TIDMWRKS
RNS Number : 1692V
TheWorks.co.uk PLC
08 August 2022
8 August 2022
TheWorks.co.uk plc
("The Works", the "Company" or the "Group")
Trading update
TheWorks.co.uk plc, the multi-channel value retailer of arts,
crafts, toys, books and stationery, announces an update on FY22
results and current trading for the 13 weeks ended 31 July 2022
(the "Period" or "Q1").(1)
Highlights
-- FY22 underlying EBITDA now expected to be higher, approximately GBP16.5m
-- Board still anticipates recommending 2.4 pence per share dividend in relation to FY22
-- Q1 total LFL sales decline of 2.5%, which includes:
o Resilient store LFL sales growth of 1.4%
o Challenging online performance with LFL sales decline of
28.6%
-- Continued good progress against "better, not just bigger" strategy
-- New committed GBP30m bank facility, extended to November 2025
-- Outlook more cautious due to heightened uncertainty in consumer backdrop
FY22 results update
In our trading update issued on 20 May 2022 we noted that the
FY22 EBITDA result was expected to be GBP15.0m. Underlying EBITDA
is now expected to be approximately GBP16.5m, primarily due to a
lower than expected level of provisions relating to stock.(2)
It is still anticipated that the Board will recommend the
payment of a 2.4 pence per share dividend in relation to FY22 at
the forthcoming AGM on 27 October 2022.
Q1 trading update
A resilient store sales performance generated positive LFL
sales, up 1.4%. Online LFL sales declined by 28.6% in Q1 but remain
40% higher than pre-COVID levels. This resulted in a total LFL
sales decline of 2.5% and total sales in the first quarter were
1.3% lower than the prior year.
As previously announced, The Works was subject to a cyber
security incident at the end of March 2022. Although the immediate
impact on trading was limited, the action taken to secure the
business had a residual impact on store and online trading. Our
recovery has progressed well and this impact to LFL sales was
therefore largely confined to May and early June. Importantly, the
decision to bring forwards planned investment to strengthen our IT
security and the cautious approach taken to reinstate the systems
has greatly improved our cyber security protection.
At the beginning of the period, store LFL sales growth was also
impacted by a strong comparative with May 2021.(3) Store
performance then improved progressively through the period, with
July's store LFL sales up 7.6%. This was driven by further
improvements to our customer proposition, including an expansion of
our front list adult book offering, enhancements to our children's
book offer and refreshed outdoor play range, as well as investment
in our biggest ever 'Back to School' offer.
Whilst store performance was resilient, online was impacted by
trends affecting the industry including channel shifting (as
post-COVID shopping trends normalise) and the challenging consumer
environment,(4) which appears to be affecting online sales more
than physical stores. Despite this, our online sales remain 40%
higher than pre-COVID levels. Although the external environment
will make it more challenging in the short term, our online
penetration is only 10% of total sales and therefore provides a
significant opportunity for growth in the medium term.
We have made good progress against our "better, not just bigger"
strategy. We are encouraged by the positive impact that this has
had on the resilience of the business and that the ongoing
improvements we are making to our proposition are resonating well
with customers.
FY23 outlook
The general market outlook has deteriorated since the beginning
of the calendar year, with low consumer confidence and rising
inflation being significant factors. It is not clear how long these
market conditions will persist, which creates a heightened degree
of uncertainty about how consumers will behave, particularly in the
forthcoming Christmas shopping season, The Works' most important
trading period.
Whilst we still expect to be able to grow sales in the remainder
of FY23, it is uncertain whether the level of growth will be in
line with original expectations and that which is required to
offset cost headwinds such as historically high freight costs,
which are showing little sign of abating in the short term, as well
as increases to the National Living Wage. In light of this
uncertainty, and reflecting its desire to maintain a more cautious
approach in these market conditions, the Board has materially
lowered its expectations in relation to FY23's result.
Financial position
The Group has recently increased the size of its committed bank
facility to GBP30.0m and extended the expiry date to the end of
November 2025, providing significant additional liquidity
headroom.
Gavin Peck , Chief Executive Officer of The Works,
commented:
"We delivered a strong performance in FY22 and will report a
better than expected profit, as well as reinstating the payment of
a dividend. Since the start of the financial year we have faced the
residual effects of the cyber security incident and increasingly
challenging trading conditions. The progressive recovery of store
trading throughout the period is reassuring and we are pleased with
the resilient performance delivered considering the lower consumer
confidence. Our recent online sales performance reflects the
challenges facing the broader sector but remains significantly
higher than pre-COVID levels and we remain confident that the long
term investment we have made in our customer proposition will see
further growth."
"The Works is a remarkably resilient business and the Group's
financial position remains robust. Although the near term market
conditions are very uncertain, we are confident that our 'better,
not just bigger' strategy still has a lot more upside to deliver in
the medium term. As a value retailer we are working hard to ensure
that customers can continue to rely on The Works as a destination
for good value products, as well as focusing on protecting our
profitability as the cost of doing business continues to rise."
Preliminary results announcement
The preliminary results for FY22 will be announced on Friday 23
September 2022, along with a further update on current trading.
Enquiries: via Sanctuary
Counsel
TheWorks.co.uk
plc
Gavin Peck CEO
Steve Alldridge
CFO
Sanctuary Counsel | 020 7340 0395
Ben Ullmann | theworks@sanctuarycounsel.com
Rachel Miller
(1) As announced at the Full Year Trading Update on 20 May 2022,
the Group plans to issue its FY22 results during September 2022.
Given the delay, as a result of the cyber security incident
announced in April 2022, the Company is today providing a separate
update on Q1 trading.
(2) Although the audit of the financial statements is not yet
fully complete, it is not anticipated that the remaining audit work
will result in material changes to this figure.
(3) Q1 FY22 LFL sales had been temporarily boosted through
pent-up demand following the reopening of stores after the
lockdown.
(4) Recent data from the British Retail Consortium (BRC) has
shown that online non-food sales are down year-on-year.
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END
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