Inspiring reading,
learning, creativity
and play
Annual Report and Accounts 2023
Contents
Strategic report
Highlights 01
Our strategic roadmap 02
Our investment case 03
At a glance 04
Chair’s statement 06
Chief Executive’s review 08
Our marketplace 12
Our business model 14
Our strategy and progress 16
How we measure performance 18
Financial review 19
Our stakeholders 26
Section 172 statement 28
ESG review 29
Task Force on Climate-Related
Financial Disclosures (TCFD) 36
Streamlined Energy and Carbon
Reporting (SECR) 47
Risk management and
principal risks and uncertainties 49
Viability statement 54
Non-financial and sustainability
information statement 57
Corporate governance
Chair’s governance introduction 58
Board of Directors 60
Corporate governance report 62
Audit Committee report 66
Nomination Committee report 70
Directors’ remuneration report 73
Annual report on remuneration 78
Directors’ report 86
Statement of Directors’ responsibilities 89
Financial statements
Independent auditor’s report 90
Consolidated income statement 98
Consolidated statement
of comprehensive income 99
Consolidated statement
of financial position 100
Consolidated statement
of changes in equity 101
Consolidated cash flow statement 102
Notes to the consolidated
financial statements 103
Company statement
of financial position 133
Company statement
of changes in equity 134
Notes to the Company
financial statements 135
Advisers and contacts 140
Our ambition: to become one
of the most loved retailers in the
UK – the go-to place for reading,
learning, creativity and play.
Highlights
Operational highlights
• Resilient performance delivered in FY23 against challenging
backdrop. Well-positioned to capitalise on opportunities
and deliver growth in FY24.
• Continued to refine our customer proposition to more closely
reflect our purpose -
to inspire customers to read, learn, create
and play
– making lives more fulfilled. Rolled out evolved brand
to stores and online to start changing legacy perceptions of The
Works and more accurately reflect the business today.
• Refreshed the product offering, launching new own brand
products such as “PlayWorks” toy range. Increased book market
share by stocking more front-list titles from best-selling authors
such as Julia Donaldson and Colleen Hoover.
• Further enhanced the quality of the store estate with 14 new
openings (which are trading ahead of expectations), three
relocations and 13 store closures. Continued to optimise
the existing estate with an investment of c.£1.4m in 34 refits,
improving the customer experience by enhancing layouts,
improving signage and optimising space utilisation.
• Invested in operational improvements, the significant benefits of
which are expected to be fully realised in FY24 and beyond. This
included restructuring the distribution centre management team,
implementing a new stock allocation system, and introducing
a new automated packing machine at our online fulfilment
provider, iForce.
• Launched a review of the business operating model to drive
effectiveness and efficiencies, improve processes and IT systems,
particularly in relation to the flow of stock through the business.
• Restructured management of the online operation to drive improved
performance. Increased focus on customer experience of the
website and introduced new tools to support analysis and provide
insights into how best to improve performance.
• Placed 12th in ‘Best Big Companies to Work For’, up from 13th
in each of the past two years, and maintained 2* accreditation
for ‘outstanding’ workplace engagement.
Visit our corporate website
corporate.theworks.co.uk
Financial highlights
Revenue
£280.1m
FY22: £264.6m
Like-for-like (LFL) sales growth
2
+4.2%
FY22: +10.5%
Adjusted basic EPS
16.5p
Restated
1
FY22: 26.0p
Profit before tax
£5.0m
Restated FY22: £14.2m
Dividend
1.6p
FY22: 2.4p
Basic EPS
8.4p
Restated
1
FY22: 22.3p
Non-IFRS 16 Adjusted EBITDA
£9.0m
FY22: £16.6m
Adjusted PBT
£10.1m
Restated FY22: £16.5m
1 See note 14 to the financial statements.
2 LFL sales growth has been calculated with reference to the FY22 comparative sales figures. In FY22’s Annual Report, two-year comparatives were used
because the use of a normal one-year LFL comparative was prevented by the various disruptions to store trading brought about by COVID-19 restrictions
in the FY21 comparative period.
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 01
Our strategic roadmap
TheWorks.co.uk plc Annual Report and Accounts 202302
Creating a better,
not just bigger business
Our purpose and strategy aim to bring our well-loved brand to life
and make The Works ‘better, not just bigger’.
Read more about our culture on page 32
Our purpose
To inspire reading, learning, creativity and play –
making lives more fulfilled.
Develop our
brand and
increase
customer
engagement
Our colleagues Our systems and data Our ESG commitments
Enhance
our online
proposition
Optimise our
store estate
Drive
operational
improvements
Our ambition
To become one of the most loved retailers
in the UK.
Read more about our strategy on pages 16 and 17
Read more about our ESG approach on pages 29 to 35
Our better, not just bigger strategy
Our strategic enablers
Underpinned by our values
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TheWorks.co.uk plc Annual Report and Accounts 2023 03
Our investment case
A differentiated offering
with significant organic
growth potential in the value
retail sector
1
Unique proposition
Better value than specialists and better choice and customer
service than discounters.
c.3,500
product lines
2
Broad demographic appeal
Diverse customer base across four addressable markets creates
significant growth opportunity.
£16.23bn
addressable market
1
3
Flexible store estate
Small inexpensive shop units in a variety of locations with
short leases that provide flexibility to respond to local
market conditions.
526
stores
4
Simplicity over complexity
Focused on implementing best retail practice, as opposed
to costly, high-risk concepts.
5
Real opportunity for growth
Previous under-potentialisation creates real opportunity for sales
and profit growth.
+5.8%
FY23 revenue growth
Read more about our marketplace on page 12
Read more about our strategy on pages 16 and 17
1 The value of the UK craft, books, stationery, toys and games markets based on Craft Intelligence, Nielsen, IRI and Statista data.
TheWorks.co.uk plc Annual Report and Accounts 202304
Our loyalty scheme
During the year, following its relaunch, our ‘Together’ loyalty scheme has
continued to grow and it now has c.1.7m active members. Giving 5 pence back
for every £1 spent, the scheme offers customers a simple loyalty proposition and
real savings. The growth in the scheme’s membership was driven by a number
of factors including double points promotions which also increased the number
of transactions and average spend. As our Together scheme enters its tenth
year we continue to see members consistently spend more money more often.
As membership continues to grow, the scheme will provide us with invaluable
data and insights about what our customers want.
At a glance
A leading family friendly
value retailer
We make reading, learning, creativity and play accessible to everyone. Great value,
fantastic ranges and excellent customer service are at the heart of our offering.
• Diverse locations including
high streets, shopping centres,
retail parks, factory outlets and
garden centres.
• Serve local communities and
play a key role supporting local
fundraising activities.
526
stores in the UK and Ireland
14
new store openings during FY23
Store estate
• Fully transactional online store.
• Exclusive online product offerings.
• Convenient click & collect service.
41 million
website visits during FY23
Multi-channel Colleagues
• Loyal, dedicated and highly
engaged colleagues are key
to our success.
• Ranked 12th in Best Big Company
to Work for national list, up from
13th last year. Consistently ranked
in the top 25 for the past five years.
Awarded second
highest two star-rating
Best Big Company to Work for
c.4,000
colleagues
c.1.7m
loyalty members
Develop our brand and increase
customer engagement
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TheWorks.co.uk plc Annual Report and Accounts 2023 05
Our product offering is designed to appeal to all the family and focuses on supporting
reading, learning, creativity and play in the categories detailed below. It includes our own
brand ranges, which support our value offering and enable us to offer exclusive products
to our customers, plus the most in-demand branded products across our categories.
Our products and brands
Our brands
Books
• A destination for children’s books
that includes bright board books for
babies, amazing activity books and
fascinating fiction for all ages including
teenagers, authoritative non-fiction
and educational workbooks to
inspire children.
• Great value offered through our 10
for £10 picture book range and our 3
for £6 adult fiction selection.
• A curated range of the very latest
trending adult books – both fiction
and non-fiction.
Arts & Crafts
• Our exclusive range of Crawford
& Black art essentials: canvases,
sketchbooks, paints, brushes and art
sets for beginners to artisans to create
their own masterpieces.
• Our essential range of ‘craft blanks’ to
personalise, craft kits and wooden items
to transform and embellish with our own
brand of Make & Create accessories.
• A collection of kids’ exclusive own brand
value kits, ready mix paints, colour-your-
own range and bumper bags of essential
accessories to inspire young budding
artists and crafters.
Stationery
• Our own brand new ‘Works Essentials’
range and big key brands stationery to
meet all home, office and school needs.
• A curated range of stationery and
accessories to fill ‘Back to School’
bags and pencil cases.
i
m
a
g
i
n
e
•
l
e
a
r
n
•
g
r
o
w
Toys & Games
• Wide range of toys including our new
own brand ‘PlayWorks’ range, designed
to ignite imaginations and encourage
cognitive development.
• £10 and under pocket money toys,
perfect for kids’ own purchases
and gifting.
• Great value summer toys range
promoting fun in the sun and aimed
at getting kids outside.
Seasonal
• Great value ranges to make seasonal
events including Christmas, Easter
and Halloween extra special.
• A great range of partyware bringing
communities and families together to
celebrate national events such as the
Jubilee and Coronation.
Introduction
Last year I wrote about the positive effect that the Group’s new
purpose -
to inspire reading, learning, creativity and play - making
lives more fulfilled
– was having on the business soon after it was
introduced. This year we embedded the purpose further across
the business, informing the implementation of our ‘better, not
just bigger’ strategy, inspiring the creation of our ESG plan and
providing clarity about the future direction of the business.
The purpose has also helped to guide colleagues as they served
customers and reinforced the incredible culture at The Works, one
of the enduring strengths and unique attributes of the business.
And whilst the economic environment has been extremely
challenging, colleagues at The Works have responded thoughtfully
to this backdrop, using it as an opportunity to inspire customers
to enjoy reading, learning, creativity and play on a budget, whilst
also supporting local communities and our charitable causes.
I am proud to chair such a creative and purpose-led business
and would like to thank everyone at The Works for their efforts.
Performance
I have long been impressed by the resilience of The Works, its ability
to adapt to unforeseen circumstances and manage challenging
trading conditions. In FY23 these traits were seen again as The
Works delivered a resilient performance, with revenue increasing
by 5.8% to £280.1m. This growth was delivered despite the business
still recovering from a cyber security incident late in the previous
financial year and an uncertain macroeconomic backdrop. Thanks
to Gavin’s steady leadership and the action taken to protect the
business, the resonance of our value customer proposition and
the patience and flexibility of our colleagues, we ended the year
on a more positive sales trajectory. Going into FY24, we can now
confidently say that The Works is a more operationally robust
business, with greatly strengthened cyber security, and remains
financially strong.
The inflationary environment did impact our profit performance,
particularly in the first half of the year given rising freight, energy
and other business costs. However, as a result of these cost
pressures easing and an improvement in store sales growth
in the second half, we ended the year in line with our revised
profit expectations. Although this is not where we expected to
be at the start of the year, it is a creditable performance given
the challenges the business faced and we ended the year in
a financially secure position.
Strategy
The Works announced its ‘better, not just bigger’ strategy in
July 2021, committing to a greater focus on the customer and to
strengthening the fundamentals of the business. This strategy not
only made The Works more resilient during the COVID pandemic
and challenging economic environment that followed, it has also
aligned business decisions more closely with our purpose, and
ultimately the customer.
Strategic progress was slower in the first half of FY23 as the business
was primarily focused on recovering from the cyber security incident
and the external environment saw retailers facing great uncertainty.
However, more progress was made in the second half of the year and
Good strategic progress
TheWorks.co.uk plc Annual Report and Accounts 202306
Chair’s statement
Some good strategic
progress was made
despite challenging trading
conditions, and the underlying
appeal and relevance of The
Works’ proposition continues
to resonate with customers.
the foundations have now been laid for significant improvements in
the year ahead.
The evolved brand has been rolled out across the business and
we are now building on this to demonstrate to customers why
The Works is the best value destination for reading, learning,
creativity and play. This will attract more customers to shop with
us and through our relaunched ‘Together’ loyalty scheme we now
have an opportunity to engage more with our growing and loyal
customer community.
Our active portfolio management continues. Our 14 new stores and
3 relocated stores opened during the year are performing ahead of
expectations and, along with our 34 store refits undertaken in the
year, continue to improve the overall quality of our store estate.
Our online performance has been disappointing, partly reflecting
a normalisation of store/online sales mix post-COVID. Following a
review of our website and online operations we now have the right
resource and plans in place to improve the customer experience
and profitability of this channel. During the year we implemented
a number of structural changes to enable improvements in our
stock allocation and distribution processes, which will help drive
significant operational efficiencies across the business.
Together, these initiatives create a real opportunity for further
strategic progress and a step-change in sales growth and
improved profitability over the medium-term. We are excited by
this potential and remain confident that our ‘better, not just bigger’
strategy is the right direction for the business.
Environmental, Social and Governance (ESG)
The Board has continued to oversee development of the Group’s
Environmental, Social and Governance plan and to monitor
progress. Whilst we have put more structure around the ESG
strategy in FY23 and made progress in key areas, the Board
recognises that there is still much more to be done.
Progress on ESG was mostly made in the second half of the year,
namely the new initiatives to support colleague engagement,
wellbeing and career development, as well as the creation of
new climate targets and an improved system of monitoring our
environmental impact.
We have now set a target to be net-zero by 2045, with an ambition
to do so by 2040 (in line with the British Retail Consortium), and we
are now fully compliant with the TCFD disclosure recommendations,
including the reporting of Scope 3 emissions. We still have a long
way to go to reduce our environmental impact but now have both
the strategy in place and the mechanisms to track progress, which
will guide our decision making in the years ahead.
Although I believe that The Works is already a diverse, inclusive
and supportive business, Diversity & Inclusion (D&I) is an area that
I feel very strongly about and there is scope for us to do more. This
year we conducted a full review of D&I at The Works and undertook
a survey to understand colleague perceptions and experiences.
Based on these insights we have now developed a strategy through
which we can make significant progress to improve our diversity and
inclusion in the years ahead. This will inspire colleagues to be even
more supportive and embracing of differences, encourage new
talent to join The Works and strengthen our special, collaborative
and supportive company culture.
CFO Succession
As announced alongside our FY23 results, Steve Alldridge has
advised the Board of his intention to step down from his role as
CFO by the end of 2023. In line with our succession plans, we are
delighted that Rosie Fordham our current Head of Finance, will be
appointed as CFO when Steve steps down.
Dividend and outlook
Despite delivering a resilient performance in FY23 and ending the
year in a strong financial position, the Board hopes that FY23’s
EBITDA was a low point and that it will increase progressively in
future. Some good strategic progress was made despite challenging
trading conditions, and the underlying appeal and relevance of The
Works’ proposition continues to resonate with customers.
During the period in which the business works to rebuild its levels of
profit, a compromise is sought, between maintaining a reasonable
dividend for shareholders, whilst ensuring that the Group continues
to maintain its cash reserves. Taking this into consideration, along
with the Company’s resilient FY23 performance, and its confidence
in the Group’s prospects, the Board proposes a final dividend of
1.6 pence per share in respect of FY23 and outlines its policy in
relation to capital distributions, which is included at the end of the
financial review.
The Board believes that the business is well positioned to take full
advantage of the opportunities ahead, make further strategic
progress and grow sales profitably, and we remain confident in the
Group’s future prospects
Carolyn Bradley
Chair
30 August 2023
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TheWorks.co.uk plc Annual Report and Accounts 2023 07
Our culture
The Works has a one-of-a-kind culture, shaped by strong values
that underpin everything we do. In the past 12 months I have
visited many stores and had the opportunity to meet colleagues
who serve our customers every day. I have also been able to
observe our culture ‘in action’ and I am pleased to report that
I have seen many examples of the caring and can-do values
we aim to embed across the Group. Above all, our people are
passionate about what they do and committed to our purpose.
Recognising the many benefits that diversity of experiences,
cultures and perspectives bring, during the year we have further
progressed our diversity and inclusion strategy to ensure we
foster an inclusive environment where everyone belongs and
can thrive (see pages 32 to 34).
Introduction
The Works delivered a resilient performance in FY23, with sales
growth driven by our fantastic network of stores and team of
talented colleagues. The economic backdrop was challenging,
characterised by high inflation and dampened consumer
confidence. This, combined with the residual impact of the cyber
security incident at the start of the year, meant that the end result
was lower than we had anticipated heading into the year. However,
by continuing to focus on our purpose and offering exceptional
value for our customers, we have enabled them to continue
reading, learning, creating and playing – demonstrating that
our value proposition has enduring relevance.
Over the past few years we have dealt with a host of external
challenges, such as the COVID-19 lockdowns and global supply
chain disruption, as well as internal ones like the cyber security
incident. This has meant that our focus has been primarily on
protecting and rebuilding the business and supporting our
dedicated colleagues. Having established a clearer runway, our
strategic progress accelerated in the second half of FY23 and we
expect to make even more significant improvements in FY24. We
remain confident in our ability to become an even ‘better, not just
bigger’ business, driving a step-change in sales and profitability
over the medium term.
Trading performance and financial results
The Works has always been a business that demonstrates its
resilience when confronted with difficult trading conditions and the
same can be said for FY23. The Group delivered a 5.8% increase
in revenue to £280.1m and LFL sales growth of 4.2%, with store LFL
sales increasing 7.5% and online sales declining by 15.0%. Outlined
below are the main factors that contributed to this performance:
• The first quarter was particularly challenging given the residual
impact of the cyber security incident, which occurred in March
2022. The action taken to protect the business and rebuild our
systems slowed down sales in May and June 2022. However,
as a result of this one-off event we have now accelerated the
implementation of IT upgrades and have even more robust
defences in place. Momentum built following our recovery with
an improving store LFL sales performance in the second half of
the year.
• Russia’s invasion of Ukraine and political turmoil in the UK
resulted in rising inflation and declining consumer confidence
over the course of the year. Families have seen incomes and
discretionary spending impacted. For value retailers like The
Works we believe that sales have been impacted by cost-
constrained consumers reigning in their spending, but that this
has been balanced, to an extent, by shoppers seeking out the
best value. This was particularly the case at Christmas, resulting
in strong store trading during peak season and into the new
calendar year.
• Retailers have witnessed a shift in consumer behaviour post-
COVID, with shoppers increasingly returning to shop in-store
and less so online. Stores have always been the lifeblood of the
business and it has therefore resulted in a net gain for The Works
given that stores represent c.90% of sales.
Demonstrating resilience
TheWorks.co.uk plc Annual Report and Accounts 202308
Chief Executive’s review
The Works delivered a
resilient performance in FY23,
with sales growth driven
by our fantastic network of
stores and team of talented
colleagues.
Profitability was constrained, particularly in the first half of FY23
given the lower than anticipated sales growth, high energy and
freight costs and the absence of COVID-related business rates
support, which had provided a boost in FY22. We revised our
profit expectations for the year in August 2022 and have achieved
a result in line with our rebased expectations, delivering a Pre-
IFRS16 Adjusted EBITDA of £9.0m and Adjusted profit before tax of
£10.1m. The statutory profit before tax was £5.0m, after impairment
charges of £5.1m. We believe this level of EBITDA is the low point
that we will build from in the years ahead, supported by greater
strategic progress that we are now set up to deliver.
Strategy
Our ‘better, not just bigger’ strategy was announced in July 2021 to
build on the existing strengths of the business – our loyal customer
base, strong culture and fantastic store network. The strategy aims
to provide The Works with a clearer purpose and a more focused
brand identity and customer proposition that will help to drive a
step-change in sales growth, as well as enabling us to improve the
operations of the business, making The Works a more customer-
focused and efficient retailer.
Since launching the strategy we have made decent progress in
some areas, but the reality of the internal and external challenges
noted above has meant more of our attention than we anticipated
has been focused on protecting the business and not on growth.
Strategic progress has been slower than we would have liked;
however, the business is now well-placed to deliver progress in
FY24 and beyond, which we expect will drive the step change
growth in sales and profitability that we want to achieve over
the medium term.
Below is a summary of the strategic progress made in FY23
and the plans we have to accelerate this in the year ahead.
Develop our brand and increase our customer engagement:
We are working hard to ensure that our customer proposition
and brand are consistent with our purpose, which will help to
change legacy perceptions of The Works as a ‘pile it high, sell it
cheap’ discounter, encourage new customers to shop with us and
increase the spend of existing customers.
In FY23 we rolled out our evolved brand to our stores and website
to ensure that the visual representation of The Works accurately
reflects our purpose and the modern, fun and engaging business
that The Works is today. We have completed the first phase of
this work and will now begin to more actively communicate this to
customers by developing and executing a marketing strategy to
bring our purpose and evolved brand to life, particularly through
our social channels.
We began to refresh our product offering to be better aligned with
our purpose, whilst maintaining our commitment to low prices. This
included the launch of new own brand ranges such as our children’s
toys ‘PlayWorks’ brand and a significantly extended range of front-
list books, including titles by authors such as Colleen Hoover and
Julia Donaldson, which helped to increase our book market share
in terms of value by 0.7% and volume by 1.3% (to 3.9% and 10.3%
respectively). There remains an opportunity to further increase
market share in all categories and in the year ahead we will
conduct an extensive refresh of our core art, craft, and stationery
ranges and launch new kids’ pocket money toys ranges.
We relaunched our ‘Together’ loyalty scheme this year and re-
engaged store colleagues to promote sign-ups. We welcomed
over 700,000 new members in FY23, with over 1.7m active members
of the scheme at the end of the year.
Our loyalty customers typically spend 30% more than non-loyalty
customers and shop more regularly. We will now focus on improving
the insight we obtain from the loyalty scheme data through new
software that will shortly be available, to support more effective
CRM and loyalty activity.
Making our business better
During the year we launched a review of our current operating
model to identify opportunities to improve our processes
and systems including product planning and product life
cycle management.
While this review is ongoing, based on early findings, we
have already started to introduce some changes including
strengthening our merchandise planning function, which
now includes a team of 25 people.
Read more about our strategy on pages 16 and 17
Driving operational
improvements
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TheWorks.co.uk plc Annual Report and Accounts 202310
Chief Executive’s review continued
Strategy continued
Enhance our online proposition: Our customers and store
colleagues want the experience of using our shopping channels
to be more consistent and integrated, with the website acting as
a shop window for our stores (and vice versa); however, to-date
the website has operated too independently. This, combined with
the fact that strategic progress in this area has been slower than
planned, means that as online sales have declined and costs
have risen, the website is not currently profitable.
We restructured the management of the online operation at
the beginning of the calendar year to facilitate an increased
rate of progress. We have also recently undertaken a series
of website usability studies to inform areas of opportunity to
improve the site, as well as introducing new tools to support
performance analysis and provide insights into how best to
improve the customer experience. To improve online profitability,
we increased delivery charges to be more in line with peers,
scaled back some online promotions and reduced fixed costs by
red uc in g th e sp ace uti lis ed at o ur thi rd-par t y f ul fi lm ent ce ntre.
Plans are in place to enhance the online customer experience and
to trial using the new EPOS solution to enable customers to order
products from our website whilst in our stores, providing more
convenient access to online range extensions. We also expect
online sales and profitability to improve as we derive benefit from
the new analytical tools introduced in late FY23. There is much more
work to be done to improve this channel which we hope will return
to sales growth and profitability, in due course.
Plans are in place to enhance the online customer experience and
to trial using the new EPOS solution to enable customers to order
products from our website whilst in our stores, providing more
convenient access to online range extensions. We also expect
online sales and profitability to improve as we derive benefit from
the new analytical tools introduced in late FY23. There is much more
work to be done to improve this channel which we hope will return
to sales growth and profitability, in due course.
Optimise our store estate: We believe that a major strength of The
Works is our large network of stores in communities across the UK
and Ireland, which have been and always will be the main driver
of sales.
This year we continued to optimise our store estate with 14 new
store openings in great locations and are pleased that these new
stores are trading ahead of expectations. We closed 13 stores and
relocated a further three, trading from 526 stores at the end of the
period. We also invested c.£1.4m in 34 store refits and continued to
improve the store experience for customers by enhancing layouts,
optimising the space utilisation across categories, and introducing
clearer navigation and signage, supported by the evolved brand.
Sales densities in our stores remain relatively low and we believe
there is a significant opportunity to increase this through winning
new customers, better ranging and customer experience, space
optimisation and improved product availability, all supported by
a new labour structure put in place at the start of FY24. Whilst the
priority in the short to medium term is to improve the existing store
estate to realise its potential, in due course we will also consider
whether to reintroduce a measured roll out programme, as we
believe there is scope for the brand to trade successfully from
at least 600 stores in the UK.
Drive operational improvements: Improving the operating
effectiveness of the business is pivotal to our success. Although we
will always maintain a lean operation, some areas of the business
were previously inadequately resourced. This year we continued to
invest ahead of time to ensure that we’re capable of realising the
sales potential we believe The Works can reach.
In FY23 we restructured the distribution centre management team.
The new team made an immediate impact, reviewing the operation
and proposing a series of improvements in the way we pick and
fulfil store deliveries for implementation in FY24. We expect to see
significant cost savings and improved product availability in-store
as a result of these changes.
We implemented a new stock allocation system, Slimstock, to
improve the quality of stock allocation decisions, which should
improve store stock availability and therefore sales. At the start
of the current calendar year we also significantly strengthened
our merchandise planning function, and have been delighted to
welcome some excellent new colleagues from respected retailers,
which will drive a step change in our capability in this area. Allowing
time for the new stock allocation system’s algorithms to ‘learn’ The
Works’ data and for our new merchandising team to get fully up to
speed with it, we expect to see further benefits in FY24 and beyond.
Towards the end of FY23 we successfully launched the pilot of our
new EPOS software in stores. Plans are in place to roll this new
software out across the store estate by the end of FY24.
A new automated packing machine and robotics were introduced
to the online fulfilment operation during the year (operated by
a third-party provider, iForce). We continue to work with iForce
to further improve the fulfilment cost per order, and reduce our
consumption of packaging.
Late in the financial year, we launched a planned review of the
business operating model. The first phase of this project entails
documenting our current ways of operating, confirming the
desired future ways of working and mapping the plan to migrate
to the improved model. There will be significant changes to
processes and IT systems over the next two to three years, which
will fundamentally improve the way our business buys, moves and
allocates stock, driving cost efficiencies and improved product
availability for our customers.
Colleagues
In an unpredictable and challenging year, our colleagues have
remained steadfast in their dedication to helping customers to
read, learn, create and play. We have worked hard to build and
maintain our unique culture, underpinned by our values and a
team of committed and enthusiastic colleagues. I am proud that
10% of colleagues were promoted in the year and was delighted
that we moved up one place to 12th in the ‘Best Big Companies to
Work For’ national list, from 13th in each of the past two years. We
also maintained our 2* accreditation for “outstanding” workplace
engagement (3* being the highest possible accreditation).
To continue to support the engagement, development
and wellbeing of our colleagues, we launched ‘MyWorks’, a
communications and engagement platform to keep colleagues
informed about company news and benefits, and to enable access
to resources on physical, mental and financial wellbeing. We also
introduced the ‘Can Do Academy’, a system to support colleagues’
learning and development, and in response to the challenges
created by the cost-of-living crisis we launched Wagestream, an app
that offers a range of financial wellbeing tools.
Looking ahead to FY24, we will continue to invest in our colleagues,
including launching a new Reward and Recognition programme
to positively reinforce our values, celebrate success and provide
financial incentives linked to our purpose and values.
Creating Dex the dinosaur
To increase our visibility and customer engagement, in
June 2022 we created Dex the dinosaur, a very recognisable
character to enable customers to build a tangible connection
with our business and our products. Aligning with our key
values of play, learning and fun, dinosaurs appeal to all
genders and generations.
During the year, Dex, who is already becoming synonymous
with our brand, visited many of our stores, including all our
new store openings, adding fun to everyone’s shopping
day. Our Dex branded product offering has also been
very successful and the Dex shopper has become our
best-selling bag.
Read more about our strategy on pages 16 and 17
Developing our
brand and increasing
customer engagement
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 11
Environmental, Social and Governance (ESG)
This time last year we were at the fledgling stages of the
environmental part of our ESG journey and I am pleased that we
have made significant further progress since then. The business
is now fully aligned around our mission of ‘Doing Business Better’,
which is about making positive and sustainable changes.
A key development was the appointment of a Sustainability
Manager in January 2023. The business has also adopted a
more structured and rigorous approach to the environment, for
example, to set longer-term ambitions to reduce the impact of our
products, packaging and waste. We are also continuing to work
with a specialist third-party ESG consultancy and during the year
we set carbon reduction targets for Scope 1, 2 and 3 emissions
and developed roadmaps to achieve them. Our Scope 1 and
Scope 2 targets, together with our ambition to achieve net zero by
2040, fully align with the British Retail Consortium’s climate action
roadmap and we became fully compliant with the Task Force on
Climate-related Financial Disclosures (TCFD) in FY23.
We are committed to creating an inclusive environment at The Works
where everyone feels they belong and where different experiences,
cultures and perspectives are embraced. We completed a review
of our existing Diversity and Inclusion (D&I) policies and practices
and have now developed a D&I strategy. Implementation of this
will increase our collective understanding of D&I, improve training,
enhance practical awareness and accountability at all levels and
ensure that barriers to inclusion are removed.
‘Giving back’ is part of our psyche and I am hugely grateful to our
colleagues and customers for their generosity in supporting our
charity initiatives. We are pleased to be developing a new charity
partnership with the National Literacy Trust this year, which is
closely aligned to our purpose of inspiring people to read, learn,
create and play.
Outlook
I am proud of the way everyone at The Works navigated a
challenging year. We expect FY23 to be the low point in The Works’
profitability post-COVID given that cost headwinds have now
eased, the financial performance improved throughout the second
half of the year and we have started to make more meaningful
strategic progress, the benefits of which are expected to be
realised in FY24 and beyond.
The macroeconomic outlook remains uncertain and we have
entered the new financial year with a degree of caution, however,
I am encouraged by the enduring appeal of The Works’ value
proposition and excited by the opportunities presented in the year
ahead, which the business is now better equipped to capitalise
on. The Board and I are comfortable with the Company compiled
estimate of the market’s forecast, an EBITDA of £10m for FY24, and
remain confident in our ability to deliver profitable growth in the
medium term.
Gavin Peck
Chief Executive Officer
30 August 2023
A number of market trends are affecting our business and shaping
our business model and strategy including:
Spending trends
In the current economic environment consumers are spending
less and they are seeking out good value quality products. Our
price proposition and overall offering position us well. In addition
our ‘Together’ loyalty scheme, which now has c.1.7 million active
members, offers customers real savings.
Evolving shopping habits
Despite an uncertain macroeconomic backdrop and consumers
being more cost conscious than ever, demand for convenient and
enjoyable shopping experiences continues to grow. In response,
our strategy is focused on making the overall shopping experience
as straightforward as possible for customers shopping in store
and online.
During the year we continued to optimise our store estate opening
14 new stores, closing 13 stores, relocating 3 others and completing
refits of 34 existing stores (see following page). Our aim is to provide
better in-store experiences through improved space planning,
making our stores easier to shop in (e.g. by reducing the number
of fixtures and amount of stock on the shop floor) and enhancing
our click & collect channel.
Located on the high street, and in shopping centres, retail parks and
garden centres, our stores are well positioned to benefit from the shift
to more localised shopping which has continued post-pandemic.
They also have a noticeable presence and are often actively involved
in community activities including local charity fundraising.
To ensure we capitalise on the online growth opportunity we
have reviewed our ecommerce operation and we are now
enhancing our online proposition in a number of areas to improve
the overall customer experience. In FY24, we will test using our new
in-store till software for customers to order from our website while
in-store, which will further integrate our channels and enhance
customer convenience.
Consistent growth in our core markets
The games, toy, art & craft, book and stationery markets have
grown consistently over the last two decades. Our product offering
is focused on these key specialist areas which appeal to a large
and diverse customer base.
According to a survey of the sector by Retail Week, published in
May 2023, we were ranked the UK’s fastest-growing value retailer.
Responsible consumption
Consumers are becoming more aware of the environmental
impact of the things they buy and are seeking out more sustainable
options. While the extent to which consumers are willing to
pay higher prices to reduce their environmental footprint is less
clear, we have a responsibility to do what we can to reduce our
environmental impact. Information about the steps we are taking
to do this is included on pages 30 to 31.
We are uniquely positioned
in the value retail sector
Our purpose, which is inspiring our customers to read, learn, create and play, sets us apart. We offer
lower prices than the specialists and more choice and better customer service than the discounters.
Premium/full price
Discount/value
Generals/variety Specialist
Books Crafts
Stationery Toys
Our marketplace
TheWorks.co.uk plc Annual Report and Accounts 202312
Enhancing the
shopping experience
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 13
New stores and refits
To create store environments that inspire our customers
and reflect the communities we serve we have continued
to enhance our store estate.
During the year we opened 14 new stores, completed 34
existing store refits, closed 13 stores and relocated 3 others.
Eight of our new stores are located in shopping centres
including Westfield London and Cribbs Causeway in
Guildford. Six others are in high street locations in Paignton,
Loughton, Minehead, Plymouth, Bude and Ringwood.
Our new and refitted stores offer our customers an improved
shopping experience and enable us to make better use of
space and deploy more effective merchandising.
Read more about our strategy on pages 16 and 17
Optimising our
store estate
14
new store openings
13
store closures
34
refits
Building on our core strengths
Our core strengths and competitive advantage create a compelling proposition
capable of delivering long-term value for all stakeholders.
Colleagues
• Approximately 4,000 colleagues who are
key to the success of our business.
• Loyal and dedicated.
• Highly engaged.
Brand value
• Exclusive own brands developed in house.
• Clear purpose, focused on inspiring reading,
learning, creativity and play.
Suppliers
• Over 400 supplier relationships.
• Located in the UK, Europe and Asia.
• Close collaboration.
Infrastructure
• Store network.
• Online store.
• Centrally located Support and
Distribution Centres.
• IT infrastructure – investing to ensure scale,
efficiency and security.
Key inputs
Read more about
our colleagues
on pages 32 to 34
Our proposition and how we create value
Evolving and growing our business
to make it better, not just bigger
Our competitive advantage
Affordable
Customer focused
Family friendly
Convenient
Multi-channel
Empowering
12
own brands
8
sub brands
c.10,000
new product lines
introduced in FY23
Design and innovate
• Identify and bring desirable and
on-trend products to the UK market.
• Unique own brand products developed
by in-house design studio in conjunction
with suppliers.
• New product lines launched
throughout the year.
• Five clear product zones: Books; Arts
& Crafts; Toys & Games; Stationery;
and Seasonal.
Enhance our online proposition
Develop our brand
and increase customer
engagement
Our business model
TheWorks.co.uk plc Annual Report and Accounts 202314
Our proposition and how we create value
Evolving and growing our business
to make it better, not just bigger
Read more about our strategy on pages 16 and 17
Sell to customers through
convenient channels
• Stores across the UK and Ireland.
• Website – 24/7 trading with exclusive
and extended ranges.
• Marketplaces (e.g. Amazon, eBay).
• Click & collect – linking
stores and online.
Source and distribute
• Experienced buying team sources
and curates product ranges, including
popular brands to complement own
brand offer.
• Relationships with over 400 suppliers.
• Work closely with suppliers to ensure
product safety and quality control.
• Warehousing and store distribution
undertaken from 157,000 sq ft facility
in Coleshill, Birmingham.
• Online orders fulfilled by third party
or picked in store.
• Leading customer delivery proposition.
c.400
stock suppliers
157,000
sq ft warehousing and
distribution facility
526
stores
‘Together’ loyalty scheme
increases customer
engagement and provides
valuable customer insights.
Drive operational
improvements
Optimise our store estate
Our people
Employment and a rewarding career
for c.4,000 colleagues.
12th
Best Big Company to Work for
Our customers
Offer affordable, accessible, good quality
products to inspire reading, learning,
creativity and play.
Our suppliers
Indirectly support employment across
our extensive supplier network.
Our community
£266k
fundraising in FY23 for Cancer Research UK, Mind,
SAMH and Inspire. Many other local charities
supported at store level.
Our shareholders
£1.0m
final dividend proposed for the year
ended 30 April 2023.
The value we create
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 15
Our strategic pillars
Enhance our
online proposition
We want to increase awareness of
our website and make it an inspiring
destination for customers by improving
our customer journey and making it
easy to use, inspiring and engaging.
Develop our
brand and increase
customer engagement
Through our brand and customer offer
we want to reach more customers and
improve the external view of The Works.
Optimise our
store estate
Our aim is to create a store environment
that can inspire our customers and
reflects the communities we serve.
Drive operational
improvements
We aspire to improve our ways of
working to become a better and more
modern retailer. We want to ensure
we operate efficiently and in a cost-
effective way.
TheWorks.co.uk plc Annual Report and Accounts 20231616
Our strategy and progress
We are improving and
developing our business
to be better, not just bigger
Since the launch of our ‘better, not just bigger strategy’ we have made good progress in some
areas, however in others we still have work to do (see page 17). The business is well-placed to
make more meaningful progress in FY24.
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 17
Progress to date and priorities for FY24
Progress
• Rolled out our evolved brand to our stores and website to ensure
that the visual representation of The Works accurately reflects
our purpose and the modern, fun and engaging business that
The Works is today.
• Refreshed our product offering to be better aligned with our
purpose, whilst maintaining our commitment to low prices
(see page 9).
• Relaunched our ‘Together’ loyalty scheme.
Priorities for FY24
• Develop and execute a marketing strategy to bring our
purpose and evolved brand to life, particularly through
our social channels.
• Conduct an extensive refresh of our core art & craft, stationery
and kids’ pocket money toys ranges.
Progress
• Opened 14 new stores, closed 13 stores, relocated 3 others
and refitted 34 existing stores (see page 10).
• Continued to improve the store experience for customers by
enhancing layouts, optimising the space utilisation across
categories, and introducing clearer navigation and signage,
supported by the evolved brand.
Priorities for FY24
• Increase in-store sales densities.
• Continue improving the existing estate with refits and relocations.
• Embed new labour structure.
Progress
• Restructured distribution centre management team
and strengthened merchandise planning function.
• Implemented new stock allocation system (see page 20).
• Introduced new automated packing machine and robotics in
third-party operated online fulfilment operation (see page 10).
• Launched the pilot of our new EPOS software in stores.
• Launched a planned review of business operating model
(see page 10).
Priorities for FY24
• Begin implementation of changes to processes and IT systems
identified by business operating model review.
Progress
• Restructured management of the online operation.
• Undertaken a series of website usability studies to inform areas
of opportunity to improve the site, as well as introducing new
tools to support performance analysis and provide insights into
how best to improve the customer experience (see page 10).
Priorities for FY24
• Enhance the customer experience including enabling customers
to order from our website whilst in store (see page 10).
Link to KPIs Link to risks
A 1
8
B 2
10
43
11
6 7
Link to KPIs Link to risks
A 1
7
B 2
8
4
10
3
9
5
11
6
Link to KPIs Link to KPIsLink to risks Link to risks
A C1 1B D2 210 107 711 11C E
Enhance our online proposition
Drive operational improvements
Develop our brand and increase
customer engagement
Optimise our store estate
Our KPIs are set out on page 18
Our principal risks are set out on pages 49 to 53
TheWorks.co.uk plc Annual Report and Accounts 202318
How we measure performance
We use five KPIs to monitor
performance and strategic progress
These KPIs, together with our performance against them, are detailed below. All of the non-GAAP
financial measures detailed can be calculated from the GAAP measures included in the financial
statements, as outlined in the notes to the financial statements. Commentary on these KPIs is
included in the Financial review.
A
Revenue growth
+5.8%
FY
£264.6m
FY
£180.7m
FY
£280.1m
Definition
The percentage year-on-year change in Group
total sales which excludes VAT and is stated
after deducting the cost of loyalty points. A
reconciliation between total sales and statutory
revenue is included on page 21.
D
Pre-IFRS 16 Adjusted EBITDA
£9.0m
FY
£16.6m
FY
£4.3m
FY
£9.0m
Definition
Represents profit for the period before IFRS 16,
net finance costs, taxation, depreciation and
amortisation, loss on disposals of property,
plant and equipment and Adjusting items.
C
Adjusted profit before tax
£10.1m
Definition
Represents profit for the period before taxation
and adjusting items. Adjusting items are gains
or losses incurred in a period which are not
expected to be recurring (Adjusting items).
Restatement of prior years
FY22 and FY21 figures are restated. Information
regarding the restatements is included in note 14
of the financial statements.
FY
FY
FY
£16.5m
£3.4m
£10.1m
E
Adjusted diluted earnings per share
16.4p
FY
FY
FY
25.6p
4.1p
16.4p
Definition
Calculated by dividing the adjusted profit for the
period attributable to ordinary shareholders by
the weighted average number of ordinary shares
in issue during the period (including dilutive share
options). Adjusted profit is before the impact of
Adjusting items.
Restatement of prior years
FY22 and FY21 figures are restated. Information
regarding the restatements is included in note 14
of the financial statements.
