TIDMWRKS
RNS Number : 3326N
TheWorks.co.uk PLC
20 January 2023
20 January 2023
TheWorks.co.uk plc
("The Works", the "Company" or the "Group")
Trading update for the 11 weeks ended 15 January 2023 and
Interim results for the 26 weeks ended 30 October 2022
Resilient performance in H1 FY23 despite cost headwinds, and
strong Christmas trading, in line with plans. FY23 expectations
unchanged, given continuing economic uncertainty.
The Works, the family-friendly value retailer of books, arts and
crafts, stationery, toys and games, announces an update on current
trading for the 11 weeks ended 15 January 2023 and its interim
results for the 26 weeks ended 30 October 2022 (the "Period" or "H1
FY23").
Trading update for the 11 weeks ended Sunday, 15 January
2023
The total LFL sales performance strengthened since the end of H1
FY23, with LFL sales growth for the 11 weeks ended 15 January 2023
of 5.7%. Store LFL sales grew by 9.7%, with online sales declining
by 14.0%.
We are encouraged by the store sales performance, which was
expected to strengthen as the comparatives from the previous year
weakened, having been affected by concerns regarding the Omicron
COVID-19 variant and supply chain disruption. Store sales were
particularly strong in the week immediately prior to Christmas,
suggesting that consumers shopped much later than in 2021 and that
many were seeking value when shopping for gifts.
Online sales over the first 11 weeks of H2 FY23 have continued
to be disappointing. Online sales softened in the run up to
Christmas, which we believe was due to consumers losing confidence
in retailers' delivery promises in light of the widely reported
postal strikes, and the potential for knock-on effects on other
carriers.
Store sales since Christmas have continued to be strong as we
entered our January sale, and we expect to end the financial year
with a clean stock position. As anticipated, we will incur a higher
level of markdown than last year, when stock levels were unusually
low. Post-sale, we will continue to improve our product proposition
with strong new seasonal and own brand range launches, which we
expect to drive stronger trading compared with last year.
H1 FY23 Financial highlights
-- Total revenue grew by 2.4% compared with H1 FY22, a resilient sales performance against strong
FY22 comparatives and given the challenging consumer backdrop.
-- Store LFL(1) sales for the Period grew by 3.5% and online sales declined by 16.9% (still 50%
above pre-Covid levels), resulting in overall LFL growth of 0.6%.
-- As expected, pre-IFRS 16 Adjusted(2) EBITDA loss was GBP6.4m compared with a GBP2.5m profit
during H1 FY22. H1 result was impacted by residual impact of the cyber security incident in
March 2022 and cost headwinds including freight, inflation(3) and notably the normalisation
of business rates charges which represented c.GBP3.9m of additional cost.
-- Loss before tax of GBP10.7m (H1 FY22: loss of GBP1.0m). Due to the seasonal nature of the
business, The Works typically makes a loss in H1, with the year's profit generation being
strongly focused on the peak Christmas trading period in H2.
-- Net cash balance at the Period end of GBP7.0m(4) (H1 FY22 GBP17.8m) reflecting a return to
the normal pattern for the Group, which typically generates cash in H2 but not in H1.
-- With the heightened level of uncertainty regarding consumer spending over the remainder of
the financial year, the Board's expectations for the overall FY23 result are unchanged, despite
the recent increase in LFL sales.
-- In line with last year, the Board is not proposing an interim dividend, but will review the
appropriate level of dividend for FY23 alongside the final results.
H1 FY23 H1 FY22
-------------------------------- ----------- ----------
Revenue GBP118.9m GBP116.1m
Revenue growth 2.4% 30.6%
LFL sales growth(1) 0.6% 14.5%
Pre-IFRS 16 Adjusted(2) EBITDA (GBP6.4m) GBP2.5m
Loss before tax (GBP10.7m) (GBP1.0m)
Basic loss per share (13.9p) (1.4p)
Net cash at bank(4) GBP7.0m GBP17.8m
H1 FY23 Operational highlights
Continued to make progress on our strategy of being "better, not
just bigger", including:
-- Further improving the customer-focused proposition by, among other things, expanding our front-list
book offer. Front and back-list titles by Colleen Hoover proved particularly popular, making
up half of our top 10 bestsellers in the Period, whilst the introduction of front-list children's
books by authors such as Julia Donaldson also helped to increase the Group's book market share,
both in terms of value and volume.
-- Capitalised on key seasonal events during the year, with refreshed outdoor play ranges proving
popular during the hot summer months and a record 'Back to School' season driven by improved
third party and own-brand stationery ranges.
-- Continued to optimise the store estate by opening seven new stores and relocating two, all
of which are trading ahead of expectations, and refitting 21 stores.
-- Launched an updated brand to ensure that the visual representation and tone of voice of The
Works aligns with its purpose and reflects the more modern, fun and engaging business we are
today. The business also relaunched its loyalty scheme, signing up 0.3m new members in the
first half, a 100% increase on H1 FY22.
-- Improved the operational performance of the Company by enhancing the supply chain with a new
stock allocation system, significantly improved IT systems following the cyber security incident
and implementing a new automated packing machine and robotics to improve the efficiency of
online fulfilment operations.
Outlook
Overall, the performance delivered in the first half was
resilient given the challenging economic conditions and we are
encouraged that trading has improved since the Period ended. The
Board's expectation for the full year results remains unchanged
given the current sales trajectory and our optimism regarding the
new ranges and the inherent strength of the customer proposition.
However, this is balanced by the possibility that consumer spending
may weaken after Christmas 2022(5) and through the remainder of the
current financial year.
Gavin Peck, Chief Executive Officer of The Works, commented:
"The Works delivered a resilient performance in the first half
against the backdrop of an increasingly challenging consumer
environment. This reflects the durability of the business, the
relevance of our value proposition, the progress we are making in
delivering our "better, not just bigger" strategy and the
relentless efforts of our fantastic colleagues. We have not been
immune from the economic headwinds affecting the retail sector,
including higher costs which impacted our profitability in the
first half more than last year. Although trading conditions were
more difficult, we were still pleased to see cost-conscious
customers buying into our value offering, which enabled us to
deliver positive sales growth overall.
"Whilst the trading environment remains uncertain, we are
encouraged by the strength of our performance during and after the
key Christmas period and believe there is significant value to be
created from delivering on our strategy in the medium-term. This is
what we will be focussing on during the upcoming period, and we
feel well placed to capitalise on the many attractive opportunities
that lie ahead."
Interim results presentation
A presentation for sell-side 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
(https://corporate.theworks.co.uk/investors/).
Enquiries:
TheWorks.co.uk plc
Gavin Peck, CEO via Sanctuary Counsel
Steve Alldridge, CFO
Sanctuary Counsel
Ben Ullmann (0)20 7340 0395
Rachel Miller theworks@sanctuarycounsel.com
Footnotes:
(1) The like for like (LFL) sales increase has been calculated conventionally with reference to
the FY22 comparative sales figures. LFL sales are defined by the Group as the year-on-year
growth in gross sales from stores which have been trading for a full financial year prior
to the current year and have been trading throughout the current financial period being reported
on, and from the Company's online store, calculated on a calendar week basis.
(2) Adjusted profit figures exclude Adjusting items. There were no Adjusting items in respect
of H1 FY23. See Note 5 of the attached condensed unaudited financial statements for details
of Adjusting items relating to the comparative period.
(3) Other inflationary increases primarily related to the UK National Living Wage and energy costs.
(4) Net cash at bank, excluding IAS 17 finance leases.
(5) Having noted the predictions made by certain economic commentators.
Notes for editors:
The Works is one of the UK's leading family-friendly value
retailers of books, arts and crafts, stationery, toys and games,
offering customers a differentiated proposition as a value
alternative to full price specialist retailers. The Group trades
from over 500 stores in the UK & Ireland and online.
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 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
Trading performance
The Works delivered a resilient performance in the first half
against the backdrop of an uncertain macroeconomic and consumer
environment. We traded against strong comparatives in H1 FY22,
which benefitted from a more notable post-COVID sales bounce than
was apparent at the time, and dealt with the residual impact of the
cyber security incident that affected sales in May and June.
Despite this, we delivered a robust performance overall thanks to
the ongoing strategic progress we have made and our value
proposition, which continues to prove popular with cost-conscious
shoppers. Revenue increased by 2.4% to GBP118.9m (H1 FY22:
GBP116.1m) and total LFL sales increased by 0.6%, driven by strong
store growth.
Our stores, which generate over 85% of revenue, performed well
with LFL sales up 3.5%. After a slower start to the period store
performance improved over the summer, with positive LFL sales
growth from June onwards. The successful expansion of front list
books continued to drive growth and we capitalised on the warm
weather during the summer holidays with good sales of refreshed
outdoor play ranges, followed by a record "Back to School" season
driven by improved branded and own-brand ranges. Store sales
remained positive in October although softened, reflecting the
increasingly challenging consumer environment towards the end of
the Period and a later peak in Christmas sales than we have
experienced in the previous two years.
