TIDMWRKS
RNS Number : 1631Z
TheWorks.co.uk PLC
21 January 2022
21 January 2022
TheWorks.co.uk plc
("The Works", the "Company" or the "Group")
Interim results for the 26 weeks ended 31 October 2021
Strong trading performance delivered, ahead of expectations and
pre-pandemic levels
The Works, the multi-channel value retailer of arts and crafts,
stationery, toys, and books announces its interim results for the
26 weeks ended 31 October 2021 (the "Period" or "H1 FY22") and an
update on current trading.
Financial highlights
-- Revenue increased by 30.6% compared with H1 FY21, which
was affected by temporary store closures due to COVID restrictions
and increased by 17.9% compared to pre-pandemic performance
(H1 FY20).
-- Strong two-year LFL (1) sales growth of 14.5%, ahead of
the Board's expectations. Store two-year LFL sales increased
by 7.3% and online sales by 80.7%.
-- Pre IFRS 16 Adjusted (2) EBITDA was GBP2.5m compared with
GBP1.5m during H1 FY21(3) .
-- Reported loss before tax of GBP1.0m, a significant improvement
on the prior year (H1 FY21: loss of GBP4.3m)(4) .
-- Further strengthened balance sheet as net cash balance
increased to GBP17.8m (H1 FY21 GBP9.3m).
-- Sales in the 11 weeks since the end of the Period have
remained strong, with a two-year LFL growth of 9.0%.
-- Overall good trading performance is expected to more than
offset significantly increased container freight costs;
Pre IFRS 16 Adjusted EBITDA for FY22 is forecast to be
approximately GBP15.0m, assuming no further COVID related
impact on trading, ahead of the Board's previous expectations.
-- The Board proposes to bring forward its review regarding
dividends, with a view to recommending a final dividend
for FY22 provided the preliminary results to be published
in late July 2022 are in line with the forecast noted above.
H1 FY22 H1 FY21
Restated (5)
GBPm GBPm
-------------------------------------------------- ---------- --------------
Revenue GBP116.1m GBP88.9m
Revenue growth/(decline) 30.6% (7.8%)
LFL sales growth(1) 14.5% 10.6%
Pre IFRS 16 adjusted(3) EBITDA GBP2.5m GBP1.5m
Reported loss before tax (GBP1.0m) (GBP4.3m)
Basic loss per share (pence) (1.4) (5.2)
Pre IFRS 16 net cash at bank (FY21 restated(5) ) GBP17.8m GBP9.3m
IFRS 16 impact on profit before tax GBP0.1m (GBP1.0m)
Operational highlights
Continued to make progress on our strategy of being "better, not
just bigger", including:
-- Improved our customer offer through greater focus on front-list
books like Richard Osman's "The Man Who Died Twice", branded
board games like Scrabble and household names like Peppa
Pig and Paw Patrol in our kids' zone, all offered at great
value prices. Continued our leading position on trends,
capitalising on the "Fidget Frenzy" trend in the Period.
-- Continued to drive a step-change in our online offer by
further developing our complementary online range extensions,
investing in our platform, digital marketing capabilities
and fulfilment capacity, which have all contributed to
the strong growth.
-- Enhanced the in-store shopping experience through better
space management, improved merchandising standards - particularly
of our core ranges - and reduced the amount of stock and
fixtures on the shop floor, making our stores easier to
navigate, which supported an 18% increase in average transaction
values in store.
-- Actively managed our store portfolio, opening three new
stores, closing five and relocating four stores - new and
relocated store performance is significantly ahead of expectations
- and continued to drive down existing store rents whilst
maintaining maximum flexibility (6) .
-- Invested in our supply chain team and systems, supporting
further improvement in product availability through better
stock management control and processes.
Trading update for the 11 weeks ended Sunday, 16 January
2022
Overall, we are pleased with the trading performance since the
half year end, which removes considerable uncertainty regarding the
FY22 result and means that, subject to there being no further COVID
related trading restrictions imposed on the business, the Board now
expects an improved performance for the full year.
Sales since the end of the Period have remained strong, with a
two-year LFL growth of 9.0% ensuring we delivered a record
Christmas; store sales grew by 0.6% and online sales by 71.9%. This
strong performance over our key Christmas trading period reflected
a well executed trading plan, and the impact of our ongoing
proposition improvements, with strong growth in adult book sales
(driven by our move into front-list titles) and our kids zone (with
branded products driving strong sales growth).
As we noted in our November trading update, we believe that some
Christmas trade was brought forward into September and October and,
therefore, the slight reduction in the rate of LFL growth compared
with H1 FY22 was anticipated. Sales in the week immediately prior
to Christmas were less affected than we expected by concerns
relating to the rapid development of the Omicron variant.
Meanwhile, our proactive management of the supply chain ensured
that we had adequate stock despite some of it arriving later than
planned.
Due to the strong sales during November and December, terminal
stock levels were low, reducing the need for significant markdown
in the January sale. This should benefit the gross margin
percentage and/or the level of stock provisions required at the end
of the financial year, albeit higher freight costs will continue to
affect margins in the second half of the year.
Despite ongoing supply chain disruption, inflationary pressures
and residual uncertainty surrounding possible COVID-19 related
restrictions, we enter 2022 in a strong financial position and
remain confident that we are well placed to make progress on the
many attractive opportunities that lie ahead.
Gavin Peck, Chief Executive Officer of The Works, commented:
"Our performance in the first half shows that our improved
customer proposition, clarified purpose and the successful
execution of our strategy are delivering tangible results. We
delivered a record Christmas, demonstrating the increasing appeal
of our customer offer and despite uncertainty over the impact of
Omicron and the ongoing supply chain challenges faced throughout
our sector.
"This better-than-expected trading provides confidence that we
will deliver an improved performance in FY22. We are now a much
stronger business than we were two years ago and believe that
delivering on our refocused strategy will have a transformational
effect on our business.
"None of this would be possible without all of our incredible
colleagues at The Works. I am extremely proud of their dedication,
hard work and ability to inspire customers to read, learn, create
and play."
Interim results presentation
A presentation for analysts will be held today at 9.30am via
video conference call. A copy of the presentation will shortly be
made available on the Company's website
(www.theworksplc.co.uk/investors).
Enquiries: via Sanctuary Counsel
TheWorks.co.uk plc
Gavin Peck, CEO
Steve Alldridge, CFO
Sanctuary Counsel (0)20 7340 0395
Ben Ullmann theworks@sanctuarycounsel.com
Rachel Miller
Footnotes:
The like for like (LFL) sales increase has been calculated
(1) with reference to the FY20 comparative sales figures, or
two-year LFL, because the extended periods of enforced
store closures during FY21 prevent it from forming the
basis of meaningful comparisons.
Adjusted profit figures exclude Adjusting items. See Note
(2) 1(c) and Note 6 of the attached condensed unaudited financial
statements for further details.
For reference, the pre IFRS 16 Adjusted EBITDA in respect
(3) of H1 FY20 was a loss of GBP3.9m.
Due to the seasonality of the business the first half of
(4) the financial year is typically loss making at PBT level.
In respect of H1 FY21, credit card transactions not yet
(5) cleared of GBP1,944k were incorrectly included within the
cash and cash equivalents balance. The figures have been
restated in this report, as a result of which, the prior
period cash balance has been reduced, and the trade and
other payables balance has been increased, by GBP1,944k.
Average 2 years to next lease exit or break.
(6)
Notes for editors:
The Works is one of the UK's leading multi-channel value
retailers of arts and crafts, stationery, toys, and books, offering
customers a differentiated proposition as a value alternative to
full price specialist retailers. The Group operates a network of
over 500 stores in the UK & Ireland and an online store.
Cautionary statement
This announcement is based on information from condensed
unaudited financial statements and may contain forward-looking
statements with respect to the financial condition, results of
operations, and business of the Group. These statements and
forecasts involve risk, uncertainty and assumptions because they
relate to events and depend upon circumstances that will occur in
the future. There are a number of factors that could cause actual
results or developments to differ materially from those expressed
or implied by these forward-looking statements. These forward
looking statements are made only as at the date of this
announcement. Nothing in this announcement should be construed as a
profit forecast. Except as required by law, the Group has no
obligation to update the forward-looking statements or to correct
any inaccuracies therein.
Chief Executive's Report
The Works delivered a strong performance in the first half,
reflecting the increasing appeal of our customer offer as well as
the work done to clarify our purpose, improve our customer
proposition, and the progress made against our refocused strategy
to make the business "better, not just bigger". Despite the
challenges created by global supply chain disruption and
uncertainty caused by COVID-19, we are now a much stronger business
than we were two years ago and have put solid foundations in place
to make further progress on the many attractive opportunities that
lie ahead.
Overview
Our trading performance in the first half was stronger than
expected and well ahead of pre-pandemic levels. When compared with
H1 FY20 (i.e. two years ago) total sales increased 17.9%, and
overall LFL sales increased by 14.5%. This reflected strong growth
in stores (+7.3%), with significant growth in average transaction
values offsetting much lower retail footfall, supported by online
sales running at almost double their pre-pandemic levels (+80.7%).
This performance indicates that our renewed focus on the customer
and our strategy are both working.
We also capitalised on some favourable external factors which
contributed to the positive performance. Customers discovered new
hobbies such as arts, craft and jigsaws during lockdowns and demand
for these products has been maintained in a more "normal" consumer
environment. Our nationwide network of conveniently located stores
meant that we were the go-to choice for families looking for
activities to entertain children during the "summer of staycations"
and we were able to quickly capitalise on the fast-growing "fidget
frenzy" trend. Towards the end of the Period we also benefited from
customers bringing forward their Christmas purchases into September
and October.
Our profit performance in the first half improved with EBITDA of
GBP2.5m (H1 FY21: GBP1.5m). Due to the seasonality of the business
the first half of the financial year is typically loss making at
PBT level, although the loss for H1 FY22 was significantly smaller
than in the prior year at GBP1.0m (H1 FY21: GBP4.3 million). The
business was affected by the shortages of ocean freight and UK
haulage capacity, however our swift action to secure the supply
chain early on meant that we were able to obtain the stock needed
to achieve our sales plans, albeit at significantly higher cost
than historical levels. Over the whole of FY22 this will result in
increased costs but should be more than offset by the
better-than-expected trading. The Group ended the Period in a
strong financial position, with net cash of GBP17.8m (H1 FY21:
GBP9.3m), up from GBP0.8m at the end of FY21.
