1 October
2024
TheWorks.co.uk
plc
("The
Works", the "Company" or the "Group")
Preliminary results for the
53 weeks ended 5 May 2024 and trading update
Finished FY24 in line with
market forecasts of pre-IFRS16 adjusted EBITDA of £6.0m.
Well positioned for profit growth in FY25 and to meet market
forecasts of pre-IFRS16 adjusted EBITDA of £8.5m, with a process to
evolve the strategy well underway.
TheWorks.co.uk plc, the
family-friendly value retailer of arts, crafts, toys, books and
stationery, announces its preliminary results for the 53 weeks
ended 5 May 2024 (the "period" or "FY24")(1) and an
update on current trading.
Financial highlights
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Delivered total revenue growth of 0.9% to
£282.6m in FY24 against a challenging backdrop characterised by
cost of living pressures and softened consumer demand.
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Store sales, which represent c.90% of total
sales, continued to drive growth, increasing by 0.6% on a like for
like (LFL(2)) basis. Online LFL sales declined by 12.4%,
resulting in an overall LFL sales decline of 0.9%.
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·
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Pre-IFRS 16 Adjusted EBITDA of £6.0m (FY23:
£9.0m). Sales were lower than originally anticipated, reflecting a
tough trading environment and operational challenges in the run up
to Christmas. This combined with increased cost headwinds put
pressure on profitability. However, due to the decisive cost action
taken and improved trading in the final quarter, the Group ended
the year in line with expectations(3).
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·
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Adjusted profit before tax(4) (PBT)
of £3.2m (FY23 Restated(5): £5.3m).
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The Group ended the Period with net
cash(6) of £1.6m (the 52-week period ended with net cash
of £6.5m, which compares to net cash of £10.2m at the end of
FY23).
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·
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The Board is not proposing a final dividend
for FY24. Future shareholder distributions will be kept under
consideration as profitability improves and net cash
allows.
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Sales in the first 21 weeks of FY25 have been
in line with our expectations, with LFL sales up 0.2%. On track to
deliver improved profitability in FY25 and meet Group compiled
market forecasts of pre-IFRS16 Adjusted EBITDA of £8.5m.
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·
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Medium term goal is to return to pre-IFRS 16
EBITDA margins of 5%.
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FY24
£m
|
FY23 (Restated)(5)
£m
|
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Revenue
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282.6
|
280.1
|
|
Revenue growth %
|
0.9%
|
5.8%
|
|
Total LFL sales
|
(0.9)%
|
4.2%
|
|
Pre-IFRS16 Adjusted
EBITDA(4)
|
6.0
|
9.0
|
|
Pre-IFRS16 EBITDA
Margin(4)
|
2.1%
|
3.2%
|
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Adjusted profit before
tax(4)
|
3.2
|
5.3
|
|
Profit before tax
|
6.9
|
9.0
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Adjusted basic EPS (pence)
|
4.2p
|
9.2p
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Basic EPS (pence)
|
10.2p
|
15.0p
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Dividend per share (pence)
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0p
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0p
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Net cash(6)
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1.6
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10.2
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FY24 business highlights
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·
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Decisive action was taken to grow product
margins, reset the cost base and scale back non-essential
investments, with the aim of improving profitability. This included
relocating our online fulfilment centre and changing ways of
working in our retail Distribution Centre, negotiating more
favourable terms with suppliers and landlords, transferring from
the Main Market to AIM and ending our customer loyalty scheme to
focus instead on providing customers with everyday low
prices.
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Evolved our brand to fulfil our purpose -
to inspire reading, learning,
creativity and play - commencing a project to make our brand
positioning clearer. This is now being rolled out in our external
marketing and includes the introduction of our new #TimeWellSpent
strapline.
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Refined our product proposition to more
clearly align to our brand purpose through the introduction of new
toys and games ranges and the relaunch of our kids' book range in
Spring 2024.
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Improved the quality of our overall store
portfolio through 9 openings, 24 closures (of mostly loss-making or
low-profit stores), 5 relocations and 21 refits. Operated from 511
stores at the end of FY24, of which 96% are profitable. New stores
on track to deliver strong payback of approximately one
year.
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Leadership changes at both plc Board and
Operating Board level, including streamlining the Operating Board
so that it is more agile and better positioned to deliver on
strategy and growth plans.
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Placed 15th in the 'Best Big Companies to Work
For' and 10th in Retail Week's 'Top 50 happiest retailers to work
for', demonstrating strong colleague engagement.
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Trading
update and outlook
Sales have been in line with our expectations
in the first 21 weeks of FY25 (ended Sunday 29 September 2024),
with LFL sales up 0.2%, outperforming the wider sector. This
performance is encouraging, against the widely reported backdrop of
improved consumer confidence having yet to translate into increased
consumer spend and non-food retail sales remaining
subdued(7).
We are well-positioned heading into our peak
Christmas trading period having addressed the capacity issues faced
in our Distribution Centre last year, our new brand strapline
#TimeWellSpent launching and exciting new product ranges set to
land, including our popular 2 for £12 gifts for all the family and
some fantastic new book releases across our fiction and non-fiction
ranges.
Strong product margin growth and cost savings
are being delivered, more than offsetting ongoing cost headwinds.
As such, we remain on track to deliver improved profitability in
FY25 and meet Group compiled market forecasts of pre-IFRS16
Adjusted EBITDA of £8.5m.
Board
change
As announced alongside our FY24 results, John
Goold and Mark Kirkland, both Non-Independent Non-Executive
Directors of The Works, have decided to step down from the Board
with effect from today.
Gavin Peck, Chief Executive Officer of The Works,
commented:
"Against a persistently challenging consumer
backdrop and tough Christmas trading, we were pleased to end FY24
in line with market expectations. This was a direct result of the
continued dedication and strong response of colleagues, the
decisive action taken to improve product margins, reduce costs and
scale back non-essential investments, supported by improved sales
in the final quarter.
"Good strategic progress was made during the
year and whilst we believe this continues to be the right high
level strategic direction for The Works, we also believe that now
is the right time to evolve the strategy. Work is therefore
underway to refine our plans to transform the business and drive an
improved performance and shareholder returns in the years
ahead.
"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 FY25. Operationally we are in a much stronger
position this year as we head into the upcoming peak Christmas
trading period and we look forward to supporting customers to have
a Christmas well spent courtesy of The Works."
Preliminary results
presentation
A copy of the FY24 Preliminary results
presentation will shortly be made available on the Company's
website (www.corporate.theworks.co.uk/investors).
A presentation and Q&A for all existing
and potential shareholders will be held via Investor Meet Company
at 1.30pm on Wednesday 2 October 2024. Investors can register
here:
https://www.investormeetcompany.com/theworkscouk-plc/register-investor
|
Enquiries:
TheWorks.co.uk
plc
Gavin
Peck, CEO
Rosie
Fordham, CFO
|
via Sanctuary
Counsel
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Sanctuary
Counsel
Ben
Ullmann
Rachel
Miller
Kitty
Ryder
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0207 340
0395
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theworks@sanctuarycounsel.com
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Singer Capital Markets
(Nomad and Broker)
Peter
Steel
Alaina
Wong
Jalini
Kalaravy
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020 7496 3000
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Footnotes:
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(1)
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The FY24 annual report and
accounts for the Group will cover the 53-week period ended 5 May
2024, compared to a 52-week period ended 30 April 2023 in
FY23.
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(2)
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53-week LFL sales growth has been
calculated with reference to the prior 53-week comparative sales
period. LFL sales growth is the growth in gross sales from stores
which have been trading for the full financial period (current and
previous year), and from the Group's online store.
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(3)
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In November 2023 the Group
announced its revised profit forecast of pre-IFRS 16 EBITDA of
£6.0m.
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(4)
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Adjusted profit figures exclude
Adjusting items. See notes 2 (Alternative performance measures) and
3 (Adjusting items) of the condensed financial statements included
in this RNS.
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(5)
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Prior period restatements reflect
adjustments wholly related to IFRS 16 lease accounting. Further
details can be found in note 12 of the condensed financial
statements included in this RNS.
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(6)
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Net cash at bank excluding finance
leases, on a pre-IFRS 16 basis.
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(7)
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The BRC-KPMG Retail Sales Monitor
for August reported that non-food sales decreased 1.7% year-on-year
over the three-months to August (link).
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Notes for editors:
The Works is one of the UK's
leading family-friendly value retailers of arts and 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 over 500 stores in the
UK & Ireland, as well as trading online at
TheWorks.co.uk.
Chair Review
Introduction
I am delighted to have joined The Works as Chair
in July 2024 and, on behalf of the whole Board, would like to take
this opportunity to thank my predecessor, Carolyn Bradley, for her
contribution to the business.
My initial, overriding impression since joining
The Works is that this is a business with a clear purpose, strong
value proposition, quality store portfolio, positive and healthy
culture, tight-knit leadership team and passionate
colleagues.
While much important progress has been made in
recent years, this has not yet translated into an improved
financial performance. There remains much to be done and although
the business continues to face challenges, this also presents an
exciting opportunity to evolve and grow. I believe there is
substantial potential for increased shareholder value and I look
forward to working closely with Gavin and his leadership team to
realise this.
FY24
performance
The business faced difficult economic conditions
in FY24, which put pressure on sales and impacted profitability.
Action taken to reduce the cost base and, grow product margins, as
well as improved sales in the final quarter provides a stronger
foundation from which to build, as we have seen in FY25 to date.
Credit must go to Gavin and his leadership team for ensuring The
Works ended the year in line with market expectations and
positioning the business for growth in the years ahead.
Strategy
Following several years of major externally
driven operational challenges, resulting in financial
underperformance and a reshaping and strengthening of both the
Operating Board and the plc Board, as detailed below, now is the
opportune moment to put in place a clear plan to transform the
business. Strong, affirmative action is needed to drive sales
growth, improve operating margins and deliver strong shareholder
returns. A review of our longer-term goals, the strategy and
operational plans to deliver on those goals is currently underway
and we expect to be in a position to share more on this alongside
our interim results in January 2025.
Our Board and
leadership
The business has undergone leadership changes at
both an Operating and plc Board level over the last
year.
Lynne Tooms was appointed as Commercial Director
in September 2023 and Rosie Fordham stepped up to the role of CFO
in January 2024. Both have had a hugely positive impact on the
business.
To reflect where The Works is today and to
ensure that the business is best able to deliver on its strategy,
Gavin restructured his leadership team in April 2024. We now have a
streamlined Operating Board which has accelerated the delivery of
our plans and improved cross-functional working.
We have also seen changes at a plc Board level
during the year. In addition to my appointment in July 2024, John
Goold and Mark Kirkland, both from one of our shareholders Kelso
plc, joined as Non-Executive Directors in February 2024. They
decided to step down from the Board in October 2024.
Catherine Glickman, Independent Non-Executive
Director, announced her intention not to seek re-election at
the AGM. The process to appoint Catherine's successor, someone that
has extensive value retail experience, is expected to be completed
before the end of the calendar year.
Capital distributions
The Board is not proposing a final dividend for
FY24. We will continue to keep future shareholder distributions
under consideration as profitability improves and net cash allows,
whilst noting some of our major shareholders' preference for share
buybacks over the payment of dividends. A further update will be
provided alongside our interim results in January 2025.
Outlook
The Board is mindful that the consumer
environment has not yet fully recovered and of continued cost
headwinds. With a strengthened leadership team and Board, a good
foundation for strategic progress, action taken around costs, and a
solid start to sales in the new financial year, we are, however,
confident that The Works will deliver profit growth in
FY25.
Finally, I would like to thank our shareholders
for their continued support whilst the business is undergoing a
period of transition.
Steve
Bellamy
Chair
CEO
Report
Introduction
In FY24 we made good progress against our
"better, not just bigger" strategy, whilst also shifting our focus
in response to challenging trading conditions. Following a
challenging second half of 2023, with particularly tough Christmas
trading, stabilising profitability became our primary focus.
Decisive action was taken to grow gross margins, reset the cost
base and scale back non-essential investments. I am pleased to
report that, as a result of this action, we finished the year in
line with market expectations. We are well positioned to realise
further benefits and deliver increased shareholder value in FY25
and beyond.
Trading
performance and financial results
In FY24 we delivered total revenue growth of
0.9% to £282.6m and a total like-for-like (LFL) sales decline of
0.9%, which was lower than our expectations at the start of the
year. Across the year our stores, which comprise c.90% of sales,
saw sales increase by 0.6% on a LFL basis, whilst online LFL sales
declined by 12.4%. Outlined below are the main factors that
contributed to this performance:
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·
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The backdrop to FY24 was persistently
challenging, characterised by high consumer inflation, low consumer
confidence and ongoing cost of living pressures. This impacted
Christmas trading in particular and drove high levels of
promotional activity across the market ahead of our peak Christmas
season.
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We faced capacity issues at our Distribution
Centre in the run up to peak trading, exacerbated by operational
challenges with embedding a new picking process, which temporarily
disrupted the flow of stock during our key trading
period.
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We had a promising start to the year and good
strategic progress was made, particularly through improvements to
our product proposition. New toys and games ranges performed well
in H1 and the relaunch of our kids' book, core art and stationery
ranges drove improved trading in-store post-Christmas.
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As part of our ongoing focus on improving the
quality of our store portfolio we closed a net 15 stores, resulting
in a sales headwind. As the closed stores were mostly loss-making
or low-profit stores, the profit impact was broadly
neutral.
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We implemented a series of changes to our
online channel to improve profitability. Although this temporarily
impacted sales, it meant that our online channel broke-even in FY24
and the Board expects this channel to be profitable in
FY25.
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Pre-IFRS16 EBITDA for FY24 was £6.0m (FY23:
£9.0m), which was lower than our expectations at the start of the
year. We faced increased cost headwinds in FY24, both those that we
had anticipated (e.g. higher business rates, increases to the
National Living and Minimum Wages and investment in our
merchandising team) and those we could not have foreseen (e.g.
substantial increases in freight costs due to supply chain
disruption). Faced with constrained profitability and uncertainty
regarding a recovery in consumer confidence, in the second half of
the year we implemented a programme to stabilise profitability.
Action taken included:
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Transferring The Works from its Main Market
listing to AIM which will result in lower corporate costs and a
more flexible regulatory environment.
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Moving our online fulfilment centre, operated
by third-party provider iForce, to a more efficient facility in
early January, which is expected to deliver a c.£1.0m per year
reduction in operating costs.
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Ending our Together Rewards loyalty scheme to
focus instead on maintaining everyday affordable prices. The scheme
had c.2 million active members and although loyalty members
typically spent more, it did not deliver adequate returns on the
annual investment of over £2m.
