Welcome to our preliminary results update for FY 2022. I'm Darcy Willson-Rymer, CEO of Card Factory, and joining me today is Kristian Lee, our CFO. Kristian and I will shortly provide the financial performance update for FY 2022, and I'll then provide an update on delivery progress for our Opening Our New Future growth strategy and then the outlook for the year ahead. Let me begin by saying that having now completed my first full year as chief executive of Card Factory, I've been impressed by the potential from the design, print, manufacturing, and retail capability, as well as the culture of the business, and I'm optimistic about our opportunities for growth. Card Factory is a company that is loved both by customers and colleagues, and there's an energy from our colleagues to do the right thing, which was reflected in our FY 2022 performance.
Reflecting on FY 2022, there were a number of operational priorities that we addressed. As lockdown ended, we ensured the stores reopened and traded as strongly as possible. We actively responded to supply chain pressures to mitigate trading disruption, and the fact that we have our own in-house design, print, and manufacturing capability proved its worth through FY 2022. We reviewed and updated our Opening Our New Future growth strategy. We successfully completed phase one of our ERP implementation, and our leadership team capability has been strengthened with new talent, and we accelerated the evolution of our culture within Card Factory. Finally, as you see within our results, we ensured we had the right financial structure in place. All of this was reflected in our FY 2022 performance, which saw sales recovering steadily after lockdown.
This enabled an improving top-line performance of GBP 364.4 million for the 12 months to January 31st, 2022, or our financial year FY 2022, which was a 28% increase year-on-year, driven by growth in store sales. The steady recovery of store performance of +33% year-on-year reflected a 20% increase in the number of trading days compared to the prior year and a recovery in our market share. Online sales were ahead of pre-pandemic levels at +23%, reflecting the expansion of our product range online and improved customer experience, as well as an accelerated shift in consumer behavior. Profits were ahead of management expectations despite significant inflationary and supply chain headwinds with a PBT of GBP 11.1 million versus guidance of GBP 7 million-GBP 10 million.
The business remains highly cash generative with significant reduction in leverage during the year. The focus on building the financial strength of the business was seen through the strong operating cash flow, which was up 42% versus the prior year to GBP 114 million, excluding lease liabilities. We ended the year with improved balance sheet strength with closing net debt, excluding lease liabilities, of GBP 74.2 million compared to GBP 107.7 million in FY 2021. Finally, we're pleased to have successfully refinanced the business with our banking partners as announced on April 21st, 2022, and the revised agreement removed the obligation on the group to use best efforts to raise further equity to make prepayments of the debt facilities. To discuss the refinancing and full details of our financial performance, I'll now hand over to Kristian.
Thank you, Darcy. I'll now give you the update on the financials for FY 2022 for Card Factory. The revenue overall grew by GBP 80 million during the period as we've seen a steady recovery in store performance following the easing of lockdown restrictions. Stores LFL was -5.7% against FY 2020, while online like- for- like revenues for Card Factory were -1.5%, with a combined position for Card Factory of -3.9%. The profit before tax for the period was GBP 11.1 million. This is ahead of the GBP 7 million-GBP 10 million guidance that we did give in January. Net debt has come down considerably, excluding lease liabilities, to GBP 74.2 million. This is nearly half where we were in January 2020 pre-pandemic. Net debt, including lease liabilities, is GBP 193.7 million.
Just moving to the like-for-like sales performance. We've still seen on the high street that footfall is subdued. In the period we've seen transactions reflect that in terms of -23% and average basket values have remained strong at +22% during the period since reopening in April 2021. Card Factory online at -1.5% was against a tough comparative of 135%, bearing in mind that FY 2021 had five months of lockdown period where people went online to shop. Moving to the divisional analysis, revenue overall in the stores was 33% up on FY 2021. We've got a consolidation evolution of the store portfolio in line with changing shopping habits. We've added a net four stores to the portfolio to 1,020.
Even post-pandemic, we're now seeing only circa 2% of stores are marginally loss-making. As part of our monthly review and the property reviews, we do address these in terms of a plan of action and relocations. Trading has recovered particularly strong through the year, especially into December, where we've seen like-for-like on December 21 against 2019 get to -1.4%. We've also introduced the first new model store in Coventry, with featuring improved customer flow, store navigation, and operational efficiencies. We plan to open a number of more of these stores as trials during the financial year. I think the store performance though reflects the strength of the Card Factory brand and underlines the importance of stores as part of the wider omni-channel strategy. Moving to online, I've touched on the -1.5%.
