Inspiring
people to do
Annual Report and Accounts 2022
THE
WORKS
TheWorks.co.uk plc Annual Report and Accounts 2022
Our ambition; to become one
of the most loved retailers in the UK –
the go-to place for reading, learning,
creativity and play.
Contents
Strategic report
Highlights 01
Our purpose 02
Our investment case 03
At a glance 04
Chair’s statement 06
Chief Executive’s review 08
Our business model 12
Our marketplace 14
Our strategy and progress 16
How we measure performance 18
Financial review 19
Our stakeholders 24
Section 172 statement 26
ESG review 28
Risk management and
principal risks and uncertainties 39
Viability statement 45
Corporate governance
Chair’s governance introduction 47
Board of Directors 48
Corporate governance report 50
Audit Committee report 54
Nomination Committee report 58
Directors’ remuneration report 60
Remuneration policy 64
Annual report on remuneration 72
Directors’ report 81
Statement of Directors’ responsibilities 84
Financial statements
Independent auditor’s report 85
Consolidated income statement 92
Consolidated statement
of comprehensive income 93
Consolidated statement
of financial position 94
Consolidated statement
of changes in equity 95
Consolidated cash flow statement 96
Notes to the consolidated
financial statements 97
Company statement
of financial position 126
Company statement
of changes in equity 127
Notes to the Company
financial statements 128
Advisers and contacts IBC
Highlights
Operational highlights
•
Delivered a strong trading performance in FY22, well ahead
of pre-COVID-19 levels, with total gross sales up 44.7% compared
with FY21 and 12.7% compared with FY20.
•
Defined the Group’s new purpose and brand positioning,
inspiring reading, learning, creativity and play - making lives
more fulfilled. This provides a common goal to show everybody
at The Works that they have a role to play in delivering our
‘better, not just bigger strategy’.
•
Created a more appealing, more customer-focused product
proposition, aligned to our purpose. This included overhauling
our book strategy to stock more front-list titles, capitalising on
the ‘BookTok’ trend and increasing ranges of popular branded
products in our kids and board games ranges.
•
Catered for increasingly ‘time poor’ customers, who seek greater
product availability and faster delivery times, by improving our
online fulfilment capacity and delivery options.
•
Improved the quality of the store estate by opening five new
stores, closing seven and relocating six. We undertook 16 store
refits as part of our strategy to refresh the store estate, as well as
enhancing the in-store experience for customers through better
space planning, ranging and merchandising.
•
Further strengthened our senior leadership team with the
appointment of a new Commercial Director and new ‘Heads
of’ in our Buying, Brand Marketing, Digital Marketing and Profit
Protection functions.
•
Maintained our high levels of colleague engagement and
13th place on the Best Big Companies to work for ranking.
•
Brought forward a review of the dividend and proposed
the payment of a final dividend of 2.4 pence per share
in respect of FY22.
Visit our website
corporate.theworks.co.uk
Financial highlights
Revenue
£264.6m
FY21: £180.7m
Like-for-like (LFL) sales growth
1
+10.5%
FY21: +6.0% Stores +120.9% online
Adjusted basic EPS
13.9p
FY21: (4.9p)
PBT
£10.2m
FY21: (£2.8m)
Dividend
2.4p
FY21: nil
Basic EPS
14.0p
FY21: (3.7p)
Non-IFRS 16 Adjusted EBITDA
£16.6m
FY21: £4.3m
Adjusted PBT
£10.1m
FY21: (£3.6m)
1 The LFL sales increase has been calculated with reference to the FY20 comparative sales figures, or two-year LFL, because the extended periods of
enforced store closures during FY21 prevent that period from forming the basis of meaningful comparisons. For the last five weeks of the period, it has
been necessary to calculate the LFL percentages with reference to the corresponding weeks in FY19, because the equivalent weeks during FY20 were
also affected by the first period of enforced store closures. Similar comparison periods are also used for the total gross sales growth figures quoted.
TheWorks.co.uk plc Annual Report and Accounts 2022 01
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Our purpose
Better, not just bigger.
