TheWorks.co.uk PLC on Tuesday hinted at brighter days ahead despite revealing a drop in annual sales and lacklustre sales growth.
The Birmingham, England-based arts, crafts and stationery company said pretax profit fell 23% to £6.9 million in the 53 weeks that ended May 5 from £9.0 million a year prior. Sales rose modestly to £282.6 million from £280.1 million although like-for-like sales declined 0.9% versus growth of 4.2% a year ago.
But TheWorks said LFL sales had picked up to growth of 0.2% in the first 21 weeks of financial 2025.
Looking ahead, the company said it was ‘well-positioned’ heading into the peak Christmas trading period, having addressed the capacity issues faced by its distribution centre last year.
‘Strong product margin growth and cost savings are being delivered, more than offsetting ongoing cost headwinds.’
It added: ‘Decisive action was taken to grow product margins, reset the cost base and scale back non-essential investments, with the aim of improving profitability.’
As such, TheWorks said it remains on track to deliver improved profitability in financial 2025 and meet group compiled market forecasts of pre-IFRS16 adjusted earnings before interest, tax, depreciation and amortisation of £8.5 million. In the financial year just ended, pre-IFRS16 adjusted Ebitda was £6.0 million, down from £9.0 million a year prior.
TheWorks said its medium term goal is to return to pre-IFRS 16 Ebitda margins of 5%. This would be more than double the 2.1% reported in financial 2024.
Chief Executive Gavin Peck said: ‘Although consumer confidence remains subdued and we continue to face tough cost headwinds, the cost and operational action we have taken and the trajectory of recent trading means we are well positioned to offset these and return to profit growth in 2024-25.
The group also announced that non-executive directors John Goold and Mark Kirkland, who also lead London-listed investment firm Kelso Group Holdings PLC, a major shareholder in TheWorks, have stepped down from the board, citing their confidence in its overhaul.
Goold and Kirkland, who are chief executive and chief financial officer respectively of Kelso, said: ’We joined TheWorks board on a temporary basis to provide additional guidance as the business underwent a period of change.
‘Since then, significant progress has been made. We are content to step down now, knowing that the company is on a path to growth and with full confidence in the management team.’
On Monday, Kelso itself reported a pretax loss of £883,669 in the six months to June 30, swung from a £1.3 million profit a year before. The firm disclosed a loss on investments of £675,873 compared with a gain of £1.8 million a year ago.
Alongside the results, Kelso unveiled a strategy update. Together with its core investment approach, Kelso will now look to seed and invest in listed single company acquisition vehicles which target both listed and private companies as well as divisions of undervalued UK businesses where it believes there is considerable upside.
Kelso said it continued to believe that they will achieve a medium term internal rate of return of 25% following the 55% appreciation in the first year of operation.
Shares in TheWorks.co.uk were up 4.2% to 25.00 pence in London on Tuesday. Kelso was 2.4% lower at 3.71p.
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