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Improving product margins through negotiations
with suppliers and more targeted promotional activity.
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Introducing changes to ways of working in our
Distribution Centre and store labour models, which are expected to
drive significant efficiencies.
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Negotiating rent savings with landlords,
particularly for low-profit and loss-making stores with leases up
for renewal.
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Restructuring our Operating Board to give us a
more agile, streamlined and focused leadership team.
|
We expect to realise most of the benefits from
this activity in FY25, however were encouraged to see improved
margins and lower costs coming through towards the end of FY24.
This action, coupled with improving store sales in the final
quarter, meant that we finished the year in line with expectations,
delivering pre-IFRS 16 Adjusted EBITDA of £6.0m (FY23: £9.0m) and
Adjusted profit before tax of £3.2m (FY23 restated:
£5.3m).
Overall, whilst it is disappointing that our
performance in the year was lower than anticipated at the outset, I
am pleased that the decisive action taken in the second half has
started to deliver positive results. This, combined with the good
strategic progress outlined below, means we are confident that The
Works now has a solid foundation on which to return to growth in
FY25 and beyond.
Strategy
Despite the challenges faced, our teams rallied
together and delivered good progress against our 'better, not just
bigger' strategy in FY24. Whilst we believe that this continues to
be the right high level strategic direction for the business, we
feel that that now is the right time to evolve the strategy and set
out a clear plan to transform the business, with the ambition to
drive sales growth, improve operating margins and deliver strong
shareholder returns. A review of the strategy is currently underway
and we expect to update shareholders on our goals and priority
focus areas in early 2025.
Strategic progress in FY24 includes:
Developing our brand and increasing
our customer engagement
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·
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Recruited a new Commercial Director to lead
our product, sourcing and quality strategy, and to ensure our brand
and product proposition continues to evolve and is aligned with our
purpose, with good progress made.
|
|
·
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Continued to evolve our brand to fulfil our
purpose to inspire reading, learning, creativity and play. We
commenced a project to make our brand positioning clearer, which is
being rolled out this Christmas and includes the introduction of
our new #TimeWellSpent strapline. This captures the important role
that we play in supporting families with affordable, feel good ways
to spend their time and connecting people with screen-free things
to do.
|
|
·
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Improved our product proposition through the
introduction of new toys and games ranges, which performed
particularly well in H1. We relaunched our kids' book range during
Spring 2024, with a much clearer offer from baby and toddler
through to fiction books for young adults, including the
introduction of more fun-learning books and a broader range of
kids' fiction titles.
|
Enhancing our online
proposition
|
·
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Delivered improvements to the retail website
to enhance the customer experience, supported by new analytical
tools including revamping our homepage, optimising product pages
and improving navigation across the site. These changes have seen
an improvement on all key metrics, including conversion, and have
laid the foundation for further improvements in FY25.
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Actively tested new trading mechanics to
determine the most effective strategies for engaging our customers,
testing a mix of limited-time discounts, web exclusives and
bundles, as well as delivery initiatives to give better choice on
delivery. Early results indicate that targeted promotions have not
only increased sales but also enhanced key KPIs such as average
order value (AOV) and profit per order.
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·
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As part of our broader efforts to improve
profitability across the business, we implemented changes to our
online channel in H2, for example increasing the free delivery
threshold and increasing delivery charges. This impacted sales but
improved profitability.
|
Optimising our store
estate
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·
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Focused on maintaining the overall quality of
our store portfolio, ensuring we have the right stores in the right
locations for our customers. This included 9 openings, 24 closures,
5 relocations and 21 refits. The business traded from 511 stores at
the year end, of which 96% are profitable.
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·
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The majority of closures were of loss-making
or low-profit stores where we were unable to agree suitable terms
with the landlord. New stores performed in line with internal
forecasts and should deliver strong payback of approximately one
year.
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·
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Successfully negotiated with landlords on FY24
lease renewals, delivering £0.8m in annual rent savings.
|
Driving operational
improvements
|
·
|
Moved our online fulfilment centre, operated
by a third-party provider, iForce, to a more efficient facility in
early January, which is expected to save c.£1m per year in
operating costs.
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·
|
Strengthened Distribution Centre management to
help embed improved ways of working and deliver benefits and
efficiencies in the 2024 calendar year and beyond.
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Following a successful pilot in 2023, began
rollout of new EPOS software (completed in July 2024) that, in
time, will enable improved functionality on our tills in stores,
enabling colleagues to spend more time on the shop floor and
respond to customer's requests quickly and efficiently.
|
Leadership and
Operating Board changes
There have been a number of changes in
leadership during the year, at both an Operating and plc Board
level. I would like to take this opportunity to thank those who
have departed and to welcome our new leadership team and Board
members, who all bring a wealth of experience.
After the period end we announced that Carolyn
Bradley would be stepping down as Chair and Steve Bellamy had been
appointed as her successor. I would like to thank Carolyn for her
support over the last few years, which has been hugely valuable
during a period of significant change at The Works. I look forward
to working with Steve and am confident that, together with our
streamlined Operating Board, the business has the right leadership
structure and experience to set a clear plan to transform our
business and deliver against it, to ensure we return to growth and
deliver increased value for shareholders.
Colleagues
I am proud that The Works maintained such strong
colleague engagement scores in FY24, placing 15th in the 'Best Big
Companies to Work For' and 10th in Retail Week's 'Top 50 happiest
retailers to work for'. I am hugely grateful to our team of
fantastic colleagues for adapting and going above and beyond when
faced with challenging trading conditions and such extensive change
across the business. It is testament to their hard work and
dedication, as well as the supportive, positive culture at The
Works that we ended the year on a more positive
trajectory.
ESG
As a business, we remain committed to "Doing
Business Better" and to making positive and sustainable changes
which will enable us to continue to inspire reading, learning,
creativity and play for generations to come.
We are taking steps to progress our ambition to
be "Net Zero" in Scope 1 by 2035, Scope 2 by 2030, and Scope 3 by
2045, with an ambition to achieve Scope 3 by 2040 to align with the
BRC's climate action roadmap. We also made good progress in the
year to support both People and Planet as outlined in the Annual
report and accounts.
Outlook
Although not where we had hoped to be going into
the year, we are pleased to have finished FY24 in line with revised
market expectations. This reflects the actions taken to reset our
cost base and improve margins, supported by improving sales in the
final quarter and the business is in a much stronger position as a
result.
Despite inflation falling and interest rates
beginning to ease, the consumer environment remains subdued and we
are yet to see a tangible improvement in consumer spend. We expect
trading conditions to continue to be tough in FY25, with cost
headwinds such as the higher National Living Wage, freight and
business rates remaining. However, I am confident that the changes
we have implemented across the business make us well placed to
offset these factors and am encouraged both by the solid sales
performance since the year end and the fact that that we are well
placed operationally to maximise sales during our peak Christmas
trading period. We expect to deliver stable sales and an improved
EBITDA in FY25 and over the medium term our ambition is to return
to pre-IFRS 16 EBITDA margins of 5%.
Gavin
Peck
Chief Executive Officer
Financial
review
Overview
The result for FY24 was in line
with the revised forecast announced by the Group in November 2023
and reflects the refocus on tighter cost control and improving
gross margins.
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|
FY24(1)
|
FY23
(Restated)(2)
|
|
Revenue
|
£282.6m
|
£280.1m
|
|
Revenue growth
|
0.9%
|
5.8%
|
|
LFL sales(3)
|
(0.9)%
|
4.2%
|
|
Pre-IFRS 16 Adjusted
EBITDA(4)
|
£6.0m
|
£9.0m
|
|
Profit before tax
|
£6.9m
|
£9.0m
|
|
Net cash
at bank(5)
|
£1.6m
|
£10.2m
|
(1)
The FY24 accounting period relates to the 53
weeks ended 5 May 2024 (also referred to as the period) and the
comparative FY23 accounting period relates to the 52 weeks ended 30
April 2023.
(2)
Prior period restatements reflect adjustment
wholly related to IFRS 16 Lease accounting. Further details can be
found in note 12 of the condensed financial statements included in
this RNS.
(3)
53 week LFL sales growth has been calculated with
reference to the prior 53 week comparative sales period. LFL sales
growth is the growth in gross sales from stores which have been
trading for the full financial period (current and previous year),
and from the Group's online store.
(4)
Adjusted profit figures exclude Adjusting items.
See notes 2 (Alternative performance measures) and 3 (Adjusting
items) of the condensed financial statements included in this
RNS.
(5)
Net cash at bank excluding finance leases, on a
pre-IFRS 16 basis.
· Revenue increased by £2.5m (+0.9%) compared with the prior
period due, in part, to an extra week of trading and LFL store
sales growth of 0.6%, along with the effect of closing a net 15
stores in the period. Online sales declined by 12.4%, as we
focussed on improving profitability, pulling total LFL sales growth
lower.
· Pre-IFRS16 Adjusted EBITDA of £6.0m, compared to £9.0m in the
prior period, reflects lower than anticipated sales and significant
cost headwinds. We partially offset some of these headwinds through
proactive operational changes at the start of the period. In light
of lower sales ahead of and during the peak trading period, we took
further action to re-focus on improving gross margins and further
reduce costs post-Christmas. This helped us to achieve the forecast
for FY24.
· Group profit before tax includes a credit of £3.7m (restated
FY23: £3.6m credit) of Adjusting items, comprising of a £1.4m
reversal of impairment charges (as a result of following the
requirements of the IFRS16 accounting standard), (restated FY23:
charge £1.1m) and £3.5m (FY23: £4.7m) profit on disposal of right
of use assets and lease liabilities. These were partially
offset by other non-recurring costs of £1.2m relating to the
Group's move to AIM (£0.5m) and restructuring costs
(£0.7m).
· The
Group ended the period with net cash of £1.6m. The comparable
52-week period to 28 April 2024 ended with net cash of £6.5m, which
compares to net cash of £10.2m at the end of FY23. The Group
continues to have access to, and utilises, a revolving credit
facility (RCF) of £20.0m to support the build of stock prior to
peak trading.
· As
part of the Company's move to AIM, the fixed charge covenant was
successfully renegotiated under the Group's banking facility,
thereby creating additional headroom when modelling the various
scenarios in the Board's going concern assessment. The accounts
have therefore been prepared on a going concern basis with no
inclusion of a material uncertainty. Refer to note 1 in the
condensed financial statements included in this RNS for further
detail.
· In
light of the lower profit delivered in FY24, the Board will not be
proposing a final dividend in relation to FY24. Future shareholder
distributions will be kept under consideration as profitability
improves and net cash allows.
The Group
refers to alternative performance measures (APMs) in this report as
it believes these provide management and other stakeholders with
helpful additional information. These measures are used by
management in running the business, including pre-IFRS 16 Adjusted
EBITDA ("EBITDA") and like for like ("LFL"[1]) sales.
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 analysis
Total revenue grew 0.9% to £282.6m
in FY24 (FY23: £280.1m). LFL(1) sales were down 0.9%,
with stores +0.6% and online -12.4%.
|
LFL sales growth
|
Stores
|
Online
|
Total
|
|
Q1
|
6.4%
|
(13.1%)
|
4.5%
|
|
Q2
|
1.2%
|
(11.8%)
|
(0.5%)
|
|
H1
|
3.5%
|
(12.2%)
|
1.6%
|
|
Q3
|
(3.4%)
|
(11.0%)
|
(4.4%)
|
|
Q4
|
1.6%
|
(14.0%)
|
0.2%
|
|
H2
|
(1.5%)
|
(11.8%)
|
(2.8%)
|
|
Full year
|
0.6%
|
(12.4%)
|
(0.9%)
|
(1)
53 week LFL sales growth has been calculated with
reference to the prior 53 week comparative sales period. LFL sales
growth is the growth in gross sales from stores which have been
trading for the full financial period (current and previous year),
and from the Group's online store.
· H1
headlines
o Group revenue performed well against an increasingly
challenging economic environment.
Total LFL sales increased by 1.6% with stores
+3.5%
o Early summer trading was particularly strong, with
performance supported by the launch of our new summer 'out to play'
ranges, and expansion of our toys and games offering. Annualising
against the residual impact of our late FY22 cyber-attack also
supported comparatives.
o Towards the end of the half, our new and extended Halloween
range performed well, however overall performance was suppressed
against a wider back drop of increasing inflationary pressures and
cost of living challenges, which resulted in an increased level of
discounting across the wider retail market.
· H2
headlines
o H2 LFL sales declined by 2.8%, reflecting a 4.4% reduction in
Q3 and a more stable Q4 increase of 0.2%.
o Performance remained challenging through peak Christmas
trading. Family finances were under
increasing pressure, meaning many customers shifted spend to
essentials rather than discretionary gifting. We maintained a level
of promotional discounting across Q3 to echo the wider market and
remain competitive, whilst also executing a more prominent January
sale.
o We also faced temporary operational efficiency
challenges as we ran out
of space in our Distribution Centre, which created short term
disruption to the flow of stock in the run up to peak trading. This
challenge eased post-Christmas which, along with range
improvements, supported the improvement in LFLs in Q4.
Store numbers
|
Store numbers
|
FY24
|
FY23
|
|
Stores at beginning of
period
|
526
|
525
|
|
Opened in the period
|
9
|
17
|
|
Closed in the period
|
(24)
|
(16)
|
|
Relocated (excluded from opened/closed above,
NIL net effect on store
numbers)
|
5
|
3
|
|
Stores at end of period
|
511
|
526
|
We were trading from 511 stores at
the period end, of which over 96% are profitable on an annual
basis. Our store estate represents c.90% of sales and delivered
positive LFLs in the period. The number of stores trading reduced
by 15 during the period. The change in store estate was heavily
weighted towards the second half of the financial period, with 12
net closures post-Christmas. We continued to optimise the portfolio
and close low-profit and loss-making stores where we were not able
to agree a commercial rent with landlords whilst continuing to look
to add new stores that fit our profile.
The 14 new stores opened in the
period (including relocations) performed well overall and in line
with their internal forecasts, which should see payback of around 1
year.
