REG - TheWorks.co.uk PLC - H1 FY25 results, Christmas trading & new strategy
24/01/2025 07:00
For best results when printing this announcement, please click on link below:
https://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20250124:nRSX5342Ua&default-theme=true
RNS Number : 5342U TheWorks.co.uk PLC 24 January 2025
24 January 2025
TheWorks.co.uk plc
("The Works", the "Company" or the "Group")
Interim results, Christmas trading update and new strategy
Delivered significant improvement in H1 FY25 profitability. Maintaining full
year guidance. Announcing new strategy to elevate The Works over the next five
years.
TheWorks.co.uk plc, the family-friendly value retailer of arts, crafts, toys,
books and stationery, announces its interim results for the 26 weeks ended 3
November 2024 (the "period" or "H1 FY25"), an update on current trading for
the 11 weeks ended 19 January 2025 and a new strategy.
Summary
· H1 FY25 total revenue growth of 1.3% to £124.2m (H1 FY24: £122.6m) and total
LFL ((1)) sales decline of 0.8%, which was in line with expectations and ahead
of the wider non-food retail sector.((2))
o Store LFL sales (over 90% of total sales) grew by 0.9%, driven by improved
seasonal ranges and fiction book sales.
o Online sales declined by 14.7%, impacted by a planned reduction in promotional
activity and reduced capacity stemming from challenges at our third-party
online fulfilment centre towards the end of the period.
· Pre-IFRS 16 Adjusted EBITDA loss of £2.8m (H1 FY24: £8.5m loss) and adjusted
loss before tax ((3)) of £6.5m (H1 FY24: Restated ((4)) £10.4m loss). ((5))
Significant year-on-year improvement driven by:
o Action taken to grow product margins, up +220bps compared to H1 FY24.
o Cost saving action over the last 12 months delivering tangible results.
· The Group ended the Period with net debt ((6)) of £8.5m (H1 FY24: net debt
£2.5m), reflecting higher levels of stock on water and the adverse impact of
the different Period end date. ((7))
· Current trading for the 11 weeks ended 19 January 2025 is in line with
expectations:
o Resilient store performance, with LFL sales up 1%, supported by significant
operational improvements across stores and in our retail Distribution Centre.
Online sales declined by 14.9% YOY.
o Strong end to Christmas trading continued into January.
· Ongoing product margin growth and cost-saving action expected to deliver
further benefits in remainder of this financial year and FY26, helping to
offset significant cost headwinds.
· On track to meet market expectations of pre-IFRS16 Adjusted EBITDA of £8.5m
for FY25 and further profit growth in FY26.
· New strategy announced - expect to transform the business and deliver sales in
excess of £375m and an EBITDA margin of at least 6% within five years.
H1 FY25 financial highlights
H1 FY25 H1 FY24
Restated ((4))
£m
£m
Revenue £124.2m £122.6m
Revenue growth % 1.3% 3.1%
Total LFL sales ((1)) (0.8)% 1.6%
Pre-IFRS 16 Adjusted EBITDA ((3)) (£2.8m) (£8.5m)
Loss before tax (£6.9m) (£16.5m)
Adjusted loss before tax ((3)) (£6.5m) (£10.4m)
Adjusted Basic loss per share (9.4p) (12.6p)
Net debt ((6)) (£8.5m) (£2.5m)
H1 FY25 strategic progress
Significant progress delivered in H1, with more targeted for H2:
· Completed project to define brand positioning more clearly, which is now
reflected in our external marketing and includes rollout of new #TimeWellSpent
strapline.
· Continued optimisation of store portfolio with three new openings, two
relocations and eight closures. Operated from 506 stores at period end, of
which 98% are trading profitably.
· Significant product margin growth as a result of negotiations with suppliers,
conscious control of mix and reduced promotional activity.
· Reduced cost base through improved ways of working at our retail Distribution
Centre, which supported delivery of targeted annualised saving of at least
£1m. Action taken in FY24 delivered further efficiencies in H1 FY25,
including the removal of the customer loyalty scheme, restructuring of the
Operating Board, implementation of a new store labour model and additional
rent savings secured through negotiations with landlords.
New strategy
Having strengthened the Board in H1 we revisited our longer-term goals to
ensure The Works has the right strategy to succeed over the long term and
become the favourite destination for affordable, screen free activities for
the whole family. We have now developed this strategy, 'Elevating The Works',
which provides a clear plan to achieve those goals and drive a significant
improvement in performance and shareholder returns. This strategy is
underpinned by three strategic drivers:
· Growing Brand Fame
· Improving Customer Convenience
· Being a Lean and Efficient Operator
We are confident that delivery of this strategy will have a transformative
impact on the business and will enable us to deliver sales in excess of £375m
and an EBITDA margin of at least 6% within five years.
Trading update
In the 11 weeks ended 19 January 2025, total LFL sales declined by 0.9%. The
performance of our store estate, accounting for over 90% of sales, was
resilient over the festive period, delivering LFL sales up 1.0%. We delivered
a much-improved Christmas operationally across our stores, both store
standards and customer service, and in our retail Distribution Centre. We saw
particularly strong growth in Adult Fiction Books and good growth in our
Christmas Accessories and Stationery ranges.
In contrast, our online performance was constrained over the festive period.
Our third-party operated online fulfilment centre faced challenges fulfilling
volumes during peak, which affected capacity and caused disruption for
customers. We took timely and decisive action to control customer demand and
protect profitability, however these unforeseen issues resulted in online LFLs
declining 14.9%, which pulled our total LFL sales lower and created an
additional circa £1m in exceptional fulfilment costs. We are currently
investigating remedial actions and are considering our options for the future
of our online offering and fulfilment.
Consumers remained cost-conscious, which resulted in high levels of
promotional activity across the market in November and December. Whilst still
providing customers with excellent value, we limited our promotional activity
and maximised full-price sales in the run up to Christmas, helping to deliver
a 190bps margin improvement year-on-year over the 11-week period.
Outlook
We saw a strong end to Christmas trading in December, which continued into
January, and the online capacity issues experienced during peak trading have
subsided. Our cash position also improved following Christmas, with £14.7m of
cash as of 19 January 2025 and we expect to end the financial year with net
cash of approximately £4m.
Consumer confidence is expected to remain fragile, however we are excited
about the potential of new ranges landing in the Spring and expect to deliver
modest sales growth for the remainder of the financial year.
We remain mindful of significant cost headwinds, including a circa £6.5m
impact in FY26 due to the rise in National Living and Minimum Wages and
changes to employers' National Insurance contributions. We will mitigate this
through ongoing action to reduce costs and grow margins, including carefully
targeted price increases. As a result, we are on track to deliver FY25 profits
in line with compiled market forecasts (Pre-IFRS16 Adjusted EBITDA of £8.5m)
and further profit growth in FY26.
With a new strategy in place and progress already underway, we are optimistic
that we can deliver a significant improvement in performance and shareholder
returns in the medium term.
Gavin Peck, Chief Executive Officer of The Works, commented:
"We started the financial year with a clear focus on reducing our cost base
and growing margins in order to offset ongoing cost headwinds. We successfully
delivered on these objectives in the first half of FY25 and are pleased to
report a significant improvement in profitability year-on-year.
"We faced persistently difficult market conditions this Christmas but did not
let this dampen our enthusiasm, instead focusing on the factors within our
control. We delivered a resilient store performance and saw strong customer
demand for our festive ranges, with our giant The Grinch soft toy standing out
as a Christmas bestseller.
"Looking ahead, we are mindful of the need to navigate fragile consumer
confidence and significant cost headwinds but believe there is much to be
optimistic about at The Works. We expect that our action to grow revenue,
increase margins and reduce costs will deliver improved results in the
remainder of this financial year and in FY26. We have laid the foundations for
our new strategy, which will transform the business and deliver a significant
improvement in performance and shareholder returns in the years to come."
Interim results presentation
A copy of the H1 FY25 Interim results presentation will shortly be made
available on the Company's website (
(http://www.corporate.theworks.co.uk/investors)
https://corporate.theworks.co.uk/investors/
(https://corporate.theworks.co.uk/investors/) ).
A presentation and Q&A for all existing and potential shareholders will be
held via Investor Meet Company at 1.30pm today (Friday 24 January 2025).
Investors can register here:
https://www.investormeetcompany.com/theworkscouk-plc/register-investor
(https://www.investormeetcompany.com/theworkscouk-plc/register-investor)
Enquiries:
TheWorks.co.uk plc
Gavin Peck, CEO via Sanctuary Counsel
Rosie Fordham, CFO
Sanctuary Counsel
Ben Ullmann 0207 340 0395 theworks@sanctuarycounsel.com (mailto:theworks@sanctuarycounsel.com)
Rachel Miller
Kitty Ryder
Singer Capital Markets (Nomad and Broker) 020 7496 3000
Peter Steel
Jalini Kalaravy
Footnotes:
(1) Total LFL sales is the growth/decline in gross sales from stores which have
been trading for the full financial period (current and previous year), and
from the Group's online store.
(2) Data from the British Retail Consortium (BRC) showed non-food retail LFL
decline of 1.3% for the 26-week period.
(3) Adjusted profit figures exclude Adjusting items. See Note 5 of the attached
condensed unaudited financial statements for details of Adjusting items.
(4) Prior period restatements reflect adjustments wholly related to IFRS 16 lease
accounting. Further details can be found in Note 15 of the condensed unaudited
financial statements included in this RNS.
(5) The seasonality of the business typically results in a loss in the first half
of the financial year, with profit being generated through Christmas trading
in H2.
(6) Net debt at bank excluding finance leases, on a pre-IFRS 16 basis.
(7) Due to the 53rd week at the end of FY24, the Period end was 3 November 2024
compared to 27 October in the prior year. This resulted in the timing of month
end payments falling within the Period end in 2024 but after the Period end in
2023.
Notes for editors:
The Works is one of the UK's leading family-friendly value retailers of arts
and crafts, stationery, toys, and books, offering customers a differentiated
proposition as a value alternative to full price specialist retailers. Our aim
is to become the favourite destination for affordable, screen free activities
for the whole family. The Group operates a network of over 500 stores in the
UK & Ireland, as well as trading online at TheWorks.co.uk
(https://www.theworks.co.uk/) .
Chief Executive's Report
Overview
Our primary focus in FY25 was to reduce our cost base and grow margins to
offset ongoing cost headwinds and improve our profitability. We successfully
delivered on these objectives in the first half of FY25, supported by good
strategic progress. Today we announce a new strategy designed to transform the
business and our financial performance in the years ahead.
H1 trading performance
The retail environment was challenging in the first half of FY25. The start of
the period saw improved consumer confidence, albeit this did not translate
into increased consumer spend. Towards the end of the period, consumer
confidence was again impacted ahead of the new government's Autumn Budget.
