actual results or

developments to differ materially from those expressed or

implied by these forward-looking statements and forecasts.

Nothing in this Annual Report and Accounts should be

construed as a profit forecast.

AGM

The AGM of the Company will be held at 11.00am on

23 June 2022 at the Company’s registered office at

CenturyHouse, Brunel Road, Wakefield 41 Industrial

Estate,Wakefield WF2 0XG. A formal notice of meeting,

explanatory circular and aform of proxy will accompany

this Annual Report and Accounts. Shareholders are

encouraged to submit their questions in advance and

tosubmit their votes by proxy inaccordance with the

instructions in the enclosed documents.

Responsibility statement of the Directors in respect of

theAnnual Report and Accounts

This statement is set out on page 106.

Approval of the Annual Report

The Strategic Report and the Corporate Governance

Report were approved by the Board on 2 May 2022 and

signed on its behalf by

Ciaran Stone

Company Secretary

3 May 2022

106

Card Factory plc Annual Report and Accounts 2022

The Directors are responsible for preparing the Annual Report

and the Group and parent Company financial statements in

accordance with applicable law and regulations.

Company law requires the Directors to prepare Group and

parent Company financial statements for each financial

year. Under that law they are required to prepare the Group

financial statements in accordance with UK-adopted

international accounting standards and applicable law and

have elected to prepare the parent Company financial

statements on the same basis.

Under company law the Directors must not approve the

financial statements unless they are satisfied that they give

a true and fair view of the state of affairs of the Group and

parent Company and of the Group’s profit or loss for that

period. In preparing each of the Group and parent

Company financial statements, the Directors are

requiredto:

• select suitable accounting policies and then apply them

consistently;

• make judgements and estimates that are reasonable,

relevant and reliable;

• state whether they have been prepared in accordance

with UK-adopted international accounting standards;

• assess the Group and parent Company’s ability to

continue as a going concern, disclosing, as applicable,

matters related to going concern; and

• use the going concern basis of accounting unless they

either intend to liquidate the Group or the parent

Company or to cease operations or have no realistic

alternative but to do so.

The Directors are responsible for keeping adequate

accounting records that are sufficient to show and explain

the parent Company’s transactions and disclose with

reasonable accuracy at any time the financial position of

the parent Company and enable them to ensure that its

financial statements comply with the Companies Act 2006.

They are responsible for such internal control as they

determine is necessary to enable the preparation of

financial statements that are free from material

misstatement, whether due to fraud or error and have

general responsibility for taking such steps as are

reasonably open to them to safeguard the assets of

theGroup and to prevent and detect fraud and other

irregularities.

Under applicable law and regulations, the Directors are

also responsible for preparing a Strategic Report, Directors’

Report, Directors’ Remuneration Report and Corporate

Governance Statement that complies with that law and

those regulations.

The Directors are responsible for the maintenance and

integrity of the corporate and financial information

included on the Company’s website. Legislation in the UK

governing the preparation and dissemination of financial

statements may differ from legislation in other jurisdictions.

In accordance with Disclosure Guidance and Transparency

Rule 4.1.14 R, the financial statements will form part of the

annual financial report prepared using the single electronic

reporting format under the TD ESEF Regulation. The

auditor’s report on these financial statements provides

noassurance over the ESEF format.

Responsibility statement of the Directors in respect of the

Annual Report and Accounts

We confirm that to the best of our knowledge:

• the financial statements, prepared in accordance with

the applicable set of accounting standards, give a true

and fair view of the assets, liabilities, financial position

and profit or loss of the Company and the undertakings

included in the consolidation taken as a whole; and

• the Strategic Report includes a fair review of the

development and performance of the business and the

position of the issuer and the undertakings included in

the consolidation taken as a whole, together with a

description of the principal risks and uncertainties that

they face.

We consider the Annual Report and Accounts, taken as a

whole, is fair, balanced and understandable and provides

the information necessary for shareholders to assess the

Group’s position and performance, business model

andstrategy.

By order of the Board

Darcy Willson-Rymer Kristian Lee

Chief Executive Officer Chief Financial Officer

3 May 2022 3 May 2022

Statement of Directors’ Responsibilities

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Card Factory plc Annual Report and Accounts 2022

Independent auditor’s report

to the members of Card Factory plc

1. Our opinion is unmodified

We have audited the financial statements of Card Factory

plc (‘the Company’) for the year ended 31 January 2022

which comprise the Consolidated income statement,

Consolidated statement of comprehensive income,

Consolidated statement of financial position, Consolidated

statement of changes in equity, Consolidated cash flow

statement, Parent Company statement of financial position,

Parent Company statement of changes in equity, Parent

Company cash flow statement and the related notes,

including the accounting policies in note 1 to both the

Group and parent Company financial statements.

In our opinion:

• the financial statements give a true and fair view of the

state of the Group’s and of the parent Company’s affairs

as at 31 January 2022 and of the Group’s profit for the

year then ended;

• the Group financial statements have been properly

prepared in accordance with UK-adopted international

accounting standards;

• the parent Company financial statements have been

properly prepared in accordance with UK-adopted

international accounting standards and as applied in

accordance with the provisions of the Companies Act

2006; and

• the financial statements have been prepared in

accordance with the requirements of the Companies

Act2006.

Basis for opinion

We conducted our audit in accordance with International

Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.

Our responsibilities are described below. We believe that

the audit evidence we have obtained is a sufficient and

appropriate basis for our opinion. Our audit opinion is

consistent with our report to the audit committee.

We were first appointed as auditor by the shareholders

on30 April 2014. The period of total uninterrupted

engagement is for the 8 financial years ended 31 January

2022. We have fulfilled our ethical responsibilities under,

and we remain independent of the Group in accordance

with, UK ethical requirements including the FRC Ethical

Standard as applied to listed public interest entities.

Nonon-audit services prohibited by that standard

wereprovided.

Overview

Materiality:

Group financial

statements as a whole

£2.3m (2021: £2m)

4.9% (2021: 5.0%)

of average PBTCO

Coverage

98% (2021: 100%) of total

profits and losses that made

up Group profit before tax

Key audit matters vs 2021

Recurring risks Recoverability of Group goodwill

and of parent’s investment

insubsidiaries

Net realisable value

ofinventories

Completeness, existence and

accuracy of the stock counts for

store inventory and accuracy of

the costing calculations for

allinventory

Event driven New: Lockdown grants related to

Covid-19

2. Key audit matters: our assessment of risks

of material misstatement

Key audit matters are those matters that, in our

professional judgement, were of most significance in the

audit of the financial statements and include the most

significant assessed risks of material misstatement (whether

or not due to fraud) identified by us, including those which

had the greatest effect on: the overall audit strategy; the

allocation of resources in the audit; and directing the

efforts of the engagement team. We summarise below the

key audit matters, in decreasing order of audit significance,

in arriving at our audit opinion above, together with our key

audit procedures to address those matters and, as required

for public interest entities, our results from those

procedures. These matters were addressed, and our results

are based on procedures undertaken, in the context of, and

solely for the purpose of, our audit of the financial

statements as a whole, and in forming our opinion thereon,

and consequently are incidental to that opinion, and we do

not provide a separate opinion on these matters.

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Card Factory plc Annual Report and Accounts 2022

The risk Our response

Recoverability of

group goodwill and of

parent’s investment

insubsidiaries

(Group goodwill:

£313.8 million;

2021:£313.8 million;

parent Company

Investments in

subsidiaries

£316.2million;

2021:£316.2 million)

Refer to page 71

(Audit Committee

Report), page 123

(other sources

ofestimation

uncertainty),

page129

(accounting policy)

and page 136

(financial

disclosures).

Forecast-based assessment

There is a risk that the business may

not meet expected growth projections

in order to support the carrying value

of the goodwill, or the parent

Company’s investment in subsidiaries.

The risk remains significant in light of

the fact that goodwill is not supported

by the market capitalisation of the

Group. Additionally forecasting future

levels sales and costs is challenging in

the current economic environment.

The group of cash-generating units

towhich goodwill is allocated,

predominantly comprises of subsidiary

company, Sportswift (trading in the

name of Card Factory), which makes

up substantially all of the recoverable

amount of the parent Company’s

investment in subsidiaries.

The directors considered the

recoverability of the goodwill balance

and the parent Company investment

subsidiaries through a value in use

calculation that had underlying

assumptions of varying sensitivity.

Theestimated recoverable amount

issubjective due to the inherent

uncertainty involved in forecasting

adiscounting future cash flows.

The effect of these matters is that,

apart of our risk assessment, we

determined that the value in use of

goodwill and the recoverable amount

the cost of investment in subsidiaries

has a high degree of estimation

uncertainty, with a potential range of

reasonable outcomes greater than our

materiality for the financial statement

as a whole. In conducting our final

audit work, we concluded that

reasonably possible changes to the

value in use would not be expected

toresult in material impairment.

Our procedures also included:

— Sensitivity analysis: Performed breakeven analysis on

the key assumptions.

— Benchmarking assumptions: Challenged and

compared the Group’s assumptions, including forecast

sales, growth in future periods, discount rate and

terminal value, to externally derived data in relation to

key inputs such as projections of economic growth and

inflation, sector analyses; and analysts’ reports.

— Our valuation expertise: Used our own valuation

specialists to assist us in assessing the appropriateness

of the discount rate applied by the Group, including

benchmarking the inputs used in the Group’s capital

asset pricing model (CAPM).

— Comparing valuations – Goodwill: Compared the sum

of the discounted cash flows to the Group’s market

capitalisation to assess the reasonableness of those

cashflows.

— Comparing valuations – Parent’s investment:

Compared the carrying amount of the investment

withthe expected value of the business based on the

value-in-use determined in the goodwill.

— Assessing transparency: Assessed whether the Group’s

disclosures about the sensitivity of the outcome of the

impairment assessment to changes in key assumptions

reflected the risks inherent in the valuation of goodwill.

— Assessing transparency: Assessed the adequacy of the

parent Company’s disclosures in respect of the

investment in subsidiaries.

We performed the tests above rather than seeking to

relyon any of the Group’s controls because the nature of

thebalances are such that we would expect to obtain

auditevidence primarily through the detailed

proceduresdescribed.

Our results:

— We found the Group’s conclusion that there is no

impairment of goodwill and of the parent Company’s

investment in subsidiaries to be acceptable

(2021:acceptable).

Independent auditor’s report continued

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Card Factory plc Annual Report and Accounts 2022

The risk Our response

Net realisable value

ofInventories

(£33.1 million;

2021:£36.4 million)

Refer to page 70

(Audit Committee

Report), page 122

(key sources of

estimation

uncertainty), page

129 (accounting

policy) and page 140

(financial

disclosures).

Subjective estimate

The Group has significant levels of

inventory, which includes estimates to

be made in relation to slow moving

and obsolete inventory.

The effect of these matters is that we

determined that the net realisable

value of inventory has a high degree of

estimation uncertainty with a potential

range of reasonable outcomes greater

than our materiality for the financial

statements as a whole.

Our procedures also included:

— Our sector experience: Assessed the appropriateness

of the Group’s inventory provisioning policies based on

our understanding of the business and changes in the

Group’s merchandising strategy.

— Retrospective evaluation: Critically assessed

movements of the provision in the year to evaluate the

historical accuracy of the inventory provision estimate.

— Re-performance: Reperformed the provision

calculations based on the Group’s provisioning policy

and for a sample of stock lines, agreed the

categorisation of each line to underlying

documentation.

— Expectation vs. outcome: We formed our own

expectation of the inventory provision using our own

view of the key assumptions above and compared our

expectation to the actual provision amount. This

included consideration of historical experience, post

yearend sales data and any changes in the Group’s

stock holding strategy.

— Test of detail: Compared, by product, for a sample of

inventory lines, inventory levels to sales data in the

period leading up to the yearend to assess whether

slow moving and obsolete inventories, had been

appropriately identified and provided for by the Group

based on the provisioning policy.

— Assessing transparency: Assessed the adequacy of the

Group’s disclosures about the degree of estimation

involved in arriving at the net realisable value of

inventories.

We performed the tests above rather than seeking to rely

on any of the Group’s controls because the nature of the

balance is such that we would expect to obtain audit

evidence primarily through the detailed procedures

described.

Our results:

— We found the Group’s assessment of the net

realisablevalue of inventories to be acceptable

(2021:acceptable).

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Card Factory plc Annual Report and Accounts 2022

The risk Our response

Completeness,

existence and

accuracy of the stock

counts for store

inventory and

accuracy of the costing

calculations for

allinventory

(£33.1 million;

2021:£41.1 million)

Refer to page 70

(Audit Committee

Report), page 129

(accounting policy)

and page 140

(financial

disclosures).

Physical quantities of store stock:

Store inventory quantities held at the

year end are determined by year end

physical counts. Controls over the

yearend counts of store inventory

arethemselves manual in nature.

Accordingly, given the high volume and

broad range of inventory held there is

arisk that quantities of store inventory

could be incorrectly recorded.

Calculation error:

The inventory costing calculations

across both store and warehouse stock

are manual in nature. Given the high

volume and broad range of inventory

held there is a risk that cost could be

incorrectly recorded.

Our procedures also included:

— Count design and attendance: Assessed the design

and implementation of the store count procedures

through attendance at a sample of store inventory

counts.

— Physical inspection: Physical inspection of stock on a

sample basis, through in-person attendance of a

sample of store stock counts at year end.

— Test of details – Quantities: Selected a sample of stock

lines to assess whether the counted quantities agreed

to the stock system and followed up on how variances

(if any) within our sample were resolved.

— Analytical procedure: Identified a selection of outlier

stores based on a number of factors such as stock

levels per square foot of selling space. For each outlier

selected we evaluated the specific characteristics of

the store (such as location) which led them to be

outliers. We then assessed the stock levels recorded by

comparison to other stores with similar characteristics.

— Re-performance: For a sample of inventory lines held in

stores and in warehouses, reperformed the standard

cost calculations and agreed each input to invoice or

other supporting documentation.

We performed the detailed tests above rather than seeking

to rely on operating effectiveness of any of the Group’s

controls because our knowledge of these controls indicated

that we would be unable to obtain the required evidence to

support reliance on controls.

Our results:

— The results of our procedures were acceptable

(2021:acceptable).

Independent auditor’s report continued

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Card Factory plc Annual Report and Accounts 2022

The risk Our response

Lockdown grants

related to Covid-19

(£8.0 million

Lockdown grant

related income;

2021: £nil)

Refer to page 71

(Audit Committee

Report), page 123

(key sources of

estimation

uncertainty),

page126

(accounting policy)

and page 132

(financial

disclosures).

Subjective estimate

The Group have recognised

£8.0million in respect of lockdown

grants related to Covid-19 but have

received amounts in excess of this.

These grants are subject to state aid

caps and the external guidance

around eligibility is evolving

andcomplex.

The effect of these matters is that we

determined that the range of possible

outcomes, with respect to the amounts

the Group will be eligible to keep,

exceeds our materiality for the

financial statements as a whole.

Our procedures also included:

— Our sector experience: Assessed Group’s position

against our interpretation of the available external

guidance, with the assistance of our internal subject

matter experts.

— Methodology implementation: Critically assessed the

calculation of possible outcomes and directors’ point

estimate to determine whether these aligned with the

available external guidance.

— Re-performance: Independently prepared our best

estimate, through consultation with our internal subject

matter experts using our interpretation of the guidance

in place.

— Assessing transparency: Assessed the adequacy of the

Group’s disclosures about the degree of estimation

involved in arriving at the amount for lockdown grants

related to Covid-19 to be recognised in the financial

statements.

Our results:

— We found the Group’s assessment of the amounts

recognised in respect of lockdown grants related to

Covid-19 to be acceptable.

We continue to perform procedures over going concern. However, following the reopening of the store portfolio in the

financial year and the refinancing agreed on 21 April 2022 which resulted in changes to the covenant arrangements in

place we have not assessed this as one of the most significant risks in our current year audit and, therefore, it is not

separately identified in our report this year as a key audit matter.

Additionally, we continue to perform procedures over the recoverability of shop property, plant and equipment and

right-of-use assets, however the improved performance in this financial year, following the reopening of the store portfolio,

has removed the impairment trigger identified in the prior year. Consequently, we have not identified this as one of the

most significant risks in our current year audit and, therefore, it is not separately identified in our report this year.

112

Card Factory plc Annual Report and Accounts 2022

3. Our application of materiality and an overview of the

scope of our audit

Materiality for the Group financial statements as a whole

was set at £2.3 million (2021: £2 million), determined with

reference to a benchmark of Group profit before tax,

normalised by averaging over the last five years (2021:

averaging over last three years) mainly due to volatility

caused by the Covid-19 pandemic. It represents 4.9%

(2021:5.0%).

Materiality for the parent Company financial statements

asa whole was set at £1.4 million (2021: £1.4 million),

determined with reference to a benchmark of parent

Company total assets, of which it represents 0.4%

(2021:0.4%).

