Theworks.co.uk Plc · LSE:WRKS
Theworks.co.uk — H1 FY20 Earnings Presentation
24 slides from Theworks.co.uk's earnings presentation, Jan 16, 2020
Slide 1: Interim results 26 weeks ended 27 October 2019
TheWorks.co.uk What will you discover? Interim results 26 weeks ended 27 October 2019 16 January 2020
Slide 2: Agenda
Agenda • Highlights Gavin Peck (CEO) • Financial Review Rosie Fordham (Interim CFO) • Business Review Gavin Peck (CEO) • Questions 1
Slide 3: Highlights
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Slide 4: H1 FY20 headline results
H1 FY20 H1 FY19 Revenue £96.4m £91.5m Total sales growth 5.4% 15.0% LFL sales growth (exc Mega Trends) (1.9%) 5.5% Reported LFL sales growth (3.6%) 3.8% Adjusted EBITDA* (£4.3m) (£0.9m) Interim Dividend (pence per share) 1.2p 1.2p Net (debt**)/cash (£14.9m) (£4.4m) * Before adjusting items and IFRS1
Slide 5: Highlights: management changes, LFLs and refocused strategy
• Management changes – focus on next phase of growth • Negative LFLs in H1 reflected two key factors: ‒ Challenging consumer backdrop ‒ Exacerbated by trading against “Squishies” Mega Trend last year (and strong sales of Slime) • New store openings remained a positive – payback running at around one
Slide 6: Financial Review
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Slide 7: Key highlights: adjusted results
Adjusted results (pre-IFRS16 Leases) H1 FY20 H1 FY19 £'m £'m Key highlights Revenue 96.4 91.5 • +5.4% revenue growth reflecting new store revenue offset by lower LFLs Gross Profit 11.0 13.6 Gross Profit Margin 11.5% 14.8% • Lower gross profit margin reflecting FX Adjusted EBITDA loss (4.3) (0.9) and
Slide 8: Cost analysis
H1 FY20 % of H1 FY19 % of YOY increase £'m revenue £'m revenue (%) Revenue 96.4 91.5 5.4% Cost of goods sold 36.3 37.7% 32.8 35.9% 10.7% Store wages 20.6 21.4% 18.2 19.9% 13.6% Store property costs 22.1 22.9% 20.8 22.7% 6.1% Other direct costs 6.3 6.5% 6.1 6.7% 2.6% Cost of sales 85.4 88.5% 77.9 85.
Slide 9: Key highlights: costs
Key highlights • Increased cost of goods sold ‒ Reflects FX headwind and investment in promotional activity • Store wages ratio increase ‒ NLW/NMW impact continues – ability to mitigate limited in absence of lone-working but increasing focus on driving efficiency savings and reviewing store labour s
Slide 10: Capital expenditure
H1 FY20 H1 FY19 YOY Change £'m £'m £'m New stores and relocations 2.9 2.9 (0.0) IT hardware and software 0.5 0.3 (0.2) Web development 0.5 0.3 (0.2) Store refits and rebrands 0.3 0.3 0.0 Other 0.6 1.0 0.4 Total capital expenditure 4.8 4.8 0.0 Capital expenditure on finance lease (0.2) (0.2) (0.0) Ne
Slide 11: Cash flow and net debt
H1 FY20 H1 FY19 £'m £'m Key highlights Adjusted EBITDA* (4.3) (0.9) • Predictable and well-controlled capital expenditure Share based payment charges 0.1 - Derivative exchange loss/(gain) 0.0 (0.2) • Working capital absorption Increase in provisions (0.1) - driven by: ‒ Higher stock levels Adjusted
Slide 12: IFRS 16 Leases impact
£'m Key highlights • Operating leases meeting IFRS16 criteria represented FY20 OPENING BALANCE SHEET IMPACT by a fixed (“right-of-use”) asset with corresponding Right of use assets 104.4 lease liability (notional debt) Lease liability (116.1) Net assets impact of IFRS16 (11.7) • Operating lease expe
Slide 13: Business Review
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Slide 14: 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 15: New store rollout
• Continued track record of delivery ‒ Net 28 opened at end of October, further 13 net opened since ‒ Payback continues to run at around one year – in line with internal expectations • Scaling back opening plans in the near term ‒ No further net openings in FY20 ‒ Net 20 openings in FY21 • Rationale
Slide 16: Like-for-like sales performance in stores
• Disappointing H1 LFLs ‒ Challenging consumer backdrop ‒ Exacerbated by absence of a Mega Trend • Improved performance over peak trading ‒ Positive growth in stores and online ‒ Comps eased as Mega Trend impact dropped away ‒ Proven track record at Christmas Christmas ranges performed well Froz
Slide 17: Online
• Sales decline in first half disappointing, but ‒ Reflects propositional changes to increase online Average Ticket Price to improve profitability ‒ Improved sales performance over peak ‒ Strong performance of fulfilment partner – continued focus on driving productivities and efficiencies • Initiati
Slide 18: Margin enhancement and cost control
• H1 product margin behind last year reflecting ‒ FX headwind ‒ Investment to drive sales over Summer • Product margin gap to prior year expected to narrow in H2 – ongoing FX headwind with more normalised promotional activity • Medium-term product margin growth expected through multiple levers • Inc
Slide 19: Summary and outlook
• H1 performance a disappointment, but pleasing to return to positive LFLs over peak trading • Trading in line with Board expectations for the full year and expect to be broadly debt free by year-end • Proactive action taken to refocus strategy in near-term ‒ Fewer new store openings ‒ Reviewing pro
Slide 20: Appendix
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Slide 21: 14/01/2020
14/01/2020 20
Slide 22: Balance sheet
HY20 HY19 £'000 £'000 Non-current assets Intangible assets 18,744 17,630 Property, plant and equipment 121,966 21,582 Deferred tax assets 2,494 307 143,204 39,519 Current assets Inventories 42,511 36,288 Current tax asset 1,967 1,535 Derivative financial asset 156 301 Trade and other receivables 9,9
Slide 23: Cash flow statement
HY20 HY19 £'000 £'000 Cash flows from operating activities (Loss) / profit for the period (6,414) (7,717) Adjustments for: Depreciation, amortisation and impairment 13,439 2,780 Derivative exchange loss/(gain) 25 (212) Net finance costs 2,099 1,104 Gain / Loss on sale of property, plant and equipmen
Slide 24: Cost analysis reconciliation to statutory costs
H1 FY20 % of H1 FY19 % of YOY increase £'m revenue £'m revenue (%) Cost analysis reconciliation to statutory costs (reflecting IFRS 16 adjustments and depreciation) Store property costs (10.9) Other direct costs (0.2) Cost of sales under IFRS 16 74.3 77.0% IFRS 16 ROUA depreciation 9.4 9.8% Non IFRS