The key areas where we've seen strong performance in Card Factory are around non-personalized cards as well as gifting, parties and balloons as people have shopped online and reintroduced parties. The other area in terms of Getting Personal was a bit more subdued at -21%. This really reflects a couple of things. One, which is around what we positioned previously about backing profitable sales and pay-per-click transactions, which have a decent return on investment. Then there's an element where we transition in Getting Personal onto the new platform, which is expected in late H1 in FY 2023. Just in terms of partnerships, GBP 4.6 million were down on the previous year, but in line with expectations. The reduction is mainly due to The Reject Shop and based on the lockdown periods that we're seeing in Australia.
We've seen Aldi maintain year-on-year flat sales, bearing in mind the five months of lockdown in FY 2021, where people were shopping more in essential retailers while non-essential retailers were closed. We've seen a robust performance in partnerships, and we've now got a new business development director who is leading that strategy. Looking at the margins of the business over the period, the product margins were strong in the period at +4.4 percentage points. 0.4 of this was around currency gains in terms of the FX blended position, and then 4% has come from the realignment of stock provisions alongside the improved stock management.
Store wages increases aligned with where we expected with National Living Wage and some of the offsets in productivity gains, while property costs increase reflects effectively the fact that there has been less rates relief from the government in FY 2022. While direct expenses have increased in line with the increase in sales and operating expenses reflecting the investment that we've made in the IT infrastructure and an element in the prior year benefiting from CJRS in terms of government support in lockdown periods. Overall, that means the EBITDA for the period was GBP 85.6 million against GBP 45.8 million. Overall, nearly double the profit of where we were last year. In addition to that, if we look at the depreciation line now, you've got the right-of-use assets, the rent charge goes through that line.
That has also reduced down to GBP 37.3 million against GBP 39.6 million in the previous period. Net financing expenses were higher than the previous year. This reflects the refinancing that we did in May 2021, and it also reflects the refinancing options that we explored before the refinancings that we announced on April 21st this year. Overall, profit before tax GBP 11.1 million against a GBP 16.4 million loss in the prior year. Importantly, looking at cash flow. The benefit of the increased profit, but one of the key call-outs I want to make is net working capital. Net working capital over two years, we've managed to improve that by GBP 62 million, which obviously has benefited in terms of reducing net debt position of the business.
Other lines you'll see on the CapEx, GBP 6.6 million, 7 million last year. This reflects the control of cash and CapEx that we made during the COVID-impacted periods to preserve cash. Lease liabilities, you'll see at GBP 54.8 million against GBP 22.1 million. That reflects GBP 19 million of deferred rents from FY 2021 into 2022. When looking at free cash flow, free cash flow was more positive than FY 2021 at GBP 42.5 million against 36.1. Underlyingly, we've took an additional hit in the year of GBP 90 million of rents, so the underlying position would be nearer GBP 61.5 million. This is the reason we've seen net debt tumble by the year end. In terms of the liquidity update, four key points really. We've delivered the refinancing.
This draws a line under the liquidity concerns, and gives us sufficient headroom. We've also removed the obligation for any equity raise, and we've got a new financing facility through to September 2025 to support the five-year strategy. Obviously, there's been a lot of talk about inflation and headwinds. We expect in FY 2023 that revenues will recover towards the FY 2020 pre-pandemic levels. As previously guided, expectation is for significant inflationary headwinds to continue through FY 2023. The key areas for Card Factory are around freight costs, fuel, National Living Wage, and energy. We have taken preemptive action on these areas and mitigated a significant proportion of them with a combination of efficient management of costs and working capital, as well as targeted price increases. The expectation in FY 2023 on revenue and profit remains unchanged. FY 2023, one additional point on CapEx.
We do expect to spend circa GBP 23 million in this financial year. This reflects the areas for delivery of the strategy and the areas where we preserve cash, as I mentioned, in the cash flow over the last couple of years. The key areas are the ERP phase two implementation, the development of online, that includes increasing our fulfillment capacity and efficiency, as well as the wider omni-channel offering and investment in stores. We're still going to invest in existing stores and new stores, circa GBP 7 million, with a gross number of stores of around 50 and a net number of stores around 38 as we do look to do more relocations in the existing portfolio. Then just looking at an update on the current trading.