Against this backdrop The Works' total revenue grew 1.3%, with total
like-for-like (LFL) sales declining 0.8%. This performance was broadly in line
with our expectations of stable sales heading into the financial year and was
ahead of the wider sector. ((1))
Stores, which comprise 91% of sales, delivered robust LFL sales growth of
0.9%. Although external factors tempered customer spend, our improved Back to
School and Halloween ranges were well received by customers and new book
releases continued to drive strong growth in fiction book sales. Online LFL
sales declined by 14.7%, reflecting operational challenges experienced at our
third-party operated online fulfilment facility towards the end of the period,
which significantly reduced capacity and performance. The first half outcome
also reflects a planned reduction in promotional activity year-on-year from
September onwards, helping to improve online profitability.
Group profitability improved significantly year-on-year, with pre-IFRS 16
Adjusted EBITDA loss of £2.8m (H1 FY24: £8.5m loss) and an Adjusted loss
before tax of £6.5m (H1 FY24: Restated £10.4m loss).((2)) This was driven by
product margin improvement (+220bps on H1 FY24) and cost saving action over
the last 12 months delivering tangible results. We expect to continue seeing
the benefits from this activity in the second half, helping to offset the
ongoing cost headwinds from changes to employers' National Insurance
contributions, higher National Living and Minimum Wages, freight costs and
business rates.
H1 strategic progress
Significant progress was delivered in H1, with more targeted in H2 and beyond
driven by our new strategy, which is explained in the section below.
Whilst developing this new strategy we completed a project to more clearly
define our brand positioning and what we want The Works to be famous for. We
now have a new mission, "to become the favourite destination for affordable,
screen free activities for the whole family" and branding to bring this
mission to life, which is being reflected in our external marketing. This
includes the introduction of our new #TimeWellSpent strapline, which was
rolled out as part of our Christmas marketing campaign.
Optimising our store portfolio continues to be a key strategic focus. As part
of this we perform an annual portfolio review (with more regular reviews of
low-profit stores), to determine clear actions to improve performance, reduce
costs and agree our approach with landlords ahead of lease expiries and
breaks, including exploring potential relocation opportunities. We also
continue to selectively open new stores, focused on a list of circa 100 target
locations where we believe there is sufficient demand for The Works and an
opportunity to drive strong payback. In the first half of FY25 we opened three
new stores, relocated two stores and closed eight predominantly loss-making
stores. Our new stores are performing well, with strong payback within just
over a year of opening. At period end, the business operated from 506 stores,
of which 98% are trading profitably. We expect a further net five store
closures in H2 FY25 but are building a new store pipeline which will see us
return to modest growth in the store estate, with a net five new stores being
targeted in FY26.
We made good progress in growing our product margins through supplier
negotiations, more conscious control of product mix and reduced promotional
activity. We also reduced our cost base, with improved ways of working at our
Distribution Centre driving better stock flows to stores and supporting the
delivery of the targeted annualised saving of at least £1m from this
initiative. Further cost savings were realised in H1 FY25 from action taken in
FY24, including the removal of the customer loyalty scheme, the restructure of
the Operating Board, implementation of the new store labour model and
additional rent savings through negotiations with landlords. These initiatives
enabled us to partially offset the significant ongoing cost headwind from
National Living and Minimum Wages increases and a further headwind from
temporarily higher freight costs in the first half.
We also completed the rollout of our new EPoS software across our store
estate, replacing the previous end of life solution and providing a platform
for improved capabilities in the future.
New strategy
Having strengthened the Board in the first half, we revisited our longer-term
goals and our strategy to achieve them, recognising the need for refined plans
to transform our business, drive a significantly improved operational and
financial performance and thereby shareholder returns in the years ahead.
Today we announce this new strategy, focused on 'Elevating The Works' to
become the favourite destination for affordable, screen free activities for
the whole family. Delivering this strategy will have a transformative impact
on the business, with an ambition to reach annual sales in excess of £375m
and an EBITDA margin of at least 6% within five years.
The key drivers of this strategy are as follows:
Growing Brand Fame
The Works is well known and loved by our core customers, but many potential
customers still don't know who we are or what we do. We have a meaningful
purpose - to inspire reading, learning, creativity and play - and a much
clearer brand identity, addressing a known customer need. We will grow our
brand fame through aligning our marketing to our new mission and brand
identity and will develop our product proposition to have more all-year-round
appeal by increasing exposure to new brands and introducing a broader party
offering and extended ranges in larger stores. We will also ensure we provide
a fun, family friendly and inspiring experience for customers that will give
them a real reason to visit and re-visit The Works and work more closely with
our charity partners to help fulfil our purpose.
Improving Customer Convenience
Customer expectations regarding convenience and value continue to grow. As a
multi-channel retailer with a large store estate, we can offer much greater
convenience than we currently do, and that offered by many of our competitors.
We will improve the convenience we offer our customers by delivering a more
consistent execution of our proposition, tailoring store ranging to better
meet the needs of local customers including through better use of store space,
accessing new customers through new store openings, improving the shopability
of our website and improving the connection between our stores and our
website. This will see us better provide our customers with the ranges they
want, where they want, further improving overall customer experience and
satisfaction.
Being a Lean and Efficient Operator
To support offering our customers great value products and delivering
sustainable profit margins, we need to be a business that is lean, simple and
efficient. This will require us to review and simplify our business processes,
invest in replacing our out-dated and inefficient systems, reduce operational
and support costs where appropriate, further increase our product margins,
grow our average selling price (to help reduce our cost to serve ratio) and
continue with our store portfolio optimisation.
The step change in sales growth to in excess of £375m sales within five years
will be driven by multiple levers, including:
· Winning new customers by improving brand recognition.
· Developing deeper relationships with, and increased spend from, existing
customers.
· Developing a more all-year-round proposition.
· Improving availability through better execution of our proposition across our
store estate.
· Increasing store sales densities through the better use of store space.
· Accessing new catchments through the opening of a net 60 new stores.
· Driving online sales growth by improving online customer experience and our
multi-channel proposition.
The growth in EBITDA margins to at least 6% within five years will be driven
by:
· Delivering LFL store sales growth on a largely fixed cost base.
· Growing our product margins.
· Reducing our operating costs through cost transformation, supported by new
systems and processes.
· Reducing our cost to serve ratio by growing our average selling price.
· Ongoing optimisation of our store portfolio.
ESG
Underpinning these strategic drivers is our commitment to 'Doing Business
Better', ensuring we continue inspiring current and future generations to
read, learn, create and play. A process is underway to refine our plans to
support our People and Planet pillars, which we will share in due course.
We were delighted to place 10(th) in the Best Big Companies to Work For, up
from 15(th) place last year and 12(th) the year before. This is a fantastic
achievement and demonstrates the special culture we have at The Works. A huge
thank you to all colleagues for helping us maintain our 1* accreditation.
Leadership changes
In July 2024 Steve Bellamy succeeded Carolyn Bradley as Chair of The Works,
bringing extensive strategic and operational experience across a range of
businesses. He has already had an incredibly positive impact on the business,
helping to drive a review of our goals and strategy, as well as operational
improvements.
Simon Hathway joined the Board shortly after the Period end as an Independent
Non-Executive Director, Chair of the Remuneration Committee and member of the
Audit and Nomination Committees. Simon is highly experienced in value retail
as both an executive and an advisor, and his counsel has already proved
invaluable to the business.
Outlook
Consumer confidence has remained fragile following the Autumn Budget and this,
combined with the operational challenges at our third-party operated online
fulfilment centre during peak Christmas trading, had an impact on sales and
profitability as we entered H2 FY25. These online capacity issues do not
affect us outside of peak and, with the strong store sales we saw in December
and into January, support our expectations of delivering modest sales growth
for the remainder of the financial year. This, together with our ongoing
action to reduce costs and grow margins, means that we remain on track to
deliver an increase in profitability in FY25, in line with market expectations
of pre-IFRS16 Adjusted EBITDA of £8.5m (FY24: £6m).
We are mindful of further significant cost headwinds in FY26, anticipating a
circa £6.5m impact due to the rise in National Living and Minimum Wage and
changes to employers' National Insurance contributions. We continue to take
proactive action to mitigate the impact of these headwinds and as part of our
new strategy we are undertaking a cost transformation project, supported by
external consultants, Interpath, which aims to unlock at least £5m of
annualised cost savings, with £2m targeted in FY26. We are also targeting
further growth in product margins, including through carefully targeted price
increases, and expect to deliver at least 100bps improvement in margins in
FY26. This action, together with an expectation of low single-digit sales
growth, will see us deliver further profit growth in FY26.
Looking further ahead, we are excited by the potential of the new strategy to
transform the business and expect to deliver a meaningful uplift in sales and
profitability in the medium-term.
Gavin Peck
Chief Executive Officer
Footnotes:
(1) Data from the British Retail Consortium (BRC) showed non-food retail LFL
decline of 1.3% for the 26-week period.
(2) The seasonality of the business typically results in a loss in the first half
of the financial year, with profit being generated through Christmas trading
in H2.
Financial Report
Overview
This report covers the 26-week period ended 3 November 2024 ("H1 FY25", "H1"
or "the Period") and refers to the comparative "H1 FY24" period of the 26
weeks ended 29 October 2023.
HY25 HY24
(Restated)((1))
Revenue £124.2m £122.6m
Revenue growth 1.3% 3.1%
LFL sales((2)) (0.8%) 1.6%
Pre-IFRS 16 Adjusted EBITDA((2)) (£2.8m) (£8.5m)
Loss before tax ((3)) (£6.9m) (£16.5m)
Net debt (£8.5m) (£2.5m)
((1) ) Prior period restatements reflect adjustments wholly
related to IFRS 16 Lease accounting. Further details can be found in Note 12
of the attached condensed unaudited financial statements.
((2) ) The Group tracks a number of alternative performance
measures ("APMs") including pre-IFRS 16 EBITDA, pre-IFRS 16 Adjusted EBITDA
and like for like ("LFL") sales, as it believes these provide stakeholders
with additional helpful information. These are described more fully in Notes
1(c) and 4 of the attached condensed unaudited financial statements.
((3) ) For further information on impairment refer to Note 3
of the attached condensed unaudited financial statements
Due to rounding, numbers presented throughout this document may not add up
precisely to the totals provided and percentages may not precisely reflect the
absolute figures.
Revenue
Total revenue increased by 1.3% to £124.2 million (H1 FY24: £122.6 million).
Total LFL sales decreased by 0.8%, with store LFLs increasing by 0.9% and
online sales decreasing by 14.7%.
The closure of the loyalty scheme towards the end of FY24 resulted in there
being no negative adjustment to gross sales from the incentives offered
through the scheme in H1 FY25 as there had been in H1 FY24. These reduced
incentives result in net revenues increasing by £0.8m year on year.
The number of stores trading decreased by five, from 511 at the end of FY24 to
506 at the end of the Period. Three new stores were opened, eight were closed
and two stores were relocated.
