REG - Kelso Group Holdings - New Investment - TheWorks.co.uk plc

Kelso groupAnnouncement

25/09/2023 07:00

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RNS Number : 4383N  Kelso Group Holdings PLC  25 September 2023

Kelso Group Holdings Plc ("Kelso" or the "Company")

Investment in TheWorks.co.uk plc ("TheWorks")

 

Kelso, the main market listed investment company, is pleased to announce that
it has made its second investment, having purchased 2.0 million ordinary
shares in TheWorks (LSE: WRKS) at an average price of 31.3p, representing 3.2%
of the issued share capital of TheWorks.

TheWorks is the UK's leading family friendly retailer of value gifts, arts and
crafts, toys and books and stationery products with 12 of its own brands,
representing c.30% of revenue. It has a clear purpose of inspiring people to
read, learn, create and play. Established in 1981, with currently 525 stores
across the UK and Ireland, it was floated on the London Stock Market in July
2018 with a valuation of approximately £100 million at 160p per share.

On 30 August 2023, TheWorks reported its preliminary results for the year
ended 30 April 2023 with revenue of £280.1 million, Adjusted EBITDA of £9.0
million and Adjusted PBT of £10.1 million. It also reported net cash of
£10.2 million. For the year to date, TheWorks reported store like for like
sales growth of 3.1% and an Adjusted EBITDA guidance for the current year to
April 2024 of £10.0 million. The current share price is c.36.5p resulting in
a market capitalisation £22.8 million.

Kelso believes that the business proposition of TheWorks is strong with its
focus on affordability and that the valuation is highly attractive at an
EV/EBITDA(1) of c.1.2x. Kelso is supportive of the current board and has voted
for all of the resolutions proposed at the forthcoming general meeting on 4
October 2023, save for the resolution proposing a final dividend of 1.6p per
share equating to £1.0 million. Kelso believes that at such valuation levels
TheWorks' cash is better served by buying its shares back for cancellation
rather than paying dividends.

Kelso believes strongly in the strategy and product range of The Works. Arts
and craft, puzzles, games and books have an important place in life especially
when focussed at the value end of the product spectrum. We are very excited
about our new investment and helping restore the intrinsic valuation of The
Works which we believe is significantly higher than the current price.

(1)Excluding IFRS 16 lease liabilities

 For further information please contact:
 Kelso Group Holdings plc                 +44 (0) 75 4033 3933
 John Goold, Chief Executive Officer

 Mark Kirkland, Chief Financial Officer

 Jamie Brooke, Chief Investment Officer

 

About Kelso

Kelso was established in 2022 to identify, engage and unlock trapped value in
the UK stock market. Kelso's strategy is to invest in situations where there
is an anomaly between the intrinsic value and prospects of a company and its
stock market valuation. Kelso will, in particular, look for situations where
it believes the sum of the parts of a business is greater than the current
value. Kelso believes that the current market conditions are such that there
are situations where UK listed companies' valuations are not appropriately
matched to their underlying intrinsic value. There may be instances where
Kelso itself could be used as a vehicle by an undervalued company to spin off
a subsidiary into its own listing. Such a transaction would undoubtedly
constitute a reverse takeover for Kelso.

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