Strategy
It is becoming increasingly apparent that consumers today don't
just want to buy a product, they want to buy into a brand with a
clear purpose. We have been working hard to clarify our purpose and
be more than just a retailer. For The Works this means inspiring
our customers by showing them what they can "do" - read, learn,
create and play - and empowering them to do it.
When combined with the successful execution of our strategy we
believe this will have a meaningful positive impact on future
sales, significantly improve our business operations and increase
our profitability. Outlined below is an overview of our priorities
for each pillar of our strategy - to be a "better, not just bigger"
version of ourselves - and our progress made in the first half.
Develop our brand and increase our customer engagement
We are focussed on fulfilling our new purpose, improving our
customer proposition, creating deeper relationships with our
customers and driving increased brand loyalty. We will continue to
focus on offering customers great value to make reading, learning,
creating and playing accessible to all and will further enhance our
product offering through better range planning, complementing our
range of own-brand products with great value branded products and
new books available on their release date. We will also make better
use of our loyalty scheme to ensure both the business and our 1
million active members are getting the most out of this, whilst
also looking to bring more customers onto it.
In the first half we have:
-- Clarified our purpose, which is focused on inspiring our
customers.
-- Improved our customer offer and increased our credibility
as a brand with more focus on:
- Front-list books (selling new books on their release date)
such as Richard Osman's "The Man Who Died Twice" and biographies
including Michael McIntyre, Billy Connolly, Rob Beckett
and Joan Collins - this activity has also driven increased
sales of associated "backlist" titles from the same author,
helping to grow our market share.
- Branded board games such as Scrabble, Articulate and Elf
Monopoly.
- Brands in our kids' zone including Paw Patrol and Hairy
Maclary in our 10 for GBP10 books offer and a wider range
of Harry Potter, Peppa Pig and Cocomelon products.
-- Strengthened our commercial team, with a new Commercial
Director who joined in July 2021 and a new Head of Brand
and Head of Buying (joining/joined in January 2022).
Enhance our online proposition
We believe there is an opportunity to drive further significant
online growth by: bringing new customers to the brand through our
website; enhancing our online user experience (e.g. through better
navigation and shopability on the site); launching more targeted
online range extensions (e.g. larger outdoor toys that are
difficult to stock in our stores); and, improving our multi-channel
credentials (e.g. through offering the ability to order online
range extensions in-store and improving our click and collect
channel).
In the first half we have:
-- Further invested in fulfilment capacity enabling us to
deliver significantly higher sales during the peak trading
period whilst offering a better delivery promise than most
of our competitors.
-- Continued to successfully enhance our complementary online
range extensions (e.g. selling paddling pools as part of
our "summer essentials" range).
-- Recruited a new Head of Digital Marketing to improve our
effectiveness in attracting new customers to the site.
Optimise our store estate
Our store estate is the lifeblood of our business and the main
way that we interact with our customers. We will continue to
undertake selective new store openings, targeting the top 100
locations that we do not currently trade in (limited to no more
than a net 10 per annum in the near term), and are focused on
optimising our existing estate with relocations and refits of our
oldest stores alongside continuing to drive down existing store
rents. We will also further improve the in-store customer
experience, for example through simplifying store layouts,
improving product ranging and merchandising, improving the
consistency of product availability and further enhancing our
customer service levels through better training of colleagues,
which will all drive higher sales densities and improved stock
turn.
In the first half we have:
-- Opened three new stores, closed five and relocated four
stores, trading from 526 stores at the end of H1 FY22.
New and relocated store performance has been significantly
ahead of expectations and, with the capital expenditure
predominantly landlord funded meaning that payback was,
on average, within one month.
-- Enhanced the in-store shopping experience through better
space management, improved merchandising standards (particularly
of our core ranges) and reduced the amount of stock and
fixtures on the shop floor, making our stores easier to
shop.
-- Driven ongoing improvements in retail disciplines, increasing
focus and simplicity in stores.
Drive operational improvements
We are focused on driving improved capability and efficiency
across our operations, as well as better product choice and
availability for our customers. We will continue to refine how we
optimise our end-to-end stock flows, for example through improving
our import supply chain, investing in our supply chain systems and
increasing the number of direct deliveries we make to stores. We
are also planning to launch automation in parts of our online
fulfilment operations and will be investing in a new store EPOS
system to improve efficiency and to enable future functionality
(e.g. self-service) in 2022.
In the first half we have:
-- Invested in our supply chain team and systems, supporting
a continued improvement in product availability and increased
stock turn through better stock management processes and
control.
-- Launched a store direct delivery trial to 29 stores, reducing
the lead time for replenishment and improving on-shelf
availability in these stores.
-- Implemented a new store labour model, with more controlled
levels of tasking - a key enabler for monitoring and driving
future productivity improvements in our stores.
-- Completed the tender for the new EPOS system, with rollout
planned for FY23.
Outlook
The strong H1 FY22 result and trading during the 11 weeks since
the end of the Period would lead us to expect that, in the absence
of other factors, the full year result for FY22 will be
significantly ahead of our previous expectations. However, as well
as the additional freight costs included in the H1 FY22 results, we
will incur further costs during H2 FY22, which will offset some of
the trading gains. A degree of uncertainty also remains regarding
the impact of COVID-19 on sales and the possibility of further
disruption cannot be ruled out entirely.
Overall, assuming that there are no further lockdowns during the
remainder of the financial year, we would anticipate that the pre
IFRS 16 Adjusted EBITDA for FY22 will be approximately GBP15.0m,
ahead of the Board's previous expectations.
Despite ongoing supply chain disruption, inflationary pressures
and uncertainty surrounding possible COVID-related restrictions, we
begin the new calendar year in a strong financial position and
remain confident that we are well placed to make progress on the
many attractive opportunities that lie ahead and are excited about
the future prospects for The Works.
Dividends
In the FY21 Annual Report, we stated that the payment of a
dividend would be reviewed in January 2023, based on the results of
the Christmas 2022 trading performance. As a result of the improved
performance, the Board proposes to bring forward its review
regarding dividends, with a view to recommending a final dividend
in respect of FY22, provided the preliminary results to be
published in late July 2022 are in line with our revised
expectations.
Gavin Peck
Chief Executive Officer
21 January 2022
Financial Report
Overview
This report covers the 26 week period ended 31 October 2021 ("H1
FY22" or "H1" or "the Period") and refers to the comparative "H1
FY21" accounting period of the 26 weeks ended 25 October 2020. The
26 week periods are offset from one another by one week due to the
inclusion of a 53(rd) week at the end of FY21.
The Group tracks a number of alternative performance measures
("APMs") including EBITDA, Adjusted EBITDA and like for like
("LFL") sales as it believes these provide stakeholders with
additional helpful information. These are described more fully in
Note 1(c) and 5 of the condensed unaudited financial
statements.
The result for the Period improved by GBP3.3m to a loss before
tax of GBP1.0m from a loss of GBP4.3m reported in respect of H1
FY21. There were no material Adjusting items in relation to H1 FY22
and the Adjusted loss was therefore also GBP1.0m (H1 FY21: Adjusted
loss of GBP4.1m). The pre IFRS 16 Adjusted EBITDA was GBP2.5m (H1
FY21: GBP1.5m), a GBP1.0m improvement.
The table summarises the largest movements between the H1 FY21
and FY22 results. A significant year on year increase in sales
generated additional gross margin, but at a lower rate due to
additional freight costs and a more normal level of discounting in
H1 FY22 (discounting was unusually low during periods of FY21 when
stores were closed). Government COVID-19 reliefs were received in
FY21, and costs in H1 FY22 reflect the resumption of normal
trading, inflation and investments flagged previously, for example,
to strengthen the senior leadership team.
GBPm
------
H1 FY21 EBITDA 1.5
Gross profit due to year on year increase in sales 17.0
Effect of lower gross product margin rate including
H1 impact of freight costs (3.6)
Reduction in government COVID-19 reliefs received
vs. H1 FY21 (8.6)
Other costs including reflecting resumption of normal
operations, inflation (3.7)
H1 FY22 EBITDA 2.5
======
The Group's financial position strengthened during the Period,
with net cash (excluding IAS 17 leases) at the balance sheet date
of GBP17.8m (H1 FY21 net cash of GBP9.3m).
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 during the Period increased by 30.6% to GBP116.1
million (H1 FY21: GBP88.9 million).
The disruptions to trading during FY21 prevent the use of the
normal LFL sales measure to describe year on year performance.
Instead, sales comparisons with FY20 are included; the 2 year LFL
sales grew by 14.5% compared with H1 FY20.
The strong sales performance was driven by a number of internal
and external factors, as outlined in the Chief Executive's
report.
The number of stores reduced by one, from 527 to 526 at the end
of the Period. Three new stores were opened, five were closed and
four stores were relocated to new sites. In relation to one of the
relocated stores, the corresponding closure of the old store had
not taken place by the period end, hence the Group traded from 526
stores rather than the 525 that the raw figures would imply.
The table shows an analysis of sales and a reconciliation to
statutory revenue.
H1 FY22 GBPm H1 FY21 GBPm Variance GBPm Variance %
------------- ------------- -------------- -----------
Total LFL sales for Period
(one year basis to agree to statutory presentation) 116.8 95.5 21.3 22.3
Sales from new/closed stores 15.2 6.0 9.2 153.3
Total Gross Sales 131.9 101.5 30.4 30.0
VAT (15.1) (11.9) (3.2) (26.9)
Loyalty points redeemed (0.7) (0.6) (0.1) (16.7)
Revenue (per statutory accounts) 116.1 88.9 27.2 30.6%
============= ============= ============== ===========
Gross profit
H1 FY22 H1 FY21
(Restated)
(1)
GBPm % of GBPm % of GBPm % Variance
revenue revenue Variance
------ --------- ------ --------- ---------- -----------
Revenue 116.1 88.9 27.1 30.5
Less: Cost of goods
sold 47.0 33.1 13.9 42.0
Product gross margin 69.1 59.5 55.8 62.7 13.3 23.8
Other costs included in statutory
cost of sales
Store payroll 21.2 18.3 19.2 21.6 2.0 10.4
Store property and establishment
costs 20.8 17.9 18.1 20.4 2.7 14.8
Store PoS and transaction
fees 1.1 0.9 0.7 0.8 0.3 45.3
Store depreciation (excluding
IFRS 16) 2.6 2.2 2.7 3.0 (0.1) (3.7)
Online variable costs 8.1 7.0 8.7 9.8 (0.7) (7.6)
IFRS16 impact (2.3) (2.0) (1.1) (1.2) (1.2) 109.1
Adjusting items (0.1) - - - (0.1) N/A
Gross profit per financial
statements 17.8 15.3 7.4 8.3 10.4 140.5
====== ========= ====== ========= ========== ===========
(1) Refer to note 1 (b) (iii) of the interim financial statements
-- The product gross margin (i.e. the conventional "gross
margin" figure typically referred to by retail businesses)
decreased to 59.5% from the 62.7% reported last year.
o Levels of discounting were unusually low during H1 FY21,
particularly online, during periods when stores were closed, but
reverted to a more normal level in H1 FY22. As noted above, there
were two significant sale periods in H1 FY22, but outside these,
discounting during the Period was minimal as sales were strong.
o Additional container freight costs were incurred as a result
of increases in global freight prices.
o The product mix included a greater proportion of front-list
books and branded games and toys, which sell at a lower percentage
margin, although they contribute positively to the cash margin.