LFL sales growth Stores Online Total
Q1 (1.6%) 0.4% (1.4%)
Q2 2.9% (21.4%) (0.3%)
H1 FY25 0.9% (14.7%) (0.8%)
· Q1 - reported a 1.4% decline in LFL sales reflecting the
challenging external market (BRC reported non-food retail LFL three-month
average decline of 1.7%) and poor performance in our Kids Books and Toys and
Games categories, which recovered through Q2.
· Q2 - reported flat LFL sales, down 0.3% (compared to BRC reported
non-food retail LFL three-month average decline of 0.8%). Store LFL sales
growth was strong, up 2.9%, reflecting much improved Back to School and
Halloween ranges and continued strong growth in Adult Fiction books. A planned
reduction in September sale activity adversely impacted sales, particularly
online, but delivered a much stronger margin rate. Online sales were also
impacted by the previously mentioned challenges experienced in online
fulfilment towards the end of the quarter and subsequent action taken to
prioritise improving profitability.
Gross profit
FY25 FY24 Restated((1))
£m % of revenue £m % of revenue Variance Variance
£m
%
Revenue 124.2 122.6 1.6 1.3
Less: Cost of goods sold (50.5) (52.5) 2.0 3.8
Product gross margin 73.7 59.3 70.1 57.2 3.6 5.1
Store payroll (24.7) (19.9) (24.9) (20.2) 0.2 0.8
Store property and establishment costs (24.4) (19.7) (25.4) (20.7) 1.0 4.0
Store PoS and transaction fees (1.2) (1.0) (1.2) (1.0) 0.0 0.0
Online variable costs (6.6) (5.3) (7.0) (5.7) 0.4 5.7
Total non-product related cost of sales (56.9) (45.8) (58.5) (47.7) 1.6 2.8
Store depreciation (excluding IFRS 16) (1.0) (0.8) (1.4) (1.1) 0.4 28.6
Adjusting items (impairment charges) (0.3) (0.3) (6.1) (5.0) 5.8 95.1
IFRS16 impact (excluding Adjusting items) 0.0 0.0 2.8 2.3 (2.8) (100.0)
Gross Profit Per Financial Statements 15.5 12.5 6.9 5.6 8.6 124.7
((1) ) Prior period restatements reflect adjustments wholly
related to IFRS 16 Lease accounting. Further details can be found in Note 15
of the attached condensed unaudited financial statements.
((2) ) Adjusted profit figures exclude Adjusting items. See Notes
4 (Alternative performance measures) and 5 (Adjusting items) of the attached
condensed unaudited financial statements.
Product gross margin increased to 59.3% from 57.2% last year, reflecting
action taken to grow margins towards the end of FY24, with notable factors as
follows:
· Significant growth as a result of negotiations with suppliers,
conscious control of product mix and reduced promotional activity.
· The hedged FX rate on payments made in US dollars during H1 was
favourable year-on-year and continues to be a tailwind in H2. H1 FY25 hedged
US dollar;GB pound rate was 1.26 versus 1.11 in H1 FY24.
· Adverse 2024 container freight rates versus 2023 rates, creating
a further headwind in H2 due to the disruption in the Red Sea. Average
container rates paid during H1 FY25 were $2.9k versus H1 FY24 of $1.8k.
Store payroll costs reduced by £0.2m.
· Changes to our store labour model implemented at the start of the
Period, supported by an hours efficiency programme implemented towards the end
of FY24, more than offset the 9.8% increase in the National Living and Minimum
Wage ('NLMW') in April 2024 (and the corresponding retail management salary
increases).
Store property and establishment costs reduced by £1.0m.
· Electricity costs reduced by £0.6m as a result of a reduction in
the contracted rate through hedging agreements, reflecting the unwind of
market-led energy price reductions.
· The renegotiation of expiring leases across the LFL store estate
resulted in a reduction in rents of £0.4m.
· A £0.3m reduction in property costs due to the net five store
closures.
· Partially offset by a £0.3m increase in dilapidation and
property repair costs.
Online variable costs decreased by £0.4m, primarily due to lower sales
volumes. Further cost savings resulted from improvements in the order profile
with increases in both average order value and average ticket price reducing
our cost to serve ratio. Efficiencies were delivered as a result of
improvements made to the online fulfilment picking process following the move
to the more automated, third-party operated, facility in January 2024.
However, our third-party online fulfilment centre subsequently faced
unexpected operational challenges, which affected capacity and resulted in
increased costs towards the end of the Period and through peak Christmas
trading.
Operating profit and pre-IFRS 16 EBITDA
HY25 HY24 (Restated)((1)) Variance Variance
£m % of revenue £m % of revenue £m %
Gross profit per financial statements 15.5 12.5 6.9 5.6 8.6 124.6
Distribution expenses (6.2) (5.0) (6.8) (5.6) 0.6 8.8
Administrative expenses (13.7) (11.0) (14.2) (11.6) 0.5 3.5
Operating profit per financial statements (4.4) (3.6) (14.1) (11.5) 9.7 68.7
Less Depreciation, amortisation and IFRS16 included in Operating profit 1.3 1.1 (0.5) (0.4) 1.8 240.0
Adjusting items 0.3 0.3 6.1 (5.0) (5.8) 95.1
Pre-IFRS 16 Adjusted EBITDA (2.8) (8.5) 5.7 67.2
((4) ) Prior period restatements reflect adjustments wholly related
to IFRS 16 Lease accounting. Further details can be found in Note 15 of the
attached condensed unaudited financial statements.
Distribution costs (before depreciation and IFRS 16) comprising picking stock
and delivering it to stores decreased by £0.6m compared with the prior
period. The move to a new way of working in the retail Distribution Centre,
supported by a strengthened management team, drove efficiencies that more than
offset the NLMW increase.
Administration costs (before depreciation and IFRS 16) increased by £0.2m
compared to H1 FY24. The prior period costs were flattered by a release of the
VAT provision and lower long term incentive employee share plan charges.
Underlying costs in H1 FY25 reduced by £0.7m reflecting a reduction in Audit
Fees (following the move to AIM) and the restructuring of the Operating Board
in late FY24.
Depreciation, amortisation and IFRS16 adjustments are favourable year-on-year
primarily due to lower rental charges and lower IFRS16 adjustments, in turn
due to a nil gain on modification of leases in the Period, offset by lower
depreciation of property, plant and equipment. Refer to Note 4 (Alternative
performance measures ("APMs")) of the attached condensed unaudited financial
statements for a reconciliation of re-IFRS16 EBITDA to profit/(loss) after
tax.
Adjusting items were a £0.3m charge in H1 FY25 (restated H1 FY24: £6.1m
charge), comprising:
· A £0.4m charge in relation to non-recurring operational costs in
respect of the challenges in online fulfilment towards the end of the Period.
· £0.3m of restructuring and legal costs.
· A £0.4m credit (restated H1 FY24: £2.0m credit) resulting from
profit on disposal and modification of right of use assets and lease
liabilities following the requirements of the IFRS16 accounting standard.
Impairment charges are nil for the Period (H1 FY24: Net charge £8.0m) as the
Directors concluded that no impairment trigger has occurred (see Note 13 of
the attached condensed unaudited financial statements).
A reconciliation of statutory profit to EBITDA can be found in Note 4 of the
attached condensed unaudited financial statements.
Net financing expense
Net financing costs in the Period were £2.4m (H1 FY24: £2.4m), mostly
relating to IFRS 16 notional interest on the calculated lease liability.
Interest relating to bank facilities was £0.4m (H1 FY24: £0.3m) and
comprised facility availability charges and amortisation of the cost of
setting up the facility.
Loss before tax
The loss before tax was £6.9m (H1 FY24: £16.5m loss) which includes the
£0.3m charge (H1 FY24: £6.1m charge) for Adjusting items (described above).
Due to the seasonality of the business, the first half of the financial year
is typically loss making.
Tax
The Group's total income tax credit in respect of the Period was £0.6m
(restated H1 FY24 credit: £3.6m). The effective tax rate on the total loss
before tax was 9.3% (H1 FY24: 21.9%; FY24: 7.8%), the Adjusted tax rate was
9.7% (restated H1 FY24: 24.6%).
The difference between the total effective tax rate and the Adjusted tax rate
relates to certain costs and depreciation charges (including impairment) being
non-deductible for tax purposes.
Earnings per share
The basic and diluted losses per share for the Period were 9.9 pence (restated
H1 FY24: 20.6 pence loss). Adjusted basic and diluted losses per share for the
Period were 9.4 pence (restated H1 FY24:12.6 pence loss).
Capital expenditure
Capital expenditure in the Period was £2.2 million (H1 FY24: £3.1m).
Lower leasehold contributions from landlords resulted in similar levels of new
store expenditure compared to FY24, despite fewer store openings.
There was a notable reduction in expenditure on store refits with four
undertaken in the Period vs 19 in the prior period).
Capital expenditure for the full year is expected to be approximately £5.0m
(FY24: £5.8m).
H1 FY25 H1 FY24 Variance
£'m £'m £m
New stores and relocations (0.7) (0.6) (0.1)
Store refits and maintenance (0.7) (1.6) 0.9
IT hardware, software, projects (0.8) (0.9) 0.1
Total capital expenditure (2.2) (3.1) 0.9
Inventory
Stock was valued at £51.7m at the end of the Period (H1 FY24: £56.1m), a
reduction of £4.4m.
The operating cycle of the business causes maximum stock levels to occur prior
to the Christmas sales peak, and therefore stock levels typically increase at
the half year end compared with the levels at the year end. The lower stock
level compared to the prior period reflects a planned reduction in stock
holding and more efficient flow of peak stock due to improvements in
strengthening of the merchandising function in FY24.
Stock in transit is higher year-on-year, reflecting higher stock on water
because of the extra transit time from China due to the Red Sea challenges
over the summer. This resulted in an extra two weeks of stock in transit
recognised on the balance sheet at the period end.
Stock provisions are higher compared to the prior period due to increased
shrinkage provision. This reflects an increase in the percentage of stock
loss, which is derived from four wall stock counts performed in stores at FY24
year end and during the Period used to calculate an estimate of the
unrecognised shrinkage at the Period end.
H1 FY25 H1 FY24
£m £m
Gross stock 42.9 50.5
Less: provisions (2.5) (1.7)
Stock net of provisions 40.4 48.8
Stock in transit 11.3 7.3
Stock per balance sheet 51.7 56.1
Cash flow
The table below shows a summarised non IFRS 16 presentation of cash flow. The
net cash outflow before loan movements for the Period was £10.2m (H1 FY24:
outflow of £12.6m). The improvement in cash flows reflects the significant
improvement in profitability in the Period.
