Interim results and Christmas trading update

22 January 2026

TheWorks.co.uk plc

("The Works", the "Company" or the "Group")

Interim results for the 26 weeks ended 2 November 2025 and Christmas trading update

Significant strategic progress driving strong performance in-store and improved profitability year-on-year. On track to meet full year market expectations.

The Works, the UK's leading specialist retailer of affordable, screen-free activities for the whole family, announces its interim results for the 26 weeks ended 2 November 2025 (the "Period" or "H1 FY26"), and an update on current trading for the 11 weeks ended 18 January 2026.

H1 FY26 financial highlights

Current trading and outlook highlights

Strategic highlights

Amidst the digital age we all live in, it is becoming increasingly evident that people want to find other ways to connect and spend their time away from screens, with growing evidence of the negative impact of too much screen time, particularly on children. By responding to this growing desire to reduce screen-time, supporting our customers to find affordable feel-good ways to spend their time and to connect through activities such as reading, learning, creativity and play, we believe there is a significant strategic and financial opportunity for The Works. Our mission - to become the favourite destination for affordable, screen-free activities for the whole family - is at the heart of everything we do and is being driven by our 'Elevating The Works' strategy.

We delivered a number of significant initiatives in H1 FY26, marking tangible progress against this strategy and towards our mission:

Trading update for the 11 weeks ended 18 January 2026

We delivered a robust performance over the 11 weeks to 18 January 2026, against a challenging backdrop with continuing subdued consumer confidence.

Store LFL sales increased 1.2%, which was ahead of the wider non-food retail market, which saw a decline of 0.4%(5). This was driven by customers seeking our affordable, screen-free activities to enjoy with family members over the festive period and our Black Friday offers that resonated well with value-conscious consumers.

Online capacity continued to be constrained by the operational challenges faced by our third-party fulfilment provider, as reported in our November trading update. As a result, online LFL sales declined 51.8%, in-line with our revised expectations as we went into the festive period, resulting in total LFL sales declining 4.2%. Work is ongoing to address the operational challenges. As the volume demand has normalised post-peak the YoY sales decline has reduced.

We have continued to deliver cost savings and our ongoing focus on increasing product margins resulted in strong growth, up +200bps YoY. This was delivered despite our bigger Black Friday promotions and the need to clear more stock through the post-Christmas sale following the lower online sales.

Outlook

We are pleased with the ongoing progress being delivered and particularly the way in which our offering of affordable, screen-free activities for the whole family is resonating with customers. This has resulted in a positive in-store performance in the second half-to-date, which is set to continue as new ranges land in the Spring and we deliver further strategic progress.

We are disappointed with the fulfilment challenges experienced at our third-party online fulfilment provider since our transition to them in September, have taken sustained action to mitigate the impact and are working closely with our provider who remains committed to delivering a long-term solution.

Our cash position further improved following Christmas, with £15.5m of cash as of 18 January 2026 (£14.7m as at 19 January 2025) and we expect to end the financial year with net cash broadly in-line with the prior year, which was £4.1m.

We expect a return to sustained sales growth, and this, coupled with ongoing product margin growth and cost saving action, will offset external cost headwinds in FY26 and into FY27. We have good visibility over our full year performance, having delivered a peak trading period in line with expectations, and therefore remain on track to deliver FY26 profit in line with market expectations of pre-IFRS 16 Adjusted EBITDA of £11.0m and expect to deliver further profit growth and shareholder value in the years ahead.

Gavin Peck, Chief Executive Officer of The Works, commented:

"At the heart of everything we do is our mission to become the favourite destination for affordable, screen-free activities for the whole family. This has never been more relevant given the digital age we all live in and our action to deliver this in the current financial year has been well-received by customers, existing and new.

"The strategic initiatives delivered in the first half of the financial year have been critical in driving a strong performance in-store and an improvement in profitability year-on-year. Along with the wider sector, we have felt the impact of a challenging consumer backdrop, however we continued to see a positive response to our excellent value and new products over the festive period.