In line with our audit methodology, our procedures on

individual account balances and disclosures were

performed to a lower threshold, performance materiality, so

as to reduce to an acceptable level the risk that individually

immaterial misstatements in individual account balances

add up to a material amount across the financial

statements as a whole.

Performance materiality was set at 75% (2021: 75%) of

materiality for the financial statements as a whole, which

equates to £1.7 million (2021: £1.5 million) for the Group and

£1.05 million (2021: £1.05 million) for the parent Company.

We applied this percentage in our determination of

performance materiality because we did not identify

anyfactors indicating an elevated level of risk.

We agreed to report to the Audit Committee any corrected

or uncorrected identified misstatements exceeding

£0.115million (2021: £0.050 million), in addition to other

identified misstatements that warranted reporting on

qualitative grounds.

Of the Group’s 6 (2021: 6) reporting components, we

subjected 4 (2021: 6) to full scope audits for Group purposes.

The components within the scope of our work accounted

for the percentages illustrated opposite.

For the residual components in 2022, we performed

analysisat an aggregated Group level to re-examine our

assessment that there were no significant risks of material

misstatement within these.

The work on all components subject to full scope audits

forGroup purposes, including the audit of the parent

Company, was performed by the Group team.

The scope of the audit work performed was predominately

substantive as we placed limited reliance upon the Group’s

internal control over financial reporting.

Independent auditor’s report continued

Normalised Group

profit before tax

£47.4m (2021: £40.4m)

Group materiality

£2.3m (2021: £2m)

£1.8m

Range of materiality at

4(2021:6) components

(£0.4m-£1.8m) (2021:

£0.2mto£1.8m)

Full scope for group audit purposes 2022

Full scope for group audit purposes 2021

Residual components

Normalised PBT

Group materiality

Group revenue

Group total assets

Total profits and losses

that made up group

profit before tax

95%

(2021: 100%)

99%

(2021: 100%)

98%

(2021: 100%)

£2.3m

Whole financial statements

materiality (2021: £2m)

£1.7m

Whole financial statements

performance materiality

(2021: £1.5m)

£0.115m

Misstatements reported

totheaudit committee

(2021:£0.050m)

100

100 100

95 98

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Card Factory plc Annual Report and Accounts 2022

4. We have nothing to report on going concern

The directors have prepared the financial statements on

the going concern basis as they do not intend to liquidate

the parent Company or the Group or to cease their

operations, and as they have concluded that the parent

Company’s and the Group’s financial position means that

this is realistic. They have also concluded that there are

nomaterial uncertainties that could have cast significant

doubt over their ability to continue as a going concern for

at least a year from the date of approval of the financial

statements (“the going concern period”).

We used our knowledge of the Group, its industry, and the

general economic environment to identify the inherent risks

to its business model and analysed how those risks might

affect the Group’s and parent Company’s financial

resources or ability to continue operations over the going

concern period. The risks that we considered most likely to

adversely affect the Group’s and parent Company’s

available financial resources and metrics relevant to debt

covenants over this period were:

• The impact of Covid-19 on the Group’s ability to keep its

store portfolio open and trading.

We considered whether this risk could plausibly affect the

liquidity or covenant compliance in the going concern

period by assessing the directors’ sensitivities over the level

of available financial resources and covenant thresholds

indicated by the Group’s financial forecasts taking account

of severe, but plausible adverse effects that could arise

from these risks individually and collectively.

Our procedures also included:

• Critically assessing assumptions in the directors’ initial

downside scenarios relevant to liquidity and covenant

metrics, in particular in relation to Group’s performance

during previous Covid-19 lockdowns. We also compared

past budgets to actual results to assess the directors’

track record of budgeting accurately.

• Considering the availability and sufficiency of the

financing arrangements in place at the Group, including

the headroom on financial covenants in place on the

Group’s new financing facility.

We considered whether the going concern disclosure in

note 1 to the financial statements gives a full and accurate

description of the directors’ assessment of going concern,

including the identified risks and dependencies.

Our conclusions based on this work:

• We consider that the directors’ use of going concern

basis of accounting in the preparation of the financial

statements is appropriate.

• We have not identified, and concur with the directors’

assessment that there is no, a material uncertainty

related to events or conditions that, individually or

collectively, may cast doubt on the Group’s or parent

Company’s ability to continue as a going concern for

thegoing concern period;

• We have nothing material to add or draw attention to

inrelation to the directors’ statement in note 1 to the

financial statements on the use of the going concern

basis of accounting with no material uncertainties that

may cast doubt over the Group and parent Company’s

use of that basis for the going concern period, and we

found the going concern disclosure in note 1 to be

acceptable; and

• the related statement under the Listing Rules set out on

page 102 to 103 is materially consistent with the financial

statements and our audit knowledge.

However, as we cannot predict all future events or

conditions and as subsequent events may result in

outcomes that are inconsistent with judgements that

werereasonable at the time they were made, the above

conclusions are not a guarantee that the Group or the

parent Company will continue in operation.

114

Card Factory plc Annual Report and Accounts 2022

5. Fraud and breaches of laws and regulations –

abilityto detect

Identifying and responding to risks of material misstatement

dueto fraud

To identify risks of material misstatement due to fraud

(‘fraud risks’) we assessed events or conditions that could

indicate an incentive or pressure to commit fraud or provide

an opportunity to commit fraud. Our risk assessment

procedures included:

• Enquiring of directors, management and inspection of

policy documentation as to the Group’s high-level

policies and procedures to prevent and detect fraud,

including the internal audit function, and the Group’s

channel for ‘whistleblowing’, as well as whether they

have knowledge of any actual, suspected or

allegedfraud.

• Reading Board and audit committee meeting minutes.

• Considering remuneration incentive schemes and

performance targets for management and directors.

• Using analytical procedures to identify any unusual or

unexpected relationships.

• We communicated identified fraud risks throughout the

audit team and remained alert to any indications of

fraud throughout the audit.

As required by auditing standards, we perform procedures

to address the risk of management override of controls, in

particular the risk that Group and component management

may be in a position to make inappropriate accounting

entries and the risk of bias in accounting estimates such

asinventory provisions and lockdown grants related to

Covid-19.

Further detail in respect of inventory provisions and

lockdown grants related to Covid-19 are set out in the

keyaudit matter disclosures in section 2 of the report.

On this audit, we do not believe there is a fraud risk related

to revenue recognition because revenue transactions have

low individual value with high volume, are routine and

process driven and do not involve judgement or estimation.

This reduces the opportunities for fraudulent activity.

We performed procedures including:

• Identifying journal entries and other adjustments to test

for all full scope components, based on risk criteria and

comparing the identified entries to supporting

documentation. These included those posted with

unusual account combinations (for cash and loans),

rounded amounts to stock provision and rounded

amounts to expenses close to year end.

• Assessing whether the judgements made in making

accounting estimates are indicative of a potential bias.

Identifying and responding to risks of material misstatement due

to non-compliance with laws and regulations

We identified areas of laws and regulations that could

reasonably be expected to have a material effect on the

financial statements from our general commercial and

sector experience, and through discussion with the directors

and other management (as required by auditing standards)

and discussed with the directors and other management

the policies and procedures regarding compliance with

laws and regulations.

As the Group is regulated, our assessment of risks involved

gaining an understanding of the control environment

including the entity’s procedures for complying with

regulatory requirements.

We communicated identified laws and regulations

throughout our team and remained alert to any indications

of non-compliance throughout the audit.

The potential effect of these laws and regulations on the

financial statements varies considerably.

Firstly, the Group is subject to laws and regulations that

directly affect the financial statements including financial

reporting legislation (including related companies

legislation), distributable profits legislation and taxation

legislation and we assessed the extent of compliance with

these laws and regulations as part of our procedures on

therelated financial statement items.

Secondly, the Group is subject to many other laws and

regulations where the consequences of non-compliance

could have a material effect on amounts or disclosures

inthe financial statements, for instance through the

imposition of fines or litigation. We identified the following

areas as those most likely to have such an effect: health

and safety, anti-bribery and employment law recognising

the nature of the Group’s activities. Auditing standards limit

the required audit procedures to identify non-compliance

with these laws and regulations to enquiry of the directors

and other management and inspection of regulatory and

legal correspondence, if any. Therefore, if a breach of

operational regulations is not disclosed to us or evident

from relevant correspondence, an audit will not detect that

breach. Through these procedures, we became aware of

actual or suspected non-compliance and considered the

effect as part of our procedures on the related financial

statement items. The identified actual or suspected

non-compliance was not sufficiently significant to our

auditto result in our response being identified as a key

auditmatter.

Independent auditor’s report continued

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Context of the ability of the audit to detect fraud or breaches of

lawor regulation

Owing to the inherent limitations of an audit, there is an

unavoidable risk that we may not have detected some

material misstatements in the financial statements, even

though we have properly planned and performed our audit

in accordance with auditing standards. For example, the

further removed non-compliance with laws and regulations

is from the events and transactions reflected in the financial

statements, the less likely the inherently limited procedures

required by auditing standards would identify it.

In addition, as with any audit, there remained a higher risk

of non-detection of fraud, as these may involve collusion,

forgery, intentional omissions, misrepresentations, or the

override of internal controls. Our audit procedures are

designed to detect material misstatement. We are not

responsible for preventing non-compliance or fraud and

cannot be expected to detect non-compliance with all laws

and regulations.

6. We have nothing to report on the other information in the

Annual Report

The directors are responsible for the other information

presented in the Annual Report together with the financial

statements. Our opinion on the financial statements does

not cover the other information and, accordingly, we do

notexpress an audit opinion or, except as explicitly stated

below, any form of assurance conclusion thereon.

Our responsibility is to read the other information and,

indoing so, consider whether, based on our financial

statements audit work, the information therein is materially

misstated or inconsistent with the financial statements or

our audit knowledge. Based solely on that work we have

not identified material misstatements in the other

information.

Strategic Report and Directors’ Report

Based solely on our work on the other information:

• we have not identified material misstatements in the

strategic report and the directors’ report;

• in our opinion the information given in those reports

forthe financial year is consistent with the financial

statements; and

• in our opinion those reports have been prepared in

accordance with the Companies Act 2006.

Directors’ Remuneration Report

In our opinion the part of the Directors’ Remuneration

Report to be audited has been properly prepared in

accordance with the Companies Act 2006.

Disclosures of emerging and principal risks and longer-

termviability

We are required to perform procedures to identify whether

there is a material inconsistency between the directors’

disclosures in respect of emerging and principal risks and

the viability statement, and the financial statements and

our audit knowledge.

Based on those procedures, we have nothing material to

add or draw attention to in relation to:

• the directors’ confirmation within viability statement on

pages 103 to 104 that they have carried out a robust

assessment of the emerging and principal risks facing

the Group, including those that would threaten its

business model, future performance, solvency

andliquidity;

• the Principal Risks disclosures describing these risks and

how emerging risks are identified, and explaining how

they are being managed and mitigated; and

• the directors’ explanation in the viability statement of

how they have assessed the prospects of the Group, over

what period they have done so and why they considered

that period to be appropriate, and their statement as to

whether they have a reasonable expectation that the

Group will be able to continue in operation and meet

itsliabilities as they fall due over the period of their

assessment, including any related disclosures drawing

attention to any necessary qualifications or assumptions.

We are also required to review the viability statement, set

out on pages 103 to 104 under the Listing Rules. Based on

the above procedures, we have concluded that the above

disclosures are materially consistent with the financial

statements and our audit knowledge.

Our work is limited to assessing these matters in the

contextof only the knowledge acquired during our financial

statements audit. As we cannot predict all future events

orconditions and as subsequent events may result in

outcomes that are inconsistent with judgements that were

reasonable at the time they were made, the absence of

anything to report on these statements is not a guarantee

as to the Group’s and Company’s longer-term viability.

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Card Factory plc Annual Report and Accounts 2022

Corporate governance disclosures

We are required to perform procedures to identify whether

there is a material inconsistency between the directors’

corporate governance disclosures and the financial

statements and our audit knowledge.

Based on those procedures, we have concluded that each

of the following is materially consistent with the financial

statements and our audit knowledge:

• the directors’ statement that they consider that the

annual report and financial statements taken as a whole

is fair, balanced and understandable, and provides the

information necessary for shareholders to assess the

Group’s position and performance, business model

andstrategy;

• the section of the annual report describing the work of

the Audit Committee, including the significant issues

thatthe audit committee considered in relation to

thefinancial statements, and how these issues were

addressed; and

• the section of the annual report that describes the review

of the effectiveness of the Group’s risk management and

internal control systems.

We are required to review the part of the Corporate

Governance Statement relating to the Group’s compliance

with the provisions of the UK Corporate Governance Code

specified by the Listing Rules for our review. We have

nothing to report in this respect.

7. We have nothing to report on the other matters on which

we are required to report by exception

Under the Companies Act 2006, we are required to report

to you if, in our opinion:

• adequate accounting records have not been kept by the

parent Company, or returns adequate for our audit have

not been received from branches not visited by us; or

• the parent Company financial statements and the part

of the Directors’ Remuneration Report to be audited are

not in agreement with the accounting records and

returns; or

• certain disclosures of directors’ remuneration specified

by law are not made; or

• we have not received all the information and

explanations we require for our audit.

We have nothing to report in these respects.

8. Respective responsibilities

Directors’ responsibilities

As explained more fully in their statement set out on page 106,

the directors are responsible for: the preparation of the

financial statements including being satisfied that they give a

true and fair view; such internal control as they determine is

necessary to enable the preparation of financial statements

that are free from material misstatement, whether due to

fraud or error; assessing the Group and parent Company’s

ability to continue as a going concern, disclosing, as

applicable, matters related to going concern; and using the

going concern basis of accounting unless they either intend

toliquidate the Group or the parent Company or to cease

operations, or have no realistic alternative but to do so.

Auditor’s responsibilities

Our objectives are to obtain reasonable assurance about

whether the financial statements as a whole are free from

material misstatement, whether due to fraud or error, and to

issue our opinion in an auditor’s report. Reasonable assurance

is a high level of assurance, but does not guarantee that an

audit conducted in accordance with ISAs (UK) will always

detect a material misstatement when it exists. Misstatements

can arise from fraud or error and are considered material

if,individually or in aggregate, they could reasonably be

expected to influence the economic decisions of users taken

on the basis of the financial statements.

A fuller description of our responsibilities is provided on the

FRC’s website at www.frc.org.uk/auditorsresponsibilities.

The Company is required to include these financial

statements in an annual financial report prepared using

thesingle electronic reporting formal specified in the

TDESEF Regulation. This auditor’s report provides no

assurance over whether the annual financial report has

been prepared in accordance with that format.

9. The purpose of our audit work and to whom we owe

our responsibilities

This report is made solely to the Company’s members,

asabody, in accordance with Chapter 3 of Part 16 of the

Companies Act 2006. Our audit work has been undertaken

so that we might state to the Company’s members those

matters we are required to state to them in an auditor’s

report and for no other purpose. To the fullest extent

permitted by law, we do not accept or assume responsibility

to anyone other than the Company and the Company’s

members, as a body, for our audit work, for this report,

orfor the opinions we have formed.

Nick Plumb (Senior Statutory Auditor)

for and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants

1 Sovereign Square

Sovereign Street

Leeds

LS1 4DA

3 May 2022

Independent auditor’s report continued

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Consolidated income statement

For the year ended 31 January 2022

Note

2022

£’m

2021

£’m

Revenue 364 .4 2 8 5 .1

Cost of sales (247.9) (205 .7)

Gross profit 116. 5 79. 4

Other operating income 3 8 .0 –

Operating expenses (92 .9) (8 6 .9)

Operating profit/(loss) 3 31 .6 (7. 5)

Finance expense 6 (20. 5) (8 .9)

Profit/(loss) before tax 1 1 .1 (16 .4)

Taxation 7 (3 .0) 2.8

Profit/(loss) for the year 8 .1 (13 . 6)

Earnings per share

pence pence

– Basic and diluted 9 2.4 (4 .0)

All activities relate to continuing operations.

