Card Factory prepares to list: will it be the next victim of IPO fever?

IPO WATCH: The retailer filed its intention to float this morning. It's brave: recent retail floats can't exactly be described as 'successful'.

by Emma Haslett
Last Updated: 15 May 2014

While everyone else was struggling to open their eyes this morning, Card Factory was up and at ‘em: the retailer, which has over 700 stores, filed its intention to float ‘at least’ 25% of its value, suggesting it will, as predicted, list at some point during the summer.

Greetings cards aren’t traditionally seen as one of the UK’s great retail prospects - just look at the fate of Clintons, which is now a shadow of its former self. But Card Factory is actually doing pretty well: the company sold over 285 million cards in the year to the end of January, with revenues of £326.9m (9% up on its previous year) and underlying growth in earnings before interest, tax depreciation and amortisation of £80.4m, up 9.2% on the year before. The retailer has opened 50 new stores a year over the past 10 years, and it reckons its market is worth £2.4-3.4bn. No cards of condolence here...

But the recent spate of IPOs has been less than kind to many of Card Factory’s newly-listed compadres: shares in Pets at Home slid by 5p immediately after it listed in March, and closed on Thursday at 209.25p, down from its listing price of 245p. Although Poundland’s shares rose slightly after it floated, its share price is still down 1.3% since it listed on 12 March.

The rumour mill has cranked out a valuation of about £700m for Card Factory, which is just under nine times EBITDA. Compare that with AO World’s estimated 72 times its projected 2015 figure, and that suggests its banks (Morgan Stanley, UBS, Nomura and Investec) have a slightly less hysterical outlook on pricing. Either that, or they’ve learned lessons from recent mistakes.

Finance Retail

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