"Guided by our strategy, alongside the hard work of our colleagues and support of our loyal customers, we are well-positioned to deliver sales and profit growth in the remainder of the financial year and beyond."

Interim results presentation

A copy of the H1 FY26 interim results presentation will be made available on the Company's website (https://corporate.theworks.co.uk/investors/).

A presentation and Q&A for all existing and potential shareholders will be held via Investor Meet Company at 12:30pm today (Thursday 22nd January 2026). Investors can register here:

https://www.investormeetcompany.com/theworkscouk-plc/register-investor

Footnotes:

Notes for editors:

The Works is the UK's leading specialist retailer of affordable, screen-free activities for the whole family, providing customers with fantastic value across four product categories: arts and crafts, stationery, toys and games, and books. The Group operates a network of over 500 stores in the UK & Ireland, as well as trading online at TheWorks.co.uk.

CEO Report

Overview

Guided by our mission to become the favourite destination for affordable, screen-free activities for the whole family, everyone at The Works is focused on supporting people to find alternative, feel-good ways to spend their time away from screens. We are pleased with the progress made in the first half of FY26. The continued execution of our 'Elevating The Works' strategy has resulted in sustained operational improvements, driven a strong in-store performance, enabled us to further grow our margins, deliver cost efficiencies and improved profitability year-on-year (YoY). As a result, we are on track to deliver FY26 profit in line with market expectations and are well positioned to deliver higher revenues, profit growth and shareholder value in the years to come.

H1 trading performance

The ongoing delivery of our 'Elevating The Works' strategy enabled us to deliver a robust trading performance in the first half of FY26. This was despite a challenging retail environment, with subdued consumer confidence and soft UK non-food retail sales throughout the Period. Total like-for-like (LFL) sales increased 0.3%, reflecting strong store sales offset by lower online sales stemming from fulfilment challenges at our third-party provider that we are addressing. We delivered total sales of £123.8m (H1 FY25: £124.2m), which was marginally lower YoY, reflecting the LFL sales growth offset by the timing of store openings and closures (closures fell early in the Period whereas openings were weighted towards the end).

Stores, which comprise over 90% of sales, delivered LFL growth of 4%, well ahead of the wider non-food retail market that saw growth of 0.6%. Store performance was supported by more customer-focused campaigns and new products landing across all categories, all focused on connecting people with affordable, screen free things to do. Improved store standards, customer service and the positive impact from our initial space optimisation initiatives also supported store LFL growth.

Online sales, which represent less than 10% of sales, declined by 36%. This reflects the impact of operational challenges experienced following the transition to a new third-party fulfilment partner in September. We took action to reduce demand to help ease capacity constraints and maximise sales and profit from the reduced capacity, however our third-party fulfilment partner experienced persistent operational challenges and was unable to resolve these ahead of peak trading. We are disappointed to have been faced with these challenges but are working with the provider to ensure that together we deliver a solution.

Sustained product margin growth (+330bps vs H1 FY25) and ongoing cost saving action enabled us to more than offset cost headwinds and the aforementioned challenges faced with our online channel. This resulted in pre-IFRS 16 Adjusted EBITDA improving 64% to a loss of £1.0m (H1 FY25: £2.8m loss) and Adjusted loss before tax of £5.1m (H1 FY25: £6.5m loss). This is as expected given the seasonality of the business, which is typically loss-making in the first half of the financial year, with profit being generated in H2.

H1 strategic progress

We have delivered a number of important strategic initiatives in the first six months of FY26, making clear progress against our 'Elevating The Works' strategy. Our efforts have been focused on helping customers to discover affordable, screen-free ways to spend their time, which in our current digital age is more important than ever as people look to reduce screen-time and find ways to connect in person.

Underpinned by three strategic drivers: growing our brand fame, improving customer convenience and being a lean and efficient operator, the strategy is focused on The Works becoming the favourite destination for affordable, screen-free activities for the whole family.