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Consolidated statement of comprehensive income

For the year ended 31 January 2022

2022

£’m

2021

£’m

Profit/(loss) for the year 8 .1 (13 . 6)

Items that may be recycled subsequently into profit or loss:

Cash flow hedges – changes in fair value 4 .1 (1 .9)

Cost of hedging reserve – changes in fair value – (0.1)

Tax relating to components of other comprehensive income (note 13) (0. 6) 0. 4

Other comprehensive income/(expense) for the period, net of income tax 3.5 (1 .6)

Total comprehensive income/(expense) for the period attributable to equity shareholders of the parent 11.6 (15. 2)

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Consolidated statement of financial position

As at 31 January 2022

Note

2022

£’m

2021

£’m

Non-current assets

Intangible assets 10 32 0.7 32 0.3

Property, plant and equipment 11 31.6 36. 8

Right of use assets 12 98. 5 111.4

Deferred tax assets 13 3.6 5.3

Derivative financial instruments 24 1.3 –

455.7 47 3. 8

Current assets

Inventories 14 3 3 .1 36 .4

Trade and other receivables 15 8 .1 9. 2

Tax receivable – 0.5

Derivative financial instruments 24 0. 8 0.1

Cash and cash equivalents 16 38 .3 12. 5

80. 3 58 .7

Total assets 536 .0 532. 5

Current liabilities

Borrowings 17 (2 5. 5) (0. 2)

Lease liabilities 12 (41 .1) (3 9. 4)

Trade and other payables 18 (71.7) (57 .4)

Provisions 22 (12 . 2) –

Tax payable (1. 5) –

Derivative financial instruments 24 (0 .2) (2.8)

(152 . 2) (9 9. 8)

Non-current liabilities

Borrowings 17 (85 .5) (118 .8)

Lease liabilities 12 (7 8.7) (105 .5)

Derivative financial instruments 24 – (1 .9)

(16 4. 2) (2 26. 2)

Total liabilities (31 6. 4) (3 26.0)

Net assets 2 19. 6 206. 5

Equity

Share capital 19 3.4 3.4

Share premium 19 2 02. 2 202 .2

Hedging reserve 1.3 (3 .1)

Cost of hedging reserve – 0.4

Reverse acquisition reserve (0.5) (0.5)

Merger reserve 2.7 2.7

Retained earnings 10. 5 1.4

Equity attributable to equity holders of the parent 2 19. 6 206. 5

The financial statements on pages 117 to 151 were approved by the Board of Directors on 2 May 2022 and were signed on

its behalf by

Kris Lee

Chief Financial Officer

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Card Factory plc Annual Report and Accounts 2022

Consolidated statement of changes in equity

For the year ended 31 January 2022

capital

£’m

premium

£’m

Hedging

reserve

£’m

Cost of

hedging

reserve

£’m

Reverse

acquisition

reserve

£’m

Merger

reserve

£’m

Retained

earnings

£’m

Total

equity

£’m

At 31 January 2020 3.4 2 02. 2 (1 . 6) 1 .1 (0. 5) 2.7 14 .2 221. 5

Total comprehensive income for the period

Profit or loss – – – – – – (13 .6) (13 . 6)

Other comprehensive income – – (1. 5) (0. 1) – – – (1. 6)

– – (1. 5) (0. 1) – – (1 3. 6) (1 5. 2)

Hedging gains/(losses) and costs of

hedging transferred to the cost of

inventory – – – (0.7) – – – (0.7)

Deferred tax on transfers to inventory – – – 0.1 – – – 0.1

Transactions with owners, recorded directly

in equity

Share-based payment charges (note 25) – – – – – – 0.8 0.8

Dividends (note 8) – – – – – – – –

Total contributions by and distributions

toowners – – – – – – 0. 8 0. 8

At 31 January 2021 3 .4 202 . 2 (3 .1) 0.4 (0. 5) 2.7 1. 4 20 6.5

Total comprehensive expense for the period

Profit or loss – – – – – – 8 .1 8 .1

Other comprehensive expense – – 3.3 – – – 0. 2 3.5

– – 3. 3 – – – 8.3 11 .6

Hedging gains/(losses) and costs of

hedging transferred to the cost of

inventory – – 1.4 (0. 5) – – – 0 .9

Deferred tax on transfers to inventory – – (0. 3) 0 .1 – – – (0 .2)

Transactions with owners, recorded directly

in equity

Share-based payment charges (note 25) – – – – – – 0.8 0. 8

Dividends (note 8) – – – – – – – –

Total contributions by and distributions

toowners – – – – – – 0. 8 0. 8

At 31 January 2022 3.4 202 .2 1.3 – (0. 5) 2.7 1 0.5 2 1 9. 6

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Consolidated cash flow statement

For the year ended 31 January 2022

Note

2022

£’m

2021

£’m

Cash inflow from operating activities 20 113 .6 7 9.9

Corporation tax paid 0 .1 (6 . 3)

Net cash inflow from operating activities 113. 7 73.6

Cash flows from investing activities

Purchase of property, plant and equipment 11 (3 .6) (4 .9)

Purchase of intangible assets 10 (3 .3) (2 . 6)

Proceeds from disposal of fixed assets – 0. 5

Net cash outflow from investing activities (6 .9) (7 .0)

Cash flows from financing activities

Interest paid on bank borrowings (6 . 5) (5.0)

Proceeds from bank borrowings 5 7. 0 –

Repayment of bank borrowings (65 .0) (2 5 .6)

Other financing costs paid (8 .7) –

Payment of lease liabilities (54. 5) (22.1)

Interest in respect of lease liabilities (3 .3) (3 . 4)

Net cash outflow from financing activities (81.0) (5 6.1)

Net increase in cash and cash equivalents 25.8 1 0.5

Cash and cash equivalents at the beginning of the year 12 .5 2 .0

Closing cash and cash equivalents 16 38 .3 12. 5

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Notes to the financial statements

1 Accounting policies

General information

Card Factory plc (‘the Company’) is a public limited company incorporated in the United Kingdom. The Company is

domiciled in the United Kingdom and its registered office is Century House, Brunel Road, Wakefield 41 Industrial Estate,

Wakefield WF2 0XG.

These consolidated financial statements consolidate the financial statements of the Company and its subsidiaries

(together referred to as the ‘Group’).

Throughout these financial statements, references to ‘FY22’ refer to the financial year ending 31 January 2022, and

references to ‘FY21’ refer to the financial year ending 31 January 2021.

Basis of preparation

These financial statements have been prepared in accordance with UK-adopted International Financial Reporting

Standards (‘UK IFRS’) and applicable law.

The financial statements have been prepared on a going concern basis under the historical cost convention, except for

certain assets and liabilities that are measured at fair value (principally derivative financial instruments).

Accounting judgements and estimates

The preparation of financial statements in conformity with UK IFRS requires judgement to be applied in forming the

Group’s accounting policies. It also requires the use of estimates and assumptions that affect the reported amount of

assets, liabilities, income and expenses. Actual results may subsequently differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised

prospectively in the period in which the estimate is revised.

The Group does not consider there to be any judgements made in the current period that have had a significant effect on

the amounts recognised in the financial statements.

Key sources of estimation uncertainty

The key sources of estimation uncertainty, being those estimates and assumptions that carry the most significant risk of

amaterial adjustment to the carrying amounts of assets and liabilities in the next financial year, are set out below.

Inventories

The Group holds significant volumes, and a broad range of inventory. The inventory provision is calculated in accordance

with a documented policy, that is based on historical experience and the Group’s stock management strategy, which

determines the range of product that will be available for sale in-store and online. The Group provides against the

carrying value of inventories where it is anticipated the amount realised may be below the cost recognised. Provision is

made in fullwhere there are no current plans to trade prior season stock through stores, and partial provision is made

against seasonal stock from prior seasons or where certain ranges do not perform as anticipated.

At the end of FY22, the total inventory provision was £20.6 million (FY21: £28.8 million), the decrease driven by global

shipping constraints during FY22 resulting in more ‘off-plan’ stock than expected being sold through during the year.

Theoverall proportion of gross inventory provided for remained broadly consistent with the prior year.

During the year, the Group reviewed its stock provisioning methodology and made changes to its policy. The purpose of

these changes was to ensure alignment was maintained with the Group’s updated stock management strategy and to

adhere with the above principle of providing where it is anticipated the net realisable value of stock will be lower than the

carrying amount. The most significant change as a result of this review arose from providing for stock lines where stock on

hand exceeds the value the Group reasonably expects to sell, based on historical sales data and the Group’s experience of

customer preferences and trends. The total value of this element of the provision was approximately £3 million. In addition,

where the Group expects to discontinue a particular line of stock, the updated policy gradually increases the level of

provision applied to a particular stock line item as it approaches the discontinuation date, reflecting the increasing risk

ofstock obsolescence.

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The element of the provision that is most sensitive to adjustment in future years relates to stock items with a partial

provision, the accuracy of which will be determined by future sales volumes. An increase or decrease of 10% in this

element of the stock provision would have a corresponding impact on the stock provision of +/- £1.1 million.

Grant income

During the current financial year, the Group received financial assistance under various Government schemes intended to

support businesses affected by local and national restrictions during the Covid-19 pandemic, including CJRS payments,

business rates relief and lockdown grant payments. IAS 20 requires that the Group is reasonably certain of complying with

the various conditions attached to Government grants before recognising the income in its financial statements.

Income received under the lockdown grant schemes is subject to conditions applied by the UK’s subsidy control regime,

inaddition to the rules and conditions attached to each individual grant. The most material of these conditions relate to

determining the eligible period for grant receipts and the calculation of the Group’s ‘uncovered fixed costs’ in the eligible

period, upon which the value of permitted relief is based. The nature of the grants received, and the unprecedented nature

of the pandemic and the support mechanisms available, means the conditions and rules attached to each payment are

complex and open to a degree of interpretation at the balance sheet date. Accordingly, the Group has had to make

certain assumptions regarding which of the payments received it is reasonably certain to have met all of the conditions,

and thus that the grants are unlikely to be repaid in a future period.

After making a provision for amounts the Group does not believe meet the above criteria (see note 22), the Group has

recognised £8.0 million of other operating income in relation to such grants received (see note 3). The final value of income

retained in relation to lockdown grants could be materially different, dependent upon final interpretation of the various

scheme rules and conditions.

Other sources of estimation uncertainty

Impairment testing

An impairment review is conducted annually in respect of goodwill, and as required for other assets and cash-generating

units (‘CGUs’) where an indicator of potential impairment exists. The carrying amounts of the assets involved and the level

of estimation uncertainty inherent in determining appropriate assumptions for the calculation of the assets’ recoverable

amounts means impairment reviews are an area of significant management focus. However, whether that estimation

uncertainty is significant to the financial statements is not known until the analysis is concluded. The Group generally

considered the estimation uncertainty in impairment reviews to be significant if a reasonably possible change in the key

assumptions would lead to a material change in the accounting outcome.

In FY22, an impairment assessment has been conducted in respect of the Card Factory business, which represents an

aggregation of CGUs to which the Group’s goodwill balance is allocated.

In addition, reflecting the impact of the Covid-19 pandemic and the expectation of future cost headwinds affecting the

store estate, the Group conducted a store-level impairment review specifically covering right-of-use assets and property,

plant and equipment insofar as directly allocable to stores.

The Group assessed the recoverable amount of both the Card Factory business and each individual store on a value in

usebasis, using consistent assumptions across both reviews, with estimates of future cash flows derived from forecasts

included within the Group’s approved budget. The assessment of future cash flows that underpin such impairment reviews

inherently require the use of estimates, notably in respect of future revenues, operating costs, terminal growth rates,

foreign currency exchange rates, discount rates and specific assumptions regarding likely recovery from the Covid-19

impacted trading environment.

The results of the impairment tests are set out in note 10 (goodwill) and note 12 (stores). The goodwill analysis had

significant headroom and accordingly, having undertaken scenario analysis on the key assumptions, the Group does

notbelieve there are any reasonably possible changes in those key assumptions that would lead to an impairment.

The Group booked an impairment charge in respect of stores of £5.0 million. Having considered scenarios consistent

withthose reviewed in respect of goodwill impairment testing, the Group is satisfied that reasonable changes in the key

assumptions would not materially change the impairment charge for stores.

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Card Factory plc Annual Report and Accounts 2022

Notes to the financial statements continued

1 Accounting policies continued

Going concern basis of accounting

The Board continues to have a reasonable expectation that the Group has adequate resources to continue in operation

for at least the next 12 months and that the going concern basis of accounting remains appropriate.

Over the course of the current and previous year, the Group has been materially affected by the Covid-19 pandemic,

withstores forced to close for approximately eight months during that two-year period and revenues and trading results

adversely affected as a result. Through a strong focus on cash management, de-levering the business and with support

from Government (including the Coronavirus Job Retention Scheme (‘CJRS’), business rates relief and lockdown grant

payments) and its wider stakeholders the Group has emerged from this period with a robust balance sheet and a platform

to execute its future strategy.

Trading since the end of lockdown, and since the balance sheet date, has been in line with expectations, with LFL sales in

certain periods returning to pre-pandemic levels.

The Group renewed its financing facilities with its banking partners in April 2022, reducing the quantum of the Group’s

term loan facilities to £150 million and extending the tenure of the Group’s debt to September 2025 (see notes 17 and 29).

The first repayments under these facilities fall due in January 2023, with full repayment of the Coronavirus Large Business

Interruption Loan Scheme (‘CLBILS’) facilities by September 2023. The Board believes the renewed facilities provide

adequate liquidity and headroom for the Group toexecute its strategic plan. At 31 January 2022, net debt excluding lease

liabilities was £74.2 million.

The Group has prepared cash flow forecasts for the 12 months following the date of approval of these accounts which

incorporate the updated debt facilities and related covenant measures. These forecasts are based on the approved budget

and business plan and include the Board’s assumptions on trading performance, including the extent and speed of the

recovery of store sales following reopening, and the timing of cash flows including amounts where payment was deferred due

to Covid-19. The Board’s trading assumptions are cautious compared to the Group’s actual experience since stores reopened

and model a gradual recovery to pre-Covid-19 levels, with negative overall LFL sales forecast in FY23 when compared to

FY20. These forecasts indicate that the Group would have significant headroom within its agreed financing arrangements,

would comfortably meet all covenant tests within those arrangements, and would be able to settle its liabilities as they fall

due for the duration of the forecasts including repayment of borrowings in line with the terms of the new facility agreements.

Whilst the current outlook is positive, the pandemic is not over. Accordingly, the Group has modelled a number of severe,

but plausible, downside scenarios involving further closures of its stores, including scenarios where government imposed

lockdowns require a two-month closure during the winter period. The Group’s assumptions regarding trading in lockdown

periods and the impact on fixed and variable overheads was based on the Group’s actual experience in FY21 and FY22

and included assumptions regarding the availability of government support, particularly in respect of salary costs and

business rates, on a basis consistent with the support received during previous lockdowns. The projections did not assume

any further lockdown grant income, nor additional discretionary cost savings.

In all cases, the scenario analysis indicated that, whilst the impact would be severe, the Group would meet the covenant

thresholds in its financing facilities and maintain sufficient liquidity to meet its liabilities as they fall due.

The Group also modelled more extreme scenarios, beyond those considered plausible. The analysis demonstrated that the

Group had additional headroom in its forecasts and the existence of further mitigations that could be taken, if required.

Based on these factors, the Board has a reasonable expectation that the Group has adequate resources and sufficient

loan facility headroom and accordingly the accounts are prepared on a going concern basis.

Principal accounting policies

The principal accounting policies set out below have been applied consistently to all periods presented in these

consolidated financial statements.

Changes in significant accounting policies

The following new standards and amendments to IFRS were effective for the first time in the current financial year:

• Amendment to IFRS 16 – Covid-19-related rent concessions.

• Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 – Interest rate benchmark reform phase 2.

New standards and amendments to existing standards effective in the period have not had a material effect on the

Group’s financial statements.

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In addition, during 2021, the IFRS Interpretations Committee finalised its agenda decision regarding accounting for the

costs of implementation and configuration for software purchased under ‘Software as a Service’ (‘SaaS’) arrangements.

Having reviewed its software arrangements during the year, the Group concluded that the prevalence of SaaS

arrangements was immaterial and no changes in accounting policy were required in order to comply with the agenda

decision and accordingly the agenda decision has not had an impact on the Group’s financial statements.

UK endorsed standards and amendments issued but not yet effective

The following new standards and amendments to IFRS have been issued but are not yet effective or yet to be endorsed by

the UK Endorsement Board.

• Amendment to IFRS 16 – Covid-19-related rent concessions beyond 30 June 2021

• Amendments to IFRS 3 – References to the conceptual framework

1,3

• Amendments to IAS 16 – Proceeds before intended use

1,3

• Amendments to IAS 37 – Onerous contracts – cost of fulfilling a contract

1,3

• Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41 – Annual improvements to IFRS standards 2018-2020 cycle

1,3

• IFRS 17 – Insurance Contracts

2,3

• Amendments to IFRS 17 – Initial application of IFRS 17 and IFRS 9 – comparative information

2,3

• Amendments to IFRS 4 – Extension to the temporary exemption from applying IFRS 9

• Amendments to IAS 1 – Classification of liabilities as current or non-current

2,3

• Amendments to IAS 12 – Deferred tax related to assets and liabilities arising from a single transaction

2,3

1 Effective for annual periods starting on or after 1 January 2022.

2 Effective for annual periods starting on or after 1 January 2023.

3 Not yet endorsed in the UK.

The application of these standards and amendments in future periods is not currently expected to have a material impact

on the Group’s financial statements.