Online trading was weaker, with LFL sales declining by 16.9%,
although still 50% ahead of pre-COVID levels. This was largely due
to consumers' stronger than expected return to shopping in stores
post-COVID. Although the online performance during the Period was
disappointing, we continue to believe that there remains a
significant opportunity to drive growth in this channel in the
medium-term through multiple levers, including improving customer
experience on the site, better online ranging and enabling the
ordering of online ranges in store. To ensure that we make the
changes necessary to improve the execution of our strategy in this
area, a review of the online operation is currently underway.
Profitability declined in the first half with an EBITDA loss of
GBP6.4m (H1 FY22: GBP2.5m profit) and a loss before tax of GBP10.7m
(H1 FY22: GBP1.0m loss). EBITDA performance was affected by lower
than expected sales growth and significant year-on-year cost
increases, most notably business rates, freight, payroll and energy
cost inflation. It is important to note that due to the seasonality
of the business the first half of the financial year is typically
loss making, with a substantial proportion of our profits generated
in H2, which includes Christmas trading.
We ended the period with net cash of GBP7.0m (H1 FY22:
GBP17.8m), which reflected the build of stock prior to the peak
trading season. The Group's total liquidity availability including
RCF headroom at the Period end was GBP33.0m.
Strategy
We have continued to make good progress against our "better, not
just bigger" strategy in the first half, as outlined below.
Our improved and more customer-focused proposition continued to
resonate well with customers, with sales growth driven by:
-- An expansion of our front-list book offer, with front and back-list titles by Colleen Hoover
proving particularly popular and making up half of our top 10 bestsellers in the period. The
successful introduction of front-list authors such as Julia Donaldson to our children's book
offer has also helped to increase our overall UK book market share by c.1% by value and c.1.5%
by volume.
-- Our refreshed outdoor play ranges in the summer, with new products such as our popular bubble
machines. We also saw a record 'Back to School' season, where improved branded stationery
ranges including Helix, Pukka and Sharpie performed well alongside own-brand ranges.
-- The relaunch of our loyalty scheme, internally and externally, resulting in us signing up
0.3m new members, a 100% increase year-on-year. The scheme has over 1.1m active members, typically
spending 30% more than non-members, and we continue to work on improving our analytical capabilities
to drive improved insight from the data this scheme provides.
We continued to optimise our store estate with good progress in
the period, including:
-- Opening seven new stores, including in high priority locations such as Teesside Retail Park,
Leeds White Rose Shopping Centre and Team Valley Shopping Park, as well as relocating a further
two stores and closing five. All new stores are trading well and ahead of expectations.
-- Continuing to invest in our existing estate, undertaking 21 refits of our oldest stores to
bring them up to modern standards.
We improved the operational capabilities of the business, a key
pillar of our strategy to become a more modern and efficient
retailer, through investments in:
-- Enhancing our supply chain through the introduction of "Slimstock", a new stock allocation
system, in September. This will help improve on-shelf availability, increase sell-through
and stock turn, and reduce markdowns.
-- Significant improvements to our IT security following the cyber security incident in March
2022. This has included refreshed mandatory training for all colleagues to raise awareness
of cyber security issues and the establishment of a new Security Operations Centre to monitor
and respond to any unusual activities in our systems or networks on a 24/7 basis.
-- Partial automation of online fulfilment operations, with the implementation of an automated
packing machine and robotics to support picking orders at our third-party provider, iForce.
This automation is key to ensuring we can maintain online profitability given the continued
headwind from National Living Wage increases.
We also launched our updated brand to ensure that the visual
representation and tone of voice of The Works aligns with our
purpose and reflects the more modern, fun and engaging business we
are today. The launch was accompanied by the rollout of new
in-store Point of Sale (POS) and a refreshed look and feel to the
website, social media channels and customer communications. This
refreshed brand encapsulates the strategic shift of the business in
the last three years from being seen as a 'pile it high' discounter
to a more customer-focused value retailer with a clearer purpose,
which will help attract and retain customers in the years
ahead.
We remain increasingly focused on our Environmental, Social and
Governance (ESG) agenda and our dedicated steering group meets
quarterly to drive progress in these areas. Progress in the period
includes:
-- Launching the 'Can Do Academy', a colleague platform dedicated to enhancing colleagues' learning
and development, and 'MyWorks', an internal communication, benefits and wellbeing platform.
Investment in these platforms demonstrates our commitment to investing in colleagues and desire
to ensure that all colleagues have rewarding careers at The Works.
-- Continuing to build on our strong colleague engagement scores, being placed 12(th) in the
Best Big Companies to Work for, up from 13(th) in each of the past two years, maintaining
a 2* accreditation for 'outstanding' engagement in the workplace.
-- Launching an external review of diversity & inclusion that will provide a framework for developing
our approach in this area to ensure that we are an inclusive organisation.
-- Ongoing work to meet the requirements in relation to Task Force on Climate-Related Financial
Disclosures (TCFD), including the development of a climate risk register and establishing
a framework to quantify our environmental impact, which is the first stage in developing a
plan to reduce it.
-- Recruiting a Sustainability Manager (who joined at the beginning of 2023), a new role, to
lead and focus our efforts to reduce the environmental impact of our business.
Outlook
We are encouraged that our value proposition has continued to
resonate with customers; we have seen sustained demand for our
offering and made continued strategic progress in the first half,
all against the backdrop of challenging trading conditions.
However, we believe that consumer spending could weaken further and
therefore that a high degree of uncertainty remains for the rest of
the financial year. Taking this into consideration, the Board's
current expectation for the full year's result remains
unchanged.
Dividends
In line with last year, the Board is not proposing an interim
dividend, but will review the appropriate level of dividend
alongside the final FY23 results.
Gavin Peck
Chief Executive Officer
20 January 2023
Financial Report
Overview
This report covers the 26 week period ended 30 October 2022 ("H1
FY23", "H1" or "the Period") and refers to the comparative "H1
FY22" period of the 26 weeks ended 31 October 2021.
The result for the Period was a loss before tax of GBP10.7m
compared with a loss of GBP1.0m for H1 FY22. The EBITDA was a loss
of GBP6.4m (H1 FY22: profit of GBP2.5m). This result was, as
anticipated, lower than last year but is consistent with the level
required in H1 FY23 to meet our overall expectation for the year.
In contrast to the previous two years, which were affected by COVID
related anomalies (including unusual sales and operating cost
patterns, furlough and rates reliefs), the seasonality of the
business typically results in a loss in the first half of the
financial year, with substantially all profit being generated
through Christmas trading in H2.
The table below summarises the movements between the H1 FY22 and
H1 FY23 EBITDA results. Revenue increased by 2.4%, but there were
significant year on year headwinds which more than offset this,
including the cessation of COVID-19 business rates relief, payroll
and energy cost inflation and higher freight costs.
GBPm
------
H1 FY22 EBITDA 2.5
Additional margin from year-on-year sales increase 2.2
Lower product gross margin percentage (4.4)
Full business rates charged in H1 FY23 (3.9)
Electricity (inflation) (0.9)
Payroll (inflation) (1.6)
Other (0.3)
H1 FY23 EBITDA (6.4)
======
At the balance sheet date the Group held net cash of GBP7.0m (H1
FY22 GBP17.8m) (excluding IAS 17 leases), reflecting a return to
the normal pattern for the business which typically generates cash
in H2 but not in H1 and, a larger than normal increase in stock
prior to Christmas, to mitigate the potential risk of further
disruptions to container freight shipping.
The Group tracks a number of alternative performance measures
("APMs") including EBITDA (on an IAS 17 basis), 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 4 of the condensed unaudited
financial statements.
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 2.4% to GBP118.9
million (H1 FY22: GBP116.1 million). LFL sales increased by 0.6%,
store LFLs increasing by 3.5% and online sales decreasing by
16.9%.
The number of stores increased by two, from 525 to 527 at the
end of the Period. Seven new stores were opened, five were closed
and two stores were relocated to new sites.
The table on the following page shows an analysis of sales and a
reconciliation to statutory revenue.
H1 FY23 GBPm H1 FY22 GBPm Variance GBPm Variance %
------------- ------------- -------------- -----------
Store LFL sales 114.7 110.8 3.8 3.5
Online sales 15.1 18.1 (3.0) (16.9)
------------- ------------- -------------- -----------
Total LFL sales for Period 129.8 128.9 0.8 0.6
Non LFL sales 4.5 3.0 1.6 53.2
Total Gross Sales 134.3 131.9 2.4 1.8
VAT (14.5) (15.1) 0.6 (4.3)
Loyalty points redeemed (0.9) (0.7) (0.2) 28.6
Revenue (per statutory accounts) 118.9 116.1 2.8 2.4
============= ============= ============== ===========
The effective VAT rate was lower than in H1 FY22 due to an
increase in the sales mix of books, which carry a zero VAT rate.
This favourable VAT effect from the higher sales of books partially
offsets the adverse percentage margin effect described below.
The cost of loyalty points redeemed increased as a result of an
increase in the number of new members recruited to the loyalty
scheme, which has been an area of focus during the Period.