-- Store payroll costs increased due to the National Living Wage
increase and because in H1 FY21, during periods when colleagues
were furloughed, only 80 % of the normal rate was paid. Operational
efficiencies and reduced tasking in the stores mitigated some of
the effects of the National Living Wage increase. In accordance
with accounting requirements, the Government furlough relief is
classified separately, as "Other operating income".
-- Store property and establishment costs increased due to a
reduction of GBP3.3m in the value of COVID-19 rates relief received
compared with H1 FY21; the reduction in the standard rates charge
applicable to H1 FY22 was GBP3.9m compared with GBP7.2m for H1 FY21
(a rates reduction of GBP1.9m is expected in relation to H2 FY22,
compared with GBP6.9m for H2 FY21). Maintenance costs were also
higher as the stores were operating throughout the period, but rent
and service charge costs were GBP0.9m lower than the previous year,
due to ongoing work to manage rent costs and because service
charges are invoiced by landlords some time after costs are
incurred; lower charges in FY22 therefore reflect lower levels of
activity by landlords when shopping centres were forced to close
during FY21.
-- Online costs decreased due to lower sales (online sales were
unusually high when the stores were forced to close during FY21)
but online marketing costs returned to a more normal level (albeit
significantly below pre-COVID levels), having been unusually low
when the stores were closed during FY21. This made the decrease
less than would have been the case otherwise.
-- The IFRS 16 impact in the table above (and in the table below
relating to Administration costs) represents the deduction from the
sub total of rent (which is a non IFRS 16 recognised cost) and its
replacement by the addition of the IFRS 16 driven depreciation
charge on the notional "right of use asset". The depreciation
charge happens to be smaller than the rent add-back, resulting in a
GBP2.3m favourable effect at the cost of sales level of the profit
and loss account. In H1 FY21 the favourable effect was smaller
because the IFRS 16 depreciation charge was larger in that period.
Note 5 of the financial statements provides a reconciliation
between pre and post IFRS 16 profit.
-- The adjusting item reported in H1 FY22 relates to the
reversal of impairment charges on the closure of stores.
Other operating expense/income
The other operating expense was GBP0.1m (H1 FY21: other
operating income of GBP5.2m). In FY21 the income related to the
Government Coronavirus Job Retention Scheme and the COVID-19
Retail, Hospitality and Leisure Grant Fund. The COVID-19 rates
relief received is netted off rates costs within statutory cost of
sales, as described in the previous section.
H1 FY22 H1 FY21
(Restated)
(1)
GBPm % of GBPm % of GBPm % Variance
Other operating income revenue revenue Variance
------ --------- ----- --------- ---------- -----------
Furlough benefit (0.1) (0.1) 4.5 5.0 4.6 102.2
COVID 19 retail grant - - 0.7 0.8 0.7 100.0
(0.1) (0.1) 5.2 5.8 5.3 102.0
====== ========= ===== ========= ========== ===========
(1) Refer to note 1 (b) (iii) of the interim financial statements
Distribution costs
Retail distribution costs were higher during the Period as the
stores were trading throughout, in contrast to the prior year and
volume driven costs therefore increased. In addition, the increase
in the National Living Wage rate increased staff costs but this was
partly mitigated by operating/efficiency improvements.
H1 FY22 H1 FY21
(Restated) (1)
GBPm % of revenue GBPm % of revenue GBPm variance % variance
----- ------------- ----- ------------- -------------- -----------
Adjusted distribution costs 4.1 3.5 3.4 3.9 0.7 17.8
Depreciation - - 0.1 0.1 (0.1) (15.9)
Distribution costs per statutory
accounts 4.1 3.5 3.5 3.9 0.6 17.4
===== ============= ===== ============= ============== ===========
(1) Refer to note 1 (b) (iii) of the interim financial statements
Administration costs
The increase in administrative costs reflects investments made
to strengthen the senior leadership team and key functions
including supply chain and IT, the cost of resuming activities such
as travel which were suppressed for periods during H1 FY21 and a
provision for potential FY22 bonus. There was no bonus cost in
respect of FY21.
H1 FY22 H1 FY21
(Restated) (1)
GBPm % of revenue GBPm % of revenue GBPm variance % variance
------ ------------- ------ ------------- -------------- -----------
Pre-IFRS 16, Adjusted
administration costs 11.4 9.8 9.2 10.4 2.2 23.4
Depreciation 0.6 0.5 1.4 1.6 (0.8) 57.1
Adjusting items - - 0.2 0.2 (0.2) (100)
IFRS 16 impact (0.2) (0.2) (0.2) (0.2) - -
Administration costs per
statutory accounts 11.8 10.2 10.6 12.0 1.2 11.0
====== ============= ====== ============= ============== ===========
(1) Refer to note 1 (b) (iii) of the interim financial statements
Adjusting items
Adjusting items comprised the reversal of impairment charges due
to the closure of stores. Whilst the sum is immaterial, impairments
have previously been treated as Adjusting items and a consistent
treatment has been applied. Refer also to Note 6 of the condensed
unaudited financial statements.
H1 FY22 H1 FY21
GBPm GBPm
-------- --------
Within cost of sales
Impairment reversal (credit) (0.1) -
(0.1) -
======== ========
Within administration expenses
Salary costs relating to former
director (charge) - 0.3
Packaging and waste provision
release (credit) - (0.1)
- 0.2
======== ========
Total adjusting items (pre
tax) (0.1) 0.2
======== ========
Net financing expense
Net financing costs in the Period were GBP2.8m (FY21: GBP2.7m),
mostly relating to notional interest on the calculated lease
liability arising under IFRS 16 "lease liabilities". Actual
interest payable was GBP0.3m, in relation to the Group's bank
facilities (H1 FY21: GBP0.2m) and predominantly comprised facility
availability charges.
Loss and Adjusted before tax
The statutory loss before tax was GBP1.0 million (H1 FY21:
GBP4.3 million). Due to the seasonality of the business, the first
half of the financial year is typically loss making at PBT level,
although the loss for H1 FY22 was a significant improvement on the
prior year.
The Adjusted loss before tax was GBP1.0 million (H1 FY21: GBP4.1
million).
Tax
The Group's tax credit in respect of the Period was GBP0.1m (H1
FY21: GBP1.0m). The effective tax rate was 14.1 % (H1 FY21: 23.2
%), whilst the adjusted tax rate was 13.3 % (H1 FY21: 23.8 %).
The reduction in the effective tax rate is due to an expected
increase in the value of the deferred tax asset which will be
recognised during FY22, as a result of the forthcoming increase in
the U.K. corporation tax rate from 19% to 25% (effective from 1
April 2023). Deferred tax assets are calculated based on the
corporation tax rate applicable when they are anticipated to
unwind, therefore, the asset is expected to be recognised at the
higher rate of 25% at the end of FY22.
Earnings per share
The basic and the diluted losses per share for the Period were
1.4 pence (H1 FY21: 5.2 pence).
Before Adjusting items, the basic and the diluted losses per
share for the Period were 1.4 pence (H1 FY21: 5.0 pence).
Capital expenditure
Capital expenditure in the Period was GBP1.6 million (H1 FY21:
GBP1.1m).
H1 FY22 H1 FY21 Variance
GBP'm GBP'm GBPm
-------- -------- ---------
New stores and relocations 0.4 - 0.4
Store refits and maintenance 0.6 0.1 0.5
IT hardware and software 0.3 0.3 -
Online development expenditure 0.1 0.6 (0.5)
Other 0.2 0.1 0.1
-------- -------- ---------
Total capital expenditure 1.6 1.1 0.5
======== ======== =========
Capex included the cost of opening three new stores and
relocating four others to new sites. Most of the new store capex
was funded by landlord lease incentive contributions which, due to
timing differences, will be reflected in the H2 FY22 capex.
The level of expenditure on store maintenance was at a more
normal level than in H1 FY21 which was low due to the COVID-19
related store closures. For the full FY22 financial year, capex is
expected to be approximately GBP3.5m.
Stock
Stock was valued at GBP40.0m at the end of the Period (H1 FY21:
GBP38.5m), an increase of 3.9%. The stock level is normally higher
at the end of the first half of the financial year than at the year
end, due to the trading cycles of the business and, accordingly,
the value of stock was GBP10.9m higher than at the end of FY21.
At the end of the Period, a higher than normal proportion of
stock was in transit due to disruption to container freight
movements which delayed the receipt of stock from Asia.
H1 FY22 H1 FY21 FY21 year end
GBPm GBPm GBPm
Gross stock 35.2 35.3 31.0
Less: provisions (4.4) (2.3) (4.4)
------- ------- -------------
Stock net of provisions 30.9 33.0 26.7
Stock in transit 9.2 5.5 2.5
------- ------- -------------
Stock per balance sheet 40.0 38.5 29.1
======= ======= =============
As noted in the trading update and Chief Executive's review,
sales have continued to be strong since the Period end and there
are low levels of terminal stock. This is helpful to the operation
of the business, as well as increasing the likelihood that stock
obsolescence provisions may be reduced at the FY22 Period end.
Cashflow
The net cash inflow for the Period was GBP17.0m (H1 FY21: inflow
of GBP16.3m). Delays in the receipt of stock due to disruption to
container freight movements resulted in corresponding payments
being made later than would normally be the case. In addition and,
as noted in the 12 November 2021 trading update, approximately
GBP10m of the favourable movement in working capital during the
Period is expected to unwind by the end of FY22. It is estimated
that the net cash balance at the end of FY22 (excluding IAS 17
leases) will be approximately GBP10m, assuming that the creditor
timing differences unwind as expected.
The table shows an abbreviated summarised cashflow analysis.