Growing brand fame

With our clearly defined mission and brand positioning, we are focused on growing our loyal customer base by getting more people familiar with The Works and to love what we do. This has been a key driver of the strong in-store performance delivered in the first half. Initiatives delivered in H1 FY26 include:

Improving customer experience

We want to provide our customers with the ranges they want, in the locations they want them, making it even easier to shop with us and improving overall experience and satisfaction. We have made strong progress in the first half of FY26, including:

Being a lean and efficient operator

We are developing a business model that is low cost and efficient, to better enable us to continue offering our customers great value products and to support ongoing profit margin growth. Progress in the first half of FY26 includes:

Board and leadership changes

There have been some changes to our PLC Board during the first half, including the appointment of Nick Wharton as an Independent Non-Executive Director, who has brought very relevant sector and plc experience. As part of the Board's succession planning, Nick replaced Harry Morley who did not seek re-election at September's AGM after seven years of valuable contribution to The Works.

Simon Hathway stepped down from his role as Independent Non-Executive Director following the Period end to take on a full-time executive role. The search to identify his successor is well-progressed and we look forward to providing an update in due course.

ESG

Our People and Planet commitments represent our approach to creating a lasting, positive impact for our people, our communities and our planet. Our commitment to 'Doing Business Better' underpins our strategic drivers and is our way of ensuring that our colleagues are motivated and supported, so that they can continue to inspire our customers to read, learn, create and play.

Illustrative of this progress was the positive result in our employee engagement survey with our new provider, WorkL, where we achieved a 3-star 'Excellent' accreditation and 76% average happiness score. With a 77% colleague participation rate, we are delighted with how the results reflect the strong culture and shared purpose we have built together.

We are continuously looking for ways to further improve. We refreshed and relaunched our organisational values and behaviours to further strengthen and embed our positive culture. We also introduced a new performance cycle along with a comprehensive career development framework.

Outlook

We are encouraged by the progress made in FY26 to-date and the positive performance delivered in-store, particularly against a consumer backdrop that remains persistently challenging. We are working with our third-party fulfilment provider to ensure that together we deliver a solution that will rectify the challenges impacting our online channel and will provide an update in due course.

We are confident in our ability to continue delivering sales and product margin growth and cost efficiencies, offsetting continued external cost headwinds in the remainder of FY26. We therefore remain on track to deliver FY26 profit in line with market expectations of pre-IFRS 16 Adjusted EBITDA of £11.0m, and expect to deliver further strategic progress, a significant improvement in financial and operational performance and shareholder value over the medium term.

Gavin Peck

Chief Executive Officer

Financial Report

Overview

This report covers the 26-week Period ended 2 November 2025 ("HY26", or the "Period") and refers to the comparative "HY25" Period of the 26 weeks ended 3 November 2024. The Company's sales and profitability is historically concentrated in the second half of the year, which includes the peak Christmas trading period.

(1) LFL sales growth is the growth in gross sales from stores which have been trading for the full financial Period (current and previous year), and from the Group's online store.

(2) Adjusted profit figures exclude Adjusting items. See notes 4 (Alternative performance measures) and 5 (Adjusting items) of the condensed financial statements included in this RNS.

(3) Net debt excludes finance leases and is stated on a pre-IFRS 16 basis.

Revenue

Total revenue was lower by 0.3% to £123.8m (HY25: £124.2m), with total LFL sales increasing 0.3%, due to:

Positive store LFL sales growth of 4.0%, reflecting strong growth in existing stores from delivery of strategic initiatives, amidst a challenging external market (BRC reported non-food retail LFL average increase of 0.6% over the same Period).

Online sales decline of 36.1% primarily reflecting the significant fulfilment challenges experienced from the move to our new third-party fulfilment provider in early September. A number of material interventions were made to the customer offer to dampen customer demand and preserve the experience for those customers who continued to shop in this channel.

We continued to make good progress against one of our strategic priorities, 'Store optimisation'. As a result, we traded from a smaller, more profitable estate during HY26 compared to HY25, resulting in a small decline in revenue year-on-year. We ended the Period with 505 stores, having opened seven stores, closed five stores, and relocated one. The closing store portfolio represented an increase of net two new stores from 503 at the FY25 year end.

