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

Works co ukAnnouncement

11/11/2022 07:16

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RNS Number : 0641G  TheWorks.co.uk PLC  11 November 2022

11 November 2022

TheWorks.co.uk plc

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

Half-year trading update for the 26 weeks ended 30 October 2022

The Works, the multi-channel value retailer of arts, crafts, toys, books and
stationery, announces an update on trading for the 26 weeks ended 30 October
2022 (the "Period" or "H1 FY23").

Trading update

The Works delivered a resilient trading performance against the backdrop of an
increasingly challenging consumer environment. Total sales for the Period
increased by 2.1%, with a total LFL((1)) sales increase of 0.6%. Store trading
was positive, increasing by 3.5% on a LFL basis, whilst online sales declined
by 16.9% (but were still 50% above pre-COVID levels).

Sales in both channels were adversely affected during May by operational
issues in the aftermath of the cyber security incident in March 2022. However,
from June onwards, the store LFL performance was positive, with particularly
strong growth in the summer, when the refreshed outdoor play range performed
well, followed by a record "Back to School" season. The expansion of our front
list book offer has been a great success, with recent new titles such as Diary
of a Wimpy Kid: Diper Överlöde by Jeff Kinney, The Bullet That Missed by
Richard Osman and It Starts With Us by Colleen Hoover being particularly
strong sellers. Online sales have been weaker in comparison, primarily due to
the normalisation of shopping trends post-COVID, but have gradually improved
throughout the period.

During the six weeks since our previous trading update, store LFL sales growth
remained positive, although the rate softened slightly. This was partly due to
losing a full trading day for the additional bank holiday, as well as the
comparatives in September and October 2021 being strong, when we believe
Christmas shopping was brought forward((2)). Online sales growth continued to
track behind stores, but we are encouraged that the rate of decline has slowed
progressively as trading through this channel stabilises, and we continue to
believe that there remains a significant opportunity for growth in this
channel in the medium term.

Outlook

Whilst we are pleased with the overall trading performance in H1 and the
resilience of our business and offering, we remain cautious with regard to how
consumer spending might be affected by external factors such as higher
inflation and interest rates during the key Christmas season and the remainder
of this financial year. However, with our value proposition more relevant than
ever and being well-placed operationally for Christmas, the Board's
expectations for the FY23 result remain unchanged((3)).

Financial position

The Group's operating cash cycle has now returned to normal after the two
previous years which exhibited an atypical pattern, due to the effects of the
COVID-19 pandemic.

The Group's financial position remains strong with net cash of £11.0m((4)) at
the Period end. This cash position benefitted from the timing of the Period
end, as approximately £5.0m of October payments were not due until 31
October, the first day of H2 FY23, albeit the cash position also fully
reflects the build of stock prior to the peak trading season.

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

"We have delivered a resilient performance in the first half with positive
sales growth overall, demonstrating continued progress against our "better,
not just bigger" strategy. Our more customer-focused product proposition has
continued to resonate, supported by the hard work and fantastic customer
service delivered by our colleagues, helping to offset the challenging trading
conditions being seen across the market.

"Although it is very difficult to predict what Christmas will look like this
year, we believe that the great products and fantastic value we offer will be
more important than ever, with families still looking to celebrate Christmas
but in a more affordable way. The Works has proven itself to be a resilient
business and we remain confident in our ability to make progress on our
strategy and deliver growth in the medium term, supported by a robust balance
sheet."

Interim results notification

The results for H1 FY23 and an update on Christmas trading will be announced
on Friday, 20 January 2023.

 

 Enquiries:

 The Works                      via Sanctuary Counsel

 Gavin Peck        CEO

 Steve Alldridge  CFO

 Sanctuary Counsel

 Ben Ullmann                    |                       020 7340 0395

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

 

 

Footnotes

 ((1))  The like for like (LFL) sales increase has been calculated conventionally with
        reference to the FY22 comparative sales figures.
 ((2))  As noted in the H1 FY22 trading update (published in November 2021) and the
        FY22 interim results (published in January 2022) we believe that some
        Christmas shopping was brought forward into September and October 2021 due to
        customer fears of limited stock as a result of supply chain disruption.
 ((3))  For reference, the Company compiled estimate of the market's expectation for
        the FY23 Adjusted EBITDA result is approximately £9.0m.
 ((4))  Net cash at bank, excluding IAS 17 finance leases.

 

 

 

 

 

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