Our purpose and strategy aim to bring our well-loved brand to life
and make The Works ‘better, not just bigger’.
To inspire reading, learning, creativity and play - making lives more fulfilled.
Our purpose:
Underpinning this purpose:
Brought to life by our family of colleagues who are:
Fulfilled by our brand that is:
Helping us to fulfil our ambition of becoming one of the most loved retailers
in the UK - the go-to place for reading, learning, creativity and play.
Fun
Empowering
Creative
Confident
Friendly
Value-led
We want reading, learning,
creativity and play to be
ACCESSIBLE TO EVERYONE,
affordable, convenient
and inclusive.
We believe in the
importance of FUN AND
FULFILMENT, taking time out
to do the things you love.e.
We want to be the GO-TO
PLACE to inspire customers
to embrace their free time. .
Crafty
Caring
Can-do
Read more about our strategy on pages 16 and 17.
Read more about our culture on page 34.
TheWorks.co.uk plc Annual Report and Accounts 202202
A differentiated offering with
significant organic growth
potential in the value retail sector.
Our investment case
1.
Clear purpose – to inspire reading,
learning, creativity and play -
making lives more fulfilled.
5.
Cash generative, low capex business model.
2.
Unique proposition – cheaper than
specialists, more choice of products and
better customer service than discounters.
6.
Simplicity over complexity - strategy
focused on implementing best retail
practice, as opposed to costly,
high-risk concepts.
3.
Broad demographic appeal (gender,
age, ethnicity, income) creates a large
addressable market.
7.
Previous under-potentialisation creates real
opportunity for growth (sales and profit).
4.
Flexible store estate - small inexpensive
shop units work well in a variety of
locations serving local communities,
and provide touch points not available
to pure-play online retailers, (e.g. click
& collect), and short leases allow for
changes in local market conditions.
8.
Significant headroom to develop online
sales (to c.20% of total sales in the
medium-term) supported by extended
ranges and initiatives to increase customer
engagement and loyalty.
TheWorks.co.uk plc Annual Report and Accounts 2022 03
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
At a glance
A leading multi-channel
value retailer.
At The Works we believe in giving everyone the opportunity to learn, be inspired and have fun.
Our mission; to become one of the most loved retailers in the UK. Our core foundations of great value,
fantastic ranges and excellent customer service are at the heart of our 525 stores and website.
We make reading, learning, creativity and play accessible to everyone.
Our 525 stores can be found
in a diverse range of locations:
on high streets, in shopping centres,
on retail parks, in factory outlets
and as concessions (typically in
garden centres).
Our stores play an important role in
inspiring reading, learning, creativity
and play in their local communities,
along with supporting local
fundraising activity.
525
stores in the UK and Ireland
Store estate
We are one of the few value retailers
with a full-featured online store
that helps our customers to shop
how they want, when they want,
seven days a week.
Our website complements our stores,
offering many exclusive products that
are not available in store, and our
popular click & collect service offers
further convenience
to customers.
1,000+
web exclusive products
41.5 million
website visits during FY22
Multi-channel Colleagues
Our loyal, dedicated and highly
engaged colleagues are key to
the success of our business.
Ranked
13th
Best Big Company to Work for
the second consecutive year
c.3,800
colleagues
Read more about our
colleagues on page 34.
TheWorks.co.uk plc Annual Report and Accounts 202204
Our brands and products
Toys & games
Toys & games covers both kids and family games. It is
a ‘one-stop shop’ for a range of kids’ favourites, from
the latest crazes to a wide range of toys, jigsaws and
big brand games. This zone also features our important
education range supporting children’s development.
We have a wide product offering, which is designed to appeal to our broad customer base.
This includes our own brand products, which support our value offering and enable us to provide
our customers with products that are exclusive to The Works. We also offer the most in-demand
branded products across our categories and new books on their release date.