I think what we've seen in the first few months of the current financial year is that it's in line with our expectations, and it's continued to recover our market share position, which is obviously key. But we are seeing a mix shift in our spring seasons, Valentine's Day, Mother's Day, towards everyday ranges, which typically represent 70% of our annual sales. We believe that shift may be more towards 73%. However, bearing in mind that Mother's Day and Valentine's Day is significantly less than 10% of the overall sales for the year. Overall, the performance through the balance of the year, we believe will increasingly benefit from the planned strategic improvements, including expansion of our market share in complementary categories, rollout of trial store and targeted price increases.
There's three key initiative areas: pricing increases, authority in complementary categories, so these include soft toys, we've introduced books, we've introduced confectionery and chocolates. The third one is leadership and card choice, key areas refreshing the ranges and new price points. Particularly around wedding, female, and open, we'll be looking to refresh those ranges. That's the conclusion of the financial update, and I'd like to pass back to Darcy for the strategy update.
Thank you, Kristian. This will be the first strategy update since our revised Opening Our New Future growth strategy was announced in September. I appreciate that not all of you could attend that update, so I'm going to begin with just a brief recap. I'll then go into more detail about key milestones we've delivered and our priorities over the coming months. In summary, it is clear that the right way forward is to transition Card Factory from being a store-led card retailer into a market- leading omni-channel retailer of cards and gifts. Through this strategy, Card Factory is well positioned to become the U.K.'s number one destination for all customers seeking unrivaled quality, value, choice, convenience, and experience.
We're working to transform Card Factory into a leading omni-channel brand in our space to help customers celebrate each and every special occasion, and it's our aim to become a global competitor, putting cards and gifts in the hands of more customers. As outlined at the time of our interim results in September, we will be building on our existing quality and value heritage to take Card Factory on a journey that provides our customers with more convenience by providing greater access to products wherever and whenever they want them. This will come through an improved digital experience and the transition to a full omni-channel business. The expansion of our U.K. and Republic of Ireland store footprint, as well as growing international presence in countries which are primed for disruption due to identified gaps in the market for Card Factory's value and quality proposition.
More choice by building upon our leading card offer to expand into complementary ranges. We'll continue to be a card-led value retailer in a stable market where 73% of U.K. adults are card givers. However, we will meet customer demand by providing greater choice through complementary gifting and party ranges, opening up an access to a large market with GBP 44 billion per annum in the U.K., which we'll be targeting GBP 5 billion, which is between four and five times larger than the card-only market that Card Factory has previously focused on. Lastly, we'll be delivering on an exceptional customer experience through improved data capabilities for understanding the customer, brand investment, and ESG investment. We'll 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 with a diverse, inclusive, and socially responsible business.
Delivery of our strategy is now underway, and some significant milestones have already been achieved. We've strengthened our leadership team with appointments into key roles of Chief Information Officer and Digital Director, recognizing the critical role digital has to play in our business growth, as well as a new Business Development Director to lead our partnership strategy. In addition, we have also 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 that we have the right capabilities to drive the next stage of our growth. Regarding our strategy delivery milestones, these include opening 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're confident that similar results can be achieved as more trial star stores are opened. Transitioning both online platforms, cardfactory.co.uk and gettingpersonal.co.uk, onto a single unified platform, unlocking cost benefits and opportunity 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 milestones include building upon our existing leadership in party and balloon categories to expand our market share in our stores within complementary categories such as stationery and confectionery. This will not come at the expense of cards in store. It's about making smarter, more agile choices about the space dedicated to complementary categories.
Completing the rollout of trial model stores so that we can prepare for a wider rollout from FY 2024, while taking valuable learnings into the existing store estate as we get them. For new store openings, we've identified a profitable route for opening our first stores in central London. In addition, 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. More broadly, in terms of the wider capabilities we need to put in place to deliver on our strategy, we will trial the ability for shoppers to click and collect any product from our online or app platforms for collection in store.
This is the first step on rolling out our omni-channel capability, which we believe provides the opportunity to leverage our brand, our store estate, our vertical integration, and our quality and value proposition, and our investment in our online channels to materially increase our share of the online market. We will deliver the second phase of our ERP. Already live across the finance function, 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 omni-channel operations. It will also allow us to integrate with future partners, both in the U.K. and internationally.