HY25 HY24 Variance
£m £m £m
Operating profit (4.4) (14.1) 9.7
Other operating cashflows((1)) (0.2) 5.3 (5.5)
Net movement in working capital (2.3) (0.2) (2.1)
Net Cash from Investing Activities (2.2) (3.1) 0.9
Tax paid (0.5) 0.0 (0.5)
Interest and financing costs (0.3) (0.4) 0.1
Purchase of Treasury Shares (0.3) (0.1) (0.2)
Cashflow before loan movements (10.2) (12.6) 2.4
Drawdown of RCF 9.0 5.0 4.0
Exchange rate movements 0.1 (0.1) 0.1
Net decrease in cash and cash equivalents (1.1) (7.7) 6.6
Opening net cash balance 1.6 10.2 (8.6)
Closing net (debt)/cash balance excluding lease liabilities (8.5) (2.5) (6.0)
(1) Other operating cashflows relate to pre-working capital
movements, excluding tax and interest. See Condensed consolidated cash flow
statement in of the attached condensed unaudited financial statements.
The Group ended the Period with net debt of £8.5m (H1 FY24: £2.5m net debt).
The higher net debt position is due to the lower opening cash at the start of
the Period, along with a working capital outflow compared to H1 FY24 as a
consequence of the timing of month end payments falling within the Period end
(due to the Period end being 3 November 2024 compared to 27 October in the
prior year) partially offset by improved profitability in the period.
Bank facilities and financial position
The Group continues to have a Revolving Credit Facility (RCF) of £20.0m,
which provides ample liquidity and is utilised to support the build of stock
prior to peak trading. The terms of this financing agreement expire on 30
November 2026.
Capital distributions
The Board is not proposing an interim dividend. Future shareholder
distributions, including share buybacks, continue to be assessed as
profitability improves and funding allows.
Rosie Fordham
Chief Financial Officer
24 January 2025
Unaudited Condensed Consolidated Income Statement
For the 26 weeks ended 3 November 2024
26 weeks to 3 November 2024 26 weeks to 29 October 2023 53 weeks to 5 May 2024
(Restated - Note 15)
Adjusted Adjusting items Total Adjusted Adjusting items(1) Total Adjusted Adjusting items Total
Note £000 £000 £000 £000 £000 £000 £000 £000 £000
Revenue 3 124,200 - 124,200 122,575 - 122,575 282,585 - 282,585
Cost of sales 5 (108,362) (316) (108,678) (109,615) (6,052) (115,667) (234,505) 3,741 (230,764)
Gross profit 15,838 (316) 15,522 12,960 (6,052) 6,908 48,080 3,741 51,821
Other operating income 4 - 4 4 - 4 8 - 8
Distribution expenses (6,160) - (6,160) (6,846) - (6,846) (12,725) - (12,725)
Administrative expenses (13,788) - (13,788) (14,173) - (14,173) (27,685) - (27,685)
Operating (loss)/profit (4,106) (316) (4,422) (8,055) (6,052) (14,107) 7,678 3,741 11,419
Finance income 6 - - - 17 - 17 19 - 19
Finance expense 6 (2,431) - (2,431) (2,411) - (2,411) (4,520) - (4,520)
Net financing expense (2,431) - (2,431) (2,394) - (2,394) (4,501) - (4,501)
(Loss) / profit before tax (6,537) (316) (6,853) (10,449) (6,052) (16,501) 3,177 3,741 6,918
Tax 9 635 - 635 2,573 1,034 3,607 (541) - (541)
(Loss) / profit for the period (5,902) (316) (6,218) (7,876) (5,018) (12,894) 2,636 3,741 6,377
(Loss) / profit before tax and IFRS 16 4 (5,454) (674) (6,128) (11,311) (3,281) (14,592) 1,118 (1,022) 96
Basic (loss)/earnings per share (pence) 10 (9.4) (9.9) (12.6) (20.6) 4.2 10.2
Diluted (loss)/earnings per share (pence) 10 (9.4) (9.9) (12.6) (20.6) 4.2 10.2
(1) Profit on disposal and modification of right-of-use assets and lease
liabilities recognised under IFRS 16 has been restated in the 26 weeks to 29
October 2023 to be shown as an Adjusting item rather than in result before
Adjusting items.
All results arise from continuing operations. The loss for the period is
attributable to equity holders of the Parent company.
Unaudited Condensed Consolidated Statement of Comprehensive Income
For the 26 weeks ended 3 November 2024
26 weeks to 26 weeks to 53 weeks to
3 November 2024 29 October 2023 (Restated - Note 15) 5 May 2024
£000 £000 £000
(Loss) / profit for the period (6,218) (12,894) 6,377
Items that may or may not be recycled subsequently into profit and loss
Cash flow hedges - changes in fair value (1,058) 2,423 1,664
Cash flow hedges - reclassified to profit and loss 404 (278) 134
Cost of hedging reserve - changes in fair value 298 (357) (415)
Cost of hedging reserve - reclassified to profit and loss 183 135 182
Tax relating to components of other comprehensive income 190 (525) (323)
Other comprehensive (expense)/ income for the period, net of income tax 17 1,398 1,242
Total comprehensive (expense) / income for the period attributable to equity (6,201) (11,496) 7,619
shareholders of the Parent
Unaudited Condensed Consolidated Statement of Financial Position
As at 3 November 2024
3 November 2024 29 October 2023 (Restated - Note 15) 5 May 2024
Note £000 £000 £000
Non-current assets
Intangible assets 12 2,177 1,583 1,866
Property, plant and equipment 13 11,936 9,456 12,358
Right of use assets 14 60,106 53,779 57,703
Deferred tax assets 4,860 8,087 4,036
79,079 72,905 75,963
Current assets
Inventories 16 51,721 56,118 31,354
Trade and other receivables 11,980 9,390 8,384
Derivative financial assets 20 90 1,134 306
Current tax asset 1,645 1,020 1,189
Cash and cash equivalents 522 2,458 1,619
65,958 70,120 42,852
Total assets 145,037 143,025 118,815
Current liabilities
Interest bearing loans and borrowings 17 9,000 5,000 -
Lease liabilities 14 20,580 18,287 19,943
Trade and other payables 51,712 60,028 29,886
Provisions 18 303 276 543
Derivative financial liabilities 20 605 84 64
82,200 83,675 50,436
Non-current liabilities
Lease liabilities 14 58,716 66,713 57,817
Provisions 18 634 893 476
59,350 67,606 58,293
Total liabilities 141,550 151,281 108,729
Net assets/ (liabilities) 3,487 (8,256) 10,086
Equity attributable to equity holders of the Parent
Share capital 19 625 625 625
Share premium 19 28,322 28,322 28,322
Merger reserve (54) (54) (54)
Share based payment reserve 2,771 2,782 2,583
Hedging reserve (139) 1,035 129
Retained earnings (28,038) (40,966) (21,519)
Total equity 3,487 (8,256) 10,086
Unaudited Condensed Consolidated Statement of Changes in Equity
Attributable to equity holders
Share based
Share Share Merger Payments Hedging Retained Total
capital premium reserve reserve reserve(1) earnings equity
For the 26 Weeks Ended 3 November 2024 £000 £000 £000 £000 £000 £000 £000
At 5 May 2024 625 28,322 (54) 2,583 129 (21,519) 10,086
Total comprehensive income / (expense) for the period
Loss for the period - - - - - (6,218) (6,218)
Other comprehensive income - - - - 17 - 17
Total comprehensive income / (expense) for the period - - - - 17 (6,218) (6,201)
Hedging gains and losses and costs of hedging transferred to the cost of - - - - (285) - (285)
inventory
Transactions with owners of the Company
Share-based payment charges - - - 188 - - 188
Acquisition of treasury shares - - - - - (301) (301)
Total transactions with owners - - - 188 - (301) (113)
Balance at 3 November 2024 625 28,322 (54) 2,771 (139) (28,038) 3,487
For the 26 Weeks Ended 29 October 2023 £000 £000 £000 £000 £000 £000 £000
At 30 April 2023 625 28,322 (54) 2,780 (331) (29,688) 1,654
Cumulative prior period adjustments - - - - - 1,762 1,762
Balance at 30 April 2023 (restated) 625 28,322 (54) 2,780 (331) (27,926) 3,416
Total comprehensive income / (expense) for the period
Loss for the period (restated, see note 15) - - - - - (12,894) (12,894)
Other comprehensive income - - - - 1,398 - 1,398
Total comprehensive income / (expense) for the period - - - - 1,398 (12,894) (11,496)
Hedging gains and losses and costs of hedging transferred to the cost of - - - - (32) - (32)
inventory
Transactions with owners of the Company
Share-based payment charges - - - 2 - - 2
Acquisition of treasury shares - - - - - (146) (146)
Total transactions with owners - - - 2 - (146) (144)
Balance at 29 October 2023 625 28,322 (54) 2,782 1,035 (40,966) (8,256)
(1 ) Hedging reserve includes £(61)k in relation
to changes in forward points which are recognised in other comprehensive
income and accumulated as a cost of hedging within the hedging reserve (£391k
for the 26 weeks ended 29 October 2023, £410k for the 53 weeks ended 5 May
2024).
Unaudited Condensed Consolidated Cash Flow Statement
For the 26 weeks ended 3 November 2024
26 weeks to 26 weeks to 53 weeks to
3 November 2024 29 October 2023 (Restated - Note 15) 5 May 2024
£000 £000 £000
Cash Flows From Operating Activities
(Loss) / profit for the period (6,218) (12,894) 6,377
Adjustments for:
Depreciation of property, plant and equipment 1,399 2,420 3,663
Impairment of property, plant and equipment - 2,787 1,589
Reversal of impairment of property, plant and equipment - (293) (1,272)
Depreciation of right-of-use assets 10,203 10,240 18,224
Impairment of right-of-use assets - 6,874 3,394
Reversal of impairment of right-of-use assets - (537) (4,620)
Amortisation of intangible assets 390 374 632
Impairment of intangible assets - 450 442
Reversal of impairment of intangible assets - (729) (850)
Derivative exchange loss / (gain) 285 344 494
Financial income - (17) (19)
Financial expense 388 275 536
Interest on lease liabilities 2,043 2,136 3,984
(Profit) / loss on disposal of property, plant and equipment 492 (174) 202
Profit on disposal of right of use assets and lease liability (358) (1,517) (3,537)
Profit relating to lease modifications and amortisation of capital (320) (984) -
contributions
(Profit) / loss on disposal of intangible assets - (66) -
Share based payment charges 188 2 (197)
Taxation (635) (3,607) 541
Operating cash flows before changes in working capital 7,857 5,084 29,583
(Increase) / decrease in trade and other receivables (3,512) (1,823) (963)
(Increase)/ decrease in inventories (20,255) (23,217) 1,149
Increase / (decrease) in trade and other payables 21,527 25,559 (3,672)
Decrease in provisions (82) (694) (844)
Cash inflows from operating activities 5,535 4,909 25,253
Corporation tax paid (457) - (97)
Net cash from operating activities 5,078 4,909 25,156
Cash flows from investing activities
Acquisition of property, plant and equipment (1,985) (3,092) (6,078)
Capital contributions received from landlords 516 659 1,460
Acquisition of intangible assets (702) (695) (1,208)
Interest received - 17 19
Net cash outflows from investing activities (2,171) (3,111) (5,807)
Cash flows from financing activities
Payment of finance lease liabilities (capital element) (10,402) (11,788) (22,471)
Payment of finance lease liabilities (interest) (2,043) (2,136) (3,984)
Payment of long term borrowing costs - (60) (60)
Other interest paid (341) (349) (434)
Proceeds from bank borrowings 9,000 5,000 (6,000)
Repayment of bank borrowings - - 6,000
Dividend paid - - -
Purchase of treasury shares (301) (146) (260)
Net cash from financing activities (4,087) (9,479) (27,209)
Net decrease in cash and cash equivalents (1,180) (7,681) (7,860)
Exchange rate movements 83 (57) (717)
Cash and cash equivalents at beginning of Period 1,619 10,196 10,196
Cash and cash equivalents at end of Period 522 2,458 1,619
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
For the 26 weeks ended 3 November 2024
1 Accounting Policies
(a) General Information
TheWorks.co.uk plc ('the Company') is a public limited company domiciled in
the United Kingdom and its registered office is Boldmere House, Faraday
Avenue, Hams Hall Distribution Park, Coleshill, Birmingham, B46 1AL. These
unaudited condensed consolidated interim financial statements ('interim
financial statements') as at and for the 26 weeks ended 3 November 2024
comprise the results of the Company and its subsidiaries (together referred to
as 'the Group').