Product gross margin and gross profit
|
|
FY24
|
|
FY23
(Restated)(1)
|
|
Variance
|
Variance
|
|
|
£m
|
% of
revenue
|
|
£m
|
% of
revenue
|
|
£m
|
%
|
|
Revenue
|
282.6
|
|
|
280.1
|
|
|
2.5
|
0.9
|
|
Less: Cost of goods
sold
|
(120.5)
|
|
|
(118.8)
|
|
|
(1.7)
|
(1.4)
|
|
Product gross margin
|
162.1
|
57.3
|
|
161.3
|
57.6
|
|
0.8
|
0.5
|
|
|
|
|
|
|
|
|
|
|
|
Store payroll
|
(50.2)
|
(17.8)
|
|
(46.8)
|
(16.7)
|
|
(3.4)
|
(7.3)
|
|
Store property and establishment
costs
|
(49.3)
|
(17.4)
|
|
(51.8)
|
(18.5)
|
|
2.5
|
4.8
|
|
Store PoS & transaction
fees
|
(2.7)
|
(1.0)
|
|
(2.3)
|
(0.8)
|
|
(0.4)
|
(17.4)
|
|
Online variable
costs
|
(15.8)
|
(5.6)
|
|
(18.4)
|
(6.6)
|
|
2.6
|
14.1
|
|
Total non-product related cost of sales
|
(118.0)
|
(41.8)
|
|
(119.4)
|
(42.6)
|
|
1.4
|
1.2
|
|
|
|
|
|
|
|
|
|
|
|
Store depreciation
|
(1.9)
|
(0.7)
|
|
(3.7)
|
(1.3)
|
|
1.8
|
49.0
|
|
Adjusting items(2)
|
3.7
|
13.1
|
|
3.6
|
1.3
|
|
(0.1)
|
(2.8)
|
|
IFRS16 impact
|
5.9
|
2.1
|
|
6.1
|
2.8
|
|
(0.2)
|
(3.3)
|
|
Gross profit per financial statements
|
51.8
|
18.3
|
|
47.9
|
17.1
|
|
3.9
|
8.1
|
(1)
Prior period restatements reflect adjustments
wholly related to IFRS 16 Lease accounting. Further details can be
found in note 12 of the condensed financial statements included in
the RNS.
(2)
Adjusted profit figures exclude Adjusting items.
See notes 2 (Alternative performance measures) and 3 (Adjusting
items) of the condensed financial statements included in this
RNS.
The product gross margin rate decreased by 30bps to 57.3% (FY23: 57.6%). Notable
factors influencing year on year comparisons are
as follows:
· Evolving product mix: Our new toys and games ranges drove
incremental sales and saw double digit growth in the period,
however these attract a lower margin percentage. The continued
growth in front-list adult fiction books also pulled the rate
lower.
· The
additional promotional activity across peak reduced the gross
margin percentage.
· The
hedged FX rate on payments made in US dollars remained a headwind
through the period. FY24 hedged US dollar;GB pound rate was 1.22
versus 1.36 in FY23.
· A
reduction in container freight rates versus 2022 rates: Average
container rates paid during FY24 were $2k versus FY23 of
$6k.
· Q4
margin improved versus FY23, supported by reduced promotional
activity and the impact of a focus on stronger negotiations with
suppliers. This activity supports the expected improvement in
margin rates in FY25, despite the higher freight rates currently
being experienced.
Non
product related costs of sales decreased by £1.4m in FY24, made up
of:
Store payroll costs increased by £3.4m, in part due to
the additional week of trading which increased costs by £0.9m.
Underlying costs increased due to:
· Changes to our store labour structure, implemented at the
start of the period, partially mitigated the impact of the 9.7%
increase in the National Living and Minimum Wage ('NLMW') in April
2023 and the corresponding retail management increases.
· A
further hours efficiency programme implemented towards the end of
the financial period is expected to deliver significant savings
across FY25, helping to mitigate further NLMW related cost
headwinds.
Store property and establishment costs
reduced by £2.5m. The
additional week of trading increased costs by
£1.0m, whilst underlying costs reduced by £3.5m.
· The
majority of the reduction was driven by business rates. £2.8m
related to the 2023 business rates revaluation and a further £0.6m
of credits were received from historic backdated rate
reductions.
· The
renegotiation of expiring leases across the LFL store estate
resulted in a reduction in rents which was further supported by the
release of rent accruals established where the effective date of
the rent decrease was back dated to a prior period (in these
situations, we continue to accrue for the higher rent level until
the reduction is confirmed in writing).
· Full
period electricity costs increased £1.6m as previously contracted
hedging agreements resulted in a slower unwind of market led energy
price reductions.
Online variable costs decreased by £2.6m. This was primarily due to lower sales
volumes, however ongoing work to improve the overall profitability
of the online business further supported the cost reduction and
helped mitigate inflationary increases. Annualised cost savings of
c.£1.0m are on track to be delivered through FY25 following the
move of our online fulfilment centre operated by a third-party
provider, iForce, to a more efficient facility in January
2024.
Operating profit and pre-IFRS 16 EBITDA
|
|
FY24
|
|
FY23
(Restated)(1)
|
|
Variance
|
Variance
|
|
|
£m
|
% of
revenue
|
|
£m
|
% of
revenue
|
|
£m
|
%
|
|
Gross profit per financial statements
|
51.8
|
18.3
|
|
47.9
|
17.1
|
|
3.9
|
8
|
|
Distribution expenses
|
(12.7)
|
4.5
|
|
(10.3)
|
3.7
|
|
(2.4)
|
23
|
|
Administrative expenses
|
(27.7)
|
9.8
|
|
(24.2)
|
8.6
|
|
(3.5)
|
14
|
|
Operating profit per financial statements
|
11.4
|
4.0
|
|
13.4
|
4.8
|
|
(2.0)
|
15
|
|
Less
Depreciation, amortisation and IFRS16 included in Operating
profit
|
(1.7)
|
0.6
|
|
(0.8)
|
0.3
|
|
0.9
|
113
|
|
Adjusting items
|
(3.7)
|
1.3
|
|
(3.6)
|
1.3
|
|
0.1
|
3
|
|
Pre-IFRS 16 Adjusted EBITDA
|
6.0
|
2.1%
|
|
9.0
|
3.2%
|
|
(3.0)
|
33
|
(1)
Prior period restatements reflect adjustments
wholly related to IFRS 16 Lease accounting. Further details can be
found in note 12 of the condensed financial statements included in
the RNS.
Distribution costs (before
depreciation and IFRS 16) comprising picking stock and delivering
it to stores increased by £2.4m compared
with FY23. 52-week distribution labour costs
increased by £1.8m, due to wage rate inflation from the increase in
the NLMW. Costs were further impacted by a reduction in
efficiencies resulting from the Distribution Centre capacity issues
experienced in the run up to peak as previously outlined. Increased
outbound pallet volumes resulted in £0.4m increase in third party
pallet delivery costs. The movement to a new way of working in the
Distribution Centre, supported by strengthened management, is
expected to drive efficiencies to offset the further increase in
NLMW in April 2024.
Administration costs (before
depreciation and IFRS 16) increased by
£2.8m compared to FY23. 52-week Support Centre
salary and related costs increased by £1.3m due to inflationary
increases experienced at the start of the financial period and the
annualising of structural changes implemented in late FY23. The
benefit of the structural changes made in late FY24, related to the
restructure of the Operating Board, had limited benefit to FY24,
but will support a lowering of our ongoing cost base from FY25. IT
infrastructure costs increased by £0.8m as we continued to roll out
our new EPOS system and invest in the strengthening of our IT
security.
Adjusting items were £3.7m
credit in FY24 (restated FY23: £3.6m credit) and include other
non-recurring costs of £1.2m relating to the Group's move to AIM
(£0.5m) and restructuring costs (£0.7m). These costs are more than
offset by a credit of £1.4m (restated FY23: impairment charge
£1.1m), resulting from the reversal of impairment charges relating
to the notional right of use asset created as a result of following
the requirements of the IFRS16 accounting standard and £3.5m
(restated FY23: £4.7m) profit on disposal of right of use assets
and lease liabilities. This is described in note 11 of the
condensed financial statements included in this RNS.
A reconciliation of statutory
profit to EBITDA can be found in note 2 of the condensed financial
statements included in this RNS.
Net financing
expense
Net financing costs in the
period were £4.5m (FY23: £4.4m), £4.0m
(FY23: £4.1m) of which related to IFRS 16 notional
interest.
Gross cash
interest payable was £0.4m, in relation to facility availability
charges (FY23: £0.3m).
Tax
|
|
FY24
£m
|
FY23
(Restated)(1)
£m
|
|
Current tax
expense/(credit)
|
-
|
(0.4)
|
|
Deferred tax expense
|
0.5
|
-
|
|
Total tax expense/(credit)
|
0.5
|
(0.4)
|
(1)
Prior period restatements reflect adjustments
wholly related to IFRS 16 Lease accounting. Further details can be
found in note 12 of the condensed financial statements included in
this RNS.
The impairment charges and
reversals reduced the taxable profits of prior periods and created
available brought forward tax losses, which significantly reduced
the effective tax rate and overall tax charge for FY24 and FY23. As
a result, there was a net tax charge of £0.5m (restated FY23: £0.4m
credit) consisting of a £nil current tax credit and a £0.5m
deferred tax charge. The £0.5m overall tax charge equated to an
effective tax rate of 7.8% (restated FY23: minus 4.4%).
The average headline corporation
tax rate for FY24 was 25.0% (FY23: 19.5%). Deferred tax has been
calculated at a rate of 25.0% in both periods.
Earnings per
share
Adjusted basic EPS for the period
was 4.2 pence (restated FY23: 9.2 pence). Adjusted
diluted EPS was 4.2 pence (restated FY23: 9.1 pence).
The difference between the Adjusted basic and
Adjusted diluted EPS figures is due to the inclusion within the
diluted EPS calculation of outstanding, potentially dilutive, share
options.
Other items
Prior period restatements reflect
adjustments wholly related to IFRS 16 Lease accounting. Further
details can be found in note 12 to the condensed financial
statements included in this RNS.
Capital
expenditure
Capital expenditure in the
Period was £5.8m (FY23: £6.7m). It
predominantly relates
to;
· New stores and
relocations £1.6m (FY23: £1.1m): the net investment
in new stores and relocations increased by £0.5m compared with
FY23. 9 new stores were opened and 5 stores relocated to new units
(FY23: 14 new stores, 3 relocations). Costs increased despite the
reduction in new stores due to reduced landlord contributions and
cost inflation.
· Store refits,
maintenance and lease renewal costs £2.3m (FY23:
£3.0m): the net investment in store
refits reduced by £0.7m compared with FY23. The quantity of refits
was lower in FY24 (20) vs FY23 (36), reflecting the impact of the
decision taken to reduce refits to conserve cash, offset, in part,
with wider construction industry inflation increasing the relative
cost per refit.
· IT hardware and
software £1.7m (FY23
£2.4m): the net investment in IT
hardware and software reduced by £0.7m compared with FY23. The
prior period included incremental expenditure relating to the
configuration and testing of the new store EPOS software prior to
its implementation in stores during FY24.
FY25 capex is expected to be
approximately £5.0m.
Inventory
Stock was valued
at £31.4m at the end of the period (FY23:
£33.4m), a decrease of £2.0m. Tighter stock
management supported a planned reduction in our period end closing
forward cover and supports lower
markdown activity in FY25. The stock value reflects higher stock on
water than we would have expected because of the extra transit time
from China due to the Red Sea challenges.
Cash
flow
The table below shows a summarised
non IFRS 16 presentation of cash flow. On this basis, the net cash
outflow for the period was £8.6m (FY23: outflow of
£6.1m).
|
|
FY24
|
FY23
|
Variance
|
|
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
Operating profit
|
11.4
|
13.4
|
2.0
|
|
Other operating
cashflows
|
(8.3)
|
(6.8)
|
(1.5)
|
|
Net movement in working
capital
|
(4.3)
|
(2.8)
|
(1.5)
|
|
Capital expenditure
|
(5.8)
|
(6.5)
|
0.7
|
|
Tax paid
|
(0.1)
|
(1.5)
|
1.4
|
|
Interest and financing
costs
|
(0.5)
|
(0.7)
|
0.2
|
|
Dividends
|
-
|
(1.5)
|
1.5
|
|
Purchase of treasury
shares
|
(0.3)
|
(0.5)
|
0.2
|
|
Cash flow before Exchange rate
movements
|
(7.9)
|
(6.7)
|
(1.2)
|
|
Exchange rate movements
|
(0.7)
|
0.6
|
(1.3)
|
|
Net decrease in cash and cash equivalents
|
(8.6)
|
(6.1)
|
(2.5)
|
|
|
|
|
|
|
Opening net cash balance excluding IAS 17
leases
|
10.2
|
16.3
|
|
|
Closing net cash balance excluding IAS 17
leases
|
1.6
|
10.2
|
|
The Group ended the period with
net cash of £1.6m. Our movement in period-end date, resulting from
the 53rd week, meant an additional payment run of
approximately £5.0m fell due before period end compared to the
prior financial period. The 52-week period ended with net cash of
£6.5m, which compares to net cash of £10.2m at the end of
FY23.
Bank facilities and financial position
The Group continues to have an RCF
of £20.0m, which provides ample liquidity and is utilised to
support the build of stock prior to peak trading. The terms of this
financing agreement expire on 30 November 2026.
Capital distributions
Considering the reduced profit in
FY24, the Board is not proposing a dividend for FY24.
We will continue to keep future
shareholder distributions under consideration as profitability
improves and note some of our major shareholders' preference for
share buybacks over the payment of dividends. A further update will
be made alongside our interim results in January 2025 and a new
capital allocation policy will be set out alongside our new
strategy in the first half of 2025.
Employee Benefit Trust funding for the purposes of share
schemes
To avoid dilution of existing
shareholder interests, the Board's intention is to consider
purchasing shares in the market to re-issue under employee share
schemes as it has done in each of the last two financial
years.
Rosie Fordham
Chief Financial Officer
Consolidated income statement
For the period ended 5 May
2024
|
|
|
|
|
52
weeks to 30 April 2023
(Restated - Note 12)
|
|
|
|
Result
before
Adjusting
items
£000
|
|
|
|
Result
before
Adjusting items
£000
|
|
|
|
Revenue
|
|
282,585
|
-
|
282,585
|
|
280,102
|
-
|
280,102
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
48,080
|
3,741
|
51,821
|
|
44,235
|
3,628
|
47,863
|
|
Other
operating income
|
|
8
|
-
|
8
|
|
8
|
-
|
8
|
|
Distribution expenses
|
|
(12,725)
|
-
|
(12,725)
|
|
(10,284)
|
-
|
(10,284)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance
income
|
|
19
|
-
|
19
|
|
227
|
-
|
227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before
tax
|
|
3,177
|
3,741
|
6,918
|
|
5,341
|
3,628
|
8,969
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alternative performance
measures
Profit before tax and IFRS
16
|
|
|
|
|
|
|
|
|
Basic
earnings per share (pence)
|
|
|
|
|
|
|
|
|
Diluted
earnings per share (pence)
|
|
|
|
|
|
|
|
|
Profit
for the period is attributable to equity holders of the
Parent.
