REG - TheWorks.co.uk PLC - Full Year Trading Update

Works co ukAnnouncement

21/05/2024 07:00

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RNS Number : 1855P  TheWorks.co.uk PLC  21 May 2024

21 May 2024

TheWorks.co.uk plc

("The Works", the "Company" or the "Group")

Trading update for the 53 weeks ended 5 May 2024

FY24 and FY25 guidance maintained

TheWorks.co.uk plc, the family-friendly value retailer of arts, crafts, toys,
books and stationery, announces a trading update for the 53 weeks ended 5 May
2024 (the "Period" or "FY24") ((1)).

FY24 overview

 ·             Total revenue growth of 0.9% to £282.6m in FY24 (FY23: £280.1m) and total
               LFL sales decline of 0.9%.
 ·             Expect to report pre IFRS 16 Adjusted EBITDA of approximately £6m in FY24 and
               deliver £8.5m in FY25, in line with market forecasts.
 ·             Medium term ambition is to return to pre IFRS 16 EBITDA margins of 5%.

 

During the year we improved the overall quality and profitability of our store
portfolio, with 9 new store openings, 24 closures, 5 relocations and 21 store
refits. We traded from 511 stores at the year end, of which over 96% are
profitable. Our store estate represents c.90% of sales and delivered positive
LFLs in the year.

In January, we announced the business had pivoted to focus on stabilising
profitability by improving margins and reducing costs. We are pleased to
report that we have made significant progress as follows:

 ·             Transferred The Works from its Main Market listing to AIM, which has a more
               flexible regulatory environment and will result in a significantly lower audit
               fee.
 ·             Moved our online fulfilment centre (operated by a third-party provider) to a
               more efficient facility.
 ·             Ended our loyalty scheme to focus instead on maintaining everyday affordable
               prices - the most important thing to our customers.
 ·             Improved product margins through negotiations with suppliers and optimised
               promotional activity.
 ·             Made changes in our Distribution Centre and store labour model, which are
               expected to drive significant efficiencies.
 ·             Negotiating rent savings with landlords, particularly for marginal and
               loss-making stores with leases up for renewal.
 ·             Restructured our Operational Board to give us a more agile and focused
               leadership team.

 

Most of the benefits from this activity are expected in FY25, but already
started to deliver improved margins and lower costs in Q4 of FY24. As a
result, the Board's expectation for FY24 (pre IFRS 16 Adjusted EBITDA of
approximately £6.0m) remains unchanged.

Financial position

The Group ended the Period with net cash ((2)) of £1.6m (the 52-week period
ended with net cash of £6.5m, which compares to net cash of £10.2m at the
end of FY23). The Works continues to have an RCF of £20.0m, which provides
ample liquidity and is utilised to support the build of stock prior to peak
trading.

Outlook

Our expectation for FY25 is to deliver stable sales. We are confident that the
action taken to reduce costs and improve margins will offset the significant
cost headwinds we face, including National Living Wage, higher freight costs
((3)) and business rates. We therefore expect to deliver an improved pre IFRS
16 Adjusted EBITDA of approximately £8.5m in FY25. Over the medium term our
ambition is to return to pre IFRS 16 EBITDA margins of 5%.

Gavin Peck, Chief Executive Officer of The Works, commented:

"We are pleased to have finished FY24 in line with market expectations, which
reflects action taken to reset our cost base and improve margins, supported by
improving store sales in the final quarter. Significant changes implemented
across the business make us well-placed to offset cost headwinds and we expect
to return to profit growth in FY25. In a year of considerable change at The
Works I am incredibly grateful to our colleagues for their ongoing dedication
to our business and to our customers."

Publication of FY24 results and change of auditor

Following our move to AIM, we are pleased to announce that we have appointed
Kreston Reeves LLP as our external auditor. To provide Kreston Reeves with
sufficient time to complete their first year audit work, the FY24 results are
expected to be announced on Tuesday 1(st) October 2024.

 

 Enquiries:

 TheWorks.co.uk plc                         via Sanctuary Counsel

 Gavin Peck        CEO

 Rosie Fordham  CFO

 Singer Capital Markets (Nomad and Broker)  020 7496 3000

 Peter Steel

 Alaina Wong

 Jalini Kalaravy
 Sanctuary Counsel

 Ben Ullmann                                0207 340 0395

 Rachel Miller                              theworks@sanctuarycounsel.com (mailto:theworks@sanctuarycounsel.com)

 Kitty Ryder

 

 (1)  The FY24 annual report and accounts for the Group will cover the 53-week
      period ended 5 May 2024, compared to a 52-week period ended 30 April 2023 in
      FY23.
 (2)  Net cash at bank excluding finance leases, and on a pre IFRS 16 basis.
 (3)  Due to ongoing supply chain disruption in the Red Sea.

 

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