Definition
The FY23 like-for-like (LFL) sales increase has
been calculated with reference to the FY22
comparative sales figures. In FY22, two-year
comparatives were used because the use of a
normal one-year LFL comparative was prevented
by the various disruptions to store trading
brought about by COVID-19 restrictions in the
FY21 comparative period. LFL sales are defined
by the Group as the year-on-year growth in
gross sales from stores which have been trading
for a full financial year prior to the current year
and have been trading throughout the current
financial period being reported on, and from the
Company’s online store, calculated on a calendar
week basis.
B
Like-for-like sales growth
+4.2%
+10.5%
+4.2%
FY
FY
FY
Online +120.9%Stores +6.0%
A resilient performance
The Pre IFRS16 Adjusted EBITDA for the Period was £9.0m (FY22: £16.6m).
The FY23 Adjusted PBT is greater than the EBITDA because of the
effect of IFRS 16. We would normally expect the Adjusted PBT to
be less than the EBITDA. Please refer to note 5 of the financial
statements for further information.
The FY23 results have been published later than originally intended.
The delay was due to significant additional work being undertaken,
principally in relation to asset impairment charges and related
impacts on IFRS 16 calculations. As well as affecting the FY23 result,
this also entailed the restatement of comparative figures for prior
periods. Whilst the delay has been frustrating, we highlight that
the issues in question have not affected the Board’s assessment
of the underlying performance of the business (for example,
as represented by the EBITDA) and had no direct cash impact.
Information regarding the restatements is included in note 14 of the
financial statements.
Overview
The result for FY23 was in line with the revised forecast we referred
to in August 2022. During the Period:
• Revenue increased by £15.5m, driven by 7.5% growth in store LFL
sales and sales from new stores exceeding sales forgone from
closed stores (through optimisation of the store estate). Online
sales declined by 15%.
• The product gross margin percentage declined due to the
planned increase in the mix of sales of lower margin books,
and increased costs of stock, principally freight. These negative
effects were partly offset by supplier rebates which were
collected (£0.6m of which related to periods prior to FY23).
• Costs increased due to:
• The cessation of COVID-19 business rates relief.
• The increase in the National Living Wage by 6.6% in April 2022.
• Electricity price inflation.
• There was a net increase in EBITDA of approximately £0.6m due
to the opening and closure of stores during the year. Although
the number of stores trading had only increased by one at the
year end, we benefitted from being able to time the openings
and closures such that we had a net six more stores trading
during the peak Christmas period. In addition, the average sales
levels from the new stores were greater than for the stores which
were closed.
• The Group experienced a cyber security incident in March 2022.
We believe the residual effects of this adversely affected
FY23’s result due to the Group taking a measured and cautious
approach to reinstating systems whilst simultaneously accelerating
the implementation of strengthened IT security. Due to the
impossibility of accurately estimating the financial effect, it
has been absorbed within the EBITDA result and not identified
separately as an Adjusting item.
The FY23 accounting Period relates to the 52 weeks ended 30 April
2023 (also referred to as the period) and the comparative FY22
accounting period relates to the 52 weeks ended 1 May 2022.
The Group refers to alternative performance measures (APMs) as it
believes these provide management and other stakeholders with
additional information which may be helpful. These measures are
routinely used by management in running the business, and include
pre-IFRS 16 Adjusted EBITDA (EBITDA) and like-for-like (LFL) sales.
Accordingly, reference is made to these measures in this report.
The Group made a profit before tax of £5.0m (restated FY22:
£14.2m). This result includes a £5.1m impairment charge, most of
which relates to the notional right of use asset created as a result
of following the requirements of the IFRS 16 accounting standard.
As in previous periods, impairments have been treated as Adjusting
items. The Adjusted profit before tax excluding impairment charges
was £10.1m (restated FY22: £16.5m).
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 19
Financial review
Overview continued
EBITDA bridge between FY22 and FY23 m
FY EBITDA .
LFL stores and online
Increased gross margin due to increase in sales in
LFL stores/decline online .
Lower gross product margin % (including impact of
higher freight costs) (.)
Cessation of COVID- business rates relief (LFL
stores) (.)
Increased payroll costs due to National Living Wage
inflation (.)
Energy price inflation (.)
Other (.)
(.)
Non – LFL Stores
Profit impact; including, timing benefit of trading
more stores through peak .
Cessation of COVID- business rates relief (.)
FY EBITDA .
We noted in the FY22 Annual Report that the net cash balance on
1 May 2022 was higher than normal as it included the benefit of
increased creditor balances. These mostly related to the continuing
effect of events connected with COVID-19 (such as rent deferrals)
and, as expected, unwound finally during FY23. Therefore, although
the FY23 net cash balance of £10.2m is lower than the prior year’s
£16.3m, it represents a more typical Period-end level, and has
grown progressively compared with the £0.8m net cash balance at
the end of FY21 and £7.1m of net debt at the end of FY20.
It has been reassuring, particularly during the periods of heightened
uncertainty in recent years, to have the benefit of a large (£30.0m
at the Period end) revolving credit bank facility, however, there is
a cost associated with maintaining such a facility. Our forecasts
indicate that even under a sensitised downside scenario, it is
unlikely that we would ever use the entire facility. With this in mind,
we have recently reduced the size of the facility to £20.0m, which
will save approximately £0.15m in annual facility maintenance
fees and, at the same time, extended the term of the facility
so that it terminates at the end of November 2026 rather than
November 2025.
The Board’ will be recommending to shareholders at the AGM a
final dividend of 1.6 pence per share in respect of FY23. Updated
information regarding the Group’s policy on dividends and capital
distributions is included at the end of this report.
Due to rounding, numbers presented throughout this document
may not add up precisely to the totals provided and percentages
may not precisely reflect the absolute figures.
Revenue analysis
Total revenue increased by 5.8% to £280.1 million (FY22: £264.6 million).
Total gross sales (1) increased by 6.1% compared to FY22. Two thirds
of the total sales increase was from LFL sales (2) which grew by
4.2%, with positive growth in stores but a decline in online sales. The
remaining sales growth was from the continued optimisation of the
store estate (see table and narrative on the following page).
The quarterly LFL sales summary in the table below and the
narrative which follows shows how store LFLs strengthened
progressively during FY23 but that we were unable to achieve
positive sales growth online, due to a combination of internal
and external factors.
LFL sales growth Stores Online Total
Q1 .% (.%) (.%)
Q2 .% (.%) .%
H1 .% (.%) .%
Q3 .% (.%) .%
Q4 .% (.%) .%
H2 .% (.%) .%
Full year .% (.%) .%
Definitions of gross sales and LFL are included on the following page.
Q1 highlights
• Sales in Q1 FY23 were constrained, particularly online, a
significant cause of which was the residual impact of the
March 2022 cyber security incident.
• We also annualised against strong FY22 comparatives, which
were the result of pent up demand following the end of the final
COVID-19 lockdown in April 2021. The strong demand in early FY22
was also driven by a larger than usual post lockdown sale, which
included stock that would normally have been sold in January/
February 2021, and strong sales of ‘fidget frenzy’ toys.
Financial review continued
TheWorks.co.uk plc Annual Report and Accounts 202320
Improving our stock allocation process
In September 2022 we introduced a new forecasting and
stock allocation system to improve our stock turn and ensure
that we offer customers the best product availability. By
analysing individual product and store sale combinations the
system enables us to forecast effectively to ensure we make
the right stock available to the right store locations.
The new system is already having a positive impact and
has enabled us to increase in store availability of our
core products.
Read more about our strategy on pages 16 and 17
Driving operational
improvements
Q2 highlights
• The Works had a good summer 2022. The newly refreshed
outdoor play range performed well and the ‘Back to School’
season sales were very good.
• The LFL sales growth rate softened slightly in the latter part of Q2
due to losing a full trading day for the additional bank holiday in
late September, as well as the comparatives in September and
October 2021 being strong, when we believe Christmas shopping
was brought forward due to consumers’ concern about possible
further lockdowns affecting Christmas shopping in 2021.
Q3 highlights
• In contrast, Q3 comparatives with the prior year weakened
due to concerns in late 2021 about the potential effects of the
emerging Omicron COVID-19 variant, supply chain disruption
and the FY22 January sale being low key.
• Sales strengthened sharply just before Christmas, suggesting
that consumers shopped much later than in 2021. We delivered
strong store sales over Christmas, which continued in the
January sale.
• Online sales were disappointing, impacted by reduced consumer
confidence in fulfilment (due to postal strikes in late 2022) as well
as the normalisation of shopping behaviour away from online,
as seen across the retail industry.
Q4 highlights
• Trading was steady following the January sale, with store sales
continuing to grow positively, and online sales continuing to be in
decline. The rate of overall sales growth increased slightly during
this quarter as the prior year comparatives weakened due to the
aftermath of the March 2022 cyber security incident.
The table below shows the reconciliation of LFL sales used for
year-on-year comparisons, with statutory revenue.
FY FY Variance Variance
m m m %
Total LFL sales
for Period
2 9 7. 0 285.0 12.0 4.2%
Sales from new/
closed stores
(optimisation of
store estate) 19.6 13.4 6.3 46.9%
Total gross sales
316.6 298.4 18.3 6.1%
VAT (35.1) (33.5) (1.7) 5.0%
Loyalty scheme costs
- points redeemed by
customers (1.4) (0.3) (1.1) 404.6%
Revenue (per
statutory accounts) 280.1 264.6 15.5 5.8%
Loyalty points as
% sales (0.5%) (0.1%)
VAT as % of sales (11.1%) (11.2%)
1 ‘Total gross sales’ include VAT and are stated prior to deducting the
cost of loyalty points which are adjusted out of the sales figure in the
calculation of statutory revenue.
2 LFL sales growth has been calculated with reference to the FY22
comparative sales figures. In FY22’s Annual Report, two-year
comparatives were used because the use of a normal one-year LFL
comparative was prevented by the various disruptions to store trading
brought about by COVID-19 restrictions in the FY21 comparative period.
The year on year increase in the cost of loyalty points shown in the
table above is larger than normal because the FY22 comparative
was unusually low (as reported last year) due to the write back of
expired points previously issued and accounted for. The underlying
cost of loyalty points redeemed by customers during the year
increased in the way we expected, both as a result of the year on
year increase in sales, and due to the additional focus placed by
the business on signing up new members and encouraging existing
members to re-engage with the loyalty scheme.
Store numbers FY FY
Stores at beginning of period
Opened in the period
Closed in the period () ()
Relocated (excluded from opened/
closed above, NIL net effect on store
numbers)
Stores at end of period
The number of stores trading increased by one during the period,
from 525 to 526. Despite this small change between the beginning
and end of year numbers, the additional sales from new/closed
stores in the table above shows a notable increase compared
with the prior year. This was principally because we benefitted
from being able to time the openings and closures such that
a net six more stores were trading during the peak Christmas
period, and secondarily because the new stores individually also
generated more sales than the stores that were closed. The new
stores are trading with sales levels at or above their financial
appraisal targets.
Product gross margin and gross profit
FY
FY
(Restated
)
% of % of Variance Variance
m revenue m revenue m %
Revenue . . . .
Less: cost of
goods sold . . . .
Product gross
margin . . . . . (.)
Other costs
included in
statutory cost
of sales
Store payroll . . . . (.) (.)
Store property
and establishment
costs . . . . (.) (.)
Store PoS and
transaction fees . . . . (.) (.)
Store
depreciation . . . . (.) (.)
Online variable
costs . . . . . .
Adjusting items
-impairment
charges . . . . (.) (.)
IFRS impact (.) (.) (.) (.) . (.)
Total non-product
related cost of sales
. . . . (.) (.)
Gross profit per
financial
statements . . . . (.) (.)
1 See note 14 to the financial statements.
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 21
Product gross margin and gross profit continued
The product gross margin rate decreased by 170bps to 57.6%
(FY22: 59.3%) The most significant factors in the year on year
movement were:
• An increase in the sales mix of front-list, lower margin books
(as has been described previously) which reduced the margin
percentage by approximately 100bps. We believe this generated
incremental cash margin due to selling higher volumes of items
which were higher priced.
• Higher freight costs, which remained high on a spot basis during
H1 before falling significantly in H2. The interval between incurring
the freight cost and selling the goods is such that the higher
rates continued to affect FY23’s margin for some time after
the spot rates had fallen; this timing factor makes it difficult
to estimate the precise impact on the margin rate, our best
estimate of which is approximately 100bps.
• There was a small year on year margin rate increase due to other
factors including stock provision movements, supplier rebates/
retrospective discounts and pricing changes. Towards the end
of FY23, prices of some lines were increased to reflect the rise in
inflation generally experienced during the year, to ensure that
the business achieves an acceptable balance between offering
value to customers and a reasonable margin.
Store payroll costs increased by £3.3m.
• The annual rise in the National Living Wage (NLW) accounted
for £2.1m or 64% of the year-on-year increase, including the
additional cost of maintaining sensible differentials between
pay grades for colleagues paid more than the NLW, in light of the
increased base wage level.
• The optimisation of the store estate, entailing the opening of 14
stores, the closure of 13, and the relocation of 3 stores, created
an additional £0.7m of store payroll costs. This increase appears
disproportionately high given that only one more store had been
added by the year end; however, the timing of the openings and
closures which benefitted the sales line (i.e. having more stores
trading during the Christmas peak) also incurred corresponding
additional costs.
Store property and establishment costs increased by £8.1m:
• The largest component of the increase was £5.8m of business
rates charges. These costs had been comparatively lower in FY22
due to COVID-19 relief, but payments resumed in full during FY23.
• Electricity costs increased by £1.0m due to inflation.
• Despite a year-on-year reduction in like for like rents, total rent
charges increased by £1.0m:
• The ongoing process of renegotiating and renewing expiring
leases resulted in a reduction of £0.6m in rents in the LFL store
estate, including the release of accruals established in some
situations where the effective date of the decrease was
backdated to a prior period, due to the protracted nature of
the rent negotiations (in these situations, we continue to accrue
for the higher rent level until the reduction is confirmed in writing).
• The timing of opening and closing stores referred to above,
plus the full year cost of stores opened part way through FY22,
resulted in additional rent costs of £0.7m (i.e. effectively a
‘volume’ related increase).
• During COVID-19 rent negotiations with landlords (for example,
where we were seeking rent concessions in respect of enforced
store closures), concessions were sometimes informally agreed
via a credit note, to be formalised subsequently. A provision is
maintained for credit notes relating to amounts that have not
been recovered after two years (although we still pursue and
expect to recover most of the amount provided for), and this
provision increased by £0.5m during FY23.
• Turnover rents increased by £0.4m due to sales increases in
the 129 stores where the rent is based wholly or partially on a
percentage of turnover. Turnover rent mechanisms typically look
back to earlier periods to calculate the applicable rent and, in
FY22, the look back periods often included periods during FY21
when stores were closed due to COVID-19 restrictions and thus
created a lower turnover. There have also been sales increases
in some stores (overall store LFL sales growth was 4.2%) which
have triggered the payment of, or increased, turnover rents.
• Service charges increased by £0.3m due to the new/closed
store timing effect described above and service charge
inflation in the existing store estate.
Online variable costs decreased by £0.3m:
• The decrease was due to the year-on-year decrease in sales
and the consequential reduction in marketing, fulfilment,
transaction and other variable costs which were £1.3m lower
than in FY22.
• These savings were partially offset by higher costs at the iForce
fulfilment facility (third party operated) and higher packaging
costs. The efficiency of the operation has been reviewed with
iForce, and changes have been implemented for FY24 which
are expected to reduce the fulfilment cost per unit, including a
reduction in the space allocated in the facility.
Adjusting items and prior year adjustment:
• Adjusting items were £5.1m in FY23, (restated FY22 £2.3m), and
comprised impairment charges. The prior period comparatives
have been restated to reflect the allocation of central overheads
to individual stores, which resulted in a higher impairment charge
being required in respect of FY22 and prior periods. This is
described in note 14 of the financial statements.
• 70% or £3.6m of the £5.1m FY23 impairment charge relates to the
notional “right of use” asset which arises through the operation
of IFRS 16.
• Consistent with the approach the Group has taken previously,
impairment charges (and reversals) are treated as Adjusting items.
As well as being consistent, this is appropriate due to the size of the
total impairment charge, which is more reflective of the broader
UK macroeconomic environment impacting many retail businesses
than of the underlying performance of individual stores.
IFRS 16 impact:
• IFRS 16 has had the effect of significantly increasing the Adjusted
profit before tax in FY23, by £7.0m compared with the non IFRS 16
figure (see note 5 of the financial statements). This £7.0m broadly
comprises £10.7m included within cost of sales per the table
above and £0.4m included within administrative costs, less £4.1m
of IFRS 16 interest charges.
• Due to the restatement of impairment charges in relation to
prior periods there is a significantly greater IFRS 16 impact than
reported in previous years, particularly on Adjusted profit. The
additional impairment charges reduced the net book value of
the IFRS 16 “right of use” asset, as a result of which, the IFRS 16
depreciation charges were reduced. Meanwhile, the actual rents
paid were unaffected, resulting in a greater disparity between
the rents and the IFRS 16 P&L charges. Please refer to note 5 of
the financial statements for a detailed analysis of the impact of
IFRS 16 on the profit before tax.
Financial review continued
TheWorks.co.uk plc Annual Report and Accounts 202322
Distribution costs to stores
FY FY
% of % of Variance Variance
m revenue m revenue m %
Adjusted
distribution costs . . . . (.) (.)
Depreciation . — . — — .
Distribution costs
per statutory
accounts . . . . (.) (.)
The costs of picking stock and delivering it to stores increased
by £1.2m compared with FY22:
• Distribution labour costs increased by £0.5m, due to wage
rate inflation from the increase in the NLW,, and an increase
in the volume of items picked. Approximately half of the cost
increase was due to inflation, and the remainder to the increase
in volumes.
• The costs of delivering pallets from the DC to stores increased by
£0.4m. Higher volumes accounted for £0.15m with the remainder
due to inflation passed on by the pallet delivery company to
which we outsource this task.
• Storage costs of £0.15m were incurred to accommodate
additional stock prior to the Christmas sales peak. This was
a precaution taken to mitigate against the risk of a repetition
of the disruption experienced the prior year.
Administration costs
Administration costs (before depreciation and IFRS 16) decreased
by £0.3m compared with FY22. The largest change was a
£2.3m decrease in bonus costs, as no bonus will be paid in
respect of FY23,
Head office salary and related costs (NI, pension etc.) increased
by £1.3m due to the planned growth in headcount as well as wage
rate inflation. Average salary rates for head office staff (including
management) increased by 3.0%, a significantly lower rate than
the 6.6% increase in the National Living Wage.
There was a net increase of £0.7m in other administration costs,
due principally to IT software licence and maintenance costs,
higher audit fees and stock taking costs.
FY FY
% of % of Variance Variance
m revenue m revenue m %
Pre-IFRS ,
Adjusted
administration
costs . . . . . .
Depreciation . . . . (.) (.)
IFRS 16 impact (.) (.) (.) (.) . .
Administration
costs per
statutory
accounts . . . . (.) (.)
Net financing expense
Net financing costs in the period were £4.4m (FY22: £5.2m), mostly
relating to IFRS 16 notional interest.
Gross cash interest payable was £0.3m, in relation to facility
availability charges (FY22: £0.4m). £0.2m of interest was received
in FY23 (FY22: £Nil).
FY
m
FY
m
Bank interest receivable (.) —
Bank interest payable
(including non-utilisation costs) . .
Other interest payable
(amortisation of facility set-up costs) . .
IFRS notional interest on
lease liabilities . .
Net financing expense . .
Tax
FY
m
FY
(Restated
)
m
Current tax (credit)/expense (.) .
Deferred tax expense/ (credit) . (.)
Total tax expense (.) .
1 See note 14 to the financial statements.
The impairment charges noted above, by reducing the taxable
profits of prior periods, created available brought forward tax
losses, which significantly reduced the effective tax rate and
overall tax charge for FY23. As a result, there was a net tax credit of
£0.3m (restated FY22: £0.3m expense) consisting of a £0.4m current
tax credit and a £0.1m deferred tax charge. The £0.3m overall tax
credit equated to an effective tax rate of (5.3%) (restated FY22: 1.9%).
The average headline corporation tax rate for FY23 was 19.5%, as
the rate changed from 19% to 25% 11 months into the financial year
(FY22: 19.0%).
Deferred tax has been calculated at a rate of 25.0% in both periods.
Earnings per share
The Adjusted basic EPS for the year was 16.5 pence (restated
FY22: 26.0 pence).
The Adjusted diluted EPS was 16.4 pence (restated
FY22: 25.6 pence).
The difference between the Adjusted basic and Adjusted diluted
EPS figures is due to the exclusion from the diluted EPS calculation
of outstanding potentially dilutive share options.
Capital expenditure
FY FY Variance
m m m
New stores and
relocations (net of landlord
contributions to
investment) . . (.)
Store refits, maintenance
and lease renewal costs . . (.)
IT hardware and software . . (.)
Other . . —
Total capital expenditure . . (.)
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 23
Capital expenditure continued
Capital expenditure in the Period was £6.7m (FY22: £3.0m):
• New stores and relocations – the net investment in new stores
and relocations increased by £0.6m compared with FY22. 14
new stores were opened and 3 stores relocated to new units
(FY22: 5 new stores, 6 relocations). In FY23, approximately 50% of
the capital costs of opening the stores was funded by landlord
contributions, a lower proportion than in FY22 when most of the
investment was landlord funded.
• Store refits, maintenance and lease renewal costs – 34 stores
were refitted in FY23 at a cost of £1.4m (FY22: 16 refits costing
£0.4m). Maintenance capex was £1.2m (FY22: £0.4m) and lease
renewal costs were £0.4m (FY22: £0.2m).
• IT hardware and software – the largest item of expenditure was
the cost of configuring and testing the new store EPOS software
prior to its implementation in stores during FY24.
FY24 capex is expected to be approximately £7.0m.
Inventory
Stock levels were £33.4m at the end of FY23 (FY22: 29.4m).
Provisions as %
of gross stock
FY FY Variance Variance FY FY
m m m % % %
Gross stock . . (.) (.)
Unrecognised
shrinkage
provision (.) (.) (.) (.) . .
Obsolescence
provision (.) (.) (.) (.) . .
Total provisions (.) (.) (.) (.) . .
Net stock on hand . . (.) (.)
Stock in transit . . (.) (.)
Stock per
balance sheet . . (.) (.)
Gross stock, £31.3m, increased by 5% compared with FY22. This is a
lower percentage increase than the corresponding year-on-year
increase in the cost of sales (10%) and it is due to an increase in the
average cost per unit of stock (due to mix as well as an increase
in overall cost prices), as the number of units in stock at the Period
end declined year on year.
Stock provisions decreased significantly, due to both volume
and rate effects.
• The provision for unrecognised shrinkage decreased due to
the introduction of full ‘4-wall’ stock counts in all stores between
Christmas and the year end. As a result, the time elapsed
between the date of the most recent store stock count and
the year end, which is one of the key variables affecting the
calculation, was significantly less than in the prior year, resulting
in a lower provision. The other key variable, the underlying
weekly rate of store stock loss, was not materially different
to the rate in FY22.
• There was a further reduction in the stock obsolescence provision
(it was £1.8m at the end of FY21), due to continued improvements
in the management of terminal and slow moving stocks.
Cash flow
The table shows a summarised non-IFRS 16 presentation cash flow;
The net cash outflow for the year was £6.1m (FY22: inflow of £15.5m).
FY FY Variance
m m m
Cash flow pre-working
capital movements 6.7 . (.)
Net movement in
working capital (2.8) . (.)
Net cash from investing
activities (6.5) (.) (.)
Tax paid (1.5) (.) (.)
Interest and
financing costs (0.7) (.) (.)
Dividends (1.5) — (.)
Purchase of
treasury shares (0.5) — (.)
Cash flow before
loan movements (6.7) . (.)
Repayment of
bank borrowings (4.0) (.) .
Drawdown of
bank borrowings 4.0 — .
Exchange rate
movements 0.6 (.) .
Net increase in cash
and cash equivalents (6.1) . (.)
Opening net cash
balance excluding
IAS leases 16.3 .
Closing net cash balance
excluding IAS leases 10.2 .
As noted at the end of FY22, the cash balance at that time
included favourable working capital timing differences which have
unwound in FY23 and resulted in a negative movement in working
capital during the Period. In most years, there would be expected
to be a broadly neutral or slightly positive movement in working
capital. The other main year-on-year variable which affected the
cash flow was the reduction in profit level compared with FY22.
Bank facilities and financial position
The Group ended the Period in a strong financial position, with net
positive bank balances of £10.2m (FY22: £16.3m). At the Period end
the Group had liquidity availability of £40.0m, including its undrawn
£30.0m bank facility.
Since the Period end, the Group has implemented a reduction
in the size of the facility, which was undrawn throughout most of
FY23, to £20.0m, and simultaneously extended its term such that
it now expires on 30 November 2026 rather than 30 November
2025. The reduction in the facility will save approximately £0.15m
in annual cash interest costs, and the smaller facility continues to
provide liquidity availability significantly in excess of the actual
anticipated requirement.
Financial review continued
TheWorks.co.uk plc Annual Report and Accounts 202324
Basis of preparation of the financial statements
The Directors believe that it is appropriate to prepare the financial
statements on a going concern basis. We note for completeness
that, despite the Directors’ confidence in the Group’s financial
position and prospects, note 1 (b) of the financial statements
includes reference to a “material uncertainty“ in relation to the
adoption of the going concern basis of preparation of the financial
statements. The reasons for this are explained in the note.
Capital distributions and FY23 final
dividend recommendation
Following a strong performance in FY22, the Group paid a
final dividend of 2.4 pence per share in respect of that year,
in November 2022. The FY22 Annual Report stated that future
payment levels will be reviewed based on conditions at the time,
with the Group confirming its intention to resume a progressive
dividend policy in due course once conditions stabilise.
The business has an ongoing capex requirement (including
discretionary capex) approximately in line with its non-IFRS 16
depreciation charge and generates strong cash flows. However,
in setting the capital distribution policy, the Board is mindful of the
principal risks that the Group faces, as outlined within this Annual
Report. At present, two of these risks, in relation to macroeconomic
conditions and the execution of the Group’s strategy, are at
increased levels. In these circumstances, we will operate with a
capital structure and capital distribution approach that ensures
the business remains financially resilient, whilst making appropriate
returns to shareholders.
Our objective is to ensure that, under normal circumstances,
ordinary dividends (in pence per share) are 2.5x covered by
Adjusted EPS. We do not believe that normal circumstances apply
in the context of setting the FY23 dividend, as outlined below.
FY23 dividend
As noted previously in the report, the Board hopes that FY23’s
EBITDA was a low point and that it will increase progressively in
future. During the period in which the business works to rebuild
its levels of profit, a compromise is sought, between maintaining
a reasonable dividend for shareholders, whilst ensuring that the
Group continues to maintain its cash reserves.
We believe that in FY23, the effects of:
• impairment charges (including the effect of prior year
adjustments on earlier periods);
• IFRS 16; and
• an unusually low tax charge,
have resulted in an Adjusted EPS which is inconsistent with our
perception of the underlying profitability as represented by the
Adjusted pre IFRS 16 EBITDA. Using EBITDA as an alternative
reference point for illustration, if the FY23 dividend was set by pro
rating using the ratio of the FY23 EBITDA (£9.0m) to the FY22 EBITDA
(£16.6m), it would be 1.3 pence per share.
Taking into account the foregoing and, in seeking to achieve a
reasonable compromise between returns to shareholders and
prudence, the Board will propose at the forthcoming AGM a final
dividend for FY23 of 1.6 pence per share (amounting to a £1.0m
total payment).
Although this is a smaller dividend than was paid in relation to
FY22, we believe that it is in keeping with FY23’s performance (for
example, the EBITDA did not meet the threshold for payment of
executive bonuses). However, it does not reflect a reduction in the
Board’s belief in the future prospects of the business, in which it
remains confident.
Indicative outlook for FY24 dividend
As previously noted, the Company compiled estimate of the
market’s forecast for FY24 is an EBITDA of approximately £10.0m. If
the actual result for FY24 transpires to be in line with this forecast,
it is anticipated that the total dividend for FY24 would grow
approximately in proportion with the EBITDA. Assuming that the
effects of non-cash accounting variables such as IFRS 16, and tax,
are more neutral in FY24, we would expect that the resulting cover
from this approach would be more in line with the 2.5x objective
outlined above.
Other forms of distribution
It is anticipated that distributions will be made solely via ordinary
dividends for the foreseeable future.
In the event that performance improves at a faster rate than
anticipated, and that this is sustained, or that for some other
reason the Group accumulates cash reserves which it deems
surplus to requirements for operation and investment purposes,
and for which it can envisage no requirement to maintain on
the balance sheet, other forms of distribution will be considered,
such as share buy backs.
Decisions as to the quantum and frequency of such
alternative distributions would be made at the time, in light of
the specific circumstances.
Share buybacks for the purposes of share schemes
To avoid dilution of existing shareholder interests, the Board’s
intention is for the Group to purchase shares in the market for
re-issue under employee share schemes.
Steve Alldridge
Chief Financial Officer
30 August 2023
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 25
Our stakeholders
To succeed it is essential
that we engage with
our stakeholders
Our stakeholders and how
we engage with them are
detailed on this and the
adjacent page. To succeed
it is essential that we
understand what matters
to them and consider this
information as part of our
decision-making process.
Our Section 172 Companies
Act statement is set out
over the page.
Our people
Enable us to fulfil our purpose
and deliver our strategy.
Our customers
Buy our products.
Our suppliers
Support our sourcing and
distribution activities.
Communities
Impacted by our activities.
Shareholders
Seek returns on their investment.
What matters to them
• Safe, healthy and good working environment.
• Fair rewards.
• Enjoyable work.
• Being part of a company that has a clear
purpose and values that resonate.
• Engagement and support.
• Development opportunities.
• Wide variety of great products.
• Good value and quality.
• Customer experience.
• Reliable and convenient service.
• Long-term relationships.
• Fair treatment.
• Payment in accordance with
contractual terms.
• Responsible business practices.
• Employment opportunities.
• Positive social impact.
• Sustainable operations.
• Competent execution of strategy.
• Good governance.
• Sustainable and growing returns.
• Regular clear and understandable
communications and transparency.
• ESG performance.
Group-wide engagement
• Interaction through various channels
including the recently launched MyWorks
communications and engagement platform
(see page 32) and regular briefings.
• Annual engagement survey to give us an
independent view of what we are doing
well and where we can improve.
• Local-level engagement including team
meetings, video calls and briefings.
• Active social media engagement.
• ‘Together’ loyalty programme.
• Customer surveys.
• Day-to-day interactions between
customers and store colleagues.
• Regular commercial dialogue.
• In-person meetings with suppliers,
factory visits and attendance at
trade fairs.
• Our quality assurance team works
closely with suppliers to ensure product
safety and quality control.
• ‘Giving Something Back’ programme
(see page 35).
• Local community initiatives (see page 35).
• Easily accessible investor information,
including announcements, results
and presentations, is available on
the Company’s website.
Board-level engagement
• Regular Director store visits and meetings with
senior management and store colleagues.
• Presentation to the Board by the People
Director covering people and talent strategy
and its linkage to the Group’s purpose, culture
and strategy.
• People Director regularly provides updates
at Board, and Nomination and Remuneration
Committee meetings.
• Regular Director store visits including
direct engagement with customers.
• Commercial Director, Retail Director
and Head of Brand regularly provide
customer feedback to the Board.
• Commercial Director provides regular
updates to the Board on supplier
matters and relationships.
• The Board and Audit Committee review
the Group’s payment practices.
• In October 2022 the Board visited
our ecommerce logistics supplier
(see page 59).
• Board oversees development of ESG
strategy and monitors progress.
• ESG steering group regularly updates
the Board on relevant ESG matters.
• Board in-depth review of the Group’s
community engagement activities.
• Annual General Meeting.
• The Chair and Committee Chairs are
available to shareholders to discuss specific
matters as they arise.
• CEO and CFO participate in meetings
and calls with investors and analysts
and provide regular Board updates
following such engagement.
Outcomes
• Awarded two-star rating (with three stars
being the highest rating) in the 2022 Best
Companies survey for outstanding levels
of engagement and ranked 12th Best Big
Company to Work for (see pages 32 and 33).
• Monitor emerging trends and
create products that customers
want and need.
• Continued growth in LFL sales.
• Increased loyalty membership.
• Board review of payment practices
ensures that suppliers are treated fairly.
• Promote fair and ethical business
practices through supply chain
management (see page 35).
• Many long-term supplier relationships.
• Increasing collaboration with key publishers.
• Strengthening ESG strategy given growing
importance to stakeholders (see pages
29 to 35).
• £172k raised in partnership with Cancer
Research UK during FY23 (see page 35).
• £94k raised in partnership with Mind, SAMH
and Inspire during FY23 (see page 35).
• Dividend payment, subject to
shareholder approval, and progressive
dividend policy.
• Strengthening ESG strategy given
growing importance to stakeholders.
Read more on pages 32 and 33
Read more on page 9
Read more on page 5
Read more on page 35
Read more on page 3
TheWorks.co.uk plc Annual Report and Accounts 202326
Our people
Enable us to fulfil our purpose
and deliver our strategy.
Our customers
Buy our products.
Our suppliers
Support our sourcing and
distribution activities.
Communities
Impacted by our activities.
Shareholders
Seek returns on their investment.
What matters to them
• Safe, healthy and good working environment.
• Fair rewards.
• Enjoyable work.
• Being part of a company that has a clear
purpose and values that resonate.
• Engagement and support.
• Development opportunities.
• Wide variety of great products.
• Good value and quality.
• Customer experience.
• Reliable and convenient service.
• Long-term relationships.
• Fair treatment.
• Payment in accordance with
contractual terms.
• Responsible business practices.
• Employment opportunities.
• Positive social impact.
• Sustainable operations.
• Competent execution of strategy.
• Good governance.
• Sustainable and growing returns.
• Regular clear and understandable
communications and transparency.
• ESG performance.
Group-wide engagement
• Interaction through various channels
including the recently launched MyWorks
communications and engagement platform
(see page 32) and regular briefings.
• Annual engagement survey to give us an
independent view of what we are doing
well and where we can improve.
• Local-level engagement including team
meetings, video calls and briefings.
• Active social media engagement.
• ‘Together’ loyalty programme.
• Customer surveys.
• Day-to-day interactions between
customers and store colleagues.
• Regular commercial dialogue.
• In-person meetings with suppliers,
factory visits and attendance at
trade fairs.
• Our quality assurance team works
closely with suppliers to ensure product
safety and quality control.
• ‘Giving Something Back’ programme
(see page 35).
• Local community initiatives (see page 35).
• Easily accessible investor information,
including announcements, results
and presentations, is available on
the Company’s website.
Board-level engagement
• Regular Director store visits and meetings with
senior management and store colleagues.
• Presentation to the Board by the People
Director covering people and talent strategy
and its linkage to the Group’s purpose, culture
and strategy.
• People Director regularly provides updates
at Board, and Nomination and Remuneration
Committee meetings.
• Regular Director store visits including
direct engagement with customers.
• Commercial Director, Retail Director
and Head of Brand regularly provide
customer feedback to the Board.
• Commercial Director provides regular
updates to the Board on supplier
matters and relationships.
• The Board and Audit Committee review
the Group’s payment practices.
• In October 2022 the Board visited
our ecommerce logistics supplier
(see page 59).
• Board oversees development of ESG
strategy and monitors progress.
• ESG steering group regularly updates
the Board on relevant ESG matters.
• Board in-depth review of the Group’s
community engagement activities.
• Annual General Meeting.
• The Chair and Committee Chairs are
available to shareholders to discuss specific
matters as they arise.
• CEO and CFO participate in meetings
and calls with investors and analysts
and provide regular Board updates
following such engagement.
Outcomes
• Awarded two-star rating (with three stars
being the highest rating) in the 2022 Best
Companies survey for outstanding levels
of engagement and ranked 12th Best Big
Company to Work for (see pages 32 and 33).
• Monitor emerging trends and
create products that customers
want and need.
• Continued growth in LFL sales.
• Increased loyalty membership.
• Board review of payment practices
ensures that suppliers are treated fairly.
• Promote fair and ethical business
practices through supply chain
management (see page 35).
• Many long-term supplier relationships.
• Increasing collaboration with key publishers.
• Strengthening ESG strategy given growing
importance to stakeholders (see pages
29 to 35).
• £172k raised in partnership with Cancer
Research UK during FY23 (see page 35).
• £94k raised in partnership with Mind, SAMH
and Inspire during FY23 (see page 35).
• Dividend payment, subject to
shareholder approval, and progressive
dividend policy.
• Strengthening ESG strategy given
growing importance to stakeholders.
Read more on pages 32 and 33
Read more on page 9
Read more on page 5
Read more on page 35
Read more on page 3
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 27
Section 172 statement
This disclosure forms the Directors’ statement under Section 414CZA
of the Companies Act 2006.
The Directors have had regard to the matters set out in
Section 172(1) (a) to (f) of the Companies Act 2006 in their
decision-making processes.
Both individually and collectively, the Directors believe that they
have acted in the way they consider, in good faith, would be most
likely to promote the success of the Company for the benefit of
its members as a whole (having regard to the stakeholders and
matters set out in Section 172(1)(a) to (f) of the Companies Act 2006)
in all decisions taken by the Board during the 52-week period
ended 30 April 2023 (FY23).
Under Section 172(1) of the Companies Act 2006, a director of a
company must act in the way he or she considers, in good faith,
would be most likely to promote the success of the Company
for the benefit of its members as a whole, and in doing so have
regard (amongst other matters) to:
• The likely consequence of any decision in the long term.
• The interests of the Company’s employees.
• The need to foster the Company’s business relationships
with suppliers, customers and others.
• The impact of the Company’s operations on the community
and the environment.
• The desirability of the Company maintaining a reputation
for high standards of business conduct.
• The need to act fairly as between members of the Company.
Promoting the Company’s
long-term success
In April 2023 the Board approved the carbon reduction targets
detailed on page 46.
As part of the approval process the Board considered the
Group’s role and the responsibility it has to contribute to
a sustainable economy, which in the long term will benefit
all stakeholders including employees, customers and the
communities within which it operates. The Board also took
into account shareholders’ increasing focus on ESG matters
when making investment decisions and growing demand
from customers to engage with businesses that operate in
a responsible way.
The Board noted that achievement of the Scope 3 target
was dependent on the Group’s supply chain and suppliers’
participation in a sustainability assessment process. While
recognising that this process may not be welcomed by all
suppliers, the Board considered that it was in the best
long-term interests of the Group’s other stakeholders and
that the environmental benefits outweighed any short-term
commercial inconvenience.
Approval of carbon
net-zero targets
TheWorks.co.uk plc Annual Report and Accounts 202328
Creating a sustainable economy and transitioning to
net zero is the challenge of our times. The responsibility
rests collectively with governments, businesses and the
general public. As a retail business we recognise our role
in this effort, as well as our responsibility to be socially
conscious and maintain high standards of governance.
ESG review
We are committed to ‘Doing Business Better’. We are making
positive and sustainable changes for our people, our communities
and our planet that will enable us to continue inspiring reading,
learning, creativity and play – for generations to come.
Our approach
We are continuing to evolve our overall ESG strategy which is
focused on the areas outlined in the graphic below.
In 2021 we launched our ESG steering group. Its role is to ensure
we operate responsibly in line with our purpose and values, and
to monitor our ESG agenda. It is chaired by our CEO, includes
members of our Operations Board, and meets on a quarterly basis.
The ESG steering group and Operations Board provide regular
updates to the Board on the development and implementation
of the Group’s sustainability strategy.
In 2023 we hired a full-time Sustainability Manager and launched
our ESG ‘action groups’ - cross-functional groups dedicated to the
implementation and monitoring of work across our ESG strategy.
In evolving our ESG strategy we are building on well-established
and effective processes that underpin our social and governance
responsibilities and obligations. As required we engage specialist
third-party consultants to support our work in these key areas.
In relation to the development of our environmental strategy,
including building roadmaps and setting targets to achieve
net zero, and to ensure we adhere to all relevant reporting
requirements including TCFD and SECR (see pages 36 to 48), we are
continuing to work with a specialist third-party ESG consultancy.
Our ESG pillars
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 29
Governance
• Operating responsibly
• Supply chain management
Read more on page 35
Environment
• Carbon emissions
• Products and packaging
• Waste and recycling
Read more on pages 30 to 31
Social
• Our people
• Health, safety and wellbeing
• Diversity and inclusion
• Giving something back
Read more on pages 32 to 34
ESG review continued
Environment
Reducing our
environmental impact
We care about our impact on the planet and we are committed to
reducing our carbon footprint, minimising waste, and sourcing more
environmentally friendly materials and products where possible.
Our targets and ambitions
During the year we set the carbon emission reduction targets
detailed below. Our Scope 1 and Scope 2 targets, together with our
Scope 3 ambition, align with the British Retail Consortium’s climate
action roadmap. In developing these targets we completed our
first Scope 1, 2 and 3 carbon balance sheet using predominantly a
spend-based approach. Over the next few years we will focus on
moving towards a supplier-based approach.