Gross profit
H1 FY23 H1 FY22
GBPm % of GBPm % of GBPm % Variance
revenue revenue Variance
------ --------- ------ --------- ---------- -----------
Revenue 118.9 116.1 2.8 2.4
Less: Cost of goods
sold 52.0 47.0 5.0 10.6
Product gross margin 66.9 56.3 69.1 59.5 (2.2) (3.2)
Overhead costs charged to statutory
cost of sales
Store payroll 23.0 19.4 21.2 18.3 1.8 8.5
Store property and establishment
costs 25.2 21.2 20.8 17.9 4.5 21.7
Store PoS and transaction
fees 0.9 0.8 1.1 0.9 (0.1) (11.9)
Store depreciation (excluding
IFRS 16) 2.5 2.1 2.6 2.2 (0.1) (3.3)
Online variable costs 8.2 6.9 8.1 7.0 0.1 1.6
IFRS16 impact (0.9) (0.8) (2.3) (2.0) 1.4 (60.4)
Adjusting items 0.0 0.0 (0.1) 0.0 0.1 (100.0)
Gross profit per financial
statements 7.9 6.7 17.8 15.3 (9.9) (55.4)
====== ========= ====== ========= ========== ===========
-- The product gross margin decreased to 56.3%, from 59.5% last year. This was due to:
o Sales mix - driven by a strategic initiative, book sales grew
significantly compared with H1 FY22, particularly "front list" or
new best seller titles. This has been a successful development, but
has resulted in a lower gross margin percentage as front list books
achieve a lower percentage margin than other products (as do
branded games and toys, which also sold strongly).
o Container freight costs, which continued to be high during
most of H1 FY23, although the rates began to abate during the
summer, and have subsequently fallen back to pre-COVID levels. The
full benefit of this reduction in freight rates will be seen in
FY24, and is expected to approximately offset a potentially less
favourable dollar exchange rate than in FY23.
o The hedged FX rate on payments made in US dollars during H1
was more favourable than in the comparative period, which was
expected to provide a margin benefit for H1 FY23. However, this was
more than offset by an accounting entry required to restate the
dollar payables on the balance sheet at the Period end at the
prevailing spot rate, which was much lower (US$1.16). This was
necessary due to a shortfall in the hedging contracts.
Substantially all of this entry is expected to unwind during
H2.
-- Store payroll costs increased due to the 6.6% increase in the
National Living Wage and the increase in the employer's national
insurance rate (which was subsequently reduced again, after the
Period end). The opportunities to mitigate the increase in the NLW
directly within store labour costs remains limited, due to the
operational gearing inherent in operating small stores, for
example, many stores already operate on a "minimum operational
hours" basis for much of the year.
-- A GBP4.5m increase in store property and establishment costs was due to:
o GBP3.9m of COVID-19 rates relief received in H1 FY22, which
lowered the prior year comparative.
o A GBP0.9m increase in electricity costs due to inflation.
o Total rent charges were in line with the previous year. There
were further savings in LFL rents, albeit the volume of these
savings was lower than in previous periods as most leases have now
been reviewed within the last 24 months. The LFL rent savings were
largely offset by rents from new/relocated stores being higher than
for the closed stores, because the new/relocated stores occupy
better units which command a higher rent.
-- Online variable (marketing and fulfilment) costs were broadly
level year on year. Due to an adverse sales mix, mostly from sales
of 10 for GBP10 children's books, online unit selling prices were
lower in H1 FY23 resulting in a similar volume of units being
processed, despite the lower sales value. The introduction of
automated robots to assist with online fulfilment picking began to
deliver efficiency benefits but these were offset by reduced
efficiencies elsewhere in the system due to high labour turnover
and an increased mix of agency staff, as well as underlying payroll
cost inflation.
-- The IFRS 16 impact in the table above (and in the
Administration costs table below) represents the additional IFRS 16
depreciation on the notional right of use asset created, less rent,
which is not recognised under IFRS 16. The difference in the size
of the adjustment compared with H1 FY22 is due to a combination of
factors including routine variations in the notional interest rate
used in the calculation, and changes in the IFRS 16 depreciation
charge. Note 4 of the financial statements provides a
reconciliation between pre and post IFRS 16 profit.
Store distribution costs
H1 FY23 H1 FY22
GBPm % of revenue GBPm % of revenue GBPm variance % variance
----- ------------- ----- ------------- -------------- -----------
Distribution costs 5.0 4.2 4.1 3.5 0.9 22.8
===== ============= ===== ============= ============== ===========
Store distribution costs increased by GBP0.9m to GBP5.0m. Note
that online fulfilment costs are included within the cost of
sales.
-- L abour costs in our retail distribution centre increased by
GBP0.5m. In addition to the 6.6% increase in the National Living
Wage, the mix of agency staff used increased, which incurs a higher
hourly rate, and there were also redundancy costs due to a
restructuring of the DC operational management team.
-- Third party delivery charges increased by GBP0.3m due to an
increase in the volumes shipped and price increases charged by the
supplier.
Administration costs
Administration costs decreased compared with the prior year.
There were no material variances of note, the overall year-on-year
reduction in costs resulted from a number of small changes which,
combined, aggregated to a GBP0.4m saving.
H1 FY23 H1 FY22
GBPm % of revenue GBPm % of revenue GBPm variance % variance
------ ------------- ------ ------------- -------------- -----------
Pre-IFRS 16, Adjusted administration
costs 10.9 9.2 11.4 9.8 (0.4) (3.8)
Depreciation 0.5 0.4 0.6 0.5 (0.2) (26.5)
IFRS 16 impact (0.2) (0.2) (0.2) (0.2) 0.0 (5.9)
Administration costs 11.2 9.4 11.8 10.2 (0.6) (5.0)
====== ============= ====== ============= ============== ===========
Net financing expense
Net financing costs in the Period were GBP2.4m (FY22: GBP2.8m),
mostly relating to IFRS 16 notional interest on the calculated
lease liability.
IFRS 16 interest was lower because recent leases have been
renewed at lower rents and with shorter lease terms, reducing the
IFRS 16 borrowings on which the interest is calculated.
Interest relating to bank facilities was GBP0.3m (H1 FY22:
GBP0.4m) and comprised facility availability charges and
amortisation of the cost of setting up the facility.
Loss before tax
The loss before tax was GBP10.7m (H1 FY22: GBP1.0m). Due to the
seasonality of the business, the first half of the financial year
is typically loss making.
Tax
The Group's tax credit in respect of the Period was GBP2.0m (H1
FY22: credit of GBP0.1m). The effective tax rate was 18.6% (H1
FY22: 14.1%).
The increase in the effective tax rate is due to the prior year
rate being lower than usual due to an increase in the value of the
deferred tax asset recognised in FY22. This was due to the
forthcoming increase in the corporation tax rate from 19% to 25%,
which becomes effective from 1 April 2023. Deferred tax assets are
calculated based on the tax rate applicable when they are
anticipated to unwind, therefore, the asset was recognised at the
higher rate of 25% at the end of FY22, creating a tax credit to the
profit and loss account.
It is anticipated that due to the lower level of profit compared
with FY22 and the availability of additional capital allowances,
there will be no current corporation tax payable for the FY23
financial year, although deferred tax calculations may result in a
small net P&L tax charge.
Earnings per share
The basic and the diluted losses per share for the Period were
13.9 pence (H1 FY22: 1.4 pence).
Capital expenditure
Capital expenditure in the Period was GBP2.5 million (H1 FY22:
GBP1.6m).
Due to a timing difference (expected to reverse in H2), the cost
of opening new stores was offset in H1 by leasehold contributions
from landlords, resulting in a nil net cost reported during the
Period.
The other notable areas of capital expenditure were on store
refits, GBP0.7m and, GBP0.6m on new EPOS till software.
Capital expenditure for the full year is still expected to be
approximately GBP7.5m.
H1 FY23 H1 FY22 Variance
GBP'm GBP'm GBPm
-------- -------- ---------
New stores and relocations 0.0 0.4 (0.4)
Store refits and maintenance 1.2 0.6 0.6
IT hardware and software 1.3 0.4 0.9
Other 0.0 0.2 (0.2)
-------- -------- ---------
Total capital expenditure 2.5 1.6 0.9
======== ======== =========
Stock
Stock was valued at GBP53.6m at the end of the Period (H1 FY22:
GBP40.0m), an increase of 34.0%.
The operating cycle of the business causes maximum stock levels
to occur prior to the Christmas sales peak, and therefore stock
levels typically increase at the half year end compared with the
levels at the year end. In addition to this seasonal build, the
stock value was higher than normal at the end of H1 FY23 due to the
following:
-- Additional stock was purchased as a precautionary measure to
mitigate the risk that ocean freight movements were once again
disrupted in the approach to the peak season, as happened in autumn
2021. In the event, stock flowed freely, resulting in a higher than
normal stock unit holding at the end of October.
-- The cost value per unit of stock was approximately 20% higher
than in the prior year, including the mix effect of higher priced
front list books, and the higher freight costs included.
-- Stock provision values are lower than the prior year due to a
reduction in the obsolescence provision.
Through a combination of compensatory adjustments to purchasing
plans on other lines and a larger January sale than last year, the
additional stock purchased to mitigate the potential risk of ocean
freight disruption is expected to have sold by the end of the
financial year, resulting in the year end stock value being broadly
in line with last year's.