1 Profit on disposal of
right-of-use assets and lease liability recognised under IFRS 16
has been restated in the prior period to be shown as an Adjusting
item rather than in the result before Adjusting items.
Consolidated statement of comprehensive income
For the period ended 5 May
2024
|
|
|
FY23
(Restated
-
Note
12)
£000
|
|
|
|
|
|
Items that may be recycled
subsequently into profit and loss
|
|
|
|
Cash flow
hedges - changes in fair value
|
1,664
|
(2,861)
|
|
Cash flow
hedges - reclassified to profit and loss
|
134
|
(62)
|
|
Cost of
hedging - changes in fair value
|
(415)
|
(162)
|
|
Cost of
hedging - reclassified to profit and loss
|
182
|
91
|
Tax
relating to components of other comprehensive income
|
|
|
Other
comprehensive income/(expense) for the period, net of income
tax
|
|
|
Total comprehensive income
for the period attributable to equity shareholders of the
Parent
|
|
|
Consolidated statement of financial position
As at 5 May
2024
|
|
|
|
FY23
(Restated
-
Note
12)
£000
|
|
Non-current
assets
|
|
|
|
|
Intangible assets
|
9
|
1,866
|
916
|
|
Property,
plant and equipment
|
10
|
12,358
|
11,773
|
|
Right-of-use assets
|
11
|
57,703
|
65,372
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
Inventories
|
14
|
31,354
|
33,441
|
|
Trade and
other receivables
|
15
|
8,384
|
7,507
|
|
Derivative financial assets
|
|
306
|
-
|
|
Current
tax asset
|
6
|
1,189
|
1,149
|
Cash and
cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Lease
liabilities
|
11,
17
|
19,943
|
19,626
|
|
Trade and
other payables
|
18
|
29,886
|
34,479
|
|
Provisions
|
19
|
543
|
565
|
|
Derivative financial liabilities
|
|
64
|
1,048
|
|
|
|
|
|
|
Non-current
liabilities
|
|
|
|
|
Lease
liabilities
|
11,
17
|
57,817
|
74,766
|
|
Provisions
|
19
|
476
|
1,298
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity attributable to
equity holders of the Parent
|
|
|
|
|
Share
capital
|
|
625
|
625
|
|
Share
premium
|
|
28,322
|
28,322
|
|
Merger
reserve
|
|
(54)
|
(54)
|
|
Share
based payment reserve
|
|
2,583
|
2,780
|
|
Hedging
reserve
|
|
129
|
(331)
|
|
|
|
|
|
|
|
|
|
|
These
financial statements were approved by the Board of Directors on 1
October 2024 and were signed on its behalf by:
Rosie
Fordham
Chief Financial
Officer
Company
registered number: 11325534
Consolidated statement of changes in equity
|
|
Attributable to equity holders of the Company
|
|
|
|
|
|
Share-based
payment
reserve
£000
|
|
|
|
Reported balance at 01 May
2022
|
|
|
|
|
|
|
|
Cumulative adjustment to opening balance (Note 12)
|
|
|
|
|
|
|
|
Restated balance at 01 May
2022 (Note 12)
|
|
|
|
|
|
|
|
|
Total comprehensive income
for the period
|
|
|
|
|
|
|
|
|
Profit
for the period (Restated - Note 12)
|
-
|
-
|
-
|
-
|
-
|
9,364
|
9,364
|
Other
comprehensive expense
|
|
|
|
|
|
|
|
|
Total comprehensive
(expense)/ income for the period
|
-
|
-
|
-
|
-
|
(2,732)
|
9,364
|
6,632
|
Hedging
gains and losses and costs of hedging transferred to the cost of
inventory (Note 12)
|
|
|
|
|
|
|
|
|
Transactions with owners of
the Company
|
|
|
|
|
|
|
|
|
Share-based payment charges
|
-
|
-
|
-
|
528
|
-
|
-
|
528
|
|
Dividend
|
-
|
-
|
-
|
-
|
-
|
(1,492)
|
(1,492)
|
Own
shares purchased by Employee Benefit Trust
|
|
|
|
|
|
|
|
Total transactions with
owners of the Company
|
|
|
|
|
|
|
|
Balance
at 30 April 2023 (Restated - Note 12)
|
|
|
|
|
|
|
|
|
Total comprehensive income
for the period
|
|
|
|
|
|
|
|
|
Profit
for the period
|
-
|
-
|
-
|
-
|
-
|
6,377
|
6,377
|
Other
comprehensive income
|
|
|
|
|
|
|
|
|
Total comprehensive income
for the period
|
-
|
-
|
-
|
-
|
1,242
|
6,377
|
7,619
|
Hedging
gains and losses and costs of hedging transferred to the cost of
inventory
Transfer
|
|
|
|
|
|
|
|
|
Transactions with owners of
the Company
|
|
|
|
|
|
|
|
|
Reversal
of share-based payment charges
|
-
|
-
|
-
|
(197)
|
-
|
-
|
(197)
|
|
Dividend
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Own
shares purchased by Employee Benefit Trust
|
-
|
-
|
-
|
-
|
-
|
(260)
|
(260)
|
Total transactions with
owners of the Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
Hedging reserve includes £410k (FY23: £150k) 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.
2
Hedging reserve includes a £290k (FY23: £nil)
transfer from retained earnings in relation to a historical tax
charge for our financial derivatives that had previously been
recognised in the consolidated income statement.
Consolidated cash flow statement
For the period ended 5 May
2024
|
|
|
|
FY23
(Restated
-
Note
12)
£000
|
|
Profit for the period
(including Adjusting items)
|
|
6,377
|
9,364
|
|
Adjustments for:
|
|
|
|
|
Depreciation of property, plant and equipment
|
10
|
3,663
|
5,147
|
|
Impairment of property, plant and equipment
|
10
|
1,589
|
775
|
|
Reversal
of impairment of property, plant and equipment
|
10
|
(1,272)
|
(574)
|
|
Depreciation of right-of-use assets
|
11
|
18,224
|
18,451
|
|
Impairment of right-of-use assets
|
11
|
3,394
|
2,173
|
|
Reversal
of impairment of right-of-use assets
|
11
|
(4,620)
|
(2,562)
|
|
Amortisation of intangible assets
|
9
|
632
|
997
|
|
Impairment of intangible assets
|
9
|
442
|
1,048
|
|
Reversal
of impairment of intangible assets
|
9
|
(850)
|
-
|
|
Derivative exchange loss/ (gain)
|
|
494
|
(721)
|
|
Financial
income
|
|
(19)
|
(227)
|
|
Financial
expense
|
|
536
|
518
|
|
Interest
on lease liabilities
|
11
|
3,984
|
4,130
|
|
Loss on
disposal of property, plant and equipment and
intangibles
|
9,
10
|
202
|
163
|
|
Profit on
disposal of right-of-use asset and lease liability
|
11
|
(3,537)
|
(4,717)
|
|
Share-based payment charges
|
|
(197)
|
528
|
|
|
|
|
|
|
Operating cash flows before
changes in working capital
|
|
29,583
|
34,098
|
|
(Increase)/decrease in trade and other receivables
|
|
(963)
|
1,033
|
|
Decrease/(increase) in inventories
|
|
1,149
|
(3,129)
|
|
Decrease
in trade and other payables
|
|
(3,672)
|
(1,443)
|
(Decrease)/increase in provisions
|
|
|
|
|
Cash flows from operating
activities
|
|
25,253
|
31,305
|
|
|
|
|
|
Net cash inflow from
operating activities
|
|
|
|
|
Cash flows from investing
activities
|
|
|
|
|
Acquisition of property, plant and equipment
|
10
|
(6,078)
|
(7,296)
|
|
Capital
contributions received from landlords
|
|
1,460
|
1,928
|
|
Acquisition of intangible assets
|
9
|
(1,208)
|
(1,309)
|
|
|
|
|
|
Net cash outflow from
investing activities
|
|
|
|
|
Cash flows from financing
activities
|
|
|
|
|
Payment
of lease liabilities (capital)
|
17
|
(22,471)
|
(23,250)
|
|
Payment
of lease liabilities (interest)
|
17
|
(3,984)
|
(4,130)
|
|
Payment
of fees from loans and borrowings
|
|
(60)
|
(336)
|
|
Interest
paid
|
|
(434)
|
(321)
|
|
Repayment
of bank borrowings
|
|
(6,000)
|
(4,000)
|
|
Proceeds
from bank borrowings
|
|
6,000
|
4,000
|
|
Dividend
paid
|
7
|
-
|
(1,492)
|
Own
shares purchased by Employee Benefit Trust
|
|
|
|
Net cash outflow from
financing activities
|
|
|
|
|
Net
decrease in cash and cash equivalents
|
|
(7,860)
|
(6,655)
|
|
Exchange
rate movements
|
|
(717)
|
571
|
Cash and
cash equivalents at beginning of period
|
|
|
|
Cash and cash equivalents at
end of period
|
|
|
|
Notes to
the consolidated financial statements
(Forming part of the
financial statements)
1. Accounting
policies
Where
accounting policies are particular to an individual note, narrative
regarding the policy is included with the relevant note; for
example, the accounting policy in relation to inventory is detailed
in Note 14 (Inventories).
(a) General
information
TheWorks.co.uk plc is a leading UK multi-channel value
retailer of arts and crafts, stationery, toys, games and books,
offering customers a differentiated proposition as a value
alternative to full price specialist retailers. The Group operates
a network of over 500 stores in the UK & Ireland and
online.
TheWorks.co.uk plc (the Company) is a UK-based public limited
company (11325534) with its registered office at Boldmere House,
Faraday Avenue, Hams Hall Distribution Park, Coleshill, Birmingham
B46 1AL.
These
consolidated financial statements for the 53 weeks ended 5 May 2024
(FY24 or the Period) comprise the results of the Company and its
subsidiaries (together referred to as the Group) and are presented
in pounds sterling. All values are rounded to the nearest thousand
(£'000), except when otherwise indicated.
(b) Basis of
preparation
The Group
financial statements have been prepared on a historical cost basis,
except for financial assets at fair value through profit and loss
including derivatives. The financial statements are prepared in
accordance with UK-adopted International Accounting
Standards.
The
preparation of the financial statements requires management to make
judgements, estimates and assumptions that affect the application
of policies, and the reported amounts of assets and liabilities,
income and expenses. The estimates and associated assumptions are
based on historical experience, future budgets and forecasts, and
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the
judgements about carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ
from these estimates.
The
estimates and assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in
which the estimate is revised if the revision affects only that
period, or in the period of the revision and future periods if the
revision affects both current and future periods. The Group's
significant judgements and estimates relate to going concern and
fixed asset impairment; these are described in Note
1(e).
(i) Going
concern
The
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 documented in the Strategic report on pages 38 to
43 of the Annual Report and Accounts. The financial statements have
been prepared on a going concern basis, which the Directors
consider appropriate having made this assessment.
The Group
has prepared cash flow forecasts for a period of at least 12 months
from the date of approval of these financial statements (the going
concern assessment period), based on the Board's forecast for FY25
and its three-year plan, referred to as the 'Base Case' scenario.
In addition, a 'severe but plausible' 'Downside Case' sensitivity
has been 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.
In
assessing the basis of preparation the Directors have
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 risks described in
the Strategic report;
· The
output of the Base Case scenario, which mirrors the Group's
three-year plan and therefore represents its 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.
Going concern and basis of
preparation conclusion
The
current economic environment remains challenging with the
cost-of-living crisis continuing to impact much of the UK
particularly low-income households, however the rate of inflation
is slowing and interest rates are at the lowest since July 2023.
There is sufficient cash headroom and headroom within both
covenants under both scenarios and therefore 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 financial statements and have therefore
prepared the financial statements on a going concern
basis.
(ii) New accounting
standards
The Group
has applied the following new standards and interpretations for the
first time for the annual reporting period commencing 1 May
2023:
· Disclosure of Accounting Policies - Amendments to IAS 1 and
IFRS Practice Statement 2
· Definition of Accounting Estimates - Amendments to IAS
8
· Deferred Tax Related to Assets and Liabilities Arising from a
Single Transaction - Amendments to IAS 12
The
adoption of the standards and interpretations listed above has not
led to any changes to the Group's accounting policies or had any
other material impact on the financial position or performance of
the Group.
As at the
date of approval of these financial statements, the following
standards and interpretations, which have not been applied in these
financial statements, were in issue, but not yet
effective:
· Non-Current Liabilities with Covenants - Amendments to IAS 1
and Classifications of Liabilities as Current or Non-Current -
Amendments to IAS 11
· Lease
Liability in a Sale and Leaseback - Amendments to IFRS
161
· Supplier Finance Agreements - Amendments to IAS 7 and IFRS
71
1 Effective for annual periods
starting on or after 1 January 2024
The
adoption of the standards and interpretations listed above is not
expected to have a material impact on the financial position or
performance of the Group.
(c) Basis of
consolidation
The
consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries). Control is achieved when the Group is exposed
to, or has rights to, variable returns from its involvement with
the entity and has the ability to direct the activities that affect
those returns through its power over the entity. Consolidation of a
subsidiary begins from the date control commences and continues
until control ceases. The Company reassesses whether or not it
controls an investee if circumstances indicate that there are
changes to the elements of control detailed above.
An
Employee Benefit Trust operated on the Group's behalf (EBT) is
acting as an agent of the Company; therefore, the assets and
liabilities of the EBT are aggregated into the Company balance
sheet and shares held by the EBT in the Company are presented as a
deduction from reserves.
(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, this will represent a
key source of estimation uncertainty.
Estimates
and judgements 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.
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:
|
|
|
|
Going
concern
|
1(b)(i)
|
|
Impairment of intangible assets, property, plant and
equipment and right-of-use assets
|
9, 10,
11
|
|
Inventory
provisions
|
14
|
2. Alternative performance
measures (APMs)
Accounting
policy
In the
reporting of financial information, the Group tracks a number of
APMs in managing its business. APMs should be considered in
addition to IFRS measurements. The Group's definitions of APMs may
not be comparable with similarly titled performance measures and
disclosures by other entities.
The Group
believes that these APMs provide stakeholders with additional
helpful information on the performance of the business. They are
consistent with how 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.
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 sales performance.
LFL sales are calculated on a gross basis to ensure that
fluctuations in the VAT rates of products sold are excluded from
the like-for-like sales growth percentage figure.
A
reconciliation of IFRS revenue to sales on an LFL basis is set out
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VAT
|
(36,599)
|
(35,149)
|
|
|
|
|
Revenue per consolidated
income statement
|
|
|
1FY24 is a 53-week period;
therefore, the LFL sales APM compares 53 weeks of FY24 to the
equivalent 53 weeks of FY23. Non-LFL store sales for FY23 include
the impact of the 53rd week which is removed to reconcile to the
reported sales number.