1 We aspire to achieve our net-zero targets through a 90% absolute
reduction in our emissions and by offsetting the remaining 10%. Our
targets have been established using a market-based methodology and
our FY22 carbon emissions performance is the baseline against which we
will measure our absolute reductions.
2 With an ambition to achieve net zero by 2040.
In addition to our carbon net-zero targets, we have set longer-term
ambitions (see adjacent panel) to reduce the impact our products,
packaging and waste have on the environment.
Longer-term ambitions
• Minimise our packaging, increase the use
of recycled materials in our packaging and
products, and switch to more environmentally
friendly product materials and packaging
where possible.
• Ensure that 100% of paper in our books, and
arts and crafts ranges are Forest Stewardship
Council (FSC) certified.
• Offer take-back schemes on our key product
ranges, such as books, toys and games, to help
our customers minimise their waste and extend
the life of our products.
• Offer recycling services for our products
and packaging which are not accepted
by household recycling facilities.
To assess and monitor the delivery of our longer-term ambitions
we set annual targets. Our FY24 targets are detailed on the
following page.
Carbon net-zero targets
1
Scope 1 –
Net zero by
2035
Scope 2 –
Net zero by
2030
Scope 3 –
Net zero by
2045
2
TheWorks.co.uk plc Annual Report and Accounts 202330
Carbon emission reduction performance
We have been calculating our Scope 1 and 2 carbon emissions,
in line with the Streamlined Energy and Carbon Reporting (SECR)
initiative, since 2019. During FY23, for the first time, we calculated
our FY22 Scope 3 carbon emissions (see page 46).
Scope 1 and 2
Our carbon emissions across Scope 1, 2 and Scope 3 (grey
fleet) decreased by 3.6%. The majority of this decrease resulted
from an improved emissions factor as a result of the continued
decarbonisation of the UK grid. Scope 1 emissions decreased
slightly due to an improvement in our data collection, resulting in
some company car emissions transferring from Scope 1 to Scope
3 (grey fleet). This transference also explains why our Scope 3
emissions have increased slightly.
Our carbon emission performance during FY23 is detailed
on page 46.
During the year we have continued to implement changes to
improve our energy efficiency. In particular, we have continued to
install LED lighting in our stores and, as at year end, 67% of our store
estate now operates with LED lighting. We also began undertaking
Energy Savings Opportunity Scheme site surveys to identify
energy efficiency opportunities. The findings of these surveys
have informed our Scope 1 and 2 net-zero roadmaps.
In the coming year we will:
• Continue to roll out LED lighting across our store estate.
• Establish a new and remodelled store energy efficiency policy.
• Develop an energy efficiency behaviour change programme
for our colleagues across stores, our Distribution Centre and
our Support Centre.
• Engage with our landlords to identify and implement energy
efficiency opportunities across our store estate.
Scope 3
To support the delivery of our Scope 3 net-zero target, in
the coming year all our suppliers will be asked to complete a
sustainability self-assessment. As part of this assessment they
will be asked to provide details of the steps they are taking to
reduce their environmental footprint and information about the
targets they have set to measure and monitor progress. This aligns
with the Supplier Engagement Scope 3 approach adopted by
many retailers.
Products and packaging
We are committed to reducing our product packaging and we are
already implementing changes that will help us achieve our longer-
term ambitions detailed above. As we refresh our product lines we
will also introduce more environmentally friendly products.
We are already making good progress and during the year we:
• Removed the shrink wrap on our own brand kids’ jigsaw puzzles.
• Removed the plastic cover on the majority of our diaries
and calendars.
• Removed the swing tag on our Christmas gift bags and replaced
with a small price label instead.
• Reworked the packaging on our Christmas gift tags, bags
and roll wrap to reduce the amount of packaging required.
• Reworked the packaging on our kids’ arts and crafts range
to reduce the amount of packaging required.
• Continued to ensure no blister packs are used in our craft ranges.
• Added a QR code to our Prima range box sets which give
customers ideas on how to upcycle their packaging.
We are also moving away from plastic packaging, and switching
to paper alternatives where possible. All our Christmas ribbons
are now packaged in paper backing card instead of plastic and
our Christmas gift tags are now packaged in new open window
paper sleeve packaging, replacing the previously used polybags.
Our novelty squidgy toys (balls) are now packaged in plastic-free
boxes and we have introduced paper packaging across all of our
stationery and outdoor toy ranges.
We are increasing the amount of recycled content in our product
ranges and packaging. All yarn in our Prima range is now made
from 100% recycled materials and our best-selling ‘Create Your Own
Christmas’ bag and stockings are now made from 100% recycled
bottles. Where polybags and other forms of plastic packaging are
still required across our craft, paper, stationery, Christmas, Easter,
toys and PlayWorks ranges, they are predominantly made from 30%
recycled content.
We are switching to FSC-certified paper packaging across all of
our product ranges where possible, with many ranges now at 100%
FSC certified. We are also sourcing strategically to increase the
amount of responsibly sourced paper in our books, with four of our
main suppliers using between 92-100% FSC-certified or PREPS 3*
paper in their manufacturing processes. 100% of the wooden SKUs
in our Christmas craft ranges are now FSC certified.
FY24 product and packaging targets
In the coming year we will:
• Remove all glitter from our Christmas cards.
• Remove the plastic shrink wrap from our own brand Christmas
wrapping paper and replace with a paper alternative.
• Ensure that all our wooden toys are manufactured with
traceable timber.
• Continue to reduce packaging size and increase its recycled
content, with the goal of ensuring the packaging in our own
brand craft ranges and our Prima range is 100% recycled content.
• Increase the amount of books that are FSC certified from 45%
in FY23 to 60% by the end of FY24.
• Introduce a recycled product range within our craft
embellishments collection.
Waste recycling
We are committed to reducing the level of waste our business
generates and to maximising the proportion that is recycled.
Our colleagues share this commitment.
To reduce waste and increase recycled materials we have
continued to educate our teams to maximise the level of waste
that can be recycled, minimise store waste sent to landfill and
reduce the number of waste collections. We operate recycling
facilities at all store locations capable of recycling mixed papers,
cardboard (which constitutes a very large proportion of store
waste) and mixed plastics including HDPE, PET and PP. Our Support
and Distribution Centres in Coleshill, Birmingham, also operate
a recycling programme to ensure all mixed film plastics and
cardboard materials are baled on site and removed for recycling.
FY24 waste recycling targets
In the year ahead we will work to continue to identify further
opportunities to increase our recycling rates across our stores,
Distribution Centre and Support Centre and explore opportunities for
in-store customer product takeback/donation or recycling schemes.
In particular we will:
• Provide educational resources to our store, Distribution Centre
and Support Centre colleagues to help maximise recycling and
reduce contamination.
• Place additional recycling bins in back of house areas and
behind tills to increase our recycling rates.
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 31
ESG review continued
People
At the end of FY23 we employed 3,968 permanent colleagues.
During our 2022 Christmas peak trading period we took on nearly
500 temporary seasonal colleagues and we are delighted that
we have been able to make over 50% of our temporary colleagues
permanent members of our team.
In a challenging and competitive retail environment, our colleagues
are fundamental to the delivery of great customer experience.
They are what makes The Works so special. In order to succeed
we need to attract and retain good people and our culture is
key to that.
Culture and feedback
Our values, together with our purpose, shape our culture. The sense
of family that comes from working in our business and the variety
and fun that a career in retail can provide are what our culture
is based on. We believe more than ever that we are creating
something special that our colleagues (and future colleagues)
want to be part of, despite being in a competitive and ever-
challenging environment. We stand out, for all the right reasons.
We continuously listen to colleagues across the Group and
encourage a two-way conversation around how best we can
improve and support them. The various channels we use are
described on page 33.
In August 2022 we launched a new communications and
engagement platform MyWorks (powered by Reward Gateway).
This interactive platform provides our colleagues with:
• Company news and business updates.
• Information on Company benefits.
• Updates about new charitable initiatives.
• Access to discounts and savings from hundreds of retailers
and services.
• Access to resources on physical, mental and financial wellbeing
through our MyWellbeing Hub.
Making a positive
social contribution
Our objective is to make a positive contribution to our
people, our customers and the communities where
we operate.
Social
Our values
Being can-do means focusing on what
matters and getting it done. Whatever
the situation, we rise to it because of the
can-do spirit and resilience we all share.
We care about each other as one team.
We care about our customers and
communities, our products and every penny
we spend. Caring about the things we do is
at the heart of our work ethic.
Crafty: for us, it’s about our ability to be
creative and agile; we are able to adapt
to change and be smart about what we
do, with the resources we have. It’s what
makes us unique.
TheWorks.co.uk plc Annual Report and Accounts 202332
c.4,000
colleagues
On an annual basis we invite our colleagues to participate in the
Best Companies ‘Make a Difference’ engagement survey. This
well-recognised third-party survey covers a number of areas
including Leadership, My Manager, Personal Growth, Wellbeing,
Fair Deal and Giving Something Back. Colleagues also have the
opportunity to leave open comments on what is great about
working at The Works and what could be better. 76% of our team
completed the 2022 full survey and we were awarded a two-star
rating (with three stars being the highest rating) in recognition of
outstanding workplace engagement.
The survey provided us with valuable insights about our culture
and the issues that matter to our colleagues. Key findings from
the survey this year included:
• 82% of colleagues feel a strong sense of family in their team
and 81% fed back that people in their team go out of their way
to help them.
• 88% of colleagues believe their team is fun to work with.
• 79% of colleagues say their manager takes an active interest
in their wellbeing and 79% recognise that help is available to
support their mental wellbeing.
• 85% of colleagues said we encourage charitable activities.
To continue the momentum and address areas where
improvements are required we are:
• Launching a Reward & Recognition programme to positively
reinforce our values, celebrate success and provide financial
incentives linked to our purpose and values.
• Evolving our store team structures to reduce levels of hierarchy,
improve flexibility and upskill colleagues. The new structures will
also create opportunities for more responsibility and higher pay.
• Sharing our progress on our environmental and
sustainability activity.
• Continuing to embed our partnership with the Retail Trust and
upskilling colleagues on wellbeing.
Health and safety
The health and safety (H&S) of all our colleagues and everyone who
visits our stores or any of our operations is of paramount importance.
We deploy a number of H&S policies including our main Health and
Safety Policy, and H&S processes are embedded in our day-to-day
operations. As part of their induction, all colleagues participate
in H&S training appropriate to their role and annual refresher H&S
training is mandatory for all employees. Our H&S Manager and
People team liaise with line managers in all parts of the business to
ensure compliance with policies and procedures and ensure that
all colleagues receive appropriate training.
We operate a dedicated H&S Committee which meets on a
quarterly basis. Its members include representatives from all parts
of our operations and our H&S Manager. The overriding objective
of decisions taken at these meetings is to make our stores and
all our operations safe places to work and visit. Material issues
arising from the H&S Committee’s discussions are escalated to
senior management and the Board receives regular reports on
H&S matters.
During FY23 there were no fatalities (FY22: nil) and eight reportable
accidents (FY22: 13). Seven of these accidents occurred in our stores
and one occurred in our Distribution Centre. All accidents were
thoroughly investigated.
We take a proactive approach in relation to all H&S matters and
our aim is to continuously improve our H&S performance. To drive
continuous improvement we operate a web-based portal and
online reporting system which allows all stores to immediately
record accidents, incidents and near misses. This real-time
data and visibility across our entire store estate helps us better
understand risks and identify the most effective mitigation. Our
store managers all use streamlined H&S checklists that focus
on things they need to monitor daily during regular floor walks,
including identifying potential hazards and ensuring fire escape
routes are always kept clear.
Wellbeing
Supporting our colleagues from a wellbeing perspective is a
key part of our people strategy and our ESG commitments. We
recognise the difficulty that financial pressures can have on our
colleagues’ overall wellbeing and this year, in response to the
cost-of-living crisis, we launched Wagestream, an app that offers
a range of financial wellbeing tools, including the ability to draw
down salary through the month as it is earned rather than waiting
until pay day and set up savings accounts. MyWorks, our new
communications and engagement platform (see page 32), also
provides information on physical, mental and financial wellbeing as
well as access to discounts and savings.
We also provide an Employee Assistance Programme for
all colleagues through our partnership with Retail Trust
(www.retailtrust.org.uk), a long-established charity, whose mission
is ‘to create hope, health and happiness’ for everyone in the retail
sector. To date with the support of Retail Trust over 50 of our
senior leaders have participated in training in relation to mental
health and wellbeing management and in the coming year we
are aiming to provide even more line managers with training in this
important area. In January 2023, via our e-learning platform, we
also launched three new Retail Trust mental wellbeing modules:
‘Wellbeing for Everyone’; ‘Supporting Yourself and Others’; and
‘Mental Health & Wellbeing – A Manager’s Toolkit’. To date over
900 colleagues have completed these modules.
To further support colleagues we introduced 50 Wellbeing
Warriors across the business. These colleagues are specifically
trained to support the mental wellbeing of their peers, act as an
impartial, confidential, listening ear and provide unbiased support
to colleagues. In particular, as required, they help colleagues
build confidence to seek advice from professionals and provide
information about how to find relevant specialist support.
Diversity and inclusion (D&I)
We value every one of our colleagues for their skills and experience
and the unique contribution they offer, irrespective of their personal
characteristics. We are committed to creating an inclusive
environment where everyone belongs and can thrive and recognise
the many benefits that diversity of experiences, cultures and
perspectives bring.
During FY23 we partnered with an external D&I consultant to
develop our D&I strategy. Based on the findings of an employee
survey and a review of our existing policies and practices we have
developed a roadmap to create an inclusive workplace across all
levels of our workforce. Our key priorities are to:
• Further improve our understanding of D&I across our business.
• Improve D&I training and enhance awareness.
• Review our internal processes to ensure barriers to inclusion
are removed.
• Ensure everyone at The Works is accountable for their role in
creating an inclusive workplace.
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 33
ESG review continued
Diversity and inclusion (D&I) continued
To help us deliver our D&I strategy and our wellbeing strategy,
we are recruiting a Diversity, Inclusion & Wellbeing Manager.
We are a signatory to the British Retail Consortium Better Jobs
Diversity and Inclusion Charter, which aims to improve D&I across
the retail industry and help drive change, and partake in its surveys
and insights sessions.
Our 2022 Gender Pay Gap Report is available at https://corporate.
theworks.co.uk/who-we-are/corporate-governance/our-policies.
As at 5 April 2022, when measured as a median average, male
colleagues were paid 2.9% more and when measured as a mean
average the hourly rate of pay for male colleagues was 12.1% higher
than female colleagues. This is because we have more men than
women in senior leadership roles, a position we are working to
address through the implementation of our D&I strategy.
The gender diversity profile across the Group as at 30 April 2023
is detailed below.
Male Female
Board
/% /%
Operations Board
/% /%
Direct reports
/.% /.%
Senior leadership
/% /%
Other employees
,/% ,/%
1 The Board (see pages 60 and 61) includes three Non-Executive Directors
and two Executive Directors.
2 Information about the members of the Operations Board,
which includes the two Executive Directors, is available at
https://corporate.theworks.co.uk/who-we-are/our-leadership. As at the
date of this Annual Report the gender diversity profile of the Operations
Board was 6/86% male and 1/14% female.
3 Direct reports to senior management (the Operations Board).
4 Senior leadership includes heads of department or equivalent.
5 Other employees includes all other colleagues who are
permanent employees.
Development and retention
Our colleagues are the heart of our business and we work hard
to retain them and provide development opportunities.
In September 2022 we launched the Can-Do Academy, our new
learning and development system that provides all colleagues with
online learning covering compliance, management and leadership
skills training. The Academy has been very well received and every
colleague across the Group has interacted with the system. Building
on this platform we will continue to expand our accessible tailored
training to support our colleagues’ personal growth and development.
Our retail developmental programme ‘I can be...’ enables colleagues
to discuss their career aspirations with their line manager and train
accordingly, making good on our promise to upskill colleagues
ready for the next step in their career. The programme also helps
us create and maintain a strong talent pipeline.
Social continued
TheWorks.co.uk plc Annual Report and Accounts 202334
Our performance and development framework, which was
launched in June 2022, continues to support our ambition to grow
and develop our own talent and during the year we were pleased
to be able to promote 10% of our colleagues.
Giving something back
Making a difference to society is not only a part of our ESG
responsibilities, but also part of our culture. We are proud to work
with national charity partners, and local causes, to give back in
the communities which we serve.
Following seven years of successful partnership with Cancer Research
UK (CRUK) we have made the decision to partner with a new charity
aligned with our purpose. We are delighted to announce the launch
of our corporate and charity fundraising partnership with the National
Literacy Trust (NLT), an independent charity working with schools
and communities to give disadvantaged children the literacy skills to
succeed in life. We will work closely with the NLT to improve accessibility,
and awareness of the importance, of literacy for all, helping us fulfil our
purpose of inspiring reading, learning, creativity and play.
We continue to partner with Mind, SAMH and Inspire and are
committed to optimising strategic opportunities to make a real
difference by fundraising and supporting campaigns to raise
awareness of the importance of wellbeing.
In the coming year we will launch our first complete, commercial
charity range that will support all of our national partners. We
will also introduce our ‘local causes programme’, supporting
local causes is already very popular in our stores, introducing this
programme will ensure we are providing our colleagues with the
tools to fundraise for causes they are passionate about.
We continue to offer two schemes that enable colleagues to make
monthly charitable donations from their net pay. Through Payroll
Giving in Action colleagues can donate any amount to any charity,
while the Pennies from Heaven scheme enables colleagues to
donate the pennies from their payslips to our charity partners.
FY impact To date impact
National partnership
Cancer Research UK (CRUK) k
.m since
August
National partnership
Mind, SAMH and Inspire k
k since
May
We care about good ethical business practices and are fully
committed to conducting business fairly, ethically and with respect
to fundamental human rights. This includes the prevention of all
forms of slavery, forced labour or servitude, child labour and human
trafficking, both in our business and supply chains. Our Modern
Slavery Statement is available at www.corporate.theworks.co.uk/
who-we-are/corporate-governance/our-policies.
Supply chain management
We have developed an Ethical Trading Code of Conduct (Code
of Conduct) for our partners, manufacturers and suppliers, to
ensure that when our customers buy from us, they can be satisfied
that the goods have been produced without exploitation and in
acceptable and sustainable working conditions.
Our Code of Conduct clearly outlines our social and ethical
requirements, which include but are not limited to: prevention of
child and forced labour, safety standards, health and hygiene,
anti-discrimination and coercion, working hours and wages
and other fundamental human rights.
In order to ensure that our suppliers meet the social and ethical
standards we expect, we implement the following arrangements:
• We require all suppliers to sign our Terms and Conditions of
Purchase which state the supplier has read and understood and
conforms to our Code of Conduct. These Terms and Conditions
of Purchase must be signed before we will place orders.
• We share our supplier manual with our suppliers to educate them
about our operating requirements. We also give clear points of
contact to ensure queries reach the appropriate person and
are dealt with quickly and effectively, with support from relevant
functions including merchandising, technical and buying.
• In partnership with TUV Rheinland, an independent specialist
in social responsibility auditing, we have developed a bespoke
supplier factory audit programme. Incorporated within this
programme are questions covering the prevention of modern
slavery, forced labour and child labour and other fundamental
human rights, which are detailed within our Code of Conduct.
Suppliers are encouraged to declare their business relationships
with individual factories that produce for us, which provides us
with a view of how sustainable our supply chain is. Our audit
programme (which also incorporates a section on supplier
capability and their QA functions) also provides ethical
visibility of suppliers and an understanding of their production
capabilities.
• We also conduct independent product testing as part of
our product surveillance test programme.
If a factory fails to reach an acceptable standard or there is
any evidence of child labour or forced labour as described in
the modern slavery legislation, the factory will be delisted and
all orders will be cancelled.
Operating in
a responsible way
We must maintain high standards of governance and operate
in a responsible way. It is the right thing to do. It is also essential
to maintain our reputation and protect our brand.
Governance
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 35
Task Force on Climate-Related Financial Disclosures (TCFD)
TCFD recommendation BEIS disclosure Page
Governance
a) Describe the Board’s oversight of climate-related
risks and opportunities.
(a) A description of the governance arrangements of the Company
in relation to assessing and managing climate-related risks
and opportunities.
37
b) Describe management’s role in assessing and
managing climate-related risks and opportunities.
37
Strategy
a) Describe the climate-related risks and
opportunities identified over the short,
medium and long term.
(d) A description of:
(i) T he principal climate-related risks and opportunities arising
in connection with the operations of the Company.
(ii) The time periods by reference to which those risks and
opportunities are assessed.
37 to 44
b) Describe the impact of climate-related risks
and opportunities on business, strategy and
financial planning.
(e) A description of the actual and potential impacts of
the principal climate-related risks and opportunities on
the business model and strategy of the Company.
44
c) Describe the resilience of the strategy, taking
into consideration different climate-related
scenarios, including a 2°C or lower scenario.
(f) An analysis of the resilience of the business model and
strategy of the Company, taking into consideration of
different climate-related scenarios.
44 and 45
Risk management
a) Describe the processes for identifying and assessing
climate-related risks.
(b) A description of how the Company identifies, assesses,
and manages climate related risks and opportunities.
45
b) Describe the processes for managing
climate-related risks.
45
c) Describe how processes for identifying, assessing,
and managing climate-related risks are integrated
into overall risk management.
(c) A description of how processes for identifying, assessing,
and managing climate-related risks are integrated into the
overall risk management process in the Company.
45
Metrics and targets
a) Disclose the metrics used to assess
climate-related risks and opportunities in line
with the strategy and risk management process.
(h) The key performance indicators used to assess progress
against targets used to manage climate-related risks and
realise climate-related opportunities and a description of
the calculations on which those key performance indicators
are based.
45 and 46
b) Disclose Scope 1, Scope 2, and, if appropriate,
Scope 3 greenhouse gas (GHG) emissions,
and related risks.
46
c) Describe the targets used to manage
climate-related risks and opportunities and
performance against targets.
(g) A description of the targets used by the Company to
manage climate-related risks and to realise climate-related
opportunities and of performance against those targets.
46
TCFD statement
We have followed the Task Force on Climate-related Financial Disclosures (TCFD) framework and are
committed to providing information about climate-related risks and opportunities that are relevant to
our business.
We are evolving our strategy and governance framework, to take account of these risks and opportunities. We have complied with
the requirements of LR 9.8.6R by including climate-related financial disclosures consistent with all of the TCFD recommendations and
disclosures. In aligning with the TCFD we have also complied with the BEIS mandatory climate-related financial disclosure requirements
under the Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022, details of which can be found below.
TheWorks.co.uk plc Annual Report and Accounts 202336
Overview
Our business activities entail the sourcing, distribution and sale of a
range of books, toys, arts and crafts and stationery products. The
environmental impact of these activities is outlined on pages 47 to
48 and, in the main, relates to product manufacturing, packaging,
waste recycling and energy consumption. We are committed to
reducing the impact our activities have on the environment. While
climate change does not pose a significant direct threat to our
business, we have identified a number of risks and opportunities
that could impact the business over the longer term. During the
year we have assessed the impact of climate-related risks and
opportunities on our strategy and financial planning. To ensure we
mitigate risks and capitalise on opportunities we have embedded
appropriate management processes. This work has been led by our
Sustainability Manager, who joined the Group in January 2023, and
has been supported by a specialist third-party ESG consultancy,
Inspired ESG (INESG).
Governance
Board oversight of climate-related risks and opportunities
The Board has overall responsibility for the Group’s climate-related
risks and opportunities.
The Board is responsible for ensuring that appropriate risk
management processes and controls are in place and has
delegated responsibility for overseeing risk management
processes and controls to the Audit Committee. Collectively,
the Audit Committee and the Board on an annual basis review
the Group’s risk register and the principal risks facing the Group
which, since FY22, has included an ‘Environmental (including
climate change)’ risk. As part of this review process the Audit
Committee and the Board deliberate and discuss the risk register,
allocate ratings for each risk, and review and update the Group’s
register of principal risks and mitigating actions. As part of these
discussions and review processes, the Board considers the threat
associated with climate change, as detailed below, and discusses
and agrees actions to mitigate its impact.
The Board factors climate change considerations into its planning
and decision-making processes. During the year the Board
approved a rollout of LED lighting in stores to improve the Group’s
energy efficiency, and the appointment of a Sustainability
Manager to lead the development of the Group’s sustainability
strategy and support its implementation.
The Board receives regular updates from the ESG steering group
and Operations Board on the development and implementation
of the Group’s sustainability strategy, including on a formal basis
annually. To support the Board in making informed decisions in
relation to the Group’s sustainability strategy, in January 2023 the
Directors participated in a training session facilitated by INESG. The
session, which focused on climate change and net-zero, enabled
the Board to make informed judgements regarding the identification
and assessment of climate-related risks and opportunities
associated with the Group’s operations and footprint. In April 2023,
following an update on the Group’s decarbonisation plan (page 30)
the Board approved net-zero targets which are a component part
of the Group’s overall environmental strategy (see page 30).
Management’s role in assessing and managing
climate-related risks and opportunities
Management of climate-related issues has been embedded
into the Group’s existing governance structure. Please refer to
the governance structure included on page 62 of the Corporate
Governance report. Reporting to the CEO, the Operations Board
is responsible for managing the day-to-day activities of the Group
and implementing the strategy agreed by the Board. The Board
has delegated the management of climate-related risks and
opportunities to the Operations Board, to ensure climate change
is integrated across core functions of the business accordingly.
The ESG steering group supports the Operations Board by ensuring
climate change is integrated into the planning and execution of
the Group’s strategy. The ESG steering group is chaired by the
CEO, and includes two Operations Board members. As noted
above, to support the Operations Board, a Sustainability Manager
was appointed in January 2023, to coordinate the management
of climate-related issues, and to ensure all relevant risks and
opportunities are identified and assessed at least annually.
We are committed to building capacity internally and equipping our
senior management with the appropriate knowledge, to deliver on
our objectives as a business. The Operations Board, ESG steering
group and Sustainability Manager consider and assess the Group’s
climate-related risks and opportunities in an annual climate risk-
management workshop facilitated by INESG. The TCFD guidance on
transition and physical risks and opportunities, and the latest climate
science structures the climate risk-management workshop. The
findings from the workshop inform our climate risk and opportunity
register which will be annually reviewed. The inaugural climate
risk management workshop was held in August 2022 to develop
management’s knowledge and understanding of climate change
and help identify and assess the associated risks and opportunities.
In March 2023 members of the Operations Board also attended
our net-zero strategy workshop. This session provided an overview
of net-zero and our FY22 Carbon Balance Sheet, which forms the
baseline measure of our emissions. The net-zero strategy workshop
has supported the business in developing carbon reduction targets
and a decarbonisation plan, bespoke to our operations and
aligned with how the Company will grow over time. The outcome
of this session was presented to the Board in April 2023, where
the Group’s carbon reduction targets were agreed.
Strategy
The climate-related risks and opportunities identified
over the short, medium and long term
Supported by INESG, we have conducted a detailed climate
scenario analysis to identify and assess the potential effect of
direct physical risks (the physical impact of climate change on our
sites and assets) and transition risks (the impact on our business,
including our supply chain, associated with the global transition
to a low-carbon economy). During FY24 we will undertake further
analysis across our key suppliers and critical supply chain routes to
identify opportunities to improve the measures we are implementing
to mitigate potential climate-related risks within the supply chain.
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 37
Task Force on Climate-Related Financial Disclosures (TCFD) continued
Climate-related risks and opportunities
The climate scenario analysis findings were presented to and
discussed with the Operations Board during the August 2022
climate risk management workshop. Our short term (up to 2025)
assesses the immediate risks and opportunities we may experience
over a three-year period.
Our medium term (2025 - 2035) is consistent with The Works’ net-zero
targets for Scope 2 by 2030 and Scope 1 by 2035.
Our long-term (2035 - 2050) is consistent with the UK Government’s
net-zero pledge by 2050 and the Works’ long-term goal is to be
net-zero across Scopes 1, 2 and 3 by 2045.
Taking into consideration the climate scenario analysis results
along with detail of existing processes and mitigation strategies
across the business, the climate-related risks and opportunities
identified were assessed and classified as ‘Low’, ‘Medium’ or
‘High’ by members of the Operations Board which ascribes a
financial threshold to each risk category. This is a high level
financial assessment of each risk and opportunity and will be
developed further as our process continues to evolve. The risks and
opportunities marked medium are deemed to be material to our
operations. All climate-related risks and opportunities identified
through our scenario analysis are detailed in the tables on pages
39 to 44. For each risk we have highlighted in which scenario there
will be the greatest impact, and the measures we are implementing
to increase our resilience.
Transition risks
As the global economy begins to decarbonise, we anticipate
that the potential impacts from transition risks will increase
as more efforts are made by governments and businesses to
reduce emissions. Our analysis suggests that the transition risks
are most significant in the ‘below 2°C’ scenario and ‘between
2-3°C’ scenario, as there is more change entailed in adapting to
increasingly aggressive policies and legislation implemented by
governments and regulatory authorities.
As we work to decarbonise our business to be net zero in relation
to Scope 1, 2 and Scope 3 emissions, this will mitigate the risk
posed by emerging policy and legislation, such as carbon taxing
and increases to greenhouse gas pricing. We have assumed that
the benefits from achieving the net-zero targets we have set will
outweigh the upfront costs of doing so.
Building resilience into our supply chain by developing deeper
relationships with key suppliers will help to minimise the potential
risks posed by climate change in relation to changing markets.
Scenario warming pathways
Below 2
o
C scenario:
Organisations follow a co-
ordinated and orderly transition
to a low-carbon economy,
aligning closely with the Paris
Agreement and Science Based
Targets Initiative.
Harmonious collaboration between governmental bodies and organisations to introduce and
adhere to policy and legislation associated with emissions reductions. Businesses strive to exhibit
proactive behaviour in reducing their carbon emissions, with low-carbon technology being readily
available and widely implemented. Market preferences shift as consumers demand low-carbon
alternatives for products and services, with businesses responding and adapting their operations.
As a result, transition risks will be more prevalent due to efforts to decarbonise the economy, but
many climate tipping points are not reached.
Between 2-3
o
C scenario:
Policies and legislation are
introduced with a staggered
effect with inconsistent levels of
action being taken, aligning with
current forecasts.
Uncoordinated approach regarding the introduction of policies and legislation, which leaves
businesses with little time to become compliant. As a result, investment into low-emissions
technology is staggered, causing companies to decarbonise in potentially abrupt steps. With
warming unable to be limited to below 2
o
C, some climate tipping points will be reached, resulting in
increased physical risks. Some transition risks will also manifest themselves as efforts are still made
to transition to a low-carbon economy, even though disjointed and sporadic.
Above 3
o
C scenario:
Minimal climate action is taken
and emissions go unchecked,
resulting in a worst-case
climate scenario.
‘Business as usual’ approach is followed, with little or no climate action being taken by governments
or businesses. Few companies set net-zero targets, with emissions continuing to go unchecked
as low-emissions technology remains untested with little capital investment. As a result, many
climate tipping points are reached, creating detrimental conditions for society as the physical risks
posed by climate change materialise. Transition risks are not prevalent here, as there has been no
movement towards a low-carbon economy.
Strategy continued
The climate-related risks and opportunities identified over the short, medium and long term continued
Our climate scenario analysis considered climate-related risks and opportunities under the three warming scenarios detailed below.
Each scenario refers to differing severities of irreversible climatic shifts, leading to permanent new climate states that could be detrimental
to society. Several established climate models were used during this exercise, including the ‘Climada natural catastrophe damage model’,
‘CORDEX regional climate projections’ and ‘Integrated Assessment Models’.
TheWorks.co.uk plc Annual Report and Accounts 202338
Category Trend and highest impact Potential impact Risk mitigation
Policy and legal
Increase in carbon/GHG pricing.
Highest impact in the:
• Medium term
• 2-3°C Scenario
MEDIUM
Potential financial impact
area: Expenditures — increased
direct costs.
The UK has committed to a series
of five-year carbon budgets. If
carbon emissions do not decrease
enough to meet targets, a tax
on carbon emissions may be
introduced. We estimate that this
impact could be highest in the
2-3°C Scenario in the medium
term, when carbon pricing is
projected to peak. Based on
FY22 Scope 1 and 2 emissions
(3,088 tCO
2
e), an estimated
potential tax of approximately
£0.2m could arise in the medium
term, assuming no reduction to
carbon emissions.
• The Group has committed to
becoming net-zero for Scope 2
by 2030 and Scope 1 by 2035. As
our carbon emissions decrease,
the potential impact of this risk
will reduce.
• Monitor and review our carbon
emissions each year against
a carbon pricing model.
Increase in climate change
regulation including increased
emissions-reporting obligations.
Highest impact in the:
• Short to medium term
• <2°C and 2-3°C Scenarios
LOW
Potential financial impact
area: Expenditures - Increased
direct costs.
We are required to comply
with environmental reporting
requirements and anticipate that
additional requirements will be
introduced over time as the UK
transitions to a net-zero economy.
If we do not meet developing
reporting requirements there is a
risk of potential sanctions imposed
by regulatory bodies.
Costs will increase if additional
resource is required to meet
increased reporting requirements.
• The Group’s CFO and Company
Secretary oversee regulatory
compliance with support from
external advisers.
• Senior management team
is aware of compliance
requirements under their areas
of responsibility and liaise with
the CFO and external advisers
to identify and manage issues.
• Policies and procedures in
place to ensure the Group has
capacity to support increased
reporting and transparency
(e.g. data collection processes).
• Partner with INESG to support
environmental reporting disclosures.
Mandates on and regulation of
existing products and services.
Highest impact in the:
• Short to medium term
• <2°C Scenario
LOW
Potential financial impact area:
Expenditures - Increased direct
and indirect costs.
We and/or our suppliers may be
subject to increased regulation in
relation to plastics and packaging
(e.g. UK Plastic Tax and Extended
Producer Responsibility).
Regulations relating to products
and packaging are likely to
intensify over time. This may
increase the cost of direct taxes
or increase materials costs.
• Introduced initiatives to reduce
plastic packaging (see page 31).
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 39
Task Force on Climate-Related Financial Disclosures (TCFD) continued
Category Trend and highest impact Potential impact Risk mitigation
Policy and
legal continued
Exposure to litigation.
Highest impact in the:
• Short to medium term
• 2-3°C Scenario
LOW
Potential financial impact
area: Expenditures —increased
direct costs.
Legal standards and reporting
requirements may become more
onerous in the short to medium
term. This could increase the risk
of lawsuits, compliance issues
and fines. Any litigation could
negatively impact our brand
and reputation.
• The Group’s CFO and Company
Secretary oversee regulatory
compliance with support from
external advisers.
• Senior management team is
made aware of key compliance
requirements within their
business areas and liaise with
the CFO and external advisers
to identify and manage issues.
Market
Increased cost of energy
and raw materials.
Highest impact in the:
• Short to medium term
• <2°C and 2-3°C Scenarios
MEDIUM
Potential financial impact area:
Expenditures - increased direct
(operating) costs.
Disruptions in recent years,
including the period of increased
ocean freight rates and reduced
availability of shipping containers,
have already impacted our
business, albeit these impacts
have now abated. Future
increases in costs could adversely
impact the Group’s profitability.
This risk is currently heightened,
due to the generally high levels of
cost inflation being experienced.
Climate change is likely to
exacerbate this, potentially
increasing costs, creating supply
disruptions and delays. Energy
costs, although lower than the
highest peaks reached following
Russia’s invasion of Ukraine, are
nevertheless expected to rise
over time.
• Maintain focus on cost control.
• Continually review supply base
and diversify and/or change
supply options where needed.
• Introducing energy efficiency
technology across the
store estate.
• Conduct site surveys to identify
energy saving opportunities.
Changing customer behaviour.
Highest impact in the:
• Medium term
• <2°C and 2-3°C Scenarios
MEDIUM
Potential financial impact area:
Revenue - decreased revenue
due to reduced demand for
products and services.
With ESG growing in importance,
customers may change their
shopping preferences, which
could potentially impact demand
for the Group’s products. Failure
to effectively predict and respond
to any such changes could affect
the Group’s sales and financial
performance.
• Implementing a net-zero strategy
and enhancing our reporting
to communicate our actions
to make our proposition more
sustainable to stakeholders,
including customers.
Strategy continued
Transition risks continued
TheWorks.co.uk plc Annual Report and Accounts 202340
Category Trend and highest impact Potential impact Risk mitigation
Reputation
Increased stakeholder concern
regarding environmental issues.
Highest impact in the:
• Short to medium term
• <2°C and 2-3°C Scenarios
MEDIUM
Potential financial impact
area: Capital and Financing –
decreased access to capital.
ESG is becoming increasingly
important to stakeholders.
Interest in, and scrutiny of, our ESG
credentials is likely to increase.
Reputational damage could
affect the financial performance
of the business.
• Invested in sustainability
function, recruiting a new
Sustainability Manager in FY23.
• The Group’s CFO and Company
Secretary oversee regulatory
compliance, with support from
external advisers.
• Partnered with INESG to
support us in relation to
environmental matters.
• Adopt internationally aligned
frameworks to ensure our
ESG strategy develops using
best practice.
Stigmatisation of the sector.
Highest impact in the:
• Medium term
• <2°C and 2-3°C Scenarios
LOW
Potential financial impact area:
Revenue - Decreased revenue
due to reduced demand for
products and services.
If value retail companies are
unable to demonstrate their
commitment to environmental
sustainability and wider ESG
aspects, customers may reduce
their purchasing, adversely
impacting sales.
• Monitor customer trends
to anticipate changes and
react accordingly.
• Implementing an ESG
programme and developing
our reporting to communicate
this to stakeholders,
including customers.
Technology
Substitute existing products
with lower-emissions alternates.
Highest impact in the:
• Short to long term
• <2°C and 2-3°C Scenarios
MEDIUM
Potential financial impact
area: Expenditures — increased
capital expenditures.
As customers become more
environmentally conscious, the
costs to ensure our products
are sustainable could increase.
This reflects costs associated
with sustainable and recycled
materials, which are likely to
increase as demand increases.
• Implementing a
net-zero strategy.
• Work with suppliers to
explore lower-emission
alternative products.
Costs to transition to lower-
emissions technology.
Highest impact in the:
• Short to long term
• <2°C and 2-3°C Scenarios
MEDIUM
Potential financial impact
area: Expenditures — increased
capital expenditures.
To reduce our Scope 1 and Scope
2 carbon emissions and meet our
net-zero targets for Scope 2 by
2030 and Scope 1 by 2035, we will
need to invest in lower emission
technology. Decarbonisation
actions identified to date
including LED lighting installation,
Company energy policy
implementation, installation of
lighting sensors and a behavioural
change programme will require an
estimated £0.7m investment over
the next six years.
Cost savings will likely mitigate
the investment outflow through
reduced energy costs.
• Installing energy efficient
technology in stores.
• Implementing a net-zero
strategy and understanding
and accounting for the
additional costs.
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 41
Task Force on Climate-Related Financial Disclosures (TCFD) continued
Strategy continued
Physical risks
We have identified several physical risks requiring appropriate levels of management, to ensure that any potential disruption to our
operations is minimised. These physical risks primarily materialise in the above 3°C scenario in the long term, where numerous climate
tipping points would be reached due to the unchecked increase in carbon emissions. We anticipate that the likelihood of extreme
weather events occurring will increase as global temperatures rise, with phenomena such as flooding posing a potential threat to
several of our sites. We will continually monitor physical risks by running annual climate scenario analysis, and expand the scope of
this to include our key suppliers and supply routes in subsequent years of reporting.
Category Trend and highest impact Potential impact Risk mitigation
Acute
Increased severity of flooding.
Highest impact in the:
• Long term
• >3°C Scenario
MEDIUM
Potential financial impact area:
increased direct and indirect
costs and decreased revenue.
If flooding in the UK occurs with
more severity and frequency
it could impact our sites and
operations, through direct
damage to buildings and assets.
Disruptions may impact transport
networks, which could increase
costs and cause delays. We may
experience an increase in property
insurance premiums.
As a substantial part of the
Group’s profit is currently
generated during the Christmas
peak sales period, extreme
weather events during this time
could have an adverse short-term
effect by disrupting shopping
behaviour, stock flow, deliveries
of products to our stores and
the fulfilment of online orders.
• Disaster recovery plan
is in place.
• Maintain appropriate business
interruption insurance cover.
• Scenario analysis of the store
estate will be undertaken
annually to monitor high risk sites
for potential long-term impacts.
• Online fulfilment capability
could support some ongoing
operations, if many sites were
closed simultaneously due
to physical damage.
Heatwaves/Extreme heat.
Highest impact in the:
• Short to long term
• 2-3°C and >3°C Scenarios
LOW
Potential financial impact area:
increased direct and indirect
costs and decreased revenue.
In the event of heatwaves and/or
periods of extreme heat occurring
more frequently, there will be an
increased demand for cooling.
This will increase energy costs,
and impact our efforts to reduce
Scope 2 emissions. There is an
increased risk of power outages
becoming more frequent due to
greater demand on the grid. Staff
health, wellbeing, comfort and
productivity may be impacted.