H1 FY23 H1 FY22
GBPm GBPm
Gross stock 46.6 35.2
Less: provisions (3.2) (4.4)
------- -------
Stock net of provisions 43.4 30.9
Stock in transit 10.2 9.2
------- -------
Stock per balance sheet 53.6 40.0
======= =======
Cashflow
The Group ended the period with net cash of GBP7.0m.
Approximately GBP5.0m of October payments were made on 31 October,
which fell into H2 FY22, thereby creating a favourable timing
difference. The cash position at the end of the Period fully
reflects the build of stock prior to the peak trading season.
The net cash outflow for the Period was GBP9.3m (H1 FY22: inflow
of GBP17.0m), reflecting a return to the normal pattern for the
business which typically generates cash in H2 but not in H1. This
was in contrast to H1 FY22, which was unusual in that a cash inflow
occurred. The size of the outflow during H1 FY23 was increased by
the larger increase in stock described above.
The table on the following page shows an abbreviated summarised
cashflow analysis.
H1 FY23 H1 FY22 Variance
GBPm GBPm GBPm
------------- ------------ ---------
Operating cash flows before changes
in working capital 5.6 15.4 (9.8)
Deduct from statutory presentation:
rent payments (14.3) (16.2) 2.0
Deduct from statutory presentation:
CLBILS repayment - 7.5 (7.5)
Deduct from statutory presentation:
RCF drawdown (4.0) - (4.0)
------------- ------------ ---------
Non IFRS cashflow before working
capital movements (12.6) 6.7 (19.3)
Net movements in working capital 3.8 19.7 (15.9)
Capex (2.5) (1.6) (0.9)
Tax paid (1.5) - (1.5)
Interest and financing costs (0.6) (0.2) (0.4)
Cashflow before loan movements (13.4) 24.6 (38.0)
Repayment of CLBILS loan - (7.5) 7.5
Drawdown of RCF 4.0 - 4.0
Exchange rate movements 0.3 (0.1) 0.4
Purchase of treasury shares by
EBT (0.1) - (0.1)
Net (decrease)/increase in cash
and cash equivalents (9.3) 17.0 (26.3)
============= ============ =========
Opening net cash balance excluding
IAS 17 leases 16.3 0.8
Closing net cash balance excluding
IAS 17 leases 7.0 17.8
GBP4.0m was drawn under the Group's RCF facility during October
2022, which was repaid on 31 October 2022, just after the Period
end.
Bank facilities
The Group's bank facilities comprise a GBP30.0m revolving credit
facility ('RCF') with HSBC which expires on 30 November 2025. The
facility includes financial covenants which are structured in a way
which is standard for retail businesses, in relation to leverage
and fixed charge cover.
Dividends
A final dividend for FY22 was paid shortly after the Period end.
As noted earlier in this report, in line with last year, the Board
is not proposing an interim dividend, but will review the
appropriate level of dividend for FY23 alongside the final results
(expected to be published in July 2023).
The Board remains committed to returning capital to shareholders
and has previously done this via the payment of dividends. The
Board is also open minded to other forms of capital distribution if
appropriate in addition to, or instead of dividends. The nature and
size of other forms of distribution (for example, share buy backs)
would depend on conditions at the time including in relation to
profit levels, the existence of excess liquidity, and the
prevailing share price.
Stephen Alldridge
Chief Financial Officer
20 January 2023
Unaudited Condensed Consolidated Income Statement
For the 26 weeks ended 30 October 2022
26 weeks to 30 26 weeks to 31 52 weeks to 1 May
October 2022 October 2021 2022
------------------------------- ----------------------------- -------------------------------
Adjusted Adjusting Total Adjusted Adjusting Total Adjusted Adjusting Total
items items items
Notes GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------- ----- --------- --------- --------- -------- --------- -------- --------- --------- ---------
Revenue 3 118,932 - 118,932 116,073 - 116,073 264,630 - 264,630
Cost of sales 5 (111,004) - (111,004) (98,344) 58 (98,286) (216,082) 29 (216,053)
---------------- ----- --------- --------- --------- -------- --------- -------- --------- --------- ---------
Gross profit 7,928 - 7,928 17,729 58 17,787 48,548 29 48,577
Other operating
income /
(expense) 4 - 4 (116) - (116) (111) - (111)
Distribution
expenses (5,030) - (5,030) (4,101) - (4,101) (9,128) - (9,128)
Administrative
expenses (11,223) - (11,223) (11,810) - (11,810) (24,004) - (24,004)
---------------- ----- --------- --------- --------- -------- --------- -------- --------- --------- ---------
Operating
(loss)/profit (8,321) - (8,321) 1,702 58 1,760 15,305 29 15,334
Finance income 6 23 23 5 - 5 16 - 16
Finance expense 6 (2,364) - (2,364) (2,757) - (2,757) (5,192) - (5,192)
---------------- ----- --------- --------- --------- -------- --------- -------- --------- --------- ---------
Net financing
expense (2,341) - (2,341) (2,752) - (2,752) (5,176) - (5,176)
---------------- ----- --------- --------- --------- -------- --------- -------- --------- --------- ---------
(Loss) / profit
before tax (10,662) - (10,662) (1,050) 58 (992) 10,129 29 10,158
Tax 9 1,986 1,986 140 - 140 (1,436) - (1,436)
---------------- ----- --------- --------- --------- -------- --------- -------- --------- --------- ---------
Loss for the
period 4 (8,676) - (8,676) (910) 58 (852) 8,693 29 8,722
---------------- ----- --------- --------- --------- -------- --------- -------- --------- --------- ---------
Loss before tax
and IFRS 16 4 (9,737) - (9,737) (1,189) 53 (1,136) 9,525 (241) 9,284
---------------- ----- --------- --------- --------- -------- --------- -------- --------- --------- ---------
Basic
(loss)/earnings
per share
(pence) 10 (13.9) (13.9) (1.5) - (1.4) 13.9 14.0
---------------- ----- --------- --------- --------- -------- --------- -------- --------- --------- ---------
Diluted
(loss)/earnings
per share
(pence) 10 (13.9) (13.9) (1.5) - (1.4) 13.7 13.7
---------------- ----- --------- --------- --------- -------- --------- -------- --------- --------- ---------
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 30 October 2022
26 weeks 26 weeks 52 weeks
to to to
30 October 31 October 1 May 2022
2022 2021
GBP000 GBP000 GBP000
--------------------------------------- ----------- ----------- -----------
(Loss) / profit for the period (8,676) (852) 8,722
Items that may or may not be recycled
subsequently into profit and loss
Cash flow hedges - changes in fair
value (498) 1,807 4,181
Cash flow hedges - reclassified to
profit and loss (1,258) 201 (321)
Cost of hedging reserve - changes in
fair value 56 (484) (83)
Cost of hedging reserve - reclassified
to profit and loss 47 55 94
Tax relating to components of other - - -
comprehensive income
--------------------------------------- ----------- ----------- -----------
Other comprehensive (expense) / income
for the period, net of income tax (1,653) 1,579 3,871
--------------------------------------- ----------- ----------- -----------
Total comprehensive (expense) / income
for the period attributable to equity
shareholders of the Parent (10,329) 727 12,593
--------------------------------------- ----------- ----------- -----------
Unaudited Condensed Consolidated Statement of Financial
Position
As at 30 October 2022
30 October 2022 31 October 21 1 May 2022
(Restated - Note 1b)
Note GBP000 GBP000 GBP000
---------------------------------------------------- ---- ---------------- --------------------- ----------
Non-current assets
Intangible assets 12 2,901 2,320 2,672
Property, plant and equipment 13 13,351 16,211 13,970
Right of use assets 13 89,133 102,844 94,351
Deferred tax assets 5,463 2,992 3,477
---------------------------------------------------- ---- ---------------- --------------------- ----------
110,848 124,367 114,470
Current assets
Inventories 14 53,571 40,043 29,387
Trade and other receivables 10,469 14,871 8,427
Derivative financial asset 18 1,775 425 2,393
Current tax asset 372 694 -
Cash and cash equivalents 10,971 17,783 16,280
---------------------------------------------------- ---- ---------------- --------------------- ----------
77,158 73,816 56,487
---------------------------------------------------- ---- ---------------- --------------------- ----------
Total assets 188,006 198,183 170,957
Current liabilities
Interest bearing loans and borrowings 15 4,000 (262) -
Lease liabilities 15 23,830 27,915 25,434
Trade and other payables 66,948 64,264 35,958
Provisions 16 204 836 204
Derivative financial liability 18 - 702 -
Current tax liability - - 1,115
---------------------------------------------------- ---- ---------------- --------------------- ----------
94,982 93,455 62,711
Non-current liabilities
Lease liabilities 15 81,128 94,508 85,702
Provisions 16 767 - 913
81,895 94,508 86,615
---------------------------------------------------- ---- ---------------- --------------------- ----------
Total liabilities 176,877 187,963 149,326
---------------------------------------------------- ---- ---------------- --------------------- ----------
Net assets 11,129 10,220 21,631
Equity attributable to equity holders of the Parent
Share capital 17 625 625 625
Share premium 17 28,322 28,322 28,322
Merger reserve (54) (54) (54)
Share based payment reserve 2,512 1,807 2,252
Hedging reserve 290 835 2,227
Retained earnings (20,566) (21,315) (11,741)
---------------------------------------------------- ---- ---------------- --------------------- ----------
Total equity 11,129 10,220 21,631
---------------------------------------------------- ---- ---------------- --------------------- ----------
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 30 October 2022 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
As at 1 May 2022 625 28,322 (54) 2,227 2,252 (11,741) 21,631
Total comprehensive income for the period
Loss for the period - - - - - (8,676) (8,676)
Other comprehensive income - - - (1,653) - - (1,653)
---------------------------------------------- ------- ------- ------- ---------- ----------- -------- --------
Total comprehensive income / (expense) for the
period - - - (1,653) - (8,676) (10,329)
Hedging gains and losses and costs of hedging
transferred to the cost of inventory - - - (284) - - (284)
---------------------------------------------- ------- ------- ------- ---------- ----------- -------- --------
Transactions with owners of the Company
Share-based payment charges - - - - 260 - 260
Acquisition of treasury shares - - - - - (149) (149)
Total transactions with owners - - - - 206 (149) 111
---------------------------------------------- ------- ------- ------- ---------- ----------- -------- --------
Balance at 30 October 2022 625 28,322 (54) 290 2,512 (20,566) 11,129
---------------------------------------------- ------- ------- ------- ---------- ----------- -------- --------
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 52 Weeks Ended 2 May 2022 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------------------------- ------- ------- ------- ---------- ----------- -------- --------
Balance at 2 May 2021 625 28,322 (54) (1,203) 1,601 (20,463) 8,828
Total comprehensive income for the period
Profit for the period - - - - - 8,722 8,772
Other comprehensive expense - - - 3,871 - - 3,871
---------------------------------------------- ------- ------- ------- ---------- ----------- -------- --------
Total comprehensive income / (expense) for the
period - - - 3,871 - 8,722 12,593
Hedging gains and losses and costs of hedging
transferred to the cost of inventory - - - (441) - - (441)
---------------------------------------------- ------- ------- ------- ---------- ----------- -------- --------
Transactions with owners of the Company
Share-based payment charges - - - - 651 - 651
Total transactions with owners - - - - 651 - 651
---------------------------------------------- ------- ------- ------- ---------- ----------- -------- --------
Balance at 1 May 2022 625 28,322 (54) 2,227 2,252 (20,463) 21,631
---------------------------------------------- ------- ------- ------- ---------- ----------- -------- --------
(1) In the comparative period the hedging reserve included
GBP108k for the 26 weeks ended 30 October 2021 (GBP176k for the 52
weeks ended 1 May 2022) 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 (GBPNIL in respect
of H1 FY23).