Pre-IFRS 16 Adjusted
EBITDA and Adjusted profit after tax
EBITDA is
defined by the Group as pre-IFRS 16 earnings before interest, tax,
depreciation, amortisation and profit/loss on the disposal of fixed
assets, after adding back or deducting Adjusting items. See Note 3
for a description of Adjusting items. Pre-IFRS 16 EBITDA is used
for the bank facility LTM EBITDA covenant calculations.
The table
below provides a reconciliation of pre-IFRS 16 EBITDA to profit
after tax and the impact of IFRS 16:
|
|
|
FY23
(Restated
-
Note
12)
£000
|
|
Pre-IFRS 16 Adjusted
EBITDA
|
6,042
|
9,000
|
|
Income
statement rental charges not recognised under IFRS 16
|
24,288
|
25,672
|
Foreign
exchange difference on euro leases
|
|
|
|
Post-IFRS 16 Adjusted
EBITDA
|
30,399
|
34,520
|
|
Loss on
disposal of property, plant and equipment
|
(168)
|
(149)
|
|
Loss on
disposal of intangible assets
|
(34)
|
(14)
|
|
Depreciation of property, plant and equipment
|
(3,663)
|
(5,147)
|
|
Depreciation of right-of-use assets
|
(18,224)
|
(18,451)
|
|
Amortisation
|
(632)
|
(997)
|
|
Finance
expenses
|
(4,520)
|
(4,648)
|
|
Finance
income
|
19
|
227
|
|
|
|
|
|
Adjusted profit after
tax
|
2,636
|
5,736
|
|
Adjusting
items (including impairment charges and reversals)
|
3,741
|
3,628
|
|
|
|
|
|
|
|
|
Profit before tax and IFRS
16
The table
provides a reconciliation of profit/(loss) before tax and IFRS 16
adjustments to profit/(loss) before tax.
|
|
|
|
FY23
(Restated - Note 12)
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) before tax and
IFRS 16 adjustments
|
|
|
|
|
|
|
|
|
Remove
rental charges not recognised under IFRS 16
|
24,166
|
-
|
24,166
|
|
25,545
|
-
|
25,545
|
|
Remove
hire costs from hire of equipment
|
122
|
-
|
122
|
|
128
|
-
|
128
|
|
Remove
depreciation charged on the existing assets
|
(94)
|
-
|
(94)
|
|
(1,236)
|
-
|
(1,236)
|
|
Remove
interest charged on the existing liability
|
4
|
-
|
4
|
|
34
|
-
|
34
|
|
Depreciation charge on right-of-use assets
|
(18,224)
|
-
|
(18,224)
|
|
(18,451)
|
-
|
(18,451)
|
|
Interest
cost on lease liability
|
(3,984)
|
-
|
(3,984)
|
|
(4,130)
|
-
|
(4,130)
|
|
|
|
|
|
|
|
|
|
|
Profit on
disposal of lease liability
|
-
|
3,537
|
3,537
|
|
-
|
4,717
|
4,717
|
|
|
|
|
|
|
|
|
|
|
Foreign
exchange difference on euro leases
|
69
|
-
|
69
|
|
(152)
|
-
|
(152)
|
Additional impairment charge under IAS 36
|
|
|
|
|
|
|
|
Net impact on
profit/(loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Adjusted profit
metrics
Profit
measures including operating profit, profit before tax, profit for
the period and earnings per share are calculated on an Adjusted
basis by adding back or deducting Adjusting items. These adjusted
metrics are included within the consolidated income statement and
consolidated statement of other comprehensive income, with further
details of Adjusting items included in Note 3.
3. Adjusting
items
Adjusting
items are unusual in nature or incidence and sufficiently material
in size that in the judgement of the Directors they merit
disclosure 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.
The
Directors believe that the Adjusted profit and earnings per share
measures included in this report provide additional useful
information to users of the accounts. These measures are consistent
with how business performance is measured internally. The profit
before tax and Adjusting items measure is not a recognised profit
measure under IFRS and may not be directly comparable with Adjusted
profit measures used by other companies.
If a
transaction or related series of transactions has been treated as
Adjusting in one accounting period, the same treatment will be
applied consistently year on year.
In
relation to FY24, the items classified as Adjusting, as shown
below, were related to transactions that had been treated as
Adjusting in prior periods.
|
|
|
FY23
(Restated
-
Note
12)
£000
|
|
Cost of
sales
|
|
|
|
Impairment charges
|
5,333
|
5,702
|
|
Impairment reversals
|
(6,742)
|
(4,613)
|
|
Profit on
disposal of right of use assets and lease
liabilities1
|
(3,537)
|
(4,717)
|
|
Other
exceptional items
|
1,205
|
-
|
|
|
|
|
1 In FY23, profit on disposal
of right of use assets and leases liabilities includes a gain on
modification of right of use assets of £3.6m
Impairment charges and reversals of prior year impairment
charges relate to fixed assets (see Notes 9, 10 and 11).
Profit on
disposal of right-of-use assets and lease liabilities relate to
leases (see Note 11).
Other
exceptional items comprise £0.5m (FY23: £nil) of professional fees
and other costs related to the listing of the Company on AIM and
£0.7m (FY23: £nil) of redundancy costs related to the restructure
of the Operating Board.
4. Operating
profit
Operating
profit before Adjusting items is stated after charging the
following items:
|
|
|
FY23
(Restated
-
Note
12)
£000
|
|
Loss on
disposal of property, plant and equipment
|
168
|
149
|
|
Loss on
disposal of intangible assets
|
34
|
14
|
|
Depreciation
|
21,887
|
23,598
|
|
Amortisation
|
632
|
997
|
|
Net
foreign exchange loss
|
170
|
392
|
|
Cost of
inventories recognised as an expense
|
120,530
|
119,085
|
|
|
|
|
Auditor's
remuneration:
|
|
|
|
|
Fees payable to the Group's
auditor for the audit of the Group's annual
accounts
|
300
|
850
|
|
Amounts payable in respect
of other services to the Company and its
subsidiaries
|
|
|
|
Audit of
the accounts of subsidiaries
|
42
|
40
|
Audit
related assurance services (provision of turnover certificates
required under certain leases)
|
|
|
|
|
|
|
5. Staff numbers and
costs
The
average number of people employed by the Group (including
Directors) during the period, analysed by category, were as
follows:
|
|
|
|
|
|
|
|
Store
Support Centre colleagues
|
280
|
243
|
|
Store
colleagues
|
3,590
|
3,564
|
Warehouse
and distribution colleagues
|
|
|
|
|
|
|
The
corresponding aggregate payroll costs were as follows:
|
|
|
|
|
Wages and
salaries
|
62,367
|
57,189
|
|
Social
security costs
|
4,422
|
4,156
|
Contributions to defined contribution pension
schemes
|
|
|
|
Total employee
costs
|
67,855
|
62,235
|
|
|
|
|
|
|
|
|
The Directors' remuneration
for the period was as follows:
|
|
|
|
|
Directors' remuneration
|
791
|
759
|
|
Contributions to defined contribution plans
|
16
|
15
|
|
|
|
|
The
following number of Directors were members of:
|
|
|
|
|
Company
defined contribution scheme
|
2
|
2
|
|
|
|
|
The
highest paid Director's remuneration and contributions to defined
contribution plans during the year were as follows:
|
|
|
|
|
Directors' remuneration
|
337
|
322
|
|
Contributions to defined contribution plans
|
10
|
9
|
|
|
347
|
331
|
6.
Taxation
Accounting
policy
The tax
expense represents the sum of the tax currently payable and
deferred tax.
Current
tax
The tax
currently payable is based on taxable profit for the year. Taxable
profit differs from net profit as reported in the income statement
because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are
never taxable or deductible. The Group's liability for current tax
is calculated using tax rates that have been enacted or
substantively enacted by the balance sheet date.
Deferred
tax
Deferred
tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the
computation of taxable profit and is accounted for using the
balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and
liabilities are not recognised if the temporary difference arises
from the initial recognition of goodwill or from the initial
recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the taxable
profit nor the accounting profit.
Deferred
tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries and associates, and
interests in joint ventures, except where the Group is able to
control the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the foreseeable
future. Deferred tax assets arising from deductible temporary
differences associated with such investments and interests are only
recognised to the extent that it is probable that there will be
sufficient taxable profits against which to utilise the benefits of
the temporary differences and they are expected to reverse in the
foreseeable future.
The
carrying amount of deferred tax assets is reviewed at each balance
sheet date and reduced to the extent that it is no longer probable
that sufficient taxable profits will be available to allow all or
part of the asset to be recovered.
Deferred
tax is calculated at the tax rates that are expected to apply in
the period when the liability is settled or the asset is realised
based on tax laws and rates that have been enacted or substantively
enacted at the balance sheet date. Deferred tax is charged or
credited in the income statement, except when it relates to items
charged or credited in other comprehensive income, in which case
the deferred tax is also dealt with in other comprehensive
income.
The
measurement of deferred tax liabilities and assets reflects the tax
consequences that would follow from the manner in which the Group
expects, at the end of the reporting period, to recover or settle
the carrying amount of its assets and liabilities.
Deferred
tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same
taxation authority and the Group intends to settle its current tax
assets and liabilities on a net basis.
Current tax and deferred
tax for the year
Current
and deferred tax are recognised in profit or loss, except when they
relate to items that are recognised in other comprehensive income
or directly in equity, in which case the current and deferred tax
are also recognised in other comprehensive income or directly in
equity, respectively. Where current tax or deferred tax arises from
the initial accounting for a business combination, the tax effect
is included in the accounting for the business
combination.
Recognised in consolidated
income statement
|
|
|
|
|
Current tax expense /
(credit)
|
|
|
|
Current
year
|
22
|
230
|
Adjustments for prior years
|
|
|
Current tax expense /
(credit)
|
|
|
|
Deferred tax expense/
(credit)
|
|
|
|
Origination and reversal of temporary differences
|
1,286
|
(212)
|
|
Change in
tax rate
|
-
|
(172)
|
Adjustments for prior years
|
|
|
Deferred tax expense /
(credit)
|
|
|
Total tax expense /
(credit)
|
|
|
1 The FY23 corporation tax
charge has been restated to reflect the tax impact of the
restatements documented in Note 12.
The UK
corporation tax rate for FY24 was 25.0% (FY23: 19.5%). Taxation for
other jurisdictions is calculated at the rates prevailing in the
respective jurisdictions.
As the
deferred tax assets and liabilities should be recognised based on
the corporation tax rate applicable when they are anticipated to
unwind, the assets and liabilities on UK operations have been
recognised at a rate of 25.0% (FY23: 25.0%). Assets and liabilities
arising on foreign operations have been recognised at the
applicable overseas tax rates.
Reconciliation of effective
tax rate
|
|
|
FY23
(Restated
- see above)
£000
|
|
|
|
|
|
Tax using
the UK corporation tax rate of 25.0% (FY23: 19.5%)
|
1,730
|
1,749
|
|
Non-deductible expenses
|
195
|
147
|
|
Effect of
tax rates in foreign jurisdictions
|
14
|
(13)
|
|
Tax over
provided in prior periods
|
(767)
|
(111)
|
|
Utilisation of unrecognised tax losses brought
forward
|
(751)
|
(2,114)
|
|
Deferred
tax not recognised
|
-
|
(18)
|
|
Losses
carried forwards
|
120
|
137
|
|
|
|
|
Total tax expense /
(credit)
|
|
|
|
|
|
|
The
Group's total income tax charge in respect of the period was £541k
(FY23: credit of £395k). The effective tax rate on the total profit
before tax was 7.8% (FY23: (4.4)%) whilst the effective tax rate on
the total profit before Adjusting items was 17.0% (FY23: (7.4)%).
The difference between the total effective tax rate and the
Adjusting tax rate relates to fixed asset impairment charges and
reversals within Adjusting items being non-deductible for tax
purposes.
The
current year tax expense recognised above is predominantly driven
by deferred tax movements on our fixed assets and
leases.
There is
also a tax charge of £323k (FY23: credit £262k) shown in the
statement of comprehensive income for fair value movements on
derivatives which impacts the deferred tax balance (Note
13).
Consolidated statement of
financial position
Included
in the consolidated statement of financial position is a current
tax debtor of £1,189k (FY23: £1,149k), resulting from the
overpayment of tax in prior years arising from the prior year
restatement (Note 12).
7.
Dividends
Accounting
policy
At the
balance sheet date, dividends are only recognised as a liability if
they are appropriately authorised and are no longer at the
discretion of the Company. Unpaid dividends that do not meet these
criteria are disclosed in the notes to the financial
statements.
|
|
|
|
|
Final
dividend for the period ended 1 May 2022 paid in FY23
|
|
|
|
Total
dividend paid to shareholders during the period
|
|
|
|
The Board
has not recommended the payment of a dividend in respect of FY24
(FY23: 1.6 pence). At the FY23 Annual General Meeting the
resolution to approve the payment of the FY23 dividend was not
approved and consequently the dividend declared in the FY23 Annual
Report was not distributed to shareholders.
8. 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 is based on the weighted average number of
shares in issue for the period, adjusted for the dilutive effect of
potential ordinary shares. Potential ordinary shares represent
shares that may be issued in connection with employee share
incentive awards.
The Group
has chosen to present an Adjusted earnings per share measure, with
profit adjusted for Adjusting items (see Note 3 for further
details) to reflect the Group's underlying profit for the
period.
|
|
|
|
|
Number of
shares in issue
|
62,500,000
|
62,500,000
|
Number of
dilutive share options
|
|
|
Number of shares for diluted
earnings per share
|
|
|
|
|
|
£000
(Restated
-
Note
12)
|
|
Total
profit for the financial period
|
6,377
|
9,364
|
|
|
|
|
Adjusted profit for Adjusted
earnings per share
|
|
|
|
|
|
Pence
(Restated
-
Note
12)
|
|
Basic earnings per
share
|
10.2
|
15.0
|
|
Diluted earnings per
share
|
10.2
|
14.8
|
|
Adjusted basic earnings per
share
|
4.2
|
9.2
|
Adjusted diluted earnings
per share
|
|
|
9. Intangible
assets
Accounting
policy
Goodwill
Goodwill
arising on consolidation represents any excess of the consideration
paid and the amount of any non-controlling interest in the acquiree
over the fair value of the identifiable assets and liabilities
(including intangible assets) of the acquired entity at the date of
the acquisition. After initial recognition, goodwill is measured
ast cost less any accumulated impairment losses. Goodwill is
recognised as an asset and assessed for impairment annually or as
triggering events occur. Any impairment in value is recognised
within the income statement. Goodwill was fully impaired in
FY20.