H1 FY22 H1 FY21 Variance
Restated
(1)
GBPm GBPm GBPm
-------- --------- ---------
Cashflow pre-working capital 6.7 3.2 3.5
Net movement in working capital 19.7 17.3 2.4
Capex (1.6) (1.1) (0.5)
Tax paid - (0.1) 0.1
Interest and financing costs (0.2) (0.8) 0.6
Dividends - - -
Cashflow before loan movements 24.6 18.5 6.1
Drawdown/(repayment) of CLBILS
loan (7.5) 7.5 (15.0)
Drawdown/(repayment) of RCF - (10.0) 10.0
Exchange rate movements (0.1) 0.3 (0.4)
Net increase in cash and cash equivalents 17.0 16.3 0.7
======== ========= =========
Opening net cash balance excluding
IAS 17 leases 0.8 (7.1)
Closing net cash balance excluding
IAS 17 leases 17.8 9.3
(1) As at 25 October 2020, credit card transactions not yet
cleared of GBP1,944k were incorrectly classified as cash and cash
equivalents. To correct this, the prior period cash balance has
been reduced and trade and other payables have been increased by
GBP1,944k.
Bank facilities and financial position
The Group's financial position is strong; even allowing for the
timing difference noted above, the underlying cash position is
positive at a time of year when, historically, cash headroom has
been at a premium. At the end of the Period the Group held net cash
of GBP17.8m (H1 FY21: net cash of GBP9.3m).
The Group's bank facilities comprise a GBP22.5m revolving credit
facility ("RCF") which expires in September 2022, with a step down
of GBP2.5m in January 2022. The relationship with the Group's bank,
HSBC, is positive, and it is expected that agreement will be
reached in due course to make suitable arrangements for facilities
beyond September 2022.
Dividends
As noted in the FY21 Annual Report and Accounts, the Board
remains committed to paying dividends, but only once satisfied that
the balance sheet is sufficiently robust. The balance sheet has
gained strength more quickly than expected at the time of drafting
the FY21 ARA and, accordingly, the Board will bring forward
consideration of dividend payments with a view to recommending a
final dividend in respect of FY22, provided the preliminary results
to be published in late July 2022 are in line with our revised
expectations.
Stephen Alldridge
Chief Financial Officer
21 January 2022
Unaudited Condensed Consolidated Income Statement
For the 26 weeks ended 31 October 2021
26 weeks to 31 26 weeks to 25 53 weeks to 2 May
October 2021 October 2020 2021
(Restated - Note (Restated - Note
1b) 1b)
----------------------------- ----------------------------- -------------------------------
Adjusted Adjusting Total Adjusted Adjusting Total Adjusted Adjusting Total
items items items
Notes GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- ----- -------- --------- -------- -------- --------- -------- --------- --------- ---------
Revenue 3 116,073 - 116,073 88,930 - 88,930 180,680 - 180,680
Cost of sales 6 (98,344) 58 (98,286) (81,523) 17 (81,506) (170,342) 975 (169,367)
--------------- ----- -------- --------- -------- -------- --------- -------- --------- --------- ---------
Gross profit 17,729 58 17,787 7,407 17 7,424 10,338 975 11,313
Other operating
(expense) /
income 4 (116) - (116) 5,151 - 5,151 17,081 - 17,081
Distribution
expenses (4,101) - (4,101) (3,494) - (3,494) (6,440) - (6,440)
Administrative
expenses 6 (11,810) - (11,810) (10,441) (199) (10,640) (19,088) (199) (19,287)
--------------- ----- -------- --------- -------- -------- --------- -------- --------- --------- ---------
Operating
profit/(loss) 1,702 58 1,760 (1,377) (182) (1,559) 1,891 776 2,667
Finance income 7 5 - 5 31 - 31 18 - 18
Finance expense 7 (2,757) - (2,757) (2,722) - (2,722) (5,486) - (5,486)
--------------- ----- -------- --------- -------- -------- --------- -------- --------- --------- ---------
Net financing
expense (2,752) - (2,752) (2,691) - (2,691) (5,468) - (5,468)
--------------- ----- -------- --------- -------- -------- --------- -------- --------- --------- ---------
Loss before tax (1,050) 58 (992) (4,068) (182) (4,250) (3,577) 776 (2,801)
Tax 10 140 - 140 969 17 986 502 - 502
--------------- ----- -------- --------- -------- -------- --------- -------- --------- --------- ---------
Loss for the
period 5 (910) 58 (852) (3,099) (165) (3,264) (3,075) 776 (2,299)
--------------- ----- -------- --------- -------- -------- --------- -------- --------- --------- ---------
Loss before tax
and IFRS 16 5 (1,189) 53 (1,136) (3,032) (182) (3,214) (3,395) 1,646 (1,749)
--------------- ----- -------- --------- -------- -------- --------- -------- --------- --------- ---------
Basic earnings
per share
(pence) 11 (1.5) - (1.4) (5.0) (5.2) (4.9) (3.7)
--------------- ----- -------- --------- -------- -------- --------- -------- --------- --------- ---------
Diluted
earnings
per share
(pence) 11 (1.5) - (1.4) (5.0) (5.2) (4.9) (3.7)
--------------- ----- -------- --------- -------- -------- --------- -------- --------- --------- ---------
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 period ended 31 October 2021
26 weeks 26 weeks 53 weeks
to to to
31 October 25 October 2 May 2021
2021 2020
GBP000 GBP000 GBP000
--------------------------------------- ----------- ----------- -----------
Loss for the period (852) (3,264) (2,299)
Items that may or may not be recycled
subsequently into profit and loss
Cash flow hedges - changes in fair
value 1,807 (1,347) (2,865)
Cash flow hedges - reclassified to
profit and loss 201 131 252
Cost of hedging reserve - changes in
fair value (484) (85) (90)
Cost of hedging reserve - reclassified
to profit and loss 55 (155) (160)
Tax relating to components of other
comprehensive income - - 536
--------------------------------------- ----------- ----------- -----------
Other comprehensive income / (expense)
for the period, net of income tax 1,579 (1,456) (2,327)
--------------------------------------- ----------- ----------- -----------
Total comprehensive income / (expense)
for the period attributable to equity
shareholders of the Parent 727 (4,720) (4,626)
--------------------------------------- ----------- ----------- -----------
Unaudited Condensed Consolidated Statement of Financial
Position
As at 31 October 2021
31 October 2021 25 October 2020 (Restated - Note 1b) 2 May 2021
(Restated - Note 1b)
Note GBP000 GBP000 GBP000
---------------------------------- ---- --------------- ------------------------------------ ---------------------
Non-current assets
Intangible assets 13 2,320 2,573 2,463
Property, plant and equipment 14 16,211 18,763 17,524
Right of use assets 14 102,844 113,701 112,542
Deferred tax assets 2,992 1,802 2,852
---------------------------------- ---- --------------- ------------------------------------ ---------------------
124,367 136,839 135,381
Current assets
Inventories 15 40,043 38,516 29,132
Trade and other receivables 14,871 7,817 6,913
Derivative financial asset 19 425 134 -
Current tax asset 694 1,787 704
Cash and cash equivalents 17,783 16,827 8,315
---------------------------------- ---- --------------- ------------------------------------ ---------------------
73,816 65,081 45,064
---------------------------------- ---- --------------- ------------------------------------ ---------------------
Total assets 198,183 201,920 180,445
Current liabilities
Interest bearing loans and
borrowings 16 (262) 7,214 7,095
Lease liabilities 16 27,915 22,423 31,552
Trade and other payables 64,264 54,430 26,188
Provisions 17 836 914 718
Derivative financial liability 19 702 294 1,649
Current tax liability - - -
---------------------------------- ---- --------------- ------------------------------------ ---------------------
93,455 85,275 67,202
Non-current liabilities
Interest bearing loans and
borrowings 16 - (262) -
Lease liabilities 16 94,508 107,497 104,362
Derivative financial liability 19 - - 53
94,508 107,235 104,415
---------------------------------- ---- --------------- ------------------------------------ ---------------------
Total liabilities 187,963 192,510 171,617
---------------------------------- ---- --------------- ------------------------------------ ---------------------
Net assets 10,220 9,410 8,828
Equity attributable to equity
holders of the Parent
Share capital 18 625 625 625
Share premium 18 28,322 28,322 28,322
Merger reserve (54) (54) (54)
Share based payment reserve 1,807 1,552 1,601
Hedging reserve 835 393 (1,203)
Retained earnings (21,315) (21,428) (20,463)
---------------------------------- ---- --------------- ------------------------------------ ---------------------
Total equity 10,220 9,410 8,828
---------------------------------- ---- --------------- ------------------------------------ ---------------------
Unaudited Condensed Consolidated Statement of Changes in
Equity
Attributable to equity holders
---------------------------------------------------------------------
Share based
Share Share Merger Hedging payment Retained Total
capital premium reserve reserve(1) reserve earnings equity
For the 26 Weeks Ended 31 October 2021 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
As at 2 May 2021 625 28,322 (54) (1,203) 1,601 (20,463) 8,828
Total comprehensive income for the period
Loss for the period - - - - - (852) (852)
Other comprehensive income - - - 1,579 - - 1,579
----------------------------------------------- ------- ------- ------- ---------- ----------- -------- -------
Total comprehensive income / (expense) for the
period - - - 1,579 - (852) 727
Hedging gains and losses and costs of hedging
transferred to the cost of inventory - - - 459 - - 459
----------------------------------------------- ------- ------- ------- ---------- ----------- -------- -------
Transactions with owners of the Company
Share-based payment charges - - - - 206 - 206
Total transactions with owners - - - - 206 - 206
----------------------------------------------- ------- ------- ------- ---------- ----------- -------- -------
Balance at 31 October 2021 625 28,322 (54) 835 1,807 (21,315) 10,220
----------------------------------------------- ------- ------- ------- ---------- ----------- -------- -------
For the 26 Weeks Ended 25 October 2020 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
As at 26 April 2020 625 28,322 (54) 1,171 1,506 (18,164) 13,406
Total comprehensive income for the period
Loss for the period - - - - - (3,264) (3,264)
Other comprehensive expense - - - (1,456) - - (1,456)
----------------------------------------------- ------- ------- ------- ---------- ----------- -------- -------
Total comprehensive expense for the period - - - (1,456) - (3,264) (4,720)
Hedging gains and losses and costs of hedging
transferred to the cost of inventory - - - 678 - - 678
----------------------------------------------- ------- ------- ------- ---------- ----------- -------- -------
Transactions with owners of the Company
Share-based payment charges - - - - 46 - 46
Total transactions with owners - - - - 46 - 46
----------------------------------------------- ------- ------- ------- ---------- ----------- -------- -------
Balance at 25 October 2020 625 28,322 (54) 393 1,552 (21,428) 9,410
----------------------------------------------- ------- ------- ------- ---------- ----------- -------- -------
For the 53 Weeks Ended 2 May 2021 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------------------------- ------- ------- ------- ---------- ----------- -------- -------
Balance at 26 April 2020 625 28,322 (54) 1,171 1,506 (18,164) 13,406
Total comprehensive income for the period
Loss for the period - - - - - (2,299) (2,299)
Other comprehensive expense - - - (2,341) 14 - (2,327)
----------------------------------------------- ------- ------- ------- ---------- ----------- -------- -------
Total comprehensive income / (expense) for the
period - - - (2,341) 14 (2,299) (4,626)
Hedging gains and losses and costs of hedging
transferred to the cost of inventory - - - (33) - - (33)
----------------------------------------------- ------- ------- ------- ---------- ----------- -------- -------
Transactions with owners of the Company
Share-based payment charges - - - - 81 - 81
Total transactions with owners - - - - 81 - 81
----------------------------------------------- ------- ------- ------- ---------- ----------- -------- -------
Balance at 02 May 2021 625 28,322 (54) (1,203) 1,601 (20,463) 8,828
----------------------------------------------- ------- ------- ------- ---------- ----------- -------- -------
(1) Hedging reserve includes GBP108k 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 (26
weeks ended 25 October 2020: GBP13k; 53 weeks ended 2 May 2021:
GBP155k).
