Half-year trading update

5 November 2020

TheWorks.co.uk plc 

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

Half-year trading update for the 26 weeks ended 25 October 2020

TheWorks.co.uk plc, the multi-channel value retailer of gifts, arts, crafts, toys, books and stationery, today announces a trading update for the 26 weeks ended 25 October 2020 (the "Period" or "H1 FY21").

Highlights 

• The Group's trading since stores reopened has continued to be strong and significantly ahead of the Board's expectations.
• LFL⁽¹⁾ sales increased 10.6% for the 19 weeks ended 25 October 2020; this excludes the 7 week period when stores were closed.
• Store LFL sales were broadly level with last year, with online sales approximately double last year's over the 19 week period.
• Strong liquidity position at Period end with net cash of £8.4m⁽²⁾, significantly ahead of last year.
• The Board considers that the Group has adequate resources to support the business during this new period of increased restrictions and remains confident in the appeal of the Group's proposition.

Trading update

Sales have continued to be strong, and significantly ahead of the Board's expectations, since the reopening of our stores in June following the lifting of restrictions introduced in March 2020. Total sales for the Period were down 7.1%, reflecting the impact of the closure of all stores for the first 7 weeks of the financial year.  Excluding the first 7 weeks, overall LFL sales increased by 10.6% in the 19 weeks ended Sunday 25 October 2020, driven by:  

• Broadly flat store LFL sales, with average transaction values continuing to be higher than last year, offsetting a reduction in the number of transactions.
• Strong online performance with sales levels approximately double last year's in the same 19 weeks. 

H1 FY21's trading performance has strengthened since our previous update on 27 August 2020, further demonstrating the appeal of The Works' proposition to a broad range of customers, particularly in the current market. Board games, jigsaws, art and craft materials and books for both children and adults have all been in high demand.

During the Period, we closed a net 4 stores (4 stores opened and 8 closed) as part of the ongoing management and optimisation of the store portfolio, which totalled 530 stores at the Period end.

Financial position

As a result of the strong trading performance, careful cost management and utilisation of the available Government support schemes, the Group's liquidity position at the end of the Period was strong, and significantly better than at the same point last year, with net cash of £8.4m, compared with net bank borrowings of £14.1m at the end of H1 FY20. The Period end cash balance included the benefit of some favourable timing differences within working capital (estimated to be approximately £4.0m), which are expected to unwind during H2 FY21.

Outlook

We have been encouraged by the performance during the Period, which was better than the "Base Case" scenario we modelled when the COVID-19 pandemic was in its earlier stage. Performance in recent weeks has strengthened further and, we believe that to some extent, sales have been brought forward as customers have acted in anticipation of further restrictions.

Experience gained from the lockdowns earlier in the year have been valuable in preparing for the further lockdowns or other restrictions which have now been implemented in the UK and in Ireland and which have or will require the closure of most of our stores, most notably, for a four week period in England. Furthermore, in anticipation of the continuation of very high online sales, we have invested in increasing online fulfilment capacity. However, and, notwithstanding these preparations, the latest restrictions will have a material adverse effect on sales, although the effect on the Group's profit and liquidity will be partially mitigated by the extension of the Government's furlough job support scheme.

Due to the Group's strong financial position on entering this period, the Board is confident that the Group has adequate resources to support the business, whilst retaining headroom within its banking facilities.

In light of the high level of uncertainty, the Board will not be issuing profit guidance for the full year FY21 at this time.

More generally, the evident appeal of the Group's proposition, and its strong financial position, give us confidence for the future.

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

"I have been pleased with the positive response of our customers to our proposition which resulted in strong trading since the reopening of our stores; the further improvement in performance in recent weeks only serves to underline this. I would like to take this opportunity to acknowledge the hard work and commitment of all colleagues throughout the business, who have helped to deliver this performance and ensured that we have continued to provide excellent service whilst maintaining safe shopping environments.

"Naturally, it is disappointing that we have had to close most of our stores again, so close to Christmas, but the strong performance since the last lockdown and our sound financial position mean we are well placed, and we are focussed on ensuring that we reopen safely, and are geared up to make up as much lost ground as possible in December.

"The last six months has demonstrated the increasing relevance and appeal of our proposition, which gives us confidence in the long-term future of the business."

Interim results notification

Our current intention is to announce the interim results for H1 FY21 and an update on Christmas trading on Friday 22 January 2021. If, due to further disruption as a consequence of the current pandemic, it becomes necessary to alter this date, we will issue a notice accordingly.

^[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 the Company's online store, calculated on a calendar week basis.  LFL sales for H1 FY21 are stated for the 19 weeks ended 25 October 2020, being the period during which the majority of the stores were trading following reopening in line with the lifting of Government restrictions.

^[2] Net cash is stated on a pre IFRS 16 basis and excluding finance leases.

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.

As at 25 October 2020, the Company operated a network of 530 stores in the UK and Ireland, 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, with an extended range of products that enables customers to shop any time of the day.