The Works has seen annual profits slump due to weak sales growth and the end of publicly-funded pandemic support.
Pre-tax profits at the Warwickshire-based discount retailer declined to £5million for the 12 months ending April, compared to £14.2million in the previous year.
Earnings were predominantly hit by an absence of business rates relief, as well as higher freight, energy and salary costs, and consumers buying a greater share of lower-margin frontlist books.
Earnings: The Works saw profits hit by weak sales growth and the end of business rates relief
Turnover still increased by 5.8 per cent to £280.1million as plunging online demand was offset by a continued recovery in store trade thanks to an absence of Covid-related restrictions.
Yet like-for-like revenues only expanded by 4.2 per cent amid a more challenging economic environment, with elevated inflationary pressures causing many hard-pressed consumers to cut back on spending.
The business also blamed a bumper comparative prior-year performance and the ‘residual impact’ of a cyber attack that damaged sales early in the period.
Because of the need to ‘rebuild’ profitability while maintaining cash reserves, The Works has decided to cut its recommended annual dividend for shareholders by one-third to 1.6 pence per share.
The Works shares dived by 11.6 per cent, or 3.75p, to 28.5p on Wednesday afternoon, making them one of the biggest fallers on the London markets.
However, its chief executive, Gavin Peck, said he anticipates the previous year to be ‘the low point’ of the company’s post-Covid profitability due to moderating costs and the recent improvement in operational performance.
The firm additionally said on Wednesday that chief financial officer Steve Alldridge would be standing down later this year.
He became finance boss on an interim basis in the summer of 2020 before being permanently appointed to the post the following May.
His early months were a tumultuous time for The Works, which warned in January 2021 that it might run out of cash after revenues tumbled when lockdown curbs forced its shops to temporarily close.
Trade eventually came bouncing back soon afterwards as restrictions were relaxed, helping profits and revenues eventually exceed pre-pandemic levels.
Alldridge is being replaced by Rosie Fordham, who is currently The Works’ head of finance and has also been its interim CFO.
Carolyn Bradley, chair of The Works, said Alldridge had ‘played a pivotal role over the last three years, helping to steer the business through the financial uncertainty created by the Covid-19 pandemic and subsequent challenging macroeconomic climate.
‘The fact that The Works is now a more financially robust business is in no small part due to Steve’s efforts – we are grateful for his contribution and wish him all the best in his future endeavours.’