Unaudited Condensed Consolidated Cash Flow Statement
For the 26 weeks ended 31 October 2021
31 October 2021 25 October 2020 2 May 2021
(Restated - (Restated -
Note 1b) Note 1b)
---
GBP000 GBP000 GBP000
----------------------------------------------------------- --------------- --------------- ------------
Cash Flows From Operating Activities
Loss for the period (852) (3,264) (2,299)
Adjustments for:
Depreciation of property, plant and equipment 2,554 2,594 5,187
Impairment of property, plant and equipment - - 957
Reversal of impairment of property, plant and equipment (53) - (1,000)
Depreciation of right-of-use assets 10,172 11,635 23,311
Impairment of right-of-use assets - - 4
Reversal of impairment of right-of-use assets (5) - (874)
Amortisation of intangible assets 376 563 947
Derivative exchange (gain) / loss 281 (68) (444)
Financial expense 412 318 617
Financial income (5) (31) (18)
Interest on lease liabilities 2,345 2,404 4,869
Loss on sale of property, plant and equipment 185 218 262
Loss on disposal of right-to-use asset 269 373 373
Loss on disposal of intangible assets - 620 311
Profit on disposal of lease liability (337) (463) (464)
Share based payment charges 206 46 81
Taxation (140) (986) (502)
---------------------------------------------------------------- --------------- --------------- ------------
Operating cash flows before changes in working capital 15,408 13,959 31,318
(Increase) / decrease in trade and other receivables (7,958) 313 1,217
Increase in inventories (10,720) (11,228) (2,284)
Increase in trade and other payables 38,256 28,314 167
Increase / (decrease) in provisions 118 (65) (261)
---------------------------------------------------------------- --------------- --------------- ------------
Cash inflows from operating activities 35,104 31,293 30,157
Corporation tax paid - (114) (30)
---------------------------------------------------------------- --------------- --------------- ------------
Net cash from operating activities 35,104 31,179 30,127
Cash flows from investing activities
Acquisition of property, plant and equipment (1,373) (514) (1,869)
Acquisition of intangible assets (233) (562) (526)
Interest received 5 31 18
---------------------------------------------------------------- --------------- --------------- ------------
Net cash outflow from investing activities (1,601) (1,045) (2,377)
---------------------------------------------------------------- --------------- --------------- ------------
Cash flows from financing activities
Interest paid (188) (219) (279)
Payment of lease liabilities (capital) (13,901) (10,848) (14,327)
Payment of lease liabilities (interest) (2,345) (2,404) (4,869)
Issue of bank loan - 7,500 7,500
Repayment of bank borrowings (7,500) (10,000) (10,000)
Payment of RCF costs - (619) (619)
---------------------------------------------------------------- --------------- --------------- ------------
Net cash outflow from financing activities (23,934) (16,590) (22,594)
Net increase in cash and cash equivalents 9,569 13,544 5,156
Exchange rate movements (101) 342 218
Cash and cash equivalents at beginning of Period 8,315 2,941 2,941
---------------------------------------------------------------- --------------- --------------- ------------
Cash and cash equivalents at end of Period 17,783 16,827 8,315
---------------------------------------------------------------- --------------- --------------- ------------
Notes to the Unaudited Condensed Consolidated Interim Financial
Statements
For the 26 weeks ended 31 October 2021
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 31 October 2021
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 2 May 2021. 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
(GBP000), 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 FY21 Annual Report and financial statements,
the Group prepared cashflow forecasts, reflecting the approved
budget for FY22, and a financial plan in respect of FY23, referred
to collectively as the "Base Case" scenario. These forecasts have
since been updated to reflect the actual results for the FY22 year
to date. In addition, a "severe but plausible" downside case
sensitivity has been used to support the Board's conclusion
regarding going concern, by stress testing the Base Case to
indicate the level of financial headroom resulting from applying
more pessimistic assumptions. The Base Case forecast and
sensitivity are described in more detail below.
In assessing the appropriateness of the basis of preparation of
the financial statements, the Directors have considered:
-- The external environment.
-- The Company's and the Group's financial position including
the quantum and expectations regarding availability of bank
facilities.
-- Measures taken or, which could be taken if necessary, to maintain or increase liquidity.
-- The potential impact on financial performance of the principal risks.
-- The output of the Base Case model, which represents the
Company's (and the Group's) estimate of the most likely financial
performance over the forecast period.
-- The resilience of the Company to the manifestation of a more
severe impact from these risks, evaluated via the severe but
plausible downside case model.
These factors are described below.
External environment
There continues to be uncertainty as to the future impact of the
COVID-19 pandemic. The level of uncertainty has increased since the
Period end due to the emergence of the "Omicron" variant.
Reflecting this, the severe but plausible downside scenario assumes
that there may be further disruption. Nevertheless, the Board's
view is that the level of risk due to COVID-19 is lower than at
this time last year, principally due to the implementation of the
vaccination programme. In addition, there appeared to be no
significant disruption to trading patterns during the peak
Christmas 2021 trading period and, more generally, the business has
demonstrated a high degree of resilience to the disruption caused
by the pandemic.
Financial position and bank facilities
At the Period end the Group held net cash (excluding IAS 17
lease liabilities) of GBP17.8m (FY21: GBP9.3m) (Note 16).
The Group's bank facilities comprise a revolving credit facility
('RCF') of GBP22.5m, which is undrawn at the date of approval of
these financial statements and which expires on 30 September 2022.
The RCF limit reduces to GBP20.0m at the end of January 2022 and
remains at this level until its expiry.
Based on the ongoing supportive stance taken by the Group's
bank, and the Group's careful management of the banking
relationship, the Board expects the facilities to be extended or
replaced, as required, in due course.
The facilities include financial covenants in relation to the
level of LTM (last twelve months' rolling) EBITDA, net bank debt
and capital expenditure.
Measures to maintain liquidity
Due to a strong trading performance and careful management of
cash, the Group had significant headroom compared with its bank
facility limits at the Period end.
In the event of further disruptions to trading being
experienced, if deemed necessary, mitigating actions would be taken
in response, which would increase liquidity. These may include, for
example, delaying and reducing stock purchases, stock liquidation,
reductions in capital expenditure and the review of payment terms.
In order to retain clear visibility as to the unmitigated effects
of applying the sensitivity assumptions, these potential
mitigations have not been built into the models described.
Financial scenario to evaluate potential impacts of risks, and
the implications for liquidity
The "Principal risks and uncertainties" section of the Group's
FY21 Annual Report and Accounts sets out the principal risks that
have been identified in relation to the Group. Please refer to
pages 22 to 27 of the report which is available at
https://www.theworksplc.co.uk/system/files/presentation-document/annual-report-2021.pdf
It is considered unlikely that all the risks would
simultaneously manifest themselves adversely. The Directors have
estimated what the most likely combination of risks might be that
could materialise within the going concern assessment period and
the combined effect; this combination of risks is reflected in the
Base Case assumptions. The most prominent risks in the near term
would appear to be connected with COVID-19, which could affect
sales, costs and liquidity. Other risks, such as in relation to the
market and economic environment could have similar manifestations
to COVID-19.
The severe but plausible downside model takes into consideration
the same risks, but assumes that their effects are more severe.
Base Case scenario
The Base Case scenario assumptions are aligned with the
Company's and the Group's internal budget and three year plan.
-- The retail stores are assumed not to be affected by further
lockdowns or significant disruptions during the going concern
period. Nevertheless, reflecting some degree of continuing
uncertainty as to the outlook for consumer spending and the
assumption that the proportion of online sales continues to
increase, LFL store sales are assumed to be below pre-COVID-19
levels during FY22 and into FY23.
-- Online sales levels during FY22 are assumed to be lower than
in FY21, when the retail stores were closed for significant
periods, but higher than in FY20, reflecting improvements in the
Group's online proposition, and the continuing growth of online
sales relative to store sales.
-- The gross margin assumptions include provision for higher
than normal ocean container freight costs during FY22 due to the
continued impact of imbalances within the global freight system but
this is assumed to have normalised by FY23. FY22 FX requirements
were hedged during 2020 at approximately $1.29 and the plan
reflects this.
-- The plan reflects the continuation of cost savings made
during FY21, for example permanent rent reductions. It also
includes provision for investment in certain areas to support
delivery of the strategic plan, provision for known or expected
inflationary increases such as further increases in the National
Living Wage, but reduced direct COVID-19 related costs, such as, in
relation to PPE.
-- Capital expenditure levels are in line with bank covenants
for FY22 and FY23, and show modest increases thereafter.
Under this Base Case scenario there is adequate facility and
covenant headroom throughout the going concern period, indicating
that the Group would have sufficient financial resources to
continue to meet its liabilities as they fall due over the going
concern period.
Severe but plausible downside case sensitivity
The downside scenario makes the following assumptions to reflect
more adverse conditions compared to the Base Case:
-- Store LFL sales are assumed to be approximately 10 % below
FY20 levels during the whole of H2 FY22; in light of actual trading
prior to Christmas 2021, this is a very cautious assumption.