Extreme weather events could also
have an adverse short-term effect
by disrupting shopping behaviour
as local footfall decreases, stock
flow, deliveries of products to
our stores and the fulfilment of
online orders.
• Introducing energy saving
initiatives and technology to
reduce the impact of increased
energy usage.
• Develop and implement
appropriate response strategies
including supplying plenty
of drinking water, to keep
staff hydrated.
• An emergency generator is
installed at the support centre/
DC to mitigate the impact of
power cuts.
• Monitor health and wellbeing
of colleagues.
TheWorks.co.uk plc Annual Report and Accounts 202342
Category Trend and highest impact Potential impact Risk mitigation
Acute continued
Increased frequency of wildfires.
Highest impact in the:
• Long term
• >3°C Scenario
LOW
Potential financial impact
area: increased direct and
indirect costs.
Even though this is not traditionally
considered as a material risk for
UK operations, the frequency and
severity of wildfires may increase
over time if extreme weather
events become more common.
• A disaster recovery plan
is in place.
• Maintain appropriate business
interruption insurance cover.
• Monitor events which may
impact the health and safety
of our employees, customers
and wider communities.
Chronic
Water stress.
Highest impact in the:
• Medium to long term
• >3°C Scenario
LOW
Potential financial impact
area: increased direct and
indirect costs.
We may be impacted by restricted
water usage as well as additional
regulation to report on water
consumption and usage. Access
to and use of water supplies
may become prohibited, as
demand outweighs the supply
of freshwater. Water may require
greater treatment which could
increase water costs.
• Developing plan to measure
water consumption to
understand usage.
• Expanding scope of climate
scenario analysis to understand
impact of water stress
on business.
Sea level rise.
Highest impact in the:
• Long term
• >3°C Scenario
LOW
Potential financial impact
area: increased direct and
indirect costs.
As sea level rises, rates of erosion
and the likelihood of storm surges
occurring increase. This can lead
to sites in coastal zones being
damaged, eventually leading to
closures and increased insurance
premiums. These impacts could
also manifest themselves in our
supply chain, if key shipping ports
are affected.
• Conduct annual scenario
analysis of store estate, to
monitor high-risk sites for
long-term impacts.
• When leases are up for
renewal, take climate scenario
analysis into account and
consider relocating away
from high-risk sites.
Climate-related opportunities
Category Trend and highest impact Potential impact Opportunity management
Products
and services
Development of new products.
Highest impact in the:
• Medium term
• <2°C Scenario
MEDIUM
Potential financial impact area:
Revenue — increased revenue
from an increased demand
for sustainable products
and services.
As customers become more
concerned about ESG, their
shopping behaviours may change,
if they wish to purchase more
sustainable products.
We may be able to capitalise on
this, if it is possible to develop more
sustainable alternative products
at prices which customers are
willing to pay.
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 43
Category Trend and highest impact Potential impact Opportunity management
Energy resources
Use of lower-emission sources
of energy.
Highest impact in the:
• Short to medium term
• <2°C Scenario
MEDIUM
Potential financial impact
area: Expenditures — reduction
in operating expenses from
increased efficiency (for example,
decreased energy costs).
The introduction of lower-emission
sources of energy across our estate
would contribute to reduced energy
consumption and associated
costs over time. It would also help
reduce our carbon emissions and
contribute to our carbon-reduction
and net-zero targets.
The continued rollout of LED
lighting, Company energy policy
implementation, installation of
lighting sensors and a behavioural
change programme will result in
an estimated carbon saving of
686 tCO
2
e.
• Conduct energy site surveys
to identify energy saving
opportunities bespoke
to our operations.
• Implementing net-zero strategy
and understanding and
accounting for the additional
cost to the business.
Task Force on Climate-Related Financial Disclosures (TCFD) continued
Impact of climate-related risks and opportunities on business,
strategy and financial planning
We have assessed the impact of climate-related risks and
opportunities on our business, strategy and financial planning.
Based on our assessment, our business is more likely to be
impacted by transition risks. As the global economy begins
to decarbonise, we anticipate that the potential impacts
from transition risks will increase as more efforts are made by
governments and businesses to reduce emissions. We are likely to
face increased operating costs as we invest in resources required
to navigate enhanced reporting requirements as well as adapting
to increased costs of energy and raw materials in our supply chain.
As outlined in the Viability statement in this Annual Report, the
Group operates a three-year financial planning cycle. Currently
identified and quantifiable transition costs (such as the costs of
retaining expert consultants INESG, and the cost of employing
the recently appointed Sustainability Manager) have been
incorporated into the Group’s financial plans.
Further, as customers and wider stakeholders become more
interested in our sustainability credentials over time we may see a
reduced demand for products, as well as a potential decreased
access to capital. However, the Group has not allowed for any
of these and other potential costs relating to other transitional
or physical climate risks in its current planning horizon, as these
are presently too remote to be included. The process of periodic
reviews of the risks and the operation of the planning cycle
will ensure that if it becomes evident that costs (or revenues)
associated with the climate risks will affect the business, they
will be reflected in financial plans in due course.
A substantial part of the Group’s profit is currently generated
during the Christmas peak sales period, therefore extreme weather
events during this time could have an adverse short-term effect by
disrupting shopping behaviour, stock flow, deliveries of products
to our stores and the fulfilment of online orders. We anticipate that
the likelihood of extreme weather events occurring will increase as
global temperatures rise, with phenomena such as flooding posing
a potential threat to several of our sites. Detail of the impact of
climate-related risks and opportunities facing our business can
be found in the tables above.
The Sustainability Manager works closely with the ESG Steering
Committee, members of the Operations Board and Heads of
Departments to ensure sustainability and climate change criteria
are integrated into decision making when fulfilling their roles across
the business. Focusing on immediate priorities for the business,
an Environmental Action Group has been established and meets
monthly to consider plans to operate more sustainably which are
presented to the Board on an ad hoc basis.
To reduce our Scope 1 and 2 carbon emissions and meet our
net-zero targets for Scope 2 by 2030 and Scope 1 by 2035, we will
need to introduce lower emission technology, as well as engage
additional resources. During the year the Board approved a rollout
of LED lighting in stores to improve the Group’s energy efficiency,
and the appointment of a Sustainability Manager to lead the
development of the Group’s sustainability strategy and support
its implementation. Moving forward, decarbonisation actions
such as further LED lighting installation, Company energy policy
implementation, installation of lighting controls and a behavioural
change programme will require investment.
Resilience of strategy taking into consideration different climate-
related scenarios, including a 2°C or lower scenario
While climate change does not pose a significant direct threat
to our business, we have identified a number of risks and
opportunities that could impact the business over the longer term
and assessed their impact.
As described above, we considered climate-related risks and
opportunities under three different warming scenarios, varying from
a best-case scenario (below 2°C) to a worst-case scenario (above
3°C). As the types of risks that present themselves will vary under
different warming scenarios, to effectively assess the resilience of
our strategy, analysing climate-related risks and opportunities
against these different warming scenarios is necessary. Our analysis
suggests that the transition risks are most significant in the ‘below
2°C’ scenario and ‘between 2-3°C’ scenario, as more change will be
required to adapt to increasingly aggressive policies and legislation
implemented by governments and regulatory authorities. As we
work to decarbonise our business to be net zero in relation to Scope
1 and Scope 2 emissions, the risk posed by emerging policy and
Strategy continued
Climate-related opportunities continued
TheWorks.co.uk plc Annual Report and Accounts 202344
legislation, such as carbon taxing and increases to greenhouse
gas pricing, will be mitigated and the benefits from achieving our
net-zero targets will outweigh the upfront costs of doing so.
Building resilience into our supply chain by developing deeper
relationships with key suppliers and also diversifying our supplier
base, will help minimise the potential risks posed by climate
change in relation to changing markets.
We have identified several physical risks requiring appropriate
levels of management, to ensure that any potential disruption
to our operations is minimised. These physical risks primarily
materialise in the ‘above 3°C’ scenario in the long term, where
numerous climate tipping points would be reached due to the
unchecked increase in carbon emissions. We will continue to
monitor physical risks through our annual climate scenario analysis,
which we will expand to include further analysis across our key
suppliers and critical supply chain routes to identify opportunities
to improve the measures we are implementing to mitigate potential
climate-related risks within the supply chain.
The information detailed above in relation to transition and
physical risks also provides an insight into the resilient nature of
our business model and, in particular, the processes and steps
we are taking to mitigate the impact of climate-related risks.
Risk management
We have an established framework used by the Group for
managing general risks which incorporates processes to make
decisions to manage or accept those risks, and to monitor steps
taken to achieve risk mitigation. The management of climate-
related risks falls within this umbrella, and uses an analogous
framework process. As this is our first climate-related risk and
opportunity assessment, the initial analysis was limited to our direct
operations. As we evolve our assessment annually and begin to
include our suppliers we will get a better understanding of the
potential size and scope of the identified climate-related risks
and opportunities over the short, medium and long term.
The processes for identifying and assessing
climate-related risks
To support management in its identification and assessment of
climate-related risks, we conducted climate scenario analysis
across all our operations in FY22 and FY23 for the first time.
Alongside this process, we launched an internal due diligence
process, to review existing business functions through a climate
lens. In conjunction with mapping of our existing business risks
and operations against those outlined by the TCFD guidance,
this informed the identification of the climate-related risks and
opportunities applicable to our locations and operations.
We have assessed the impact of each climate-related risk and
opportunity across all three scenarios (a below 2°C, a 2-3°C and an
above 3°C scenario), and three time horizons (short, medium and
long term), to understand the scenario and timeframe within which
our business is most vulnerable to each risk, or best positioned
to capitalise on each opportunity. A climate risk management
workshop was held during FY23 with members of the Operations
Board, followed by subsequent one-to-one discovery sessions,
to collect supporting data, to inform the assessment of each risk
and opportunity, including high-level financial modelling which
ascribes a financial threshold to each risk category. The risks and
opportunities marked medium are deemed to be material to our
operations. All climate-related risks and opportunities identified
through our scenario analysis are detailed in the tables on pages
39 to 44. For each risk we have highlighted in which scenario there
will be the greatest impact, and the measures we are implementing
to increase resilience.
The process for managing climate-related risks
Through the internal stakeholder engagement process, we
identified existing mitigation processes, which could be developed
or adopted to mitigate the impact of climate change. Details of
existing mitigation actions can be found on page 31. As explained
on page 37 the Operations Board is responsible for managing the
Group’s climate-risks and opportunities supported by the ESG
steering group and the Sustainability Manager. In addition senior
managers are assigned specific responsibilities to ensure climate-
related risks and opportunities are accurately assessed and
effectively managed. The climate scenario analysis undertaken in
FY23 will be repeated annually.
The Sustainability Manager works closely with the ESG Steering
Committee, members of the Operations Board and Heads of
Departments to ensure sustainability and climate change criteria is
integrated into decision making when fulfilling their roles across the
business. These sessions, along with monthly Environmental Action
Group meetings, are used to identify opportunities to manage risks.
Integration of processes for identifying, assessing
and managing climate-related risks into overall
risk management
Following a detailed operational risk review completed by our
Head of Finance, an environmental (including climate change) risk
was highlighted and included in the updated risk register in FY22.
The review included individual meetings with each Operations
Board member covering current and emerging risks affecting their
respective areas of responsibility and broader corporate risks in
other parts of the business.
We have considered our existing risk process and structure of
our risk register, when creating a climate risk register, to ensure
climate-related risks and opportunities are easily integrated into
existing business functions, where appropriate. We mapped our
existing business risks against those outlined by the TCFD guidance
to identify risk owners.
Following our FY23 climate risk management workshop, we held
one-to-one discovery sessions with members of the Operations
Board to further inform the assessment of climate-related risks
and opportunities and establish risk mitigation actions across
the business. This process will be repeated annually.
The Board and Audit Committee will continue to review the
business’ principal risks, including climate change risk, twice
per year.
With support from the Sustainability Manager, the CFO will be
responsible for the climate risk register, to ensure climate-related
risks and opportunities are reported annually. The climate risk
register contains all transition and physical risks highlighted and
informs the annual assessment of the environmental (including
climate change) risk.
Metrics and targets
Metrics used to assess climate-related risks
and opportunities in line with strategy and risk
management processes
We use a range of metrics to assess and manage our climate-
related risks and opportunities, including carbon emissions (see
pages 45 and 46), energy consumption (see page 47), waste and
recycling (see page 31) and products and packaging (see page 31).
We have considered cross-industry metrics including transition and
physical risks, climate-related opportunities, capital deployment,
carbon pricing and executive remuneration when reviewing the
impact of climate change on our business. Reporting against these
metrics can be found from pages 46 and 47. Each year we aim to
develop these metrics while enhancing our TCFD reporting.
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 45
Metrics and targets continued
Metrics used to assess climate-related risks and
opportunities in line with strategy and risk management
processes continued
Every year we will set short-term annual targets which will help us
achieve our longer term environmental ambitions (see page 30). We
will also review industry remuneration best practice and guidance
and consider linking executive remuneration with the delivery and
performance of our net-zero strategy and related targets.
Scope 1, Scope 2 and Scope 3 GHG emissions and
related risks
We have been calculating our Scope 1 and 2 carbon emissions,
in line with the Streamlined Energy and Carbon Reporting initiative
(SECR) since 2019 (page 47). This year, as part of the work we
undertook to develop our carbon balance sheet, we calculated our
Scope 3 carbon emissions for the first time. To establish a baseline
for reporting we have used FY22 financial data to estimate our
prior year Scope 3 emissions. We will use this baseline to measure
progress against our emissions reductions targets. In FY24, our
efforts will focus on aligning our Scope 3 data collection with our
Scope 1 and 2 collection processes.
Our Scope 1, Scope 2 and Scope 3 emissions in relation to FY23
are set out below.
Carbon emissions (tCO
2
e) (tonnes)
Scope FY FY
Scope
Scope , ,
Scope
Total , ,
Calculations have used the methodology based on the
Greenhouse Gas Protocol (GHG Protocol) Corporate Value
Chain standards. Within Scope 3, there are 15 categories, with
12 applicable to our operations. Over time we aim to improve our
data collection processes to increase the accuracy of our Scope 3
emissions data.
Targets used to manage climate-related risks and
opportunities and performance against targets
We are committed to becoming net-zero for Scope 2 emissions by
2030, Scope 1 emissions by 2035, and Scope 3 emissions by 2045,
with an ambition to be net-zero in our Scope 3 emissions by 2040.
Our Scope 1 and 2 targets, with our Scope 3 ambition, align with
the British Retail Consortium’s Climate Action Roadmap.
We are in the process of developing our transition plan and setting
near-term targets. More information on how we are reducing
our environmental impact can be found on pages 30 and 31.
Task Force on Climate-Related Financial Disclosures (TCFD) continued
Target Progress so far
Net-zero Scope 1
emissions by 2035
We continue to build our roadmap for achieving net-zero in Scope 1, and are currently reviewing
our car fleet options to determine when we will transition to a hybrid and/or electric fleet.
Net-zero Scope 2
emissions by 2030
We have installed LED lighting and energy efficient equipment in all new stores to help reduce
our in-store energy consumption. We are also retrofitting our existing estate with LED lighting
to continue the decarbonisation of our Scope 1 and 2 emissions.
We conducted ESOS surveys across a number of our key sites to identify energy-savings
opportunities. We will utilise the outputs of the surveys to implement energy efficiency measures
across our estate.
Net-zero Scope 3
emissions by 2045
1
We have calculated our Scope 3 emissions for the first time for the FY21/22 reporting period. This
has provided us with a Scope 3 baseline from which we can understand emissions across our value
chain, and begin formalising a decarbonisation strategy to meet our net-zero target. A number
of Scope 3 categories will be targeted for data methodology improvements, where we will look
to transition from average and spend-based data to activity-based data.
1 With an ambition to achieve net zero by 2040.
TheWorks.co.uk plc Annual Report and Accounts 202346
Streamlined Energy and Carbon Reporting (SECR)
In accordance with the SECR requirements the information below
summarises our energy usage, associated emissions, energy
efficiency actions and energy performance.
This year, for the first time, the disclosure covers all our operations
including the Republic of Ireland.
Carbon emissions are categorised as follows:
• Scope 1: Consumption and emissions related to direct
combustion of natural gas and fuels utilised for transportation
operations, such as company vehicle fleets.
• Scope 2: Consumption and emissions related to indirect
emissions relating to the consumption of purchased electricity
in day-to-day business operations.
• Scope 3: Consumption and emissions related to emissions resulting
from sources not directly owned by us. These relate to grey fleet
(business travel undertaken in employee-owned vehicles) only.
Group data
Total Group reportable energy supplies consumption (kWh):
Utility and scope FY FY
Scope : Gaseous and other fuels , ,
Scope : Transport (company fleet) , ,
Scope : Electricity ,, ,,
Scope : Transport (grey fleet) , ,
Total ,, ,,
Total Group emissions (tCO
2
e)
Utility and scope FY FY
Scope : Gaseous and other fuels . .
Scope : Transport (company fleet) . .
Scope : Electricity ,. ,.
Scope : Transport (grey fleet) . .
Total ,. ,.
Group intensity metric
An intensity metric of tCO
2
e per £m revenue has been applied
to our annual total emissions and is detailed in the table below.
Intensity metric FY FY
tCO
e/m revenue . .
Regional data
Total reportable energy supplies consumption (kWh)
for UK operations
Utility and scope FY FY
Scope : Gaseous and other fuels , ,
Scope : Transport (company fleet) , ,
Scope : Electricity ,, ,,
Scope : Transport (grey fleet) , ,
Total ,, ,,
Total emissions (tCO
2
e) for UK operations
Utility and scope FY FY
Scope : Gaseous and other fuels . .
Scope : Transport (company fleet) . .
Scope : Electricity ,. ,.
Scope : Transport (grey fleet) . .
Total ,. ,.
Intensity metric for UK operations
Intensity metric FY FY
tCO
e/m revenue . .
Total reportable energy supplies consumption (kWh) for Republic
of Ireland operations
1
Utility and scope FY
Scope : Gaseous and other fuels —
Scope : Transport (company fleet) ,
Scope : Electricity ,
Scope : Transport (grey fleet) ,
Total ,
Total emissions (tCO
2
e) for Republic of Ireland operations
Utility and scope FY
Scope 1: Gaseous and other fuels —
Scope 1: Transport (company fleet) .
Scope 2: Electricity .
Scope 3: Transport (grey fleet) .
Total .
Intensity metric for Republic of Ireland operations
Intensity metric FY
tCO
e/m revenue .
1 As highlighted above this is the first year our Republic of Ireland
operations have been included in our disclosure; therefore, no prior year
data is available.
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 47
Energy efficiency improvements
We are committed to improving energy efficiency across our
operations, which is paramount if we are to achieve our Scope
1 and Scope 2 net-zero targets. In FY23, we implemented
several energy efficiency measures to reduce our overall energy
consumption including:
• Continuing the rollout of LED lighting across our store estate. As at
year end 67% of our store estate now operates with LED lighting.
• Began undertaking Energy Savings Opportunity Scheme (ESOS)
surveys to identify energy efficiency opportunities. The findings of
these surveys have informed our Scope 1 and 2 net-zero roadmaps.
We are planning further efficiency improvements in the coming
year including:
• Continuing to rollout LED lighting across our store estate.
• Establishing a new and remodelled store energy efficiency policy.
• Developing an energy efficiency behaviour change programme
for our colleagues across our stores, Distribution Centre and
Support Centre.
• Engaging with our landlords to identify and implement energy
efficiency opportunities across our store estate.
Reporting methodology
The above information (including the Scope 1, 2 and 3 consumption
and CO
2
e emissions data) has been developed and calculated
using the GHG Protocol – A Corporate Accounting and Reporting
Standard (World Business Council for Sustainable Development
and World Resources Institute, 2004); Greenhouse Gas Protocol –
Scope 2 Guidance (World Resources Institute, 2015); ISO 14064-1
and ISO 14064-2 (ISO, 2018; ISO, 2019); Environmental Reporting
Guidelines: Including Streamlined Energy and Carbon Reporting
Guidance (HM Government, 2019).
For our UK operations, UK Government Emissions Factor Database
2022 version 1 has been used, utilising the published kWh gross
calorific value (CV) and kgCO
2
e emissions factors relevant for
reporting period 01/05/2022–30/04/2023. For our Republic of
Ireland operations, Sustainable Energy Authority of Ireland (SEAI)
2022 conversion factors have been used, utilising the kgCO
2
e
emission factors for relevant reporting period 1 May 2022 to 30
April 2023.
Estimations were undertaken to cover missing billing periods for
properties directly invoiced to The Works. These were calculated
on a kWh/day pro-rata basis at the meter level.
Intensity metrics have been calculated using total tCO
2
e figures.
Total turnover used for the performance indicator for FY23 was
£280.1m (FY22: £264.6m).
Streamlined Energy and Carbon Reporting (SECR) continued
TheWorks.co.uk plc Annual Report and Accounts 202348
Risk management framework
The Board is responsible for ensuring that appropriate risk
management processes and controls are in place. The Board
has delegated responsibility for overseeing risk management
processes and controls to the Audit Committee. Day-to-day
risk management is the responsibility of the senior management
team. Further details of the governance structure are set out in
the Corporate governance report on page 62.
Risks are identified and assessed using a bottom-up review
process. Senior management determines the potential risks that
could affect their areas of responsibility and the likelihood and
impact. This information is used to create the Group’s primary
risk register and capture principal risks which are subsequently
considered by the Audit Committee and the Board.
Risk appetite
The Board determines the Group’s risk appetite. Where a conflict
exists between risk management and strategic ambitions, the
Board seeks to achieve a balance which facilitates the long-term
success of the Group.
Principal and emerging risks and changes in
principal risks
The Board conducts a robust assessment of the principal risks facing
the Group and emerging risks, including those that could threaten the
operation of its business, future performance or solvency. The Board
formally reviews the Group’s principal risks at least twice a year.
A detailed operational risk review was undertaken by the Head of
Finance during November 2022. This review included discussions
with members of the Operations Board covering current, principal
and emerging risks affecting their respective areas of responsibility
and broader corporate risks. Following this review, the Group’s
primary risk register and its principal risks and mitigation plans were
updated, and considered by the Audit Committee and the Board in
January 2023, March 2023 and July 2023.
A climate risk workshop, facilitated by INESG, the Group’s specialist
third-party ESG consultancy, was held in August 2022. Members of
the Operations Board participated in the workshop which covered:
an introduction to climate change and climate scenarios; risk
classification; transition and physical risks identified; and how to
approach climate change as a material risk to the business. Using
the outputs from the workshop the Group’s first climate risk register
was developed and subsequently reviewed and approved by
the Board in January 2023. Further information in relation to the
Group’s climate risks is included on pages 37 to 46.
The principal risks and uncertainties facing the Group as at the
date of this Annual Report are set out in order of priority on pages
50 to 53, together with details of how these are currently mitigated.
The adjacent heatmap illustrates the Board’s assessment of the
likelihood of the principal risks occurring and the resulting impact,
after taking into account mitigating actions.
During the year the main changes to the principal risks were as follows:
• Removal of COVID-19 risk: Given the significantly reduced impact
of risks associated with COVID-19 this risk is no longer considered
to be a principal risk.
• Renaming of ‘Market’ risk: The ‘Market’ risk has been renamed
‘Design and execution of strategy’, and has been refined to
reflect the importance of the Group’s strategy and the direct
correlation between successful strategic execution and market
performance. This risk has also been assessed as having a high
priority and ranked accordingly.
During the year a geopolitical emerging risk was identified.
Approximately two thirds of the Group’s stock is sourced from
China and if drastic economic sanctions were to be imposed on
China this could have a material impact on the Group’s ability to
obtain stock. Moving the product mix away from goods sourced
from China could mitigate this risk; however, a significant lead time
would be required to do this. Currently the probability of this risk
crystallising is considered to be very low. Accordingly this emerging
risk will be maintained on our secondary risk register and we will
continue to monitor it.
The Group may be exposed to other risks and uncertainties
not presently known to management, or currently deemed
less material, that may subsequently have an adverse effect
on the business. Further, the exposure to each risk will evolve
as mitigating actions are taken or as new risks emerge or the
nature of risks change.
Risk management and principal risks and uncertainties
Effective risk management helps
us identify, evaluate and manage
the risks which could impact
the business
Low Likelihood High
Low Impact High
Risk heatmap
3 2
1
4
7
6
5
8
9
11
10
Principal risks
1 Design and execution of
strategy (previously ‘Market’ risk)
2 Economy
3 Supply chain
4 IT systems and cyber security
5 Brand and reputation
6 Seasonality of sales
7 People
8 Environmental (including
climate change)
9 Regulation/compliance
10 Liquidity
11 Business continuity
Increased
Decreased
Unchanged
Change from prior year
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 49
Risk, profile change and link to strategy Mitigation
1. Design and execution of strategy (previously ‘Market’ risk)
The Group generates its revenue from the sale of books, toys
and games, arts and crafts and stationery.
Although it has a track record of understanding customers’ needs
for these products, the market is competitive. Customers’ tastes
and shopping habits can change quickly. Failure to effectively
predict or respond to changes could affect the Group’s sales
and financial performance.
Failure to effectively execute the ‘better, not just bigger’ strategy (e.g. due
to insufficient capacity or inadequate capability) would have an adverse
impact on the Group’s ability to grow, particularly if the envisaged sales
growth drivers fail to increase sales. Furthermore achieving increased
sales growth could be more challenging if consumer confidence is
impacted by deteriorating economic conditions.
Change from prior year
Increased risk level. The Board believes that the previous risk rating
needs to increase to reflect the significant impact this risk could have
on the profitability of the Group and therefore increased the risk rating.
Link to strategy
• Increased strategic focus on developing the brand and
increasing customer engagement to further differentiate
the Group from competitors.
• Emerging trends monitored by a recently strengthened
trading team that has a track record of responding to
changing consumer tastes.
• Monitor competitors’ propositions and discuss key developments
at weekly trading meetings and at Board level on a regular basis.
• Monitor and review customer feedback.
• Use sales data and online feedback channels to inform
purchasing and marketing decisions.
• Flexible lease terms allow the Group to adapt its store
portfolio (which continues to be highly relevant to customers)
to suit evolving shopping habits.
• Ongoing investment in the Group’s online capability ensures
complementary digital and store propositions, as customers
increasingly engage with both channels.
• Significant investments have been made to date and further
investment is planned in FY24 to drive operational improvements.
2. Economy
A deterioration in macroeconomic conditions or a reduction in
consumer confidence could impact customer spending and
reduce the Group’s revenue and profitability.
Change from prior year
Increased risk level. Inflation remains high and the cost-of-living
challenge looks likely to persist for some time. Although we have not
yet observed any quantifiable effect on our business, this could impact
consumer spending and, as a result, the Group’s sales. The current
economic environment, including the following issues, is also causing
costs to be higher which could impact profitability:
• Raw materials and energy costs. Our energy rates are hedged in the
short term, but at higher rates than those which prevailed historically.
• Continued increases in National Living and Minimum Wages affects the
business because most of the Group’s colleagues are paid the National
Minimum or Living Wage.
• Geopolitical issues, including the Russian invasion of Ukraine, which
has had direct inflationary effects.
• FX rates. The pound is now stronger compared with the dollar than
during certain points in FY23. There is reduced risk in FY24 due to the
Group’s hedging policies, although we remain indirectly exposed to
FX rates, through indirect sourcing which represents approximately
60% of purchases for resale.
• Freight rates, which have significantly affected our costs in recent
years, are now at pre-COVID levels, and are not expected
to represent a threat for the foreseeable future.
Link to strategy
• Take account of expected impact in the strategic planning
process, budgets and forecasts.
• Control costs while making carefully considered investments
in certain areas to support growth.
• Increase direct sourcing to improve gross margin. While this
initiative was delayed by COVID-19 in China, momentum
should increase in FY24.
• Operate stores on flexible short-term leases to benefit from
reductions in rents through the rolling renegotiation of leases.
Store estate can be adapted relatively quickly in the event
of material local changes in demand.
Risk management and principal risks and uncertainties continued
Optimise our
store estate
Develop our brand and increase
customer engagement
Enhance our
online proposition
Drive operational
improvements
Principal and emerging risks and changes in principal risks continued
TheWorks.co.uk plc Annual Report and Accounts 202350
Risk, profile change and link to strategy Mitigation
3. Supply chain
The Group uses third parties, including many in Asia, for the supply
of products. Risks include the potential for supplier failures, risks
associated with manufacturing and importing goods from overseas,
potential disruption at various stages of the supply chain and suppliers
failing to act or operate ethically.
Failure to execute the restructuring of the supply chain team
successfully to implement necessary changes to the stock process
could prevent the right stock getting to the right stores at the right time
and materially impact sales growth.
Supply chain disruption due to COVID-19 restrictions potentially being
maintained in certain parts of the world, particularly China, could
cause disruption to stock availability and cost inflation. Any significant
increase in geopolitical tensions between the West and China could
affect the ability to purchase stock.
Due to the Group’s low level of exposure to sales outside the UK risks
connected with Brexit are low.
Change from prior year
Unchanged level of risk.
Link to strategy
• Strengthened buying and supply chain teams and further
investment is ongoing in FY24.
• Ongoing review of supplier base and diversification and
change implemented as appropriate to provide flexibility
and reduce reliance on individual suppliers.
• Independent monitoring of suppliers undertaken by
third-party auditors with local country knowledge and
an understanding of social and ethical requirements.
• In-house product quality assurance team undertakes product
testing as part of a product surveillance test programme.
• Implement policies that reinforce the Group’s values and
its commitment to conduct business fairly, ethically and
with respect to human rights which suppliers are required
to adhere to.
• Proactive management of supply chain to ensure stock levels
are appropriate.
• Continue to review freight costs (including measures
to mitigate them) and monitor alternative sourcing
arrangements where practicable.
4. IT systems and cyber security
The Group relies on key IT systems. Failure to develop and maintain
these, or any prolonged system performance problems or lack of
service, could affect the Group’s ability to trade and/or could lead
to significant fines and reputational damage.
Reliable systems and data integrity are key to the execution of the
strategy. Ensuring systems and processes are fit for purpose will enable
the delivery of improvements to the proposition.
Change from prior year
Reduced risk. The Group experienced a cyber security incident at the
end of March 2022. Actions taken in response to the incident have
significantly reduced the risk of the business suffering major loss or
disruption in the event of subsequent attacks.
Link to strategy
• Modern two-factor authentication for access, combined
with up-to-date end point detection capabilities (to monitor
devices and assess unexpected/risky activity) and network
segmentation, lowers the probability of malicious entry
and speed of movement of malware across the business.
• 24/7/365 Security Operations Centre, established in FY23,
monitors and responds to any unusual activities in systems
or networks.
• Enhanced working from home capabilities established
in response to the pandemic have reduced the level of
dependence on a single-site head office.
• Regular IT investment strategy review undertaken by the
Operations Board, including security and infrastructure
investment programmes.
• Further strengthened in-house IT capabilities during FY23.
5. Brand and reputation
The Group’s brand is vital to its success. Failure to protect the brand,
in particular product quality and safety, could result in the Group’s
reputation, sales and future prospects being adversely affected.
Diversity and inclusion issues have become more prominent in customer
preferences; failure to stock a diverse range of products and ensure
inclusivity could create reputational damage.
Change from prior year
Unchanged level of risk. Developing our brand and increasing customer
engagement is a strategic aim. In autumn 2022 we launched an
updated brand to ensure that the visual representation and tone
of voice of The Works aligns with its purpose and reflects the more
modern, fun and engaging business we are today.
Link to strategy
• Communicate to colleagues our clarified purpose and values.
• Provide intellectual property guidance and education to
design and sourcing teams.
• Monitor customer product reviews and take appropriate
action to remove products from sale and take other actions
as appropriate where quality issues are identified.
• In-house product quality assurance team works with suppliers
to ensure product quality, safety and ethical production.
• Conduct third-party technical and ethical audits.
• Monitor the Group’s ESG responsibilities and implement
processes to ensure the Group operates in a responsible
way (see pages 29 to 35).
• Recruiting a D&I manger to lead our D&I strategy including
reviewing our product range to ensure inclusivity.
• Operate brand tracking that provides feedback from
customers and highlights potential brand damaging issues.
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 51
Risk, profile change and link to strategy Mitigation
6. Seasonality of sales
The Group generally makes substantially all of its profit in the second
half of the financial year during the peak Christmas trading period.
Interruptions to supply, adverse weather or a significant downturn in
consumer confidence or a failure to successfully execute strategy in this
period could have a significant impact on the short-term profitability of
the Group.
Change from prior year
Unchanged level of risk.
Link to strategy
• Continue to develop the year-round appeal of
the proposition.
• Hold weekly trading meetings to ensure that immediate
action is taken to maximise sales based on current and
expected trading conditions.
• Plan rigorously for product proposition, supply chain and
retail operations to ensure the success of the peak Christmas
trading period.
7. People
The Group’s success is strongly influenced by the quality of the Board,
senior management team and staff generally. A lack of effective
succession planning and development of key colleagues could harm
future prospects.
Change from prior year
Unchanged level of risk.
Link to strategy
• Discuss and review succession plans at Nomination
Committee meetings.
• Establish development programmes to support
future leaders.
• Operate the ‘Can Do Academy’ to facilitate training
and development.
• Launched a new employee communications and
engagement platform MyWorks (see page 32).
• Well-managed search and recruitment processes, together
with appealing proposition and welcoming culture, enables
recruitment of high-calibre executives.
• Implement a Remuneration Policy designed to ensure
management incentives support the Group’s long-term
success for the benefit of all stakeholders, including a
Long-Term Incentive Plan for Executive Directors and
restricted share awards for Operations Board members.
For further details see pages 76 to 77.
8. Environmental (including climate change)
There is an increased focus on sustainable business from consumers
and regulators. In our business this applies to products and packaging
in particular. Failure to respond to these demands could affect the
Group’s reputation, sales and financial performance.
Supply chain disruptions due to more extreme weather events created
as a result of global warming could damage operations, in particular
the flow of stock which could adversely impact sales.
There are increased reporting and disclosure requirements relating
to climate change and environmental impact including new taxes,
regulation and compliance risks as noted in risk 9 below.
Change from prior year
Increased level of risk. Reporting and disclosure requirements are
continuing to increase and achievement of the Group’s longer-term
environmental ambitions are dependent on effective implementation
of the Group’s sustainability strategy and suppliers taking steps to
reduce their environmental footprint (see pages 30 and 31).
Link to strategy
• An ESG steering group meets quarterly and reports to the
Board and the Operations Board on a regular basis.
• Implementing initiatives to reduce our impact on the
environment (see pages 30 and 31).
• Retain specialist third-party ESG consultancy, Inspired
Energy, to assist in the further development of the
Group’s environmental strategy and ensure compliance
with TCFD requirements.
• Appointed a Sustainability Manager in January 2023
to lead the development and implementation of our
environmental strategy.
• Working with third-party logistics providers to explore and
invest in energy efficient solutions within the supply chain.
• Developed a climate risk register (see pages 38 to 45).
Risk management and principal risks and uncertainties continued
Optimise our
store estate
Develop our brand and increase
customer engagement
Enhance our
online proposition
Drive operational
improvements
Principal and emerging risks and changes in principal risks continued
TheWorks.co.uk plc Annual Report and Accounts 202352
Risk, profile change and link to strategy Mitigation
9. Regulation/compliance
The Group is exposed to an increasing number of legal and regulatory
compliance requirements including the Bribery Act, the Modern Slavery
Act, the General Data Protection Regulation (GDPR) and the Listing
Rules. Failure to comply with these laws and regulations could lead to
financial claims, penalties, awards of damages, fines or reputational
damage which could significantly impact the financial performance
of the business.
There are extensive and increasingly onerous laws and regulations
(including reporting and disclosure requirements) surrounding
climate change and environmental reporting. Failure to comply with
these could result in financial penalties, legal consequences and/or
reputational damage.
Change from prior year
Unchanged level of risk.
Link to strategy
• Oversight of regulatory compliance by Group CFO and
Company Secretary with support from external advisers.
• Implement policies and procedures in relation to both
mandatory requirements and measures the Group has
adopted voluntarily (e.g. anti-bribery and corruption,
adherence to National Living Wage requirements).
• Operate a Whistleblowing Policy and procedure which
enable colleagues to confidentially report any concerns
or inappropriate behaviour.
• Operate a GDPR Policy which is overseen by a suitably
experienced data supervisor and monitored by members
of a GDPR governance monitoring group who meet regularly
and report key issues to the senior management team.
• Retain experienced advisers where necessary to cover gaps
in expertise in the in-house team.
10. Liquidity
Insufficient liquidity available and/or insufficient headroom in banking
facilities. Potential for breach of banking covenants if financial
performance is significantly worse than forecast.
Availability of credit insurance to suppliers may be reduced or removed
resulting in an increased cash requirement.
Change from prior year
Unchanged level of risk.
Link to strategy
• Financial forecasts and covenant headroom monitored
and reported to the Board and the bank monthly.
• Strategy focuses on driving like-for-like sales and improving
efficiency, rather than previous store rollout plan, which is a
less capital intensive strategy.
• The Group’s bank facility at year end FY23 comprised a
committed RCF of £30m with an expiry date of 30 November
2025. Since the Period end, the Group has implemented
a reduction in the size of the facility, which was undrawn
throughout most of FY23, to £20.0m, and simultaneously
extended its term such that it now expires on 30
November 2026.
• Careful management of banking relationship increases the
likelihood of a supportive response in the event that it should
be needed.
11. Business continuity
Significant disruption to the operation, in particular internal IT systems,
Support Centre or Distribution Centre, could severely impact the
Group’s ability to supply stores or fulfil online sales resulting in financial
or reputational damage.
Change from prior year
Unchanged level of risk.
Link to strategy
• IT recovery plans fully tested in the response to the March
2022 cyber security incident.
• Implemented new cloud back-ups which improve the
flexibility of any disaster recovery plan response.
• Enhanced business continuity plan in place including
system recovery.
• Subscribe to a cloud-based technology recovery centre
to improve speed and execution of a recovery.
• Undertake disaster recovery dry run exercises. Emergency
generator installed at the Group’s Support Centre to insulate
the business from the impact of power cuts.
• Maintain appropriate business interruption insurance cover.
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 53
In accordance with Provision 31 of the UK Corporate Governance Code
(the Code), the Directors have assessed the prospects and viability
of the Group taking into account the Group’s current position and
the potential impact of the principal risks documented in this report.
The Directors have used a period of three years to make this
assessment, a period which they consider to be appropriate
for the following reasons:
• Retail market trends evolve rapidly, including the way customers
shop and the impact of new technologies. The potential
uncertainty as to how the market may have evolved more than
three years into the future is considered too great to enable
plans extending beyond this period to be meaningful.
• Uncertainty exists in relation to the wider economy and its
potential impact on consumer demand and shopping habits.
• The average remaining term of the Group’s property portfolio
leases is approximately three years.
The text which follows closely reflects the text in Note (1) (b) (i) of the
financial statements, relating to the preparation of the accounts
on a going concern basis. The accounts have been prepared on
a going concern basis, but Note (1) (b) (i) refers to the existence
of a material uncertainty regarding the availability of borrowing
facilities in the event that they may be needed under a sensitised
“severe but plausible” downside case.
The Group has prepared cash flow forecasts for FY24 to FY26,
referred to as its ‘Base Case’ scenario. In addition, a ‘severe but
plausible’ ‘Downside Case’ sensitivity has been prepared to
support the Board’s conclusion regarding viability, by stress testing
the Base Case to indicate the financial headroom resulting from
applying more pessimistic assumptions.
In assessing the Group’s viability the Directors have considered:
• The external environment.
• The Group’s financial position including the quantum and
expectations regarding the availability of bank facilities.
• The potential impact on financial performance of the risks
described in the Strategic report.
• The output of the Base Case scenario, which represents the Group’s
view of the most likely financial performance over the viability period.
• Measures to maintain or increase liquidity in the event of a
significant downturn in trading.
• The resilience of the Group to these risks having a more severe
impact, evaluated via the Downside Case which shows the impact
on the Group’s cash flows, bank facility headroom and covenants.
These factors are described below.
External environment
The risks which are considered the most significant relate to the
economy and the market, specifically their effect on the strength of
trading conditions, and the Group’s ability to successfully execute
its strategy. The risk of weaker consumer demand is considered to
be the greater of these risks currently, due to the continued high
level of inflation and its potential effect on economic growth and
consumer spending.
An emerging risk has been noted in relation to the possible effects
of climate change, but this is not expected to have a material
financial impact on the Group during the viability period.
Financial position and bank facilities
At the end of FY23 the Group held net cash at bank of £10.2m
(FY22: of £16.3m).
After the Period end, the Group extended the term of its bank
facility by one year and it now expires on 30 November 2026,
thereby covering the entirety of the viability period. At the same
time, following a review of the historic utilisation of the facility, the
Group’s anticipated future cash requirements, and the costs of
maintaining the facility, the Group requested that HSBC reduce the
size of the facility from £30m to £20m.
The facility includes two financial covenants which are tested quarterly:
1. The ‘Leverage Ratio’ or level of net debt to LTM (last 12 months’)
EBITDA must not exceed 2.5 times during the life of the facility.