Gross profit

Product gross margin increased by 330bps to 62.6% in HY26 (HY25: 59.3%), primarily reflecting the continued focus on delivering margin growth from a combination of better buying (negotiations with suppliers and control of product mix), reduced markdown from improved stock management, as well as selective price increases. Product margin further benefited from the achieved hedging rate on inventory purchased in US dollars which was favourable year-on-year, (HY26 US dollar: GB pound rate 1.28 versus 1.26 in HY25), along with favourable HY26 container freight rates during the Period, with average container rates in HY26 of $2.6k versus $2.9k in HY25.

Store payroll costs increased by £2.4m, driven by the 6.7% increase in the National Living and Minimum Wage ('NLMW') and changes to employer NI contributions which created a combined £2.3m cost headwind.

Store property and establishment costs increased by £0.4m, reflecting savings in store electricity costs more than offset by inflationary cost increases in service charge and increased turnover rent reflecting the LFL store performance.

Online variable costs decreased by £1.2m, reflecting the significant reduction in revenues resulting from the third-party fulfilment challenges. Our priority throughout the Period was to preserve customer experience and loyalty, and to protect profitability. We therefore took action to manage customer demand, for example by reducing online marketing spend, and to increase Average Order Values. The lower outbound volumes led to lower parcel delivery costs, offsetting significantly higher (53%) costs per order due to productivity inefficiencies within the third-party fulfilment centre.

Operating profit

Distribution expenses (before depreciation), decreased by £0.4m compared with the prior Period. This reflected continuing efficiencies driven by improved ways of working in the stores Distribution Centre ("DC"), together with reduced external storage costs over peak (supported by the investment in our new mezzanine level within the DC that provided additional storage capacity and improved productivity). These savings more than offset the combined £0.2m impact of the April 2025 NLMW and National Insurance contribution increases on distribution labour costs.

Administration expenses (before depreciation and IFRS 16) decreased by £0.3m compared with the prior Period, primarily due to the savings realised from the support centre restructure, implemented in April 2025, which was part of the £2m cost saving initiative in FY26.

Operating profit reconciliation to pre-IFRS 16 Adjusted EBITDA

(1) Adjusted profit / (loss) excludes Adjusting items. See Notes 4 (Alternative performance measures) and 5 (Adjusting items) of the attached condensed financial statements.

Depreciation, amortisation and IFRS 16 adjustments reflect higher depreciation and amortisation charges (£0.3m) as a result of FY25 year-end impairment reversals increasing asset values, offset with lower IFRS 16 adjustments (£0.4m) primarily due to higher underlying asset values from new leases in the Period.

Adjusting items of £0.5m (HY25: £0.3m charge) reflect the one-off cost of transitioning to the new third-party fulfilment provider.

Net financing expense in the Period was £2.8m (HY25: £2.4m), mostly relating to IFRS 16 notional interest on the calculated lease liability.

Interest expense relating to bank facilities was £0.6m (HY25: £0.4m), reflecting increased usage of the rolling credit facility as a consequence of the earlier pre-peak stock intake as noted below.

Profit before tax

Loss before tax was £5.6m (HY25: £6.9m loss) which includes the £0.5m charge (HY25: £0.3 charge) for Adjusting items (described above and in Note 5 (Adjusting items)).

Tax

The Group's total income tax credit in respect of the Period was £0.2m (HY25: £0.6m credit). The effective tax rate on the total loss before tax was 2.9% (HY25: 9.3%) whilst the effective tax rate on the total loss before Adjusting items was 3.1% (HY25: 9.7%).

Earnings per share

The basic and diluted loss per share for the Period were 8.7 pence (HY25: 9.9 pence loss). Adjusted basic and diluted loss per share for the Period were 7.9 pence (HY25: 9.4 pence).

Capital expenditure

Capital expenditure in the Period was £3.5 million (HY25: £2.2m).

· The increased investment in new stores and relocations reflects the seven new stores and one relocation opened in the Period, compared to three new stores and two relocations in the comparative Period of FY25.