-- Online growth is also modelled at a lower level than in the Base case.
-- Sales levels remain below the Base Case into FY23.
-- The gross margin has been assumed to be adversely affected
more than is already reflected in the Base Case, due to higher
ocean container freight costs.
-- Costs in the model are only adjusted to the extent that they
move directly with sales levels, for example online fulfilment and
marketing costs are assumed to reduce to correspond with the lower
online sales, but the model does not reflect other mitigating
actions that may be taken (as described above), depending on
management's assessment of the situation at the time.
-- This downside scenario assumes that there would not be any
further government support available.
Under this scenario, the Group continues to have adequate
headroom within its facility limit and covenants. Accordingly,
under this downside scenario, the Board's expectation is that the
business would continue to have adequate resources to continue in
operation.
Conclusion regarding basis of preparation
Due to the ongoing COVID-19 pandemic, there continues to be a
level of uncertainty which is greater than what would previously
have been regarded as normal. However, the Group's assessment is
that the level is lower than at this time last year, and that the
resilience demonstrated by the business provides additional
assurance about its ability to withstand any further COVID-19
related disruption.
Consequently, 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
unaudited condensed financial statements and have therefore
prepared them 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 FY21.
(iii) Restatement of figures previously reported in the interim
financial statements for H1 FY21
Business Rates Relief
In the FY21 interim accounts, business rates relief was
disclosed within other operating income, with cost of sales
including the gross rates payable figure. This treatment did not
accord with required practice and therefore these items have been
restated in the comparative figures. The business rates relief is
now reflected via a GBP7,215k reduction in cost of sales (from
GBP85,219k to GBP78,004k) with a corresponding reduction in other
operating income (from GBP12,276k to GBP5,151k). There is no impact
on the overall H1 FY21 result.
Classification of online related costs
Certain online costs relating to distribution/fulfilment and
website maintenance previously treated as Distribution or
Administration costs have been classified within Cost of Sales in
the H1 FY22 accounts as this more accurately reflects their nature.
The comparatives for H1 FY21 have been restated to maintain
consistency; the effect on Gross Profit, Distribution costs and
Administration costs are summarised in the table.
H1 FY21
GBPm
--------
Reduction in Gross
Profit (3.5)
Reduction in Distribution
costs 3.3
Reduction in Administration
costs 0.2
Net effect on Loss
before tax (0.0)
========
Bank overdraft
As at 25 October 2020, credit card transactions not yet cleared
of GBP1,944k were included within the cash and cash equivalents
balance. The comparative figures included within this report have
been restated so that the cash balance has been reduced and the
trade and other receivables balance has been increased by
GBP1,944k.
(iv) Restatement of figures previously reported in the annual
report and accounts for FY21
Property, plant and equipment and right of use assets
balances
As at 2 May 2021 the impairment charges for the period were
incorrectly split between the right of use asset and property,
plant and equipment categories. These have been restated for the
interim financial statements, resulting in an increase in the right
of use asset balance of GBP801k, and a decrease in the property,
plant and equipment balance of GBP801k.
(c) Alternative Performance Measures and Adjusting items
The Group includes alternative performance measures (APMs) as
part of its reporting of financial information. These 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 the use of APMs, which are not
considered to be a substitute for or superior to IFRS measures, can
provide stakeholders with additional helpful information on the
performance of the business. The business uses APMs internally in
its operational planning and reporting and for setting remuneration
targets. APMs should be viewed as supplemental to IFRS measures
presented in the Group's consolidated financial statements which
are prepared in accordance with IFRS.
The key APMs that the Group uses include: like-for-like sales
growth; Earnings before interest, tax, depreciation and
amortisation (EBITDA), Profit before tax and 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 5.
"Adjusted" measures are calculated by adding back or deducting
Adjusting Items. Adjusting Items are those items which the Group
analyses separately in order to present a further measure of the
Group ' s performance. Each of these items, costs or incomes, is
considered to be significant in nature and/or quantum or are
consistent with items treated as adjusting in prior periods.
Separately identifying these items from profit metrics provides
additional information on the performance of the business across
periods because it is consistent with how the business performance
is planned by, and reported to, the Board.
Refer to Note 6 for information regarding items that were
treated as Adjusting in the current or comparative periods.
(d) Critical accounting judgements and 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 accounting policies. Where a significant risk
of materially different outcomes exists due to management
assumptions or sources of estimation uncertainty, 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.
The estimates which have a significant risk of causing a
material adjustment to the carrying amount of assets and
liabilities within the next 12 months are discussed below.
Critical accounting judgements
Adjusting items
Adjusted profit measures are not recognised under IFRS and may
not be directly comparable with Adjusted profit measures used by
other companies. The classification of Adjusting items may require
significant management judgement. The Group's definitions of
Adjusting items are outlined within both the Group accounting
policies and Note 6. These definitions have been applied
consistently year on year. Each of the Adjusting items included in
these interim financial statements has had a related or similar
transaction in prior periods that has also been treated as
Adjusting.
Note 6 provides further details of items classified as
Adjusting.
Hedge accounting
The Group is exposed to foreign currency risk, most
significantly to the US dollar as a result of sourcing products
from Asia which are paid for predominantly in US dollars. The Group
hedges these exposures using forward foreign exchange contracts and
hedge accounting is applied when the requirements of IFRS 9 are
met, which include that a forecast transaction must be "highly
probable".
The Group has applied judgement in assessing whether the
forecast purchases remain "highly probable". The Group's policy is
that approximately 50 % of the forecast purchase requirements are
initially hedged, approximately 12 months prior, with incremental
hedges taken out over time, as the buying period approaches and
therefore as certainty increases over the forecast purchases. As a
result of this progressive strategy, reducing the supply pipeline
of inventory, should this occur, should not immediately lead to
over-hedging and the disqualification of the "highly probable"
test. If the forecast transactions were no longer expected to
occur, any accumulated gain or loss on the hedging instruments
would immediately be reclassified to profit or loss.
Key sources of estimation uncertainty
Impairment of property, plant and equipment, right of use assets
and intangibles
Property, plant and equipment, right-of-use assets and
intangible assets are reviewed for impairment if events or changes
in circumstances indicate that the carrying amount may not be
recoverable. The Directors consider an individual retail store to
be a cash-generating unit ('CGU'). The Board has concluded that no
further impairment charges were required as at the Period end
date.
The carrying value of the Group's Goodwill was fully impaired in
FY20 and therefore no further provision is required.
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 two revenue streams, retail stores and an online
store, the results of which are aggregated into one reportable
segment. 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 store and online channels having
significant economic interdependencies, 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
31 October 2021 25 October 2020 2 May 2021
GBP000 GBP000 GBP000
--------------------------- ---------------- ---------------- --------------
Sale of goods
- UK 114,060 87,057 177,730
- EU (Republic of Ireland) 2,013 1,873 2,950
--------------------------- ---------------- ---------------- --------------
Total revenues 116,073 88,930 180,680
--------------------------- ---------------- ---------------- --------------
Seasonality of operations
The Group's revenue is subject to seasonal fluctuations as a
result of the Christmas period. The peak period is from October
through to December; consequently, the first half of the year from
April to October is expected to generate less revenue than the
second half.
4 Other operating income / expense
26 weeks ended 31 October 26 weeks ended 25 October 53 weeks ended 2 May 2021
2021 2020 (Restated -
Note 1b)
GBP000 GBP000 GBP000
----------------------------- ----------------------------- ----------------------------- -------------------------
COVID-19 Job Retention Scheme
Grants receivable (119) 4,472 15,309
COVID-19 Retail, Hospitality
and Leisure Grant Fund - 675 1,765
Rent receivable 3 4 7
----------------------------- ----------------------------- ----------------------------- -------------------------
(116) 5,151 17,081
----------------------------- ----------------------------- ----------------------------- -------------------------
In the prior period, The Group used the financial support
packages made available by the UK Government to businesses
adversely affected by trading restrictions imposed as a consequence
of COVID-19, including the Coronavirus Jobs Retention Scheme,
Business Rates Relief Scheme and the Retail, Hospitality and
Leisure Grant Fund. The GBP119k charge in H1 FY22 was to correct an
immaterial overstatement of the income reported in respect of
FY21.
5 Alternative performance measures ("APMs")
Like-for-like ("LFL") sales
These are usually defined as the year-on-year growth in gross
sales from stores which have been opened for a full 63 weeks (but
excluding sales from stores closed for all or part of the relevant
period or prior year comparable period), and from its online store,
calculated on a calendar week basis. The measure is used widely in
the retail industry as an indicator of sales performance.
Due to the effect on sales of stores being required to close for
periods during FY21, the normal LFL measure does not provide
meaningful information and is not included within this report. In
common with many similarly affected businesses, a 2-year LFL
comparison is used instead for FY22, whereby FY20 rather than FY21
sales are used as a basis for comparing the current period's
performance.
EBITDA, Adjusted EBIDTA and Adjusted profit after tax
EBITDA is defined by the Group as earnings before interest, tax,
depreciation, amortisation and profit/loss on the disposal of fixed
assets. Adjusted EBITDA is calculated by adding back or deducting
Adjusting items to EBITDA. See Note 1 (c) and (d) for further
information regarding Adjusting items.
In addition, the Group has shown another measure of Adjusted
EBITDA, which removes the impact of IFRS 16. The table below
provides a reconciliation of Adjusted EBITDA to loss after tax, and
shows the impact of IFRS 16 on adjusted EBITDA.