Unaudited Condensed Consolidated Cash Flow Statement
For the 26 weeks ended 30 October 2022
30 October 2022 31 October 2021 1 May 2022
GBP000 GBP000 GBP000
----------------------------------------------------------- --------------- --------------- ----------
Cash Flows From Operating Activities
(Loss) / profit for the period (8,676) (852) 8,722
Adjustments for:
Depreciation of property, plant and equipment 2,410 2,554 5,005
Impairment of property, plant and equipment - - 416
Reversal of impairment of property, plant and equipment - (53) (175)
Depreciation of right-of-use assets 11,172 10,172 20,029
Impairment of right-of-use assets - - 710
Reversal of impairment of right-of-use assets - (5) (980)
Amortisation of intangible assets 526 376 806
Derivative exchange (gain) / loss (390) 281 289
Financial expense 330 412 692
Financial income (23) (5) (16)
Interest on lease liabilities 2,034 2,345 4,500
Loss on sale of property, plant and equipment (18) 185 244
Loss on disposal of right-of-use asset 519 269 2,066
Profit on disposal of lease liability (558) (337) (2,340)
Share based payment charges 260 206 651
Taxation (1,986) (140) 1,436
------------------------------------------------------------ --------------- --------------- ----------
Operating cash flows before changes in working capital 5,600 15,408 42,055
(Increase) / decrease in trade and other receivables (1,706) (7,958) (1,514)
Increase in inventories (24,030) (10,720) (892)
Increase in trade and other payables 29,706 38,256 9,336
(Decrease) / increase in provisions (146) 118 399
------------------------------------------------------------ --------------- --------------- ----------
Cash inflows from operating activities 9,424 35,104 49,384
Corporation tax paid (1,487) - (222)
------------------------------------------------------------ --------------- --------------- ----------
Net cash from operating activities 7,937 35,104 49,162
Cash flows from investing activities
Acquisition of property, plant and equipment (1,773) (1,373) (1,936)
Acquisition of intangible assets (755) (233) (1,015)
Interest received 23 5 16
------------------------------------------------------------ --------------- --------------- ----------
Net cash outflow from investing activities (2,505) (1,601) (2,935)
------------------------------------------------------------ --------------- --------------- ----------
Cash flows from financing activities
Interest paid (304) (188) (157)
Payment of lease liabilities (capital) (12,223) (13,901) (25,969)
Payment of lease liabilities (interest) (2,028) (2,345) (4,500)
RCF drawdown 4,000 - -
Repayment of bank borrowings - (7,500) (7,500)
Purchase of treasury shares (149) - -
Payment of RCF costs (336) - -
------------------------------------------------------------ --------------- --------------- ----------
Net cash outflow from financing activities (11,040) (23,934) (38,126)
Net (decrease) / increase in cash and cash equivalents (5,608) 9,569 8,101
Exchange rate movements 299 (101) (136)
Cash and cash equivalents at beginning of Period 16,280 8,315 8,315
------------------------------------------------------------ --------------- --------------- ----------
Cash and cash equivalents at end of Period 10,971 17,783 16,280
------------------------------------------------------------ --------------- --------------- ----------
Notes to the Unaudited Condensed Consolidated Interim Financial
Statements
For the 26 weeks ended 30 October 2022
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 30 October 2022
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 52 weeks ended 1 May 2022. 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 FY22 Annual Report and financial statements
(which were approved on 23 September 2022), the Group prepared a
cash flow forecast, which covers a period of at least twelve months
from the date of approval of these unaudited condensed financial
statements, and is henceforth referred to as the 'Base Case'
scenario. In addition, a 'severe but plausible' 'Downside Case'
sensitivity was prepared to support the Board's conclusion
regarding going concern, by stress testing the Base Case to
indicate the financial headroom resulting from applying more
pessimistic assumptions. These models have subsequently been
updated for the purposes of preparing these interim financial
statements.
In assessing the basis of preparation the Directors
considered:
-- The external environment.
-- The Group's financial position including the quantum and
expectations regarding availability of bank facilities.
-- The potential impact on financial performance of the principal risks.
-- The output of the Base Case scenario, which represents the
Group's estimate of the most likely financial performance over the
forecast period.
-- Measures to maintain or increase liquidity in the event of a
significant downturn in trading.
-- The resilience of the Group to these risks having a more
severe impact, evaluated via the Downside Case which shows the
impact on the Group's cash flows, bank facility headroom and
covenants.
-- The response to situations in which consumer market
conditions are more severe than the Downside Case.
These factors are described below.
External environment
The risks which were most prominent in the Board's consideration
of going concern are those relating to the economy and the market,
particularly the risk of consumer demand weakening due to the
factors that have been widely reported externally, including a much
higher level of inflation and interest rates and concerns about the
effect these may have on household budgets and consumer spending on
discretionary items.
Whilst potentially severe, the adverse impact on trading in the
event of a further weakening of consumer demand due to general
economic or market weakness is expected to have a less severe
impact than the full closure of stores for extended periods, as
occurred during periods of the COVID-19 pandemic.
Financial position and bank facilities
At the Period end the Group held net cash (excluding IAS 17
lease liabilities) of GBP7.0m (HY22: GBP17.8m) (Note 15).
The Group's bank facilities comprise a GBP30.0m revolving credit
facility (RCF) which terminates at the end of November 2025. The
facility includes two financial covenants which are structured in a
way that is typical for a retail business of this size and are
tested quarterly:
1. The level of net debt to LTM (last twelve months') EBITDA (maximum ratio 2.5x).
2. The "Fixed Charge Cover" or ratio of LTM EBITDA prior to
deducting rent and interest, to LTM rent and interest (minimum
ratio 1.20x until 31 October 2023, 1.25x until 31 October 2024 and
1.30x thereafter).
The bank facility is larger than the Group expects to use, and
has been sized in this way to provide the Board and stakeholders
with additional assurance as to the availability of liquidity,
given the continuing heightened levels of uncertainty as regards
the economy and external environment, and to provide such assurance
beyond the going concern period.
Potential impact of risks on Base Case and Downside Case
scenarios
The 'Principal risks and uncertainties' section of the Strategic
report on pages 39 to 44 of the Group's FY22 Annual Report, sets
out the main risks that the Board considers relevant.
It is considered unlikely that all the risks would manifest
themselves to adversely affect the business at the same time. The
Directors have estimated what the most likely combination of risks
might be that could materialise within the going concern assessment
period and how the business might be affected; this combination of
risks is reflected in the Base Case assumptions. As noted above,
the most prominent risk in the near term is considered to be the
risk of lower consumer spending due to a weakened economy, which
could affect sales, costs and liquidity.