2. The ‘Fixed Charge Cover’ or ratio of LTM EBITDA prior to
deducting rent and interest, to LTM rent and interest. This
covenant increases in steps to reflect the expectation of
progressively improving financial performance during the life
of the facility, as follows: until October 2023, the ratio must
be at least 1.20 times; for the following 12 months the ratio
must be at least 1.25 times, and thereafter at least 1.30 times.
The Group expects to be able to operate and have sufficient
headroom within these covenants.
Potential impact of risks on financial scenarios
It is considered unlikely that all the risks described in the Strategic
report would manifest themselves to adversely affect the business
at the same time. The Base Case scenario/the Group’s three-
year financial plan, implicitly already takes into account the risks
described, and assumes that they manifest themselves in a way or
to an extent that might be considered ‘neutral’.
The Downside Case scenario assumes that there are more severely
negative effects than in the Base Case. In particular, the Downside
Case assumptions are that macroeconomic conditions are
significantly worse, resulting in reduced consumer spending and
lower sales. It should be noted that the Base Case already takes
into account the current subdued consumer market conditions.
The Downside Case assumes that conditions become worse
still from the second half of the FY24 financial year.
Viability statement
TheWorks.co.uk plc Annual Report and Accounts 202354
Base Case scenario
The Base Case scenario assumptions reflect the following factors:
• Store sales (which represent over 85% of total sales) during the
first part of FY24 are above the Base Case requirement but
online sales are below it. The Group is implementing plans to
improve its online profitability in the medium term; in the short
term, costs relating to the online business are being tightly
controlled to ensure that they reflect the reduced sales level.
• The Base Case gross margin percentage reflects the expected
full year effect in FY24 of targeted price increases applied
since the beginning of 2023 and also significantly lower ocean
container freight costs. These favourable factors are partially
offset by a less favourable hedged FX rate than in FY23.
• Anticipated further inflationary effects, in particular the increase
in the National Living Wage. In respect of other costs, notably
property occupancy costs, it is not expected that there will be
further significant inflationary effects during FY24 and FY25,
following the significant increases (for example in electricity
costs) already experienced during FY23.
• Capital expenditure levels are in line with the Group’s strategic
plan. A significant proportion of the Group’s capital expenditure
is discretionary, particularly over a short-term time period. As a
result, if required, it can therefore be reduced substantially, for
example, in the event the Group needs to preserve cash.
• The anticipated costs of the Group’s net zero climate change
commitments have been incorporated within the Base Case
model within the next three years. As set out in the climate
related disclosures on pages 36 to 46, the impact on the Group’s
financial performance and position is not expected to be
material in the short term.
• The plan makes provision for dividend payments.
Under the Base Case scenario, the Group expects to make routine
operational use of its bank facility each year as stock levels are
increased in September-October, prior to peak sales occurring.
This is consistent with the normal pattern experienced prior to
COVID-19.
The output of the Base Case model scenario indicates that the
Group has sufficient financial resources to remain viable over the
three-year period.
Measures to maintain or increase liquidity in
circumstances such as are described below
If necessary, mitigating actions can and would be taken in
response to a significant downturn in trading, such as is described
below, which would increase liquidity.
These include, for example, delaying and reducing stock
purchases, stock liquidation, reductions in capital expenditure, the
review of payment terms and the review of dividend levels. Some of
these potential mitigations have been built into the Downside Case
model, and some are additional measures that would be available
in the event of that scenario, or worse, actually occurring.
Severe but plausible Downside Case scenario
The Downside Case makes the following assumptions to reflect
more adverse macroeconomic conditions compared to the
Base Case:
• Store LFL sales are assumed to be 5% lower than in the Base
Case from October 2023 until January 2025.
• In this scenario online sales are assumed to be lower than in the
Base Case during FY24 despite the Group’s attempts to increase
them, but show recovery in FY25.
• The product gross margin assumptions are the same as in
the Base Case other than in January 2024 when it is lower, to
allow for the clearance of stock which is assumed would have
accumulated due to the inability to reduce stock purchases
immediately in response to the lower sales level.
• Expected FX requirements are hedged until mid-FY25, and
freight rates are hedged until the end of 2023. Beyond that time,
it is not anticipated that there will be any interruption to global
freight systems as was experienced as a result of the COVID-19
pandemic, which were a consequence of unique circumstances.
Other gross margin inputs are relatively controllable, including
via the setting of selling prices to reflect any systematic changes
in the cost price of goods bought for resale.
• Volume related costs in the Downside Case are lowered where
they logically alter in a direct relationship with sales levels,
for example, forecast online fulfilment and marketing costs.
The model also reflects certain steps which could be taken to
mitigate the effect of lower sales, depending on management’s
assessment of the situation at the time. These include
adjustments to stock purchases, reducing capital expenditure,
reductions in labour usage, a reduction in discounts allowed
as part of the Group’s loyalty scheme and the suspension of
dividend payments.
• The combined financial effect of the modified assumptions in
this scenario compared with the Base Case, during the viability
assessment period FY24 to FY26, including implementing some
of the mitigating activities available, would result in:
• A reduction in store net sales of approximately £63m.
• A reduction in online net sales of approximately £1m.
• A reduction to EBITDA of approximately £15m.
Under this scenario the Group will draw on its bank facility prior to
Christmas 2023 but, as a result of the mitigating actions that would
be taken in H2 FY24 in response to a downturn in sales, particularly
in reducing the value of stock bought for resale, it would not make
subsequent use of the bank facility.
The bank facility financial covenants are complied with during
the pre-Christmas 2023 period when the facility is being used, but
the forecast indicates that the Fixed Charge covenant will not be
complied with throughout FY25, although at this time the facility is
not expected to be in use under this scenario.
On the basis of this Downside Case scenario with the ‘severe but
plausible’ set of assumptions as described, the business would continue
to have adequate resources to continue in operation on a viable basis.
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 55
Severe but plausible Downside Case scenario continued
However, the cash headroom at certain quarterly covenant
testing points in FY25 and FY26 is limited, and there are reasonably
plausible scenarios in which this headroom could be eroded and
create a borrowing requirement. For example, if sales decreased
by a further 1% during the going concern period (which covers the
earlier part of the viability assessment period) compared with the
Downside Case, a small borrowing requirement could arise.
The Group has a strong relationship with its bank, HSBC, and has
a recent track record of working collaboratively with the bank
to resolve potential covenant issues, for example, a waiver was
agreed by HSBC in 2021 as noted in the Group’s FY21 Annual Report.
Despite this strong relationship with the bank and the recent evidence
of successfully managing comparable situations, if a borrowing
requirement arose when the financial covenants are not complied
with, there is a risk that the Group would not be able to utilise its
borrowing facilities if required.
The Directors believe that, should such a situation arise in practice,
it would have time before a potential breach to mitigate further,
and potentially to make arrangements with the bank, as has occurred
previously, to adjust the covenant levels to prevent a breach.
Furthermore, the Group has successfully managed through
challenging conditions during the recent COVID-19 pandemic,
and the Directors believe it unlikely that comparably challenging
conditions will be experienced during the forecast period, despite
the concerns regarding the current macroeconomic conditions.
Nevertheless, despite the Directors’ confidence in relation to these
matters, there is no certainty as to whether the mitigating actions
would provide the level of liquidity required in the time available to
implement them, nor whether the bank would make adjustments to
the financial covenants.
Conclusion regarding viability
Having considered the possibilities modelled under the scenarios
described above, including the Board’s assessment of the
likelihood that each scenario transpires, and the likelihood that
the Group would be able to take actions to successfully mitigate
the effects should such events occur, the Board is satisfied that
the Group can maintain its financial commitments. The Directors
therefore confirm they have a reasonable expectation that the
Group will be able to continue in operation and meet its liabilities
as they fall due over the three-year viability assessment period.
Viability statement continued
TheWorks.co.uk plc Annual Report and Accounts 202356
Non-financial and sustainability information statement
Key matter Policies and standards that govern
our approach
Further information
Environment and
climate-related
financial disclosures
• Sustainability strategy. • ESG review: pages 29 to 35.
• TCFD statement: pages 36 to 46.
• Our stakeholders: page 26.
Employees • Health & Safety Policy.
• Dignity & Respect Policy.
• Equality, Diversity & Inclusion Policy.
• Whistleblowing Policy.
• Colleague handbook.
• Social Media Policy.
• Disciplinary & Grievance Policies.
• Data protection.
• ESG review: pages 32 to 34.
• Our stakeholders: pages 26 and 27.
• Remuneration report: pages 73 to 85.
• Corporate governance report: pages 62 to 65.
Respect for
human rights
• Modern Slavery Statement.
• Ethical Trading Code of Conduct.
• Whistleblowing Policy.
• ESG review: page 35.
• Corporate governance report: pages 62 to 65.
Social • Sustainability strategy.
• Data protection.
• ESG review: pages 30 to 34.
• Our stakeholders: pages 26 and 27.
Anti-corruption and
anti-bribery
• Bribery Policy.
• Whistleblowing Policy.
• ESG review: page 35.
• Corporate governance report: page 63.
Additional disclosures • Business model: pages 14 and 15.
• Key performance indicators: page 18.
• Principal risks: pages 49 to 53.
In accordance with Sections 414CA and 414CB of the
Companies Act 2006 the information below is provided to
help our stakeholders understand our position in relation
to key non-financial and sustainability matters. The further
information highlighted below is incorporated by cross-reference.
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 57
The Board is fully committed to
implementing the highest standards
of corporate governance.
Chair’s governance introduction
Dear shareholder
I am delighted to present our Corporate governance report for
the year ended 30 April 2023, which sets out how our governance
framework has operated and developed during the course
of the year.
The Board remains fully committed to implementing the highest
standards of corporate governance, and I am pleased to report
that it has applied the principles of the 2018 UK Corporate
Governance Code in so far as it applies to smaller listed companies
(below the FTSE 350).
The Company’s performance in FY23 has continued to be impacted
by the uncertain economic environment, and in particular concerns
around the cost of living, as well as ongoing (but reducing) effects
of supply chain disruption due to the Covid-19 pandemic. The
lingering effects of the cyber security incident towards the end
of FY22 also affected the business’ operations.
During the year the Company’s leadership team and structure
have continued to evolve and we have continued to make
operational improvements to ensure that the business is run in the
most efficient and cost-effective way, including through proposed
changes to the store labour model which were reviewed by the
Board during the year.
As a Board, we have also devoted time to monitoring initiatives
to support our people and culture. This has included updates on
our employee engagement survey, and progress against actions
arising from it, as well as receiving a detailed talent review covering
various workstreams to support the development of our colleagues.
Our governance framework has also been further strengthened.
In particular, in line with our commitment to reduce our impact on
the environment and implement the TCFD recommendations, we
have increased our focus on environmental and climate-related
matters. In setting our emission reduction targets to achieve our
net-zero ambitions (which are described in more detail on page
30) the Board has spent a significant amount of time discussing,
challenging management on, and ultimately approving the
approach adopted.
TheWorks.co.uk plc Annual Report and Accounts 202358
Site visit to iForce
Managing a cost-effective and efficient fulfilment process
is vital to the delivery of the Group’s ability to maintain a
competitive value offering online. Given the importance of
this process, in early October 2022 the Board held its meeting
at the iForce distribution centre in Rugby (the site from which
the majority of the Group’s online channel sales are fulfilled).
The visit included a tour of the iForce operation, and the
opportunity to see in action the Company’s investment in
an automated packing machine and robots to improve the
efficiency of the stock picking operation. Board members
were also able to engage directly with the Company’s key
contacts at iForce, enabling them to assess the strength of
the supplier relationship and understand the challenges and
improvement opportunities to support the efficient delivery
of online purchases to customers.
Read more about our strategy on pages 16 and 17
Drive operational
improvements
Financial statementsCorporate governanceStrategic report
Our programme of Operations Board member presented ‘deep
dives’ at our scheduled Board meetings continues to work well
in both ensuring that the Board is kept well informed of progress
against key strategic and operational projects, as well as providing
opportunities to engage directly with senior management and their
direct reports. During FY23, ‘deep-dives’ have focused in particular
on IT projects and security (with the Board keen to oversee
progress to enhance our IT security infrastructure following the
cyber attack last year), and ESG and net zero (as noted above). We
have also devoted significant time to projects aimed at improving
stock management processes, including the review of the Group’s
operational structure, enhancement of its merchandising functions,
and proposals to enhance underlying systems.
I led an internal Board evaluation process during the year which
is summarised on page 64. I am delighted to report that the
unanimous conclusion was that the Board dynamics are working
well, and that the Board, its Committees and individual Directors
are operating effectively. We have identified some actions to
take forward in FY24 to ensure that we continue to support
management and the business in the best way possible. These
include allocating additional time for store visits and strategy
review, improving the visibility and understanding of the Board
across the business, and continuing to review the information
included in monthly reporting to the Board.
I have also enjoyed increased levels of direct engagement with
our shareholders during the year including participating in a
number of face-to-face meetings. These interactions are extremely
beneficial; they provide a deeper understanding of what really
matters to our shareholders, and this invaluable information better
equips the Board when considering the shareholder context in its
discussions and debates.
I look forward to meeting shareholders at our forthcoming Annual
General Meeting (AGM), which will be held on 4 October 2023.
Carolyn Bradley
Chair
30 August 2023
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 59
Image TBC
Board of Directors
An experienced team
Carolyn Bradley
Chair and Non-Executive Director
Date of appointment
September 2021
Committee membership
Chair of the Nomination Committee and
member of the Remuneration Committee.
Relevant skills and experience
• Extensive retail, marketing and
commercial experience in executive and
non-executive roles including 25 years at
Tesco plc where her roles included Group
Brand Director, UK Marketing Director and
Chief Operating Officer for Tesco.com.
• Significant consumer experience
including leading Tesco’s Clubcard
loyalty scheme, the ‘Every Little Helps’
service campaign and the grocery home
delivery business.
Current external appointments
Senior Independent Director and Chair of
the Remuneration Committee of SSP Group
plc and Non-Executive Director of Majid
Al Futtain Retail LLC and The Mentoring
Foundation.
Catherine Glickman
Independent Non-Executive Director
Date of appointment
July 2018
Committee membership
Chair of the Remuneration
Committee and member of the
Audit and Nomination Committees.
Relevant skills and experience
• Significant retail experience as Group HR
Director of Genus plc, having previously
held the same role at Tesco plc where she
led retail management development and
customer service training during a period
of significant expansion in the UK and
overseas. Prior to this she held positions
at Somerfield and Boots.
• Extensive people and reward expertise
having developed reward structures that
align leadership motivation with strategy
at both Genus plc and Tesco plc.
Current external appointments
Non-Executive Director and Chair of the
Remuneration Committee at Renishaw plc.
Harry Morley
Senior Independent Non-Executive Director
Date of appointment
July 2018
Committee membership
Chair of the Audit Committee
and member of the Nomination
and Remuneration Committees.
Relevant skills and experience
• Extensive retail and consumer
experience, including as co-founder
of Tragus Holdings Ltd, owner of Café
Rouge and Bella Italia restaurant
chains and a Non-Executive Director
of Bibendum Wine Holdings Ltd.
• Significant financial and commercial
expertise as Chief Financial Officer of
Tragus Holdings Ltd and CEO of Armajaro
Asset Management LLP. He also held
senior management roles at P&O.
• Chartered accountant.
Current external appointments
Non-Executive Director and Chair of the
Audit Committee at JD Wetherspoon plc,
a Trustee of the Ascot Authority and from 1
September 2023, a Non-Executive Director
of Schroder UK Mid Cap Fund plc. Director
of Cadogan Group Limited and two related
subsidiary companies.
N A AN NRR R
TheWorks.co.uk plc Annual Report and Accounts 202360
Experience
Retail
Consumer
Finance
PLC
100%
60%
100%
100%
Tenure
1–3 years 40%
3–6 years 60%
Male 60%
Female 40%
Gender
Gavin Peck
Chief Executive Officer
Date of appointment
January 2020
Committee membership
None
Relevant skills and experience
• Significant financial, retail and
commercial expertise, including as Chief
Financial Officer of The Works, and, prior
to that, as Commercial Director at Card
Factory plc where he was responsible for
the commercial function (buying, space
and merchandising) and leadership of
the commercial finance team. He played
a key role in the successful IPO of Card
Factory in 2014 and its subsequent
growth and evolution as a listed business.
• Chartered Accountant, having started
his career at PwC where he spent eight
years working in the audit and corporate
finance departments.
• Joined The Works as CFO in April 2018,
overseeing the IPO and serving as an
Executive Director of TheWorks.co.uk plc
since the IPO in July 2018.
Current external appointments
None
Steve Alldridge
Chief Financial Officer
Date of appointment
May 2021
Committee membership
None
Relevant skills and experience
• Significant financial and retail expertise
having initially joined The Works on an
interim basis as CFO in June 2020. Prior
to that, over 20 years’ experience of
working in retail, most recently as CFO
of Bonmarché Holdings plc, where he
led a highly effective finance function,
and completed several significant
transactions, including a private equity
backed management buyout, and
two stock market listings. Previously he
worked at Peacocks, the discount retailer,
and chartered accountants EY.
• Chartered accountant.
Current external appointments
None
Committee membership
Audit Committee
Nomination Committee
Remuneration Committee
Chair of Committee
A
N
R
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 61
Corporate governance report
UK Corporate Governance Code – compliance statement
The Company has applied all of the principles of the UK Corporate Governance Code (the Code) as they apply to it as a ‘smaller company’
(below FTSE 350) and has complied with all relevant provisions of the Code during the year. Full details of the Code are available at
www.frc.org.uk. Details explaining how the Company has applied the principles of the Code can be found throughout this Annual Report.
Governance structure
Board
• Overall leadership of the Group.
• Oversees and embeds sound principles of corporate
governance.
• Ensures appropriate policies, procedures and controls are in
place to support effective risk management and performance
against agreed financial and operational metrics.
• Sets strategy, purpose, values and culture.
• Approves major contracts.
• Approves business plan and budget.
• Sets and oversees environment and climate strategy and targets.
Certain matters are reserved to the Board and formally documented in a Schedule of Matters Reserved to the Board.
The Board has delegated a number of its responsibilities to the Audit Committee, Nomination Committee and Remuneration
Committee. The Schedule of Matters Reserved to the Board and each Committee’s terms of reference are available at
https://corporate.theworks.co.uk/who-we-are/corporate-governance.
Audit Committee Nomination Committee Remuneration Committee
• Reviews annual and interim financial
statements.
• Reviews accounting policies and
financial reporting and regulatory
compliance.
• Reviews internal control system.
• Monitors processes for internal audit,
risk management and external audit.
• Monitors independence
of external auditor.
• Oversees relationship with
external auditor.
Read more on pages 66 to 69
• Identifies and nominates appointments
to the Board.
• Reviews Non-Executive Directors’ time
commitments.
• Oversees succession planning.
• Reviews size and composition
of the Board.
• Promotes diversity.
• Undertakes annual performance
evaluation of the Board, its Committees
and individual Directors.
Read more on pages 70 to 72
• Sets Remuneration Policy.
• Determines Executive Director and
senior management remuneration.
• Approves annual bonus plan and
Long-Term Incentive Plan targets.
• Reviews workforce remuneration policies
and practices.
• Ensures that provisions regarding
disclosure of remuneration are fulfilled.
Read more on pages 73 to 85
Operations Board
• Reporting to the CEO, responsible for the day-to-day trading activities of the Group and implementing the strategy agreed
by the Board.
• Monitors performance against financial and operational targets and manages risk.
Information about the Operations Board is available at https://corporate.theworks.co.uk/who-we-are/our-leadership.
How the Board operates
The Board meets at least ten times per year, and its activity at
each meeting is planned in accordance with a formal schedule of
activity which is updated on a rolling basis and is approved by the
Board. This ensures that it receives appropriate information at the
appropriate time, and that all key operational, financial reporting
and governance matters are discussed during the year. In addition
to standing items, agendas incorporate sufficient flexibility to allow
specific areas of focus to be considered as and when required, and
for store or Distribution Centre visits to be incorporated into the
annual meeting activity. The schedule includes regular ‘deep-dive’
presentations from Operations Board members on specific areas
of their responsibility, which increase the Non-Executive Directors’
understanding of key operational initiatives and challenges and
provide the opportunity for senior executives to meet and discuss
their areas of responsibility with the Board.
To support consistency of information, a Board pack is circulated
in advance of each meeting. It includes summary reports from the
CEO, the CFO and each of the other Operations Board members,
as well as underlying supporting data and metrics. The Company
Secretary also prepares a standard format report for each
meeting to ensure the Board is kept up to date on recent and
upcoming announcements, share dealing requests and statutory
or regulatory filings, and regulatory or legislative developments
which may impact the Company. Separate papers are prepared to
support any specific matters requiring Board decision or approval,
or to provide updates on actions raised at previous meetings.
The Non-Executive Directors provide ongoing feedback to the
CEO and CFO on the content of papers to ensure they continue to
support effective debate and decision making by the Board.
All Directors have direct access to the Operations Board members
and other senior managers should they require additional
information on any of the items to be discussed at Board meetings.
The Board and the Audit Committee also receive regular and
specific reports to enable monitoring of the effectiveness of the
Company’s systems of internal control.
Minutes of all Board and Committee meetings are taken by the
Company Secretary and circulated to Directors for approval as soon
as practicable following the meetings. Specific actions arising from
meetings are recorded both in the minutes and on separate action
logs, thereby facilitating the effective communication of actions to
those responsible and allowing the Board to monitor progress.
TheWorks.co.uk plc Annual Report and Accounts 202362
Composition, independence and attendance
There were no changes to the Board during FY23, and it therefore
continues to be comprised of five Directors (including the Chair).
The Board (on the recommendation of the Nomination Committee)
continues to determine that both of the Non-Executive Directors
(Catherine Glickman and Harry Morley) are independent, and
therefore, excluding the Chair, half of the Board comprises
independent Directors in compliance with provision 11 of the Code.
Individual Director attendance at scheduled Board and Committee
meetings (where they are a member) is set out in the table below:
Director
Board
meetings
held/
attended
Audit
Committee
meetings
held/
attended
Remuneration
Committee
meetings
held/
attended
Nomination
Committee
meetings
held/
attended
Carolyn Bradley 11/11 N/A 4/4 2/2
Gavin Peck 11/11 N/A N/A N/A
Steve Alldridge 11/11 N/A N/A N/A
Catherine Glickman 11/11 4/4 4/4 2/2
Harry Morley 11/11 4/4 4/4 2/2
All Directors are expected to attend all meetings of the Board and
any Committees of which they are members, and to devote sufficient
time to the Company’s affairs to fulfil their duties as Directors. The
Non-Executive Directors’ letters of appointment anticipate that
each Non-Executive Director will need to commit a minimum of two
days per month to the Company but clarify that more time may be
required. In addition, the Non-Executive Directors are expected to
commit appropriate preparation time ahead of each meeting.
Where Directors are unable to attend a meeting, they are
encouraged to submit any comments on papers or matters to
be discussed to the Chair in advance to ensure that their views
are recorded and taken into account during the meeting.
Roles and division of responsibilities
There have been no changes to the roles and responsibilities of
the members of the Board during the year. As previously reported,
there is a clear division of responsibilities between the Chair and
the CEO (with the Chair’s primary role being to lead the Board and
ensure its independence and effectiveness, and the CEO’s primary
role being the day-to-day management and leadership of the
Company). Harry Morley is the Senior Independent Director, and his
duties in that role include acting as a sounding board for the Chair,
being available as an additional point of contact for shareholders,
and leading the evaluation of the Chair’s performance.
The Company Secretary supports the Board and each of the three
Board Committees, and attends all meetings. The Company Secretary
is available to all the Directors to advise on company law, governance
and best practice, whilst assisting the Board in ensuring that the
correct policies, processes and information are tabled for discussion,
noting or approval at the correct point in time throughout the year.
Board activities during the year
The Board met formally on 11 scheduled occasions during the year. It
also undertook three site visits. In October 2022 the Directors visited
the Group’s third-party fulfilment partner’s (iForce) distribution centre
in Rugby (see page 59) and in November 2022 its Watford Atria
store. In April 2023 the Board also undertook a tour of the Group’s
Distribution Centre (co-located within its head office at Boldmere
House) to see the new pick matrix that has been introduced to
improve the efficiency of the store replenishment process.
In addition to scheduled meetings, the Board also met on two
separate occasions by video conference at short notice to review
trading performance and to deal with final approval of the FY22
results announcement and Annual Report.
Financial statementsCorporate governanceStrategic report
The key matters the Board focused on during the year are detailed in
the table below. In addition the standing agenda for each scheduled
Board meeting includes discussion of the information contained
within the Board pack circulated in advance of each meeting (see
previous page).
Topic Activity
Strategy
• Mid-year progress review against strategic objectives.
• Approved investment in stock transformation
(including review of operational structure and
enhancement of the merchandising function).
Financial and
reporting
• Reviewed and approved the FY24 budget.
• Reviewed and approved the half-year and
full-year financial statements.
• Approved the Group tax strategy.
People
and culture
• Received an update on Company culture and
reviewed a summary of key workforce policies
and procedures.
• Reviewed employee engagement survey.
• Received detailed talent review, and update on
workstreams to support colleague development
and internal succession.
• Reviewed proposed changes to store
labour model.
Shareholder
engagement
• Received regular updates from CEO and
CFO on their engagement with analysts
and institutional investors.
• Discussed feedback from the Chair’s meeting
with investors during the year.
• Approved appointment of Singer Capital
as corporate broker.
ESG • Reviewed the Group’s carbon balance sheet
and approved methodology for assessing
Scope 3 emissions.
• Agreed net-zero strategy and targets.
• Reviewed climate-related risks and opportunities
facing the business.
• Received updates on development of the
diversity and inclusion strategy, and approved
the updated Board Diversity Policy.
Risk
management
• Reviewed the Group’s risk register and internal
controls structure.
• Received regular updates on internal financial
control improvements.
• Reviewed detailed progress reports on steps
being taken to enhance IT security infrastructure
following last year’s cyber security incident.
• Reviewed and proposed amendments to the
Group’s policy relating to bribery and corruption.
Governance • Reviewed the results of the Board evaluation,
and agreed an action plan for FY24.
• Reviewed various governance policies, including
the Disclosure Policy, Whistleblowing Policy,
Share Dealing Code and Board Diversity Policy.
• Reviewed and approved changes to the
Board’s Schedule of Matters Reserved
and its Committees’ terms of reference.
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 63
Training and development
The efficient and effective operation of the Board depends on the
ability of individual Directors (and in particular the Non-Executive
Directors) to bring the benefit of their own business knowledge
and experience. Ensuring that all Directors have an in-depth
understanding of the Company’s own operations is an important
element in enabling the benefit of that experience, and we seek
to support this understanding through the detailed materials
circulated in advance of Board meetings, as well as collective and
individual Director site visits or days out in stores, which are usually
accompanied by different members of the Operations Board.
We also expect our Directors to keep themselves up to date in
relation to developments in regulation and corporate governance
best practice. As highlighted above the Company Secretary
ensures that the Board is briefed on forthcoming legal and
regulatory developments, and Directors are encouraged to attend
externally facilitated seminars, webinars and workshops to develop
their knowledge and experience in particular areas relevant to their
role with the business.
Evaluation and effectiveness
In accordance with provision 21 of the Code, the Board considered
whether it would be appropriate to conduct an externally facilitated
evaluation process during the year. Given the size of the Board, the
relative cost of an externally facilitated process, and a desire to allow
the Executive Directors to maintain focus on managing the business in
a challenging environment without unnecessary distraction, the Board
agreed that an internal evaluation process would again be the best
approach. However, to gather more qualitative feedback the Board
agreed that the process should move away from a questionnaire-
based approach to one led by the Chair and involving face-to-face
conversations with each member of the Board. Information about
the FY23 evaluation process, including its findings and key actions, is
summarised in the table below:
Corporate governance report continued
Process Discussions and output
1. PLC Board
interviews
Carolyn Bradley met with each member of the Board. Discussions focused on:
• Board dynamics.
• Meeting content and process.
• Governance and activity programme.
• Committee performance.
• Individual Director performance.
2. Operations
Board
feedback
session
Gavin Peck led a group discussion with the Operations Board seeking feedback on:
• Their interactions with Board Directors (through one-to-one meetings or their attendance at PLC Board meetings).
• Broader business/colleague perception and understanding of the Board’s role.
• The culture promoted by the Board.
3. Feedback Summary feedback compiled by Carolyn Bradley was discussed at the April 2023 Board meeting. Key findings were:
• Universal agreement that Board dynamics are good.
• Meetings are effective, with appropriate content, papers and governance.
• Appropriate time is spent on strategy.
• Interactions with Operations Board are positive and well received.
• Committees are well chaired and operate effectively.
• More time could be spent in stores and monitoring trends and developments in the retail sector.
• Challenge from the Non-Executive Directors is appropriate and well received.
4. Next steps The Board agreed the following actions:
• Hold an extended two-day meeting each year to accommodate store visits alongside a strategy review.
• Consider the level of detail required in Operations Board reports to the Board, including whether they could
be more succinct.
• Consider ways to deepen broader business understanding/knowledge of the Board and its role.
Progress made in addressing some of the actions identified in the FY22 evaluation process is summarised below:
Key matter Actions Progress in FY
Purpose, values
and strategy
• Develop an overall execution plan encompassing
all elements of the Company’s strategy.
• Create a dashboard to monitor and measure
progress against relevant KPIs.
• Regular updates provided by the CEO
on progress against strategic pillars.
Stakeholders • Build on recent good stakeholder engagement
with both colleagues and shareholders.
• Develop and support the Company’s ESG
programme, at Board and executive level,
recognising that the programme requires
more definition and data provision.
• Continued focus on colleague engagement.
• Chair has met with a number of shareholders
in the year.
• Significant focus on ESG (particularly climate
and net zero) in the year.
The Board and succession • Increase Nomination Committee focus
on succession planning at Board and
executive levels.
• Create more opportunities for the Board to
meet rising stars and future executive leaders.
• Additional time devoted to succession planning
during the year.
• Operational ‘deep-dive’ presentations to the
Board expanded to include presentations by
Operations Board members’ direct reports.
TheWorks.co.uk plc Annual Report and Accounts 202364
Appointment and election
The Board considers all Directors to be effective and committed
to their roles and to have sufficient time to perform their duties.
In accordance with the Company’s Articles of Association
(articles), all members of the Board will be offering themselves
for reappointment at the Company’s AGM on 4 October 2023.
All of the Directors have service agreements or letters of
appointment and the details of their terms are set out below.
Executive Director service contracts
Name Position
Date of
service
agreement
Notice
period by
Company
(months)
Notice
period by
Director
(months)
Gavin Peck CEO 19 July 2018 12 12
Steve Alldridge CFO 14 May 2021 6 6
The Non-Executive Directors (including the Chair) do not have
service contracts, but are instead appointed by letters of
appointment. Each of the Non-Executive Directors and the Chair
are appointed for a three-year term, subject to their annual
reappointment by shareholders at the AGM.
Non-Executive Director appointments
Name
Date of
appointment
Appointment letter
commencement
date
Unexpired
term as at
October
Carolyn Bradley 30 September
2021
30 September
2021
months
Catherine Glickman 19 July 2018 26 July 2022 months
Harry Morley 19 July 2018 26 July 2022 months
Conflicts of interest and external appointments
In accordance with the Board’s approved procedure relating to
the disclosure of any conflicts or potential conflicts of interest, all
Directors have confirmed that they did not have any conflicts of
interest with the Group during the year. None of the Directors took
on any new external appointments during FY23.
Whistleblowing
The Company has in place procedures by which colleagues may,
in confidence, raise concerns relating to possible improprieties
in matters of financial reporting, financial control or any other
matter. The Whistleblowing Policy applies to all colleagues across
the Group, and the Board is responsible for monitoring the policy
and ensuring that the arrangements are effective. A review of the
Whistleblowing Policy and arrangements was initiated in the latter
part of FY23, and while the Board continues to be of the view that
existing arrangements are appropriate it is anticipated that the
language of the policy will be updated in FY24 to bring it in line
with that of other workforce policies.
Stakeholder engagement
The CEO and Operations Board members are responsible for
the day-to-day management of stakeholder relationships and
ensuring that stakeholder issues are appropriately reported to the
Board. Further information on how we engage with stakeholders
is set out on pages 26 and 27. The Directors recognise their duty
under Section 172 of the Companies Act to consider the interests
of stakeholders, and the nature of our business means that the
interests of our colleagues, customers and suppliers are at the front
of mind in the Board’s decision-making process. The Company’s
Section 172 statement is included on page 28.
Engagement with the workforce
The Board recognises that the Company’s culture underpins its
long-term success. Accordingly, assessing and monitoring the
culture that is being fostered across the Group forms part of the
Board’s activity schedule. This assessment is conducted through
a combination of reviews of the output of our regular employee
engagement surveys, updates from the People Director through
our programme of Operations Board members’ ‘deep-dive’
presentations to the Board, formal reporting on people related
statistics in the monthly Board pack, and Board members’ own
interactions with colleagues across the Group (including through
Board or individual Director site visits). The Board also regularly
reviews workplace policies and practices.
As part of its review of Code compliance during the year, the
Board again assessed the various methods by which the Directors
engage with the wider workforce. The Board continues to be of the
view that the combination of existing engagement mechanisms
ensures that the Board is appropriately informed about, and
understands, workforce views, and therefore this approach
continues to appropriately address the requirement to engage
with the workforce under provision 5 of the Code. The Board
does not currently intend to adopt one of the three workforce
engagement methods suggested in that provision, but will continue
to monitor its workforce (and wider stakeholder) engagement
mechanisms to ensure they operate effectively.
Relations with shareholders
The Board recognises the importance of explaining financial
results and key strategic and operational developments in the
business to the Company’s shareholders, and of understanding
any shareholder concerns.
Ensuring a satisfactory dialogue with shareholders and receiving
reports on the views of shareholders are matters reserved for the
Board. Day-to-day responsibility for investor relations is delegated
to the CEO and the CFO, who are supported by the Company’s
retained financial PR advisers, and its corporate brokers. As part
of its investor relations programme, the Group aims to maintain
a dialogue with its shareholders, including institutional investors,
to discuss issues relating to the performance of the Group.
Information and investor news is also made available via the
Company’s website (https://corporate.theworks.co.uk/investors).
The Chair has also met with a number of shareholders during FY23.
Investor relations is a standing item on the Board’s agenda. The
Executive Directors and the Chair provide feedback directly to the
Board on key matters arising in their meetings with shareholders,
ensuring that all Directors are aware of shareholder views. These
matters are discussed and assessed by the Board before deciding
on whether any further action or engagement is required.
The Company’s AGM provides a further opportunity for
shareholders to engage directly with the Board. The Company’s
2023 AGM will take place at 9am on 4 October 2023 at Boldmere
House, Faraday Avenue, Hams Hall Distribution Park, Coleshill,
Birmingham B46 1AL. This Annual Report and financial statements
and Notice of the AGM will be made available to shareholders
in accordance with the required notice periods.
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 65
Members
• Harry Morley (Chair)
• Catherine Glickman
Number of meetings held in the year:
4
Committee’s role and responsibilities
• Reviews the annual financial statements, including
accounting estimates and judgements.
• Assists the Board with the discharge of its responsibilities
in relation to the external audit including audit scope,
external auditor appointment and the extent of non-audit
work undertaken by the external auditor.
• Reviews the effectiveness of the Group’s internal control
and risk management systems.
• Monitors the Group’s internal audit arrangements.
Main activities during FY23
• Assessing the effectiveness of the Group’s internal
control framework.
• Monitoring stock control improvements. Reviewing and
challenging management’s assessment of the Company’s
principal risks.
• Consideration of the viability and going concern
assessment and store impairment.
Terms of reference:
Available at https://corporate.theworks.co.uk/who-we-are/
corporate-governance
Audit Committee report
Dear shareholder
I am pleased to present the Audit Committee’s report for the
52-week period ended 30 April 2023. The report sets out the
Committee’s work in relation to financial reporting, internal
control and audit, risk management and oversight of the
external audit process.
Timing of the FY23 results
The FY23 results have been published later than originally intended.
The delay was due to significant additional work being undertaken,
principally in relation to asset impairment charges and related
impacts on IFRS 16 calculations. As well as affecting the FY23 result,
this also entailed the restatement of comparative figures for prior
periods. Whilst the delay has been frustrating, we highlight that
the issues in question have not affected the Board’s assessment
of the underlying performance of the business (for example,
as represented by the EBITDA) and had no direct cash impact.
Information regarding the restatements is included in note 14 of the
financial statements.
Composition of Committee, role and main
activities in FY23
The Committee’s members, its role and main activities are detailed
in the adjacent panel. I am a qualified chartered accountant. I
also have an executive background in finance roles and am an
experienced audit committee chair. The Board is satisfied that I
have recent and relevant financial experience as recommended
under provision 24 of the Code. Both Catherine Glickman and
I have significant knowledge and experience of the retail and
leisure sectors; accordingly the Board is also satisfied that the
Committee has competence relevant to the sector in which the
Company operates.
Meetings and attendees
The Committee met on four occasions during the year, and has
met three times since the year end. All meetings were attended by
all members of the Committee as shown in the table on page 63.
The external auditor has the right to attend meetings, and the
Board Chair, Executive Directors and Head of Finance typically
attend each meeting by invitation. Other members of the
management team may also attend meetings by invitation from
time to time.
Outside of the formal meeting programme, the Audit Committee
Chair maintains a dialogue with key individuals involved in the
Company’s governance, including the Chair, the CEO, the CFO
and the external auditor. At least twice per year, the Committee
also meets the external auditor without members of the
management team present.
TheWorks.co.uk plc Annual Report and Accounts 202366
Activity during the year
The Committee’s activities during the year are set out in the table below. In addition to its ongoing oversight of the Company’s external
financial reporting, the Committee spent time on:
• Assessing the effectiveness of the Group’s internal control framework and ensuring it continues to develop to meet the evolving needs
of the business and adapts to align with new systems and processes.
• Monitoring stock control improvements.
• Reviewing and challenging management’s assessment of the Company’s principal risks given continued economic uncertainty and the
need to assess and manage climate-related risks and opportunities.
Audit Committee activity in FY23
Financial statements and reporting Risk management and internal control systems
• Reviewed significant accounting estimates and
judgements in connection with full-year and
half-year financial statements.
• Reviewed half-year and full-year financial
statements and associated narrative reporting,
and recommended approval of them by
the Board.
• Reviewed scenario analysis in support of going
concern and long-term viability assessments.
• Received updates on workstreams to improve stock control systems and processes.
• Reviewed internal financial controls, and progress against agreed
improvement plans.
• Received regular updates on actions to strengthen finance team capability.
• Reviewed delegated authorities.
• Reviewed and challenged risk register, principal risks facing the business,
and process for identifying emerging risks.
External audit relationship Governance and other matters
• Received and reviewed FY23 audit plan
and strategy.
• Received regular reports from KPMG on audit
progress and status.
• Reviewed effectiveness of FY22 audit process.
• Reviewed auditor’s independence (including
non-audit services).
• Agreed audit fees.
• Approved FY23 tax strategy.
• Reviewed payment practices reporting and performance against supplier
payment terms.
• Reviewed and recommended minor changes to Audit Committee terms
of reference.
Significant issues considered in relation to the financial statements
Significant issues and accounting judgements are identified by the finance team and through the external audit process and are
reviewed by the Audit Committee. The significant issues considered by the Committee in respect of the year ended 30 April 2023
are set out in the table below.
Significant issues and judgements How the issues were addressed
Going concern
The Committee considered the appropriateness of applying the going concern convention
in the preparation of the financial statements. The Committee noted that under a “severe
but plausible” downside scenario model prepared to assess the appropriateness of the
basis of preparation, the Group could breach its fixed charge bank covenant when the
bank facility is being drawn upon. Whilst the Directors do not consider this a likely scenario
in practice, it is nevertheless a plausible one, and to comply with the approach required
by the relevant accounting standards, a material uncertainty in relation to the basis of
preparation has been included in Note 1 (b) of the financial statements.
Carrying value of Parent Company investments
Judgement was required to assess the carrying value of the parent company’s investment
in its subsidiaries, particularly given the current disparity between the estimated value in
use derived by management, and the Group’s market capitalisation. The Committee noted
that a significant impairment charge has been recognised in FY23 although the carrying
value remains significantly higher than the market capitalisation, even after taking this
into account. The Committee noted that the market capitalisation appears unusually low
compared to the Group’s peers, when compared on the basis of, for example, multiples of
earnings.
Impairment of property, plant and equipment,
right-of-use assets and intangibles
The committee considered the approach taken to calculating the value in use estimate
used in assessing the impairment of store fixed assets and the IFRS 16 right of use asset.
It was considered appropriate to allocate a greater proportion of the Group’s central
overhead costs to cash generating units than in previous years. This judgement resulted
in a significant impairment charge for the Period, and, the requirement to retrospectively
adjust impairment charges reported in respect of prior periods.
