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
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Total revenue growth of 0.9% to
£282.6m in FY24 (FY23: £280.1m) and total LFL sales decline of
0.9%.
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Expect to report pre IFRS 16
Adjusted EBITDA of approximately £6m in FY24 and deliver £8.5m in
FY25, in line with market forecasts.
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Medium term ambition is to return to
pre IFRS 16 EBITDA margins of 5%.
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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:
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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.
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Moved our online fulfilment centre
(operated by a third-party provider) to a more efficient
facility.
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Ended our loyalty scheme to focus
instead on maintaining everyday affordable prices - the most
important thing to our customers.
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Improved product margins through
negotiations with suppliers and optimised promotional
activity.
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Made changes in our Distribution
Centre and store labour model, which are expected to drive
significant efficiencies.
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Negotiating rent savings with
landlords, particularly for marginal and loss-making stores with
leases up for renewal.
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Restructured our Operational Board
to give us a more agile and focused leadership team.
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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 1st October
2024.
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Enquiries:
TheWorks.co.uk plc
Gavin
Peck CEO
Rosie Fordham CFO
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via Sanctuary Counsel
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Singer Capital Markets (Nomad and Broker)
Peter Steel
Alaina Wong
Jalini Kalaravy
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020 7496 3000
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Sanctuary Counsel
Ben Ullmann
Rachel Miller
Kitty Ryder
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0207 340 0395
theworks@sanctuarycounsel.com
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(1)
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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.
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(2)
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Net cash at bank excluding finance
leases, and on a pre IFRS 16 basis.
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(3)
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Due to ongoing supply chain
disruption in the Red Sea.
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