The Works to focus on profitability after fall in full-year earnings
By Josh White
Date: Tuesday 01 Oct 2024
(Sharecast News) - Value bookseller and stationer The Works reported total full-year revenue growth of 0.9% on Tuesday, to £282.6m, despite challenging economic conditions.
The AIM-traded company said store sales, which account for 90% of total revenue, increased 0.6% on a like-for-like basis during the 53 weeks ended 5 May, while online sales dropped 12.4%, leading to an overall decline in like-for-like sales of 0.9%.
Pre-IFRS 16 adjusted EBITDA for the year was £6.0m, down from £9.0m in 2023.
The firm cited a tough trading environment and operational challenges, particularly around the Christmas period, as reasons for the decline in profitability.
Despite the hurdles, The Works ended the year in line with market expectations, thanks to cost-cutting measures and improved trading in the final quarter.
Adjusted profit before tax was £3.2m, down from £5.3m in the prior year.
The company ended the period with £1.6m in net cash, a decrease from £10.2m at the end of 2023.
Its board did not propose a final dividend for 2024, but said distributions would be considered in the future as profitability improves.
Looking ahead, The Works was optimistic about the 2025 financial year, with like-for-like sales up 0.2% in the first 21 weeks, in line with expectations.
The company said it was on track to meet its market forecast of pre-IFRS 16 adjusted EBITDA of £8.5m for the year, adding that its medium-term goal was to return to EBITDA margins of 5%.
It said it had taken several steps to improve profitability, including relocating its online fulfilment centre, renegotiating supplier and landlord terms, and streamlining its leadership team.
The retailer also evolved its brand, introducing a new marketing strapline, 'TimeWellSpent,' and refining its product offering with new ranges in toys and books.
It currently operates 511 stores, with 96% being profitable.
The outlook for 2025 remained positive as the company addressed previous capacity issues and prepared for the crucial Christmas trading period.
The Works said it aimed to capitalise on new product ranges and strong promotional offers, such as its popular 2-for-£12 gifts.
In board news, John Goold and Mark Kirkland, both non-independent non-executive directors, stepped down on Tuesday.
"Against a persistently challenging consumer backdrop and tough Christmas trading, we were pleased to end 2024 in line with market expectations," said chief executive officer Gavin Peck.
"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."
Peck said work was thus underway to refine the company's 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 2025.
"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."
Reporting by Josh White for Sharecast.com.
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