26 weeks ended 31 October 2021 26 weeks ended 53 weeks ended
25 October 2020 2 May 2021
GBP000 GBP000 GBP000
---------------------------------------------------- ------------------------------ ---------------- --------------
Non IFRS 16 Adjusted EBITDA 2,500 1,483 4,285
---------------------------------------------------- ------------------------------ ---------------- --------------
IAS17 income statement charges not recognised under
IFRS 16 12,410 12,762 27,572
Foreign exchange differences on euro leases 11 (82) (59)
---------------------------------------------------- ------------------------------ ---------------- --------------
Post IFRS 16 Adjusted EBITDA 14,921 14,163 31,798
---------------------------------------------------- ------------------------------ ---------------- --------------
Loss on disposal of right-of-use assets (269) (373) (353)
Profit on disposal of lease liability 337 463 464
Loss on disposal of property, plant and equipment (185) (218) (262)
Loss on disposal of intangible assets - (620) (311)
Depreciation of PPE (2,554) (2,594) (5,187)
Depreciation of RoUA (10,172) (11,635) (23,311)
Amortisation (376) (563) (947)
Finance expenses (2,757) (2,722) (5,486)
Finance income 5 31 18
---------------------------------------------------- ------------------------------ ---------------- --------------
Adjusted profit / (loss) before tax (1,050) (4,068) (3,577)
---------------------------------------------------- ------------------------------ ---------------- --------------
Adjusted tax (charge) / credit 140 969 502
---------------------------------------------------- ------------------------------ ---------------- --------------
Adjusted profit / (loss) after tax (910) (3,099) (3,075)
---------------------------------------------------- ------------------------------ ---------------- --------------
Adjusting items (Note 6) 58 (182) 776
---------------------------------------------------- ------------------------------ ---------------- --------------
Tax (charge) / credit in relation to Adjusting items - 17 -
---------------------------------------------------- ------------------------------ ---------------- --------------
Loss after tax (852) (3,264) (2,299)
---------------------------------------------------- ------------------------------ ---------------- --------------
Profit before tax and IFRS 16
The following tables provides a reconciliation of profit/(loss)
before tax and IFRS 16 adjustments to profit/(loss) before tax.
26 weeks to 31 26 weeks to 25 53 weeks to 2
October 2021 October 2020 May 2021
(Restated - Note
1b)
Adjusting Adjusting Adjusting
Adjusted items Total Adjusted items Total Adjusted items Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------- -------- --------- -------- -------- --------- -------- -------- --------- --------
Profit / (loss)
before tax
before
IFRS 16
adjustments (1,189) 53 (1,136) (3,032) (182) (3,214) (3,395) 1,646 (1,749)
----------------- -------- --------- -------- -------- --------- -------- -------- --------- --------
Remove IAS 17
rental
charge 12,349 - 12,349 12,717 - 12,717 27,449 - 27,449
Remove hire costs
from hire of
equipment 63 - 63 45 - 45 124 - 124
Remove
depreciation
charged on the
existing
assets 151 - 151 214 - 214 329 - 329
Remove interest
charged on the
existing
liability 16 - 16 19 - 19 44 - 44
Depreciation
charge
on right of use
asset (10,172) - (10,172) (11,635) - (11,635) (23,311) - (23,311)
Interest cost on
lease liability (2,347) - (2,347) (2,404) - (2,404) (4,869) - (4,869)
Loss on disposal
of right of use
asset (269) - (269) (373) - (373) (353) - (353)
Profit on
disposal
of lease
liability 337 - 337 463 - 463 464 - 464
Foreign exchange
difference on
euro
leases 11 - 11 (82) - (82) (59) - (59)
Additional
impairment
charge under IAS
36 - 5 5 - - - - (870) (870)
Net Impact of
IFRS
16 on profit /
(loss)
before tax 139 5 144 (1,036) - (1,036) (182) (870) (1,052)
----------------- -------- --------- -------- -------- --------- -------- -------- --------- --------
Profit / (loss)
before tax (1,050) 58 (992) (4,068) (182) (4,250) (3,577) 776 (2,801)
----------------- -------- --------- -------- -------- --------- -------- -------- --------- --------
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. See Note 1 (c) and (d) for further information
regarding Adjusting items. These adjusted metrics are included
within the consolidated income statement and statement of other
comprehensive income, with further details of Adjusting items
included below in Note 6.
6 Adjusting items
During the period, the items analysed below have been classified
as Adjusting:
26 weeks ended 31 October 26 weeks ended 25 October 53 weeks ended 2 May 2021
2021 2020
GBP000 GBP000 GBP000
----------------------------- ----------------------------- ----------------------------- -------------------------
Within cost of sales
Impairment charges (1) - - 961
Impairment reversals (1) (58) - (1,873)
Duty Provision(2) - (17) (63)
----------------------------- ----------------------------- ----------------------------- -------------------------
Total cost of sales (58) (17) (975)
----------------------------- ----------------------------- ----------------------------- -------------------------
Within administrative
expenses
Salary costs(3) - 322 322
Packaging and waste costs
penalty(4) - (123) (123)
Total administrative expenses - 199 199
Total Adjusting items (58) 182 (776)
----------------------------- ----------------------------- ----------------------------- -------------------------
(1) These relate to fixed asset impairment charges and reversals
of prior year impairment charges.
(2) Due to reduction in a provision previously recognised
regarding a review of the Group's duty rates, which has
subsequently been concluded.
(3) Salary costs relate to payments to a former Director.
(4) This relates to the release of an excess provision held
regarding a historical packaging and waste cost penalty.
7 Finance income and expense
26 weeks ended 31 October 26 weeks ended 25 October 53 weeks ended 2 May 2021
2021 2020
GBP000 GBP000 GBP000
----------------------------- ----------------------------- ----------------------------- -------------------------
Finance income
Bank interest receivable 5 31 18
----------------------------- ----------------------------- ----------------------------- -------------------------
Total finance income 5 31 18
Finance expense
Bank interest payable 269 173 322
Other interest payable 143 145 295
Interest payable on lease
liabilities 2,345 2,404 4,869
----------------------------- ----------------------------- ----------------------------- -------------------------
Total finance expense 2,757 2,722 5,486
----------------------------- ----------------------------- ----------------------------- -------------------------
8 Share based payments
During the Period, 1,085,105 shares were awarded under
"TheWorks.co.uk 2018 Long Term Incentive Plan" and 1,209,189 share
options were awarded under the Save As You Earn Scheme. (26 weeks
ended 25 October 2020: nil and nil, 52 weeks ended 2 May 2021:
847,458 and nil respectively).
During the Period, 601,693 restricted stock awards were granted
to key management and senior employees, with a three year vesting
period (26 weeks ended 25 October 2020: 714,286, 52 weeks ended 2
May 2021: 857,143).
Expense recognised in the income statement
The IFRS 2 charge recognised during the Period was as
follows:
26 weeks ended 31 October 26 weeks ended 25 October 53 weeks ended 2 May 2021
2021 2020
GBP000 GBP000 GBP000
----------------------------- ----------------------------- ----------------------------- -------------------------
LTIP - Share based payment
expense 146 28 25
SAYE - Share based payment
expense 60 18 56
Total IFRS 2 charges 206 46 81
----------------------------- ----------------------------- ----------------------------- -------------------------
9 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 GBP384k (26 weeks ended 25
October 2020: GBP313k; 53 weeks ended 2 May 2021: GBP643k).
10 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
GBP0.14 million (H1 FY21: GBP0.97 million). The effective tax rate
on the total loss before tax was 14.1 % (H1 FY21: 23.2 %), the
Adjusted tax rate was 13.3 % (H1 FY21: 23.8 %).
The difference between the total effective tax rate and the
Adjusted tax rate relates to certain underlying costs and
depreciation charges being non-deductible for tax purposes.
The year on year reduction in the effective tax rate is due to
an expected increase in the value of the deferred tax asset which
will be recognised during FY22, as a result of the forthcoming
increase in the U.K. corporation tax rate from 19% to 25%
(effective from 1 April 2023). Deferred tax assets are calculated
based on the corporation tax rate applicable when they are
anticipated to unwind, therefore, the asset is expected to be
recognised at the higher rate of 25% at the end of FY22.
11 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 6 for
further details) to reflect the Group's underlying profit for the
Period.
31 October 2021 25 October 2020 2 May 2021
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
--------------------------------------------------------------- --------------- --------------- ----------
GBP000 GBP000 GBP000
--------------------------------------------------------------- --------------- --------------- ----------
Loss for the financial period (852) (3,264) (2,299)
Adjusting items (58) 165 (776)
Total adjusted profit / (loss) for adjusted earnings per share (910) (3,099) (3,075)
--------------------------------------------------------------- --------------- --------------- ----------
Pence Pence Pence
--------------------------------------------------------------- --------------- --------------- ----------
Basic earnings per share (1.4) (5.2) (3.7)
Diluted earnings per share (1.4) (5.2) (3.7)
Adjusted basic earnings per share (1.5) (5.0) (4.9)
Adjusted diluted earnings per share (1.5) (5.0) (4.9)
--------------------------------------------------------------- --------------- --------------- ----------
12 Dividends
No dividend has been declared by the Company in respect of the
period ended 31 October 2021.
13 Intangible assets
Goodwill Software Total
GBP000 GBP000 GBP000
----------------------------------- -------- -------- ------
Cost
Balance at 2 May 2021 16,180 8,043 24,223
Additions - 233 233
Disposals - - -
----------------------------------- -------- -------- ------
Balance at 31 October 2021 16,180 8,276 24,456
----------------------------------- -------- -------- ------
Amortisation / Impairment
Balance at 2 May 2021 16,180 5,580 21,760
Amortisation charge for the Period - 376 376
Disposals - - -
----------------------------------- -------- -------- ------
Balance at 31 October 2021 16,180 5,956 22,136
----------------------------------- -------- -------- ------
Net book value
----------------------------------- -------- -------- ------
At 2 May 2021 - 2,463 2,463
----------------------------------- -------- -------- ------
At 31 October 2021 - 2,320 2,320
----------------------------------- -------- -------- ------
14 Property, plant and equipment
RoUA - RoUA - Plant & Land and Plant & Fixtures &
Property Equipment buildings equipment fittings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------------- -------- -------------- --------- --------- ---------- -------
Cost
Balance at 2 May 2021 158,772 1,913 10,682 3,376 26,167 200,910
Additions 731 7 150 150 1,073 2,111
Disposals (609) - (187) (23) (270) (1,089)
------------------------------------------- -------- -------------- --------- --------- ---------- -------
Balance at 31 October 2021 158,894 1,920 10,645 3,503 26,970 201,932
------------------------------------------- -------- -------------- --------- --------- ---------- -------
Depreciation and impairment
Balance at 2 May 2021 (Restated - Note 1b) 47,167 976 5,555 2,762 14,384 70,844
Depreciation charge for the Period 9,944 228 418 320 1,816 12,726
Impairment reversals (5) - (13) (2) (38) (58)
Disposals (340) - (115) (15) (165) (635)
------------------------------------------- -------- -------------- --------- --------- ---------- -------
Balance at 31 October 2021 56,766 1,204 5,845 3,065 15,997 82,877
------------------------------------------- -------- -------------- --------- --------- ---------- -------
Net book value
------------------------------------------- -------- -------------- --------- --------- ---------- -------
At 2 May 2021 111,605 937 5,127 614 11,783 130,066
------------------------------------------- -------- -------------- --------- --------- ---------- -------
At 31 October 2021 102,128 716 4,800 438 10,973 119,055
------------------------------------------- -------- -------------- --------- --------- ---------- -------
Impairment losses
Property, plant and equipment is reviewed for impairment if
events or changes in circumstances indicate that the full carrying
value may not be recoverable. When a review for impairment is
conducted the recoverable amount is estimated based on either
value-in-use calculations or fair value less costs of disposal.
