Theworks.co.uk Plc · LSE:WRKS
Theworks.co.uk — The Works — FY2019 Earnings Presentation
30 slides from Theworks.co.uk's earnings presentation, Jul 3, 2019
Slide 1: Preliminary Results 52 Weeks ended 28 April 2019
What will you discover? Preliminary Results 52 Weeks ended 28 April 2019 3 July 2019 yx ( ya \s é “A ee ae < Ff Pe eae 4 Be 5 x : 4 £ [’ q a iG Ph es u ‘ y ~
Slide 2: Introduction and key messages; financial review; business review; questions
• Introduction and key messages Kevin Keaney (CEO) • Financial review Gavin Peck (CFO) • Business review Kevin Keaney (CEO) • Questions 1
Slide 3: What will you discover?
discover? yt will you
Slide 4: Viewed as a specialist by discount retailers and as a discounter by full price specialists
Viewed as a specialist by discount retailers and as a discounter by the full price specialists Source: Management 03/07/2019 3
Slide 5: The Works continues to be associated with value, variety and choice
The Works continues to be associated with Leading the way in value for money value, variety and choice Ranking of criteria (out of 15 criteria) in customer purchasing decision within [category]; 1= most important Q. If you had three words to describe The Works, what would they be? Base: All responde
Slide 6: Customer channels: stores and e-commerce
Stores (c90% of Sales ) E-commerce (c10% of Sales) High Street Shopping Centres Factory Outlets Fulfilment Channels Concessions Retail Parks Devices Customer Customer Engagement 03/07/2019 5
Slide 7: We have a proven four pillar growth strategy
We have a proven four pillar growth strategy New Store Multi-Channel Margin | Rollout Strategy Enhancement te) Great People ee Business Systems o | Fulfi iment Cost Control Chaise "e Always Good Quality Great Value for Money
Slide 8: We have achieved good growth in a very difficult year for retail
• We have achieved good growth in what has been a very difficult year for retail • We are delivering against the strategy set out at the time of our IPO • New store opening performance has been particularly pleasing – there has never been a better time to open new stores • Positive LFL growth delive
Slide 9: What will you discover?
be jat will you di cover? leWorksco.uk a
Slide 10: FY19 financial highlights
FY19 FY18 YOY Change £'m £'m Revenue 217.5 192.1 13.2% FY19: Squishies Mega Trend generated £0.6m EBITDA (FY18: Spinners Mega Trend generated LFL sales growth 3.0% 4.7% £1.2m EBITDA) Adjusted EBITDA 13.8 13.2 4.2% £7.4m after normalising net Adjusted EBITDA post-Mega Trends 13.2 12.0 9.6% finance ch
Slide 11: Adjusted EBITDA cost breakdown
FY19 % of FY18 % of £'m revenue £'m revenue Revenue 217.5 192.1 Cost of goods sold 81.2 37.4% 74.5 38.8% Store wages 37.2 17.1% 30.9 16.1% Store property costs 42.2 19.4% 37.6 19.6% Other direct costs 14.3 6.6% 11.6 6.0% Cost of sales 174.9 80.4% 154.7 80.5% Distribution costs 11.8 5.4% 9.1 4.7% Adm
Slide 12: Key highlights
Key highlights • Further improvement in product margins ‒ Multiple levers driving – see later ‒ FX accounts for c50% of FY19 improvement • NLW/NMW headwind partially mitigated ‒ Continues to impact store wages ratio – ability to mitigate limited in absence of lone- working ‒ Further pressure on dist
Slide 13: Cash flow
FY19 FY18 £'m £'m Adjusted EBITDA 13.8 13.2 Share based payment charges 0.1 0.0 Derivative exchange loss/(gain) 0.1 (0.5) Increase in provisions 0.1 0.0 Adjusted Operating Cashflow before working capital 14.1 12.8 April payment runs impacting versus FY17 position Net capital expenditure (8.2) (7.5)
Slide 14: Capital expenditure
FY19 FY18 £'m £'m New stores and relocations 5.0 5.3 IT hardware and software 1.0 0.7 Web development 0.4 0.3 Store refits and rebrands 0.7 0.4 Other 1.3 1.2 Total capital expenditure 8.5 7.8 Capital expenditure on finance lease (0.3) (0.3) Net capital expenditure 8.2 7.5 13
Slide 15: IFRS16 key points
Key points to note £'m • Operating leases meeting IFRS16 criteria represented by a fixed (“right-of-use”) asset with corresponding lease FY20 OPENING BALANCE SHEET IMPACT liability (notional debt) Right of use assets 103.8 Lease liability (114.2) • Operating lease expense replaced by asset depreciat
Slide 16: FY20 outlook
New Store • Net 50 new stores – similar opening profile to FY19 Openings • Payback within 12 months • Likely to be below recent historic levels in the absence of a Mega LFL Sales Growth Trend and given the current economic environment • H1 broadly flat in the absence of a Mega Trend • Product margin
Slide 17: What will you discover?