(b) Basis of preparation
The interim financial statements have been prepared in accordance with IAS 34
Interim Financial Reporting, and should be read in conjunction with
TheWorks.co.uk plc financial statements for the 53 weeks ended 5 May 2024. The
interim financial statements do not include all of the information required
for a complete set of IFRS financial statements. However, selected explanatory
notes are included to explain events and transactions that are significant to
an understanding of the changes in the Group's financial position and
performance since the last annual financial statements.
The consolidated financial statements are presented in pounds sterling and all
values are rounded to the nearest thousand (£000), except when otherwise
indicated.
(i) Going concern
The unaudited condensed financial statements have been prepared on a going
concern basis, which the Directors consider appropriate for the reasons set
out below.
The Directors have assessed the prospects of the Group, taking into account
its current position and the potential impact of the principal risks which
have been identified through the Group's risk evaluation process.
In preparing its FY24 Annual Report and financial statements (which were
approved on 1 October 2024), the Group prepared a cash flow forecast. The
revised forecast covers a period of 18 months from the date of approval of
these unaudited condensed financial statements (the going concern assessment
period), based on the Board's forecast for FY25 and its three-year plan,
referred to the 'Base Case' scenario. In addition, a 'severe but plausible'
'Downside Case' sensitivity was prepared to support the Board's conclusion
regarding going concern, by stress testing the Base Case to indicate the
financial headroom resulting from applying more pessimistic assumptions.
In assessing the basis of preparation the Directors considered:
• The external environment.
• The Group's financial position including the quantum and
expectations regarding availability of bank facilities.
• The potential impact on financial performance of the principal
risks.
• The output of the Base Case scenario, which mirrors the Group's
three-year plan and therefore represents its estimate of the most likely
financial performance over the forecast period.
• Measures to maintain or increase liquidity in the event of a
significant downturn in trading.
• The resilience of the Group to these risks having a more severe
impact, evaluated via the Downside Case which shows the impact on the Group's
cash flows, bank facility headroom and covenants.
These factors are described below.
External environment
The risks which are considered the most significant to this evaluation relate
to the economy and the market, specifically their effect on the strength of
trading conditions, and the Group's ability to successfully execute its
strategy. The risk of weaker consumer demand is considered to be the greater
of these risks, due to higher interest rates and years of high level
inflation, and its potential effect on economic growth and consumer spending.
An emerging risk has been noted in relation to the possible effects of climate
change, but this is not expected to have a material financial impact on the
Group during the forecast period.
Financial position and bank facilities
At the Period end the Group held net debt (excluding lease liabilities) of
£8.5m (HY24: £2.5m) (Note 17).
The Group's bank facilities comprise a £20.0m revolving credit facility (RCF)
which terminates at the end of November 2026. The facility includes two
financial covenants which are structured in a way that is typical for a retail
business of this size and are tested quarterly:
1. The level of net debt to LTM (last twelve months') EBITDA must not
exceed 2.5 times during the life of the facility.
2. The "Fixed Charge Cover" or ratio of LTM EBITDA prior to deducting
rent and interest, to LTM rent and interest. In March 2024, the Group agreed
an amendment to the facility agreement which resulted in in a reset of the
fixed charge cover; until October 2025, the ratio must be at least 1.05 times
and thereafter 1.20 times.
The Group expects to be able to operate and have sufficient headroom within
these covenants during the forecast period.
Potential impact of risks on financial scenarios
The 'Principal risks and uncertainties' section of the Strategic report on
pages 38 to 43 of the Group's FY24 Annual Report, sets out the main risks that
the Board considers relevant.
It is considered unlikely that all the risks would manifest themselves to
adversely affect the business at the same time. The Base Case scenario/ the
Group's three-year financial plan implicitly already takes into accounts the
risks described and assumes that they manifest themselves in a way or to an
extent that might be considered 'neutral'.
The Downside Case scenario assumes that there are more severely negative
effects than the Base Case. In particular, the Downside Case assumptions are
that macroeconomic conditions are significantly worse, resulting in reduced
consumer spending and lower sales. It should be noted that the Base Case
already teaks into account the current subdued consumer market conditions. The
Downside Case assumes conditions become worse still from the second half of
the FY25 financial year.
Base Case scenario
The Base Case scenario assumptions reflect the following factors:
· The macroeconomic environment remains challenging resulting in
only marginal total sales growth in the second half of FY25 with sales in the
outer years reflecting a slightly improving external environment.
· The FY25 product margin percentage is exceeding the expected
performance in the Base Case and has increased significantly compared to the
prior year. It reflects the expected full year effect of targeted cost price
reductions, along with a slightly favourable hedged FX rate; these are partly
offset by the increased ocean container freight costs that have been in place
since the beginning of 2024.
· The anticipated further inflationary effects, in particular the
increase in the National Living Wage and reduction in the threshold applied to
National Insurance. In respect of other costs, notably property occupancy
costs, it is not expected that there will be further significant inflationary
effects in the forecast period following the significant increases (for
example in electricity costs) already experienced during FY24.
· Capital expenditure levels are in line with the Group's strategic
plan. A significant proportion of the Group's capital expenditure is
discretionary, particularly over a short-term time period. As a result, if
required, it can therefore be reduced substantially, for example, in the event
of the Group needing to preserve cash.
· The anticipated costs of the Group's net zero climate change
commitments have been incorporated within the Base Case model. As set out in
the climate related disclosures in the annual report, the impact on the
Group's financial performance and position is not expected to be material in
the short term.
· The plan makes provision for capital distribution payments in the
form of buy backs or dividends.
Under the Base Case scenario, the Group expects to make routine operational
use of its bank facility each year as stock levels are increased in
September-October, prior to peak sales occurring.
The output of the Base Case model scenario indicates that the Group has
sufficient financial resources to continue to operate as a going concern and
for the financial statements to be prepared on this basis.
Measures to maintain or increase liquidity in the event of a significant
downturn in trading
If necessary, mitigating actions can and would be taken in response to a
significant downturn in trading such as is described below, which would
increase liquidity.
These include, for example, delaying and reducing stock purchases, stock
liquidation, reductions in capital expenditure, the review of payment terms
and the review of dividend levels. Some of these potential mitigations have
been built into the Downside Case model, and some are additional measures that
would be available in the event of that scenario, or worse, actually
occurring.
Severe but plausible Downside Case scenario
The Downside Case makes the following assumptions to reflect more adverse
macroeconomic conditions compared to the Base Case:
· In the second half of FY25 store and online sales are assumed to
be lower than the Base case by 1.5% and 2.0% respectively reflecting a more
challenging consumer environment over peak.
· Store and online sales continue to be lower than the Base Case in
FY26 and FY27 and store sales are further reduced as the assumption
surrounding new store growth is reduced in the Downside Case.
· The product gross margin percentage is lower in FY26 and FY27
reflecting continued higher ocean freight rates (which are already built into
the FY25 Base Case) along with an assumed increase in promotional activity to
allow for the clearance of stock which is assumed would have accumulated due
to lower sales levels. Expected FX requirements are hedged until mid-FY26.
Other gross margin inputs are relatively controllable, including via the
setting of selling prices to reflect any systematic changes in the cost price
of goods bought for resale.
· Volume related costs in the Downside Case are lowered where they
logically alter in a direct relationship with sales levels, for example,
forecast online fulfilment and marketing costs. The model also reflects
certain steps which could be taken to mitigate the effect of lower sales,
depending on management's assessment of the situation at the time. These
include adjustments to stock purchases, reducing capital expenditure,
reductions in variable labour usage and the suspension of dividend
payments.
· The combined financial effect of the modified assumptions in this
scenario compared with the Base Case, over the three-year period, including
implementing some of the mitigating activities available, would result in:
o A reduction in store net sales of approximately £30m.
o A reduction in online net sales of approximately £3m.
o A reduction to EBITDA of approximately £13m.
Under this scenario the Group will draw on its bank facility for the usual
peak stock build. The bank facility financial covenants are complied with
throughout the period, including during the pre-Christmas period when the
facility is being used. There is sufficient headroom within both covenants and
sufficient cash headroom under this scenario throughout the going concern
period.
Conclusion regarding basis of preparation
The current economic environment remains challenging with the cost-of-living
crisis continuing to impact much of the UK particularly low-income households,
however the rate of inflation is slowing and interest rates are at the lowest
since July 2023. There is sufficient cash headroom and headroom within both
covenants under both scenarios and therefore the Directors are confident that
the Group will have sufficient funds to continue to meet its liabilities as
they fall due for at least 12 months from the date of approval of the
financial statements and have therefore prepared the financial statements on a
going concern basis.
(ii) Accounting policies
The interim financial statements have been prepared on a basis consistent with
the accounting policies published in the Group's financial statements for
FY24.
(c) Alternative performance measures and Adjusting items
The Group tracks a number of alternative performance measures (APMs) in
managing its business, which are not defined or specified under the
requirements of IFRS because they exclude amounts that are included in, or
include amounts that are excluded from, the most directly comparable measure
calculated and presented in accordance with IFRS, or are calculated using
financial measures that are not calculated in accordance with IFRS.
