14 May 2021

TheWorks.co.uk plc 

("The Works", the "Company" or the "Group")

Full year trading update for the 53 weeks ended 2 May 2021

TheWorks.co.uk plc, the multi-channel value retailer of arts, crafts, toys, books and stationery, announces its pre-close update for the 53 weeks ended 2 May 2021 (the "Period" or "FY21").

FY21 performance

The Works has delivered a resilient performance, with lower sales than in FY20 reflecting Government restrictions, partially offset by good growth online and strong customer demand when stores were allowed to trade. During the 53 week Period, there were 16 weeks when all stores were closed and a further 8 weeks when at least 75% of the stores were closed, as required by Government restrictions. This included our peak Christmas trading period and, as a result, total sales ⁽¹⁾ declined by 19.0% to £206.2m (FY20: 254.6m).

Store LFL sales ⁽²⁾ during the period grew by 6.0% and online sales grew by 120.9% compared with FY20, demonstrating the value of The Works' multi-channel model, the appeal of the proposition and the loyalty of our customers. Throughout the year our online performance was supported by the investment we made to increase online capacity and our new customer website.

Immediately following the Government's announcement of the most recent lockdown in early January 2021, the Company revised its internal profit forecast. The final FY21 figure is expected to be in line with this forecast.

In line with our revised strategy, during the year our focus was on optimising our existing store estate rather than pursuing a targeted number of new store openings. At the Period end the Group traded from 527 stores across the UK and Ireland (FY20: 532 stores).

Financial position

Despite sales levels being significantly lower than normal, through the tight control of costs allied to careful cash management and use of the available Government support schemes, the Group ended FY21 in a strong financial position, having generated cash of approximately £7.5m during the year. On a pre IFRS 16 basis and excluding finance leases, the Group held net cash balances of approximately £0.5m at the end of the period (FY20 year end: net bank debt of £7.1m), resulting in headroom of £30.0m within its bank facility limit.

Outlook

Sales since the majority of stores reopened have been very encouraging (the Group's stores in the Republic of Ireland are due to reopen on Monday 17 May). It is probably too soon to judge the extent to which these encouraging sales reflect strong underlying performance as opposed to pent up demand. As expected, with the reopening of the stores, online sales have reduced but remain significantly ahead of pre COVID-19 levels.

The Board's view is that the level of uncertainty at the beginning of FY22 related to COVID-19 and its potential impacts on the business is lower than it was at the beginning of FY21. Nevertheless, a higher than normal degree of uncertainty remains, and is expected to persist for some time particularly regarding the shape of the consumer recovery. In this context, the Group is not publishing profit guidance but, due to its strong financial position, and the evident appeal of its proposition, the Board is confident in the future prospects of the business.

Board update

Steve Alldridge, who joined the business in June 2020 as Interim CFO, has been formally appointed to the Board as CFO with effect from the date of this announcement ⁽³⁾. His expertise and leadership have been invaluable during the pandemic and the Board congratulates Steve on his appointment.

Gavin Peck, Chief Executive Officer of The Works, commented:

"Like many retailers, the last 12 months have been incredibly challenging for The Works, which has historically relied mainly on in-store sales. Our business was severely impacted by successive lockdowns and forced closures of our entire store estate.

"Despite this, the period has highlighted the resilience of the business and our ability to both adapt our offer and leverage our multi-channel model. Since we couldn't control store closures we focused on the things we could, keeping tight control of costs, optimising our operations and vastly improving our online offering. As a result, our financial position remained strong, online growth exceeded our expectations, and when stores re-opened we saw customer demand returning quickly to pre-COVID levels.

"I am incredibly proud of our colleagues who have supported each other so brilliantly and the unique culture at The Works that has enabled us to withstand this difficult year and emerge quickly and optimistically as a stronger business. Although uncertainty remains, particularly around the shape of the consumer recovery, the Board expects the early progress to continue and remains confident in the future prospects of the business."

Full year results notification

Our current intention is to announce the full year results for FY21 and an update on trading on Tuesday 20 July 2021. If it becomes necessary to alter this date, we will issue a notice accordingly.

Footnotes:

^[1] "Sales" include VAT and are stated before making adjustments required to arrive at statutory revenue. The sales figures quoted above form the basis of the Group's like for like ("LFL") sales comparisons and are calculated on a basis consistent with the "Total gross sales" line included in the Financial Review section of the Group's FY20 Annual Report and Accounts.

^[2] The Group does not typically quote separate LFL figures for stores and online, as this would be inconsistent with the ethos of a multi-channel business. However, the introduction and subsequent lifting of trading restrictions throughout FY21, and the consequential disruption to sales patterns, prevents the calculation of a meaningful combined store and online LFL sales figure. Therefore, in the current exceptional circumstances and, to provide an indication of the trading performance adjusted for periods when the stores were closed, individual LFLs are quoted in respect of FY21.

LFL sales are normally defined by the Group 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 the Company's online store, calculated on a calendar week basis.  Store LFL sales for FY21 are for the 53 weeks ended 2 May 2021, excluding periods when stores were required to be closed to comply with COVID-19 restrictions on trading. Online LFL sales are for the entire 53 week period, including when the stores were closed.

 ^[3] Pursuant to the requirement of LR 9.6.13R it is noted that Steve Alldridge was CFO of Bonmarché Holdings plc until August 2019. Bonmarché Holdings plc was placed into administration in October 2019. There is no further information to be disclosed under the requirements of LR 9.6.13R.

Notes for editors:

TheWorks.co.uk plc is one of the UK's leading multi-channel value retailers of, arts, crafts, stationery, toys and books, offering customers a differentiated proposition as a value alternative to full price specialist retailers.

The Group operates a network of 527 stores in the UK & Ireland with a variety of location types including traditional high-streets, retail parks, shopping centres, factory outlets and concessions. In FY21 the Group opened 7 stores and closed 12. The Works also has a significant online presence that complements the store offer and enables customers to shop any time of the day, and from an extended range of products not always available in stores.