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20 May 2022 07:00
20 May 2022
TheWorks.co.uk plc
("The Works", the "Company" or the "Group")
Trading update for the 52 weeks ended 1 May 2022
TheWorks.co.uk plc, the multi-channel value retailer of arts, crafts, toys, books and stationery, announces a trading update for the 52 weeks ended 1 May 2022 (the "Period" or "FY22").
Highlights
· | Strong trading performance; two-year LFL(1) sales increase of 10.4% and total two-year sales growth of 12.7%(1),(2). |
· | Improved proposition helping to offset external headwinds; FY22 EBITDA forecast of £15.0m is reiterated. |
· | Strong financial position: net cash(3) of £16.3m at the Period end, an increase of £15.5m during FY22. |
· | Dividend re-instated; the Board expects to recommend a dividend of approximately 2.4 pence per share alongside its FY22 results in September and maintain a progressive dividend policy thereafter. |
FY22 trading performance
The Works delivered a strong trading performance in FY22, well ahead of pre-COVID levels. Total sales(2) for the Period increased by 12.7% compared to FY20 (i.e. compared to two years ago). Two-year LFL sales increased by 10.4%, with positive growth continuing both online and in stores.
Sales since our last update in January 2022 have been driven by the further development of our customer proposition, in particular the expansion of our front list book ranges, which has coincided with the emergence of the "BookTok" phenomenon. By capitalising on this trend, we have been able to draw attention to previously best-selling books and prompt renewed customer interest in them. Branded toys and games have also continued to perform strongly, through reinforcements to our ranges of, for example, Peppa Pig, Paw Patrol and Cocomelon.
Following the strong first half and record Christmas trading performance, two-year LFL sales during the final months of the financial year remained positive although, as expected, the rate of growth has been lower than before Christmas. Consumer spending is widely reported to have slowed in recent months and we believe this has had an impact on our sales. In addition, as noted in the announcement on 5 April 2022, we experienced some limited disruption to trading and business operations as a result of a cyber security incident at the end of March. Despite these headwinds, the operational and propositional improvements we have made throughout the year have helped to offset the impact of the external headwinds noted above, meaning that the FY22 EBITDA forecast of £15.0m is retained.
Furthermore, with our strategic focus on being a "better, not just bigger" version of ourselves, during FY22 we continued to improve the quality of the store estate, opening 5 new stores, closing 7 and relocating 6 stores. The business traded from 525 stores at the end of the Period.
Financial position
The Group ended the Period in a strong financial position, with net cash(3) of £16.3m (FY21: £0.8m). This is higher than the £10.0m level noted in the FY22 Interim results statement, due to the unwinding of certain working capital timing differences taking longer than anticipated.
Dividend
In the Interim results announcement dated 21 January 2022, the Board noted its intention to reinstate the payment of dividends provided the final FY22 results were as expected. Accordingly, the Board currently expects to recommend to shareholders the payment of a final dividend in respect of FY22, following the 2022 AGM. The amount to be recommended will be confirmed once the audit is completed, but is expected to be approximately 2.4 pence per share. Once the payment of dividends has been reinstated, the Board intends to maintain a progressive dividend policy.
Outlook
There continues to be uncertainty relating to the external environment and how this might affect levels of consumer spending in the months ahead. This has been taken into account in setting the Group's internal plans for FY23.
The Board remains confident in the future prospects of the business because of the underlying appeal and relevance of The Works' proposition, the opportunity to grow sales profitably through the implementation of its strategy, and the Group's strong financial position.
Gavin Peck, Chief Executive Officer of The Works, commented:
"We are pleased to report strong trading in FY22, consistently delivering sales well ahead of pre-COVID levels and another record Christmas. This performance, and the resilience that our business has shown against a challenging external backdrop, demonstrates the positive effect of our "better, not just bigger" strategy, which still has a lot more upside to deliver. We are delighted that our improved trading performance will enable us to recommend reinstating the dividend and remain optimistic that we can deliver further sales growth in the year ahead."
"As we move into our new financial year, general trading conditions remain challenging. We will continue to focus on the factors within our control and ensure that, as customers face increasing cost-of-living pressures, they can continue to rely on The Works as a destination for great value products to inspire reading, learning, creativity and play. None of this would be possible without the passion, commitment and patience of our brilliant colleagues, who have gone above and beyond to deliver for customers."
Full year results publication
The cyber security incident in April 2022 had a limited impact on trading, but has prompted the decision to significantly speed up the implementation of plans to strengthen our IT security measures. Given the additional time needed to implement these improvements, the Group plans to allow more time to finalise its FY22 results, which will be issued during September 2022.
Enquiries:
TheWorks.co.uk plc Gavin Peck CEO Steve Alldridge CFO
|
via Sanctuary Counsel |
|
Sanctuary Counsel Ben Ullmann Rachel Miller
|
+44 7944 868288 | +44 7918 606667 | |
theworks@sanctuarycounsel.com |
(1) | The like for like (LFL) sales increase has been calculated with reference to the FY20 comparative sales figures, or two-year LFL, because the extended periods of enforced store closures during FY21 prevent that period from forming the basis of meaningful comparisons. For the last 5 weeks of the Period, it has been necessary to calculate the LFL percentages with reference to the corresponding weeks in FY19, because the equivalent weeks during FY20 were also affected by the first period of enforced store closures. Similar comparison periods are also used for the total sales growth figures quoted. |
(2) | "Total sales" referred to in this statement includes VAT and is stated prior to deducting the cost of loyalty points which are adjusted out of the sales figure in the calculation of statutory revenue. The 52 week comparison period used for the LFL and total sales growth calculations uses a literal mapping of calendar weeks between FY22 and the corresponding 52 weeks two/three years prior. Due to the inclusion of a 53rd week in the FY21 accounting period, the FY20/FY19 statutory accounting periods are one week offset from the 52 week period used in the LFL and total sales comparisons. A reconciliation between the figures included in this statement and the FY22 statutory revenue will be included in the Group's Annual Report. |
(3) | Net cash at bank excluding finance leases and on a non-IFRS 16 basis. |
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