Arts, crafts and hobbies
Our Arts, Crafts and Hobbies Zone comprises a wide
selection of paints, brushes, art sets, paper, canvas
and craft kits that cater for the needs of beginners
to experts, alongside a complementary book offer to
further inspire our artistic and crafty customers. Our
buying expertise allows us to offer fantastic value for
money across the whole range and is further supported
by a well curated range extension online.
Our own brands
Our own brands
Our own brands
Our own brands
Stationery
Our stationery selection includes our own- brand Paper
Place high-quality fashion notebooks, writing sets,
storage boxes and address books. These sit alongside
our big brands offer including Bic, Helix, Xerox and Pukka.
Our Scribblicious range includes trendy pens, pencils,
pencil cases, and storage solutions suitable for all ages.
Seasonal
We offer customers everything they may need to
make family occasions and seasonal events really
special including ‘back to school’, summer fun,
Easter and Christmas.
Books
We have refined our book ranges, becoming a
destination for kids books, growing brands in each age
range, with a brilliantly priced, curated range of the
very latest trending non-fiction adult books.
c.6,000 products available in store c.400 ‘core’ lines permanently in stock
TheWorks.co.uk plc Annual Report and Accounts 2022 05
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Chair’s statement
Over the course of the last year
I have seen The Works become
an increasingly modern and
efficient business.
Introduction
I have greatly enjoyed my first year as Chair of The Works and feel
very proud to be part of a business that seeks to enrich the lives
of its customers and their families, friends and communities. I have
spent a lot of my time getting to know the business, meeting the
teams and celebrating too, having joined during The Works’ 40th
anniversary year.
I have been impressed by the resilience of the business and its
ability to adapt to challenging external conditions, whilst also
delivering good strategic and financial progress. Over the course
of the last year I have also seen The Works become an increasingly
modern and efficient business that is being run, for the long-term
and in a more professional and structured way by Gavin Peck
and his strengthened leadership team. I have seen time and time
again exactly why its customers have such a strong affinity to the
brand, how it is managing to maintain its position as one of the
leading retailers in the value sector and how it has sustained a
well-earned reputation for being an incredibly supportive workplace
for colleagues.
A standout feature of The Works is its truly unique culture. It is
one of the greatest strengths of the business and has developed
as a result of strong leadership, a positive work environment
and a shared passion for delighting customers. Clarifying the
Group’s purpose – to inspire reading, learning,creativity and play
- making lives more fulfilled. – has already had a positive effect on
colleagues across the business by helping them to understand the
role they can play in inspiring our customers and supporting our
communities. Given the current external environment, our purpose
has never been more relevant. It is vital that we help our customers
to be resourceful, show them how to get creative and that having
fun doesn’t need to be costly or excessively consumptive.
This has all been spearheaded by a strengthened leadership
team, led by Gavin, and supported by a team of passionate and
committed colleagues. On behalf of the Board I would like to thank
colleagues for all they have done, and continue to do, for our
business and stakeholders, and for constantly going above and
beyond to care for one other.
Performance
All retailers have faced difficult external conditions over the past
year, particularly the increased costs and disruption caused by
the global supply chain challenges post COVID-19. The Works
was also subject to a cyber-security incident in March which
required swift and extensive action to be taken to protect the
business and minimise the impact on trading. Each of these factors
in isolation would be enough to test any retailer, let alone both
in one year. However, despite the adverse impacts from these
events, due to the groundwork that Gavin and colleagues laid
before the pandemic, an improved customer proposition and
effective execution of our strategy, the business was able to deliver
a strong trading performance in FY22, which was well ahead
of pre-pandemic levels. Revenue increased to £264.6m (FY21:
£180.7m), profit before tax increased to £10.2m (FY21: loss before
tax of £2.8m) and the business delivered another record Christmas,
demonstrating its resilience in very challenging circumstances.
TheWorks.co.uk plc Annual Report and Accounts 202206
Strategy
The last year has also demonstrated that the refocused ‘better,
not just bigger’ strategy, which is already delivering tangible results,
is the right strategic direction for the business. If we continue making
progress against each of our four strategic pillars the Board and I are
confident that we will see more new customers choose The Works
as their primary destination for products to read, learn, create and
play and that we will earn increased customer loyalty from existing
customers. We will also be very well positioned to deliver sustainable
sales and profit growth in the medium-term and to create value for
all our stakeholders.