Software
Where
computer software is not an integral part of a related item of
computer hardware, the software is treated as an intangible asset.
Capitalised software costs include external direct costs of goods
and services (such as consultancy), as well as internal payroll
related costs for employees who are directly working on the
project. Internal payroll related costs are capitalised if the
recognition criteria of IAS 38 Intangible Assets are met or are
expensed as incurred otherwise.
Capitalised software development costs are amortised on a
straight-line basis over their expected economic lives, normally
between three and seven years. Computer software under development
is held at cost less any recognised impairment loss. Any impairment
in value is recognised within the income statement and treated as
an Adjusting item.
|
|
|
|
|
|
Cost
|
|
|
|
|
At 30
April 2023
|
16,180
|
9,310
|
25,490
|
|
Additions
|
-
|
1,208
|
1,208
|
|
|
|
|
|
|
|
|
|
|
|
Amortisation and
impairment
|
|
|
|
|
At 30
April 2023 (Restated)
|
16,180
|
8,394
|
24,574
|
|
Amortisation charge
|
-
|
632
|
632
|
|
Impairment charge
|
-
|
442
|
442
|
|
Impairment reversals
|
-
|
(850)
|
(850)
|
|
|
|
|
|
|
|
|
|
|
|
Net book
value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1. During FY24 the Group reviewed
assets on the fixed asset register with a nil net book value.
Following this review intangible assets with a cost and accumulated
depreciation of £207k were deemed to no longer be in use by the
Group and have therefore been disposed of.
|
|
|
|
|
|
Cost
|
|
|
|
|
At 1 May
2022
|
16,180
|
9,058
|
25,238
|
|
Additions
|
-
|
1,309
|
1,309
|
|
|
|
|
|
|
|
|
|
|
|
Amortisation and
impairment
|
|
|
|
|
At 1 May
2022 (Restated)
|
16,180
|
7,392
|
23,572
|
|
Amortisation charge (Restated2)
|
-
|
997
|
997
|
|
Impairment charge (Restated2)
|
-
|
1,048
|
1,048
|
|
|
|
|
|
At 30
April 2023 (Restated)
|
|
|
|
|
Net book
value
|
|
|
|
At 1 May
2022 (Restated2)
|
|
|
|
At 30
April 2023 (Restated2)
|
|
|
|
2. These balances have been restated
to reflect the impact of the prior period restatements in Note
12.
Refer to
Note 10 for details of impairment of intangible assets.
10. Property, plant and
equipment
Accounting
policy
Items of
property, plant and equipment are stated at their cost of
acquisition or production, less accumulated depreciation and
accumulated impairment losses.
Depreciation is charged on a straight-line basis over the
estimated useful lives as follows:
• Leasehold property improvements:
over the life of the lease.
• Fixtures and fittings: 15% per
annum straight line or depreciated on a straight-line basis over
the remaining life of the lease, whichever is shorter.
• Computer equipment: 25% to 50% per
annum straight line.
The
assets' residual values and useful lives are reviewed, and adjusted
if appropriate, at each balance sheet date, with the effect of any
changes in estimate accounted for on a prospective basis. An
asset's carrying amount is written down immediately to its
recoverable amount if the asset's carrying amount is greater than
its estimated recoverable amount.
An item
of property, plant and equipment is derecognised upon disposal or
when no future economic benefits are expected to arise from the
continued use of the asset. The gain or loss arising on the
disposal or scrappage of an asset is determined as the difference
between the sale proceeds and the carrying amount of the asset and
is recognised in profit or loss.
Impairment of tangible and
intangible assets
The
carrying amounts of the Group's tangible and intangible assets with
a measurable useful life are reviewed at each balance sheet date to
determine whether there is any indication of impairment to their
value. If such an indication exists, the asset's recoverable amount
is estimated and compared to its carrying value. Where the asset
does not generate cash flows that are independent from other
assets, the Group estimates the recoverable amount of the cash
generating unit (CGU) to which the asset belongs. The Directors
consider an individual retail store to be a CGU, as well as the
Company's trading website.
The
recoverable amount of an asset is the greater of its fair value
less disposal cost and its value in use (the present value of the
future cash flows that the asset is expected to generate). In
determining value in use, the present value of future cash flows is
discounted using a discount rate that reflects current market
assessments of the time value of money in relation to the period of
the investment and the risks specific to the asset
concerned.
The
carrying value represents each CGU's specific assets, as well as
the right-of-use assets, plus an allocation of corporate assets
where these assets can be allocated on a reasonable and consistent
basis.
Where the
carrying value exceeds the recoverable amount an impairment loss is
established with a charge being made to the income statement. When
the reasons for a write down no longer exist, the write down is
reversed in the income statement up to the net book value that the
relevant asset would have had if it had not been written down and
if it had been depreciated.
Measuring recoverable
amounts
The Group
estimates the recoverable amount of each CGU based on the greater
of its fair value less disposal cost and its value in use (VIU),
derived from a discounted cash flow model which excludes IFRS 16
lease payments. In assessing the fair value less disposal cost the
ability to sublease each store has been considered and it is
concluded that this is not applicable for the majority of the store
estate. Where it is deemed reasonable to assume the ability to
sublet the potential cash inflows generated are insignificant;
therefore, the VIU calculation is used for all stores. A proportion
of click & collect sales are included in store cash flows to
reflect the contribution stores make to fulfilling such orders. The
key assumptions applied by management in the VIU calculations are
those regarding the growth rates of sales and gross margins,
medium-term growth rates, central overhead allocation and the
discount rate used to discount the assumed cash flows to present
value.
Projected
cash flows for each store are limited to the useful life of each
store as determined by its current lease term unless a lease has
already expired or is due to expire within 12 months of 5 May 2024
where the intention is to remain in the store and renew the lease.
For these leases, the lease term of the previously expired lease is
used for cash flow projections.
Projected
cash flows for the trading website are limited to 60 months as this
is in line with the average useful economic life of the assets
assigned to the web CGU.
Impairment
triggers
Due to
the challenging macroeconomic environment and the existence of a
material brought forwards impairment charge, all CGUs other than
stores which have been open for less than 12 months have been
assessed for impairment.
Key
assumptions
The key
financial assumptions used in the estimation of the recoverable
amount are set out below. The values assigned to the key
assumptions represent management's assessment of current market
conditions and future trends and have been based on historical data
from external and internal sources. Management determined the
values assigned to these financial assumptions as
follows:
The
post-tax discount rate is derived from the Group's weighted average
cost of capital, which has been estimated using the capital asset
pricing model, the inputs of which include a company risk-free
rate, an equity risk premium, a Group size premium, a forecasting
risk premium and a risk adjustment (beta). The discount rate is
compared to the published discount rates of comparable businesses
and relevant industry data prior to being adopted.
|
|
|
|
|
Post-tax
discount rate
|
10.50%
|
11.95%
|
|
|
|
|
While the
online CGU is in a different stage of establishment to that of the
store CGUs, the same pre-tax discount rate has been used in the
impairment assessment. Given that the website is not performing in
line with expectations, all assets relating to the web CGU are
fully impaired; as such an increase in the pre-tax discount rate
used for the web assessment would not increase the impairment
charge recognised.
Cash flow
forecasts are derived from the most recent Board-approved corporate
plans that form the Base Case on which the VIU calculations are
based. These are described in Note 1(b)(i) (Going
concern).
The
assumptions used in the estimation of future cash flows
are:
• Rates of growth in sales and gross
margins, which have been determined on the basis of the factors
described in Note 1(b)(i) (Going concern).
•
Central costs are reviewed to identify amounts which
are necessarily incurred to generate the CGU cash flows. As a
result of the analysis performed at the end of FY24, 89% (FY23:
87%) of central costs have been allocated by category using
appropriate volumetrics.
Cash
flows beyond the corporate plan period (FY28 and beyond) have been
determined using the medium-term growth rate; this is based on
management's future expectations, reflecting, amongst other things,
current market conditions and expected future trends and has been
based on historical data from both external and internal sources.
Immediately quantifiable impacts of climate change and costs
expected to be incurred in connection with our net zero commitments
are included within the cash flows. The useful economic lives of
store assets are short in the context of climate change scenario
models; therefore, no medium to long-term effects have been
considered.
Impairment
charge
During
FY24, an impairment charge of £5,333k was recognised against 184
stores with a recoverable amount of £23,396k, and an impairment
charge of £nil was recognised against the trading website (restated
FY23: an impairment charge of £5,111k was recognised against 161
stores with a recoverable amount of £17,437k , and an impairment
charge of £591k was recognised against the website). An impairment
reversal of £5,883k has been recognised in FY24 relating to 135
stores with a recoverable amount of £33,537k as at 5 May 2024, and
an impairment reversal of £859k was recognised against the website
(restated FY23: an impairment reversal of £4,613k was recognised
relating to 159 stores with a recoverable amount of £35,536k, and
an impairment reversal of £nil was recognised against the
website).
A net
impairment credit of £1,409k (restated FY23: charge of £1,089k) has
therefore been shown on the face of the consolidated income
statement. In line with the previously adopted treatment,
impairment charges and reversals have been shown as Adjusting
items.
Sensitivity
analysis
Whilst
the Directors believe the assumptions adopted are realistic,
reasonably possible changes in key assumptions could still occur,
which could cause the recoverable amount of certain stores to be
lower or higher than the carrying amount. The impact on the net
impairment charge recognised from reasonably possible changes in
assumption are detailed below:
- A reduction
in sales of 5% from the Base Case plan to reflect a potential
Downside Scenario would result in an increase in the net impairment
charge of £7,950k. An increase in sales of 5% from the Base Case
plan would decrease the net impairment charge by
£5,345k.
- A reduction
in gross margin of 2% would result in an increase in the net
impairment charge of £2,051k. An increase in gross margin of 2%
would decrease the net impairment charge by £1,898k.
- A 200 basis
point increase in the pre-tax discount rate would result in an
increase in the net impairment charge of £1,245k, while a 200 basis
point decrease in the pre-tax discount rate would result in a
decrease in the net impairment charge of £1,233k.
- A 100 basis
point decrease in the medium-term growth rate would result in an
increase in the net impairment charge of £480k, while a 100 basis
point increase in the medium-term growth rate would result in an
decrease in the net impairment charge of £470k.
- Increasing
the percentage of central costs allocated across CGUs from 89% to
99% would result in an increase in the net impairment charge of
£1,886k. Decreasing the percentage of central costs allocated
across CGUs from 89% to 79% would result in a decrease in the net
impairment charge of £1,756k.
Whilst
the Directors consider their assumptions to be realistic, should
actual results be different from expectations, then it is possible
that the value of property, plant and equipment included in the
balance sheet could become materially different to the estimates
used.
Property, plant and
equipment
|
|
Leasehold
improvements
£000
|
|
Fixtures
and
fittings
£000
|
|
|
Cost
|
|
|
|
|
|
At 30
April 2023 (Restated2)
|
7,408
|
3,656
|
19,195
|
30,259
|
|
Additions
|
409
|
353
|
3,971
|
4,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
impairment
|
|
|
|
|
|
At 30
April 2023 (Restated2)
|
5,682
|
3,245
|
9,559
|
18,486
|
|
Depreciation charge
|
412
|
370
|
2,881
|
3,663
|
|
Impairment charge
|
209
|
282
|
1,098
|
1,589
|
|
Impairment reversals
|
(174)
|
(618)
|
(480)
|
(1,272)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book
value
|
|
|
|
|
At 30
April 2023 (Restated2)
|
|
|
|
|
|
|
|
|
|
|
1. During FY24 the Group reviewed
assets on the fixed asset register with a nil net book value.
Following this review, fixed assets with a cost and accumulated
depreciation of £4,263k were deemed to no longer be in use by the
Group and have therefore been disposed of. The totals disposed of
by category were as follows: £570k leasehold improvements; £213k
plant and equipment; and £3,274 fixtures and fittings.
2.
These balances have been restated to reflect the
impact of the prior period restatements (Note 12).
|
|
Leasehold
improvements
£000
|
|
Fixtures
and
fittings
£000
|
|
|
Cost
|
|
|
|
|
|
At 01 May
2022
|
10,729
|
3,818
|
27,259
|
41,806
|
|
Additions
|
933
|
1,109
|
4,772
|
6,814
|
|
|
|
|
|
|
At 30
April 2023 (Restated2)
|
|
|
|
|
|
Depreciation and
impairment
|
|
|
|
|
|
At 1 May
2022 (Restated2)
|
8,577
|
3,426
|
19,347
|
31,350
|
|
Depreciation charge (Restated2)
|
1,462
|
718
|
2,967
|
5,147
|
|
Impairment charge (Restated2)
|
5
|
331
|
439
|
775
|
|
Impairment reversals (Restated2)
|
(172)
|
-
|
(402)
|
(574)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book
value
|
|
|
|
|
At 1 May
2022 (Restated2)
|
|
|
|
|
At 30
April 2023 (Restated2)
|
|
|
|
|
1. During FY23 the Group reviewed
assets on the fixed asset register with a nil net book value.
Following this review, fixed assets with a cost and accumulated
depreciation of £17,502k were deemed to no longer be in use by the
Group and have therefore been disposed of. The totals disposed of
by category were as follows: £3,995k leasehold improvements;
£1,172k plant and equipment; and £12,375k fixtures and
fittings.
2 These balances have been
restated to reflect the impact of the prior period restatements
(Note 12).
11. Leases
Accounting
policy
The Group
leases many assets, including properties, IT equipment and
warehouse equipment.
Identification
At the
inception of a contract, the Group assesses whether it is, or
contains, a lease. A contract is, or contains, a lease if it
conveys the right to control the use of an asset for a period of
time, in exchange for consideration. Control is conveyed where the
Group has both the right to direct the asset's use and to obtain
substantially all the economic benefits from that use. For each
lease or lease component, the Group follows the lease accounting
model as per IFRS 16, unless the permitted recognition exceptions
can be used.
Recognition
exceptions
The Group
has elected to account for lease payments as an expense on a
straight-line basis over the lease term or another systematic basis
for the following types of leases:
(i) Leases with a term of 12 months or
less.
(ii) Leases where the underlying asset has a low
value.
(iii) Concession leases where the landlord has
substantial substitution rights.
For
leases where the Group has taken the short-term lease recognition
exemption and there are any changes to the lease term or the lease
is modified, the Group accounts for the lease as a new
lease.
For
leases where the Group has taken a recognition exemption as
detailed above, rentals payable under these leases are charged to
the income statement on a straight-line basis over the term of the
relevant lease, except where another more systematic basis is more
representative of the time pattern in which economic benefits from
the lease asset are consumed.
