Theworks.co.uk Plc · LSE:WRKS
Theworks.co.uk — The Works — H1 2023 Earnings Presentation
24 slides from Theworks.co.uk's earnings presentation, Jan 20, 2023
Slide 1: FY23 Christmas Trading Update and Interim Results
FY23 Christmas Trading Update and Interim Results 26 weeks ended 30 October 2022 20 January 2023 us W WORKS
Slide 2: Agenda
Agenda Highlights Gavin Peck (CEO) Financial Review Steve Alldridge (CFO) Business Review Gavin Peck (CEO)
Slide 3: Highlights
Highlights —\
Slide 4: Resilient H1 performance against challenging consumer environment and residual cyber impact
Ss Resilient H1 performance against backdrop of challenging consumer environment and residual impact of cyber security incident Increased H1 loss, reflecting return to typical pattern and material cost headwinds Improved LFLs since end of H1(+5.7%). Christmas trading was stronger vs. weaker comps, a
Slide 5: Financial Review
yy Financial Review Steve Alldridge, CFO —\
Slide 6: H1 FY23 result reverted to the more usual pattern
+ H1FY23 result has reverted to the more usual pattern - whereby The Works typically reports a loss in H1 + EBITDA loss of £6.4m vs. £2.5m profit in H1 FY22. The year-on-year comparison was exaggerated by: QI1FY23 sales affected by residual effects of cyber security incident Lower gross margin % due
Slide 7: LFL sales growth detail
LFL sales growth detail Stores Online Total + HIFY23LFL +0.6% al 14% (28.6%) (2.5%) ° al @2 5.0% (8.9%) 29% * Store and online sales in May and June affected by residual impact of HI 3.5% (16.9%) 0.6% Mar ‘22 cyber security incident Tl weeks ended 15 January 2023 9.1% (14.0%) 5.7% * Store sales stre
Slide 8: Gross margin
gross margin H1FY23 H1FY22 % of % of £m % £m £m 1 A revenue revenue Variance Variance Revenue 118.9 116.1 28 24% Less: Cost of goods sold 52.0 47.0 5.0 10.6% Product gross margin 66.9 56.3% 69.1) 59.5% (2.2) (3.2%) + Product gross margin decreased 320bps to 56.3% Further increase in sales mix of fro
Slide 9: Costs included in cost of sales
cluded in cost of sales HIFY23 HIFY22 % of % of £m % revenue £m revenue Variance Variance Store payroll 23.0 19.4% 21.2 18.3% 18 8.5% Store property and establishment costs 25.2 21.2% 20.8 17.9% 4S 21.7% Store PoS and transaction fees 09 0.8% W 0.9% (0.1) (11.9%) Store depreciation (excluding IFRS 1
Slide 10: Operating costs
osts H1FY23 H1FY22 % of % of £m % £m . A revenue revenue _Variance Variance Distribution costs 5.0 4.2% 41 3.5% 09 22.8% Administration costs 10.9 9.2% TA 9.8% (0.4) (3.8%) * Store distribution costs increased by £0.9m + Primarily due to inflation in NLW and increase in mix of agency staff (higher h
Slide 11: Capital expenditure
* Total capex for FY23 expected to be approximately £7.5m, per previous guidance H1FY23 H1FY22 Variance + Spend will be weighted towards H2 FY23 due to £m £m £m + Phasing of projects New stores and relocations 0.0 04 (0.4) * — Timing difference relating to new store capital contributions Store refit
Slide 12: Stock value
Stock value grew due to 12% increase in units on hand and 20% average increase in cost per unit The pre-Christmas stock build was accelerated to alleviate concerns regarding possible repetition of supply chain disruption Targeting FY23 year end stock position broadly in line with last year's, throug
Slide 13: Cash flow and liquidity
The Works’ typically experiences cash outflow during H1 due to ° Profile of profit generation through the financial year . Build of stock in readiness for Christmas sales season H1 FY23 reflected a return to this pattern, plus impact of larger than planned stock build as supply chain disruption did
Slide 14: Business Review
yy Business Review Gavin Peck, CEO —\
Slide 15: Trading Performance
‘Trading Performance + Resilient H1 performance in light of external trading environment - Total LFLs +0.6% (stores: +3.5%, online -16.9%) * Hlimpacted by three key factors: - Residual impact of cyber security incident (as we implemented stronger security) - Post-COVID shopping trends normalising ye
Slide 16: Our "Better, not just Bigger" Strategy
Our “Better, not just Bigger” Strategy @ @ @ KRY Develop our brand and increase customer engagement Enhance our online proposition Optimise our store estate eee Our Colleagues Our ESG Commitments & Drive operational improvements
Slide 17: Develop our Brand and Increase Customer Engagement
our Brand and Increase Customer Engagement Objective: Reach new customers, increase existing customer oO i aE engagement and evolve external perceptions of The Works. Ninfons aN . Seem Key progress in FY23 to date: i En * Launched brand evolution, aligned to new purpose * Further developed product o
Slide 18: Enhance our Online Proposition
e our Online Proposition Objective: Increase awareness of our website and make it a more inspiring destination for our customers Key progress in FY23 to date: We're making way . were cet Increased focus on enhancing online customer experience, supported by ee - Brand evolution applied to website - U
Slide 19: Optimise our Store Estate
e our Store Estate Objective: Create a store environment that can inspire our customers and reflect the communities we serve Key progress in FY23 to date: * Improved store look and feel through brand evolution * Ongoing portfolio management, improving overall estate - 7new stores, 2 relocations, 5 c
Slide 20: Operational Improvements
erational Improvements Objective: Improve our ways of working to become a better and more modern retailer, whilst ensuring we continue to operate efficiently and in a cost-effective way Key progress in FY23 to date: * Continued focus on enhancing end to end stock flows in the business New stock allo
Slide 21: Our Strategic Enablers — Progress Update
Our Strategic Enablers — Progress Update eee Our Our Systems Our ESG Colleagues and Data Commitments Placed 12" in Best Big Companies New EPOS software developed for Environmental strategy under to work for in 2022 (up from 13") rollout in CY23 development with 3° party Launched new Communication Ne
Slide 22: Summary
Summary + Resilient H1 performance against backdrop of challenging consumer environment and residual impact of cyber security incident * Increased H1 loss, reflecting return to normal pattern and material cost headwinds + Improved LFLs since end of H1(+5.7%). Christmas trading was stronger vs. weake
Slide 23: Slide 23
Slide 24: Our purpose
ose Underpinning this Purpose: Fulfilled by our brand that is: All brought to life by our family of colleagues who are: Helping us to fulfil our ambition of becoming one of the most loved retailers in the UK — the go-to place for reading, learning, creativity and play.