· The £0.6m increased expenditure in the warehouse reflects the introduction of a mezzanine floor in the retail distribution centre, which has increased storage capacity and enhanced operational efficiency.

Inventory

Inventory was valued at £52.1m at the end of the Period (HY25: £51.7m). The operating cycle of the business causes maximum stock levels to occur prior to the Christmas sales peak and therefore stock levels are typically higher at the half year end compared with the year end.

The increased gross stock level compared to the prior Period reflects lower than anticipated online sales due to the operational challenges following the transition to a new third-party online fulfilment provider and the planned build of pre-peak stock earlier than in the prior year which is reflected in the year-on-year decrease in stock in transit.

Higher inventory provisions than the prior year, reflects a higher shrinkage provision for stock held at the third-party online fulfilment provider, together with a higher obsolescence provision reflecting the lower sell through of certain product lines. Underlying store shrinkage provisions are in line with the prior year.  

Cash flow

The table below shows a summarised pre IFRS 16 presentation of cash flow.

The Group ended the Period with net debt of £5.3m (HY25: £8.5m net debt). The net cash outflow before exchange rate movements for the Period was £9.3m (HY25: outflow of £10.2m), reflecting reduced operating losses in the Period partially offset by increased capital investment together with the adverse impact on working capital of accelerating the build of inventory in advance of the peak Christmas trading period.

(1) Other operating cashflows relate to pre-working capital movements, excluding tax and interest. See Condensed consolidated cash flow statement of the attached condensed financial statements.

Bank facilities and financial position

The Group continues to have a Revolving Credit Facility (RCF) of £20.0m, which provides ample liquidity and is utilised to support the build of stock prior to peak trading. The terms of this financing agreement expire on 30 November 2026. The Group is in discussions regarding the renewal of the facility which it expects to conclude before approval of the FY26 Annual Report and Accounts in July 2026.

Capital distributions

The Board is not proposing to declare an interim dividend. The potential for shareholder distributions, including dividends and share buybacks, will continue to be assessed against other opportunities for investment as profitability improves and funding allows.

Employee Benefit Trust funding for the purposes of share schemes

To manage dilution of existing shareholder interests, the Board's intention is to continue providing funding to the Company's Employee Benefit Trust as appropriate. This will enable the EBT to continue purchasing shares in the market that can subsequently be used to satisfy the exercise of options under employee share schemes, as it has done in each of the last two financial years. SAYE exercises may be satisfied through the issue of new shares in the future.

Rosie Fordham

Chief Financial Officer

22 January 2026

Unaudited Condensed Consolidated Income Statement

For the 26 weeks ended 02 November 2025

All results arise from continuing operations. The (loss)/ profit for the Period is attributable to equity holders of the Parent company.

Unaudited Condensed Consolidated Statement of Comprehensive Income

For the 26 weeks ended 02 November 2025

Unaudited Condensed Consolidated Statement of Financial Position

As at 02 November 2025

Unaudited Condensed Consolidated Statement of Changes in Equity

1 Hedging reserve includes £211k 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 (£(61)k for the 26 weeks ended 03 November 2024, £330k for the 52 weeks ended 04 May 2025).

Unaudited Condensed Consolidated Cash Flow Statement

For the 26 weeks ended 02 November 2025

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

For the 26 weeks ended 02 November 2025

1 Accounting Policies

(a) General Information

TheWorks.co.uk plc ('the Company') is a public limited company domiciled in the United Kingdom and its registered office is Boldmere House, Faraday Avenue, Hams Hall Distribution Park, Coleshill, Birmingham, B46 1AL. These unaudited condensed consolidated interim financial statements ('interim financial statements') as at and for the 26 weeks ended 02 November 2025 comprise the results of the Company and its subsidiaries (together referred to as 'the Group').

(b) Basis of preparation

The interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting and should be read in conjunction with TheWorks.co.uk plc financial statements for the 52 weeks ended 04 May 2025. The interim financial statements do not include all of the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual financial statements.

The consolidated financial statements are presented in pounds sterling and all values are rounded to the nearest thousand (£000), except when otherwise indicated.