Basis of consolidation

These consolidated financial statements incorporate the financial results of the Company and all of its subsidiaries made

up to 31 January each year.

Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to,

variable returns from its involvement with the entity and has the ability to direct the activities that affect those returns

through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial

statements from the date on which control commences until the date on which control ceases. Intercompany transactions

and balances between Group companies are eliminated upon consolidation.

Business combinations

Subject to the transitional relief in IFRS 1, all business combinations have historically been accounted for by applying the

acquisition method as at the acquisition date, which is the date on which control is transferred to the Group, as set out in

IFRS 3.

The Group measures goodwill at the acquisition date as the fair value of the consideration transferred less the fair value of

identifiable assets acquired and liabilities assumed. Any contingent consideration payable is recognised at fair value at

the acquisition date. Subsequent changes to the fair value of the contingent consideration are recognised in profit or loss.

Costs related to the acquisition are expensed to the income statement as incurred.

Acquisitions prior to 1 February 2011 (date of transition to IFRS)

IFRS 1 grants certain exemptions from the full requirements of IFRS in the transition period. The Group and Company

elected not to restate business combinations that took place prior to 1 February 2011. In respect of acquisitions prior to the

transition date, goodwill is included at 1 February 2011 on the basis of its deemed cost at that date, which represents the

amount recorded under UK GAAP.

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Card Factory plc Annual Report and Accounts 2022

Notes to the financial statements continued

1 Accounting policies continued

Revenue

Group revenue is principally attributable to the retail sale of cards, dressings and gifts subject to a single performance

obligation fulfilled by receipt of goods at the point of payment with minimal returns and refunds. Revenue is recognised

atthe point the customer is deemed to have taken delivery of the goods.

Revenue attributable to retail partners and non-retail customers currently represents a small percentage of Group

Revenue and is typically characterised by single performance obligations and standard Group products. Certain contracts

with retail partners are subject to a cost of entering into the contract along with a minimum order quantity and volume

related rebate for an initial period of the contract. Revenue subject to potential rebate is deferred as a contract liability

tothe extent the volume related terms are yet to be satisfied. Costs of entering into a contract are treated as a contract

asset and expensed to the income statement as performance obligations are fulfilled for goods subject to the minimum

order quantity.

Government grants

Income associated with Government support initiatives is recognised where there is reasonable assurance that the grant

will be received and the Group will comply with all attached conditions. Grants are recognised in the income statement

over the period necessary to match them with the related costs for which they are to compensate. If costs have already

been incurred, the grant income is recognised immediately at the point the above criteria are met.

Government support received by the Group in the current and previous year principally reflect amounts received under

Covid-19 support initiatives, including the CJRS, business rates relief, and various other grants available to non-essential

retailers that were forced to close during periods of local and national lockdown (collectively referred to in these financial

statements as ‘lockdown grants’). When considering its entitlement to grant income, the Group has considered the extent

to which the amount received is within the limits imposed by relevant state aid and subsidy control rules.

Employee costs and business rates charges in the income statement are presented net of CJRS support and rates relief

received respectively. Grant income received in relation to Covid-19 lockdown grants is presented separately as other

operating income.

Where the Group has received income in connection with government grants but does not believe it will comply with all of

the attached conditions, a provision is made for the Group’s best estimate of amounts that will be repaid.

In addition, during the current year the Group was able to access financing facilities under the CLBILS. The CLBILS

facilities are backed by a government guarantee. As this guarantee cannot reasonably have a value placed upon it, the

Group considers the guarantee a form of government assistance under IAS 20. The Group has accounted for its CLBILS

facilities in accordance with its usual policy for bank borrowings, described below under ‘non-derivative financial

liabilities’. The key terms of the CLBILS facilities are described in note 17.

Finance expense

Finance expense comprises interest charges, including interest on leases under IFRS 16, and losses on interest rate derivative

financial instruments. Borrowing costs that are directly attributable to the acquisition, construction or production of an asset

that takes a substantial time to be prepared for use, are capitalised as part of the cost of that asset.

Interest expense is recognised in the income statement as it accrues, using the effective interest method. The effective

interest method takes into account fees, commissions or other incremental transaction costs integral to the yield. Accounting

policies for leases are detailed separately.

Foreign currencies

Functional and presentation currency

The consolidated financial statements are presented in pound Sterling, which is the functional currency of the Company.

Foreign operations

The Group has one foreign subsidiary with a Euro functional currency. The activities of foreign operations are not material

to the Group. On consolidation, assets and liabilities of foreign operations are translated into Sterling at year-end

exchange rates. The results of foreign operations are translated into Sterling at average rates of exchange for the year.

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Transactions and balances

The Group has currency transactions in respect of inventory purchases and certain sales to retail partners that are

denominated in US Dollars. Transactions in foreign currencies are recorded at the exchange rate on the transaction date.

Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end

exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income

statement within cost of sales, except when deferred in other comprehensive income as qualifying cash flow hedges.

Foreign currency gains and losses are reported on a net basis.

Taxation

Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except

to the extent that it relates to items recognised directly in equity or through other comprehensive income, in which case it

is recognised in equity or other comprehensive income respectively.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or

substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial

reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for:

the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable

profit other than in a business combination, and differences relating to investments in subsidiaries to the extent that they

will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner

of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively

enacted at the balance sheet date.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against

which the temporary difference can be utilised.

Dividends

Dividends are recognised as a liability in the period in which they are approved.

Financial instruments

Non-derivative financial assets

Non-derivative financial assets comprise trade and other receivables and cash and cash equivalents. The Group classifies

all its non-derivative financial assets as financial assets at amortised cost. Financial assets at amortised cost are initially

measured at fair value plus directly attributable transaction costs, except for trade and other receivable receivables

without a significant financing component that are initially measured at transaction price. Subsequent to initial

recognition non-derivative financial assets are carried at amortised cost less allowances for expected credit losses.

Cash and cash equivalents comprise cash in hand, at bank and on short-term deposit for less than three months. Bank

overdrafts, within borrowings, that are repayable on demand and form an integral part of the Group’s cash management

are included as a component of cash and cash equivalents for the purpose of the cash flow statement.

Non-derivative financial liabilities

Non-derivative financial liabilities comprise bank borrowings and trade and other payables. Non-derivative financial

liabilities are initially recognised at fair value, less any directly attributable transaction costs and subsequently stated at

amortised cost using the effective interest method. Accounting policies for lease liabilities are detailed separately.

Derivative financial instruments

Derivative financial instruments are mandatorily categorised as fair value through profit or loss (‘FVTPL’) except to the

extent they are part of a designated hedging relationship and classified as cash flow hedging instruments.

The Group utilises foreign currency derivative contracts and US Dollar denominated cash balances to manage the foreign

exchange risk on US Dollar denominated purchases and interest rate derivative contracts to manage the risk on floating

interest rate bank borrowings.

Derivative financial instruments not designated as an effective hedging relationship principally relate to structured foreign

exchange options that form part of the foreign exchange risk management policy detailed in note 23 of the financial

statements. Gains and losses in respect of foreign exchange and interest rate derivative financial instruments that are

notpart of an effective hedging relationship are recognised within cost of sales and net finance expense.

128

Card Factory plc Annual Report and Accounts 2022

Notes to the financial statements continued

1 Accounting policies continued

Derivative financial instruments continued

Cash flow hedges

When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of

thederivative is recognised in other comprehensive income (‘OCI’) and accumulated in the hedging reserve. The effective

portion of changes in the fair value of the derivative that is recognised in OCI is limited to the cumulative change in fair

value of the hedged item, determined on a present value basis, from inception of the hedge. Any ineffective portion of

changes in the fair value of the derivative is recognised immediately in profit or loss.

The Group determines the existence of an economic relationship between the hedging instrument and hedged item based

on the currency, amount and timing of their respective cash flows, applying a hedge ratio of 1:1. The Group assesses

whether the derivative designated in each hedging relationship is expected to be and has been effective in offsetting

changes in cash flows of the hedged item using the hypothetical derivative method.

In these hedge relationships, the main sources of ineffectiveness are:

• changes in the timing of the hedged transactions; and

• the effect of the counterparties’ and the Group’s own credit risk on the fair value of the forward foreign exchange

contracts, which is not reflected in the change in the fair value of the hedged cash flows attributable to the change in

exchange rates.

The Group designates only the change in fair value of the spot element of forward exchange contracts as the hedging

instrument in cash flow hedging relationships. The change in fair value of the forward element of forward exchange

contracts (‘forward points’) is separately accounted for as a cost of hedging and recognised in a costs of hedging reserve

within equity.

When foreign exchange hedged forecast transactions subsequently result in the recognition of inventory, the amount

accumulated in the hedging reserve and the cost of hedging reserve is included directly in the initial cost of the inventory.

For interest rate hedges, the Group designates only the change in the fair value of the intrinsic element of a derivative as

the hedging instrument in cash flow hedging relationships. The Group has elected to separately account for the time

valueas a cost of hedging. Consequently, changes in time value are recognised in other comprehensive income and

accumulated in a cost of hedging reserve as a separate component within equity. Amounts accumulated in the hedging

reserve and the cost of hedging reserve are reclassified to profit or loss in the same period or periods during which the

hedged interest cash flows affect profit or loss.

If the hedge no longer meets the criteria for hedge accounting or the hedging instrument is sold, expires, is terminated

oris exercised, then hedge accounting is discontinued prospectively. When hedge accounting for cash flow hedges is

discontinued, the amount that has been accumulated in the hedging reserve remains in equity until it is included in the

cost of inventory on its initial recognition or, for interest cash flow hedges, it is reclassified to profit or loss in the same

period or periods as the hedged interest future cash flows affect profit or loss.

If the hedged future cash flows are no longer expected to occur, then the amounts that have been accumulated in the

hedging reserve and the cost of hedging reserve are immediately reclassified to profit or loss.

Fair value estimation

The techniques applied in determining the fair values of financial assets and liabilities are disclosed in note 24.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.

Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives as follows:

• buildings 25 – 50 years

• leasehold improvements shorter of 5 years and lease term

• plant and equipment 3 – 10 years

• fixtures and fittings 5 years

• motor vehicles 4 years

Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.

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Card Factory plc Annual Report and Accounts 2022

Intangible assets and goodwill

Goodwill

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to CGUs and is not amortised but

is tested annually for impairment.

Software

Computer software is carried at cost less accumulated amortisation and any provision for impairment. Costs relating to

development of computer software are capitalised if the recognition criteria of IAS 38 ‘Intangible Assets’ are met or

expensed as incurred otherwise.

Other intangible assets

Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and less

accumulated impairment losses.

Amortisation

Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible

assets unless such lives are indefinite. Intangible assets with an indefinite useful life and goodwill are systematically tested

for impairment at each balance sheet date. Other intangible assets are amortised from the date they are available for

use. The estimated useful life of software is 3-5 years.

Impairment of non-financial assets

The carrying values of non-financial assets are reviewed for impairment where there is an indication of impairment.

Ifanimpairment loss arises, the asset value is adjusted to its estimated recoverable amount and the impairment loss is

recognised in the income statement. Goodwill is reviewed for impairment at the balance sheet date and whenever an

indication of impairment is identified.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is based on the first-in first-out principle and

includes expenditure incurred in acquiring the inventories, production costs and other costs in bringing them to their

existing location and condition. In the case of manufactured inventories and work in progress, cost includes an

appropriate share of overheads based on normal operating capacity.

Provisions are made for obsolete, slow-moving and discontinued inventories, based on experience and the Group’s

merchandising plans for current and future seasons.

Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in

equity as a deduction from the proceeds.

Merger reserve

On 30 April 2014 Card Factory plc acquired 100% of the share capital of CF Topco Limited in a share for share exchange,

thereby inserting Card Factory plc as the Parent Company of the Group. The shareholders of CF Topco Limited became

100% owners of the enlarged share capital of Card Factory plc. The premium arising on the issue of shares is recognised in

the merger reserve.

Share-based payments

The Company issues equity-settled share-based payments to employees within the Group through the Card Factory

Restricted Share Awards Scheme (‘RSA’) (previously through the (‘LTIP’)) and the Card Factory SAYE Scheme (‘SAYE’), see

note 25 for further details. The cost of equity-settled share awards is measured as the fair value of the award at the grant

date using the Black-Scholes model.

The cost of the awards is expensed to the income statement, together with a corresponding adjustment to equity, on a

straight-line basis over the vesting period of the award. The total income statement charge is based on the Group’s

estimate of the number of share awards that will eventually vest in accordance with the vesting conditions. The awards do

not include market-based vesting conditions. At each balance sheet date, the Group revises its estimate of the number of

awards that are expected to vest. Any revision to estimates is recognised in the income statement, with a corresponding

adjustment to equity.

130

Card Factory plc Annual Report and Accounts 2022

Notes to the financial statements continued

1 Accounting policies continued

Leases

Definition of a lease

Under IFRS 16, a contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for

a period of time in exchange for consideration. On transition to IFRS 16, the Group elected to apply the practical expedient

to grandfather the assessment of which transactions are leases. Contracts that were not identified as leases under IAS 17

and IFRC 4 were not reassessed. Therefore, the definition of a lease under IFRS 16 has been applied only to contracts

entered into or changed on or after 1 February 2019.

The Group has assessed that its entire store lease portfolio, some warehousing locations, an office location and motor

vehicles are lease contracts. Other contracts assessed, including distribution contracts and IT equipment, are deemed not

to be a lease within the definition of IFRS 16 or are subject to the election not to apply the requirements of IFRS 16 to short-

term or low value leases. The Group recognises the lease payments associated with these leases as an expense on a

straight-line basis over the lease term.

For property leases containing a non-lease component (for instance a lease inclusive of rates and service charge), the

Group has elected to apply the practical expedient not to separate the non-lease component from the lease component

and treat the whole contract as a lease. A small proportion of the store lease portfolio are subject to an element of

turnover linked variable rents that are excluded from the definition of a lease under IFRS 16. The Group does not have

anysignificant lessor contracts.

Accounting as a lessee

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is

initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made

at or before the commencement date, plus any initial direct costs incurred, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the

end of the lease term. The right-of-use asset is periodically reduced by any impairment losses, and adjusted for certain

remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement

date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s

incremental borrowing rate. Typically, the Group uses its incremental borrowing rate, at the date of lease commencement,

as the discount rate.

The Group determines its incremental borrowing rate by reference to its own funding arrangements, which are subject

toleverage margin ratchets, variable three-month SONIA interest rates and periodic refinancing, thereby ensuring they

remain a reasonable reflection of the Group’s current borrowing costs. The Group’s leases are predominantly in respect

ofits store portfolio, which represent the majority of the Group’s revenue and therefore the Group’s borrowing costs, as

atthedate of lease commencement, are deemed to be representative of the incremental borrowing costs for additions to

right-of-use assets. The Group does not believe there are significant differences between the risk margins that would apply

across its lease portfolio. The term and payment profile are reflected in the discount rate applied to each individual lease

by virtue of the variable interest-curve component of the incremental borrowing rate.

The assessment of lease term may include the application of judgement, particularly in respect of options to break often

included in the Group’s property leases. The Group assesses lease term as the non-cancellable period of the lease plus an

assessment of reasonably certain continued tenancy in respect of tenant options to break or renew. This period usually

equates to the full term of the lease.

After initial recognition, the lease liability is measured at amortised cost using the effective interest method. It is

remeasured when there is a change in future lease payments arising from a change in an index, rate or contractual market

rent review or if the Group changes its assessment of whether it will exercise a break option. When the lease liability is

remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is

recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

From time to time, a lease may expire without a new lease being agreed. In such circumstances, if the Group has not

served or received notice under the terms of the lease, it may continue to occupy the store whilst a new lease is agreed,

referred to as a ‘holdover arrangement’. Most of the store portfolio is protected by the Landlord and Tenant Act (1954),

under which as tenant the Group has an automatic right to a new lease subject to certain specific grounds under which

the landlord can cancel. Under a holdover arrangement, the lease typically continues on a rolling basis on the same

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financial terms as the previous lease until new terms are formally agreed. The Group accounts for holdover arrangements

by assuming a new five-year lease with payments equivalent to those previously agreed. Five years represents the average

term of a lease across the Group’s store portfolio, inclusive of break periods considered reasonably likely not to be

exercised. In rare circumstances, the holdover lease may be calculated using alternative assumptions that better reflect

the Group’s expectations regarding the likely cost and term of the new lease being negotiated. When new terms are

agreed, the holdover lease is modified according to the Group’s normal accounting policy for lease modifications, as

described above.

Where a lease expires at the end of its contractual term, including where the store in question enters a holdover

arrangement, the right-of-use asset cost and accumulated depreciation associated with that lease is treated as a disposal.

2 Segmental reporting

The Group has two operating segments trading under the names Card Factory and Getting Personal.