As lessee
Upon
lease commencement, the Group recognises a right-of-use asset and a
lease liability.
Initial
measurement
The
right-of-use asset is initially measured at cost, which comprises
the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus any initial
direct costs incurred and an estimate of costs to dismantle and
remove the underlying asset, or to restore the underlying asset or
the site on which it is located at the end of the lease, less any
lease incentives received.
The lease
liability is initially measured at the present value of the lease
payments payable over the lease term, discounted at the incremental
borrowing rate as the rate implicit in the lease cannot be readily
determined.
Variable
lease payments that depend on an index or a rate are included in
the initial measurement of the lease liability and are initially
measured using the index or rate as at the commencement date.
Amounts expected to be payable by the Group under residual value
guarantees are also included. Variable lease payments that are not
included in the measurement of the lease liability are recognised
in profit or loss in the period in which the event or condition
that triggers payment occurs unless the costs are included in the
carrying amount of another asset under another accounting
standard.
The Group
has applied judgement to determine the lease term for some lease
contracts that include renewal options. The assessment of whether
the Group is reasonably certain to exercise such options impacts
the lease term, which significantly affects the value of lease
liabilities and right-of-use assets recognised.
The
payments related to leases are presented under cash flows from
financing activities and cash flows from operating activities in
the cash flow statement.
Subsequent
measurement
After
lease commencement, the Group values right-of-use assets using a
cost model. Under the cost model, a right-of-use asset is measured
at cost less accumulated depreciation and accumulated
impairment.
The lease
liability is subsequently increased by the interest cost on the
lease liability and decreased by lease payments made. It is
re-measured to reflect changes in the lease term (using a revised
discount rate); the assessment of a purchase option (using a
revised discount rate); the amounts expected to be payable under
residual value guarantees (using an unchanged discount rate); and
future lease payments resulting from a change in an index or a rate
used to determine those payments (using an unchanged discount
rate).
The
re-measurements are matched by adjustments to the right-of-use
asset. Lease modifications may also prompt re-measurement of the
lease liability unless they are determined to be separate
leases.
Depreciation of
right-of-use assets
The
right-of-use asset is subsequently depreciated using the
straight-line method, from the commencement date to the earlier of
either the end of the useful life of the right-of-use asset or the
end of the lease term. The estimated useful lives of right-of-use
assets are determined on the same basis as those of property, plant
and equipment. In addition, the right-of-use asset is reduced by
impairment losses, if any, and adjusted for certain re-measurements
of the lease liability.
Determining the lease
term
Termination options are included in a number of property
leases across the Group. These terms are used to maximise
operational flexibility. At the commencement date of property
leases, the Group determines the lease term to be the full term of
the lease, assuming that any option to break or extend the lease is
unlikely to be exercised. Leases will be revalued if it becomes
likely that a break clause is to be exercised. In determining the
likelihood of the exercise of a break option, management considers
all facts and circumstances that create an economic incentive to
exercise the termination option. For property leases, the following
factors are the most relevant:
• The profitability of the leased
store and future plans for the business.
• If there are any significant
penalties to terminate (or not extend), the Group is typically
reasonably certain to extend.
(i)
Amounts recognised in the statement of financial
position
Right-of-use
assets
|
|
|
|
|
|
2024
|
|
|
|
|
|
|
|
|
|
At 30
April 2023 (Restated)
|
64,703
|
669
|
65,372
|
|
Depreciation charge for the year
|
(17,949)
|
(275)
|
(18,224)
|
|
Additions
to right-of-use assets
|
10,931
|
-
|
10,931
|
|
Effect of
modifications to right-of-use assets
|
(1,059)
|
-
|
(1,059)
|
|
Derecognition of right-of-use assets
|
(543)
|
-
|
(543)
|
|
Impairment charge
|
(3,394)
|
-
|
(3,394)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2023
|
|
|
|
|
|
|
|
|
|
At 1 May
2022 (Restated)
|
69,563
|
1,013
|
70,576
|
|
Depreciation charge for the year
|
(18,094)
|
(357)
|
(18,451)
|
|
Additions
to right-of-use assets
|
17,217
|
13
|
17,230
|
|
Effect of
modifications to right-of-use assets
|
(4,075)
|
-
|
(4,075)
|
|
Derecognition of right-of-use assets
|
(297)
|
-
|
(297)
|
|
Impairment charge
|
(2,173)
|
-
|
(2,173)
|
|
|
|
|
|
At 30 April 2023
(restated)
|
|
|
|
The total
impairment charge/ reversal is in Adjusting items.
Lease
liabilities
|
|
|
|
|
|
2024
|
|
|
|
|
|
|
|
|
|
At 30
April 2023 (Restated)
|
93,686
|
706
|
94,392
|
|
Additions
to lease liabilities
|
8,929
|
-
|
8,929
|
|
Interest
expense
|
3,962
|
22
|
3,984
|
|
Effect of
modifications to lease liabilities
|
1,059
|
-
|
1,059
|
|
Lease
payments
|
(26,151)
|
(304)
|
(26,455)
|
|
Disposals
of lease liabilities
|
(4,080)
|
-
|
(4,080)
|
Foreign
exchange movements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2023
|
|
|
|
|
|
|
|
|
|
At 1 May
2022 (Restated)
|
106,844
|
1,047
|
107,891
|
|
Additions
to lease liabilities
|
15,051
|
15
|
15,066
|
|
Interest
expense
|
4,107
|
33
|
4,140
|
|
Effect of
modifications to lease liabilities
|
(4,075)
|
-
|
(4,075)
|
|
Lease
payments
|
(26,991)
|
(389)
|
(27,380)
|
|
Disposals
of lease liabilities
|
(1,402)
|
-
|
(1,402)
|
Foreign
exchange movements
|
|
|
|
|
|
|
|
|
Carrying value of leases
included in the consolidated statement of financial
position
|
|
|
|
|
Current
|
19,943
|
19,626
|
|
|
|
|
Total carrying value
of leases
|
|
|
Maturity analysis -
contractual undiscounted cash flows:
|
|
|
|
|
Less than
one year
|
23,446
|
27,163
|
|
One to
two years
|
18,787
|
21,904
|
|
Two to
three years
|
13,738
|
17,225
|
|
Three to
four years
|
9,968
|
12,363
|
|
Four to
five years
|
6,574
|
8,771
|
|
|
|
|
Total undiscounted lease
liabilities
|
|
|
(ii) Amounts recognised in
the consolidated income statement
|
|
|
FY23
(Restated
-
Note
12)
£000
|
|
Depreciation charge on right-of-use assets (RoUA)
|
18,224
|
18,451
|
|
Interest
cost on lease liability
|
3,984
|
4,140
|
|
Profit on
disposal of RoUA / lease liability
|
(3,537)
|
(1,105)
|
|
Foreign
exchange difference on euro leases
|
69
|
(152)
|
Additional impairment charge under IAS 36
|
|
|
|
Operating lease rentals -
hire of plant, equipment and motor vehicles
|
|
|
|
|
|
|
Total plant, equipment and
motor vehicle operating lease rentals
|
|
|
|
Operating lease rentals -
store leases
|
|
|
|
- Stores
with variable lease rentals
|
(434)
|
300
|
|
-
Concession leases (the landlord has substantial substitution
rights)
|
848
|
977
|
|
-
Low-value leases
|
(11)
|
13
|
|
- Lease
is expiring within 12 months or has rolling break
clauses
|
63
|
53
|
|
- Lease
has expired
|
766
|
397
|
-
Variable lease payments as a result of COVID-19
concessions
|
|
|
Total store operating lease
rentals
|
|
|
Depreciation of right-of-use asset by class:
|
|
|
FY23
(Restated
-
Note
12)
£000
|
|
Land and
buildings
|
17,949
|
18,094
|
|
|
|
|
Total right-of-use asset
depreciation
|
|
|
12. Prior period
restatements
FY23 prior period
restatement
The FY23
financial statements included a prior year restatement which
resulted in an increase to the impairment of right-of-use assets,
following a correction to the allocation of central costs to each
cash generating unit, which had previously been omitted from the
calculations. This also resulted in a reduction in the depreciation
charge as a result of the reduced net book value of the right of
use assets.
FY24 prior period
restatement
There were
a number of stores where the lease had expired prior to the start
of the FY24 financial period. The Group recognises a right-of-use
asset and lease liability for such stores where it is likely that a
new lease will be entered into, based on an estimate of the new
lease terms, prior to final agreement of terms with the
landlord. These stores had been subject to impairment as part
of the FY23 prior period restatement described above. During the
current period, the Directors have considered the allocation of
impairment to these stores and concluded that impairment was
incorrectly calculated in light of the modification of the
lease. A gain on modification of the lease of £3,612k should
have been recognised in the prior period, with a corresponding
increase to right of use assets of £3,612k.
As a
result, the FY22 closing impairment balance relating to
right-of-use assets has been increased by £2,657k, the closing
impairment balance relating to property, plant and equipment has
been reduced by £628k and the closing impairment balance relating
to intangible assets has been reduced by £60k. The adjustment to
FY22 closing reserves is therefore £1,969k.There are further
impacts due to impairment disposed of variance £(1,373)k,
depreciation variance £1,596k and change in NBV if PPE £140k, all
of the impacts total to £2,332 which is the opening adjustment seen
in the Statement of Changes in Equity.
In FY23,
the net impairment charge has been reduced by £3,723k for
right-of-use assets, £170k for property, plant and equipment and
£70k for intangible assets. Therefore, the net increase to total
profit before tax relating to FY23 impairment charges is
£3,963k.
Depreciation reduction due
to impairment
As a
result of the adjustments to right-of-use assets and impairment
above, the net book value of fixed assets was higher at the start
of FY23 than previously disclosed, resulting in the depreciation
charge being understated. The FY22 closing accumulated
depreciation has
been increased by £1,516k relating to right of use assets, £69k
relating to property, plant and equipment and £11k relating to
intangible assets, with a corresponding decrease in retained
earnings of £1,596k.
In FY23,
the depreciation charge has increased by £3,032k relating to right
of use assets, £100k relating to property, plant and equipment and
£18k relating to intangible assets, reducing Adjusted profit before
tax by £3,150k.
Adjustment related to closed
stores
There were
a number of stores closed prior to FY24, where property, plant and
equipment had been correctly disposed of but corresponding
depreciation had not been adjusted for when calculating the prior
year restatement in the FY23 financial statements.
In FY23,
the depreciation charge related to property, plant and equipment
has been increased by £598k and the depreciation charge related to
intangible assets has been increased by £101k. Therefore, the net
decrease to total profit in FY23 is £698k.
Impairment reduction as a
result of depreciation adjustment on disposed
assets
As a
result of the adjustments to right-of-use assets and depreciation
above for closed stores, the net book value of fixed assets was
lower at the start of FY23 than previously disclosed, resulting in
the impairment charge being overstated. The FY22 closing
accumulated impairment has been decreased by £1,603k relating to
right of use assets, with a corresponding increase in retained
earnings of £1,603k.
In FY23,
the impairment charge has decreased by £230k relating to right of
use assets, increasing Adjusted profit before tax by
£230k.
Adjustment to opening
balances
As part of
the review of IFRS 16 balances during the period, the Directors
identified adjustments to opening balances that were not required.
These balances related to previous adjustments to the residual rent
balance in the consolidated income statement following the IFRS 16
calculations.
These
adjustments resulted in an increase in the FY23 opening balances of
£3,245k to the right of use assets brought forward and £3,245k
decrease to the lease liability brought forward. In FY23, the
depreciation charge associated with right of use assets has been
increased by £578k, with a corresponding reduction in the rent
charge in the consolidated income statement. The depreciation
charge to the right of use asset has been reduced by £578k and the
lease liability reduced by £578k in the consolidated statement of
financial position.
Impact on cash flow
statement
These
adjustments increase the 'depreciation of property, plant and
equipment', 'depreciation of right of use assets' and 'amortisation
of intangible assets' balance in the consolidated cash flow
statement, however there is no overall impact on 'net increase in
cash and cash equivalents'.
Corporation tax
restatement
The above
adjustments have resulted in restatements to the corporation tax
charges, current tax assets/ liabilities and the deferred tax
asset. Refer to Notes 6 and 13 for restated tax
disclosures.
The
following tables summarise the impact of the above restatements on
the Group's consolidated financial statements including the impact
of current and deferred corporation tax.
