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

Works co ukAnnouncement

09/11/2023 07:00

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RNS Number : 8618S  TheWorks.co.uk PLC  09 November 2023

9 November 2023

TheWorks.co.uk plc

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

Half-year trading update for the 26 weeks ended 29 October 2023

The Works, the multi-channel value retailer of arts, crafts, toys, books and
stationery, announces an update on trading for the 26 weeks ended 29 October
2023 (the "Period" or "H1 FY24").

Trading update

In the first half of FY24 The Works delivered total sales growth of 3.4% and a
total LFL sales increase of 1.6%. Store LFLs increased by 3.5%, whilst online
sales declined by 12.2%.

The macro-economic environment was challenging throughout the period,
characterised by high inflation and low consumer confidence. In the nine weeks
since our previous update, consumer demand has softened further and, combined
with unseasonable weather conditions, this has caused reduced footfall.((1))
We have seen a slowdown in the rate of store LFL sales growth as a result,
particularly in October although, conversely, the online LFL has improved.

Mindful of this trading environment, we have reviewed all areas of activity,
including implementing additional promotions and taking mitigating action to
reduce costs where we can, whilst also gearing up to deliver excellent value
for customers this Christmas.

Outlook

As always, trading in the six weeks between now and Christmas will have a
significant bearing on the overall result for the financial year. Last year,
consumers left Christmas shopping until very late in the season, and we expect
that sales may follow a similar pattern this year. As such, any forecast
prepared at this stage includes a high degree of uncertainty.

We anticipate that trading conditions during H2 FY24 will remain challenging
and consumer spend will be subdued, resulting in the continuation of the
increased levels of discounting recently seen across the sector. To ensure
that we offer the best value to our customers, we expect to maintain a higher
level of promotional activity than envisaged at the outset of the year. We
will also continue to take action to reduce costs.

Taking into account the level of uncertainty with regard to sales, and our
expectation that it will be necessary to continue to maintain a higher than
planned level of discounting to remain competitive, we have revised our
estimate of the likely full year result for FY24, and now expect that the pre
IFRS 16 Adjusted EBITDA will be approximately £6.0m.((2))

Financial position

The Group had net bank borrowings of £2.5m at the Period end, reflecting the
build of stock prior to the peak trading season, and the corresponding low
point in cash levels. There was £17.5m of headroom within our £20.0m bank
facility.

CFO succession

It was announced at the Preliminary results on 30 August 2023 that Rosie
Fordham, Head of Finance at The Works, would succeed Steve Alldridge as CFO by
the end of December 2023 following an orderly handover process. We confirm
that Rosie will assume the position of CFO and join the Board of Directors on
31 December 2023.

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

"The first half of the year has been challenging for the retail sector as
cost-of-living pressures continued to weigh on households. We have focused on
delivering excellent value for our customers, adapting as best we can to the
tough trading conditions, and I am proud of the way our colleagues have
rallied together and responded.

"Consumer sentiment softened towards the end of the period, which resulted in
early discounting across the sector and increased uncertainty as we head into
the Christmas period. Recognising the competitiveness of the market we have
responded with more promotional activity, which we expect to continue as we
approach Christmas. Families will want to celebrate Christmas affordably and
our value proposition makes us an ideal choice for them.

"Market conditions remain challenging and given the level of uncertainty in
trading and forecasting we believe it is now prudent to moderate our
expectations for FY24. Despite this short-term volatility, we believe that our
'better, not just bigger' strategy has the potential to deliver profitable
growth in the medium and long-term."

Interim results notification

The results for H1 FY24 and an update on Christmas trading will be announced
on Thursday, 18 January 2024.

 

 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                  |

 Kitty Ryder                    |

 

 

Footnotes

 (1)  For example, the BRC (British Retail Consortium) footfall data for October,
      which reported a 5.7% year on year decline in footfall, compared with a 2.9%
      year on year decline in September (link
      (https://brc.org.uk/news/corporate-affairs/brollies-up-footfall-down/) ).
 (2)  The Company compiled estimate of the market's expectation for the FY24 pre
      IFRS 16 Adjusted EBITDA result prior to this announcement was approximately
      £10.0m.

 

 

This announcement contains inside information for the purposes of Article 7
of Regulation (EU) No 596/2014.

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