Card Factory retails greeting cards, dressing and gifts principally through an extensive UK store network, with a small

number of stores in the Republic of Ireland, and also through third-party retail partners. Getting Personal is an online

retailer of personalised cards and gifts. The accounting policies applied in preparing financial information for each of

theGroup’s segments are consistent with those applied in the preparation of the consolidated financial statements.

Theinformation reviewed by the Board is consolidated, except that revenue is shown separately for each segment.

Revenue for each segment, and a reconciliation to consolidated revenue, is provided in the table below:

2022

£’m

2021

£’m

Card Factory revenue 351.5 268.6

Getting Personal revenue 12.9 16.5

Consolidated revenue 364.4 285.1

Of which derived from customers in the UK 357.5 277.6

Of which derived from customers overseas 6.9 7.5

Group revenue is almost entirely derived from retail customers. Average transaction value is low and products are

transferred at the point of sale. Group revenue is presented as a single category subject to substantially the same

economic factors that impact the nature, amount, timing and uncertainty of revenue and cash flows. Revenue from retail

partnerships and non-retail customers were c.£5.6 million in the year (2021: £6.6 million). Revenue from overseas reflects

revenues earned from the Group’s stores in the Republic of Ireland and retail partners based outside the UK.

Of the Group’s non-current assets, £2.1 million relates to assets based outside of the UK, principally in relation to the

Group’s stores in the Republic of Ireland.

3 Operating profit/(loss)

Operating profit/(loss) is stated after charging/(crediting) the following items:

2022

£’m

2021

£’m

Staff costs (note 5) 113.8 90.9

Government grant income (8.0) –

Depreciation expense

– owned fixed assets (note 11) 8.8 9.2

– right of use assets (note 12) 37.4 39.9

Amortisation expense (note 10) 2.9 1.6

Impairment of right-of-use assets (note 12) 5.0 2.6

Profit on disposal of fixed assets – –

Foreign exchange gain 2.6 (0.3)

132

Card Factory plc Annual Report and Accounts 2022

Notes to the financial statements continued

3 Operating profit/(loss) continued

Government grants and Covid-19 support

During the 2022 and 2021 financial years, the Group has received government-backed financial support in the form of

payments under the CJRS, business rates relief and income from lockdown grants.

The operating profit for 2022 includes c.£9.4 million (2021: c.£31.4 million) in respect of payments received under CJRS,

£8.0 million (2021: £nil) of lockdown grant income, and c.£13.1 million (2021: c.£18.1 million) retail business rates relief. These

values are stated net of provisions made where the Group expects to make repayments of amounts received in excess of

the value the Group reasonably believes it is entitled to retain (see note 22).

Under the CJRS, grant income was claimed in respect of certain costs to the Group of furloughed employees. Staff costs

above is stated net of CJRS support received.

Business rates relief for the Group’s entire store portfolio commenced 1 April 2020, with no business rates payable in

respect of retail locations until 1 July 2021, at which point retail locations in England received a 66% discount on the total

rates bill with no rates payable in the rest of the UK. Property costs, included in cost of sales (where related to the store

portfolio) and operating expenses (where related to administrative buildings) in the income statement, are presented net

of business rates relief received.

Lockdown grant income is presented separately in the income statement as other operating income, and reflects the value

of payments received in respect of lockdown grants, where the Group has reasonable assurance that it will comply with

the conditions attached to the grants. Further detail in respect of the estimates and assumptions made in calculating the

values recognised is provided in note 1.

The total fees payable by the Group to KPMG LLP and their associates during the period was as follows:

2022

£’000

2021

£’000

Audit of the consolidated and Company financial statements 30 34

Amounts receivable by the Company’s auditor and its associates in respect of:

Audit of financial statements of subsidiaries of the Company 340 340

Audit-related assurance services 45 25

Other assurance services 288 –

Total fees 703 399

Other assurance services provided in the year were in respect of assurance services in connection with the Group’s

financial statements for transactions that did not proceed. The appointment of KPMG LLP to provide such services was

made in accordance with the Group’s policy on external auditors supplying non-audit services.

4 EBITDA

Earnings before interest, tax, depreciation and amortisation (‘EBITDA’) represents profit for the period before net finance

expense, taxation, depreciation, amortisation and impairment charges.

2022

£’m

2021

£’m

Operating profit/(loss) 31.6 (7.5)

Depreciation, amortisation and impairment 54.0 53.3

EBITDA 85.6 45.8

5 Employee numbers and costs

The average number of people employed by the Group (including Directors) during the year, analysed by category, was

asfollows:

2022

Number

2021

Number

Management and administration 434 425

Operations 8,736 9,322

9,170 9,747

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Card Factory plc Annual Report and Accounts 2022

The aggregate payroll costs of all employees including Directors were as follows:

2022

£’m

2021

£’m

Employee wages and salaries 99.8 78.0

Equity-settled share-based payment expense 0.8 0.8

Social security costs 6.5 5.9

Defined contribution pension costs 1.5 1.3

Total employee costs 108.6 86.0

Agency labour costs 5.2 4.9

Total staff costs 113.8 90.9

Total employee costs are presented net of £9.4 million (2021: £31.4 million) recovered through the CJRS.

Key management personnel

The key management personnel of the Group comprise the Card Factory plc Board of Directors, the Executive Board and

the Operating Board. Key management personnel compensation is as follows:

2022

£’m

2021

£’m

Salaries and short-term benefits 4.4 4.4

Equity-settled share-based payment expense 0.6 0.7

Social security costs 0.6 0.6

Defined contribution pension costs 0.1 0.1

5.7 5.8

Remuneration of Directors

2022

£’m

2021

£’m

Directors’ remuneration 1.8 1.4

Amounts receivable under long-term incentive schemes 0.1 0.1

Company contributions to defined contribution pension plans – –

1.9 1.5

The table above includes the remuneration of Directors in each year. Further details of the remuneration of the current

directors are disclosed in the Directors’ Remuneration Report on pages 74 to 97.

6 Finance expense



2022

£’m

2021

£’m

Finance expense  

Interest on bank loans and overdrafts 6.8 5.1

Amortisation of loan issue costs 10.4 0.4

Lease interest 3.3 3.4

 20.5 8.9

Amortisation of loan issue costs includes £1.2 million in relation to the Group’s previous financing facilities where

amortisation was accelerated following the refinancing in May 2021, in addition to amounts relating to the debt facilities

agreed in May 2021, and costs incurred associated with alternative financing options that ultimately did not complete.

Seenote 17 for further details.

134

Card Factory plc Annual Report and Accounts 2022

Notes to the financial statements continued

7 Taxation

The tax charge includes both current and deferred tax. The tax charge reflects the estimated effective tax on the profit

before tax for the Group for the year ending 31 January 2022 and the movement in the deferred tax balance in the year,

sofar as it relates to items recognised in the income statement.

Taxable profit or loss differs from profit or loss before tax as reported in the income statement, because it excludes items

of income or expenditure that are either taxable or deductible in other years or never taxable or deductible.

Recognised in the income statement

2022

£’m

2021

£’m

Current tax charge/(credit)

Current year 1.2 (0.8)

Adjustments in respect of prior periods 0.8 0.1

2.0 (0.7)

Deferred tax charge/(credit)

Origination and reversal of temporary differences 1.2 (1.9)

Adjustments in respect of prior periods (0.7) 0.1

Effect of change in tax rate 0.5 (0.3)

1.0 (2.1)

Total income tax charge/(credit) 3.0 (2.8)

The effective tax rate of 27.0% (2021: 17.1% credit) on the profit (2021: loss) before taxation for the year is higher than (2021:

lower than) the average rate of mainstream corporation tax in the UK of 19% (2021: 19%). The higher effective tax rate is

principally due to the effect of changes in future tax rates (see note 13).

The tax charge is reconciled to the standard rate of UK corporation tax as follows:

2022

£’m

2021

£’m

Profit/(loss) before tax 11.1 (16.4)

Tax at the standard UK corporation tax rate of 19.0% (2021: 19.0%)

Tax effects of: 2.1 (3.1)

Expenses not deductible for tax purposes 0.3 0.4

Adjustments in respect of prior periods 0.1 0.2

Effect of change in tax rate 0.5 (0.3)

Total income tax charge/(credit) 3.0 (2.8)

Total taxation recognised through the income statement, other comprehensive income and through equity are as follows:

2022 2021

Current

£’m

Deferred

£’m

Total

£’m

Current

£’m

Deferred

£’m

Total

£’m

Income statement 2.0 1.0 3.0 (0.7) (2.1) (2.8)

Other comprehensive income – 0.6 0.6 – (0.4) (0.4)

Equity – 0.2 0.2 – (0.1) (0.1)

Total tax 2.0 1.8 3.8 (0.7) (2.6) (3.3)

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8 Dividends

There were no dividends paid in either the current or the previous year. The Board is not recommending a final dividend

inrespect of the financial year ended 31 January 2022 (2021: no final dividend).

Whilst the Group’s CLBILS and term loan facilities, as drawn at 31 January 2022, remain outstanding (see note 17),

theGroup is prohibited from making distributions.

9 Earnings per share

Basic earnings per share is calculated by dividing the profit/(loss) for the period attributable to ordinary shareholders

bythe weighted average number of ordinary shares in issue during the period.

Diluted earnings per share is based on the weighted average number of shares in issue for the period, adjusted for the

dilutive effect of potential ordinary shares. Potential ordinary shares represent employee share incentive awards and

saveas you earn share options.

2022

(Number)

2021

(Number)

Weighted average number of shares in issue 341,770,579 341,626,396

Weighted average number of dilutive share options 1,843,537 128,446

Weighted average number of shares for diluted earnings per share 343,614,116 341,754,842

£’m £’m

Profit/(loss) for the financial period 8.1 (13.6)

pence pence

Basic earnings per share 2.4 (4.0)

Diluted earnings per share 2.4 (4.0)

10 Intangible assets

Goodwill

£’m

Software

£’m

Total

£’m

Cost

At 1 February 2021 328.2 13.7 341.9

Additions – 3.3 3.3

Disposals – – –

At 31 January 2022 328.2 17.0 345.2

Amortisation/impairment

At 1 February 2021 14.4 7.2 21.6

Amortisation in the period – 2.9 2.9

Amortisation on disposals – – –

At 31 January 2022 14.4 10.1 24.5

Net book value

At 31 January 2022 313.8 6.9 320.7

At 31 January 2021 313.8 6.5 320.3

136

Card Factory plc Annual Report and Accounts 2022

Notes to the financial statements continued

10 Intangible assets continued

Goodwill

£’m

Software

£’m

Total

£’m

Cost

At 1 February 2020 328.2 14.1 342.3

Additions – 2.6 2.6

Disposals – (3.0) (3.0)

At 31 January 2021 328.2 13.7 341.9

Amortisation/impairment

At 1 February 2020 14.4 8.1 22.5

Amortisation in the period – 1.6 1.6

Impairment in the period – (2.5) (2.5)

At 31 January 2021 14.4 7.2 21.6

Net book value

At 31 January 2021 313.8 6.5 320.3

At 31 January 2020 313.8 6.0 319.8

Impairment testing

Goodwill arising on the acquisition of Getting Personal in 2011 of £14.4 million is allocated to the Getting Personal CGU,

which corresponds to the Getting Personal operating segment (see note 2). Goodwill in respect of the Getting Personal

CGU was fully written down in 2020.

All remaining goodwill is in respect of the Card Factory business, which is comprised of all of the Card Factory stores (each

an individual CGU for impairment testing purposes), associated central functions and shared assets. Card Factory is the

lowest level at which the Group’s management monitors goodwill internally, and also corresponds with the Card Factory

operating segment disclosed in note 2.

The total carrying amount of the Card Factory CGU, inclusive of liabilities that are necessarily considered in determining

the recoverable amount of the CGU, at 31 January 2022 was £295.0 million. The recoverable amount of the Card Factory

CGU has been determined based on a value-in-use calculation. This value-in-use calculation is based on the Group’s most

recent approved five-year plan with a 0% (2021: 0%) terminal growth rate applied thereafter, representing management’s

estimate of the long-term growth rate of the sector. The analysis does not include new or additional revenue streams such

as new stores and new retail partnerships, to reflect the value-in-use of the existing business.

The key assumptions used to forecast operating cash flows include: sales growth, based on historic performance and

latest expectations; product mix; foreign exchange rates, based on hedges in place and market forward curves for

unhedged items, the Group’s current expectations in relation to operational costs; and the wider macro-economic factors

affecting the Group’s trading environment. The values assigned to each of these assumptions were determined based on

historical performance and expected future trends.

The forecast cash flows are discounted at a pre-tax rate of 12.0% (2021: 12.0%) calculated using the capital asset pricing

model utilising available market data and compared to the published discount rates of comparable businesses.

No impairment loss was identified. The valuation indicates sufficient headroom such that any reasonably possible change

to key assumptions would not result in an impairment of the related goodwill.

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11 Property, plant and equipment

Freehold

property

£’m

Leasehold

improvements

£’m

Plant, equipment,

fixtures & vehicles

£’m

Total

£’m

Cost

At 1 February 2021 17.8 40.2 67.6 125.6

Additions 0.1 0.7 2.8 3.6

Disposals – (0.1) (0.1) (0.2)

At 31 January 2022 17.9 40.8 70.3 129.0

Depreciation

At 1 February 2021 3.9 34.8 50.1 88.8

Depreciation in the period 0.5 2.6 5.7 8.8

Depreciation on disposals – (0.1) (0.1) (0.2)

At 31 January 2022 4.4 37.3 55.7 97.4

Net book value

At 31 January 2022 13.5 3.5 14.6 31.6

At 31 January 2021 13.9 5.4 17.5 36.8

Freehold

property

£’m

Leasehold

improvements

£’m

Plant, equipment,

fixtures & vehicles

£’m

Total

£’m

Cost

At 1 February 2020 17.5 40.3 66.4 124.2

Additions 0.3 0.7 3.9 4.9

Disposals – (0.8) (2.7) (3.5)

At 31 January 2021 17.8 40.2 67.6 125.6

Depreciation

At 1 February 2020 3.5 32.4 46.7 82.6

Provided in the period 0.4 3.1 5.7 9.2

Depreciation on disposals – (0.7) (2.3) (3.0)

At 31 January 2021 3.9 34.8 50.1 88.8

Net book value

At 31 January 2021 13.9 5.4 17.5 36.8

At 31 January 2020 14.0 7.9 19.7 41.6

138

Card Factory plc Annual Report and Accounts 2022

Notes to the financial statements continued

12 Leases

The Group has lease contracts, within the definition of IFRS 16 Leases, in relation to its entire store lease portfolio, some

warehousing office locations, an office location and motor vehicles. Other contracts, including distribution contracts and

IT equipment, are deemed not to be a lease within the definition of IFRS 16 or are subject to the election not to apply the

requirements of IFRS 16 to short-term or low value leases. Accounting policies for leases are detailed in note 1. Assets,

liabilities and the income statement expense in relation to leases are detailed below.

Right-of-use assets

Buildings

£’m

Motor Vehicles

£’m

Total

£’m

Cost

At 1 February 2021 316.3 1.6 317.9

Additions 29.7 0.1 29.8

Disposals (45.2) (0.4) (45.6)

Effect of foreign exchange rates (0.2) – (0.2)

At 31 January 2022 300.6 1.3 301.9

Depreciation and impairment

At 1 February 2021 205.7 0.8 206.5

Depreciation in the period 37.0 0.4 37.4

Impairment in the period 5.0 – 5.0

Depreciation on disposals (44.3) (0.3) (44.6)

Impairment on disposals (0.8) – (0.8)

Effect of foreign exchange rates (0.1) – (0.1)

At 31 January 2022 202.5 0.9 203.4

Net book value

At 31 January 2022 98.1 0.4 98.5

At 31 January 2021 110.6 0.8 111.4

Buildings

£’m

Motor Vehicles

£’m

Total

£’m

Cost

At 1 February 2020 324.5 1.3 325.8

Additions 22.2 0.6 22.8

Disposals (30.4) (0.3) (30.7)

At 31 January 2021 316.3 1.6 317.9

Depreciation and impairment

At 1 February 2020 192.7 0.7 193.4

Depreciation in the period 39.5 0.4 39.9

Impairment in the period 2.6 – 2.6

Depreciation on disposals (28.9) (0.3) (29.2)

Impairment on disposals (0.2) – (0.2)

At 31 January 2021 205.7 0.8 206.5

Net book value

At 31 January 2021 110.6 0.8 111.4

At 31 January 2020 131.8 0.6 132.4

Disposals and depreciation on disposals includes fully depreciated right-of-use assets where the lease term has expired,

including amounts in respect of leases that have expired but the asset remained in use whilst a new lease was negotiated.

The Group’s full accounting policy in respect of leases and right-of-use assets is set out in note 1.

