Theworks.co.uk. Regulatory News (WRKS)

21 May 2024

TheWorks.co.uk plc

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

Trading update for the 53 weeks ended 5 May 2024

FY24 and FY25 guidance maintained

TheWorks.co.uk plc, the family-friendly value retailer of arts, crafts, toys, books and stationery, announces a trading update for the 53 weeks ended 5 May 2024 (the "Period" or "FY24") (1).

FY24 overview

During the year we improved the overall quality and profitability of our store portfolio, with 9 new store openings, 24 closures, 5 relocations and 21 store refits. We traded from 511 stores at the year end, of which over 96% are profitable. Our store estate represents c.90% of sales and delivered positive LFLs in the year.

In January, we announced the business had pivoted to focus on stabilising profitability by improving margins and reducing costs. We are pleased to report that we have made significant progress as follows:

Most of the benefits from this activity are expected in FY25, but already started to deliver improved margins and lower costs in Q4 of FY24. As a result, the Board's expectation for FY24 (pre IFRS 16 Adjusted EBITDA of approximately £6.0m) remains unchanged.

Financial position

The Group ended the Period with net cash (2) of £1.6m (the 52-week period ended with net cash of £6.5m, which compares to net cash of £10.2m at the end of FY23). The Works continues to have an RCF of £20.0m, which provides ample liquidity and is utilised to support the build of stock prior to peak trading.

Outlook

Our expectation for FY25 is to deliver stable sales. We are confident that the action taken to reduce costs and improve margins will offset the significant cost headwinds we face, including National Living Wage, higher freight costs (3) and business rates. We therefore expect to deliver an improved pre IFRS 16 Adjusted EBITDA of approximately £8.5m in FY25. Over the medium term our ambition is to return to pre IFRS 16 EBITDA margins of 5%.

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

"We are pleased to have finished FY24 in line with market expectations, which reflects action taken to reset our cost base and improve margins, supported by improving store sales in the final quarter. Significant changes implemented across the business make us well-placed to offset cost headwinds and we expect to return to profit growth in FY25. In a year of considerable change at The Works I am incredibly grateful to our colleagues for their ongoing dedication to our business and to our customers."

Publication of FY24 results and change of auditor

Following our move to AIM, we are pleased to announce that we have appointed Kreston Reeves LLP as our external auditor. To provide Kreston Reeves with sufficient time to complete their first year audit work, the FY24 results are expected to be announced on Tuesday 1st October 2024.