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

Works co ukAnnouncement

20/05/2022 07:00

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RNS Number : 1809M  TheWorks.co.uk PLC  20 May 2022

20 May 2022

TheWorks.co.uk plc

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

Trading update for the 52 weeks ended 1 May 2022

TheWorks.co.uk plc, the multi-channel value retailer of arts, crafts, toys,
books and stationery, announces a trading update for the 52 weeks ended 1 May
2022 (the "Period" or "FY22").

Highlights

 ·         Strong trading performance; two-year LFL((1)) sales increase of 10.4% and
           total two-year sales growth of 12.7%((1),(2)).
 ·         Improved proposition helping to offset external headwinds; FY22 EBITDA
           forecast of £15.0m is reiterated.
 ·         Strong financial position: net cash((3)) of £16.3m at the Period end, an
           increase of £15.5m during FY22.
 ·         Dividend re-instated; the Board expects to recommend a dividend of
           approximately 2.4 pence per share alongside its FY22 results in September and
           maintain a progressive dividend policy thereafter.

 

FY22 trading performance

The Works delivered a strong trading performance in FY22, well ahead of
pre-COVID levels. Total sales((2)) for the Period increased by 12.7% compared
to FY20 (i.e. compared to two years ago). Two-year LFL sales increased by
10.4%, with positive growth continuing both online and in stores.

Sales since our last update in January 2022 have been driven by the further
development of our customer proposition, in particular the expansion of our
front list book ranges, which has coincided with the emergence of the
"BookTok" phenomenon. By capitalising on this trend, we have been able to draw
attention to previously best-selling books and prompt renewed customer
interest in them. Branded toys and games have also continued to perform
strongly, through reinforcements to our ranges of, for example, Peppa Pig, Paw
Patrol and Cocomelon.

Following the strong first half and record Christmas trading performance,
two-year LFL sales during the final months of the financial year remained
positive although, as expected, the rate of growth has been lower than before
Christmas. Consumer spending is widely reported to have slowed in recent
months and we believe this has had an impact on our sales. In addition, as
noted in the announcement on 5 April 2022, we experienced some limited
disruption to trading and business operations as a result of a cyber security
incident at the end of March. Despite these headwinds, the operational and
propositional improvements we have made throughout the year have helped to
offset the impact of the external headwinds noted above, meaning that the FY22
EBITDA forecast of £15.0m is retained.

Furthermore, with our strategic focus on being a "better, not just bigger"
version of ourselves, during FY22 we continued to improve the quality of the
store estate, opening 5 new stores, closing 7 and relocating 6 stores. The
business traded from 525 stores at the end of the Period.

Financial position

The Group ended the Period in a strong financial position, with net cash((3))
of £16.3m (FY21: £0.8m). This is higher than the £10.0m level noted in the
FY22 Interim results statement, due to the unwinding of certain working
capital timing differences taking longer than anticipated.

Dividend

In the Interim results announcement dated 21 January 2022, the Board noted its
intention to reinstate the payment of dividends provided the final FY22
results were as expected. Accordingly, the Board currently expects to
recommend to shareholders the payment of a final dividend in respect of FY22,
following the 2022 AGM. The amount to be recommended will be confirmed once
the audit is completed, but is expected to be approximately 2.4 pence per
share. Once the payment of dividends has been reinstated, the Board intends to
maintain a progressive dividend policy.

Outlook

There continues to be uncertainty relating to the external environment and how
this might affect levels of consumer spending in the months ahead. This has
been taken into account in setting the Group's internal plans for FY23.

The Board remains confident in the future prospects of the business because of
the underlying appeal and relevance of The Works' proposition, the opportunity
to grow sales profitably through the implementation of its strategy, and the
Group's strong financial position.

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

"We are pleased to report strong trading in FY22, consistently delivering
sales well ahead of pre-COVID levels and another record Christmas. This
performance, and the resilience that our business has shown against a
challenging external backdrop, demonstrates the positive effect of our
"better, not just bigger" strategy, which still has a lot more upside to
deliver. We are delighted that our improved trading performance will enable us
to recommend reinstating the dividend and remain optimistic that we can
deliver further sales growth in the year ahead."

"As we move into our new financial year, general trading conditions remain
challenging. We will continue to focus on the factors within our control and
ensure that, as customers face increasing cost-of-living pressures, they can
continue to rely on The Works as a destination for great value products to
inspire reading, learning, creativity and play. None of this would be possible
without the passion, commitment and patience of our brilliant colleagues, who
have gone above and beyond to deliver for customers."

Full year results publication

The cyber security incident in April 2022 had a limited impact on trading, but
has prompted the decision to significantly speed up the implementation of
plans to strengthen our IT security measures. Given the additional time needed
to implement these improvements, the Group plans to allow more time to
finalise its FY22 results, which will be issued during September 2022.

 

 Enquiries:


 TheWorks.co.uk plc             via Sanctuary Counsel

 Gavin Peck        CEO

 Steve Alldridge  CFO

 Sanctuary Counsel

 Ben Ullmann                    +44 7944 868288     |       theworks@sanctuarycounsel.com (mailto:theworks@sanctuarycounsel.com)

 Rachel Miller                  +44 7918 606667     |

 

 ((1))  The like for like (LFL) sales increase has been calculated with reference to
        the FY20 comparative sales figures, or two-year LFL, because the extended
        periods of enforced store closures during FY21 prevent that period from
        forming the basis of meaningful comparisons. For the last 5 weeks of the
        Period, it has been necessary to calculate the LFL percentages with reference
        to the corresponding weeks in FY19, because the equivalent weeks during FY20
        were also affected by the first period of enforced store closures. Similar
        comparison periods are also used for the total sales growth figures quoted.
 ((2))  "Total sales" referred to in this statement includes VAT and is stated prior
        to deducting the cost of loyalty points which are adjusted out of the sales
        figure in the calculation of statutory revenue. The 52 week comparison period
        used for the LFL and total sales growth calculations uses a literal mapping of
        calendar weeks between FY22 and the corresponding 52 weeks two/three years
        prior. Due to the inclusion of a 53(rd) week in the FY21 accounting period,
        the FY20/FY19 statutory accounting periods are one week offset from the 52
        week period used in the LFL and total sales comparisons. A reconciliation
        between the figures included in this statement and the FY22 statutory revenue
        will be included in the Group's Annual Report.
 ((3))  Net cash at bank excluding finance leases and on a non-IFRS 16 basis.

 

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