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Reflecting the impact of Covid-19 on the Group’s store portfolio and the expectation of future cost headwinds in the

Group’s strategic plan, both of which were considered to be an indicator of potential impairment, an impairment review

ofthe Group’s store assets was undertaken in the 2022 financial year. For this purpose, each of the Group’s stores is

considered to be a CGU, with each store’s carrying amount determined by assessing the value of right-of-use assets and

property, plant and equipment insofar as they are directly allocable to an individual store. The recoverable amount of

each store was determined based on the expected future cash flows applicable to each store, assessed using a basis

consistent with the future cash flows used in the goodwill impairment test described in note 10. As a result, the key

assumptions are also considered to be consistent with those described in note 10, in addition to the allocation of central

and shared costs to individual stores. Application of these assumptions resulted in an impairment charge of £5.0 million

(2021: £2.6 million). Having conducted scenario analysis, the Group does not consider any reasonably possible change in

the key assumptions would result in a material change to the impairment charge.

Lease liabilities

2022

£’m

2021

£’m

Current lease liabilities (41.1) (39.4)

Non-current lease liabilities (78.7) (105.5)

Total lease liabilities (note 22) (119.8) (144.9)

Rent concessions agreed across FY21 and FY22 in response to Covid-19 were principally in respect of the timing of

payments and did not significantly impact the total consideration payable in respect of leases. In accordance with the

amendment to IFRS 16 in respect of Covid-19 concessions, lease liabilities have not been remeasured in respect of

Covid-19 concessions except to the extent the rent concession was agreed as part of a lease renewal or extension.

Lease expense:

Total lease related expenses

2022

£’m

2021

£’m

Depreciation expense on right-of-use assets 37.4 39.9

Impairment of right-of-use assets 5.0 2.6

Profit on disposal of fixed assets – (0.3)

Lease interest 3.3 3.4

Expense relating to short-term and low value leases

– 0.6

Expense relating to variable lease payments

0.2 –

Total lease related income statement expense 45.9 46.2

1 Contracts subject to the election not to apply the requirements of IFRS 16 to short-term or low value leases.

2 A small proportion of the store lease portfolio are subject to an element of turnover linked variable rents that are excluded from the definition of a lease under IFRS 16.

13 Deferred tax assets and liabilities

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of an asset or

liability in the financial statements and the corresponding tax bases used in the computation of taxable profit/loss.

Movement in deferred tax during the year:

Fixed

assets

£’m

Share–

based

payments

£’m

Derivative

financial

instruments

and hedge

accounting

£’m

IFRS 16

Leases

£’m

Tax losses

£’m

Other timing

differences

£’m

Total

£’m

At 1 February 2020 0.2 0.1 0.1 1.4 – 0.9 2.7

Credit to income statement 0.1 – – – 1.7 0.3 2.1

Charge to other comprehensive income – – 0.4 – – – 0.4

Credit to equity – – 0.1 – – – 0.1

At 31 January 2021 0.3 0.1 0.6 1.4 1.7 1.2 5.3

Credit/(charge) to income statement 0.5 0.2 – (1.4) 0.5 (0.8) (1.0)

Credit/(charge) to other comprehensive income – 0.2 (0.8) – – – (0.6)

Charge to equity – – (0.2) – – – (0.2)

At 31 January 2022 0.8 0.5 (0.3) – 2.2 0.4 3.6

140

Card Factory plc Annual Report and Accounts 2022

Notes to the financial statements continued

13 Deferred tax assets and liabilities continued

Deferred tax assets and liabilities are offset to the extent they are levied by the same tax authority and the Group has a

legally enforceable right to do so, otherwise they are shown separately in the balance sheet.

Deferred tax assets and liabilities are offset as follows:

2022

£’m

2021

£’m

Deferred tax assets 3.9 5.3

Deferred tax liabilities (0.3) –

Net deferred tax asset 3.6 5.3

In 2016, changes in corporation tax rates were enacted which reduced the mainstream corporation tax rate to 17% with

effect from 1 April 2020. Prior to 1 April 2020, the mainstream corporation tax rate was 19%. In 2020, the reduction in the

mainstream corporation tax rate to 17% was cancelled, and the tax rate has remained unchanged at 19% since. Deferred

tax balances at 31 January 2022 were measured with a tax rate of 19%.

The Finance Act 2021 contains legislation to increase the mainstream corporation tax rate from 19% to 25% with effect

from 1 April 2023. This increase in tax rate has now been substantively enacted. The Group has therefore remeasured the

deferred tax assets and liabilities at this higher rate of tax where these are expected to be realised or settled on or after

1 April 2024. For those deferred tax assets and liabilities that are expected to be realised or settled on or after 1 April 2023,

a hybrid rate of 24% has been used as a basis upon which remeasurement has taken place.

14 Inventories

2022

£’m

2021

£’m

Finished goods 32.7 35.9

Work in progress 0.4 0.5

33.1 36.4

Inventories are stated net of provisions totalling £20.7 million (2021: £28.9 million). The value of inventories written down in

the period was £11.6 million (2021: £18.1 million).

The cost of inventories recognised as an expense and charged to cost of sales in the year, net of movements in provisions,

was £121.6 million (2021: £107.1 million).

15 Trade and other receivables

2022

£’m

2021

£’m

Current

Trade receivables 3.0 1.6

Other receivables – 5.6

Prepaid property costs 2.3 –

Other prepayments and accrued income 2.8 2.0

8.1 9.2

The Group has net US Dollar denominated trade and other receivables of £1.0 million (2021: £1.0 million).

Group revenue is principally attributable to the retail sale of cards, dressings and gifts. Revenue is subject to a single

performance obligation fulfilled by receipt of goods at the point of payment with minimal returns and refunds.

Tradereceivables are attributable to retail partnerships and non-retail sales which generated revenue of £5.6 million

(2021:£6.6million) in the year. No significant impairment loss has been recorded against trade receivables.

Other receivables in the prior year principally reflected amounts receivable under the CJRS.

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16 Cash and cash equivalents

2022

£’m

2021

£’m

Cash at bank and in hand 38.3 12.5

Bank overdraft (note 17) – –

Net cash and cash equivalents 38.3 12.5

Group cash and cash equivalents held in bank accounts within the Revolving Credit Facility (‘RCF’) facility described in

note 17 are subject to a netting arrangement.

The Group’s cash and cash equivalents are denominated in the following currencies:

2022

£’m

2021

£’m

Sterling 21.5 1.1

Euro 1.4 0.4

US Dollar 15.4 11.0

38.3 12.5

17 Borrowings

2022

£’m

2021

£’m

Current liabilities

Bank loans and accrued interest 25.5 0.2

Bank overdraft – –

25.5 0.2

Non-current liabilities

Bank loans 85.5 118.8

Bank loans

Bank borrowings as at 31 January 2022 are summarised as follows:

Liability

£’m

Interest rate

Interest margin

ratchet range

31 January 2022

Secured term loans 67.2 4.50 + SONIA – Interest rate increases 1.00% every six months

Secured CLBILs 44.8 See note. –

Secured revolving creditfacility – 4.50 + SONIA 2.75 - 4.50 Total facility size = £100 million

Accrued interest 0.5

Debt issue costs (1.5)

111.0

31 January 2021

Unsecured revolving creditfacility 120.0 2.5 + LIBOR 1.00 - 2.50 Total facility size = £200 million

Accrued interest 0.2

Debt issue costs (1.2)

119.0

On 21 May 2021, the Group concluded a refinancing of its borrowing facilities with its banking syndicate. The revised

facilities comprised a £75 million Term Loan, £50 million CLBILS loan, and a RCF of £100 million. The facilities introduced

security via fixed and floating charges over certain of the Group’s assets.

142

Card Factory plc Annual Report and Accounts 2022

Notes to the financial statements continued

17 Borrowings continued

The Term Loan interest rate margin was 4.5% over SONIA, increasing at 1% every six months until fully repaid. The CLBILS

facilities attract interest rates of between 3.1% and 3.75% over SONIA or the Bank of England Base Rate. The RCF, when

drawn, was subject to an interest rate ratchet of between 2.75% and 4.5% over SONIA based upon the Group’s

leverageposition.

The Group drew down the Term Loan and CLBILS facility in full at the commencement date. The RCF was drawn during

the period to support liquidity when needed; however these drawings have been repaid and the RCF is undrawn at the

balance sheet date. The full RCF remains available to draw on if required.

All of the revised facilities were due to expire on 24 September 2023, with the Term Loan and CLBILS facilities subject to a

defined repayment schedule, which commenced on 31 January 2022. Total repayments in respect of the Term Loan and

CLBILS facilities during FY22 were £13 million, which included an additional prepayment of £8 million in accordance with

the facility terms over and above the defined schedule.

At the balance sheet date, the Group remained subject to two financial covenants, tested quarterly from March 2022, in

relation to leverage (ratio of net debt to EBITDA) and interest cover (ratio of interest and rent costs to EBITDA). Covenant

thresholds were phased to return to 2.5x leverage and 2.0x interest cover by January 2023. In addition, the terms of the

CLBILS facilities prevent the Group from making any distributions to shareholders whilst the CLBILS remain outstanding.

Debt issue costs in respect of the May 2021 refinancing totalled £6.7 million and included £5.0 million of deferred fees that

were contingent upon prepayments being made by November 2021. The value of debt issue costs remaining deferred on

the balance sheet at 31 January reflected the Group’s expectation that a further refinancing would conclude in the first

quarter of FY23. In addition, during FY22, the Group incurred £2.5 million of costs in respect of financing transactions that

did not complete.

Subsequent to the balance sheet date, on 21 April 2022, the Group concluded a further refinancing of its bank facilities

which reduced the quantum and extended the tenure of the facilities, alongside changes to the covenant terms. See note

29 for further details.

Contractual cash flows of financial liabilities as at the year-end date are disclosed in note 24.

18 Trade and other payables

2022

£’m

2021

£’m

Current

Trade payables 31.1 11.1

Other taxation and social security 4.6 19.3

Contract liabilities 2.4 0.9

Property accruals 4.9 6.0

Other accruals and deferred income 28.7 20.1

71.7 57.4

The Group has net US Dollar denominated trade and other payables of £8.5 million (2021: £5.2 million).

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19 Share capital and share premium

2022

(Number)

2021

(Number)

Share capital

Allotted, called up and fully paid ordinary shares of one pence:

At the start of the period 341,626,396 341,626,396

Issued in the period (note 25) 251,945 –

At the end of the period 341,878,341 341,626,396

£’m £’m

Share capital

At the start of the period 3.4 3.4

Issued in the period (note 25) – –

At the end of the period 3.4 3.4

£’m £’m

Share premium

At the start of the period 202.2 202.2

Issued in the period (note 25) – –

At the end of the period 202.2 202.2

20 Notes to the cash flow statement

Reconciliation of operating profit to cash generated from operations:

2022

£’m

2021

£’m

Profit before tax 11.1 (16.4)

Net finance expense 20.5 8.9

Operating profit 31.6 (7.5)

Adjusted for:

Depreciation and amortisation 49.1 50.7

Impairment of right-of-use assets 5.0 2.6

Cash flow hedging foreign currency movements (1.4) (0.1)

Share-based payments charge 0.8 0.8

Operating cash flows before changes in working capital 85.1 46.5

Decrease/(increase) in receivables 1.1 2.2

Decrease in inventories 3.3 18.0

Increase/(decrease) in payables 11.9 13.2

Movement in provisions 12.2 –

Cash inflow from operating activities 113.6 79.9

144

Card Factory plc Annual Report and Accounts 2022

Notes to the financial statements continued

21 Analysis of net debt

At 1 February

2021

£’m

Cash flow

£’m

Non-cash

changes

£’m

At 31 January

2022

£’m

Secured bank loans and accrued interest (note 17) (119.0) 8.0 – (111.0)

Lease liabilities (144.9) 57.8 (32.7) (119.8)

Total debt (263.9) 65.8 (32.7) (230.8)

Add: debt costs capitalised (1.2) (8.7) 8.4 (1.5)

Less: cash and cash equivalents (note 16) 12.5 25.8 – 38.3

Net debt (252.6) 82.9 (24.3) (194.0)

Lease liabilities 144.9 (57.8) 32.7 119.8

Net debt excluding lease liabilities (107.7) 25.1 8.4 (74.2)

At 1 February

2020

£’m

Cash flow

£’m

Non-cash

changes

£’m

At 31 January

2021

£’m

Unsecured bank loans and accrued interest (note 17) (144.1) 25.6 (0.5) (119.0)

Lease liabilities (145.9) 22.1 (21.1) (144.9)

Total debt (290.0) 47.7 (21.6) (263.9)

Add: debt costs capitalised (1.0) (0.6) 0.4 (1.2)

Less: cash and cash equivalents (note 16) 2.0 10.5 – 12.5

Net debt (289.0) 57.6 (21.2) (252.6)

Lease liabilities 145.9 (22.1) 21.1 144.9

Net debt excluding lease liabilities (143.1) 35.5 (0.1) (107.7)

22 Provisions

Covid-19-related

support

£’m

Total

£’m

At 1 February 2020, 31 January 2021 and 1 February 2022 – –

Provisions made during the year 12.2 12.2

At 31 January 2022 12.2 12.2

Covid-19-related support provisions reflect amounts received under one-off schemes designed to provide support to

businesses affected by Covid-19 restrictions, including lockdown grants and CJRS, in excess of the value the Group

reasonably believes it is entitled to retain under the terms and conditions of those schemes. The provisions have been

estimated based on the Group’s interpretation of the terms and conditions of the respective schemes and, where

applicable, independent professional advice. However, the actual amount that will be repaid is not certain (see page 123).

The Group is taking steps to confirm amounts repayable and settle its positions. This exercise is expected to conclude

within the next financial year.

23 Financial risk management

The principal financial risks faced by the Group are liquidity, foreign currency, interest rate and counterparty credit risk.

The Board have overall responsibility for managing risks and uncertainties across the Group. The principal financial risks

and uncertainties and the actions taken to mitigate them are reviewed on an ongoing basis. Further details of the Group’s

approach to managing risk are included in the Principal Risks and Uncertainties section of the Strategic Report on pages

38 to 41 and in the Corporate Governance Report on pages 58 to 67.

Liquidity risk

Despite the impact of Covid-19 on trading and profitability across FY21 and FY22, the Group has continued to generate

significant operating cash inflows. Cash flow forecasts are prepared to assist management in identifying future liquidity

requirements. At the balance sheet date, the Group had net debt (note 21) of £74.2 million (2021: £107.7 million) and an

undrawn RCF facility of £100 million (see note 17).

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On 21 May 2021 the Group renewed its financing facilities with its banking partners, which at that point comprised a

£75million Term Loan, £50 million CLBILS and a RCF of £100 million. Under revised covenant terms, the Group had to

achieve defined Net Debt and EBITDA targets, measured on a monthly basis until March 2022, following which the

business moved to quarterly covenant tests of Interest Cover and Leverage. Covenant thresholds were phased to return to

2.5x leverage and 2x interest cover by January 2023. The facilities had an expiry date of 24 September 2023 (unchanged

from the previous arrangement).

The facilities were structured to incentivise an early reduction of overall debt with fees of up to £5 million payable if

pre-payments were not made in line with specified dates from 30 November 2021 through until 30 July 2022.

Subsequent to the balance sheet date, on 21 April 2022, the Group agreed a further renewal of its financing facilities, which

extended the term of the facilities and introduced a new amortising repayment schedule. See note 29 for further details.

Until the business has no outstanding CLBILS, there will be a prohibition of any payment to shareholders by way of

dividend or share buy-back.

The table below analyses the contractual cash flows of the Group’s non-derivative financial liabilities as at the balance

sheet date. The amounts disclosed in the tables are the contractual undiscounted cash flows, including contractual

interest. Where amounts are not yet fixed, principally in respect of interest payments linked to SONIA in the Group’s bank

facilities, the values have been determined with reference to forward curves at the balance sheet date.

Less than

one year

£m

One to

two years

£m

Two to

five years

£m

More than

five years

£m

Total

£m

At 31 January 2022

Bank loans 31.7 88.9 – – 120.6

Lease liabilities 46.8 32.0 44.7 6.7 130.2

Trade and other payables 71.7 – – – 71.7

150.2 120.9 44.7 6.7 322.5

At 31 January 2021

Unsecured bank loans 0.2 – 120.0 – 120.2

Lease liabilities 63.0 33.6 47.1 8.3 152.0

Trade and other payables 57.4 – – – 57.4

120.6 33.6 167.1 8.3 329.6

The table below analyses the contractual cash flows of the Group’s derivative financial instruments as at the balance

sheet date. The amounts disclosed represent the total contractual undiscounted cash flows at the balance sheet date

exchange and interest rates.