Environmental, Social and Governance (ESG)
The Works has been increasingly focused on its ESG agenda in
recent years and has developed three pillars to provide greater
clarity and structure, as well as a steering group to drive progress
in these areas (see page 28). The business has now laid the
foundations for a more ambitious and systematic approach
to ESG and made some good early progress, but more work
needs to be done. In particular we need to develop a detailed
programme of activities and agree metrics to measure progress
and targets to reduce our environmental impact. We must also
implement the necessary changes to ensure that our reporting
is consistent with the recommendations of the Task Force on
Climate-related Financial Disclosures. The Works’ governance
structure is effective and the business has a good track record in
protecting its people and supporting its communities; however,
there are plenty of opportunities to enhance these areas further,
for example by promoting greater diversity and inclusion across the
business. Our colleagues have shown a desire to engage more in
our ESG position and already play a role in supporting their local
communities, fundraising for our charity partners and protecting
the environment, for example through recycling and donating old
stock to schools and charities. They are by nature enthusiastic,
crafty and resourceful, so will play an important part in driving
progress against our ESG pillars.
Dividend
As part of some prudent measures to strengthen the balance sheet
and manage the cost base and cash flows during the COVID-19
pandemic, dividends were suspended in FY20 and FY21. Reflecting
the Group’s strong performance in FY22, and its future potential, the
Board has brought forward its review of the dividend and is proposing
the payment of a final dividend of 2.4 pence per share in respect
of FY22, subject to shareholder approval at our AGM on 27 October
2022, and will look to maintain the cadence of twice yearly dividend
payments thereafter. Whilst the consumer market remains especially
volatile, we will review future payment levels based on prevailing
conditions, but intend to resume a progressive dividend policy in due
course once conditions stabilise.
Outlook
Our success this year reflects the ongoing appeal of our
proposition and the resilience of our business and was achieved
despite some significant external challenges. In the current
economic environment, characterised by ongoing inflationary
pressure and subdued consumer sentiment, our value proposition
is more relevant than ever. We are confident that the Group will
continue to make good strategic progress in the year ahead and
will deliver growth in the medium term, albeit that the underlying
Adjusted EBITDA result for FY23 will be lower than in FY22.
Carolyn Bradley
Chair
23 September 2022
Q&A with Carolyn
You have now been in your role for a
year. What are the key things that have
stood out?
Having spent many years working in retail and
consumer businesses, I have experienced a
variety of cultures and The Works truly is one of a
kind. I have had the opportunity to visit a number
of our stores and meet our colleagues. They are
passionate about what they do and committed
to serving our customers. We also have a clear
set of values that are helping to nurture a culture
which was already strong. And within the UK
retail sector, we have a unique, affordable and
accessible product offering, which given the
current cost of living crisis I am confident will
be more important than ever before.
Is the strategy likely to change?
No. We have a clear plan built around four
key priorities that will support value creation
for all stakeholders and enhance our business.
This strategy is being effectively executed by
our leadership team and it is already starting
to deliver in a number of areas, particularly
in improving our customer proposition.
What are your priorities for the
coming year?
As we monitor the Group’s strategic progress,
my fellow Board members and I will continue to
focus on ensuring that The Works remains the
destination for great value products to inspire
reading, learning, creativity and play. We have
an unrivalled customer loyalty programme and
I have seen first hand how effectively these
schemes can drive growth. We must capitalise
on our Together Loyalty Rewards programme,
which already truly engages and delights our
customers. More generally we must increase
our focus on our ESG agenda, particularly our
environmental strategy. We recognise that
we have a role to play in the transition to net
zero and, from a commercial perspective,
we need to be able to respond to increasing
customer demand for more sustainable products
and packaging.
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
TheWorks.co.uk plc Annual Report and Accounts 2022 07