During late FY22 the Group experienced a cyber security
incident. This had a limited immediate/direct impact on trading
towards the end of FY22 although there was a residual effect on
trading during early FY23 as the Group took the decision to
implement a very cautious and low risk approach to reinstating its
systems, whilst simultaneously introducing significantly
strengthened cyber security measures. As a result of these measures
the risk of a material impact from any future cyber security attack
should be substantially lessened.
The Downside Case scenario takes into consideration the same
risks as the Base Case but assumes that their effects are more
severe, especially if consumer spending weakens further.
Base Case scenario
The Base Case scenario assumptions are aligned with the Group's
internal forecast:
-- During FY22 sales were adversely impacted during the peak
trading season by significant disruptions to the flow of stock into
the business due to problems in the ocean freight system and store
sales were also affected by the Omicron COVID-19 variant. The Base
Case assumes that sales are not affected by these factors during
the going concern period.
-- Online sales levels during FY23 have been lower than
expected. The Base Case assumes that online sales improve from
their recent levels but not to the level initially expected,
despite the fact that the Group plans to implement measures to
improve online sales.
-- The gross margin assumptions include provision for the
continuation for a longer period than initially expected of higher
than normal ocean container freight costs, until the end of FY23.
Actual container freight rates have since reduced significantly
compared with the rates included in the Base Case, which more than
offsets additional discounting which is expected to be incurred in
the January 2023 sale.
-- The Base Case provides for known or expected inflationary
increases including those associated with significantly higher
electricity prices which are assumed to double and not to reduce
during the going concern period, and wage rates including further
increases in the National Living Wage.
-- Capital expenditure levels are in line with the Group's
strategic plan, which would enable a reduction in capital
expenditure in the event of a Downside scenario occurring.
The output of the Base Case model scenario indicates that the
Group would have sufficient financial resources to continue to meet
its liabilities as they fall due over the going concern period.
Measures to maintain or increase liquidity in the event of a
significant downturn in trading
If deemed necessary, mitigating actions would be taken in
response to a significant downturn in trading, which would increase
liquidity. These may include, for example, delaying and reducing
stock purchases, stock liquidation, reductions in capital
expenditure, the review of payment terms and the review of dividend
levels. Some of these potential mitigations have been built into
the Downside Case model, and some have been noted as additional
measures that may be taken in practice in the event of that
scenario, or worse, actually occurring.
Severe but plausible Downside Case scenario
The Downside Case makes the following assumptions to reflect
more adverse conditions compared to the Base Case:
-- Store LFL sales are assumed to be lower than the Base Case to
allow for the possibility that consumer spending is adversely
affected as outlined above.
-- Online sales are assumed to be lower than in the Base Case,
reflecting the possibility that external factors such as a shift in
consumer shopping patterns away from online sales may be more
severe than anticipated, and/or the failure by the Group to
successfully implement its plans to improve the online sales
performance.
-- The gross margin assumptions are consistent with the Base
Case, which the Board believes already takes a sufficiently
cautious view.
-- Volume related costs in the Downside Case are lowered where
they move directly with sales levels; for example, online
fulfilment and marketing costs are assumed to reduce to correspond
with the lower online sales. The model also reflects certain steps
which could be taken to mitigate the effect of lower sales levels,
depending on management's assessment of the situation at the time.
These include adjustments to stock purchases, reducing capital
expenditure, reductions in headcount or labour usage, a reduction
in discounts allowed as part of the Group's loyalty scheme and
suspending the payment of dividends.
Having considered the output of the Downside Case and the
additional mitigating steps available, the Board's conclusion is
that the business would continue to have adequate resources to
continue in operation under this severe but plausible set of
assumptions.
Consideration of more severe scenarios
The Board recognises that more severe downside scenarios than
those modelled might arise. Accordingly, it has considered a range
of more severe possibilities than are reflected in the Downside
Case, including a 10% reduction in sales between January 2023 and
April 2024.
In these circumstances, in addition to the measures included in
the Downside Case, further mitigating measures would be required
and are available which when implemented, would generate additional
profit and/or cash and provide further liquidity headroom and/or
further headroom in relation to the financial covenants. Such
measures could include further reductions in capital expenditure
and further reductions in discretionary expenditure in areas such
as travel, training and professional fees.
Conclusion regarding basis of preparation
The current economic environment, characterised by higher
inflation than has been experienced for a number of years, and a
high level of uncertainty about how long the situation will persist
and whether it will become worse before it improves, creates a
higher than normal level of uncertainty with regard to the strength
of consumer spending. However, the Board's assessment is that,
despite this, the overall level of risk is not as high as was
represented by COVID-19, which resulted in a complete inability to
operate the majority of the Group's business for significant
periods of time. The resilience demonstrated by the business during
those periods, in very challenging conditions, provides additional
assurance about the Group's ability to continue as a going concern
in the event of an extended economic downturn due to high inflation
etc.
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 FY22.
(iii) Restatement of figures previously reported in the interim
financial statements for H1 FY22
Change to practice of grossing up business rates prepayments
In the FY22 interim accounts, as had previously been well
established and accepted common practice, unpaid business rates
invoices on the accounts payable ledger were recorded as a
prepayment in the consolidated balance sheet. It has subsequently
transpired that this was technically incorrect, and the prior year
figures have therefore been restated to match the new practice
which is not to prepay the whole year's rates value. This reduces
the prior year business rates prepayment and accounts payable
balances by GBP3,137k. This change has no profit or cash
effect.
(c) Alternative performance measures and Adjusting items
The Group tracks a number of alternative performance measures
(APMs) in managing its business, which 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 these APMs, which are not considered to
be a substitute for or superior to IFRS measures, provide
stakeholders with additional helpful information on the performance
of the business. They are consistent with how the business
performance is planned and reported internally, and are also
consistent with how these measures have been reported historically.
Some of the APMs are also used for the purpose of setting
remuneration targets.
The APMs should be viewed as supplemental to, but not as a
substitute for, measures presented in the consolidated financial
statements prepared in accordance with IFRS. The Group believes
that the APMs are useful indicators of its performance but they may
not be comparable with similarly titled measures reported by other
companies due to the possibility of differences in the way they are
calculated.
The key APMs that the Group uses include: like-for-like sales
growth (LFL); 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 4.
"Adjusted" measures are calculated by adding back or deducting
Adjusting Items. Adjusting items are material in size and unusual
in nature or incidence and, in the judgement of the Directors,
should therefore be disclosed separately on the face of the
financial statements to ensure that the reader has a proper
understanding of the Group's financial performance and that there
is comparability of financial performance between periods.
Refer to Note 5 for information regarding items that were
treated as Adjusting in the comparative periods.
(d) 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 the Group's accounting policies. Where a
significant risk of materially different outcomes exists due to
assumptions or other judgements, this will represent a key source
of estimation uncertainty.
Estimates and judgements are continually evaluated and 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.
Key sources of estimation uncertainty which are material to the
financial statements are described in the context of the matters to
which they relate, in the following notes:
Description Note
-------------------------------- ----
Going concern 1
Inventory - shrinkage provision 14
-------------------------------- ----
2 Segmental reporting
IFRS 8 requires segment information to be presented on the same
basis as used by the Chief Operating Decision Maker for assessing
performance and allocating resources.
The Group has one operating segment with two revenue streams,
stores and online. This reflects the Group's management and
reporting structure. Aggregation is deemed appropriate due to both
operating segments having similar economic characteristics, similar
products on offer, and numerous operational and commercial
interdependencies.
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 52 weeks ended
30 October 2022 31 October 2021 1 May 2022
GBP000 GBP000 GBP000
--------------------------- ---------------- ---------------- --------------
Sale of goods
- UK 116,933 114,060 260,087
- EU (Republic of Ireland) 1,999 2,013 4,543
--------------------------- ---------------- ---------------- --------------
Total revenues 118,932 116,073 264,630
--------------------------- ---------------- ---------------- --------------
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 Alternative performance measures ("APMs")
Like-for-like ("LFL") sales
LFL sales are defined by the Group as the year-on-year growth in
gross sales from
-- stores which have been trading for a full financial year
prior to the current year and have been trading throughout the
current financial period being reported on, and
-- from the Company's online store, calculated on a calendar week basis.
The measure is used widely in the retail industry as an
indicator of underlying sales performance, eliminating the effects
of changes between comparative periods in the number of stores
trading.
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) for a definition of
Adjusting items.