Less than

one year

£m

One to

two years

£m

Two to

five years

£m

More than

five years

£m

Total

£m

At 31 January 2022

Foreign exchange contracts

– Inflow 60.4 37.3 – – 97.7

– Outflow (59.7) (36.4) – – (96.1)

Interest rate contracts

– Inflow 0.4 0.6 – – 1.0

At 31 January 2021

Foreign exchange contracts

– Inflow 74.3 27.0 4.4 – 105.7

– Outflow (76.7) (27.6) (4.4) – (108.7)

Interest rate contracts

– Outflow (0.7) (0.5) (0.2) – (1.4)

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Card Factory plc Annual Report and Accounts 2022

Notes to the financial statements continued

23 Financial risk management continued

Foreign currency risk

A significant proportion of the Group’s retail products are procured from overseas suppliers with purchases denominated

in US Dollars. The Group has an established currency hedging policy which aims to mitigate the risk of adverse currency

movements whilst providing sufficient flexibility and available credit lines to act when markets are volatile.

The Group’s policy requires forward cover, using a combination of currency on hand, expected receipts and derivative

contracts, of between 50% and 100% of the next 12 months’ rolling forecast US Dollar requirements, up to 80% forward

cover for the period 12 to 24 months, and up to 40% for the period 24 to 36 months. The policy permits a proportion of

each year’s US Dollar requirement to be covered by structured options and similar instruments.

The continued impact on trade from Covid-19 resulted in the discontinuation of certain hedging relationships during the

year where inventory purchase cash flows were no longer expected to occur. Amounts recognised in the hedging reserve

and cost of hedging reserve in respect of discontinued hedges were released to the income statement. Excess foreign

exchange hedged positions were resolved by a combination of trading USD cash back to Sterling and extending maturity

dates on structured trades not designated as a hedging relationship. Gains and losses on discontinued hedges were

recognised in the income statement.

The table below analyses the sensitivity of the Group’s US Dollar denominated financial instruments to a 10 cent

movement in the USD to GBP exchange rate at the balance sheet date, holding all other assumptions constant.

2022 2021

Impact on profit

after tax

£’m

Impact on cash

flow hedging

reserve

£’m

Impact on profit

after tax

£’m

Impact on cash

flow hedging

reserve

£’m

10 cent increase (1.2) (5.3) (2.5) (3.7)

10 cent decrease 1.6 6.3 3.1 4.4

Interest rate risk

The Group’s principal interest rate risk arises from its long-term borrowings. Bank borrowings are denominated in Sterling

and are borrowed at floating interest rates. The Group has an established policy that permits the use of interest rate

derivative financial instruments to mitigate the interest rate risk on an element of these borrowing costs. Current Group

policy requires between 25% and 75% of forecast floating interest rate borrowings to be hedged for the next 24 months,

up to 50% for the period 24 to 36 months and up to 25% for periods greater than 36 months.

The table below shows the impact on the reported results of a 50 basis point increase or decrease in the interest rate for

the year.

2022 2021

Impact on profit

after tax

£’m

Impact on cash

flow hedging

reserve

£’m

Impact on profit

after tax

£’m

Impact on cash

flow hedging

reserve

£’m

50 basis point interest rate increase (0.3) 0.3 (0.2) 0.6

50 basis point interest rate decrease 0.3 (0.3) 0.2 (0.7)

Counterparty credit risk

The Group is exposed to counterparty credit risk on its holdings of cash and cash equivalents and derivative financial

assets. To mitigate the risk, counterparties are limited to high credit-quality financial institutions and exposures are

monitored on a monthly basis. Sterling cash balances have historically been maintained at near zero or overdrawn

withinthe facility to minimise interest expense on the RCF, thereby reducing counterparty credit risk on cash balances.

However;during FY22 cash balances have increased, reflecting the Group’s aim to deleverage the business during the

Covid-19 pandemic.

The Group is also exposed to counterparty credit risk in relation to certain payments in advance of goods to overseas

suppliers. To limit this exposure, goods from overseas suppliers are not paid until after shipment, except for a limited

number of deposit payments in prepayments.

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Credit risk in respect of trade receivables on revenues from retail partners and non-retail customers, and other receivables

and prepayments, is not significant to the Group. Revenues from retail partners and non-retail customers represented

c.£4.6 million in the year and trade receivables at 31 January 2022 were £1.4 million (2021: £1.6 million). Total trade and

other receivables at 31 January 2022 are £8.1 million (FY21: £9.2 million). The Group considers expected credit losses as not

material and no impairment allowances have been recognised in respect of credit risk.

Capital management

The Group’s capital management policy is to maintain a capital structure that is conservative yet efficient in terms of

providing long-term returns to shareholders. The Board monitors the Group’s capital structure principally through

reviewing leverage – the ratio of net debt (excluding lease liabilities) to EBITDA. The Group’s long-term target is to

maintain a leverage policy of between 0.5 to 1.5 times.

The Group defines capital as equity attributable to the equity holders of the parent plus net debt. Net debt is shown in

note 21.

Following the impact of Covid-19, the Group has prioritised de-levering the business and protecting liquidity to ensure it

can continue to meet the needs of all stakeholders in the longer term. Alongside the restrictions imposed by the Group’s

CLBILS facility (see note 17), this has resulted in no distributions to shareholders being made during FY21 and FY22.

Whilst the CLBILs remain outstanding, the Group is prohibited from making distributions. Following the refinancing of

theGroup’s facilities in April 2022, the remaining CLBILs facilities are due to be repaid over the period to September

2023.Therefore, the Board envisages the earliest point for dividend payments to be considered will be the end of FY24.

Providing leverage remains within the range above, it is the Board’s intention to pay annual ordinary dividends based

onatargeted dividend cover of between 2.0 and 3.0 times the Group’s consolidated post-tax profit.

Details on Group borrowings and new funding arrangements agreed after the balance sheet date are set out in notes 17

and 29 of the consolidated financial statements. The Group has a continued focus on free cash flow generation. The Board

monitors a range of financial metrics together with banking covenant ratios, maintaining suitable headroom to ensure

that the Group’s financing requirements continue to be serviceable. Further detail regarding covenant restrictions and

liquidity forecasts are provided on pages 102 to 104, 124 and 151.

24 Financial instruments

Fair value

IFRS 13 requires categorisation of the Group’s financial instruments, where measured at fair value, in accordance with the

fair value hierarchy to illustrate the basis upon which the fair value has been determined:

• Level 1: fair value measurements are derived from quoted prices in active markets for identical assets or liabilities;

• Level 2: fair value measurements are based on inputs other than quoted prices included within Level 1 that are

observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• Level 3: fair value measurements derived from valuation techniques that use inputs that are not based on observable

market data (unobservable inputs).

The fair value of the Group’s foreign currency and interest rate derivative financial instruments are largely determined by

comparison between forward market prices and the contract price; therefore, these contracts are categorised as Level 2.

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Notes to the financial statements continued

24 Financial instruments continued

Derivative financial instruments

The balance sheet date fair value of derivative financial instruments is as follows:

2022

£’m

2021

£’m

Derivative assets

Non-current

Interest rate contracts 0.3 –

Foreign exchange contracts 1.0 –

1.3 –

Current

Interest rate contracts 0.2

Foreign exchange contracts 0.6 0.1

0.8 0.1

Derivative liabilities

Current

Interest rate contracts – (0.7)

Foreign exchange contracts (0.2) (2.1)

(0.2) (2.8)

Non-current

Interest rate contracts – (0.6)

Foreign exchange contracts – (1.3)

– (1.9)

Net derivative financial instruments

Interest rate contracts 0.5 (1.3)

Foreign exchange contracts 1.4 (3.3)

1.9 (4.6)

Interest rate contracts

At 31 January 2022 the Group held fixed for floating interest rate swaps to hedge a portion of the variable interest rate risk

on bank borrowings. Notional principal amounts for interest hedges totalled £60.0 million for the period to October 2022

then reducing to £40 million for the period to October 2023 (2021: £80.0 million for the period to October 2021, reducing to

£60.0 million for the period to October 2022 then reducing to £30.0 million for the period to October 2023). Unhedged fair

value movements of £nil (2021: £nil) were expensed to the income statement within financial expense.

Foreign exchange contracts

At 31 January 2022 the Group held a portfolio of foreign currency derivative contracts with notional principal amounts

totalling £97.7 million (2021: £105.7 million) to mitigate the exchange risk on future US Dollar denominated trade purchases.

Foreign currency derivative contracts with a notional value of £23.1 million representing a fair value asset of £0.1 million

(2021: £46.6 million representing a fair value liability of £1.2 million) were not designated as hedging relationships. Fair

value movements in foreign currency derivatives are recognised in other comprehensive income to the extent the contract

is part of an effective hedging relationship. The fair value movements of £1.3 million that do not form part of an effective

hedging relationship have been charged to the income statement (2021: £1.2 million) within cost of sales.

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Classification of financial instruments

The table below shows the classification of financial assets and liabilities at the balance sheet date. Fair value disclosures

in respect of lease liabilities are not required.

At 31 January 2022

Mandatorily at

FVTPL

£’m

Cash flow hedging

instruments

£’m

Financial assets at

amortised cost

£’m

Other financial

liabilities

£’m

Financial assets measured at fair value

Derivative financial instruments 0.1 2.0 – –

Financial assets not measured at fair value

Trade and other receivables – – 8.1 –

Cash and cash equivalents – – 38.3 –

Financial liabilities measured at fair value

Derivative financial instruments – (0.2) – –

Financial liabilities not measured at fair value

Secured bank loans – – – (111.0)

Trade and other payables – – – (71.7)

0.1 1.8 46.4 (182.7)

At 31 January 2021 £’m £’m £’m £’m

Financial assets measured at fair value

Derivative financial instruments – 0.1 – –

Financial assets not measured at fair value

Trade and other receivables – – 7.2 –

Cash and cash equivalents – – 12.5 –

Financial liabilities measured at fair value

Derivative financial instruments (1.2) (3.5) – –

Financial liabilities not measured at fair value

Unsecured bank loans – – – (119.0)

Unsecured bank overdrafts – – – –

Trade and other payables – – – (57.4)

(1.2) (3.4) 19.7 (176.4)

The fair values of financial instruments have been assessed as approximating to their carrying values. Derivative financial

instruments are utilised to mitigate foreign exchange risk on the requisition of inventory and interest rate risk on

borrowings. Derivatives not designated as a hedging relationship are mandatorily classified at FVTPL.

25 Equity-settled share-based payment arrangements

Card Factory Restricted Share Awards and Long Term Incentive Plan

The Company grants restricted share awards (‘RSAs’) to the Executive Directors, members of the senior management team

and senior employees within the Group under the terms of the Group’s LTIP. Grants are made annually under the scheme,

subject to approval by the Board. The award comprises a right to receive free shares or nil cost options. The shares are

tobe issued within 30 days, or as soon as practicable, after the vesting date. Grants awarded in the year to Executive

Directors and senior management vest in stages over three, four and five years and vested shares may not be sold (other

than to pay taxes due on vesting) until the end of the five-year period. Grants awarded in the year to senior employees are

subject to a three-year vesting period. All restricted share awards are subject to a performance underpin through which

the Remuneration Committee can exercise discretion to reduce the number of awards that will vest based on certain

defined criteria.

Grants awarded prior to 31 January 2018 under the LTIP were subject to a three-year vesting period with performance

conditions and a two-year holding period for awards in favour of senior management. Further details on Executive

Director share awards are provided in the Remuneration Report on pages 74 to 97.

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Card Factory plc Annual Report and Accounts 2022

25 Equity-settled share-based payment arrangements continued

Card Factory SAYE Scheme (‘SAYE’)

The SAYE scheme is open to all employees (in years prior to FY19 length of service eligibility applied). Grants are made

annually under the scheme, subject to approval by the Board. Options may be exercised under the scheme within six

months of the completion of the three-year savings contract. There is provision for early exercise in certain circumstances

such as death, disability, redundancy and retirement.

Reconciliation of outstanding awards

RSA/LTIP SAYE

Number of

options

Weighted

average

exercise

price

Number of

options

Weighted

average

exercise

price

Outstanding at 1 February 2020 1,921,256 £0.01 1,037,266 £1.80

Granted during the year 2,618,058 £0.01 3,648,970 £0.27

Exercised during the year – £0.01 – –

Forfeited during the year (858,239) £0.01 (724,827) £1.72

Outstanding at 31 January 2021 3,681,075 £0.01 3,961,409 £0.40

Granted during the year 1,911,815 £0.01 1,499,150 £0.29

Exercised during the year (239,943) £0.01 (12,002) £0.27

Forfeited during the year (903,945) £0.01 (1,324,356) £0.48

Outstanding at 31 January 2022 4,449,002 £0.01 4,124,201 £0.37

At 31 January 2022 there were 2,459 options remaining exercisable at £1.61 under the SAYE scheme which lapsed on

1 April2021.

Fair value of awards

The fair value of awards granted during the year has been measured using the Black-Scholes model assuming the

inputsbelow.

2022 2021

RSA/LTIP (1)* SAYE RSA/LTIP (1)* RSA/LTIP (2) SAYE

Granted during the year 1,911,815 1,499,150 304,356 2,313,702 3,648,970

Fair value at grant date £0.68 £0.29 £0.79 £0.35 £0.10

Share price at grant date** £0.68 £0.61 £0.79 £0.35 £0.35

Exercise price** £0.01 £0.54 £0.01 £0.01 £0.27

Expected volatility 66% 67% 40% 60% 60%

Expected term (years) 3 to 5 3 2 3 to 5 3

Expected dividend yield N/A*** 0% N/A*** N/A*** 10%

Risk free interest rate 0.16% 0.16% 0.30% 0.00% 0.00%

* In the prior year, a special share award was granted on 28 February 2020 to certain senior employees vesting after two years.

** The exercise price for SAYE awards is set at a 20% discount to an average market price determined in accordance with scheme rules. The share price at the grant

date is the closing price on the grant date.

*** RSA/LTIP awards have a £nil exercise price and accrue dividend equivalents over the vesting period, consequently the fair value at grant date is equal to the grant

date share price.

The expected volatility is based on historical volatility of the Company over the expected term at the grant date.

Impact on the income statement

The total expense recognised in the income statement arising from share-based payments is as follows:

All amounts exclude national insurance costs

2022

£’m

2021

£’m

RSA or LTIP 0.6 0.7

SAYE 0.2 0.1

Total share-based payment expense 0.8 0.8

Notes to the financial statements continued

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26 Capital commitments

There were no material capital commitments at 31 January 2022 (2021: £0.8 million).

27 Contingent liabilities

There were no material contingent liabilities at 31 January 2022 (2021: £nil).

28 Related party transactions

The Group has taken advantage of the exemptions contained within IAS 24 ‘Related Party Disclosures’ from the

requirement to disclose transactions between Group companies as these have been eliminated on consolidation.

A full listing of the Group’s subsidiary undertakings is provided in the notes to the Company accounts on page 157.

Transactions with key management personnel

The key management personnel of the Group comprise the Card Factory plc Board of Directors, the Executive Board and

the Operating Board. Disclosures relating to remuneration of key management personnel are included in note 5 of the

financial statements. Further details of Directors’ remuneration are set out in the Directors’ Remuneration Report on pages

74 to 97. Directors of the Company and their immediate families control 0.02% of the ordinary shares of the Company.

There were no other related party transactions in the year.

29 Subsequent events

Refinancing

On 21 April 2022, the Group agreed an updated and amended financing package with its banking partners, which reduced

the quantum and extended the term of the Group’s facilities.

The revised facilities comprise term loans of £30 million, CLBILS of £20 million and a RCF of £100million. The aggregate

value of the Group’s facilities therefore reduced to £150 million. The CLBILs facilities are subject to an amortising

repayment profile, with final maturity in September 2023. The term loans are subject to an amortising repayment profile

with final maturity in September 2025. The RCF final maturity is in September 2025.

The interest rate attached to the CLBILs facilities is unchanged. The term loans will attract a fixed margin of 500bps and

the RCF margin remains based on a ratchet between 275 and 450bps dependent upon the Group’s leverage position.

The covenant package attached to the facilities remains based on quarterly tests of interest cover and leverage, tested

quarterly. The Group must maintain interest cover of 1.5x to 31 October 2023 and 1.75x thereafter, and maintain leverage of

below 3.75x to 31 October 2022, 3.0x to 31 October 2023, and 2.5x thereafter. The requirement for the Group to use best

efforts to raise £70 million of equity proceeds to pay down debt has been removed.