Finally, to support maintaining margins, we have begun a highly targeted set of price increases across some of our products, which follows on from the success we achieved last year. We are carefully analyzing the impact on sales, and further price rises on other SKUs are being actively considered. We're gonna do this all while maintaining our value proposition. Regarding our ESG focus, we are committed to growing our business in a socially and environmentally responsible way. We're making considerable headway in meeting these objectives. Highlights include being on track to reduce waste, with 90% of our products being free of single-use plastic, and all of our products being glitter-free by the end of FY 2024. Progressing well in terms of reducing our carbon footprint, and we have an ambition to become a carbon- neutral business.
From a social perspective, we launched our diversity, equality, and inclusion strategy, which is making a positive difference for colleagues, for the communities we work within, the products we sell, and the suppliers we work with. Our approach to career progression and talent management is progressive for all colleagues, and we continue to have a positive impact within the communities we work within and the charities we support through our Card Factory Foundation, all of which is underpinned by a rigorous approach to good governance. In summary, as we look ahead, we are focused on building out our digital proposition and leveraging our store estate and brand heritage to transform Card Factory into an omni-channel business, allowing our customers to access our product anywhere and anytime they choose. We will continue to build on our success in complementary categories to address a GBP 5 billion gifting market.
At the same time, we're also expanding our successful partnership model, both in the U.K. and internationally, all of which will continue to be built upon the strength of our vertically integrated model, which is a unique point of difference for Card Factory, allowing us to own every aspect of design, manufacture, distribution, and sales channels, both in store and online. We'll continue to build the financial strength of the business, which is highly profitable and has strong cash generation and is now underpinned by the successful refinancing. This means Card Factory in FY 2023 will expect revenues will head towards pre-pandemic levels, and our expectations for FY 2023 revenue and profit are unchanged. We've taken preemptive action to help mitigate the inflationary pressures we are seeing across the business, and we will continue to monitor and respond to developing macro environmental pressures.
Card Factory is now well-positioned for longer-term growth, targeting over GBP 600 million in sales by FY 2026. Delivery of this growth ambition is well underway and will make significant headway in the delivering of our Opening Our New Future strategy this year. We are therefore excited by the growth opportunity ahead. We continue to focus on implementing changes to enable delivery on our transition from a store-led card retailer to a market-leading omni-channel retailer of cards and gifts. Thank you for your engagement and your time today. Kristian and I will now be happy to take any questions that you may have.
Ladies and gentlemen, to ask a question over the phone, please press star one. We'll now take our first question from Kate Calvert on Investec. Please go ahead.
Morning, everyone. Just two for me. First on the supply chain. Given your exposure to China and obviously the continuing sort of COVID restrictions, disruptions over there, what are you doing differently this year to ensure consistency of supply, particularly in the run up to Christmas? My second question is on your product margin percentage, it's still quite a bit below where peak levels were pre-COVID. Sort of where do you see that getting back to over the next three years?
Thanks, Kate. Yeah, so I mean, in terms of China, as you say, there is some exposure to China, so we have been monitoring that quite carefully. The bit we've looked at generally is, you know, in terms of assessing risk to the business is where we can source other products from, so within Europe and other areas. I think at the minute, in terms of the amount of product we've sourced already in terms of the seasons and Christmas in particular, that we remain pretty comfortable with that. In terms of product margin, we made an obvious note in the statement around, we did provide for stock at the back end of last year. Because of some freight issues, that would have been widely noted in the press, we ended up where we substituted some products.
There was a little bit of a tailwind on that provision. I think if we're looking at the 4% we guided to in the note, 4 percentage points difference, there's probably about two of that which is in relation to a tailwind in the period. I think product margins will remain like I say, 2% different, but there or thereabouts. I don't think that the pre-tax product margins that we'd seen back to those levels on the basis we've introduced a lot of other categories. We've mentioned about confectionery, chocolates and other products in the non-card area. These are things which are actually, you know, driving good cash sales.
The margin, like I say, I expect it to be about 2% different to the current position at the year end.
Great. Thanks so much.
There are currently no further questions in phone queue.
Thank you, Sergey. We've had a number of questions come in from the webcast. Just a reminder for those who wish to ask a question on the webcast, please click on the Submit Question button in the control panel at the bottom of your screen. Our first question is from Adam Tomlinson from Liberum. Can you please talk about current stock position and availability levels? How comfortable are you and where does inventory need to be?