(i) Going concern

The unaudited condensed financial statements have been prepared on a going concern basis, which the Directors consider appropriate for the reasons set out below.

The Directors have assessed the prospects of the Group, taking into account its current position and the potential impact of the principal risks which have been identified through the Group's risk evaluation process.

In preparing its FY25 Annual Report and financial statements (which were approved on 22 July 2025), the Group prepared a detailed strategic review and produced a five-year plan to support the new strategy, 'Elevating The Works'. The cash flow forecast prepared covers a period of at least 12 months from the date of approval of these unaudited condensed financial statements (the going concern assessment period), based on the Board's forecast for FY26 and its 5-year strategic plan, referred to as the 'Base Case' scenario. In addition, a 'severe but plausible' 'Downside Case' sensitivity was prepared to support the Board's conclusion regarding going concern, by stress testing the Base Case to indicate the financial headroom resulting from applying more pessimistic assumptions.

In assessing the basis of preparation the Directors considered:

· The external environment.

· The Group's financial position including the quantum and expectations regarding availability of bank facilities.

· The output of the Base Case scenario, which mirrors the Group's five-year strategic plan and therefore represents its estimate of the most likely financial performance over the forecast period.

· The potential impact on financial performance of the principal risks, including if the operational challenges at the Group's third-party online fulfilment provider were to continue.

· 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.

Financial position and bank facilities

At the Period end the Group held net debt (excluding lease liabilities) of £5.3m (HY25: £8.5m) (Note 16).

The Group's bank facilities comprise a £20.0m revolving credit facility (RCF) which terminates at the end of November 2026. The Group is in discussions regarding the renewal of the facility which it expects to conclude prior to approval of the FY26 Annual report and accounts in July 2026. The current facility includes two financial covenants which are structured in a way that is typical for a retail business of this size and are tested quarterly:

1. The level of net debt to LTM (last twelve 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, until October 2025 the ratio was required to be at least 1.05 and thereafter it must be at least 1.20 times.

The Group expects to be able to operate and have sufficient headroom within these covenants during the forecast period.

Potential impact of risks on financial scenarios

The 'Principal risks and uncertainties' section of the Strategic report on pages 36 to 41 of the Group's FY25 Annual Report, sets out the main risks that the Board considers relevant.

It is considered unlikely that all the risks would manifest themselves to adversely affect the business at the same time. The Group's five-year financial plan has been formed from the new strategy, 'Elevating The Works', which has three strategic drivers which are underpinned by the strategic initiatives and clear delivery plans. In delivering the strategy, the risks to the business have been taken into consideration and where deemed to have a financial implication these have been addressed through the strategic initiatives.

The Downside Case scenario assumes that there are more severely negative effects than 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 the Group's current sales growth does not continue over the Christmas peak in FY26 financial year and assumes reduced sales growth over the remaining three-year financial period.

Conclusion regarding basis of preparation

The current economic environment remains challenging with the impact being felt by much of the UK particularly low-income households. There is sufficient cash headroom and headroom within both covenants under both scenarios and therefore the Directors are confident that the Group will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of the financial statements and have therefore prepared the financial statements on a going concern basis.

(ii) Accounting policies

The interim financial statements have been prepared on a basis consistent with the accounting policies published in the Group's financial statements for FY25.

(c) Alternative performance measures and Adjusting items

In the reporting of financial information, the Group tracks a number of APMs in managing its business. APMs should be considered in addition to IFRS measurements. The Group's definitions of APMs may not be comparable with similarly titled performance measures and disclosures by other entities.

The Group believes that these APMs, which are not considered to be a substitute for or superior to IFRS measures, provide stakeholders with additional helpful information on the performance of the business. They are consistent with how the business performance is planned and reported internally and are also consistent with how these measures have been reported historically. Some of the APMs are also used for the purpose of setting remuneration targets.

The APMs should be viewed as supplemental to, but not as a substitute for, measures presented in the consolidated financial statements prepared in accordance with IFRS. The Group believes that the APMs are useful indicators of its performance but they may not be comparable with similarly titled measures reported by other companies due to the possibility of differences in the way they are calculated.