Existence, completeness and valuation of inventory
As noted in the ‘Risk management and internal control’ section of the committee’s report,
the committee reviewed the Group’s arrangements for improved stock taking processes.
The implementation of these reduced the level of judgement required in the valuation of
inventory compared with FY23. Although a degree of judgement will always be required in
relation to the valuation of stock, the process is now more mechanistic than previously.
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 67
Financial Reporting Council (FRC) letter
In April 2023, the Company receive a query from the FRC following
a review of our Annual Report and Accounts for the 52-week period
ended 1 May 2022. The Committee reviewed all correspondence
between the Group and the FRC, and also discussed the matters
raised with our auditor. The matters raised by the FRC related to
the valuation of the Parent Company investment in subsidiaries,
and the calculation of income tax on gains recognised in other
comprehensive income. As a result of the review, in the FY23 Annual
Report and Accounts, the disclosure of the assumptions regarding
Parent Company investment have been increased.
The FRC’s enquiries, which were limited to a review of the FY22
Annual Report and Accounts, are now complete. The FRC does
not benefit from detailed knowledge of our business or an
understanding of the underlying transactions entered into, and
accordingly the review provides no assurance that the FY22 Annual
Report and Accounts is correct in all material respects.
Risk management and internal control
The Board has overall responsibility for setting the Group’s risk
appetite and ensuring that there is an effective risk management
framework to maintain levels of risk within the risk appetite.
The Board has delegated responsibility for review of the risk
management methodology and effectiveness of internal
control to the Audit Committee.
During the year the Audit Committee and the Board reviewed
the Group’s risk register, and challenged management on the
classification of risks and the mitigations in place. This included
a consideration of the principal risks and uncertainties facing
the Group and a discussion of emerging risks and how these are
identified. This process informed the Committee’s year-end review
of principal risks and uncertainties and its recommendation to the
Board. Further details of the Group’s risk management approach,
structure and principal risks are set out on pages 49 to 53.
The Group’s system of internal control comprises entity-wide high-
level controls, controls over business processes and store-level
controls. Policies and procedures and defined levels of delegated
authority have been approved and communicated across the
Group, and include an Internal Control Framework, corporate risk
register, business continuity plan and IT system policies. These
are supplemented by other policies and procedures which are
communicated to colleagues through the employee handbook.
Management has identified the key operational and financial
processes which exist and implemented internal controls over these
processes in addition to the higher level review and authorisation-
based controls. These policies are designed to ensure the accuracy
and reliability of financial reporting and govern the preparation
of the financial statements. The Board is ultimately responsible for
the Group’s system of internal controls and risk management and
discharges its duties in this area by:
• Holding regular Board meetings to consider the matters reserved
for its consideration.
• Receiving regular management reports which provide
an assessment of key risks and controls.
• Scheduling periodic Board reviews of strategy including reviews
of the material risks and uncertainties facing the business.
• Ensuring there is an organisational structure with defined
responsibilities and levels of authority.
• Ensuring there are documented policies and procedures in place.
• Regularly reviewing reports containing detailed information
regarding financial performance, forecasts, actual and forecast
bank covenant compliance and financial and non-financial KPIs.
In reviewing the effectiveness of the system of internal controls,
the Audit Committee:
• Reviews the risk register compiled and maintained by senior
managers within the Group and questions and challenges
where necessary.
• Regularly reviews the system of financial
and accounting controls.
The Committee’s review of the effectiveness of internal control
and risk management systems is an ongoing process. The key
areas of focus during FY23 are detailed below.
• As reported in the Company’s 2022 Annual Report, a Profit
Protection Manager (PPM) was appointed in January 2022.
During FY23, the Committee received and reviewed the PPM’s
strategy and plan to drive improvements across the Company’s
operational controls in order to reduce losses. The Committee
also received updates on the implementation of the plan,
including the introduction of a new rolling stock count process
covering the Group’s entire store estate, and discussed KPMG’s
audit of the FY23 stock position. The Committee also considered
plans to improve EPOS data analysis to support better detection
of in-store stock discrepancies.
• In September 2022 the finance team presented a detailed
schedule of internal financial controls and planned
improvements, and the Committee has regularly reviewed
this schedule in order to monitor progress and assess the
effectiveness of the control improvements.
• Delegated authority limits are subject to regular review by
the Committee. During the last year, the finance team has
implemented a new and more sophisticated accounts payable
(AP) system which has improved the control environment for
invoice approval and embedded a workflow structure that
supports more effective controls. An updated delegated
authority matrix, including the documentation of the
improvements driven by the new AP system has been developed.
Audit Committee report continued
TheWorks.co.uk plc Annual Report and Accounts 202368
The Committee is satisfied that the internal controls and risk
management systems, including processes to identify and
improve such systems and controls where necessary, continue
to operate effectively.
Internal audit
In accordance with the Code, the Committee continues to keep
the need for an internal audit function under review. In making
that assessment, the Committee takes into account the risk and
controls environment of the Group, and in particular any areas
where additional assurance as to the effectiveness of controls
and processes (over and above assurance provided through the
Committee’s own reviews and the external audit process) may be
required. As previously reported, the Group has engaged specialist
independent advisers to review and make recommendations in
relation to certain IT matters, and in FY23 dedicated resource within
its finance team to review systems and processes, oversee and/or
implement improvements and review internal controls.
The Committee is satisfied that the work of the dedicated function
within the finance team has operated effectively to provide
appropriate assurance over internal controls during FY23. On this
basis, and with the option to use specialist independent advisers
to review any priority areas of focus, the Committee remains of the
view that there is no current requirement for the establishment of
a permanent dedicated internal audit function, but will continue
to keep this under review.
External auditor
The Audit Committee is responsible for overseeing the Group’s
relationship with its external auditor, KPMG LLP. This includes the
ongoing assessment of the auditor’s independence and the
effectiveness of the external audit process, the results of which inform
the Committee’s recommendation to the Board as to the auditor’s
appointment (subject to shareholder approval) or otherwise.
Appointment and tenure
KPMG was appointed as the Company’s external auditor in 2018.
The current lead audit partner, Gordon Docherty, was appointed
following the conclusion of the FY22 audit. In line with KPMG’s
internal policy, and subject to there having been no change in
external auditor, it is anticipated that Gordon Docherty will remain
as the lead audit partner for five years concluding with the FY27
audit. In accordance with the Code, the Audit Committee intends
to put the external audit out to tender at least every ten years.
Non-audit services
The engagement of the external audit firm to provide non-audit
services to the Group can impact on the independence
assessment. The Company has therefore adopted a policy which
requires Audit Committee approval for any permitted non-audit
services, except for permitted non-audit services with a fee of less
than £5k on an individual basis or £20k on an aggregated basis
which the CFO and the Audit Committee have pre-approved.
When reviewing requests for non-audit services the Audit
Committee will assess:
• Whether the provision of such services impairs the auditor’s
independence or objectivity and any safeguards in place
to eliminate or reduce such threats.
• The nature of the non-audit services.
• Whether the skills and experience make the auditor the most
suitable supplier of the non-audit service.
• The fee to be incurred for non-audit services, both for individual
non-audit services and in aggregate, relative to the Group
audit fee.
• The criteria which govern the compensation of the individuals
performing the audit.
The external auditor may not be engaged to provide non-audit
services which have been identified as ’prohibited’ in accordance
with legislative and regulatory requirements.
During the year, the only non-audit services which KPMG was
engaged to carry out related to the issuance of turnover
certificates for a small number of stores where the terms of the
lease require them to be independently verified. The fees paid to
KPMG LLP in respect of these services totalled £1k, representing less
than 1% of the total audit fee. Further detail is included in Note 7 to
the financial statements on page 110.
External audit effectiveness
During the year, the Committee reviewed the effectiveness
of the FY22 year-end audit process. The format of the review
included taking into account the views of the internal finance
team, members of the Committee and others involved in the
audit process which were discussed at the Committee’s meeting
in January 2023. In general, all parties had concluded that the
FY22 audit process had been rigorous, exhaustive and effective,
and that KPMG had demonstrated independence, objectivity
and an appropriate level of professional scepticism throughout
the process.
Performance evaluation
The evaluation of the performance of the Committee was
conducted as part of the broader Board evaluation process set
out on page 64 of this Annual Report. I am pleased to report that
feedback relating to the Committee was positive, indicating that
the Committee continues to operate effectively.
Harry Morley
Chair of the Audit Committee
30 August 2023
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 69
Members
• Carolyn Bradley (Chair)
• Catherine Glickman
• Harry Morley
Number of meetings held in the year:
2
Committee’s role and responsibilities
• Oversees succession planning.
• Identifies and nominates appointments to the Board.
• Reviews Non-Executive Directors’ time commitments.
• Reviews size and composition of the Board.
• Promotes diversity.
Main activities in FY23
• Succession planning at Board and senior
management level.
• Diversity.
Terms of reference:
Available at https://corporate.theworks.co.uk/who-we-are/
corporate-governance
Nomination Committee report
Dear shareholder
I am pleased to present the Nomination Committee’s report for
the 52-week period ended 30 April 2023. This report summarises
the work of the Nomination Committee during the year.
Composition of Committee, role and main
activities in FY23
The Committee’s members, its role and main activities are
detailed in the adjacent panel. During the year there has been
specific focus on succession planning, both at Board and senior
management level, and diversity.
Meetings and attendees
The Committee met twice during the year. All meetings were
attended by all members of the Committee as shown in the
table on page 63.
Only members of the Committee have the right to attend meetings,
but the CEO and People Director are typically invited to attend at
least part of each meeting, particularly when executive succession
planning and other workforce related matters are being discussed.
Other Directors, executives or advisers may be invited to attend all
or part of any meeting as appropriate.
Succession planning
The Committee discussed Board succession planning and in
particular the need to plan appropriately for the rotation of the
Non-Executive Directors to support Board stability and avoid
a situation where both Catherine Glickman and Harry Morley
(who were appointed on the Company’s IPO in 2018) step down
at the same time. Although no Board changes are imminent, the
Committee has agreed in principle that Catherine and Harry will
step down in a staggered fashion and, given their respective key
roles as Chairs of the Remuneration and Audit Committees, that
there may be some overlap between the appointment of their
replacements and the date that they step down.
The Committee has also agreed that Board diversity (particularly
gender and ethnicity) will be key factors in any search process for
new Non-Executive Directors, albeit recognising that appointments
will always be made on merit and based on objective criteria.
In March 2023 the Committee received an update on Executive
Director and senior management succession led by the CEO and
People Director. This included a high-level analysis of potential
internal successors for Executive Director and Operations Board
roles. It is intended that more formal internal succession plans will
be developed, and this topic will continue to be a regular point
of discussion for the Committee. The Board will also monitor and
review initiatives to support the identification and development
of internal talent through its regular updates from the People
Director, and the action plans arising from our employee
engagement activity.
In line with our Executive Director succession plans, we were
delighted to announce that Rosie Fordham will succeed Steve
Alldridge as CFO following an orderly handover of responsibilities
and by the end of 2023.
Promoting diversity and inclusion will be
key factors in our succession planning
and NED appointment processes.
TheWorks.co.uk plc Annual Report and Accounts 202370
Diversity and inclusion (D&I)
The Committee is responsible for monitoring compliance with the objectives of the Board Diversity Policy (the D&I Policy). During the year,
the Committee considered and approved an updated D&I Policy to ensure alignment with D&I policies and initiatives across the wider
business. The updated D&I Policy reflects the Board’s aspiration to achieve the gender and ethnic diversity targets introduced into the
Listing Rules in 2022, which reflect the recommendations of the FTSE Women Leaders Review and the Parker Review.
The updated D&I Policy also sets out the Company’s commitment to promote equality, diversity and inclusion, and a supportive culture
that actively values difference. It also recognises:
• That a key driver in building a workforce that is truly representative of all sections of society and the Group’s customers is a Board
that has a balance of skills, knowledge, strengths, experience, diversity and independence which enables it to provide a range
of perspectives, insight and challenge.
• The expectation that the Board will role model inclusive language, behaviours and practice, and set a clear message about
the importance of diversity and inclusion across the Company.
The specific objectives and Nomination Committee responsibilities set out in the D&I Policy, together with current status and progress
against those objectives and responsibilities, is set out below.
Aspirational objective or responsibility Status and progress
Board to comprise at least 40% women. Met. Current Board comprises 40% female members.
At least one of Chair, CEO, CFO or SID to be a woman. Met. Chair is female.
At least one Director from a non-white ethnic minority background. Not met. Aim to address through future Board succession planning.
Regularly review the structure, size and composition of the Board. Annually recurring item on the Nomination Committee agenda.
Encourage diversity in the recruitment process by:
• Only engaging search firms that are signatories to the Executive
Search Firm’s Voluntary Code of Conduct.
• Ensuring the search firm brief includes appropriate emphasis
on diversity.
• Encouraging long lists to include women, people from ethnic
minority backgrounds and other under-represented groups with
the skills and experience required.
• Considering candidates who may not have previous executive/
non-executive directorship roles.
No external search process has been instructed to date, but any
future search process will be conducted in line with these points.
Have regard to the D&I Policy when considering Board
succession planning.
D&I Policy is taken into account when discussing Board succession.
Review the D&I Policy annually, assessing its effectiveness
and recommending any changes to the Board.
The updated D&I Policy was approved in March 2023 and will
be reviewed annually as part of the Nomination Committee’s
programme of work.
Currently it is not anticipated that the size of the Board will be increased. Therefore all Non-Executive Directors in post at any one time
will also be members of each of the Audit, Remuneration and Nomination Committee, and the D&I Policy does not contain any specific
diversity objectives relating to the composition of the Board’s Committees.
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 71
Nomination Committee report continued
Diversity and inclusion (D&I) continued
As required under Listing Rule 9.8.6R, the breakdown of the gender identity and ethnic background of the Company’s Directors and
executive management (the Operations Board) as at 30 April 2023 is set out in the tables below. To compile this data each Board and
Operations Board member was asked to complete a survey. In the future the Company will seek to gather this data on the appointment
of any new Board or Operations Board member.
Gender identity
Number of
Board members
Percentage
of the Board
Number of
senior positions
on the Board
Number
in executive
management
Percentage
of executive
management
Men % %
Women % %
Not specified/prefer not to say — — — — —
Ethnic background
Number of
Board members
Percentage
of the Board
Number of
senior positions
on the Board
Number
in executive
management
Percentage
of executive
management
White British or other White % %
Mixed/multiple ethnic groups — — — %
Asian/Asian British — — — — —
Black/African/Caribbean/Black British — — — — —
Other ethnic group, including Arab — — — — —
Not specified/prefer not to say — — — — —
1 Includes CEO, CFO, Chair and Senior Independent Director.
As shown in the tables above, as at 30 April 2023, the Company
achieved the Listing Rule targets of 40% of its Board of Directors
being women, and at least one of the senior Board positions
(in our case, the Chair) being held by a woman.
The Company has not achieved the target of at least one member
of the Board being from a minority ethnic background. Given
the size of our Board, which the Committee continues to believe
is appropriate, and the tenure of the existing Non-Executive
Directors, it is unlikely that this target will be achieved until
at least the first round of Non-Executive Director rotation.
The Committee will continue to keep the D&I Policy, and
broader diversity targets, under review and both will continue
to be important factors in our succession planning discussions
and any search process for new appointments.
Other matters considered
At its meeting in March 2023 the Committee conducted its annual
review of the size, structure and composition of the Board, the
independence of the Non-Executive Directors, and Non-Executive
Director time commitments. The Committee concluded that the
size, structure and composition of the Board and its Committees
remain appropriate taking into account the size and cost
structure of the business, and that the Board’s balance of skills
and experience is appropriate and supports effective debate
and decision making.
None of the factors which could impact the independence of Non-
Executive Directors (as set out in provision 10 of the Code) apply to
our Non-Executive Directors, and the Committee is satisfied that
both Catherine Glickman and Harry Morley remain independent in
thought and judgement. Catherine and Harry have both confirmed,
as have I, that we continue to be able to devote sufficient time to
fulfil our roles as Directors of the Company.
Performance evaluation
The evaluation of the Committee’s performance in 2023 was
conducted as part of the wider Board evaluation process described
on page 64. The Committee was found to be operating effectively.
Carolyn Bradley
Chair of the Nomination Committee
30 August 2023
TheWorks.co.uk plc Annual Report and Accounts 202372
Members
• Catherine Glickman (Chair)
• Carolyn Bradley (member since 2021)
• Harry Morley (member since 2018)
Committee’s role
• Sets Remuneration Policy.
• Determines Executive Director and senior
management remuneration.
• Approves annual bonus and LTIP targets.
• Reviews workforce remuneration policies and practices.
Main activities during FY23
• Finalised Remuneration Policy and recommended its
approval at the 2023 AGM.
• Considered proposed increase to CEO maximum LTIP
opportunity, and amended Policy for approval at
the 2023 AGM.
• Approved LTIP awards and targets.
• Monitored annual bonus targets and outturn.
• Reviewed Executive Director salaries.
• Reviewed wider workforce pay and benefits.
Directors’ remuneration report
Chair of the Remuneration Committee’s letter to shareholders
Dear shareholder
As Chair of the Remuneration Committee, I present our Directors’
remuneration report for the 52-week period ended 30 April 2023.
This year’s report consists of this letter, a summary of our Directors’
Remuneration Policy (the Policy) and how we propose to apply the
Policy in FY24, and the annual report on remuneration which sets out
payments made to the Directors and demonstrates how Company
performance and remuneration were aligned during FY23.
The Policy was approved at the 2022 AGM, with over 99% of votes
cast in favour of it, reflecting the strong shareholder support for our
responsible approach to Directors’ remuneration. During FY23, we have
considered the overall remuneration package for Gavin Peck, our CEO.
Gavin is an exceptional leader and in order to reward him appropriately,
we are proposing an amendment to the Policy reflecting our proposal
to increase Gavin’s maximum LTIP award opportunity to 150%
of salary. I explain our rationale for the proposal below.
At the 2023 AGM, we will be asking shareholders to vote on three
resolutions relating to remuneration as follows:
1. To approve an amendment to the Policy.
2. To approve an amendment to the rules of our LTIP to reflect
the Policy amendment.
3. The advisory vote on the annual report on remuneration.
FY23 remuneration in the context of our
business performance
As detailed in the Strategic report, the Group delivered a resilient
performance in FY23 against a challenging backdrop. In particular:
• Total sales growth increased 6.1% (with like-for-like sales growth
of 4.2%).
• Further improvements were made to our customer-focused
proposition, including through the expansion of our front list
book offer.
• Continued optimisation of the store estate by opening 14 new
stores and refitting 34 existing stores.
• Ended the year in a strong financial position, with net cash of £10.2m.
The FY23 bonus opportunity for Gavin Peck and Steve Alldridge
was up to a maximum of 100% of salary, with 90% of the award
based on stretching EBITDA targets and the remaining 10% based
on performance against key strategic objectives (details of the
measures and targets are set out on page 79). Our Adjusted EBITDA
result for FY23 was in line with revised market expectations at
£9.0m, but below our original EBITDA budget and the threshold
level of post-bonus EBITDA performance for Executive Director
bonuses. Therefore, not withstanding the Committee’s assessment
that Gavin Peck and Steve Alldridge had made good progress
against the strategic objectives set (as described on page 79),
no bonus was payable to the Executive Directors for FY23.
The Committee has continued to ensure that remuneration
reflects performance, incentivises management and aligns
with shareholders’ interests.
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 73
FY23 remuneration in the context of our business
performance continued
The Committee was impressed by progress, but ultimately
determined that it would not be appropriate to award any bonus
in respect of the strategic element based on the broader financial
performance of the Company and the fact that, in general, bonuses
were not payable to staff or senior management below Executive
Director level.
Gavin Peck was granted a Long-Term Incentive Plan (LTIP) award
in February 2021 which was subject to performance conditions
based on EPS performance over the three financial years ending
with FY23 and a share price target. Details of the targets are set
out on page 80. As Adjusted EPS is impacted by the prior year
restatements described in note 14 to the financial statements,
the Committee’s assessment of the outturn of the EPS target
is estimated. This estimate excludes the impact of a £0.6m tax
credit received during the year. This exclusion results in Adjusted
EPS (before the impact of prior period restatements) below the
threshold target and accordingly the Committee’s estimate is
that the LTIP award will lapse in full. The Committee considers that
exercise of discretion in this way is appropriate taking into account
operational performance. The Committee retains discretion to
make adjustments to formulaic vesting outturns (whether up or
down) in appropriate circumstances, including to take into account
changes in tax rates. The final vesting is being reviewed to ensure
that performance is being assessed on a fair and consistent basis
and is reflective of wider corporate performance.
The Committee has also considered prior year LTIP outturns for
FY22 and FY21 in the context of the impact of the prior period
restatements. The Committee has concluded that the outturns of
38.4% and 0% of maximum respectively were reflective of underlying
business performance and that it would not be appropriate to
make any adjustments that may otherwise increase the level of
vesting. In order to ensure that the Adjusted EPS performance
measures that apply to in-flight LTIPs can be assessed on a fair and
consistent basis (given the impact of prior period restatements),
the Committee intends to review those targets during FY24. This
review is intended to ensure that the level of stretch in the targets
is maintained and the targets are not made materially easier or
harder to achieve as a result of the restatement.
Remuneration across the business
The Committee continues to make decisions on remuneration for
the Executive Directors in the context of decisions for colleagues
across the Group.
For FY24, salaries for colleagues in retail have increased in line
with the National Living Wage, with further investment in the
management grades to maintain appropriate differentials. This
resulted in an average increase of 8.6% for colleagues in retail.
Salaries for Distribution Centre and Support Centre roles increased
in line with the National Living Wage where relevant with further
investment in certain grades to maintain appropriate differentials,
and outside of that, an average increase of 5% was applied.
Following a benchmarking exercise we also increased our car
allowance rates (the first such increase for over six years).
As reported last year, in August 2023, we launched a new
communications and engagement platform (MyWorks by Reward
Gateway) across the business. This offers colleagues discounts and
money saving offers with a number of businesses and services; this
has been well received. In response to the cost-of-living crisis we also
launched Wagestream, an app that offers all colleagues a range of
Directors’ remuneration report continued
financial wellbeing tools, including early access to earned wages as
well as savings account access and financial wellbeing resources.
Our Operations Board directors continue to be an effective high-
performing team. For FY24, the starting point for Operations Board
salary increases was 5% (in line with the standard increase for
Distribution and Support Centre colleagues outside of National
Minimum Wage (NMW) increases), and we adjusted salaries to
reflect increased responsibilities for individual roles. Following the
departure of the Digital and Marketing Director during the year,
the net impact of the Operations Board salary increases is a circa
£0.1m saving. As indicated in our FY22 Annual Report, during FY23
we implemented a hybrid incentive arrangement comprising
an award of restricted shares (vesting after two years subject
to continued employment) plus an award of nil-cost options
subject to performance over a three-year period. For area and
retail management, we operate a bonus scheme which rewards
achievement of objectives aligned with our strategy.
Gavin Peck – incentive remuneration
As I mention above, during the year, we have considered Gavin
Peck’s remuneration. We want to recognise his exceptional
performance and leadership, providing him with a strong
incentivisation and retention mechanism, whilst taking into
account the interests of shareholders. The Committee concluded
that the correct approach to achieve this would be to align any
adjustment to reward with the long-term interests of shareholders
and propose increasing Gavin’s LTIP opportunity to 150% of
base salary.
Under the Policy approved at the 2022 AGM, the maximum annual
Long-Term Incentive Plan award is 100% of base salary, or 200%
of base salary in exceptional circumstances, with these limits
reflected in the formal rules of the LTIP. As it is our intention that
the 150% of salary level will become Gavin’s usual annual grant,
we have agreed that in the interests of transparency we will seek
shareholder approval to increase the ‘normal’ limit at the 2023
AGM. No increase will be made to the ‘exceptional circumstances’
limit, which will remain at 200% of base salary, and the CFO’s
maximum LTIP opportunity will remain at 100% of base salary
(reflecting our view that it is appropriate to recognise Gavin’s position
in leading the business by differentiating the level of his LTIP award).
In line with our approach to transparent communications with
shareholders, I wrote to our largest shareholders following the
FY23 year end to set out details of our proposed approach to the
LTIP, and offered the opportunity to discuss our approach. I was
pleased that a number of shareholders took up the opportunity
to speak with me directly, and indicated support for our proposals.
Having regard to feedback received during that engagement,
we are also proposing an additional minor amendment to the
Policy to clarify that a share retention requirement, aligned with
the in-service share ownership guideline, applies also to deferred
bonus shares in addition to LTIP shares.
Approach to remuneration for FY24
Our approach to Directors’ remuneration in respect of FY24
is summarised in the table on page 76, which also reflects the
proposed amendment to the Remuneration Policy.
The Committee approved salary increases of 5% for both Gavin
and Steve, with such increases being below the average increase
applied across the wider workforce, which outside of NMW
increases was an average of 7%.
TheWorks.co.uk plc Annual Report and Accounts 202374
For FY24, we will also apply a minor re-weighting of the
EBITDA and strategic measures which apply to the Executive
Directors’ annual bonus scheme. The maximum bonus
opportunity for both Executive Directors will remain at 100%
of base salary, but with 80% of the maximum opportunity
subject to EBITDA performance, and the remaining 20%
subject to strategic measures. This change will strengthen
the Committee’s ability to reward building the strategic
capability of the business, including performance against our
sustainability targets.
As noted in the Chair’s statement on page 7, during FY24 Rosie
Fordham will succeed Steve Alldridge as CFO. I am pleased
that we are in a position to make an internal appointment,
demonstrating our focus on development and succession
planning. Rosie’s remuneration from her appointment as CFO
will be in line with the Policy, and is summarised in the Policy
summary and FY24 intended implementation table on page
76. As Steve will leave the business during FY24, he will not be
eligible for a FY24 bonus and will not receive an LTIP award
during the year.
As reported last year, Harry Morley and I were awarded a
3% increase in our fees with effect from 1 September 2022.
Following the annual review, the Non-Executive Director and
Chair fees will be increased by 5% (in line with the increase for
the Executive Directors, and below the average increase for
the wider workforce) with effect from 1 September 2023.
Stakeholder engagement
Given the challenges of FY23, I would like to thank the Executive
Directors, the Operations Board Directors and all our colleagues
at The Works for their continued commitment, enthusiasm and
hard work.
Our colleagues are a vital part of our customer experience.
We continue to be a company in which colleagues can develop
their careers, with the majority of colleagues being internally
developed and 10% promoted in the last year. We are delighted
that we continue to be recognised as one of the 25 Best Big
Companies to Work for.
The Board continues to receive regular updates on colleague
wellbeing, morale, retention and health and safety and visits
stores and engages with colleagues regularly. We review the
annual Best Companies engagement survey results, in which
colleagues provide feedback on leadership, personal growth
and giving something back, as well as pay and benefits, and
these inform decisions on remuneration.
On behalf of the Board, I would like to thank shareholders for
their support for our Policy at the 2022 AGM. I remain happy
to receive any questions or feedback from shareholders at any
time, and hope that you will be happy to support the resolutions
proposed at our 2023 AGM.
Catherine Glickman
Chair of the Remuneration Committee
30 August 2023
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 75
Our Policy – summary and FY24 intended approach
In the interests of transparency, we have included on page 77 the LTIP and “in-service” shareholding guidelines sections of the Policy,
incorporating the amendments for which shareholder approval is to be sought at the 2023 AGM. Since we are not seeking approval for
a Directors’ Remuneration Policy at the 2023 AGM, in line with the applicable regulations, we have not included the Policy in this report.
The Policy is set out in our FY22 Annual Report which is available on our website.
The following table summarises the key aspects of our Policy approved at the 2022 AGM, changes proposed in the Policy and, subject
to shareholder approval for the amendment to the maximum LTIP opportunity for the CEO as described on page 74, information on
how we intend to implement the policy in FY24.
Policy summary Implementation in FY
Base salary
Ordinarily reviewed annually. In line with typical practice,
increases are normally within the range of increases
awarded to other colleagues. Flexibility is retained to
award higher increases in appropriate circumstances.
For FY24, the Executive Directors’ salaries have been
increased by 5% to:
• Gavin Peck: £324,450.
• Steve Alldridge: £227,115.
• On her appointment to CFO, Rosie Fordham’s salary
will be £180,000. Subject to her developing in line with
expectations, it is intended that her salary will increase
to £200,000 for FY25, and to £220,000 for FY26.
Retirement benefits
Defined contribution pension (or cash equivalent).
Maximum contribution aligned with the contribution
available to other employees.
Executive Director pension contributions continue to be
aligned with the wider workforce at 3% of base salary.
Rosie Fordham’s pension contribution will be reduced
to 3% on her appointment as CFO.
Annual bonus
Maximum opportunity of 100% of salary.
Full bonus ordinarily paid in cash but with flexibility
to defer into shares for up to two years.
Up to 20% of maximum will be earned for threshold
performance and up to 50% of the maximum will be
earned for on-target performance.
The Committee has discretion to amend the pay-out
should any formulaic output not reflect the Committee’s
assessment of overall business performance.
At least 50% of the bonus is based on financial measures.
The balance of the bonus opportunity will be based
on financial measures and/or the delivery of strategic/
individual measures.
For FY24, the maximum bonus opportunity will be 100%
of salary for each Executive Director.
A minor change to the weightings of the performance
measures will be applied. Performance will be based
on EBITDA as regards 80% of the award and strategic
objectives with clear measurable targets as regards 20%
of the award. As targets (both financial and strategic)
under the annual bonus are considered commercially
sensitive, these will be disclosed retrospectively in the
FY24 Annual Report.
For Rosie Fordham, any bonus payable under the
Policy for FY24 will be pro-rata from the date of her
appointment as CFO.
LTIP
Subject to approval by shareholders at the 2023 AGM,
maximum award of 150% of salary, or 200% of salary in
exceptional circumstances, with up to 25% vesting for
threshold performance.
For at least 75% of an LTIP award, the performance
measures will be based on financial measures.
A minor amendment to the Policy is proposed to increase
the maximum LTIP award to 150% of salary (from 100%
of salary).
For FY24, we propose to grant to our CEO, Gavin Peck,
at the level of 150% of salary and to our incoming CFO,
Rosie Fordham, will be granted an LTIP at the level of
100% of salary.
It is proposed that the awards will be subject to
performance conditions based on EPS and share price,
with an equal weighting.
The awards will not be granted until after the 2023 AGM.
Full details of the performance metrics and targets, which
will be set with a level of stretch commensurate with the
size of the LTIP awards, will be included in the regulatory
announcement at the time the awards are granted.
In-service shareholding
guidelines
Executive Directors are required to retain half of all shares acquired under the LTIP (after sales to cover tax and any
exercise price) until such a time as their holding as a value is equal to 200% of salary.
Post-employment
shareholding guidelines
Following employment, an Executive Director must retain for one year such of their relevant shares (shares acquired
pursuant to LTIP or deferred bonus awards granted after 1 May 2022) as have a value equal to 200% of their salary
(or, if fewer, all of their relevant shares).
Non-Executive Directors’
remuneration
Fees are set taking into account the responsibilities of the
role and expected time commitment.
Chair and Non-Executive Director fees for FY24 (with
effect from 1 September 2023) are as follows:
Base fee
Chair’s fee
Harry Morley
Catherine Glickman
Directors’ remuneration report continued
TheWorks.co.uk plc Annual Report and Accounts 202376
In the interests of transparency, we have set out below the LTIP and “in-service” shareholding guideline sections of the Policy approved at
the 2022 AGM, in each case updated to reflect the amendments for which shareholder approval is to be sought at the 2023 AGM.
Component Purpose and link to strategy Operation Maximum opportunity Performance measures
Long-Term
Incentive
Plan (LTIP)
The LTIP provides a clear link
between the remuneration
of the Executive Directors
and the creation of value for
shareholders by rewarding
the Executive Directors for
the achievement of longer-
term objectives aligned with
shareholders’ interests.
Under the LTIP, the Committee may
grant awards as conditional shares
or as nil (or nominal) cost options.
Awards will usually vest following
the assessment of the applicable
performance conditions, typically
following the end of a three-year
performance period, but will not be
released (so that the participant is
entitled to acquire shares) until the
end of a holding period of two years
beginning on the vesting date.
Alternatively, awards may be granted
on the basis that the participant is
entitled to acquire shares following
the assessment of the applicable
performance conditions but that
(other than as regards sales to cover
tax liabilities and any exercise price)
the award is not released (so that
the participant is able to dispose
of those shares) until the end of the
holding period.
The Committee has discretion to amend
the pay out should any formulaic output
not reflect the Committee’s assessment
of overall business performance.
LTIP awards may incorporate the right
to receive additional shares calculated
by reference to the value of dividends
which would have been paid on the
vested shares subject to the award
up to the time of release; this amount
may be calculated assuming that the
dividends have been reinvested in the
Company’s shares on such basis as the
Committee determines.
The Committee may at its discretion
structure awards as qualifying LTIP
awards, consisting of a tax qualifying
Company Share Option Plan (CSOP)
option with a per share exercise price
equal to the market value of a share at
the date of grant and an ordinary nil
(or nominal) cost LTIP award, with the
ordinary award scaled back at exercise
to take account of any gain made on
exercise of the CSOP option.
Recovery provisions apply and are set
out in the Policy approved at the 2022
AGM and included on page 67 of our
FY22 Annual Report which is available
on our website.
The maximum award level is
150% of base salary, or 200%
of base salary in exceptional
circumstances.
The market value of shares
subject to an LTIP award
will be determined on such
basis as the Committee
considers appropriate, which
will be applied consistently
where possible.
If a qualifying LTIP is granted,
the value of shares subject to
the CSOP option will not count
towards the limit referred
to above, reflecting the
provisions for the scale back
of the ordinary LTIP award.
For at least 75% of an LTIP
award, the performance
measures will be based
on financial measures
(which may include, but
are not limited to, earnings
per share, relative total
shareholder return and
share price). Any balance
of an LTIP award will be
subject to performance
measures based on
non-financial measures
aligned with the Company’s
strategic priorities.
Subject to the Committee’s
discretion to amend the
formulaic output, awards
will vest up to 25% for
threshold performance,
rising to 100% for maximum
performance.
Shareholding
guidelines
To align the interests of the Executive Directors with those of shareholders, the Committee has adopted formal shareholding
guidelines. Executive Directors are required to retain half of all shares acquired under the LTIP and any deferred bonus award
(after sales to cover tax and exercise price) until such time as their holding as a value is equal to 200% of salary.
Shares subject to LTIP awards which have vested but not been released (that is which are in a holding period), or which have been
released but have not been exercised, and shares subject to deferred bonus awards, count towards the guidelines on a net of
assumed tax basis.
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 77
This report has been prepared in accordance with the applicable regulations and the Code.
Composition of the Committee
The members of the Committee are Catherine Glickman (Chair), Carolyn Bradley and Harry Morley.
Duties and responsibilities
The Committee’s key responsibilities are detailed in the panel on page 73.
When determining the application of the Directors’ Remuneration Policy in FY23, the Committee considered the factors of clarity,
simplicity, risk, predictability, proportionality and alignment to culture as referred to in the Code. As with the approach in FY22, these were
reflected, in particular, in the Executive Directors’ LTIP awards which are subject to simple and transparent performance measures based
on our appetite for risk, with specific monetary caps added as a further risk mitigation.
As part of its work, the Committee reviewed the remuneration for the wider workforce and related policies and takes these into account
when setting the Policy for Executive Director and senior management remuneration.
Meetings and attendees
The Committee met a total of four times during the year and has met once since the year end. All members attended those meetings
as shown in the table on page 63. The Committee receives assistance from the CEO, CFO, People Director and Company Secretary,
who attend meetings by invitation, except when issues relating to their own remuneration are being discussed.
Performance evaluation
The evaluation of the performance of the Committee was conducted as part of the broader Board evaluation process set out on page
64. Feedback relating to the Committee indicated that it continues to operate effectively, with all members (and other attendees)
contributing appropriately to debate and discussion around remuneration matters.
Advisers
Deloitte LLP (Deloitte) is retained to provide independent advice to the Committee as required. Deloitte is a member of the Remuneration
Consultants Group and, as such, voluntarily operated under that group’s Code of Conduct in relation to executive remuneration
consulting in the UK. Deloitte’s fees for providing remuneration advice to the Committee were £3,000 for FY23. The Committee assesses
from time to time whether this appointment remains appropriate or should be put out to tender and takes into account the Remuneration
Consultants Group Code of Conduct when considering this.
Deloitte was appointed by the Committee and has provided share scheme advice and general remuneration advice to the Company.
Single figure table – audited information
The table below sets out total remuneration in respect of FY23 for each person who served as a Director in that year, along with the
corresponding remuneration for FY22:
Salary and
fees
Benefits
Pension
Annual
bonus
Long-term
incentive
Total
Total fixed
remuneration
Total variable
remuneration
Executive Directors
Gavin Peck — — —
263
Steve Alldridge
(appointed May
) — — —
— 163
Non-Executive
Directors
Carolyn Bradley
(appointed
September ) — — N/A N/A N/A
— — N/A N/A N/A
Harry Morley — — N/A N/A N/A
— — N/A N/A N/A
Catherine Glickman — — N/A N/A N/A
— — N/A N/A N/A
1 Salary and fees: The amount of salary/fees earned in respect of the year.
2 Benefits: The taxable value of benefits received in the year: these are principally private medical insurance and car or car allowance. For Gavin Peck the
2023 (and 2022) benefits figures include his SAYE options granted in November 2022 (and August 2021), valued as the aggregate discount of the exercise
price from the share price used to determine the exercise price.
3 Pension: The pension figure represents the cash value of pension contributions for the Executive Director to the defined contribution pension arrangement
and any cash payments in lieu of pension contributions made in the year.
4 Annual bonus: The cash value of the bonus earned in respect of the financial year. Further information in relation to the FY23 bonuses is set out below;
no bonuses were earned by the Executive Directors in respect of FY23.
Annual report on remuneration
TheWorks.co.uk plc Annual Report and Accounts 202378
5 Long-term incentives: Gavin Peck was granted an LTIP award in February 2021 subject to the performance conditions set out below. The estimated
outturn is that the award will lapse in full. The final vesting is being reviewed to ensure that performance is being assessed on a fair and consistent
basis taking into account the impact of prior period restatements on the EPS target and to ensure that the final vesting is reflective of wider corporate
performance. Any change in outturn will be trued up in the FY24 single figure table.
Truing up of FY22 single figure table numbers – audited information
The 2022 LTIP figure was calculated based on the three-month average share price to the end of FY22. The 2022 LTIP figure in the single
figure table above has therefore been adjusted to reflect the actual share price of £0.29 (being the closing share price on 22 September
2022, the day before the vesting date of 23 September 2022). The figure also includes the value of dividend equivalents for the period
from grant to the vesting date.
Annual incentive plan – audited information
Each Executive Director was eligible to earn a bonus in respect of FY23 of up to 100% of salary. 90% of the award was based on EBITDA
targets (required to be achieved after funding of any bonus payments triggered) which were considered to be suitably stretching, and
took account of the fact that we would not benefit from £5.6m business rates relief in FY23 as we had done in FY22. The remaining 10% was
based on performance against key strategic objectives as set out below, with any payout in respect of the strategic objectives element
being subject to the achievement of a threshold level of EBITDA performance.
As shown in the table below, actual adjusted EBITDA outperformance above the threshold target was not sufficient to support a threshold
bonus level and, therefore, no bonus was earned by either Executive Director in respect of this element for the year.
EBITDA element
Performance
(m)
Vesting
(% of maximum
for EBITDA
element)
Actual
performance
(m)
Bonus earned for
EBITDA element
(% of maximum
for EBITDA
element)
Bonus earned
for EBITDA
element
(% of salary)
Threshold 9 20%
9
1
% 0%
Maximum 13 100%
1 Adjusted EBITDA before funding of any bonus. Outperformance over the threshold target was not sufficient to fund threshold level bonuses, and therefore
no bonus was earned for the EBITDA element.
Strategic objectives element
Each Executive Director made good progress in the year against the strategic objectives set (as summarised below). However, since the
adjusted EBITDA performance measure was not met, no bonus was earned by reference to those achievements.
Gavin Peck, CEO
Gavin’s objectives were to develop the brand externally and internally, develop a quantified ESG approach including environmental
targets, drive the implementation of the strategy and continue to develop both leaders and colleagues. The Board considers that,
given the challenges during the year, overall Gavin has achieved his objectives (exceeding them in some areas), including:
• Roll out of first phase of the evolved brand.
• Refreshed product offer and loyalty scheme relaunched.
• Realignment of online operational team and deployment of new analytical tools following completion of website usability studies.
• Store estate improved - 17 new stores opened (including 3 relocations), and 34 refits.
• Improved operational efficiency (new store labour model, implementation of improved supply chain systems, automation
in online fulfilment).
• Continued investor (including potential investor) engagement, and raised brand awareness.
• Led development of clear ESG strategy, incorporating strong positions on colleagues, community and environmental commitments
(base line targets, including Net Zero by 2045, set and agreed by the Board).
• Delivered MyWorks (colleague engagement platform) and Can Do Academy (learning and development platform). Improved ranking
from 13th to 12th in ‘Best Big Companies to Work For’ category and maintained 2* accreditation.