The Group believes that these APMs, which are not considered to be a
substitute for or superior to IFRS measures, provide stakeholders with
additional helpful information on the performance of the business. They are
consistent with how the business performance is planned and reported
internally, and are also consistent with how these measures have been reported
historically. Some of the APMs are also used for the purpose of setting
remuneration targets.
The APMs should be viewed as supplemental to, but not as a substitute for,
measures presented in the consolidated financial statements prepared in
accordance with IFRS. The Group believes that the APMs are useful indicators
of its performance but they may not be comparable with similarly titled
measures reported by other companies due to the possibility of differences in
the way they are calculated.
The key APMs that the Group uses include: like-for-like sales growth (LFL);
Pre-IFRS 16 Earnings before interest, tax, depreciation and amortisation
(Pre-IFRS 16 EBITDA), Profit before tax and IFRS 16, Pre-IFRS 16 Adjusted
EBITDA, Adjusted Profit; and Adjusted earnings per share. The APMs used by the
Group and explanations of how they are calculated and how they can be
reconciled to a statutory measure where relevant, are set out in Note 4.
"Adjusted" measures are calculated by adding back or deducting Adjusting
Items. Adjusting items are material in size and unusual in nature or incidence
and, in the judgement of the Directors, should therefore be disclosed
separately on the face of the financial statements to ensure that the reader
has a proper understanding of the Group's financial performance and that there
is comparability of financial performance between periods.
Refer to Note 5 for information regarding items that were treated as
Adjusting.
(d) Key sources of estimation uncertainty
The preparation of consolidated financial statements requires the Group to
make estimates and judgements that affect the application of policies and
reported amounts.
Critical judgements represent key decisions made by management in the
application of the Group's accounting policies. Where a significant risk of
materially different outcomes exists, this will represent a key source of
estimation uncertainty.
Estimates and judgements are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable
under the circumstances. Actual results may differ from these estimates.
Key sources of estimation uncertainty which are material to the interim
financial statements are described in the context of the matters to which they
relate, in the following notes:
Description Note
Going concern 1
Impairment of intangible assets, property, plant and equipment and 13
right-of-use assets
2 Segmental reporting
IFRS 8 requires segment information to be presented on the same basis as is
used by the Chief Operating Decision Maker for assessing performance and
allocating resources.
The Group has one operating segment with two revenue streams, bricks and
mortar stores and online. This reflects the Group's management and reporting
structure as viewed by the Board of Directors, which is considered to be the
Group's Chief Operating Decision Maker. Aggregation is deemed appropriate due
to both operating segments having similar economic characteristics, similar
products on offer and a similar customer base.
3 Revenue
The Group's revenue is derived from the sale of finished goods to customers.
The following table shows the primary geographical markets from which revenue
is derived.
26 weeks ended 26 weeks ended 53 weeks ended
3 November 2024 29 October 2023 5 May 2024
£000 £000 £000
Sale of goods
- UK 122,127 120,588 277,828
- EU (Republic of Ireland) 2,073 1,987 4,757
Total revenues 124,200 122,575 282,585
Seasonality of operations
The Group's revenue is subject to seasonal fluctuations as a result of peaking
during the approach to Christmas, from October to December. Therefore, the
first half of the financial year, from April to October, typically produces
lower revenue and profit than the second half.
4 Alternative performance measures ("APMs")
Like-for-like ("LFL") sales
LFL sales are defined by the Group as the year-on-year growth in gross sales
from stores which have been trading for a full financial year prior to the
current year and have been trading throughout the current financial period
being reported on, and from the Company's online store, calculated on a
calendar week basis. The measure is used widely in the retail industry as an
indicator of sales performance. LFL sales are calculated on a gross basis to
ensure that fluctuations in the VAT rates of products sold are excluded from
the like-for-like sales growth percentage figure.
Pre-IFRS 16 Adjusted EBITDA (EBITDA) and Adjusted profit after tax
EBITDA is defined by the Group as pre-IFRS 16 earnings before interest, tax,
depreciation, amortisation and profit/loss on the disposal and modification of
fixed assets, after adding back or deducting Adjusting items. See Note 5 for a
description of Adjusting items. Pre-IFRS 16 EBITDA is used for the bank
facility LTM EBITDA covenant calculations.
The table provides a reconciliation of pre-IFRS 16 EBITDA to profit/(loss)
after tax and the impact of IFRS 16:
26 weeks ended 26 weeks ended 53 weeks ended
3 November 2024 29 October 2023 5 May 2024
(Restated - Note 15)
£000 £000 £000
Pre-IFRS 16 Adjusted EBITDA (2,779) (8,486) 6,042
Income statement rental charges not recognised under IFRS 16 10,809 13,179 24,288
Foreign exchange differences on euro leases (10) 45 69
Post-IFRS 16 Adjusted EBITDA 8,020 4,738 30,399
( )
Profit / (loss) on disposal of property, plant and equipment (134) 174 (168)
Profit / (loss) on disposal of intangible assets - 67 (34)
Depreciation of property, plant and equipment (1,399) (2,420) (3,663)
Depreciation of right-of-use-assets (10,203) (10,240) (18,224)
Amortisation (390) (374) (632)
Finance expenses (2,431) (2,411) (4,520)
Finance income - 17 19
Tax credit / (charge) 635 2,573 (541)
Adjusted (loss) / profit after tax (5,902) (7,876) 2,636
Adjusting items (including impairment charges and reversals) (316) (6,052) 3,741
Tax (charge) / credit in relation to Adjusting items - 1,034 -
(Loss) / profit after tax (6,218) (12,894) 6,377
Profit before tax and IFRS 16
The following tables provides a reconciliation of (loss)/profit before tax and
IFRS 16 adjustments to (loss)/profit before tax.
26 weeks ended 26 weeks ended 53 weeks ended
3 November 2024 29 October 2023 5 May 2024
(Restated - Note 15)
Adjusted Adjusting items Total Adjusted Adjusting items Total Adjusted Adjusting items Total
£000 £000 £000 £000 £000 £000 £000 £000 £000
(Loss) / profit before tax before IFRS 16 adjustments (5,454) (674) (6,128) (11,311) (3,281) (14,592) 1,118 (1,022) 96
Remove rental charges not recognised under IFRS 16 11,111 - 11,111 13,117 - 13,117 24,166 - 24,166
Remove hire costs from hire of equipment 56 - 56 62 - 62 122 - 122
Remove depreciation charged on the existing assets - - - - - - (94) - (94)
Remove interest charged on the existing liability 6 - 6 14 - 14 4 - 4
Depreciation charge on right of use asset (10,203) - (10,203) (10,240) - (10,240) (18,224) - (18,224)
Interest cost on lease liability (2,043) - (2,043) (2,136) - (2,136) (3,984) - (3,984)
Profit on disposal of right-of-use assets and lease liability - 358 358 - 980 980 - 3,537 3,537
Profit on modification of leases - - - - 983 983 - - -
Foreign exchange difference on euro leases (10) - (10) 45 - 45 69 - 69
Additional net impairment charge under IAS 36 - - - - (4,734) (4,734) - 1,226 1,226
Net Impact of IFRS 16 on (loss) / profit before tax (1,083) 358 (725) 862 (2,771) (1,909) 2,059 4,763 6,822
(Loss) / profit before tax (6,537) (316) (6,853) (10,449) (6,052) (16,501) 3,177 3,741 6,918
Other adjusted profit metrics
Other key profit measures including operating profit, profit before tax,
profit for the period, and earnings per share are also calculated on an
Adjusted basis by adding back or deducting Adjusting items. These adjusted
metrics are included within the consolidated income statement and statement of
other comprehensive income, with details of Adjusting items included below in
Note 5.
5 Adjusting items
During the period, the items analysed below have been classified as Adjusting:
26 weeks ended 3 November 2024 26 weeks ended 53 weeks ended
29 October 2023 5 May 2024
(restated)
£000 £000 £000
Within cost of sales
Impairment charges - 10,110 5,333
Impairment reversals - (2,095) (6,742)
Profit on disposal and modification of right-of-use assets and lease (358) (1,963) (3,537)
liabilities
Other exceptional items 674 - 1,205
Total Adjusting items before tax 316 6,052 (3,741)
Impairment charges and reversals of prior period impairment charges relate to
fixed assets (see Notes 12, 13, 14).
Profit on disposal and modification of right-of-use assets and lease
liabilities relate to leases (see Note 14).
Other exceptional items comprise of £0.1m of redundancy costs, £0.1m related
to the settlement of a legal case and £0.4m related to non-recurring
operational costs as a result of the challenges in online fulfilment. (26
weeks ended 29 October 2023: £nil. 53 weeks ended 5 May 2024: £0.5m of
professional fees and other costs related to the listing of the Company on AIM
and £0.7m of redundancy costs related to the restructure of the Operating
Board.)
6 Finance income and expense
26 weeks ended 3 November 2024 26 weeks ended 53 weeks ended
29 October 2023 5 May 2024
£000 £000 £000
Finance income
Bank interest receivable - 17 19
Total finance income - 17 19
Finance expense
Bank interest payable (310) (210) (389)
Amortisation of capitalised loan costs (78) (65) (147)
Interest payable on lease liabilities (2,043) (2,136) (3,984)
Total finance expense (2,431) (2,411) (4,520)
7 Share based payments
During the Period, nil shares were awarded under "TheWorks.co.uk 2018 Long
Term Incentive Plan" and nil awarded under the Save As You Earn Scheme. (26
weeks ended 29 October 2023: 2,716,687 and 1,416,375, 53 weeks ended 5 May
2024: 2,716,687 and 1,416,375 respectively).
During the Period, nil restricted stock awards were granted to key management
and senior employees (26 weeks ended 29 October 2023: 856,250, 53 weeks ended
5 May 2024: 856,250).
Expense recognised in the income statement
The IFRS 2 charge recognised during the Period was as follows:
26 weeks ended 26 weeks ended 53 weeks ended
3 November 2024 29 October 2023 5 May 2024
£000 £000 £000
LTIP -- Share based payment (credit) / expense 79 (155) (308)
RSA - Share based payment expense 82 121 84
SAYE - Share based payment expense 27 36 27
Total IFRS 2 charges/ (credit) 188 2 (197)
8 Employee benefits
The Group operates a defined contribution pension scheme. The pension charge
for the period represents contributions payable by the group to the scheme and
amounted to £565k (26 weeks ended 29 October 2023: £484k; 53 weeks ended 5
November 2024: £1,066k).
9 Tax
The income tax expense or credit is determined by multiplying the loss before
tax for the interim reporting period by management's best estimate of the
weighted average annual income tax rate expected for the full financial year,
adjusted for the tax effect of certain items recognised in full in the interim
period. As such, the effective tax rate in the interim financial statements
may differ from management's estimate of the effective tax rate for the annual
financial statements.