The key APMs that the Group uses include: like-for-like sales growth (LFL); EBITDA, Pre-IFRS 16 Adjusted EBITDA, Adjusted profit after tax, Profit after tax, Net debt; and Adjusted earnings per share. The APMs used by the Group and explanations of how they are calculated and how they can be reconciled to a statutory measure where relevant, are set out in Note 4.

"Adjusted" measures are calculated by adding back or deducting Adjusting Items. Adjusting items are material in size and unusual in nature or incidence and, in the judgement of the Directors, should therefore be disclosed separately on the face of the financial statements to ensure that the reader has a proper understanding of the Group's financial performance and that there is comparability of financial performance between periods.

Refer to Note 5 for information regarding items that were treated as Adjusting.

(d) Key sources of estimation uncertainty

The preparation of consolidated financial statements requires the Group 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 Group's accounting policies. Where a significant risk of materially different outcomes exists, this will represent a key source of estimation uncertainty.

Estimates and judgements 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.

Key sources of estimation uncertainty which are material to the interim financial statements are described in the context of the matters to which they relate, in the following notes:

2 Segmental reporting

IFRS 8 requires segment information to be presented on the same basis as is used by the Chief Operating Decision Maker for assessing performance and allocating resources.

The Group has one operating segment with two revenue streams, bricks and mortar stores and online. This reflects the Group's management and reporting structure as viewed by the Board of Directors, which is considered to be the Group's Chief Operating Decision Maker. Aggregation is deemed appropriate due to both operating segments having similar economic characteristics, similar products on offer and a similar customer base.

3 Revenue

The Group's revenue is derived from the sale of finished goods to customers. The following table shows the primary geographical markets from which revenue is derived.

Seasonality of operations

The Group's revenue is subject to seasonal fluctuations as a result of peaking during the approach to Christmas, from October to December. Therefore, the first half of the financial year, from April to October, typically produces lower revenue and profit than the second half.

4 Alternative performance measures ("APMs")

Like-for-like ("LFL") sales

Closest IFRS equivalent: revenue

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. The measure is used widely in the retail industry as an indicator of sales performance. LFL sales are calculated on a gross basis to ensure that fluctuations in the VAT rates of products sold are excluded from the LFL sales growth percentage figure.

EBITDA and pre-IFRS 16 Adjusted EBITDA

Closest IFRS equivalent: operating profit1

EBITDA is earnings before interest, tax, profit or loss on disposal of fixed assets, depreciation, amortisation and impairment reversals and charges. The Group uses EBITDA as a measure of trading performance, as it usually correlates with the Group's operating cash generation.

Pre-IFRS 16 Adjusted EBITDA is defined by the Group as pre-IFRS 16 earnings before interest, tax, depreciation, amortisation and profit/loss on the disposal of fixed assets, after adding back or deducting Adjusting items. Pre-IFRS 16 EBITDA is used for the bank facility financial covenants.

The table below provides a reconciliation of operating profit to Adjusted EBITDA and pre-IFRS 16 EBITDA:

1 Whilst operating profit is not defined formally in IFRS, it is considered a generally accepted accounting measure.

Adjusted profit after tax

Closest IFRS equivalent: profit before tax

Adjusted PBT is profit before tax adjusted to exclude the effect of transactions that, in the opinion of the Directors, are either one off in nature and/or are unreflective of the underlying trading performance of the Group in the Period. Adjusted PBT reports a normalised or underlying trading performance of the Group. The transactions that have been adjusted could distort the impression of future performance trends based on the current year results.

The Group uses Adjusted PBT to assess its performance on an underlying basis excluding these items and believes measures adjusted in this manner provide additional information about the impact of unusual or one-off items on the Group's performance in the Period.

These adjusted metrics are included within the consolidated income statement and consolidated statement of other comprehensive income, with further details of Adjusting items included in Note 5.

Financial position APMs

Net debt

Closest IFRS equivalent: no equivalent; however it is calculated by combining IFRS measures for cash and borrowing.