The Group also reports another measure of Adjusted EBITDA, which
removes the impact of IFRS 16, to provide a measure that is
consistent with internal reporting and is as used by the Group in
its investment appraisals. The table provides a reconciliation of
Adjusted EBITDA to profit/(loss) after tax and the impact of IFRS
16:
26 weeks ended 30 October 2022 26 weeks ended 52 weeks ended
31 October 21 1 May 2022
GBP000 GBP000 GBP000
------------------------------------------------------ ------------------------------ -------------- --------------
Non IFRS 16 Adjusted EBITDA (6,389) 2,500 16,562
------------------------------------------------------ ------------------------------ -------------- --------------
IAS17 income statement charges not recognised under
IFRS 16 12,242 12,410 24,433
Foreign exchange differences on euro leases (123) 11 120
------------------------------------------------------ ------------------------------ -------------- --------------
Post IFRS 16 Adjusted EBITDA 5,730 14,921 41,115
------------------------------------------------------ ------------------------------ -------------- --------------
Loss on disposal of right-of-use assets (519) (269) (2,066)
Profit on disposal of lease liability 558 337 2,340
Loss on disposal of property, plant and equipment 18 (185) (244)
Depreciation of PPE (2,410) (2,554) (5,005)
Depreciation of RoUA (11,172) (10,172) (20,029)
Amortisation (526) (376) (806)
Finance expenses (2,364) (2,757) (5,192)
Finance income 23 5 16
------------------------------------------------------ ------------------------------ -------------- --------------
Adjusted (loss) / profit before tax (10,662) (1,050) 10,129
------------------------------------------------------ ------------------------------ -------------- --------------
Adjusted tax credit / (charge) 1,986 140 (1,436)
------------------------------------------------------ ------------------------------ -------------- --------------
Adjusted (loss) / profit after tax (8,676) (910) 8,693
------------------------------------------------------ ------------------------------ -------------- --------------
Adjusting items (Note 5) - 58 29
Tax (charge) / credit in relation to Adjusting items - - -
------------------------------------------------------ ------------------------------ -------------- --------------
Loss after tax (8,676) (852) 8,722
------------------------------------------------------ ------------------------------ -------------- --------------
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 ended 26 weeks ended 52 weeks ended
30 October 2022 31 October 21 1 May 2022
----------------------------- ----------------------------- -----------------------------
Adjusting Adjusting Adjusting
Adjusted items Total Adjusted items Total Adjusted items Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------- -------- --------- -------- -------- --------- -------- -------- --------- --------
(Loss) / profit
before tax before
IFRS 16 adjustments (9,737) - (9,737) (1,189) 53 (1,136) 9,525 (241) 9,284
---------------------- -------- --------- -------- -------- --------- -------- -------- --------- --------
Remove IAS 17
rental charge 12,242 - 12,242 12,410 - 12,410 24,433 - 24,433
Remove depreciation
charged on the
existing assets 104 - 104 153 - 153 275 - 275
Remove interest
charged on the
existing liability 19 - 19 14 - 14 31 - 31
Depreciation charge
on right of use
asset (11,172) - (11,172) (10,172) - (10,172) (20,029) - (20,029)
Interest cost
on lease liability (2,034) - (2,034) (2,345) - (2,345) (4,500) - (4,500)
Loss on disposal
of right of use
asset (519) - (519) (269) - (269) (2,066) - (2,066)
Profit on disposal
of lease liability 558 - 558 337 - 337 2,340 - 2,340
Foreign exchange
difference on
euro leases (123) - (123) 11 - 11 120 - 120
Additional impairment
charge under IAS
36 - - - - 5 5 - 270 270
Net Impact of
IFRS 16 on (loss)
/ profit before
tax (925) - (925) 139 5 144 604 270 874
---------------------- -------- --------- -------- -------- --------- -------- -------- --------- --------
(Loss) / profit
before tax (10,662) - (10,662) (1,050) 58 (992) 10,129 29 10,158
---------------------- -------- --------- -------- -------- --------- -------- -------- --------- --------
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. These adjusted metrics are included within the
consolidated income statement and statement of other comprehensive
income, with details of Adjusting items which affected the
comparative period included below in Note 5.
5 Adjusting items
During the comparative period, the items analysed below have
been classified as Adjusting:
26 weeks ended 30 October 2022 26 weeks ended 31 October 2021 52 weeks ended 1 May 2022
GBP000 GBP000 GBP000
--------------------------- ------------------------------ ------------------------------ -------------------------
Within cost of sales
Impairment charges (1) - - 1,126
Impairment reversals (1) - (58) (1,155)
Total within cost of sales - (58) (29)
--------------------------- ------------------------------ ------------------------------ -------------------------
Total Adjusting items - (58) (29)
--------------------------- ------------------------------ ------------------------------ -------------------------
(1) These relate to prior period fixed asset impairment charges
and reversals of impairment charges.
6 Finance income and expense
26 weeks ended 30 October 26 weeks ended 31 October 52 weeks ended 1 May 2022
2022 2021
GBP000 GBP000 GBP000
----------------------------- ----------------------------- ----------------------------- -------------------------
Finance income
Bank interest receivable 23 5 16
----------------------------- ----------------------------- ----------------------------- -------------------------
Total finance income 23 5 16
Finance expense
Bank interest payable 147 269 401
Amortisation of capitalised
loan costs 183 143 291
Interest payable on lease
liabilities 2,034 2,345 4,500
----------------------------- ----------------------------- ----------------------------- -------------------------
Total finance expense 2,364 2,757 5,192
----------------------------- ----------------------------- ----------------------------- -------------------------
7 Share based payments
During the Period, no shares were awarded under "TheWorks.co.uk
2018 Long Term Incentive Plan" and no share options were awarded
under the Save As You Earn Scheme. (26 weeks ended 31 October 2021:
1,085,105 and 1,209,189, 52 weeks ended 1 May 2022: 1,085,105 and
1,209,189 respectively).
During the Period, no restricted stock awards were granted to
key management and senior employees (26 weeks ended 31 October
2021: 601,693, 52 weeks ended 1 May 2022: 601,693).
Expense recognised in the income statement
The IFRS 2 charge recognised during the Period was as
follows:
26 weeks ended 30 October 26 weeks ended 31 October 52 weeks ended 1 May 2022
2022 2021
GBP000 GBP000 GBP000
----------------------------- ----------------------------- ----------------------------- -------------------------
LTIP - Share based payment
expense 213 146 584
SAYE - Share based payment
expense 47 60 67
Total IFRS 2 charges 260 206 651
----------------------------- ----------------------------- ----------------------------- -------------------------
8 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 GBP431k (26 weeks ended 31
October 2021: GBP384k; 52 weeks ended 1 May 2022: GBP777k).
9 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
GBP1.99 million (H1 FY22: GBP0.14 million). The effective tax rate
on the total loss before tax was 18.6% (H1 FY22: 14.1%), the
Adjusted tax rate was 18.6% (H1 FY22: 13.3%).
The difference between the total effective tax rate and the
Adjusted tax rate in the prior period relates to certain costs and
depreciation charges being non-deductible for tax purposes.
The year on year increase in the effective tax rate is due to
the prior year rate being lower than usual, due to an increase in
the value of the deferred tax asset, which was recognised during
FY22. This was 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 was recognised at the higher rate of 25% at the end of
FY22.
10 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 5 for
further details) to reflect the Group's underlying profit for the
Period.
30 October 2022 31 October 2021 1 May 2022
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) - - 940,673
--------------------------------------------------------------- --------------- --------------- ----------
Number of shares for diluted earnings per share 62,500,000 62,500,000 63,440,673
--------------------------------------------------------------- --------------- --------------- ----------
GBP000 GBP000 GBP000
--------------------------------------------------------------- --------------- --------------- ----------
(Loss) / profit for the financial period (8,676) (852) 8,722
Adjusting items - (58) (29)
Total Adjusted (loss) / profit for Adjusted earnings per share (8,676) (910) 8,693
--------------------------------------------------------------- --------------- --------------- ----------
Pence Pence Pence
--------------------------------------------------------------- --------------- --------------- ----------
Basic (loss) / earnings per share (13.9) (1.4) 14.0
Diluted (loss) / earnings per share (13.9) (1.4) 13.7
Adjusted basic (loss) / earnings per share (13.9) (1.5) 13.9
Adjusted diluted (loss) / earnings per share (13.9) (1.5) 13.7
--------------------------------------------------------------- --------------- --------------- ----------
11 Dividends
Following the period end a final dividend was paid in respect of
FY22 of GBP1.5m, representing 2.4 pence per share.
12 Intangible assets
Goodwill Software Total
GBP000 GBP000 GBP000
----------------------------------- -------- -------- ------
Cost
Balance at 1 May 22 16,180 9,058 25,238
Additions - 755 755
Disposals - - -
----------------------------------- -------- -------- ------
Balance at 30 October 2022 16,180 9,813 25,993
----------------------------------- -------- -------- ------
Amortisation / Impairment
Balance at 1 May 2022 16,180 6,386 22,566
Amortisation charge for the Period - 526 526
Disposals - - -
----------------------------------- -------- -------- ------
Balance at 30 October 2022 16,180 6,912 23,092
----------------------------------- -------- -------- ------
Net book value
----------------------------------- -------- -------- ------
At 1 May 2022 - 2,672 2,672
----------------------------------- -------- -------- ------
At 30 October 2022 - 2,901 2,901
----------------------------------- -------- -------- ------
13 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 1 May 2022 151,405 2,421 10,415 3,818 27,258 195,317
Additions 6,473 - (325) 657 1,441 8,246
Disposals (3,525) - (97) (10) (153) (3,785)
----------------------------------- -------- -------------- --------- --------- ---------- -------
Balance at 30 October 2022 154,353 2,421 9,993 4,465 28,546 199,778
----------------------------------- -------- -------------- --------- --------- ---------- -------
Depreciation and impairment
Balance at 1 May 2022 58,067 1,408 6,317 3,388 17,816 86,996
Depreciation charge for the period 10,977 195 360 275 1,775 13,582
Impairment reversals - - - - - -
Disposals (3,006) - (90) (12) (176) (3,284)
----------------------------------- -------- -------------- --------- --------- ---------- -------
Balance at 30 October 2022 66,038 1,603 6,587 3,651 19,415 97,294
----------------------------------- -------- -------------- --------- --------- ---------- -------
Net book value
----------------------------------- -------- -------------- --------- --------- ---------- -------
At 1 May 2022 93,338 1,013 4,098 430 9,442 108,321
----------------------------------- -------- -------------- --------- --------- ---------- -------
At 30 October 2022 88,315 818 3,406 814 9,131 102,484
----------------------------------- -------- -------------- --------- --------- ---------- -------
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 1 May 2022. The Group
determined that each store is a separate CGU. Only stores with an
indicator of impairment were included within the impairment
assessment, including 38 stores with a budgeted loss at EBITDA
level and an additional 30 stores which were historically loss
making and may be considered for closure at the next lease break
date.