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Card Factory plc Annual Report and Accounts 2022

Parent Company statement of financial position

As at 31 January 2022

Note

2022

£’m

2021

£’m

Non-current assets

Investments 4 316.2 316.2

Deferred tax assets 0.5 0.3

316.7 316.5

Current assets

Trade and other receivables 5 2.5 2.0

Total assets 319.2 318.5

Current liabilities

Trade and other payables 6 (4.2) (3.5)

Net assets 315.0 315.0

Equity

Share capital 7 3.4 3.4

Share premium 7 202.2 202.2

Merger reserve 2.7 2.7

Retained earnings 106.7 106.7

Equity attributable to equity holders of the parent 315.0 315.0

The financial statements on pages 152 to 159 were approved by the Board of Directors on 2 May 2022 and were signed on

its behalf by

Kris Lee

Chief Financial Officer

Company number 09002747

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Parent Company statement of changes in equity

For the year ended 31 January 2022

capital

£’m

premium

£’m

Merger

reserve

£’m

Retained

earnings

£’m

Total

equity

£’m

At 31 January 2020 3.4 202.2 2.7 107.2 315.5

Total comprehensive income for the year

Profit or loss – – – (1.3) (1.3)

Transactions with owners, recorded directly in equity

Share-based payments – – – 0.8 0.8

At 31 January 2021 3.4 202.2 2.7 106.7 315.0

Total comprehensive income for the year

Profit or loss – – – (0.8) (0.8)

Transactions with owners, recorded directly in equity

Share-based payments – – – 0.8 0.8

At 31 January 2022 3.4 202.2 2.7 106.7 315.0

The notes that accompany these financial statements are included on pages 155 to 159.

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Card Factory plc Annual Report and Accounts 2022

Parent Company cash flow statement

For the year ended 31 January 2022

Note

2022

£’m

2021

£’m

Cash (outflow)/inflow from operating activities 10 – –

Corporation tax paid – –

Net cash (outflow)/inflow from operating activities – –

Cash flows from investing activities – –

Dividends received – –

Net cash inflow from investing activities – –

Cash flows from financing activities – –

Dividends paid 3 – –

Net cash outflow from financing activities – –

Net increase in cash and cash equivalents – –

Cash and cash equivalents at the beginning of the year – –

Closing cash and cash equivalents – –

The notes that accompany these financial statements are included on pages 155 to 159.

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Notes to the Parent Company financial statements

1 Accounting policies

Basis of preparation

These financial statements have been prepared in accordance with UK-adopted International Financial Reporting

Standards (‘UK IFRS’) and applicable law.

The financial statements have been prepared under the historical cost convention and on the going concern basis.

TheDirectors’ assessment of going concern is set out on page 124 of the consolidated financial statements.

Significant judgements and estimates

The preparation of financial statements in conformity with UK IFRS requires the use of judgements, estimates and

assumptions that affect the application of the Company’s accounting policies and reported amounts of assets and

liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions

arereviewed on an ongoing basis. Revisions to estimates are recognised prospectively. The Company has identified the

following as significant estimates in the period:

Investment in subsidiaries impairment testing

The impairment testing of investment in subsidiaries requires significant judgement in determining the assumptions to

beused to estimate the value-in-use, including estimates of future revenues, operating costs, terminal value growth rates,

the pre-tax discount rate and the Covid-19 trading environment.

Principal accounting policies

The principal accounting policies set out below have been applied consistently to all periods presented in these

financialstatements.

Changes in significant accounting policies

New standards and amendments to existing standards effective in the period, which are set out in full on page 124 of the

consolidated financial statements, have not had a material effect on the Company’s financial statements.

UK endorsed standards and amendments issued but not yet effective

A full list of standards and amendments that are in issue but not yet effective is provided on page 125 of the consolidated

financial statements.

The adoption of these standards and amendments in future periods is not expected to have a material impact on the

Company’s financial statements.

Income statement

The Company made a loss after tax of £0.8 million for the year ended 31 January 2022 (2021: £1.3 million loss), including

£nil dividends received from subsidiary undertakings (2021: £nil). As permitted by section 408 of the Companies Act 2006,

the income statement of the Company is not presented as part of the financial statements.

Investments

Investments in subsidiary undertakings are held at cost less any provision for impairment.

Financial instruments

Non-derivative financial assets

Non-derivative financial assets comprise trade and other receivables classified as financial assets at amortised cost.

Thetrade and other receivables do not have a significant financing component and are initially measured at transaction

price. At each reporting date, the Company assesses whether financial assets carried at amortised cost are credit-

impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated

future cash flows of the financial asset have occurred. The Company measures loss allowances at an amount equal to

lifetime expected credit loss

Non-derivative financial liabilities

Non-derivative financial liabilities comprise trade and other payables. Trade and other payables are initially recognised at

fair value, less any directly attributable transaction costs and subsequently stated at amortised cost using the effective

interest method.

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Card Factory plc Annual Report and Accounts 2022

1 Accounting policies continued

Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in

equity as a deduction from the proceeds.

Merger reserve

On 30 April 2014 Card Factory plc acquired 100% of the share capital of CF Topco Limited in a share for share exchange,

thereby inserting Card Factory plc as the Parent Company of the Group. The shareholders of CF Topco Limited became

100% owners of the enlarged share capital of Card Factory plc. The premium arising on the issue of shares is recognised

inthe merger reserve.

Share-based payments

The Company issues equity-settled share-based payments to employees within the group through the Card Factory

Restricted Share Awards Scheme (‘RSA’) and the Card Factory SAYE Scheme (‘SAYE’), see note 25 of the consolidated

financial statements for further details. The cost of equity-settled share awards is measured as the fair value of the award

at the grant date using the Black-Scholes model.

The cost of awards to employees of the Company is expensed to the income statement, together with a corresponding

adjustment to equity, on a straight-line basis over the vesting period of the award. The cost of awards to employees of

subsidiary undertakings is recognised as a capital contribution, immediately reimbursed by the subsidiary. The total cost

of the awards is based on the Company’s estimate of the number of share awards that will eventually vest in accordance

with the vesting conditions. The awards do not include market-based vesting conditions. At each balance sheet date, the

Company revises its estimate of the number of awards that are expected to vest. Any revision to estimates is recognised

inthe income statement, with a corresponding adjustment to equity. The expense recognised in the Company income

statement is subsequently charged to subsidiary entities to the extent that management services are provided to those

subsidiary entities.

Dividends

Dividends are recognised as a liability in the period in which they are approved such that the Company is obliged to pay

the dividend.

Taxation

Tax on the profit or loss for the period comprises current and deferred tax. Tax is recognised in the income statement

except to the extent that it relates to items recognised directly in equity or through other comprehensive income, in which

case it is recognised in equity or other comprehensive income respectively.

Current tax is the expected tax payable or receivable on the taxable income or loss for the period, using tax rates enacted

or substantively enacted at the balance sheet date. Deferred tax is provided on temporary differences between the

carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets

or liabilities that affect neither accounting nor taxable profit other than in a business combination and differences relating

to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of

deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and

liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against

which the temporary difference can be utilised.

2 Employee costs

The Company has no employees other than the Board of Directors. Full details of Directors’ remuneration are set out in the

Directors’ Remuneration Report on pages 74 to 97.

Notes to the Parent Company financial statements continued

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3 Dividends

No dividends were paid during either the current or the previous financial year. The Board is not recommending a final

dividend in respect of the financial year ended 31 January 2022 (2021: no final dividend).

4 Investments in subsidiaries

£’m

At 31 January 2021 and 31 January 2022 316.2

The market capitalisation of the Group at 31 January 2022 was below the Company’s investment in subsidiaries.

Therecoverable amount of its investments in subsidiaries have been determined based on value-in-use calculations

whichrequire the use of estimates. Management has prepared discounted cash flows based on forecasts which were

anticipated at the year-end. The Directors are satisfied that there is no impairment of the investment in subsidiaries.

The key assumptions and sensitivity to those assumptions are consistent with those described in note 10 to the

consolidated financial statements.

Subsidiary undertakings

At 31 January 2022 the Company controlled 100% of the issued ordinary share capital of the following subsidiaries, all of

which are included in the consolidated financial statements. All subsidiaries are registered in England and Wales with the

exception of Card Factory Ireland Limited which is registered in the Republic of Ireland. The registered office of the

Company is Century House, Brunel Road, Wakefield 41 Industrial Estate, Wakefield, West Yorkshire, WF2 0XG.

Subsidiary undertaking Nature of business Registered office

CF Bidco Limited* Intermediate holding company Same as the Company

Sportswift Limited Sale of greeting cards and gifts Same as the Company

Printcraft Limited Printers Same as the Company

Getting Personal Limited Online sale of personalised products and gifts Same as the Company

Card Factory Ireland Limited Sale of greeting cards and gifts **

CF Topco Limited* Dormant Same as the Company

CF Interco Limited Dormant Same as the Company

Short Rhyme Limited Dormant Same as the Company

Heavy Distance Limited Dormant Same as the Company

Getting Personal Group Limited Dormant Same as the Company

Getting Personal (UK) Limited Dormant Same as the Company

Lupfaw 221 Limited Dormant Same as the Company

Sportswift Properties Limited Dormant Same as the Company

CF Midco Limited Dormant Same as the Company

Century Cards Limited Dormant Same as the Company

Rose Card Limited Dormant Same as the Company

Celebration Cards Limited Dormant Same as the Company

Sportswift Trading Limited Dormant Same as the Company

CF Newco Limited Dormant Same as the Company

321 Cards Limited Dormant Same as the Company

Card Concepts Limited Dormant Same as the Company

Excelsior Graphics Limited Dormant Same as the Company

Card Factory Stores Limited Dormant Same as the Company

Card Factory Retail Limited Dormant Same as the Company

Card Factory Online Limited Dormant Same as the Company

Card Factory Greetings Limited Dormant Same as the Company

* Shares held directly. All other subsidiaries shares are held indirectly through subsidiary undertakings.

** 6th Floor, 2 Grand Canal Square, Dublin 2, Dublin, Republic of Ireland.

158

Card Factory plc Annual Report and Accounts 2022

5 Trade and other receivables

2022

£’m

2021

£’m

Amounts owed by Group undertakings 1.9 1.8

VAT recoverable 0.1 0.2

Prepayments and other debtors 0.5 –

2.5 2.0

Trade and other receivables of the Company principally relate to balances due on demand from subsidiary undertakings.

The Company has assessed the expected credit loss as very low and has made no provision for impairment.

6 Trade and other payables

2022

£’m

2021

£’m

Amounts owed to Group undertakings 2.9 3.0

Trade payables 1.0 0.2

Accruals 0.3 0.3

4.2 3.5

7 Share capital and share premium

2022

(Number)

2021

(Number)

Share capital

Allotted, called up and fully paid ordinary shares of one pence:

At the start of the period 341,626,396 341,626,396

Shares issued in the year 251,945 –

At the end of the period 341,878,341 341,626,396

£’m £’m

Share capital

At the start of the period 3.4 3.4

Shares Issued in the year – –

At the end of the period 3.4 3.4

£’m £’m

Share premium

At the start of the period 202.2 202.2

Shares issued in the year – –

At the end of the period 202.2 202.2

The company has only one class of shares, which are ordinary shares of 1 pence each, carrying no right to a fixed income.

No shareholders have waived their rights to dividends.

During the 2022 financial year, 251,945 shares (2021: nil shares) were issued in satisfaction of options vesting in accordance

with the rules of the Group’s employee share schemes. Full details in respect of the Group’s employee share schemes,

including remaining options outstanding, are included in note 25 to the consolidated financial statements.

Notes to the Parent Company financial statements continued

159

Financial StatementsGovernanceStrategic Report

Card Factory plc Annual Report and Accounts 2022

8 Financial risk management

The financial risk management strategy of the Company is consistent with the Group strategy detailed in note 23 of the

consolidated financial statements. Company exposure to liquidity, interest rate, foreign exchange and credit risk are

principally to the extent they impact the trade of its subsidiary investments. Trade and other receivables of the Company

principally comprise amounts due from Group undertakings.

9 Financial instruments

Classification of financial instruments.

Financial assets have all been classified as financial assets at amortised cost. Financial liabilities have all been classified

as other financial liabilities.

Maturity analysis

All financial instrument assets and liabilities fall due in less than one year.

Fair values

The fair values of financial instruments have been assessed as approximating to their carrying values.

10 Notes to the cash flow statement

2022

£’m

2021

£’m

(Loss)/profit before tax (1.2) (1.6)

Dividends received – –

Operating loss (1.2) (1.6)

Adjusted for:

Share-based payment charge 0.2 0.3

Operating cash flows before changes in working capital (1.0) (1.3)

Decrease/(increase) in receivables 0.3 (0.5)

Increase in payables 0.7 1.8

Cash inflow/(outflow) from operating activities – –

11 Related party transactions

Amounts due to and from Group undertakings are set out in notes 5 and 6 of the financial statements. Transactions

between the Company and its subsidiaries were as follows:

2022

£’m

2021

£’m

Management services 1.1 1.4

Dividends received from Group undertakings – –

Inter-company working capital cash flows from Group undertakings 1.1 1.4

Transactions with key management personnel

The key management personnel of the Company comprise the Card Factory plc Board of Directors. Disclosures relating to

Directors’ remuneration are set out in the Remuneration Report on pages 74 to 97. Directors of the Company control

0.02% of the ordinary shares of the Company.

160

Card Factory plc Annual Report and Accounts 2022

Glossary

Alternative Performance Measures (‘APMs') and other explanatory information

Introduction

In the reporting of the financial statements, the Directors have adopted various APMs of financial performance, position

orcash flows other than those defined or specified under International Financial Reporting Standards (‘IFRS’). These

measures are not defined by IFRS and therefore may not be directly comparable with other companies’ APMs, including

those in the Group’s industry. APMs should be considered in addition to IFRS measures and are not intended to be a

substitute for IFRS measurements.

Purpose

The Directors believe that these APMs provide additional useful information on the performance and position of the Group

and are intended to aid the user in understanding the Group’s results.

The APMs presented in the Annual Report and Accounts are consistent with measures used internally by the Board and

management for performance analysis, planning, reporting and incentive setting purposes.

Definitions of the APMs used in this report are as follows:

‘EBITDA’ is earnings before interest, tax, depreciation, amortisation and impairment charges. Earnings is equivalent

toprofit after tax calculated in accordance with IFRS and each adjusting item is calculated in accordance with the

relevant IFRS. A reconciliation of EBITDA to profit after tax is provided in note 3 to the consolidated financial statements.

The Group uses EBITDA as a measure of trading performance, as it usually closely correlates to the Group’s operating

cashgeneration.

‘Leverage’ is the ratio of Net Debt to EBITDA for the previous 12 months. The Group monitors and reports leverage as akey

measure of its financing position and performance. Leverage is also a key covenant defined within the Group’s financing

facilities. A calculation of Leverage (both inclusive and exclusive of lease liabilities) is provided in the financial review on

page 36 of this report.

‘Like-for-like’ or ‘LFL’ calculates the growth or decline in sales in the current period versus a prior comparative period,

excluding any sales earned from new stores opened in the current period (or since the comparative period. Throughout

thisreport, LFLs for Card Factory stores are two-year LFLs to FY20 (as the last full year of trading prior to Covid-related

closure restrictions) and exclude any periods where stores were forced to close.

The Group defines Iike-for-Iike sales as the year-on-year growth in sales via Card Factory retail channels as follows:

• Card Factory Stores: ‘Store LFLs’ consider stores that were open in both the current year and the comparative period;

• ‘Card Factory Online’: made via the Card Factory website, www.cardfactory.co.uk;

• ‘Card Factory LFL’ is defined as like-for-like sales in stores plus sales from the Card Factory website.

www.cardfactory.co.uk;

• ‘Getting Personal’: made via the separately branded personalised card and gift website, www.gettingpersonal.co.uk;

• ‘Online’: like-for-like sales for Card Factory Online and Getting Personal combined.

Sales by Printcraft, the Group’s printing division, to external third-party customers are excluded from any LFL

salesmeasure.

‘Net Debt’ is calculated by subtracting the Group’s cash and cash equivalents from its borrowings. Net debt is a key

measure of the Group’s balance sheet strength, and is also a covenant in the Group’s financing facilities. The Group

presents net debt both inclusive and exclusive of lease liabilities, but focusses upon the value exclusive of lease liabilities,

which is consistent with the calculation used for covenant purposes.

‘Percentage Movements’ have been calculated before figures were rounded to £0.1 million.

Corporate brokers

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Legal advisors

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Auditor

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Principal bankers

Royal Bank of Scotland Group plc

Leeds Corporate Office

3rd Floor

2 Whitehall Quay

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Registrars

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Investor relations

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Tel: +44 020 7353 4200

Registered office

Century House

Brunel Road

Wakefield 41 Industrial Estate

Wakefield West Yorkshire WF2 0XG

Company Registration No: 9002747

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Advisors and Contacts

161

Card Factory plc Annual Report and Accounts 2022

Annual Report and Accounts 2022

Card Factory plc

Century House

Brunel Road

Wakefield 41 Industrial Estate

Wakefield

West Yorkshire

WF2 0XG

cardfactory.co.uk

cardfactoryinvestors.com