COVID-19 Update

23 March 2020

TheWorks.co.uk plc 

COVID-19 Update

TheWorks.co.uk plc ("The Works", the "Company" or the "Group"), the multi-channel value retailer of gifts, arts, crafts, toys, books and stationery, announces an update regarding COVID-19.

Trading in the nine weeks since the Group's last update on Thursday 16 January 2020 to Sunday 15 March 2020 had been strong, with LFL sales growth of +2.9%.  This strong growth was delivered across both stores and online.

Last week, despite declining high street footfall, the Group experienced a significant uplift in sales, both in stores and online, as customers demanded products to support with their child's ongoing education, mindfulness material to support mental health or products to "beat the boredom" during this period of social distancing.

The Group has been monitoring the rapidly changing situation and guidance closely with the key priority at present being the health and wellbeing of its colleagues, customers and wider communities.  To date, the Group has continued to follow the Government's advice and kept its stores trading.  However, to encourage social distancing for the safety and wellbeing of its colleagues, customers and the wider community the Board has taken the decision to close all of its stores as of tonight.  The Group's website, www.theworks.co.uk, will continue to trade as normal unless further restrictions are put in place by the Government to restrict the movement of people and/or goods.

The Group has always maintained a prudent approach to costs, however, it is now taking a number of additional temporary measures to help manage its cost base and cashflows during this challenging time.  These measures include:

·     All non-essential capital investment has been temporarily suspended, including the new store rollout programme (with the exception of a small number of stores where we are legally committed);

·     All discretionary operational expenditure, such as store point of sale and marketing spend and travel costs will be managed to minimum spend levels;

·     Discussions with landlords will be held regarding measures to reduce net cash outflow on store rents whilst stores are closed;

·     Planned stock intake will be reviewed to ensure careful cash management, particularly as the Group builds towards its peak working capital requirements ahead of Christmas 2020;

·     Considering the likely prolonged impact on consumer demand, the Board do not currently expect to declare a final ordinary dividend for the year ending 26 April 2020.

The Group notes and appreciates the various actions taken by the Government to support businesses and their employees during these challenging times.  The reduction in business rates is expected to provide a monthly cash saving of c£1.2m, while the temporary deferral of HMRC payments will contribute positively to our short-term cash flow.  The announced support for payment of wages for colleagues is welcomed.  However, there remains significant details to work through to fully understand the impact of all of these measure on The Group.

Net cash at the end of February 2020 stood at c£1.5m and the Group has access to a £25m revolving credit facility (expiring in June 2021).

Given the continued uncertainty as a result of COVID-19, the Board does not believe it appropriate to provide guidance for the financial years ending April 2020 or April 2021 at this time.

The Group will announce a trading update for the year ending 26 April 2020 on 7 May 2020.

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