Net debt is calculated by subtracting the Group's cash and cash equivalents from its gross borrowing. Net debt is utilised in the calculation of leverage, a covenant in the Group's financing facilities.

The Group presents net debt inclusive and exclusive of lease liabilities, which is consistent with the definition used for its banking covenant calculations.

5 Adjusting items

During the Period, the items analysed below have been classified as Adjusting:

Transition costs of £0.5m related to the move to a new third-party provider in the Period.

For the 26 weeks ended 03 November 2024: Exceptional fulfilment costs of £0.4m related to non-recurring operational costs as a result of issues at our online third-party fulfilment centre. Other exceptional costs comprised £0.1m of redundancy costs and £0.1m related to the settlement of a legal case.

For the 52 weeks ended 04 May 2025: £1.2m in relation to exceptional fulfilment costs at the third-party fulfilment centre over peak and £0.6m related to the review of the cost base of the Group, which included £0.4m of redundancy costs.)

Impairment charges and Impairment reversals relate to property, plant and equipment, intangible assets and right-of-use assets (see Notes 12, 13, 14). No impairment has been recognised in the Period.

Profit on disposal of right-of-use assets and lease liabilities relate to leases (see Note 14).

6 Finance income and expense

7 Share based payments

During the Period, 2,249,020 shares were awarded under "TheWorks.co.uk 2018 Long Term Incentive Plan" and nil awarded under the Save As You Earn Scheme. (26 weeks ended 03 November 2024: nil and nil, 52 weeks ended 04 May 2025: 2,454,187 and nil respectively).

During the Period, 40,000 restricted stock awards were granted to key management and senior employees (26 weeks ended 03 November 2024: nil, 52 weeks ended 04 May 2025: 102,500).

Expense recognised in the income statement

The IFRS 2 charge recognised during the Period was as follows:

8 Employee benefits

The Group operates a defined contribution pension scheme. The pension charge for the Period represents contributions payable by the group to the scheme and amounted to £599k (26 weeks ended 03 November 2024: £565k; 52 weeks ended 04 May 2025: £1,125k).

9 Tax

The income tax expense or credit is determined by multiplying the loss before tax for the interim reporting Period by management's best estimate of the weighted average annual income tax rate expected for the full financial year, adjusted for the tax effect of certain items recognised in full in the interim Period. As such, the effective tax rate in the interim financial statements may differ from management's estimate of the effective tax rate for the annual financial statements.

The Group's total income tax credit in respect of the Period was £160k (26 weeks ended 03 November 2024 credit: £635k, 52 weeks ended 04 May 2025 tax charge: £165k). The effective tax rate on the total loss before tax was 2.9% (26 weeks ended 03 November 2024: 9.3%; 52 weeks ended 04 May 2025: effective tax rate on total profit before tax was 2.0%), the Adjusted tax rate was 3.1% (26 weeks ended 03 November 2024: 9.7%, 52 weeks ended 04 May 2025: 3.6%). The difference between the total effective tax rate and the Adjusted tax rate relates to certain costs and depreciation charges (including impairment) being non-deductible for tax purposes.

The effective tax rate of 2.9% differs from the UK corporation tax rate of 25% principally due to the impact of adjustments for deferred tax, non-deductible expenditure such as those related to share-based payment and depreciation charges, and the difference in the tax rate applied to other jurisdictions. 

10 Earnings per share

Basic earnings per share is calculated by dividing the profit or loss for the Period attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the Period.

Diluted earnings per share uses the weighted average number of shares in issue for the Period, adjusted for the dilutive effect of potential ordinary shares. Potential ordinary shares represent employee share incentive awards. In the event that there are losses per share, diluted EPS is deemed to be the same as Basic EPS.

The Group has chosen to present an Adjusted earnings per share measure, with profit adjusted for Adjusting items (see Note 5 for further details) to reflect the Group's underlying (loss) / profit for the Period.

11 Dividends

The Board has not declared a dividend in respect of FY26 interim results (FY25: nil).

12 Intangible assets