The Group's total income tax credit in respect of the Period was £635k (26
weeks ended 29 October 2023 credit (restated): £3,607k, 53 weeks ended 5 May
2024 tax charge: £541k). The effective tax rate on the total loss before tax
was 9.3% (26 weeks ended 29 October 2023 restated: 21.9%; 53 weeks ended 5 May
2024: 7.8%), the Adjusted tax rate was 9.7% (26 weeks ended 29 October 2023
restated: 24.6%, 53 weeks ended 5 May 2024: 17.0%).
The difference between the total effective tax rate and the Adjusted tax rate
relates to certain costs and depreciation charges (including impairment) being
non-deductible for tax purposes.
10 Earnings per share
Basic earnings per share is calculated by dividing the profit or loss for the
period attributable to ordinary shareholders by the weighted average number of
ordinary shares in issue during the period.
Diluted earnings per share uses the weighted average number of shares in issue
for the period, adjusted for the dilutive effect of potential ordinary shares.
Potential ordinary shares represent employee share incentive awards. In the
event that there are losses per share, diluted EPS is deemed to be the same as
Basic EPS.
The Group has chosen to present an Adjusted earnings per share measure, with
profit adjusted for Adjusting items (see Note 5 for further details) to
reflect the Group's underlying (loss) / profit for the Period.
3 November 2024 29 October 2023 5 May 2024
(Restated - Note 15)
Number Number Number
Number of shares in issue 62,500,000 62,500,000 62,500,000
Number of dilutive share options (nil in the event of a loss) - - -
Number of shares for diluted earnings per share 62,500,000 62,500,000 62,500,000
£000 £000 £000
(Loss) / profit for the financial period (6,218) (12,894) 6,377
Adjusting items 316 5,018 (3,741)
Total Adjusted (loss) / profit for Adjusted earnings per share (5,902) (7,876) 2,636
Pence Pence Pence
Basic (loss) / earnings per share (9.9) (20.6) 10.2
Diluted (loss) / earnings per share (9.9) (20,6) 10.2
Adjusted basic (loss) / earnings per share (9.4) (12.6) 4.2
Adjusted diluted (loss) / earnings per share (9.4) (12.6) 4.2
11 Dividends
The Board has not recommended the payment of a dividend in respect of FY25
interim results (FY24: nil).
12 Intangible assets
Goodwill Software Total
£000 £000 £000
Cost
Balance at 5 May 2024 16,180 10,299 26,479
Additions - 701 701
Disposals - (3) (3)
Balance at 3 November 2024 16,180 10,997 27,177
Amortisation / Impairment
Balance at 5 May 2024 16,180 8,433 24,613
Amortisation charge - 390 390
Impairment charge - - -
Impairment reversal - - -
Disposals - (3) (3)
Balance at 3 November 2024 16,180 8,820 25,000
Net book value
At 5 May 2024 - 1,866 1,866
At 3 November 2024 - 2,177 2,177
13 Property, plant and equipment
Leasehold Plant & Fixtures &
improvements equipment fittings Total
£000 £000 £000 £000
Cost
Balance at 5 May 2024 5,818 3,763 19,072 28,653
Additions (22) 332 1,159 1,469
Disposals (115) (23) (368) (506)
Balance at 3 November 2024 5,681 4,072 19,863 29,616
Depreciation and impairment
Balance at 5 May 2024 4,149 3,138 9,008 16,295
Depreciation charge 100 49 1,250 1,399
Impairment charges - - - -
Impairment reversals - - - -
Disposals 262 (20) (256) (14)
Balance at 3 November 2024 4,511 3,167 10,002 17,680
Net book value
At 5 May 2024 1,669 625 10,064 12,358
At 3 November 2024 1,170 905 9,861 11,936
Impairment of tangible and intangible assets
The carrying amounts of the Group's tangible and intangible assets with a
measurable useful life are reviewed at each balance sheet date if events or
circumstances indicate that the full carrying value may not be recoverable to
determine whether there is any indication of impairment to their value. If
such an indication exists, the asset's recoverable amount is estimated and
compared to its carrying value. Where the asset does not generate cash flows
that are independent from other assets, the Group estimates the recoverable
amount of the CGU to which the asset belongs. The Directors consider an
individual retail store to be a cash generating unit (CGU), as well as the
Company's website.
The recoverable amount of an asset is the greater of its fair value less
disposal cost and its value in use (the present value of the future cash flows
that the asset is expected to generate). In determining value in use, the
present value of future cash flows is discounted using a discount rate that
reflects current market assessments of the time value of money in relation to
the period of the investment and the risks specific to the asset concerned.
The carrying value represents each CGU's specific assets, as well as the IFRS
16 right-of-use asset, plus an allocation of corporate assets where these
assets can be allocated on a reasonable and consistent basis.
Where the carrying value exceeds the recoverable amount an impairment loss is
established with a charge being made to the income statement. When the reasons
for a write down no longer exist, the write down is reversed in the income
statement up to the net book value that the relevant asset would have had if
it had not been written down and if it had been depreciated.
An impairment review was conducted for the 53 weeks to 5 May 2024 for the
Annual Report and Accounts signed on 1 October 2024. All CGU's were reviewed
for impairment. An impairment charge or reversal of impairment recognised in
prior periods was recognised in the 53 weeks to 5 May 2024. The Directors have
reviewed the events and circumstances since 5 May 2024, and the Group's Base
Case plan and do not consider it to have changed materially since the
impairment review as at 5 May 2024 was completed and have therefore concluded
that no impairment trigger has occurred.
As a result of no impairment triggers being present, no impairment review was
completed for the the 26 weeks ended 3 November 2024, and therefore no
impairment charge or reversal was recognised. An impairment charge of £5,333k
was recognised for the 53 weeks ended 5 May 2024 against 184 stores with a
recoverable amount of £23,396k, and an impairment charge of £591k was
recognised against the trading website. An impairment reversal of £6,742k was
recognised for the 53 weeks ended 5 May 2024 relating to 135 stores with a
recoverable amount of £33,537k. In line with the previously adopted
treatment, impairment charges and reversals have been shown as Adjusting
items.
14 Leases
Amounts recognised in the statement of financial position
Right-of-use assets
Land and buildings Plant and equipment
£000 £000 Total
£000
3 November 2024
At 5 May 2024 57,309 394 57,703
Depreciation charge for the year (10,088) (115) (10,203)
Additions to right-of-use assets 4,153 79 4,232
Effect of modifications to right-of-use assets 8,031 - 8,031
Derecognition of right-of-use assets 343 - 343
Impairment charge(1) - - -
Impairment reversals(1) - - -
At 3 November 2024 59,748 358 60,106
(1 The total impairment charge/ reversal is in Adjusting items.)
Lease liabilities
Land and buildings Plant and equipment
£000 £000 Total
£000
3 November 2024
At 5 May 2024 77,336 424 77,760
Additions to lease liabilities 3,833 79 3,912
Interest expense 2,034 9 2,043
Effect of modifications to lease liabilities 8,031 - 8,031
Lease payments (12,322) (123) (12,445)
Disposals of lease liabilities (15) - (15)
Foreign exchange movements 10 - 10
At 3 November 2024 78,907 389 79,296
Carrying value of leases included in the consolidated statement of financial
position
As at 3 November 2024 As at 5 May 2024
Current 20,580 19,943
Non-current 58,716 57,817
At 3 November 2024 79,296 77,760
15 Prior period restatements
The following adjustments were identified when completing the FY24 full year
financial statements, and therefore adjustments have been made to the FY24
half year comparatives.
Restatement of opening balances
As part of the review of IFRS 16 balances during the 53 weeks ended 5 May
2024, the Directors identified adjustments to opening balances that were not
required. These balances related to previous adjustments to the residual rent
balance in the consolidated income statement following the IFRS 16
calculations.
These adjustments resulted in an increase in the FY24 opening balances of
£3,822k to the right of use assets brought forward and £3,822k decrease to
the lease liability brought forward.
Adjustment to impairment, associated depreciation and profit on disposal of
right-of-use assets
There were a number of stores where the lease had expired prior to the start
of the FY24 financial period. The Group recognises a right-of-use asset and
lease liability for such stores where it is likely that a new lease will be
entered into, based on an estimate of the new lease terms, prior to final
agreement of terms with the landlord. During the 53 weeks ended 5 May 2024,
the Directors considered the allocation of impairment to these stores and
concluded that impairment was incorrectly calculated in light of the
modification of the lease. In the interim financial statements for the 26
weeks ended 29 October 2023, adjustments were made to correct this which have
now been adjusted for as a prior period restatement in line with disclosures
made in the FY24 Annual Report and Accounts.
A gain on modification of the lease of £3,613k should have been recognised in
the prior period, with a corresponding increase to right of use assets of
£3,613k. As a result, the FY23 closing right-of-use asset balance has been
increased by £3,613k with a corresponding reduction to right-of-use assets
additions recognised in FY24 interim financial statements. Gain on
modification of £3,613k shown in the consolidated income statement for 26
weeks ended 29 October 2023 has been reversed and shown as an adjustment to
opening retained earnings.
The FY23 closing right-of-use asset has been decreased by £1,880k as a result
of the reversal of an impairment reversal of £1,603k, depreciation charge of
£4,549k and profit on disposal of right-of-use assets of £1,066k previously
recognised in the FY24 interim financial statements. The corresponding
adjustments have been made to the consolidated income statement for the 26
weeks ended 29 October 2023, resulting in a decrease to FY24 opening retained
earnings of £1,732k.
Impact on cash flow statement
These adjustments increase the 'depreciation of property, plant and
equipment', 'depreciation of right of use assets' and 'amortisation of
intangible assets' balance in the consolidated cash flow statement, however
there is no overall impact on 'net increase in cash and cash equivalents'.
Corporation tax restatement
The above adjustments have resulted in restatements to the corporation tax
charges, current tax assets/ liabilities and the deferred tax asset. Refer to
Note 9 for restated tax disclosures.
The following tables summarise the impact of the above restatements on the
Group's consolidated financial statements including the impact of current and
deferred corporation tax.
