who sold 6 million shares ? and WHY

Clinton Cards

F L A S H
19 October 2005 General Retailers United Kingdom Hold 69.75p
Analysts
Matthew McEachran
+44 (0) 20 7597 5054
matthew.mceachran@investec.co.uk
Mark Charnock
+44 (0) 20 7597 5028
mark.charnock@investec.co.uk
Investec acts as Broker and Advisor to
Clinton Cards
Performance
Year End: 31 January 2004 2005 2006E 2007E 2008E
Turnover (£m) 336.7 392.8 501.4 517.5 543.4
EBITDA (£m) 40.3 49.4 30.3 42.4 49.2
EBITA (£m) 29.5 36.2 17.5 26.3 31.4
EBITA Margin (%) 8.8 9.2 3.5 5.1 5.8
PBT (Normalised) (£m) 29.5 35.5 13.5 22.5 28.0
Tax Rate (%) 33.6 29.3 30.0 30.0 30.0
EPS (Normalised) - Fully Diluted (p) 9.4 12.1 4.6 7.6 9.5
EPS (Reported) - Fully Diluted (p) 8.5 11.1 2.8 6.5 8.5
DPS (p) 3.20 3.55 3.55 3.80 3.79
Source: Company Accounts/Investec Securities Estimates
Valuation
Year End: 31 January 2004 2005 2006E 2007E 2008E
PE (Normalised) (x) 7.4 5.8 15.3 9.2 7.4
EV/Sales (x) 0.4 0.5 0.4 0.4 0.3
EV/EBITDA (x) 3.5 4.1 6.9 4.7 3.9
FCF Yield (%) 0.8 7.9 0.0 11.4 13.4
Yield (%) 4.6 5.1 5.1 5.5 5.4
Source: Company Accounts/Investec Securities Estimates



First half results due end October
Interims are due on 31st October. Historically Clintons was just profitable in
H1. However, delays in restructuring Birthdays, coupled with tough trading
conditions for both chains, is expected to result in a material loss this year.
Interim loss expected to be substantial
We envisage the core Clinton’s chain will make a £1m loss this year (04, £3m
profit). However, an £8m loss at Birthdays and c£2m of acquisition funding
costs means we expect the group to report an £11m loss in total.
Furthermore, delays in repositioning Birthdays means we are downgrading FY
estimates by £2.5m to £13.5m PBT (-16%), and by a similar amount next year.
Near term downside but medium term upside - Hold
The restructuring and repositioning of Birthdays is behind schedule. This is a
concern for investors, since it coincides with weak consumer trading
conditions and intensifying competition, thereby triggering more downgrades.
Whilst not currently an issue, financial pressure could arise if sales performance
were to weaken further, particularly in the key pre-Christmas period.
Notwithstanding this, performance should reverse next year as Birthdays
initiatives gain traction. Near term concerns may outweigh optimism of this
recovery next year, though - certainly until hard evidence becomes visible.
Market Cap £144m
Enterprise Value £210m
Reuters Code CC.L
12m high/low 113p/69.75p
Share Price Performance
0
20
40
60
80
100
120
Oct-03 Oct-04 Oct-05
1m 3m 12m
Price (10.0) (14.2) (20.3)
Rel. All Share (7.8) (15.2) (30.9)
Source: JCF Group
Impact On Estimates
-18.0
-16.0
-14.0
-12.0
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2006 2007 2008
Change in normalised EPS (%)
Source: Investec Securities Estimates

Refer to important disclosures starting on page 6
Losses on the cards - H1. Downgrade - H2.