be jat will you di cover? leWorksco.uk a
Slide 18: New store rollout
• New store rollout remains our biggest growth driver • Continuing track record of delivery in FY19 ‒ 50 net new stores opened – trading from 497 stores at the end of the years ‒ Payback in under 12 months – ahead of historic average ‒ Improving returns on retail parks • Flexible lease terms ensurin
Slide 19: Like-for-like sales growth and product offering
• LFLs +3% (FY18: +4.7%) ‒ Positive growth in stores and online • Ongoing refresh of product offering ‒ Thousands of new lines introduced – driving “product discovery” ‒ New ranges launched o “Pen Bars” o Own-brand “Corner Piece” adult jigsaws o Online range extensions, including “Crafters Companion
Slide 20: Multi-channel strategy
• Continued growth of our online channel – an integrated part of the physical shopping experience • Click and Collect – continues to be our fastest growing channel ‒ Refreshed the online customer journey ‒ Improved in store processes ‒ Driving an additional 0.5m customer visits a year ‒ Increased ad
Slide 21: Margin enhancement
• Further growth in product gross margin – multiple levers driving ‒ Mix management – overall and within categories ‒ Lower mark-downs, supported by: “Aged stock” remaining at historic lows Strong sell-through of seasonal ranges Careful management of Squishies stocks ‒ Further own-brand develo
Slide 22: Our colleagues and our communities
• Our colleagues ‒ We have created over 350 new jobs ‒ We have promoted over 450 colleagues ‒ We made the Sunday Times Top 25 Big Companies to work for at the first attempt • Our communities ‒ We raised over £0.2m in our strategic partnership with CRUK – over £0.5m now raised together ‒ “Keen to be
Slide 23: Current trading and FY20 priorities
• Net 50 new stores to open New Store Rollout • 70%+ to be open prior to peak Christmas trading period • Strong pipeline of opportunities – a net 9 new stores already opened • Thousands of new lines planned – driving “product discovery” • Helium Balloons rollout to 450+ stores LFL Sales Growth • Kid
Slide 24: Good growth in a very difficult year for retail
• We have achieved good growth in what has been a very difficult year for retail • We are delivering against the strategy set out at the time of our IPO • New store opening performance has been particularly pleasing – there has never been a better time to open new stores • Positive LFL growth delive
Slide 25: Differentiated proposition within attractive growth market segments
Differentiated proposition within attractive growth market segments Proven multi-channel model Well invested infrastructure to support growth Highly experienced management team Clear four pillar strategy for growth Strong and consistent track record of delivering profitable growth 03/07/2019 24
Slide 26: 03/07/2019
03/07/2019 25
Slide 27: 03/07/2019
03/07/2019 26
Slide 28: Balance sheet
FY19 FY18 £'000 £'000 Non-current assets Intangible assets 18,494 18,499 Property, plant and equipment 20,786 18,693 Deferred tax assets 351 299 39,631 37,491 Current assets Inventories 25,157 21,495 Trade and other receivables 17,589 17,224 Derivative financial asset 158 89 Current tax asset 0 0 Ca
Slide 29: Cash flow statement
FY19 FY18 £'000 £'000 Cash flows from operating activities (Loss) / profit for the period 1,120 1,785 Adjustments for: Depreciation 4,912 4,077 Amortisation 1,049 939 Impairment of property, plant and equipment 41 135 Derivative exchange loss/(gain) 73 (451) Net finance costs 804 3,604 Gain / Loss o
Slide 30: Adjusted results reconciliation to statutory results
Adjusted results FY19 FY18 £'m £'m Reconciliation to statutory results Adjusted profit before tax 6.7 4.2 Relocation of eCommerce fulfilment operations (0.5) 0.0 Relocation of support centre 0.0 0.0 Staff incentives on IPO (1.2) 0.0 Costs relating to IPO and refinancing (2.9) (1.5) Packaging waste c