Summarised consolidated
income statement
|
|
|
|
|
|
|
|
|
|
Per FY23 financial
statements
|
Right-of-use asset cost variance
|
Depreciation variance
|
Impairment disposed of variance
|
Impairment charge variance
|
Disposals depreciation reduction adjustment
|
IFRS 16
adjustment
|
FY23
restated
balance
|
|
|
|
Income
statement
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
280,102
|
-
|
-
|
-
|
-
|
-
|
-
|
280,102
|
|
|
|
Cost of
sales
|
(236,202)
|
3,612
|
(3,150)
|
230
|
3,963
|
(692)
|
-
|
(232,239)
|
|
|
|
Gross
profit
|
43,900
|
3,612
|
(3,150)
|
230
|
3,963
|
(692)
|
-
|
47,863
|
|
|
|
Other
operating income
|
8
|
-
|
-
|
-
|
-
|
-
|
-
|
8
|
|
|
|
Distribution expenses
|
(10,284)
|
-
|
-
|
-
|
-
|
-
|
-
|
(10,284)
|
|
|
|
Administrative expenses
|
(24,197)
|
-
|
-
|
-
|
-
|
-
|
-
|
(24,197)
|
|
|
|
Operating
profit
|
9,427
|
3,612
|
(3,150)
|
230
|
3,963
|
(692)
|
-
|
13,390
|
|
|
|
Finance
income
|
227
|
-
|
-
|
-
|
-
|
-
|
-
|
227
|
|
|
|
Finance
expense
|
(4,648)
|
-
|
-
|
-
|
-
|
-
|
-
|
(4,648)
|
|
|
Profit before
tax
Taxation
|
5,006
265
|
3,612
-
|
(3,150)
25
|
230
(42)
|
3,963
-
|
(692)
147
|
-
-
|
8,969
395
|
|
|
|
|
Profit after
tax
|
5,271
|
3,612
|
(3,125)
|
188
|
3,963
|
(545)
|
-
|
9,364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Summarised consolidated
statement of financial position
|
|
|
|
|
|
|
|
|
|
Per FY23 financial
statements
|
Right-of-use asset cost variance
|
Depreciation variance
|
Impairment disposed of variance
|
Impairment
charge
variance
|
Disposals depreciation reduction adjustment
|
IFRS 16
adjustment
|
FY23
restated
balance
|
|
Non-current
assets
|
|
|
|
|
|
|
|
|
|
Intangible assets
|
916
|
-
|
(29)
|
-
|
130
|
(101)
|
-
|
916
|
|
Property,
plant and equipment
|
11,733
|
-
|
(167)
|
-
|
798
|
(591)
|
-
|
11,773
|
|
Right of
use assets
|
67,463
|
3,612
|
(4,549)
|
1,603
|
1,066
|
-
|
(3,823)
|
65,372
|
|
Other
non-current Assets
|
4,854
|
-
|
40
|
(199)
|
-
|
149
|
-
|
4,844
|
|
|
84,966
|
3,612
|
(4,705)
|
1,404
|
1,994
|
(543)
|
(3,823)
|
82,905
|
|
Current
assets
|
52,293
|
-
|
-
|
-
|
-
|
-
|
-
|
52,293
|
|
Total
assets
Liabilities
|
137,259
|
3,612
|
(4,705)
|
1,404
|
1,994
-
|
(543)
|
(3,823)
|
135,198
|
|
Current
lease liabilities
|
(23,449)
|
-
|
-
|
-
|
-
|
-
|
3,823
|
(19,626)
|
|
Other
current liabilities
|
(36,092)
|
-
|
-
|
-
|
-
|
-
|
-
|
(36,092)
|
|
Non-current lease liabilities
|
(74,766)
|
-
|
-
|
-
|
-
|
-
|
|
(74,766)
|
|
Other
non-current lease liabilities
|
(1,298)
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,298)
|
|
Total
liabilities
|
(135,605)
|
-
|
-
|
-
|
-
|
-
|
3,823
|
(131,782)
|
|
Net assets
|
1,654
|
3,612
|
(4,705)
|
1,404
|
1,994
|
(543)
|
-
|
3,416
|
|
Equity attributable to
equity holders of the Parent
|
|
|
|
|
|
|
|
|
|
Retained
earnings
|
(34,959)
|
-
|
(1,579)
|
1,217
|
(1,969)
|
-
|
-
|
(37,290)
|
|
Retained
earnings in year
|
5,271
|
3,612
|
(3,126)
|
187
|
3,963
|
(543)
|
-
|
9,364
|
|
Other
reserves
|
31,342
|
-
|
-
|
-
|
-
|
-
|
-
|
31,342
|
|
Total
equity
|
1,654
|
3,612
|
(4,705)
|
1,404
|
1,994
|
(543)
|
-
|
3,416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Summarised consolidated
statement of changes in equity
|
|
|
|
|
Share-based
payment
reserve
£000
|
|
|
|
Reported balance at 30 April
2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restated balance at 30 April
2023
|
|
|
|
|
|
|
|
13. Deferred tax
assets
Recognised deferred tax
assets
Deferred
tax assets are attributable to the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment
|
2,785
|
2,866
|
|
-
|
-
|
|
Leases
|
980
|
1,362
|
|
-
|
-
|
|
Temporary
timing differences
|
332
|
354
|
|
-
|
-
|
Financial
assets/(liabilities)
|
|
|
|
|
|
|
|
|
|
|
|
|
Movement in deferred tax
during the year
|
|
|
|
Temporary
timing
differences
£000
|
Financial
assets/
(liabilities)
£000
|
|
|
At 30
April 2023 (Restated1)
|
2,866
|
1,362
|
354
|
262
|
4,844
|
|
Adjustment in respect of prior years
|
785
|
16
|
-
|
-
|
801
|
|
Deferred
tax charge to profit and loss
|
(866)
|
(398)
|
(22)
|
-
|
(1,286)
|
Deferred
tax credit in equity profit and loss
|
|
|
|
|
|
|
|
|
|
|
|
|
1 The FY23 deferred tax asset
has been restated to reflect the tax impact of the restatements
documented in Note 12.
Movement in deferred tax
during the prior year
|
|
|
|
Temporary
timing
differences
£000
|
Financial
assets/
(liabilities)
£000
|
|
|
At 1 May
2022
|
2,728
|
1,645
|
195
|
-
|
4,568
|
|
Adjustment in respect of prior years
|
(369)
|
-
|
-
|
(598)
|
(967)
|
|
Deferred
tax credit/ (charge) to profit and loss
(Restated1)
|
507
|
(283)
|
159
|
-
|
383
|
Deferred
tax credit in equity profit and loss
|
|
|
|
|
|
|
|
|
|
|
|
|
1 The FY23 deferred tax asset
has been restated to reflect the tax impact of the restatements
documented in Note 12.
Tax
losses carried forward for which no deferred tax asset has been
recognised are £nil (FY23: £9,273k).
14.
Inventories
Accounting
policy
Inventories comprise stocks of finished goods for resale and
are valued on a weighted average cost basis and carried at the
lower of cost and net realisable value. Cost includes all direct
expenditure and other attributable costs incurred in bringing
inventories to their present location and condition.
The
process of purchasing inventories may include the use of cash flow
hedges to manage foreign exchange risk. Where hedge accounting
applies, an adjustment is applied such that the cost of stock
reflects the hedged exchange rate.
|
|
|
|
|
Gross
stock value
|
28,401
|
31,278
|
|
Less:
stock provisions for shrinkage and obsolescence
|
(1,932)
|
(1,037)
|
|
Goods for
resale net of provisions
|
26,469
|
30,241
|
|
|
|
|
|
|
|
|
The cost
of inventories recognised as an expense during the period was
£120.5m (FY23: £119.1m).
Stock was
valued at £31.4m at the end of the period (FY23: £33.4m), a
decrease of £2.0m. Tighter stock management supported a planned
reduction in our period end closing forward cover and supports
lower markdown activity in FY25. The stock value reflects higher
stock on water than we would have expected because of the extra
transit time from China due to the Red Sea challenges.
Stock
provisions
The Group
makes provisions in relation to stock quantities, due to potential
stock losses not yet reflected in the accounting records, commonly
referred to as unrecognised shrinkage, and in relation to stock
value, where the net realisable value of an item is expected to be
lower than its cost, due to obsolescence.
Shrinkage
provision
During
FY24, full four wall counts were performed in 518 stores during two
waves of counts - 199 stores were counted between August and
September with a further 335 stores counted (including 23 recounted
stores) between March and May. Through these counts, the Group
established that its accounting records reflected the actual
quantities of stock in stores. This process also provides the Group
with an indication of the typical percentage of stock loss, which
is used to calculate, by extrapolation, unrecognised shrinkage at
the balance sheet date. The stock records were updated to reflect
the results of the stock counts, however, due to the estate being
counted throughout the year compared to FY23 where all stores were
counted near the year end, the unrecognised shrinkage provision has
increased to £1.1m (FY23: £0.4m). The provision relates to store
stock with a value of £20.6m (FY23: £20.9m).
Obsolescence
provision
The
Group's inventory does not comprise a large proportion of stock
with a 'shelf life'. Stock lines which are slow selling because
they have been less successful than planned, or which have sold
successfully and become fragmented as they reach the natural end of
their planned selling period, are usually discounted and sold
during 'sale' events, for example the January sale. This stock is
referred to as terminal stock.
During
FY24 the Group held slightly more terminal stock than the prior
period. Consequently, the obsolescence provision has increased to
£0.8m (FY23: £0.6m).
The Group
has also considered the impact of customer preferences and ESG
considerations on potential stock obsolescence, and these factors
are not deemed to have a material impact on the level of provision
required.
15. Trade and other
receivables
|
|
|
|
|
Current
|
|
|
|
Trade
receivables
|
2,626
|
2,864
|
|
Other
receivables
|
506
|
359
|
|
Prepayments
|
5,252
|
4,284
|
Trade and other
receivables
|
|
|
Trade
receivables are attributable to sales which have been paid for by
credit card pending receipt into the Company's bank account and are
classified as finance assets at amortised cost. The trade
receivables balance is primarily made up of aforementioned pending
credit card receipts of £2.3m (FY23: £2.4m). No credit is provided
to customers. The individual value and nature of trade receivables
is such that no material credit losses occur; therefore, no loss
allowance has been recorded at the period end (FY23:
£nil).
Other
receivables relate to stock on water deposits paid and other
accounts payable debit balances. Prepayments relate to prepaid
property costs and other expenses.
16. Cash and cash
equivalents
|
|
|
|
Cash and
cash equivalents
|
|
|
|
|
|
|
The
Group's cash and cash equivalents are denominated in the following
currencies:
|
|
|
|
|
Sterling
|
1,142
|
8,208
|
|
Euro
|
397
|
1,949
|
|
|
|
|
Cash and cash
equivalents
|
|
|
At 5 May
2024, the Group held net cash (excluding lease liabilities) of
£1.6m (FY23: £10.2m). This comprised cash of £1.6m (FY23:
£10.2m).
17.
Borrowings
Accounting
policy
Interest-bearing bank loans and overdrafts, loan notes and
other loans are recognised in the balance sheet at amortised cost.
Finance charges associated with arranging non-equity funding are
recognised in the income statement over the life of the facility.
All other borrowing costs are recognised in the income statement in
accordance with the effective interest rate method. A summary of
the Group's objectives, policies, procedures and strategies with
regard to financial instruments and capital management can be found
in Note 25 to the Annual Report and Accounts. At 5 May 2024 and 30
April 2023 all borrowings were denominated in Sterling.
For the
period ended 5 May 2024, the Group's bank facilities comprised of a
revolving credit facility of £20.0m (FY23: £30.0m) expiring on 30
November 2025. During the period, the facility was extended by a
year and reduced in size by £10.0m on the request of the
Directors.
The
nature of the covenants associated with the facility remained
consistent throughout both periods presented. The levels of the
covenant measures were amended on 18 March 2024 (see Note
1).
None of
the Group's cash and cash equivalents (FY23: £nil) are held by the
trustee of the Group's Employee Benefit Trust in relation to the
share schemes for employees.
|
|
|
|
|
Non-current
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
Lease
liabilities
|
19,943
|
19,626
|
|
|
|
|
Reconciliation of borrowings
to cash flows arising from financing activities
|
|
|
|
Borrowings at start of the
period
|
|
|
|
Changes from financing cash
flows
|
|
|
|
Payment
of lease liabilities (capital)
|
(22,471)
|
(23,250)
|
|
Payment
of lease liabilities (interest)
|
(3,984)
|
(4,130)
|
|
Proceeds
from loans and borrowings1
|
6,000
|
4,000
|
|
Repayment
of bank borrowings1
|
(6,000)
|
(4,000)
|
Total changes from financing
cash flows
|
|
|
|
Other
changes
|
|
|
|
Addition
of lease liabilities
|
9,988
|
10,991
|
|
Disposal
of lease liabilities
|
(4,080)
|
(1,402)
|
|
The
effect of changes in foreign exchange rates
|
(69)
|
152
|
|
|
|
|
|
|
|
|
Borrowings at end of the
period (excluding overdrafts)
|
|
|
1£6.0m was drawn under the
Group's RCF from 28 June 2023 to 29 November
2023.
Net debt
reconciliation
|
|
|
|
|
Net debt (excluding
unamortised debt costs)
|
|
|
Cash and
cash equivalents
|
|
|
|
Net bank
cash
|
(1,619)
|
(10,196)
|
Non-IFRS
16 lease liabilities
|
|
|
|
Non-IFRS 16 net
cash
|
(1,530)
|
(9,928)
|
IFRS 16
lease liabilities
|
|
|
Net debt including IFRS 16
lease liabilities
|
|
|
18. Trade and other
payables
|
|
|
|
|
Current
|
|
|
|
Trade
payables
|
18,081
|
22,960
|
|
Other tax
and social security
|
3,525
|
2,610
|
|
|
|
|
|
|
|
|
Trade
payables principally comprise amounts outstanding for trade
purchases and operating costs.
The
Directors consider that the carrying amount of trade payables
approximates to their fair value.
Accrued
expenses comprise various accrued property costs, payroll costs and
other expenses, including £166k (FY23: £484k) of deferred income in
relation to the customer loyalty scheme. The Group's loyalty scheme
was closed to new members on 30 March 2024 with loyalty vouchers
(and thus liability) expiring on 30 June 2024.
The Group
has net US dollar denominated trade and other payables of £7.0m
(FY23: £6.6m).
19.
Provisions
Accounting
policy
Provisions are recognised when the Group has a present
obligation as a result of a past event, and it is probable that the
Group will be required to settle that obligation. Provisions are
the best estimate of the expenditure required to settle the
obligation at the end of the reporting period and are discounted to
present value where the effect is material.
|
|
|
|
|
|
At 30 April 2023
|
514
|
1,349
|
1,863
|
|
Released
|
(367)
|
(24)
|
(391)
|
|
Utilised
|
-
|
(453)
|
(453)
|
|
|
|
|
|
Maturity
analysis of cash flows:
|
|
|
|
|
|
Due in
less than one year
|
147
|
396
|
543
|
|
Due
between one and five years
|
-
|
476
|
476
|
|
Due in
more than five years
|
-
|
-
|
-
|
|
|
|
|
|
Property
provision
A
dilapidation provision is recognised when there is a future
obligation relating to the maintenance of leasehold property. The
provision is based on management's best estimate of the obligation
which forms part of the Group's unavoidable cost of meeting its
obligations under the lease contracts. Key uncertainties are
estimates of amounts due.
HMRC VAT
provision
HMRC
initiated a VAT review in August 2022 in respect of a four-year
period (FY19 to FY22). The review is ongoing and therefore a
provision of £147k (FY23: £514k) is recognised in respect of the
potential liability.
20. Related party
transactions
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.
Transactions with key
management personnel
The key
management personnel of the Group comprise The Works.co.uk plc
Board of Directors and the Group's Operational Board. Further
details of Director's remuneration are set out in the Directors'
remuneration report on pages 57 to 66 of the Annual Report and
Accounts.
The
compensation of key management personnel (including the Directors)
is as follows:
|
|
|
|
|
Key
management remuneration - including social security
costs
|
2,982
|
3,132
|
|
Pension
contributions
|
116
|
184
|
LTIP -
including social security costs
|
|
|
|
|
|
|
Further
details on the compensation of key management personnel who are
Directors are provided in the Group's Directors' remuneration
report.
21. Subsidiary
undertakings
The
results of all subsidiary undertakings are included in the
consolidated financial statements. The principal place of business
and the registered office addresses for the subsidiaries are the
same as for the Company.
|
|
|
|
|
|
|
|
The Works
Investments Limited
|
Active
|
Direct
|
09073458
|
Ordinary
|
100%
|
|
The Works
Stores Limited
|
Active
|
Indirect
|
06557400
|
Ordinary
|
100%
|
|
|
|
|
|
|
|