Steve Alldridge CFO
Steve’s objectives were to continue the stakeholder engagement with both investors and banks, improve the financial control
environment, improve the quality of data and performance reporting to enhance business support and strengthen the Finance Team.
The Board consider that Steve has met his objectives for the year:
• Successfully negotiated an extension of banking facilities at reduced cost and maintained strong relationships with our
banking partner.
• Continued to engage with investors and other stakeholders, changing broker at the end of the year.
• Tightened financial controls and disciplines, with better visibility and insight on stock holding.
• Improved performance reporting, supported by a strengthened business partnering capability.
• Finance function strengthened with talented individuals, raising the future capability of the team.
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 79
Long-term incentives
LTIP award vesting
Gavin Peck was granted an LTIP award in the form of nil-cost options over 847,457 shares in February 2021. The award was subject
to performance conditions set out below, general and windfall-gain underpins, and a two-year post-vesting holding period.
Measure Weighting
Threshold
(% vesting)
Maximum (%
vesting) Actual performance
Adjusted EPS 50% 3.1 pence 13.1 pence N/A
Share price
50% £0.50 £2 33.85p
1 Average share price over the period of four weeks beginning with the announcement by the Company of its Full Year Trading Update for its 2022/23
financial year.
As described in the Remuneration Committee Chair’s letter on page 74, adjusted EPS is impacted by the prior year restatements
described in note 14 to the financial statements, as such, the Committee’s assessment of the outturn of the EPS target is estimated. This
estimate excludes the impact of a £0.6m tax credit received during the year. This exclusion results in adjusted EPS (before the impact of
prior period restatements) below the threshold target and accordingly the Committee’s estimate is that the LTIP award will lapse in full.
Long-term incentives – awards granted during FY23 – audited information
LTIP awards were granted to Gavin Peck and Steve Alldridge on 17 November 2022 equal to 100% of salary on the following basis:
Type of award
Maximum
opportunity
Number of
shares
Face value at
grant
% of award vesting
at threshold Performance period
Gavin Peck LTIP 100% of salary 936,363 308,999 20% See footnote 2
Steve Alldridge LTIP 100% of salary 655,454 216,299 20% See footnote 2
1 For these purposes, the face value of an award is calculated by multiplying the number of shares over which the award was granted by 33 pence, the
average closing share price for each of the three business days prior to the date of grant (rounded up to the nearest whole pence).
2 Each award is subject to performance conditions assessed over the Company’s FY23, FY24 and FY25 financial years as regards the EPS element of the
performance condition, with the share price element of the performance condition assessed following the announcement by the Company of its Full Year
Trading Update for its FY25 financial year (as described further below). To the extent an award vests following the end of the performance period, it is
subject to a further two-year holding period before the shares are released.
A summary of the performance conditions for these awards (with half of each award based on EPS, and half on share price) is set out on
page 77. The Committee believes that the Executive Directors have direct influence over both measures, and that targets are stretching
but achievable.
SAYE Scheme options granted during FY23 – audited information
Gavin Peck was granted a SAYE Scheme option on 4 November 2022 as detailed below as part of the SAYE Scheme offer made to
all eligible colleagues.
Type of award
Number of
shares Exercise price
Face value at
grant
Gavin Peck SAYE option 31,034 £0.29 10,964
1 In line with the SAYE Scheme, this is set at a 20% discount to 35.33 pence, the average closing share price on 5, 6 and 7 October 2022, the three business
days prior to the date of invitation.
2 For these purposes, the face value of the option is calculated by multiplying the number of shares over which the option was granted by 35.33 pence,
the average closing share price for each of the three business days prior to the date of invitation.
Annual report on remuneration continued
TheWorks.co.uk plc Annual Report and Accounts 202380
Statement of Directors’ shareholding and share interests – audited information
The number of shares of the Company in which the Directors had a beneficial interest, together with details of the Executive Directors’
long-term incentive interests, as at 30 April 2023, are set out in the table below.
Outstanding scheme interests April Beneficially owned shares
Unvested LTIP
interests
subject to
performance
conditions
Scheme
interests not
subject to
performance
measures
Vested but
unexercised
scheme interests
Total shares
subject to
outstanding
scheme
interests
May April
Total of all
scheme
interests and
shareholdings
at April
Executive Directors
Gavin Peck ,, , , ,, , , ,,
Steve Alldridge ,, — — ,, — — ,,
1 SAYE awards that have not vested.
2 LTIP awards that have vested but remain unexercised.
3 The tax qualifying CSOP awards granted as part of the 2019 awards are not included in these numbers, reflecting that if they were to be exercised the LTIP
element of those awards would be reduced to reflect the gain on the CSOP element, as referred to on page 77.
Outstanding scheme interests April Beneficially owned shares
Unvested LTIP
interests
subject to
performance
conditions
Scheme
interests not
subject to
performance
measures
Total shares
subject to
outstanding
scheme
interests May April
Total of all
scheme
interests and
shareholdings
at April
Non-Executive Directors
Carolyn Bradley — — — , , ,
Harry Morley
— — — , , ,
Catherine Glickman — — — , , ,
1 Includes interest of Kate Morley (a person closely associated with Harry Morley).
Executive Directors’ interests under share schemes – audited information
The table below sets out the Executive Directors’ interests in the LTIP and SAYE Schemes.
The LTIP awards are subject to performance conditions as set out in the table below.
Award date
Vesting, exercise
or release date
As at
May
Granted
during the
year
Exercised
during the
year
Lapsed
during the
year
Number of
shares at
April
Exercise
price
Gavin Peck
LTIP September
,
September 250,617 — — 154,466 96,151 N/A
February June 847,457 — — — 847,457 N/A
September June 638,297 — — — 638,297 N/A
November June — 936,363 — — 936,363 N/A
SAYE August October 16,363 — — — 16,363 55p
November December — 31,034 — — 31,034 29p
Steve Alldridge
LTIP September June 446,808 — — — 446,808 N/A
November June — 655,454 — — 655,454 N/A
1 In addition to his LTIP award, Gavin Peck was also granted a tax qualifying CSOP award over 37,037 shares with an exercise price of £0.81. The CSOP
award vested at 38.4% (the same level as the LTIP award – see Note 2 below) and lapsed in respect of the balance of the shares subject to it so that it is
not held over 22,815 shares. To the extent a CSOP award is exercised at a gain, the extent to which the associated LTIP award can be exercised shall be
reduced by the amount of the gain so that there is no increase in the pre-tax value of the award.
2 38.4% of Gavin Peck’s LTIP award granted in 2019 vested by reference to EPS performance over the three financial years ending with FY22. The remaining
portion of the award (154,666) lapsed on the vesting date as shown in the table above. The vested portion of the award will not be released to Gavin so
that he can exercise it until the end of a further two-year holding period.
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 81
Executive Directors’ interests under share schemes – audited information continued
The performance condition applying to Gavin Peck’s LTIP award granted in February 2021 is summarised on page 81. The estimated
outturn is that the award will lapse in full.
Vesting of the LTIP awards made in September 2021 and November 2022 is based on EPS and share price targets as set out in the
table below.
Award date Measure Weighting Threshold (% vesting) Maximum (% vesting)
September EPS
% . pence . pence
Share price
% . .
November EPS
% . pence . pence
Share price
% . .
1 Basic EPS for the Company’s FY24, pre-IFRS 16 and subject to such adjustments as the Remuneration Committee determines to ensure that performance
is assessed on a fair and consistent basis.
2 Average share price over the period of four weeks following the announcement by the Company of its Full Year Trading Update for its 2023/24
financial year.
3 Basic EPS for the Company’s FY25, pre-IFRS 16 and subject to such adjustments as the Remuneration Committee determines to ensure that performance
is assessed on a fair and consistent basis.
4 Average share price over the period of four weeks following the announcement by the Company of its Full Year Trading Update for its 2024/25
financial year.
The awards are subject to a general performance underpin, whereby the Committee shall assess overall financial performance of the
Group over the performance period in determining the level of vesting and an assessment of whether any of the value of the awards on
assessment of the performance conditions represents a ‘windfall gain’. The awards are also subject to a cap such that the value of the
vested shares under an award, determined by reference to the price used to assess the share price element of the performance condition,
may not exceed £2,500,000 in the case of Gavin Peck’s award and £1,750,000 in the case of Steve Alldridge’s award.
As noted in the Remuneration Committee Chair’s statement on page 74, the EPS targets for in-flight LTIPs will be reviewed in FY24 to
consider the impact of prior period restatements and to ensure that performance can be assessed on a fair and consistent basis. This
review is intended to ensure that the level of stretch in the targets is maintained and the targets are not made materially easier or harder
to achieve as a result of the restatement.
Directors’ share ownership guidelines – audited information
The Committee has adopted a shareholding guideline for the Executive Directors, which requires the Executive Directors to retain half
of all shares acquired under the LTIP (after sales to cover tax and any exercise price) until such time as their holding has a value equal to
200% of salary. Shares subject to LTIP awards which have vested but not been released (i.e. which remain in a holding period), or which
have been released but have not been exercised, and any shares subject to deferred bonus awards, count towards the guidelines on a
net of assumed tax basis.
Executive Director
Number
of shares
counting
towards the
guideline at
April
Value of
shares
counting
towards
the guideline
Value of
shares as
a percentage
of base salary
Shareholding
guideline met?
Gavin Peck , , .% In progress
Steve Alldridge — — — In progress
1 Based on a share price of 31 pence as at 28 April 2023 (being the last trading day prior to the year end of 30 April 2023).
2 Steve Alldridge has not yet had any LTIP award which has vested. When he does so, he will be required to retain shares in accordance with the Policy
which will count towards the shareholding guideline.
Annual report on remuneration continued
TheWorks.co.uk plc Annual Report and Accounts 202382
Performance graph and historical CEO remuneration outcomes
The graph below shows the total shareholder return (TSR) performance for the Company’s shares in comparison to the FTSE SmallCap
for the period from Main Market Admission on 19 July 2018 to 30 April 2023. The TSR performance of the FTSE SmallCap index has been
selected as it is considered the most appropriate comparator group. For the purposes of the graph, TSR has been calculated as the
percentage change in the market price of the shares during the period, assuming that dividends are reinvested. The graph shows the
value, as at 30 April 2023, of £100 invested in shares in the Company on 19 July 2018 compared with £100 invested in the FTSE SmallCap.
YE
2019
YE
2020
YE
2021
YE
2022
YE
2023
0
20
40
80
140
150
120
100
60
Total shareholder return (rebased to £100)
TheWorks.co.uk plc FTSE SmallCap
The table below sets out the CEO’s total remuneration over the last five financial years, valued using the methodology applied to the single
total figure of remuneration. The Committee does not believe that the remuneration paid in earlier years as a private company bears any
comparative value to that paid in its time as a public company and, therefore, the Committee has chosen to disclose remuneration only
for the four most recent financial years (with the figures for FY19 being for the period from Admission on 19 July 2018 to 28 April 2019):
Year (CEO)
Total single
figure
remuneration
Annual
bonus payout
(% of maximum
opportunity)
LTIP vesting
(% of maximum
number of
shares)
(Gavin Peck) % %
(Gavin Peck) % .%
(Gavin Peck) % %
(Gavin Peck – from January ) % N/A
(Kevin Keaney – until January ) % N/A
(Kevin Keaney) % N/A
1 The 2022 figure reflects the CEO’s single total figure of remuneration for FY22 as included in this report updated to reflect the ‘truing up’ of the FY22 LTIP
figure as referred to on page 79.
2 There was no LTIP capable of vesting in respect of performance ending 2019 and 2020.
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 83
Change in remuneration of Directors compared to Group employees
The table below sets out the annual change in salary and fees, benefits and bonus paid to each of the Directors from FY20 to FY23. The
regulations also require a comparison of the change in the remuneration of the employees of TheWorks.co.uk plc. The Company has no
employees other than the Executive Directors and, accordingly, strictly no disclosure is required. Given the added complexities of the
impact in FY21 of furlough, the Company has not included the average employee salary changes between FY21 and FY22, but, in the
interests of transparency, has provided information on the approach to the change in salary of the Group’s UK employees.
Notes to the table provide additional information in relation to the changes. Additional information in relation to the changes in previous
years is set out in the relevant previous Directors’ remuneration reports.
Executive Directors Non-Executive Directors UK employees’ average
Gavin Peck Steve Alldridge
Carolyn Bradley
Catherine
Glickman Harry Morley
Salary/fees FY22–FY23 % % % % % 3.46%
5
FY21–FY22 % — — % %
See note to
corresponding
table in FY22 DRR
FY20–FY21 % — — (%) (%)
See note to
corresponding
table in FY22 DRR
Taxable benefits FY22–FY23 % % N/A N/A N/A 5.5%
6
FY21–FY22 %
— — N/A N/A (.%)
FY20–FY21 % — — N/A N/A .%
Annual bonus FY22–FY23 N/A
N/A
N/A N/A N/A N/A
FY21–FY22 N/A — — N/A N/A
See note to
corresponding
table in FY DRR
FY20–FY21 N/A — — N/A N/A (.%)
1 Carolyn Bradley and Steve Alldridge were appointed during FY22, and therefore there is no disclosure for the change in their remuneration between
FY21 and FY22. In the case of Steve Alldridge, the 3% change between FY22 and FY23 reflects the 3% increase to his salary for FY23.
2 Increase reflects increase due to SAYE discount included in taxable benefits.
3 No annual bonus was earned by Gavin Peck or Steve Alldridge in respect of FY23. Therefore, the percentage change between FY22 and FY23 is not
considered to be a meaningful disclosure.
4 The UK employees’ average changes are calculated comparing the remuneration for the tax year ended 5 April 2022 with the remuneration for the tax
year ended 5 April 2023 as this data is more readily available than data in respect of financial years. The value of SAYE options granted in November 2022
has been excluded for consistency with the CEO pay ratio calculation on page 85.
5 In FY22 rates for store and Distribution Centre colleagues were increased in line with increases in the National Living and Minimum Wages, with colleagues
aged 23 plus receiving an increase of 6.6% in April 2022. We applied an average 3% increase to non-minimum wage colleagues and maintained a wage
differential in store teams. In FY23 rates for store and Distribution Centre colleagues were increased in line with increases in the National Living and
Minimum Wages, with colleagues aged 23 plus receiving an increase of 9.7% in April 2023. Outside of all applicable NMW increases, an average of 7.1%
was given across the business (7% average for store management and 5% average for Store Support and Distribution Centre colleagues).
6 The increase in benefits paid in FY23 is due to a rise in the number of managers in our support centre who receive taxable benefits. The percentage
change reflects an increase in the average value of benefits provided from c.£119 to c.£126.
Relative importance of spend on pay
The following table sets out the total remuneration for all employees and the total shareholder distributions in FY22 and FY23. All figures
provided are taken from the relevant Company accounts.
FY
FY
Percentage
change
Total remuneration for all employees (including Executive Directors) , , 3.7%
Dividends and share buyback – , N/A
Since there were no dividends or buybacks in FY22, the percentage change between FY22 and FY23 is not considered to be a
meaningful disclosure.
Annual report on remuneration continued
TheWorks.co.uk plc Annual Report and Accounts 202384
CEO pay ratio
The table below shows how the CEO’s remuneration (as taken from the single figure remuneration table and, therefore, taking into
account the CEO’s voluntary reduction in remuneration in relevant years as disclosed in previous Directors’ remuneration reports)
compares to equivalent remuneration for full-time equivalent UK employees, ranked at the 25th, 50th and 75th percentile.
Pay ratio Remuneration values ()
Year Method th percentile Median th percentile th percentile Median th percentile
FY Option C : : : Salary only , , ,
Total remuneration , , ,
FY Option C : : : Salary only , , ,
Total remuneration , , ,
FY Option C : : : Salary only , , ,
Total remuneration , , ,
FY Option C : : : Salary only , , ,
Total remuneration , , ,
The methodology applied to calculate pay ratios was as follows:
• The regulations set out three methodologies for determining the CEO pay ratio. We have chosen ‘Option C’ consistent with the previous
years’ calculations.
• As ratios could be unduly impacted by joiners and leavers who may not participate in all remuneration arrangements in the year of joining
and leaving, the Committee has modified the statutory basis to exclude any employee not employed throughout the financial year.
• The FY22 ratios in this table have been updated to reflect the CEO’s single total figure of remuneration for FY22 as included in this report
and updated to reflect the ‘truing up’ of the FY22 LTIP figure (referred to on page 79).
• Employee pay data is based on full-time equivalent (FTE) base pay for UK employees as at 31 March of the relevant year (based on
FTE salary for salaried employees and hourly pay rates for hourly paid employees), to which actual pension contributions, bonus and
benefits have been added, except that the value of SAYE options has been excluded (for the purposes of the FY20, FY22 and FY23
calculations) as their value is not considered to have a significant impact on the CEO pay ratios and sourcing the data for each
employee is administratively burdensome. The employees have then been ranked by FTE pay and benefits calculated on this basis
and the employees at the 25th percentile, 50th percentile (median) and 75th percentile have been identified. The FTE pay and benefits
calculated on this basis for those three employees are then compared to the CEO single figure of remuneration to calculate the ratios;
the calculations do not, therefore, take into account the impact of the identified employees having been furloughed during any year
in which that was relevant.
• For 2020 the CEO single figure of remuneration used comprises the single total figure for FY20 for Kevin Keaney, plus the single total
figure for Gavin Peck for the period of the year from his appointment as CEO (16 January 2020) to 26 April 2020.
The CEO pay ratio has the potential to vary considerably year on year due to a significant proportion of the CEO’s remuneration package
comprising performance related variable pay. Gavin Peck earned a bonus equal to 78% of salary in respect of FY22 and the vesting at
38.4% of maximum of the LTIP award granted to him in September 2019 was similarly included in his FY22 single total figure of remuneration.
As reported elsewhere in this Directors’ Remuneration Report, Gavin Peck did not earn a bonus in respect of FY23 and the estimated
outturn of the LTIP granted to him in February 2021 is that the award will lapse in full. The variance in incentive outcomes between FY22
and FY23 is the primary reason for the decrease in the CEO pay ratio between FY22 and FY23.
The Company considers that the median pay ratio is consistent with pay, reward and progression policies for the Company’s employees
as a whole.
Payments to past Directors and for loss of office – audited information
No payments for loss of office or to past Directors were made during FY23.
Implementation of the Policy
Information on how the Committee intends to implement the Policy is set out in the Policy summary table on pages 76 and 77.
Shareholder voting at AGM
The following table shows the results of the binding vote on the Policy, and the advisory vote on the Directors’ Remuneration Report,
at the 2022 AGM.
Approval of the Remuneration Policy
Approval of the Directors’
remuneration report
Total number
of votes
% of
votes cast
Total
number
of votes
% of
votes cast
For (including discretionary) ,, . ,, .
Against , . , .
Withheld , N/A , N/A
On behalf of the Board.
Catherine Glickman
Chair of the Remuneration Committee
30 August 2023
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 85
Directors’ report
The Directors present their report for the financial year ended 30 April 2023. Additional information which is incorporated by reference
into this Directors’ report, including information required in accordance with the Companies Act 2006 (the Act) and Listing Rule 9.8.4R
of the UK Financial Conduct Authority’s Listing Rules, can be located as follows:
Disclosure Location
Future business developments Strategic report – pages to .
Environmental policy ESG review – pages to .
Employee engagement Our stakeholders – pages and .
ESG review – pages to .
Corporate governance report – pages to .
Diversity policy Nomination Committee report – pages to .
Viability Viability statement – pages to .
Section statement Page .
Stakeholder engagement in key decisions Our stakeholders – pages and .
Section statement – page .
Corporate governance report – pages to
Corporate governance compliance statement Corporate governance report – pages to .
Financial risk management objectives and policies
(including hedging policy and use of financial instruments)
Note to the financial statements – pages to .
Exposure to price risk, credit risk, liquidity risk and cash flow risk Note to the financial statements – pages to .
Details of long-term incentive schemes Directors’ remuneration report – pages to .
Statement of Directors’ responsibilities Page .
Directors
The Directors of the Company who held office throughout the period are set out below:
Carolyn Bradley (Chair)
Gavin Peck (CEO)
Steve Alldridge (CFO)
Harry Morley (Senior Independent Director)
Catherine Glickman (Non-Executive Director)
Summaries of the current Directors’ key skills and experience are included on pages 60 and 61.
Results and dividend
The results for the year are set out in the consolidated income statement on page 98. The Directors propose the payment of a final
dividend of 1.6 pence per share on 2 November 2023 (with a record date of 6 October 2023), subject to approval on 4 October 2023.
Articles of Association
The rules governing the appointment and replacement of Directors are set out in the Company’s Articles. The Articles may be amended by
a special resolution of the Company’s shareholders. The Articles also set out in full the powers of the Directors in relation to issuing shares
and buying back the Company’s own shares.
Share capital
Details of the Company’s share capital, including changes during the year, are set out in Note 24 to the financial statements. As at 30 April
2023, the Company’s issued share capital consisted of 62,500,000 ordinary shares of 1 pence each. There have been no changes to the
Company’s issued share capital since the financial period end.
Ordinary shareholders are entitled to receive notice of, and to attend and speak at, any general meeting of the Company. On a show of
hands every shareholder present in person or by proxy (or being a corporation represented by a duly authorised representative) shall have
one vote, and on a poll every shareholder who is present in person or by proxy shall have one vote for every share of which he is the holder.
The Notice of AGM specifies deadlines for exercising voting rights and appointing a proxy or proxies.
Other than the general provisions of the Articles (and prevailing legislation) there are no specific restrictions of the size of a holding or on
the transfer of the ordinary shares.
The Directors are not aware of any agreements between holders of the Company’s shares that may result in the restriction of the transfer
of securities or on voting rights. No shareholder holds securities carrying any special rights or control over the Company’s share capital.
TheWorks.co.uk plc Annual Report and Accounts 202386
Authority for the Company to purchase its own shares
Subject to authorisation by shareholder resolution, the Company may purchase its own shares in accordance with the Act. Any shares
which have been bought back may be held as treasury shares or cancelled immediately upon completion of the purchase.
At the Company’s AGM held on 27 October 2022, the Company was generally and unconditionally authorised by its shareholders to make
market purchases (within the meaning of Section 693 of the Act) of up to a maximum of 6,250,000 of its ordinary shares. The Company
has not repurchased any of its ordinary shares under this authority, which is due to expire at the AGM to be held on 4 October 2023, and
accordingly has an unexpired authority to purchase up to 6,250,000 ordinary shares with a nominal value of £62,500.00. A resolution
to renew the authority for a further year will be proposed at the 2023 AGM.
Directors’ interests
The number of ordinary shares of the Company in which the Directors were beneficially interested as at 30 April 2023 is set out in the
Directors’ remuneration report on pages 73 to 75.
Directors’ indemnities
The Company’s Articles provide, subject to the provisions of UK legislation, an indemnity for Directors and Officers of the Company
and the Group in respect of liabilities they may incur in the discharge of their duties or in the exercise of their powers.
Directors’ and Officers’ liability insurance cover is maintained by the Company and is in place in respect of all the Company’s Directors
at the date of this report. The Company reviews its level of cover on an annual basis.
Compensation for loss of office
The Company does not have any agreements with any Executive Director or employee that would provide compensation for loss of
office or employment resulting from a takeover except that provisions of the Company’s LTIP and other share schemes may cause
options and awards outstanding under such schemes to vest on a takeover. Further information is provided in the Directors’ remuneration
report on pages 76 to 77.
Significant interests
The table below shows the interests in shares notified to the Company in accordance with the Disclosure Guidance and Transparency
Rules as at 30 April 2023, and 29 August 2023 (being the latest practicable date prior to publication of this Annual Report).
As at April As at August
Name of shareholder
Number of ordinary shares
of pence each held
Percentage of
total voting rights held
Number of ordinary shares
of pence each held
Percentage of
total voting rights held
Schroders plc 12,043,141 19.27% 12,043,141 19.27%
Jupiter Fund Management plc 5,317,667 8.50% 2,442,667 3.90%
Hudson Management Limited 3,911,000 6.25% 5,811,000 9.30%
Graeme Coulthard 3,500,000 5.60% 4,050,000 6.48%
Downing Strategic Micro-Cap
Investment Trust 2,750,000 4.40% 2,750,000 4.40%
Branches outside the UK
Other than ten stores located in the Republic of Ireland, the Company has no branches outside the UK.
Employee involvement
Information relating to employees of the Group and how the Company engages with its workforce can be found on pages 32 to 34
Disabled employees
It is the policy of the Group to provide equal recruitment and other opportunities for all colleagues regardless of sex, age, religion,
race, disability or sexual orientation. The Group gives full consideration to applications for employment from disabled people, where
they adequately fulfil the requirements of the job. Once employed by the Group, we ensure that disabled colleagues have full access
to training and career development opportunities. Where colleagues become disabled, it is the Group’s policy to provide continuing
employment and retraining where practicable.
Political donations
The Company did not make any political donations during the year.
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 87
Change of control – significant agreements
There are a number of agreements that may take effect after, or terminate upon, a change of control of the Company, such as commercial
contracts, bank loan agreements and property lease arrangements.
The only significant agreement to which the Company is a party that takes effect, alters or terminates upon a change of control of the Company
following a takeover bid, and the effect thereof, is the Company’s committed bank facility dated 10 June 2022 which contains a provision such
that, in the event of a change of control, the facility may be cancelled and all outstanding amounts, together with accrued interest, will become
repayable on the date falling 30 days following written notice being given by the lenders that the facility has been cancelled.
Audit information
Each of the Directors at the date of the approval of this report confirms that:
• So far as the Director is aware, there is no relevant audit information of which the Company’s auditor is unaware.
• The Director has taken all the reasonable steps that he/she ought to have taken as a Director to make himself/herself aware of
any relevant audit information and to establish that the Company’s auditor is aware of the information.
The confirmation is given and should be interpreted in accordance with the provisions of Section 418 of the Act.
Auditor
A resolution to reappoint KPMG LLP will be proposed at the forthcoming AGM.
Annual General Meeting
The AGM will be held on 4 October 2023. The Notice of AGM is contained in a separate letter from the Chair accompanying this report.
Post-balance sheet events
Other than as disclosed in the Strategic report, there have been no material post-balance sheet events involving the Company or any
of the Company’s subsidiaries as at the date of this report.
The Strategic report on pages 1 to 57 and this Directors’ report have been drawn up and presented in accordance with, and in reliance
upon, applicable English company law and any liability of the Directors in connection with these reports shall be subject to the limitations
and restrictions provided by such law.
By order of the Board
Gavin Peck
Chief Executive Officer
30 August 2023
Directors’ report continued
TheWorks.co.uk plc Annual Report and Accounts 202388
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual Report and the Group and Parent Company financial statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare Group and Parent Company financial statements for each financial year. Under that law,
they are required to prepare the Group financial statements in accordance with UK adopted International Accounting Standards and
applicable law and have elected to prepare the Parent Company financial statements in accordance with UK accounting standards
and applicable law, including FRS 101 Reduced Disclosure Framework.
Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Parent Company and of the Group’s profit or loss for that period. In preparing each of the
Group and Parent Company financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable, relevant, reliable and prudent;
• for the Group financial statements, state whether they have been prepared in accordance with UK adopted International
Accounting Standards;
• for the Parent Company annual statements, state whether applicable UK accounting standards have been followed, subject
to any material departures disclosed and explained in the Parent Company financial statements;
• assess the Group and Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern; and
• use the going concern basis of accounting unless they either intend to liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Parent Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Parent Company and enable them to ensure
that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error,
and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to
prevent and detect fraud and other irregularities.
Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report, Directors’ Report, Directors’
Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s
website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in
other jurisdictions.
Responsibility statement of the Directors in respect of the Annual Financial Report
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as
a whole; and
• the Strategic report includes a fair review of the development and performance of the business and the position of the issuer and the
undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that
they face.
We consider that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group’s position and performance, business model and strategy.
By order of the Board
Gavin Peck
Chief Executive Officer
30 August 2023
Statement of Directors’ responsibilities
Financial statementsCorporate governanceStrategic report
TheWorks.co.uk plc Annual Report and Accounts 2023 89
1. Our opinion is unmodified
We have audited the financial statements of TheWorks.co.uk plc
(“the Company”) for the 52 week period ended 30 April 2023 which
comprise the Consolidated income statement, Consolidated
statement of comprehensive income, Consolidated statement of
financial position, Consolidated statement of changes in equity,
Consolidated cash flow statement, Company statement of
financial position and Company statements of changes in equity
and the related notes, including the accounting policies in note 1.
In our opinion:
• the financial statements give a true and fair view of the state of
the Group’s and of the parent Company’s affairs as at 30 April
2023 and of the Group’s loss for the 52 week period then ended;
• the Group financial statements have been properly prepared in
accordance UK-adopted international accounting standards;
• the parent Company financial statements have been properly
prepared in accordance with UK accounting standards, including
FRS 101 Reduced Disclosure Framework; and
• the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities are described below. We believe that the audit
evidence we have obtained is a sufficient and appropriate basis
for our opinion. Our audit opinion is consistent with our report to
the audit committee.
We were first appointed as auditor by the directors on 11 July 2018. The
period of total uninterrupted engagement is for the 5 financial years
ended 30 April 2023. We have fulfilled our ethical responsibilities
under, and we remain independent of the Group in accordance
with, UK ethical requirements including the FRC Ethical Standard
as applied to listed public interest entities. No non-audit services
prohibited by that standard were provided.
Overview
Materiality:
group financial
statements as a whole
k (: k)
.% (: .%) of revenue
Coverage % (: %) of revenue
Key audit matters vs
Recurring risks Going concern
Existence, completeness
and accuracy of
inventory held in stores
Carrying amount of
Parent Company
investment in subsidiaries
New risk Impairment of property,
plant and equipment
and right of use assets
Independent auditor’s report
To the members of TheWorks.co.uk plc
TheWorks.co.uk plc Annual Report and Accounts 202390
2. Material uncertainty related to going concern
The risk Our response
Going concern
We draw
attention to note
1 to the financial
statements which
indicates that in
the severe but
plausible downside
scenario the
Group is forecast
to breach its loan
covenants during
the going concern
assessment period.
These events and
conditions, along
with the other
matters explained
in note 1, constitute
a material
uncertainty
that may cast
significant doubt
on the Group’s
and the parent
company’s ability
to continue as a
going concern.
Our opinion is not
modified in respect
of this matter.
Disclosure quality
The financial statements explain how the Board has
formed a judgement that it is appropriate to adopt the
going concern basis of preparation for the Group and
parent Company.
That judgement is based on an evaluation of the inherent
risks to the Group’s and Company’s business model and
how those risks might affect the Group’s and Company’s
financial resources or ability to continue operations over
a period of at least 12 months from the date of approval
of the financial statements.
The risk for our audit is whether or not those risks are such
that they amounted to a material uncertainty that may
cast significant doubt about the ability to continue as a
going concern. If so, that fact is required to be disclosed
(as has been done) and, along with a description of the
circumstances, is a key financial statement disclosure.
Our procedures included:
• Funding assessment: Considering the
availability and sufficiency of the financing
arrangements in place at the Group, including
the headroom on financial covenants in place on
the Group’s renewed revolving credit facility
• Sensitivity analysis: Challenging the stress
testing performed by the Directors considering
the severe but plausible scenarios that
could arise;
• Historical comparisons: Assessing historical
forecasting accuracy, by comparing previous
forecast results to those actually achieved by
the Group;
• Assessing assumptions: Assessing the key
assumptions (including growth rates in turnover
and margin expectations) as included in the
directors’ business plans and approved at
the period-end date by considering historic
store performance, recent trading and sector
knowledge to set our own expectations;
• Evaluating directors’ intent: Evaluating the
achievability of the actions the directors
consider they would take to improve the position
should the risks materialise, taking into account
the extent to which the directors can control the
timing and outcome of these;
• Comparing assumptions: Considering whether
the forecasts and assumptions used by the
Directors are consistent with other forecasts
used by the Group (including those used to
assess recoverability of Parent Company
investments in subsidiaries and recoverability of
store assets); and
• Assessing transparency: Considering whether
the going concern disclosure in the basis
of preparation of the accounts gives a full
and accurate description of the Directors’
assessment of going concern, including the
identified risks and corresponding assumptions.
Our results
We found the going concern disclosure in note 1 with
a material uncertainty to be acceptable (2022 result
without any material uncertainty: acceptable).
3. Other key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements
and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those
which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the
engagement team. Going concern is a significant key audit matter and is described in section 2 of our report. We summarise below
the other key audit matters in decreasing order of audit significance, in arriving at our audit opinion above, together with our key audit
procedures to address those matters and, as required for public interest entities, our results from those procedures. These matters were
addressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial
statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a
separate opinion on these matters.
TheWorks.co.uk plc Annual Report and Accounts 2023 91
Financial statementsCorporate governanceStrategic report
3. Other key audit matters: our assessment of risks of material misstatement continued
The risk Our response
Impairment of
property, plant
and equipment
and right-
of-use assets
Carrying amount
£78.5 million, out
of the total PPE
and ROUA of
£79.2 million (2022:
carrying amount
£85.5 million, out
of the total PPE
and ROUA of £86.5
million (restated)).
Refer to page 67
(Audit Committee
Report), page 115
note 14 (financial
disclosures – PPE
and ROU assets).
Forecast-based assessment:
The Group has significant property, plant and equipment
and right-of-use assets held on the consolidated
balance sheet.
The Group estimates the recoverable amount of property,
plant and equipment and right of use assets based on
their value in use, derived from a discounted cash flow
model prepared by management. The key assumptions
applied by management are short-term sales growth,
profit margin and discount rates, which all involve a high
degree of estimation uncertainty.
The increased economic uncertainty and the cost of
living crisis in the UK, has increased the risk in relation to
the recoverability of store assets at the cash generating
unit (“CGU”) level; each store being a CGU.
In addition as described in the financial statements
Note 14 the Group have reconsidered the allocation
of central costs to individual CGUs for the purposes of
impairment testing.
Subjective estimate
Subjective inputs to the value in use calculation, such as
the allocation of central overheads, discount rates and
remaining asset lives require judgement.
Calculation error
The model used to calculate the value in use is complex,
and so open to the possibility of mathematical error given
the complexity of the impairment methodology.
Prior year adjustment
The estimates used in, and accuracy of calculation of the
prior year adjustment could be incorrect. Furthermore,
the disclosures presented may not adequately address
the requirements of IAS 8 in relation to the description of
the adjustment and the impact of the correction.
The effect of these matters is that, as part of our risk
assessment for audit planning purposes we determined
that the degree of estimation uncertainty to be less than
that materiality, however in conducting our final audit
work, we reassessed the degree of estimation uncertainty
in relation to the value in use of store assets and we
determined that the risk has increased. It has a high
degree of estimation uncertainty with a potential range
of reasonable outcomes greater than our materiality
for the financial statements as a whole. The financial
statements (note 14) disclose the range/sensitivity
estimated by the Group.
We performed the detailed tests below rather
than seeking to rely on any of the Group’s controls
because the nature of the balance is such that we
would expect to obtain audit evidence primarily
through the detailed procedures described.
Our procedures included:
• Model design evaluation and re-performance:
We evaluated the reasonableness of the design
of VIU models in line with the requirements of
the accounting standard and re-performed
the calculations the Directors performed for
determining the VIU of each cash generating
unit, including assessing whether the allocation
of central overhead across each of the CGU is
appropriate.
• Benchmarking assumptions: We compared the
Group’s assumptions, in particular those relating
to forecast short-term sales growth rates and
discount rates, to externally derived data and
industry forecasts.
• Historical Comparisons: We assessed the
Group’s performance against budget in the
current and prior periods to evaluate the
historical accuracy of the Group’s forecasts
on a store by store basis and performed a
retrospective review on any prior year provisions/
impairments.
• Sensitivity Analysis: We performed sensitivity
analysis on the assumptions namely the
budgeted growth rates and discount rate.
• Assessing transparency: We assessed whether
the group’s disclosures about the sensitivity of
the outcome of the impairment assessment to
changes in key assumptions reflected the risks
related to the valuation of store assets. We
assessed if the disclosures in relation to the prior
year adjustment were in accordance with IAS 8.
Our results
We found the Group’s property, plant and
equipment and right-of-use assets balances
and the related impairment charges to be
acceptable (2022: acceptable). We found the prior
year adjustment and related disclosures to be
acceptable.
Independent auditor’s report continued
To the members of TheWorks.co.uk plc
TheWorks.co.uk plc Annual Report and Accounts 202392
3. Other key audit matters: our assessment of risks of material misstatement continued
The risk Our response
Existence,
completeness
and accuracy
of Inventory
Stores Inventory:
£21.0 million;
(2022: £20.4 million)
Refer to page 67
(Audit Committee
Report), and
page 123 note
17 (financial
disclosures).
Subjective estimation:
Inventory is a significant balance. It is held in stores, at
the Company warehouse and at a third- party logistics
provider. The risks described below relate to inventory
held at the stores.
It is usual in a retail environment for differences to arise
between the inventory records and physical quantities
for a variety of reasons, including theft and other losses,
often referred to as shrinkage.
The existence and completeness of inventory and
the extent of shrinkage was previously assessed by
management through sample inventory counts at
every store throughout the year (“tactical counts”) and
complete inventory counts at a number of stores (“wall-
to-wall counts”). The inventory records were adjusted
to reflect the results of management’s count processes
and a shrinkage provision was established to cater for an
estimate of the losses incurred between the count dates
and the year end.
In the prior year, Management’s count processes in the
stores were disrupted by a cyber incident in March 2022.
As a result, management were not able to conduct as
many wall-to-wall counts as planned to confirm the
existence and completeness of store inventory during the
course of the year. Therefore, management conducted
wall-to- wall counts at a sample of stores and estimated
the level of unrecognised shrinkage across the estate on
this basis.
Management’s count processes in the stores for FY23 was
to perform wall-to-wall inventory counts across all stores
within the final quarter of the year to establish a new
inventory volume baseline. Management expected that
the pre-count inventory record contained inaccuracies
and therefore variances identified in the count were not
highly scrutinised. Additionally, the count process was
new for FY23. Based on these factors we considered that
there was a high risk that the counts would be executed
incorrectly, or the results recorded incorrectly resulting in
a material error in the inventory record.
Management still developed an estimate for the level of
unrecognised shrinkage in the stores inventory balance,
but this was based on count results from all stores and
the period between the count date and year-end was
far shorter for almost all stores. As a result, the provision
for shrinkage was considered to have a far lower degree
of estimation uncertainty with a potential range of
outcomes smaller than our materiality for the financial
statements as a whole.
We performed the detailed tests below rather
than seeking to rely on any of the Group’s controls
because the our knowledge of the design of these
controls indicated that we would not be able to
obtain the required evidence to support reliance
on controls.
Our procedures included:
• Test of detail: We counted 640 line items at 25
stores close to the year end. We reconciled these
to the year end listings and compared our count
results with the company inventory records;
• Assessing methodology: We assessed the
methodology used by the group to calculate the
shrinkage provision;
• Independent reperformance: We performed
our own evaluation of the shrinkage based
on our count results, which we compared to
management’s estimate; and
• Assessing transparency: We assessed the
adequacy of the group’s disclosures about the
degree of estimation uncertainty involved in
arriving at the shrinkage provision.
Our results
The results of our testing were satisfactory and we
found the existence, completeness and accuracy
of Inventory to be acceptable (2022: acceptable).
TheWorks.co.uk plc Annual Report and Accounts 2023 93
Financial statementsCorporate governanceStrategic report
3. Other key audit matters: our assessment of risks of material misstatement continued
The risk Our response
Carrying
amount
of Parent
Company
investment in
subsidiaries
£38.4 million;
(2022: £57.3 million)
Refer to page 67
(Audit Committee
Report), page 136
note 33 (financial
disclosures).
Forecast-based assessment:
The carrying amount of the Parent Company’s
investments in subsidiaries represents 100% (2022: 80.1%)
of the Parent Company’s total assets. The net assets
of the subsidiaries are less than the carrying amount
of the Parent Company’s investment which is therefore
assessed with reference to their discounted forecast
future cash flows. This is inherently judgemental due to
the subjectivity and uncertainty involved in selecting the
appropriate key assumptions, being long term growth
rate, discount rate and underlying cashflows, and
preparing the future discounted cash flow model.
The effect of these matters is that, as part of our risk
assessment, we determined that the carrying value of the
parent company’s investment in subsidiaries has a high
degree of estimation uncertainty, with a potential range
of reasonable outcomes greater than our materiality
for the financial statements as a whole. The financial
statements (Note 33) disclose the sensitivity estimated by
the Company.
We performed the tests below rather than seeking
to rely on any of the Group’s controls because the
nature of the balance is such that we would expect
to obtain audit evidence primarily through the
detailed procedures described.