Summarised consolidated income statement
Per FY24 interim financial statements Right-of-use asset cost variance Depreciation variance Impairment charge variance Profit on disposal of right-of-use asset FY24 interim
restated balance
Income statement
Revenue 122,575 - - - - 122,575
Cost of sales (113,935) (3,613) 4,549 (1,602) (1,066) (115,667)
Gross profit 8,640 (3,613) 4,549 (1,602) (1,066) 6,908
Other operating income 4 - - - 4
Distribution expenses (6,846) - - - - (6,846)
Administrative expenses (14,173) - - - - (14,173)
Operating profit (12,375) (3,613) 4,549 (1,602) (1,066) (14,107)
Finance income 17 - - - - 17
Finance expense (2,411) - - - - (2,411)
Profit before tax (14,769) (3,613) 4,549 (1,602) (1,066) (16,501)
Taxation 3,757 - (29) - (121) 3,607
Profit after tax (11,012) (3,613) 4,520 (1,602) (1,187) (12,894)
Summarised consolidated statement of financial position
Per FY24 interim financial statements Right-of-use asset cost variance Depreciation variance Impairment charge variance Profit on disposal of right-of-use asset IFRS 16 adjustment FY24 interim
restated
balance
Non-current assets
Intangible assets 1,583 - - - - - 1,583
Property, plant and equipment 9,426 - - 30 - - 9,456
Right of use assets 57,602 - - - - (3,823) 53,779
Other non-current Assets 8,087 - - - - - 8,087
76,698 - - 30 - (3,823) 72,905
Current assets 70,270 - (29) - (121) - 70,120
Total assets 146,968 - (29) 30 (121) (3,823) 143,025
Liabilities
Current lease liabilities (22,110) - - - - 3,823 (18,287)
Other current liabilities (65,388) - - - - - (65,388)
Non-current lease liabilities (66,713) - - - - (66,713)
Other non-current lease liabilities (893) - - - - - (893)
Total liabilities (155,104) - - - - 3,823 (151,281)
Net liabilities (8,136) - (29) 30 (121) - (8,256)
Equity attributable to equity holders of the Parent
Retained earnings (29,688) 3,612 (4,549) 1,633 1,066 - (27,926)
Retained earnings in year (11,158) (3,612) 4,520 (1,603) (1,187) - (13,040)
Other reserves 32,710 - - - - - 32,710
Total equity (8,136) - (29) 30 (121) - (8,256)
Summarised consolidated statement of changes in equity
Share Share Merger Share-based Hedging Retained Total
capital premium reserve payment reserve (1) earnings equity
£000 £000 £000 reserve £000 £000 £000
£000
Reported balance at 30 April 2023 625 28,322 (54) 2,780 (331) (29,688) 1,654
Cumulative adjustment - - - - - 1,762 1,762
Restated balance at 30 April 2023 625 28,322 (54) 2,780 (331) (27,926) 3,416
16 Inventory
3 November 2024 29 October 2023 5 May 2024
£000 £000 £000
Goods for resale 42,859 50,530 28,401
Less: stock provisions for shrinkage and obsolescence (2,450) (1,682) (1,932)
Goods for resale net of provisions 40,409 48,848 26,469
Stock in transit 11,312 7,270 4,885
Inventory 51,721 56,118 31,354
A provision of £2.5m for stock obsolescence and shrinkage is included in the
balance sheet at the Period end (29 October 2023: £1.7m, 5 May 2024: £1.9m).
The provision is an estimate, which is based on stock ageing and historical
trends and is reviewed by management during the year.
17 Borrowings and cash
3 November 2024 29 October 2023 5 May 2024
(Restated - Note 15)
£000 £000 £000
Non-current liabilities
Lease liabilities 58,716 66,713 57,817
Non-current liabilities 58,716 66,713 57,817
Current liabilities
Revolving credit facility (RCF) 9,000 5,000 -
Lease liabilities 20,580 18,287 19,943
Current liabilities 29,580 23,287 19,943
The Group's bank facilities comprise an RCF of £20.0m expiring 30 November
2026. The facility includes financial covenants in relation to the level of
net debt to LTM EBITDA and 'Fixed Charge Cover' or ratio of LTM EBITDA prior
to deducting rent and interest, to LTM rent and interest.
None of the Group's cash and cash equivalents (FY24: £Nil) is held by the
trustee of the Group's employee benefit trust in relation to the share schemes
for employees.
Net debt reconciliation
3 November 2024 29 October 2023 5 May 2024
(Restated - Note 15)
£000 £000 £000
Net debt (excluding unamortised debt costs)
RCF 9,000 5,000 -
Cash and cash equivalents (522) (2,458) (1,619)
Net debt / (cash) at bank 8,478 2,542 (1,619)
Non IFRS 16 lease liabilities 11 139 89
Non IFRS 16 net debt / (cash) 8,489 2,681 (1,530)
IFRS 16 lease liabilities 79,296 85,000 77,760
Net debt including IFRS 16 lease liabilities 87,785 87,681 76,230
18 Provisions
HMRC VAT Provision Property Total
£000 £000 £000
Balance at 5 May 2024 147 872 1,019
Provisions made during the period - 158 158
Provisions used during the period - (240) (240)
Provisions released during the period - - -
Balance as at 3 November 2024 147 790 937
Maturity analysis of cash flows:
HMRC VAT Provision Property Total
£000 £000 £000
Due in less than one year 147 156 303
Due between one and five years - 634 634
Due in more than five years - - -
Total 147 790 937
Property provision
(a) A dilapidation provision is recognised when there is a future
obligation relating to the maintenance of leasehold property. The provision is
based on management's best estimate of the obligation which forms part of the
Group's unavoidable cost of meeting its obligations under the lease contracts.
Key uncertainties are estimates of amounts due.
(b) HMRC VAT provision
(c) HMRC initiated a VAT review in August 2022 in respect of a four-year
period (FY19 to FY22). The review is ongoing and therefore a provision of
£147k (FY24: £147k) is recognised in respect of the potential liability.
19 Share Capital
As at 3 November 2024, 29 October 2023 and 5 May 2024 the company had the
following share capital:
£000
Share capital 625
Share premium 28,322
20 Financial Instruments
The following table details the Group's expected maturities for its financial
liabilities based on the undiscounted contractual maturities of the financial
liabilities, including interest that will be payable.
Within 1 year 2-5 years 5+ years Total
Contractual maturity of financial liabilities £000 £000 £000 £000
3 November 2024
Non Derivative
Interest bearing 9,000 - - 9,000
Non-interest bearing 46,966 634 - 47,600
Undiscounted lease liabilities 23,753 51,165 16,953 91,871
Derivative
Forward currency contracts 605 - - 605
80,324 51,799 16,953 149,076
29 October 2023
Non Derivative
Interest bearing 5,000 - - 5,000
Non-interest bearing 65,532 893 - 66,425
Undiscounted lease liabilities (restated - Note 15) 21,915 55,977 20,666 98,558
Derivative
Forward currency contracts 84 - - 84
92,531 56,870 20,666 170,067
5 May 2024
Non Derivative
Interest bearing - - - -
Non-interest bearing 27,214 - - 27,214
Undiscounted lease liabilities 23,446 49,067 17,632 90,145
Derivative
Forward currency contracts 64 - - 64
50,724 49,067 17,632 117,423
Fair value measurements
Financial instruments carried at fair value are measured by reference to the
following fair value hierarchy, based on the extent to which the fair value is
observable;
· Level 1 fair value measurements are derived from quoted prices
(unadjusted) in active markets for identical assets or liabilities;
· Level 2 fair value measurements are derived from inputs other
than quoted prices included within Level 1 that are observable for the asset
or liability, either directly (i.e. as prices) or indirectly (i.e. derived
from prices); and
· Level 3 fair value measurements are those derived from valuation
techniques that include inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
Derivative financial instruments are carried at fair value under a Level 2
valuation method. All other financial instruments carried at fair value are
measured using the Level 1 valuation method.
There were no transfers between the levels during the current or prior period.
Derivative Financial Instruments
The fair value of derivative financial instruments at the Balance Sheet date
is as follows:
3 November 2024 29 October 2023 5 May 2024
£000 £000 £000
Net Derivative Financial Instruments
Foreign exchange contracts (515) 1,050 242
Classification of financial instruments
The tables below show the classification of financial assets and liabilities
as at 3 November 2024. The fair values of financial instruments have been
assessed to be approximately equivalent to their carrying values.
Financial
Cash flow assets at Other
hedging amortised financial
instruments cost liabilities
£000 £000 £000
Financial assets measured at fair value
Derivative financial instruments 90 - -
Financial assets not measured at fair value
Trade and other receivables - 11,980 -
Cash and cash equivalents - 522 -
Financial liabilities measured at fair value
Derivative financial instruments (605) - -
Financial liabilities not measured at fair value
Unsecured bank loans - - (9,000)
Lease liabilities - - (79,296)
Trade and other payables - - (51,712)
As at 3 November 2024 (515) 12,502 (140,008)
Financial
Cash flow assets at Other
hedging amortised financial
instruments cost liabilities
£000 £000 £000
Financial assets measured at fair value
Derivative financial instruments 1,134 - -
Financial assets not measured at fair value
Trade and other receivables - 9,390 -
Cash and cash equivalents - 2,458 -
Financial liabilities not measured at fair value
Unsecured bank loans (84) - (5,000)
Lease liabilities (85,000)
Trade and other payables - - (60,028)
As at 29 October 2023 1,050 11,848 (150,028)
Cash flow Financial Other
hedging assets at Financial
instruments amortised cost Liabilities
£000 £000 £000
Financial assets measured at fair value
Derivative financial instruments 306 - -
Financial assets not measured at fair value
Trade and other receivables - 8,384 -
Cash and cash equivalents - 1,619 -
Financial liabilities measured at fair value
Derivative financial instruments (64) - -
Financial liabilities not measured at fair value
Lease liabilities - - (77,760)
Trade and other payables - - (29,886)
As at 5 May 2024 242 10,003 (107,646)
21 Related parties
Identity of related parties with which the Group has transacted
Balances and transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not disclosed
in this note. There were no transactions with related parties who are not
members of the Group during the financial period.
22 Contingent liabilities
There were no contingent liabilities noted at the end of the Period.
By Order of the Board
Rosie Fordham
Chief Financial Officer
24 January 2025
Principal risks and uncertainties
There are a number of risks and uncertainties which could have a material
negative impact on the Group's performance over the remainder of the current
financial year. These could cause actual results to differ materially from
historical or expected results. The Board does not believe that these risks
and uncertainties are materially different to those published in the Group's
Annual Report for the period ended 5 May 2024.
These risks are associated with:
1. Economy and market
2. Design and execution of strategy
3. Supply chain
4. IT systems and cyber security
5. Brand and reputation
6. Seasonality of sales
7. People
8. Environmental (including climate change)
9. Regulation and compliance
10. Liquidity
11. Business continuity
Detailed explanations of these risks are set out on pages 38 to 43 of the FY24
Annual Report which is available at
https://corporate.theworks.co.uk/application/files/9417/2833/3328/TheWorks.co.uk_plc_Annual_Report_and_Accounts_2024.pdf
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR FZGZMZFGGKZZRecent news on Works co uk
See all newsREG - TheWorks.co.uk PLC - Director/PDMR Shareholding
AnnouncementREG - TheWorks.co.uk PLC - Director/PDMR Shareholding
AnnouncementREG - TheWorks.co.uk PLC - Director/PDMR Shareholding
AnnouncementREG - TheWorks.co.uk PLC - Purchase of Shares for the Employee Benefit Trust
AnnouncementREG - TheWorks.co.uk PLC - Holding(s) in Company
Announcement