TIDMWRKS
RNS Number : 1897M
TheWorks.co.uk PLC
07 May 2020
7 May 2020
TheWorks.co.uk plc
Full Year Trading Update
TheWorks.co.uk plc ("The Works", or the "Company"), the
multi-channel value retailer of gifts, arts, crafts, toys, books
and stationery, announces a trading update covering the 52-week
period to 26 April 2020 (the "Period").
Full year overview
Revenue for the Period increased by 3.5% year-on-year. Overall
like-for-like ("LFL") sales in the year to 22 March 2020 (the day
before all stores were closed due to the COVID-19 outbreak) were
+0.7%([1]) , with growth both in stores and online. During the
Period, the Company opened a net 37 new stores, taking the total
number of stores in the estate to 534.
As previously reported, despite a challenging first half of the
year due to the difficult consumer backdrop and the absence of a
Mega Trend([2]) , The Works returned to positive LFL sales growth
during the peak Christmas trading period. This momentum continued
and, prior to the COVID-19 outbreak, the Company was trading in
line with the Board's expectations and was on target to be debt
free at year-end.
Recent trading
The Company saw a significant increase in sales, both in stores
and online, prior to store closures, with overall LFL sales +81% in
the week to Sunday, 22 March 2020. This reflected strong customer
demand for products to support childrens' ongoing education,
mindfulness materials to support mental health and products to
"beat the boredom" during this period of social distancing.
Online
The strong demand online has continued during the lockdown
period, with sales up more than three times the equivalent period
last year. The unprecedented level of demand and the Company's
strict adherence to social distancing and additional health and
safety measures at the distribution centre has required it to limit
daily sales volumes. However, the Company is working closely with
its third-party fulfilment partner to expand its online fulfilment
capacity both in the short-term and to support increased volumes
through peak trading over Christmas.
Managing cost base and cashflows
Due to the significant impact brought about by COVID-19 and as
outlined in the update on 23 March 2020, the Company has
implemented a number of measures to manage its cost base and
cashflows. Updates on these measures, and other actions taken, are
as follows:
-- Capital investment plans have been reviewed, with capital expenditure in the coming year expected to be c.GBP3m
versus the c.GBP9m previously expected. The new store rollout programme is currently suspended (with the
exception of a small number of stores where the Company is legally committed);
-- Discussions with landlords to reduce rents whilst stores are closed are ongoing;
-- The Company continues to work collaboratively with suppliers to review stock intake plans and agree extended
payment terms in the coming months and through the peak working capital period ahead of Christmas 2020;
-- The Company has significantly reduced its online marketing spend and promotional activity to help manage sales
within capacity constraints which, coupled with an increase in the average transaction value, has resulted in
margin enhancement online;
-- All of the Company's store colleagues (including Area and Divisional sales managers), the vast majority of its
retail distribution centre colleagues and a significant proportion of its support centre colleagues have been
furloughed under the government's Job Retention Scheme. The Company agreed to top up the additional 20% of
salary for these colleagues for the month of April; and,
-- Gavin Peck, CEO, has taken a voluntary 33% pay reduction, Catherine Glickman and Harry Morley (Non-Executive
Directors) have waived 33% of their fees and the Chairman, Dean Hoyle, has waived 100% of his fees. These
reductions will be in effect for three months. The Operational Directors have also taken a voluntary 20% pay
reduction for the period of store closures.
Financial position and scenario planning
Net debt (pre- IFRS16) as at 26 April 2020 stood at c.GBP7.9m,
reflecting the impact of the partial unwind of working capital and
the impact of stores not trading for the last five weeks of the
financial year. The Company has access to a GBP25m revolving credit
facility (expiring in June 2021). The Board continues to run
various scenarios to assess the potential impact of the current
pandemic, including a three-month lockdown period followed by a
prolonged period of subdued sales. Under the scenarios considered,
taking into account the mitigating actions noted above, the Company
is able to operate within its existing banking facilities. The
Company is having constructive dialogue with its lending bank
regarding the forecast covenant breaches under these scenarios and
to explore additional funding options should the pandemic have an
impact materially worse than currently modelled.
Re-opening stores
The Company continues to monitor the impact of the pandemic
closely and is putting in place plans to re-open its stores at the
appropriate time (subject to Government guidelines). The health and
wellbeing of colleagues and customers are its key priorities and
appropriate measures will be implemented in its stores, retail
distribution centre and support centre to ensure ongoing
safety.
Outlook
The Board is confident that The Works' proposition will continue
to resonate well with customers during this period of extended
social distancing. Whilst it is not possible to provide specific
guidance for the financial year ahead, the Board has a cautious
outlook given the highly uncertain trading conditions and the
potential impact of social distancing in stores. This caution is
reflected in its modelling and the Board believes that, based on
the scenarios considered, it currently has appropriate liquidity in
place.
Enquiries:
TheWorks.co.uk plc via Teneo
Gavin Peck, CEO
Rosie Fordham, Interim CFO
Teneo
Ben Foster, Haya Herbert-Burns, Rachel Miller
+44 (0)7776 240806/ +44 (0) 7342 031051/ +44
(0) 7850 656713
Notes to Editors:
TheWorks.co.uk plc is a multi-channel value retailer of gifts,
arts, crafts, toys, books and stationery - offering customers a
differentiated proposition as a value alternative to full price
specialist retailers. The Works sells its quality products at
affordable prices across four product zones comprising Kids; Arts,
Craft & Hobbies; Stationery; and Family Gifts, which are
supplemented by both seasonal and regional offerings.
As at 26 April 2020, the Company operated a network of 534
stores in the UK and Ireland. Stores can be found on high streets,
in retail parks, shopping centres, factory outlets and as
concessions in various locations. The Works also has a significant
and growing online presence that enables customers to shop any time
of the day, with an extended range of products not available in
stores. This multi-channel offering is one of the first of its kind
in the value retail sector and includes a popular Click &
Collect service, driving additional footfall and sales in
store.
([1]) LFL sales are defined as the year-on-year growth in gross
sales from stores which have been opened for a full 63 weeks (but
excluding sales from stores closed for all or part of the relevant
period or prior year comparable period), and from its e-Commerce
platform, calculated on a calendar week basis.
([2]) Mega Trends are defined as any individual product, or
collection of products, for which sales exceed 3 per cent. of
weekly sales for a temporary period and for which management deem
to be material in terms of impacting on the underlying performance
of the Company.
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END
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