22nd Jan 2015 11:24
LONDON (Alliance News) - Investec reiterates its Buy rating on Card Factory, saying the group delivered another good sales performance and is trading in line with market expectations.
The broker said cash generation of the company was "very strong" and noted the company guided its net debt at year-end will be below market expectations of GBP114-135 million.
Investec reiterates its view that the decline in debt makes the possibility of the company returning capital to shareholders in its 2016 financial year. It reckons the strength of cash generation and potential for capital returns is not priced into its current valuation.
Investec said total sales growth of 8.1% in the first 11 months for Card Factory is in line with its estimates and said the slowdown in like-for-like sales growth, down to 1.8% from 3.1% last year, was against strong comparables and was driven Christmas card sales being weighted to lower-margin boxed cards, a declining market which does not provide material contribution to Card Factory's profit.
The broker has a 310 pence price target on the stock.
Card Factory shares were down 5.2% to 261.50 pence on Thursday, one of the worst performers in the FTSE 250.
By Sam Unsted; [email protected]; @SamUAtAlliance
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