In terms of current stock levels, we've obviously made some investments in handheld terminals and basically getting at line level, SKU level stock details in stores. We've got a lot more, a much better handle on the stock and availability. Off the back of that, we have managed to successfully bring stock levels down. You know, I think we remain comfortable at the reduced stock levels that we've seen at the end of FY 2022.
Please can you give details on the CapEx set up in FY 2023?
We've not given obviously a breakdown on the GBP 23 million guidance, but effectively the key area is really around the ERP phase two, which is the core stock system, which will give us the full stock loop, which will improve our visibility on stock further. Also online investment, so around online fulfillment, so actually the capacity and ability to fulfill orders better, as well as investment in omni-channel and online. And then as I said, we're still looking, that will be circa GBP 7 million, which will go into stores around 50 growth stores, 38 net, and also relocations within there. Other areas we'll continue to invest in is the vertical integration and Newport and obviously the competitive difference we've got there. There'll be an element in there.
Some of this really is where we've controlled cash in previous two years on CapEx. You know, some of the investment that was always part of the five-year plan.
Can you give a bit more color on where the major investment's going?
As I say, they split between them categories really. Like I say, we've not give any more detail than that.
Thank you. His next question is, when you talk about price rises, can you help quantify what you have in mind and what you've seen the competition do so far?
On price rises, obviously we've done a number of tests in the market prior to making these changes to see the impact on volumes. Where we've looked at these is certain key price points. Examples would be GBP 0.59-0.69, we moved GBP 0.89-0.99. Some GBP 1.49 cards to GBP 1.99. The key point is though, we're not just doing that just on a change of the tab on the existing card. We are looking to re-engineer the cards and put more value into the card. Obviously then there is on the non-card areas where we've introduced other categories, books, confectionery, chocolates, at different price points as well.
Kristian, I'm just gonna add on the price thing. I think it's important. First of all, back in September, I said that we would look to offset inflation through a combination of productivity and price, which is our strategy, and we're doing. I think the other point on price that's important is maintaining the architecture. While we've, as Kristian has said, moved some of the pricing up to GBP 0.89-GBP 0.99, for example, what we've looked to do is maintain logical price architecture. We haven't changed our entry price point at GBP 0.29, but we have brought in higher price cards, so our exit price point in some categories is higher.
Take wedding for example, we've now put in a card that has more to it, so it's more value, as Kristian outlined, but with an exit price point of GBP 2.99, for example. In addition, it's about maintaining appropriate architecture, and also looking at how we can drive spend.
Thank you. Adam's last question is, you talk about having already mitigated a significant portion of inflationary headwinds so far. Can you please give some further details?
Obviously one of the key areas has been freight. I suppose we're looking at the main inflationary areas as being freight, obviously, National Living Wage continues what we've seen on fuel prices. The freight piece in particular, one thing we looked at in a lot of detail is container fill. Obviously maximizing containers and the timing of when them containers are shipped makes an impact on the pricing. Obviously in terms of in stores, we've looked at more efficiencies, more where we can use investment in IT and technology to take tasks out of the store to combat National Living Wage. We've hedged, you know, sort of three years out in the price what's happened on energy prices in that area.
On fuel, you know, we've been in negotiations with a number of carriers in terms of from DC into stores, and those contracts in terms of, you know, not taking the full impact of the fuel inflation through those negotiations. There's been a lot of other measures, but they're probably some of the big ticket things.
Thank you. We've had a number of questions come through from James Gilbert from Argan Capital. Firstly, please can you walk us through the build up of your projected revenue growth in the medium term from each of your initiatives? How much from store openings, range, market expansion, online, et cetera? Can you give us guidance on medium-term operating margin targets in this context, please?
In terms of the build up of the projected revenue in the medium term, obviously we've not given that breakdown in the market. In terms of the overall split of where we target to get to in the next five years up to FY 2026, is for 20% of the sales to be through online and partnerships. In terms of the margins, we guided previously in terms of the margins of where we were targeting in the future to get to, you know, circa 17% from PBT. Those guidances sort of remain intact, but clearly with inflation where it is, those things will remain under review.
Thank you. Just as a reminder, if you'd like to ask a question via the webcast, please click on the Submit Question button at the bottom of your screen. We have no further questions, so I'd like to hand back to our speakers for any additional or closing remarks.
Very good. Just to take the opportunity to thank everybody for their time and their attention today and look forward to catching up with our shareholders in due course. Thanks very much, everybody.