Value-in-use calculations are based on management's estimates of
future cash flows expected to be generated by the assets and an
appropriate discount rate. Consideration is also given to whether
the impairment assessments made in prior years remain appropriate
based on the latest expectations in respect of recoverable
amounts.
An impairment review was conducted at 2 May 2021 whereby the
Group determined that each store is a separate CGU. Each CGU was
tested for impairment at that date because the UK Government trade
restrictions implemented as a result of the COVID-19 pandemic were
considered an impairment trigger for such a test.
At 31 October 2021 no additional indicators of impairment have
been identified and no further impairment charges have been
recognised during the Period (53 weeks to 2 May 2021: reversal of
GBP913k; 26 weeks to 25 October 2020: GBPNil). GBP58k of impairment
reversals have been recognised relating to stores that have
permanently closed during the Period.
15 Inventory
31 October 2021 25 October 2020 2 May 2021
GBP000 GBP000 GBP000
Goods for resale 35,210 35,255 31,045
Less: stock provisions for shrinkage and obsolescence (4,354) (2,287) (4,391)
------------------------------------------------------- --------------- --------------- ----------
Goods for resale net of provisions 30,856 32,968 26,654
Stock in transit 9,187 5,548 2,478
------------------------------------------------------- --------------- --------------- ----------
Inventory 40,043 38,516 29,132
------------------------------------------------------- --------------- --------------- ----------
A provision of GBP4.4m for stock obsolescence and shrinkage is
included in the balance sheet at the Period end (25 October 2020:
GBP2.3m, 2 May 2021: GBP4.4m). The provision is an estimate, which
is based on stock ageing and historical trends and is reviewed by
management during the year.
16 Borrowings
26 weeks ended 26 weeks ended 53 weeks ended
31 October 2021 25 October 2020 2 May 2021
GBP000 GBP000 GBP000
---------------------------------------------- ---------------- ---------------- --------------
Non-current liabilities
Lease liabilities 94,508 107,497 104,362
Unamortised debt issue costs - (262) -
---------------------------------------------- ---------------- ---------------- --------------
Non-current liabilities 94,508 107,235 104,362
---------------------------------------------- ---------------- ---------------- --------------
Current liabilities
Secured bank loans - 7,500 7,500
Unamortised debt issue costs (262) (286) (405)
---------------------------------------------- ---------------- ---------------- --------------
Current interest bearing loans and borrowings (262) 7,214 7,095
---------------------------------------------- ---------------- ---------------- --------------
Lease liabilities 27,915 22,423 31,552
---------------------------------------------- ---------------- ---------------- --------------
Current liabilities 27,653 29,637 38,647
---------------------------------------------- ---------------- ---------------- --------------
The Group's bank facilities comprise a GBP22.5m revolving credit
facility ("RCF") which expires in September 2022, with a step down
of GBP2.5m in January 2022. The board expects these facilities to
be extended, or replaced, as required, in due course.
The facility includes financial covenants in relation to the
level of EBITDA, net debt and capital expenditure.
Net debt reconciliation
31 October 2021 25 October 2020 2 May 2021
(Restated -
Note 1b)
GBP000 GBP000 GBP000
--------------------------------------------- --- --------------- --------------- ----------
Net debt (excluding unamortised debt costs)
CLBILS term loan - 7,500 7,500
Bank overdraft - - -
Cash and cash equivalents (17,783) (16,827) (8,315)
Net cash at bank (17,783) (9,327) (815)
Non IFRS 16 lease liabilities 622 957 766
-------------------------------------------------- --------------- --------------- ----------
Non IFRS 16 net cash (17,161) (8,370) (49)
-------------------------------------------------- --------------- --------------- ----------
IFRS 16 lease liabilities 121,801 128,963 135,148
-------------------------------------------------- --------------- --------------- ----------
Net debt including IFRS 16 lease liabilities 104,640 120,593 135,099
-------------------------------------------------- --------------- --------------- ----------
17 Provisions
Dilapidations Total
GBP000 GBP000
-------------------------------------- ------------- ------
Balance at 2 May 2021 718 718
-------------------------------------- ------------- ------
Provisions made during the period 118 118
Provisions used during the period - -
Provisions released during the period - -
Balance as at 31 October 2021 836 836
-------------------------------------- ------------- ------
Dilapidation provision
In accordance with IAS 37 Provisions, an estimate has been made
in respect of estimated property dilapidation costs associated with
anticipated lease terminations. These costs are expected to be paid
during the course of the year and therefore are not discounted.
18 Share Capital
As at 31 October 2021 the company had the following share
capital:
GBP000
-------------- ------
Share capital 625
Share premium 28,322
-------------- ------
19 Financial Instruments
The following table details the Group's expected maturities for
its financial liabilities. The tables below are based on the
undiscounted contractual maturities of the financial liabilities
including interest that will be payable on those liabilities.
Within 1 year 2-5 years 5+ years Total
Contractual maturity of financial liabilities GBP000 GBP000 GBP000 GBP000
---------------------------------------------- ------------- --------- -------- -------
31 October 2021
Non Derivative
Interest bearing - - - -
Non-interest bearing 59,870 - - 59,870
Lease liabilities 31,702 72,545 25,673 129,920
Derivative
Forward currency contracts 702 - - 702
---------------------------------------------- ------------- --------- -------- -------
92,274 72,545 25,673 190,492
---------------------------------------------- ------------- --------- -------- -------
25 October 2020
Non Derivative
Interest bearing 7,500 - - 7,500
Non-interest bearing 54,430 - - 54,430
Finance lease liabilities 22,423 78,293 29,204 129,920
Derivative
Forward currency contracts 294 - - 294
---------------------------------------------- ------------- --------- -------- -------
84,647 78,293 29,204 192,144
---------------------------------------------- ------------- --------- -------- -------
2 May 2021
Non Derivative
Interest bearing 7,500 - - 7,500
Non-interest bearing 26,035 - - 26,035
Finance lease liability 35,978 86,601 30,158 152,737
Derivative
Forward currency contracts 1,649 53 - 1,702
---------------------------------------------- ------------- --------- -------- -------
71,162 86,654 30,158 187,974
---------------------------------------------- ------------- --------- -------- -------
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:
As at As at As at
31 October 2021 25 October 2020 2 May 2021
------------------------------------- ---------------- ---------------- -----------
Net Derivative Financial Instruments
Foreign exchange contracts (277) (160) (1,702)
------------------------------------- ---------------- ---------------- -----------
Classification of financial instruments
The tables below show the classification of financial assets and
liabilities as at 31 October 2021. 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
GBP000 GBP000 GBP000
------------------------------------------------- ----------- --------- -----------
Financial assets measured at fair value
Derivative financial instruments 425 - -
Financial assets not measured at fair value
Trade and other receivables - 14,871 -
Cash and cash equivalents - 17,783 -
Financial liabilities measured at fair value
Derivative financial instruments (702) - -
Financial liabilities not measured at fair value
Finance lease liability - - (122,423)
Trade and other payables - - (64,264)
-------------------------------------------------
As at 31 October 2021 (277) 32,654 (186,687)
------------------------------------------------- ----------- --------- -----------
Financial
Cash flow assets at Other
hedging amortised financial
instruments cost liabilities
GBP000 GBP000 GBP000
------------------------------------------------- ----------- --------- -----------
Financial assets measured at fair value
Derivative financial instruments 134 - -
Financial assets not measured at fair value
Trade and other receivables - 7,817 -
Cash and cash equivalents - 16,827 -
Financial liabilities measured at fair value
Derivative financial instruments (294) - -
Financial liabilities not measured at fair value
Unsecured bank loans - - (7,500)
Finance lease liability - - (129,920)
Trade and other payables - - (54,430)
------------------------------------------------- ----------- --------- -----------
As at 25 October 2020 (160) 24,644 (191,850)
------------------------------------------------- ----------- --------- -----------
Financial
Cash flow assets at Other
hedging amortised financial
instruments cost liabilities
GBP000 GBP000 GBP000
------------------------------------------------- ----------- --------- -----------
Financial assets measured at fair value - - -
Derivative financial instruments - - -
Financial assets not measured at fair value
Trade and other receivables - 6,913 -
Cash and cash equivalents - 8,315 -
Financial liabilities measured at fair value
Derivative financial instruments (1,702) - -
Financial liabilities not measured at fair value
Unsecured bank overdraft - - (7,500)
Finance lease liabilities - - (135,914)
Trade and other payables - - (26,188)
------------------------------------------------- ----------- --------- -----------
As at 2 May 2021 (1,702) 15,228 (169,602)
------------------------------------------------- ----------- --------- -----------
20 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 this financial period.
21 Contingent liabilities
There were no contingent liabilities noted at the end of the
Period.
Responsibility statement of the Directors in respect of the
interim financial statements
We confirm that to the best of our knowledge:
-- the condensed unaudited set of financial statements has been
prepared in accordance with IAS 34 Interim Financial Reporting as
adopted by the EU;
-- the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that have occurred
during the first half of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining half of the
year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken place in
the first half of the current financial year and that have
materially affected the financial position or performance of the
entity during that period; and any changes in the related party
transactions described in the last annual report that could do
so.
By Order of the Board
Stephen Alldridge
Chief Financial Officer
21 January 2022
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 materially differ from historical or expected results.
The Board does not believe that these risks and uncertainties are
materially different to those published in the Annual Report for
the period ended 2 May 2021.
These risks comprise all those associated with the COVID-19
pandemic, the risk of insufficient liquidity, adverse market,
demand or competition changes, deterioration in the U.K. economic
environment, damage to brand & reputation, disruptions or
failures in the supply chain which could be detrimental to the
proposition, loss of key personnel, business continuity, IT systems
and cyber security, failure to comply with regulations, cost
inflation, failure of stock management controls and the seasonality
of sales.
Detailed explanations of these risks are set out on pages 22 to
27 of the FY21 Annual Report which is available at
https://www.theworksplc.co.uk/system/files/presentation-document/annual-report-2021.pdf
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END
IR PPUWGGUPPPGU
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January 21, 2022 02:00 ET (07:00 GMT)
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