At 30 October 2022 no further impairment charges or reversals
have been recognised during the Period (52 weeks to 1 May 2022:
GBP29k reversal; 26 weeks to 31 October 2021: GBP58k reversal).
14 Inventory
30 October 2022 31 October 2021 1 May 2022
GBP000 GBP000 GBP000
Goods for resale 46,626 35,210 29,817
Less: stock provisions for shrinkage and obsolescence (3,214) (4,354) (3,252)
------------------------------------------------------ --------------- --------------- ----------
Goods for resale net of provisions 43,412 30,856 26,565
Stock in transit 10,159 9,187 2,822
------------------------------------------------------ --------------- --------------- ----------
Inventory 53,571 40,043 29,387
------------------------------------------------------ --------------- --------------- ----------
A provision of GBP3.2m for stock obsolescence and shrinkage is
included in the balance sheet at the Period end (31 October 2021:
GBP4.4m, 1 May 2022: GBP3.3m). The provision is an estimate, which
is based on stock ageing and historical trends and is reviewed by
management during the year.
15 Borrowings and cash
26 weeks ended 26 weeks ended 52 weeks ended
30 October 2022 31 October 2021 1 May 2022
GBP000 GBP000 GBP000
-------------------------------- ---------------- ---------------- --------------
Non-current liabilities
Lease liabilities 81,128 94,508 85,702
Non-current liabilities 81,128 94,508 85,702
-------------------------------- ---------------- ---------------- --------------
Current liabilities
Revolving credit facility (RCF) 4,000 - -
Unamortised debt issue costs - (262) -
Lease liabilities 23,830 27,915 25,434
-------------------------------- ---------------- ---------------- --------------
Current liabilities 27,830 27,653 25,434
-------------------------------- ---------------- ---------------- --------------
The Group's bank facilities comprise an RCF of GBP30m expiring
30 November 2025. The facility includes financial covenants in
relation to the level of net debt to LTM EBITDA and "Fixed Charge
Cover" or ratio of LTM EBITDA prior to deducting rent and interest,
to LTM rent and interest.
Net debt reconciliation
30 October 2022 31 October 2021 1 May 2022
GBP000 GBP000 GBP000
--------------------------------------------- --------------- --------------- ----------
Net debt (excluding unamortised debt costs)
RCF 4,000 - -
Cash and cash equivalents (10,971) (17,783) (16,280)
Net cash at bank (6,971) (17,783) (16,280)
Non IFRS 16 lease liabilities 362 622 485
---------------------------------------------- --------------- --------------- ----------
Non IFRS 16 net cash (6,609) (17,161) (15,795)
---------------------------------------------- --------------- --------------- ----------
IFRS 16 lease liabilities 104,596 121,801 110,651
---------------------------------------------- --------------- --------------- ----------
Net debt including IFRS 16 lease liabilities 97,987 104,640 94,856
---------------------------------------------- --------------- --------------- ----------
16 Provisions
Dilapidations Total
GBP000 GBP000
-------------------------------------- ------------- ------
Balance at 1 May 2022 1,117 1,117
-------------------------------------- ------------- ------
Provisions made during the period - -
Provisions used during the period (146) (146)
Provisions released during the period - -
Balance as at 30 October 2022 971 971
-------------------------------------- ------------- ------
Dilapidation provision
In accordance with IAS 37 Provisions, the Group recognises
provisions for the cost of reinstating certain Group properties at
the end of their lease term, based on the conditions set out in the
terms of the individual leases. The timing of the outflows will
match the ends of the relevant leases, which range from 1 to 14
years.
17 Share Capital
As at 30 October 2022 the company had the following share
capital:
GBP000
-------------- ------
Share capital 625
Share premium 28,322
-------------- ------
18 Financial Instruments
The following table details the Group's expected maturities for
its financial liabilities based on the undiscounted contractual
maturities of the financial liabilities, including interest that
will be payable.
Within 1 year 2-5 years 5+ years Total
Contractual maturity of financial liabilities GBP000 GBP000 GBP000 GBP000
---------------------------------------------- ------------- --------- -------- -------
30 October 2022
Non Derivative
Interest bearing 4,000 - - 4,000
Non-interest bearing 62,219 - - 62,219
Undiscounted lease liabilities 24,902 60,820 19,236 104,958
Derivative
Forward currency contracts - - - -
---------------------------------------------- ------------- --------- -------- -------
91,121 60,820 19,236 171,177
---------------------------------------------- ------------- --------- -------- -------
31 October 2021
Non Derivative
Interest bearing - - - -
Non-interest bearing 59,870 - - 59,870
Undiscounted lease liabilities 31,702 72,545 25,673 129,920
Derivative
Forward currency contracts 702 - - 702
---------------------------------------------- ------------- --------- -------- -------
92,274 72,545 25,673 190,492
---------------------------------------------- ------------- --------- -------- -------
1 May 2022
Non Derivative
Interest bearing - - - -
Non-interest bearing 32,917 913 - 33,830
Undiscounted lease liabilities 31,592 83,017 21,862 136,471
Derivative
Forward currency contracts - - - -
---------------------------------------------- ------------- --------- -------- -------
64,509 83,930 21,862 170,301
---------------------------------------------- ------------- --------- -------- -------
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
30 October 2022 31 October 2021 1 May 2022
------------------------------------- ---------------- ---------------- -----------
Net Derivative Financial Instruments
Foreign exchange contracts 1,775 (277) 2,393
------------------------------------- ---------------- ---------------- -----------
Classification of financial instruments
The tables below show the classification of financial assets and
liabilities as at 30 October 2022. 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 1,775 - -
Financial assets not measured at fair value
Trade and other receivables - 10,469 -
Cash and cash equivalents - 10,971 -
Financial liabilities measured at fair value
Derivative financial instruments - - -
Financial liabilities not measured at fair value
RCF - - (4,000)
Lease liabilities - - (104,958)
Trade and other payables - - (66,948)
-------------------------------------------------
As at 30 October 2022 1,775 21,440 (175,906)
------------------------------------------------- ----------- --------- -----------
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 (Restated - Note 1b) - 11,734 -
Cash and cash equivalents - 17,783 -
Financial liabilities measured at fair value
Derivative financial instruments (702) - -
Financial liabilities not measured at fair value
Lease liabilities - - (122,423)
Trade and other payables - - (64,264)
-------------------------------------------------
As at 31 October 2021 (277) 29,517 (186,687)
------------------------------------------------- ----------- --------- -----------
Cash flow Financial Other
hedging assets at financial
instruments amortised cost liabilities
GBP000 GBP000 GBP000
------------------------------------------------- ----------- -------------- -----------
Financial assets measured at fair value - - -
Derivative financial instruments 2,393 - -
Financial assets not measured at fair value
Trade and other receivables - 8,427 -
Cash and cash equivalents - 16,280 -
Financial liabilities measured at fair value
Derivative financial instruments - - -
Financial liabilities not measured at fair value
Unsecured bank overdraft - - -
Lease liabilities - - (111,136)
Trade and other payables - - (35,958)
------------------------------------------------- ----------- -------------- -----------
As at 1 May 2022 2,393 24,707 (147,094)
------------------------------------------------- ----------- -------------- -----------
19 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 the financial period.
20 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
20 January 2023
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 differ materially from historical or expected results.
The Board does not believe that these risks and uncertainties are
materially different to those published in the Group's Annual
Report for the period ended 1 May 2022.
These risks are associated with
1. The economy/market
2. Design and execution of strategy (previously referred to as "Market")
3. IT systems and cyber security
4. Supply chain
5. Brand and reputation
6. Regulation and compliance
7. Seasonality of sales
8. People
9. Business continuity
10. Environmental (including climate change)
11. Liquidity
Detailed explanations of these risks are set out on pages 39 to
44 of the FY22 Annual Report which is available at
https://corporate.theworks.co.uk/application/files/9616/6478/3372/TheWorks.co.uk_plc_Annual_Report_and_Accounts_2022.pdf
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END
IR GPUPPGUPWPGB
(END) Dow Jones Newswires
January 20, 2023 02:00 ET (07:00 GMT)
Grafico Azioni Theworks.co.uk (LSE:WRKS)
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Da Feb 2023 a Mar 2023
Grafico Azioni Theworks.co.uk (LSE:WRKS)
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Da Mar 2022 a Mar 2023