Our procedures included:
• Test of Detail: We used our sector
knowledge and understanding of the
business and considered whether or not
they had been appropriately captured in the
impairment models;
• Our valuation expertise: We used experts to
assist us in assessing appropriateness of the
methodology and assumptions. In addition we
performed an independent calculation of the
discount rate based on market data to assist us
in assessing the discount rate assumptions used
by the Group;
• Assessing assumptions: We assessed the key
assumptions (including growth rates in turnover
and margin expectations) as included in the
directors’ business plans and approved at
the period-end date by considering historic
performance and industry forecasts to set our
own expectations;
• Sensitivity Analysis: We applied sensitivities to
key assumptions to assess their impact on the
recoverability of the assets;
• Historical comparison: We evaluated the
historical accuracy of the Group’s forecasts by
comparing previous budget to actual results;
• Comparing valuations: We compared the results
of discounted cash flows against the Group’s
market capitalisation; and
• Assessing transparency: We also considered
the adequacy of the Group’s disclosure of the
key risks and sensitivity around the outcome,
and whether that disclosure reflected the
risks inherent in the valuation of investments
in subsidiaries.
Our results
The results of our testing were satisfactory and
we found the impairment of £19.6m recorded and
the resulting carrying value of the investment in
subsidiaries to be acceptable (2022: acceptable).
Independent auditor’s report continued
To the members of TheWorks.co.uk plc
TheWorks.co.uk plc Annual Report and Accounts 202394
Revenue
Group materiality
Benchmark – Revenue
£280m (2022: £265m)
Group materiality
£750k (2022: £750k)
£750k
Whole financial statements
materiality (2022: £750k)
£487.5k
Whole financial statements
performance materiality
(2022: £487.5k)
£37.5k
Misstatements reported
to the audit committee
(2022: £37.5k)
4. Our application of materiality and an overview of the
scope of our audit
Materiality for the Group financial statements as a whole was set
at £750k (2022: £750k), determined with reference to a benchmark
of revenue of £280m (2022: £265m) as disclosed in note 3, of which it
represents 0.27% (2022: 0.28%).
Materiality for the parent Company financial statements as a
whole was set at £412k (2022: £600k), determined with reference
to a benchmark of Company net assets, of which it represents
1.40% (2022: 1.17%).
In line with our audit methodology, our procedures on individual
account balances and disclosures were performed to a lower
threshold, performance materiality, so as to reduce to an acceptable
level the risk that individually immaterial misstatements in individual
account balances add up to a material amount across the
financial statements as a whole.
Performance materiality was set at 65% (2022: 65%) of materiality
for the financial statements as a whole, which equates to £487.5k
(2022: £487.5k) for the Group and £267k (2022: £390k) for the parent
Company. We applied this percentage in our determination of
performance materiality based on the level of misstatements
and control deficiencies in the control environment during the
prior period.
We agreed to report to the Audit Committee any corrected
or uncorrected identified misstatements exceeding £37.5k
(2022: £37.5k), in addition to other identified misstatements that
warranted reporting on qualitative grounds.
The scope of the audit work performed was predominately
substantive as we placed limited reliance upon the Group’s internal
control over financial reporting.
The group team performed the audit of the group as if it was a
single aggregated set of financial information. The audit was
performed using materiality and performance materiality level
set out above.
5. Going concern
The directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the group
or the company, or to cease their operations, and as they have
concluded that the group and the company’s financial position
means that this is realistic for at least 12 months from the date of
approval of the financial statements (“the going concern period”).
As stated in section 2 of our report, they have also concluded that
there is a material uncertainty related to going concern.
An explanation of how we evaluated management’s assessment of
going concern is set out in section 2 of our report.
Our conclusions based on this work:
• we consider that the directors’ use of the going concern basis
of accounting in the preparation of the financial statements
is appropriate;
• we have nothing material to add or draw attention to in relation
to the directors’ statement in note 1 to the financial statements
on the use of the going concern basis of accounting, and
their identification therein of a material uncertainty over the
Group and Company’s use of that basis for the going concern
period; and
• the related statement under the Listing Rules set out on page
86 is materially consistent with the financial statements and our
audit knowledge.
6. Fraud and breaches of laws and regulations –
ability to detect
Identifying and responding to risks of material misstatement
due to fraud
To identify risks of material misstatement due to fraud (“fraud risks”)
we assessed events or conditions that could indicate an incentive
or pressure to commit fraud or provide an opportunity to commit
fraud. Our risk assessment procedures included:
• Enquiring of directors and inspection of policy documentation
as to the Group’s and the Company’s high-level policies and
procedures to prevent and detect fraud and the Group’s and the
Company’s channel for “whistleblowing”, as well as whether they
have knowledge of any actual, suspected or alleged fraud.
• Reading Board minutes.
• Considering remuneration incentive schemes and performance
targets for management and directors including the EPS target
for management remuneration.
• Held fraud risks discussions with Forensic Specialists.
We communicated identified fraud risks throughout the audit
team and remained alert to any indications of fraud throughout
the audit.
As required by auditing standards, and taking into account
possible pressures to meet profit targets and our overall knowledge
of the control environment we perform procedures to address the
risk of management override of controls, in particular the risk that
Group management may be in a position to make inappropriate
accounting entries and the risk of bias in accounting estimates
and judgements such as dilapidations, cashflow and impairment
assumptions. On this audit we do not believe there is a fraud risk
related to revenue recognition because transactions are highly
disaggregated, individually immaterial and quick cash settlement.
We did not identify any additional fraud risks.
We performed procedures including:
• Identifying journal entries to test based on risk criteria and
comparing the identified entries to supporting documentation.
These included those posted to unusual accounts.
• Assessing whether the judgements made in making accounting
estimates are indicative of a potential bias.
TheWorks.co.uk plc Annual Report and Accounts 2023 95
Financial statementsCorporate governanceStrategic report
6. Fraud and breaches of laws and regulations – ability
to detect continued
Identifying and responding to risks of material misstatement due
to non-compliance with laws and regulations
We identified areas of laws and regulations that could reasonably
be expected to have a material effect on the financial statements
from our general commercial and sector experience and through
discussion with the directors and others management (as required
by auditing standards) and discussed with the directors (and other
management) the policies and procedures regarding compliance
with laws and regulations.
As the Group and Company are regulated, our assessment of risks
involved gaining an understanding of the control environment including
the entity’s procedures for complying with regulatory requirements.
We communicated identified laws and regulations throughout our
team and remained alert to any indications of non- compliance
throughout the audit.
The potential effect of these laws and regulations on the financial
statements varies considerably.
Firstly, the Group and Company are subject to laws and regulations
that directly affect the financial statements including financial
reporting legislation (including related companies legislation),
distributable profits legislation and taxation legislation and we
assessed the extent of compliance with these laws and regulations
as part of our procedures on the related financial statement items.
Secondly, the Group and Company are subject to many other
laws and regulations where the consequences of non-compliance
could have a material effect on amounts or disclosures in the
financial statements, for instance through the imposition of fines
or litigation We identified the following areas as those most likely
to have such an effect: health and safety, data protection laws,
anti-bribery, employment law, regulatory capital and liquidity,
recognising the regulated nature of the Group’s and Company’s
activities. Auditing standards limit the required audit procedures
to identify non-compliance with these laws and regulations to
enquiry of the directors and other management and inspection of
regulatory and legal correspondence, if any. Therefore if a breach
of operational regulations is not disclosed to us or evident from
relevant correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or breaches of
law or regulation
Owing to the inherent limitations of an audit, there is an unavoidable
risk that we may not have detected some material misstatements
in the financial statements, even though we have properly planned
and performed our audit in accordance with auditing standards.
For example, the further removed non- compliance with laws
and regulations is from the events and transactions reflected
in the financial statements, the less likely the inherently limited
procedures required by auditing standards would identify it.
In addition, as with any audit, there remained a higher risk of
non-detection of fraud, as these may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal
controls. Our audit procedures are designed to detect material
misstatement. We are not responsible for preventing non-compliance
or fraud and cannot be expected to detect non- compliance with
all laws and regulations.
7. We have nothing to report on the other information
in the Annual Report
The directors are responsible for the other information presented
in the Annual Report together with the financial statements.
Our opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion
or, except as explicitly stated below, any form of assurance
conclusion thereon.
Our responsibility is to read the other information and, in doing so,
consider whether, based on our financial statements audit work,
the information therein is materially misstated or inconsistent with
the financial statements or our audit knowledge. Based solely on
that work we have not identified material misstatements in the
other information.
Strategic report and directors’ report
Based solely on our work on the other information:
• we have not identified material misstatements in the strategic
report and the directors’ report;
• in our opinion the information given in those reports for the
financial year is consistent with the financial statements; and
• in our opinion those reports have been prepared in accordance
with the Companies Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration Report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
Disclosures of emerging and principal risks and longer-term viability
We are required to perform procedures to identify whether there
is a material inconsistency between the directors’ disclosures in
respect of emerging and principal risks and the viability statement,
and the financial statements and our audit knowledge.
Based on those procedures, other than the material uncertainty
related to going concern referred to above, we have nothing
further material to add or draw attention to in relation to:
• the directors’ confirmation within the Viability Statement page 54
that they have carried out a robust assessment of the emerging
and principal risks facing the Group, including those that would
threaten its business model, future performance, solvency and liquidity;
• the Emerging and Principal Risks disclosures describing these
risks and how emerging risks are identified, and explaining how
they are being managed and mitigated; and
• the directors’ explanation in the Viability Statement of how
they have assessed the prospects of the Group, over what
period they have done so and why they considered that period
to be appropriate, and their statement as to whether they
have a reasonable expectation that the Group will be able
to continue in operation and meet its liabilities as they fall
due over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications
or assumptions.
We are also required to review the Viability Statement, set out on
page 54 under the Listing Rules. Based on the above procedures,
we have concluded that the above disclosures are materially
consistent with the financial statements and our audit knowledge.
Our work is limited to assessing these matters in the context of
only the knowledge acquired during our financial statements
audit. As we cannot predict all future events or conditions and as
subsequent events may result in outcomes that are inconsistent
with judgements that were reasonable at the time they were made,
the absence of anything to report on these statements is not a
guarantee as to the Group’s and Company’s longer-term viability.
Independent auditor’s report continued
To the members of TheWorks.co.uk plc
TheWorks.co.uk plc Annual Report and Accounts 202396
7. We have nothing to report on the other information
in the Annual Report continued
Corporate governance disclosures
We are required to perform procedures to identify whether there
is a material inconsistency between the directors’ corporate
governance disclosures and the financial statements and our
audit knowledge.
Based on those procedures, we have concluded that each of the
following is materially consistent with the financial statements and
our audit knowledge:
• the directors’ statement that they consider that the annual
report and financial statements taken as a whole is fair,
balanced and understandable, and provides the information
necessary for shareholders to assess the Group’s position and
performance, business model and strategy;
• the section of the annual report describing the work of the
Audit Committee, including the significant issues that the audit
committee considered in relation to the financial statements,
and how these issues were addressed; and
• the section of the annual report that describes the review of
the effectiveness of the Group’s risk management and internal
control systems.
We are required to review the part of the Corporate Governance
Report relating to the Group’s compliance with the provisions of the
UK Corporate Governance Code specified by the Listing Rules for
our review. We have nothing to report in this respect.
8. We have nothing to report on the other matters on
which we are required to report by exception
Under the Companies Act 2006, we are required to report to you if,
in our opinion:
• adequate accounting records have not been kept by the parent
Company, or returns adequate for our audit have not been
received from branches not visited by us; or
• the parent Company financial statements and the part of
the Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law
are not made; or
• we have not received all the information and explanations we
require for our audit.
We have nothing to report in these respects.
9. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 89,
the directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error; assessing the Group
and parent Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern; and
using the going concern basis of accounting unless they either
intend to liquidate the Group or the parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our
opinion in an auditor’s report. Reasonable assurance is a high level
of assurance, but does not guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s
website at www.frc.org.uk/auditorsresponsibilities.
The Company is required to include these financial statements
in an annual financial report prepared using the single electronic
reporting format specified in the TD ESEF Regulation. This auditor’s
report provides no assurance over whether the annual financial
report has been prepared in accordance with that format.
10. The purpose of our audit work and to whom we owe
our responsibilities
This report is made solely to the Company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to
them in an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company’s members,
as a body, for our audit work, for this report, or for the opinions we
have formed.
Gordon Docherty
(Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
One Snowhill
Snowhill Queensway
Birmingham
B4 6GH
30 August 2023
TheWorks.co.uk plc Annual Report and Accounts 2023 97
Financial statementsCorporate governanceStrategic report
52 weeks to 30 April 2023
52 weeks to 1 May 2022
(Restated – Note 14)
Note
Result before
Adjusting items
£000
Adjusting
items
£000
Total
£000
Result before
Adjusting items
£000
Adjusting
items
£000
Total
£000
Revenue 3 280,102 — 280,102 264,630 - 264,630
Cost of sales 6 (231,150 ) (5,052 ) (236,202 ) (209,598 ) (2,262 ) (211,860 )
Gross profit 48,952 (5,052 ) 43,900 55,032 (2,262 ) 52,770
Other operating income/(expense) 4 8 — 8 (111 ) — (111 )
Distribution expenses (10,284 ) — (10,284 ) (9,128 ) — (9,128 )
Administrative expenses (24,197 ) — (24,197 ) (24,116 ) — (24,116 )
Operating profit 7 14,479 (5,052 ) 9,427 21,677 (2,262 ) 19,415
Finance income 227 — 227 16 16
Finance expenses (4,648 ) — (4,648 ) (5,192 ) — (5,192 )
Net financing expense 9 (4,421 ) — (4,421 ) (5,176 ) — (5,176 )
Profit before tax 10,058 (5,052 ) 5,006 16,501 (2,262 ) 14,239
Taxation 10 265 — 265 (276 ) — (276 )
Profit for the period 10,323 (5,052 ) 5,271 16,225 (2,262 ) 13,963
Alternative performance measure
Profit before tax and IFRS 16 5 3,025 (1,488 ) 1,537 10,980 (2,191 ) 8,789
Basic earnings per share (pence) 12 16.5 8.4 26.0 22.3
Diluted earnings per share (pence) 12 16.4 8.4 25.6 22.0
Profit for the period is attributable to equity holders of the Parent.
Consolidated income statement
For the period ended 30 April 2023
TheWorks.co.uk plc Annual Report and Accounts 202398
FY23
£000
FY22
(Restated –
Note 14)
£000
Profit for the year 5,271 13,963
Items that may be recycled subsequently into profit and loss
Cash flow hedges – changes in fair value (2,862 ) 4,181
Cash flow hedges – reclassified to profit and loss (62 ) (321 )
Cost of hedging – changes in fair value (162 ) (83 )
Cost of hedging – reclassified to profit and loss 91 94
Tax relating to components of other comprehensive income 262 -
Other comprehensive (expense)/income for the period, net of income tax (2,733 ) 3,871
Total comprehensive income for the period attributable to equity shareholders of the Parent 2,538 17,834
Consolidated statement of comprehensive income
For the period ended 30 April 2023
TheWorks.co.uk plc Annual Report and Accounts 2023 99
Financial statementsCorporate governanceStrategic report
Note
FY23
£000
FY22
(Restated –
Note 14)
£000
Non-current assets
Intangible assets 13 916 1,617
Property, plant and equipment 14 11,733 9,896
Right-of-use assets 14, 15 67,463 76,621
Deferred tax assets 16 4,854 4,708
Current assets
Inventories 17 33,441 29,387
Trade and other receivables 18 7,507 8,427
Derivative financial asset 25 — 2,393
Current tax asset 1,149 —
Cash and cash equivalents 19 10,196 16,280
Total assets 137,259 149,329
Current liabilities
Lease liabilities 15, 20 23,449 25,434
Trade and other payables 21 34,479 35,958
Provisions 22 565 204
Derivative financial liability 25 1,048 —
Current tax liability — 740
Non-current liabilities
Lease liabilities 15, 20 74,766 85,702
Provisions 22 1,298 913
Total liabilities 135,605 148,951
Net assets 1,654 378
Equity attributable to equity holders of the Parent
Share capital 24 625 625
Share premium 24 28,322 28,322
Merger reserve (54 ) (54 )
Share based payment reserve 2,780 2,252
Hedging reserve (331 ) 2,227
Retained earnings (29,688 ) (32,994 )
Total equity 1,654 378
These financial statements were approved by the Board of Directors on 30 August 2023 and were signed on its behalf by:
Steve Alldridge
Chief Financial Officer
Company registered number: 11325534
Consolidated statement of financial position
As at 30 April 2023
TheWorks.co.uk plc Annual Report and Accounts 2023100
Attributable to equity holders of the Company
Share
capital
£000
Share
premium
£000
Merger
reserve
£000
Share-based
payment
reserve
£000
Hedging
reserve
1
£000
Retained
earnings
£000
Total
equity
£000
Reported balance at 2 May 2021 625 28,322 (54 ) 1,601 (1,203 ) (20 ,463 ) 8,828
Cumulative adjustment to opening balance (Note 14) - - - - - (26, 494 ) (26, 494 )
Restated balance at 2 May 2021 625 28,322 (54 ) 1,601 (1,20 3 ) (46,957 ) (17 ,666 )
Total comprehensive income for the period
Profit for the period (Restated – Note 14) — — — — — 13,963 13, 963
Other comprehensive income — — — — 3,871 — 3,871
Total comprehensive income for the period — — — — 3,871 13, 963 17 ,834
Hedging gains and losses and costs of hedging transferred
to the cost of inventory (Note 25) — — — — (441 ) — (4 41 )
Transactions with owners of the Company
Share-based payment charges — — — 651 — — 651
Total transactions with owners — — — 651 — — 651
Balance at 1 May 2022 (Restated – Note 14) 625 28,322 (54 ) 2,252 2,227 (32, 994 ) 378
Total comprehensive income/(expense) for the period
Profit for the period — — — — — 5,27 1 5, 271
Other comprehensive expense — — — — (2,733 ) — (2,733 )
Total comprehensive income/(expense) for the period — — — — (2,733 ) 5,27 1 2,538
Hedging gains and losses and costs of hedging transferred
to the cost of inventory (Note 25) — — — — 1 75 — 1 75
Transactions with owners of the Company
Share-based payment charges — — — 528 — — 528
Dividend — — — — — (1,4 92 ) (1,492 )
Own shares purchased by employee benefit trust — — — — — (473 ) (473 )
Total transactions with owners — — — 528 — (1, 965 ) (1,437 )
Balance at 30 April 2023 625 2 8,322 (54 ) 2,780 (331 ) (29 ,688 ) 1,654
1 Hedging reserve includes £170 k (FY22: £175 k) in relation to changes in forward points which are recognised in other comprehensive income and
accumulated as a cost of hedging within the hedging reserve.
Consolidated statement of changes in equity
TheWorks.co.uk plc Annual Report and Accounts 2023 101
Financial statementsCorporate governanceStrategic report
FY23
£000
FY22
(Restated –
Note 14)
£000
Profit for the year (including Adjusting items) 5,271 13,963
Adjustments for:
Depreciation of property, plant and equipment 4,458 4,040
Impairment of property, plant and equipment 944 1,389
Reversal of impairment of property, plant and equipment (574 ) (573 )
Depreciation of right-of-use assets 14,840 15,094
Impairment of right-of-use assets 6,126 6,165
Reversal of impairment of right-of-use assets (2,562 ) (6,094 )
Amortisation of intangible assets 878 567
Impairment of intangible assets 1,118 1,375
Derivative exchange (gain)/loss (721 ) 289
Financial income (227 ) (16 )
Financial expense 518 692
Interest on lease liabilities 4,130 4,500
Loss on disposal of property, plant and equipment 149 179
Profit on disposal of right-of-use assets and lease liability (1,105 ) (441 )
Loss on disposal of intangible assets 14 —
Share-based payment charges 528 651
Taxation (265 ) 276
Operating cash flows before changes in working capital 33,520 42,056
Decrease/(increase) in trade and other receivables 1,033 (1,514 )
Increase in inventories (3,129 ) (892 )
(Decrease)/increase in trade and other payables (1,443 ) 9,336
Increase in provisions 746 399
Cash flows from operating activities 30,727 49,385
Corporation tax paid (1,508 ) (222 )
Net cash inflow from operating activities 29,219 49,163
Cash flows from investing activities
Acquisition of property, plant and equipment (7,296 ) (2,818 )
Capital contributions received from landlords 1,928 882
Acquisition of intangible assets (1,309 ) (1,015 )
Interest received 227 16
Net cash outflow from investing activities (6,450 ) (2,935 )
Cash flows from financing activities
Payment of lease liabilities (capital) (22,672 ) (25,969 )
Payment of lease liabilities (interest) (4,130 ) (4,500 )
Payment of RCF fees (336 ) —
Other interest paid (321 ) (157 )
RCF drawdown 4,000 —
Repayment of bank borrowings (4,000 ) (7,500 )
Dividend paid (1,492 ) —
Purchase of treasury shares (473 ) —
Net cash outflow from financing activities (29,424 ) (38,126 )
Net (decrease)/increase in cash and cash equivalents (6,655 ) 8,102
Exchange rate movements 571 (137 )
Cash and cash equivalents at beginning of year 16,280 8,315
Cash and cash equivalents at end of year 10,196 16,280
Consolidated cash flow statement
For the period ended 30 April 2023
TheWorks.co.uk plc Annual Report and Accounts 2023102
TheWorks.co.uk plc Annual Report and Accounts 2023 103
Financial statementsCorporate governanceStrategic report
1. Accounting policies continued
(b) Basis of preparation continued
(i) Going concern continued
TheWorks.co.uk plc Annual Report and Accounts 2023104104
Notes to the consolidated financial statements continued
(Forming part of the financial statements)
1. Accounting policies continued
(b) Basis of preparation continued
(i) Going concern continued
TheWorks.co.uk plc Annual Report and Accounts 2023 105
Financial statementsCorporate governanceStrategic report
105
1. Accounting policies continued
(b) Basis of preparation continued
TheWorks.co.uk plc Annual Report and Accounts 2023106106
Notes to the consolidated financial statements continued
(Forming part of the financial statements)
1. Accounting policies continued
TheWorks.co.uk plc Annual Report and Accounts 2023 107
Financial statementsCorporate governanceStrategic report
107
TheWorks.co.uk plc Annual Report and Accounts 2023108108
Notes to the consolidated financial statements continued
(Forming part of the financial statements)
5. Alternative performance measures (APMs) continued
TheWorks.co.uk plc Annual Report and Accounts 2023 109
Financial statementsCorporate governanceStrategic report
109
Notes to the consolidated financial statements continued
(Forming part of the financial statements)
8. Staff numbers and costs continued
TheWorks.co.uk plc Annual Report and Accounts 2023 111
Financial statementsCorporate governanceStrategic report
111
10. Taxation continued
Accounting policy continued
Deferred tax continued
TheWorks.co.uk plc Annual Report and Accounts 2023112112
Notes to the consolidated financial statements continued
(Forming part of the financial statements)
TheWorks.co.uk plc Annual Report and Accounts 2023 113
Financial statementsCorporate governanceStrategic report
113
13. Intangible assets continued
Accounting policy continued
Software continued
TheWorks.co.uk plc Annual Report and Accounts 2023114114
Notes to the consolidated financial statements continued
(Forming part of the financial statements)
TheWorks.co.uk plc Annual Report and Accounts 2023 115
Financial statementsCorporate governanceStrategic report
115
14. Property, plant and equipment continued
TheWorks.co.uk plc Annual Report and Accounts 2023116116
Notes to the consolidated financial statements continued
(Forming part of the financial statements)
14. Property, plant and equipment continued
Sensitivity analysis continued
TheWorks.co.uk plc Annual Report and Accounts 2023 117
Financial statementsCorporate governanceStrategic report
117
14. Property, plant and equipment continued
Prior period restatements continued
TheWorks.co.uk plc Annual Report and Accounts 2023118118
Notes to the consolidated financial statements continued
(Forming part of the financial statements)
14. Property, plant and equipment continued
TheWorks.co.uk plc Annual Report and Accounts 2023 119
Financial statementsCorporate governanceStrategic report
119
14. Property, plant and equipment continued
TheWorks.co.uk plc Annual Report and Accounts 2023120120
Notes to the consolidated financial statements continued
(Forming part of the financial statements)
15. IFRS 16 continued
Lessee accounting under IFRS 16 continued
TheWorks.co.uk plc Annual Report and Accounts 2023 121
Financial statementsCorporate governanceStrategic report
121
15. IFRS 16 continued
Amounts recognised in the statement of financial position continued
TheWorks.co.uk plc Annual Report and Accounts 2023122122
Notes to the consolidated financial statements continued
(Forming part of the financial statements)
TheWorks.co.uk plc Annual Report and Accounts 2023 123
Financial statementsCorporate governanceStrategic report
123
17. Inventories continued
Stock provisions continued
TheWorks.co.uk plc Annual Report and Accounts 2023124124
Notes to the consolidated financial statements continued
(Forming part of the financial statements)
TheWorks.co.uk plc Annual Report and Accounts 2023 125
Financial statementsCorporate governanceStrategic report
125
21. Trade and other payables continued
TheWorks.co.uk plc Annual Report and Accounts 2023126126
Notes to the consolidated financial statements continued
(Forming part of the financial statements)
24. Share capital and share premium continued
Accounting policy continued
TheWorks.co.uk plc Annual Report and Accounts 2023 127
Financial statementsCorporate governanceStrategic report
127
25. Financial instruments continued
Accounting policy continued
TheWorks.co.uk plc Annual Report and Accounts 2023128128
Notes to the consolidated financial statements continued
(Forming part of the financial statements)
25. Financial instruments continued
Financial risk management continued
TheWorks.co.uk plc Annual Report and Accounts 2023 129
Financial statementsCorporate governanceStrategic report
129
25. Financial instruments continued
TheWorks.co.uk plc Annual Report and Accounts 2023130130
Notes to the consolidated financial statements continued
(Forming part of the financial statements)
25. Financial instruments continued
Classification of financial instruments continued
TheWorks.co.uk plc Annual Report and Accounts 2023 131
Financial statementsCorporate governanceStrategic report
131
26. Equity-settled share-based payment arrangements continued
TheWorks.co.uk plc Annual Report and Accounts 2023132132
Notes to the consolidated financial statements continued
(Forming part of the financial statements)
Note
FY
FY
(Restated –
Note )
Fixed assets
Investment , ,
, ,
Current assets
Trade and other receivables
Total assets , ,
Current liabilities
Trade and other payables , ,
Total liabilities , ,
Net assets , ,
Share capital
Share premium , ,
Share-based payment reserve , ,
Retained earnings (,) ,
Total equity , ,
These financial statements were approved by the Board of Directors on 30 August 2023 and were signed on its behalf by:
Steve Alldridge
Chief Financial Officer
Company registered number: 11325534
Company statement of financial position
As at 30 April 2023
TheWorks.co.uk plc Annual Report and Accounts 2023 133
Financial statementsCorporate governanceStrategic report
Share capital
Share premium
Share based
payment reserve
Retained
Earnings
Total equity
Reported balance at May , , , ,
Cumulative adjustment to opening balance (Note ) — — — (,) (,)
Restated balance at May , , , ,
Total comprehensive expense for the period
Loss for the period — — — (,) (,)
Total comprehensive expense for the period — — — (,) (,)
Transactions with owners of the Company
Share-based payment charge — — —
Transactions with owners of the Company — — —
Balance at May (Restated - Note ) , , , ,
Total comprehensive expense for the period
Loss for the period — — — (,) (,)
Total comprehensive expense for the period — — — (,) (,)
Transactions with owners of the Company
Share-based payment charge — — —
Dividend — — — (,) (,)
Own shares purchased by employee benefit trust — — — () ()
Transactions with owners of the Company — — (,) (,)
Balance at April , , (,) ,
Company statement of changes in equity
TheWorks.co.uk plc Annual Report and Accounts 2023134
30. Accounting policies
(a) Basis of preparation
The Company financial statements have been prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure
Framework (FRS 101). In preparing these financial statements, the Company applies the recognition, measurement and disclosure
requirements of UK-adopted International Accounting Standards (Adopted IFRSs) but makes amendments where necessary in order to
comply with Companies Act 2006 and has set out below where advantage of the FRS 101 disclosure exemptions has been taken. The
financial statements have been prepared under the historical cost convention.
An Employee Benefit Trust operated on the Company’s behalf (‘EBT’) is acting as an agent of the Company, therefore the assets and
liabilities of the EBT are aggregated into the Company balance sheet and shares held by the EBT in the Company are presented as a
deduction from equity.
The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for at least
12 months from the date of issue of these financial statements. Accordingly, the financial statements have been prepared on a going
concern basis. Refer to Note 1(b)(i) for further information regarding the basis of preparation.
Principal accounting policies
The principal accounting policies set out below have been applied consistently to all periods presented in these financial statements.
New accounting standards
The Company has applied the following new standards and interpretations for the first time for the annual reporting period commencing
2 May 2022:
• Annual Improvements to IFRS 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41)
• Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37)
• Property, Plant and Equipment – Proceeds before Intended Use (Amendments to IAS 16)
• References to the Conceptual Framework (Amendments to IFRS 3)
• COVID-19 Related Rent Concessions beyond 30 June 2021 (Amendments to IFRS 16)
The adoption of the standards and interpretations listed above has not led to any changes to the Company’s accounting policies or had
any other material impact on the financial position or performance of the Company.
(b) Income statement
The Company made a loss after tax of £20.1m for the period relating to the impairment of the investment balance (FY22: loss of £15.1m).
As permitted by Section 408 of the Companies Act 2006, the income statement of the Company is not presented as part of the financial
statements.
In these financial statements, the Company has applied the exemptions available under FRS 101 in respect of the following disclosures:
• Cash flow statement and related notes.
• Comparative period reconciliations for share capital.
• Transactions with wholly owned subsidiaries.
• Capital management.
• The effects of new but not yet effective IFRS.
• The compensation of key management personnel.
As the consolidated financial statements include the equivalent disclosures, the Company has also taken the exemptions under FRS 101
available in respect of the following disclosures:
• IFRS 2 share-based payments in respect of Group-settled share-based payments.
(c) Key sources of estimation uncertainty
The preparation of financial statements requires the Company to make estimates and judgements that affect the application of policies
and reported amounts.
Critical judgements represent key decisions made by management in the application of the Company accounting policies. Where a
significant risk of materially different outcomes exists due to the requirement to make assumptions in arriving at a figure, this will represent
a key source of estimation uncertainty.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.
The estimates which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next
12 months are discussed below.
Key sources of estimation uncertainty which are material to the financial statements are described in the context of the matters to which
they relate, in the following note:
Description Note Page
Impairment of investments in subsidiaries
31. Employee costs
The Company has no employees other than the Board of Directors. Full details of Directors’ remuneration are set out in the Directors’
remuneration report.
Notes to the Company financial statements
TheWorks.co.uk plc Annual Report and Accounts 2023 135
Financial statementsCorporate governanceStrategic report
32. Dividends
Accounting policy
At the balance sheet date, dividends are only recognised as a liability if they are appropriately authorised and are no longer at the
discretion of the Company. Unpaid dividends that do not meet these criteria are disclosed in the notes to the financial statements.
Pence per share
FY
FY
Final dividend for the year ended May .p , —
Total dividend paid to shareholders during the year .p , —
Dividend equivalents totalling £603k (FY22: £375k) were accrued in the year in relation to share-based long-term incentive schemes.
The Board has recommended the payment of a 1.6 pence per share final dividend in respect of FY23 (FY22: 2.4 pence).
33. Investments in subsidiaries
Key source of estimation uncertainty
The carrying value of the investment in subsidiary undertakings is reviewed for impairment on an annual basis. The recoverable amount
is determined based on value in use. The value in use method requires the Group to determine appropriate assumptions (which are key
sources of estimation uncertainty) in relation to the growth rates of sales and gross margins, operating costs, future capital maintenance
expenditure, long-term growth rates and the pre-tax discount rate used to discount the assumed cash flows to present value. Estimation
uncertainty arises due to changing economic and market factors.
FY
At May ,
Additions ,
Impairment charge (,)
At May ,
Additions
Impairment charge (,)
At April ,
Investments in subsidiaries represent the Company’s investment in its subsidiary, The Works Investments Limited.
Impairment of investments in subsidiaries
The Company evaluates its investments in subsidiaries annually for any indicators of impairment. The Company considers the relationship
between its market capitalisation and the carrying value of its investments, among other factors, when reviewing for indicators of impairment.
As described above, key assumptions for the value in use calculation include those regarding the pre-tax discount rate, long-term growth
rates, and expected trading performance (sales, gross margin and operating costs).
The recoverable amount of the investment in The Works Investments Limited has been re-evaluated based on the Group’s latest forecast
post-tax cash flows included in its Base Case plan (see Note 1(b)(i)) which have regard to historical performance and knowledge of the
current market, together with the Group’s views on the future achievable growth and the impact of committed cash flows. The cash flows
include estimates of ongoing capital expenditure required to maintain the store network, but exclude any significant growth capital
initiatives. The immediately quantifiable costs of short term climate change risks and our net zero commitments have been included
in the cashflows. Increased capital expenditure has been included in the medium term cashflows to reflect anticipated technological
investment that is likely to be required either due to climate risk or in meeting our net zero commitments.
Management estimates pre-tax discount rates that reflect the current market assessment of the time value of money and the risks
specific to the Group. The pre-tax discount rate is derived from the Group’s weighted average cost of capital, which has been estimated
using the capital asset pricing model, the inputs of which include a company risk-free rate, equity risk premium, Group size premium,
a forecasting risk premium and a risk adjustment (beta). The FY23 pre-tax discount rate has been calculated on a pre-IFRS 16 basis,
therefore the cashflows used in the value in use calculation include IFRS-16 lease payments.
FY FY
Pre-tax discount rate .% .%
Long-term growth rate .% .%
As a result of this analysis, an impairment charge of £19.5m has been recognised during FY23.
Sensitivity analysis
As disclosed in the accounting policies note, the cash flows used within the impairment model, the long-term growth rate and the pre-tax
discount rate are sources of estimation uncertainty and changes in these assumptions could lead to further impairment.
Management has performed sensitivity analysis on the assumptions in the impairment model using reasonably possible changes in these
key assumptions:
• a 10 basis point reduction in the long-term growth rate would result in an increase in impairment of £1.3m;
• a 10% reduction in cash flows from the Base Case plan would result in an increase in the impairment of £2.8m; and
• a 20 basis point increase in the pre-tax discount rate would result in an increase in impairment of £3.3m.
In the event that all three were to occur simultaneously, there would be an increase in impairment of £6.7m.
Notes to the Company financial statements continued
TheWorks.co.uk plc Annual Report and Accounts 2023136
34. Trade receivables
FY
FY
Prepayments and accrued income
Trade and other receivables
35. Trade payables
FY
FY
(Restated
)
Non-trade payables and accrued expenses
Accruals
Amounts owed to Group undertakings , ,
Trade and other payables , ,
1 These balances have been restated to reflect the impact of the prior period restatements discussed below.
Amounts owed to Group undertakings are non-interest bearing and repayable on demand. The increase in the balance relates to the
FY22 final dividend and Plc related payroll costs being paid by The Works Stores Limited during the year as the Company does not have a
bank account.
Prior Period Restatements
The FY21 fixed asset impairment restatement detailed in Note 14 retrospectively reduces the distributable reserves in The Works Stores
Limited at the end of FY21. This prior year restatement affects an intercompany loan waiver which occurred in FY21, of a £5.5m payable
which had been due to The Works Stores Limited from TheWorks.co.uk plc. As this is a waiver from a subsidiary to the parent company,
the waiver is a deemed distribution of profits. Following the prior year restatement, The Works Stores Limited had negative distributable
reserves as at the time of the waiver, as such the distribution was unlawful. Therefore, as at the date of the waiver the Company is liable
to repay an amount equal to the original amount subject to the waiver, and an intercompany payable of £5.5m was created at this date.
This results in a £5.5m increase to amounts owed to group undertakings as at the end of FY21, with a corresponding reduction in profit
after tax. In the FY22 financial statements, the amounts owed to group undertakings is increased by £5.5m compared with the amount
previously stated, and the brought forward retained earnings balance has been reduced by £5.5m.
The following tables summarise the impact of the above restatements on the Group’s consolidated financial statements.
Summarised consolidated statement of financial position
Per FY
financial
statements Adjustment
FY
restated
balance
Total assets , — ,
Liabilities
Trade and other payables () (,) (,)
Total liabilities () (,) (,)
Net assets , (,) ,
Equity attributable to equity holders of the Parent
Retained earnings , (,) ,
Other reserves , — ,
Total equity , (,) ,
Per FY
financial
statements Adjustment
FY
restated
balance
Total assets , — ,
Liabilities
Trade and other payables () (,) (,)
Total liabilities () (,) (,)
Net assets , (,) ,
Equity attributable to equity holders of the Parent
Retained earnings , (,) ,
Other reserves , — ,
Total equity , (,) ,
TheWorks.co.uk plc Annual Report and Accounts 2023 137
Financial statementsCorporate governanceStrategic report
35. Trade payables continued
Prior Period Restatements continued
Summarised consolidated statement of changes in equity
Attributable to equity holders of the Company
Share
capital
Share
premium
Share-based
payment
reserve
Retained
earnings
Total
equity
Reported balance at May , , , ,
Cumulative adjustment — — — (,) (,)
Restated balance at May , , , ,
Attributable to equity holders of the Company
Share
capital
Share
premium
Share-based
payment
reserve
Retained
earnings
Total
equity
Reported balance at May , , , ,
Cumulative adjustment — — — (,) (,)
Restated balance at May , , , ,
36. Share capital and share premium
Accounting policy
The following describes the nature and purpose of each reserve within equity:
• Share premium account: Proceeds received in excess of the nominal value of shares issued, net of any transaction costs.
• Share based payment reserve: Represents the cumulative charges to income under IFRS 2 Share-based Payments on all share options
and schemes granted, net of share option exercises.
• Retained earnings: All other net gains and losses and transactions with owners (e.g. dividends) not recognised elsewhere.
FY
Number
FY
Number
Share capital
Allotted, called up and fully paid ordinary shares of p:
At the start of the period , ,
Issued in the period — —
At the end of the period , ,
FY
FY
Share capital
At the start of the period
Issued in the period — —
At the end of the period
Share premium
At the start of the period , ,
Issued in the period — —
At the end of the period , ,
During the year, the Employee Benefit Trust purchased £473k (FY22: £Nil) of the Company’s shares for the purpose of satisfying future
employee share-based payment awards.
Investment in own shares
At 30 April 2023, the Employee Benefit Trust held 1,240,577 (FY22: Nil) of the Company’s shares.
The Trust has waived any entitlement to the receipt of dividends in respect of its holding of the Company’s ordinary shares. The market
value of these shares at 30 April 2023 was £390,161 (FY22: £Nil). In the current period, 1,408,086 (FY22: Nil) were repurchased and transferred
into the Trust, with 167,491 (FY22: Nil) reissued on exercise of share options.
Notes to the Company financial statements continued
TheWorks.co.uk plc Annual Report and Accounts 2023138
37. Equity-settled share-based payment arrangements
Accounting policy
The Group operates an equity-settled share-based compensation plan.
The cost of the awards to employees is expensed to the income statement, together with a corresponding adjustment to equity, on a
straight-line basis over the vesting period of the award. The cost of awards to employees of subsidiary undertakings is recognised as an
increase in the investment in the subsidiary. The total income statement charge is based on the Company’s estimate of the number of
share awards that will eventually vest in accordance with the vesting conditions. The awards granted during FY23 include market-based
vesting conditions. At each balance sheet date, the Company revises its estimate of the number of awards that are expected to vest.
Any revision to estimates is recognised in the income statement, with a corresponding adjustment to equity.
During FY23, the Group had three (FY22: three) share-based payment schemes, which are described below.
TheWorks.co.uk Long-Term Incentive Plan (LTIP)
Further details of the Group’s LTIP arrangements are included in the Directors’ remuneration report. The LTIP rules provide for the grant of
performance related and restricted awards.
The LTIP awards are subject to a three-year vesting period and will usually only vest following the satisfaction of performance conditions.
Vested shares will not be released until the end of an additional holding period of two years beginning on the vesting date. Performance
measures under the LTIP are based on financial measures. For FY23, the vesting conditions require three years’ service from the grant
date and the achievement of an EPS target, and a share price target (FY22 awards: three years’ service from the grant date and the
achievement of an EPS target, and a share price target).
Restricted stock awards (RSA)
Restricted stock awards have previously been granted to certain employees, with a three-year vesting period. Restricted share awards
are not subject to performance conditions.
Save As You Earn Scheme (SAYE)
A Save As You Earn Scheme is established which is a UK tax-qualified scheme under which eligible employees (including Directors) may
save up to a maximum monthly limit of £250 (as determined by the Remuneration Committee) over a period of three years. Participants
are granted an option to acquire shares at up to a 20% discount to the price as at the date of grant. The number of shares under option is
that which can be acquired at that price using savings made.
For more information, refer to Note 26.
Expense recognised in the Company income statement
FY
FY
(Restated –
Note )
Share-based payment expenses
Expense recognised in the Company income statement
Expense recognised in the subsidiary income statement
Total IFRS charges recognised in the Group income statement
TheWorks.co.uk plc Annual Report and Accounts 2023 139
Financial statementsCorporate governanceStrategic report
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