Preliminary results - 52 weeks ended 4 May 2025

22 July 2025

TheWorks.co.uk plc

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

Preliminary results for the 52 weeks ended 4 May 2025

Finished FY25 in line with recently upgraded market expectations, significant improvement in profitability underpinned by new strategy, well positioned to deliver further profit growth in FY26.

TheWorks.co.uk plc, the retailer of affordable, screen-free activities for the whole family, announces its preliminary results for the 52 weeks ended 4 May 2025 (the "period" or "FY25").

Financial highlights

Business highlights

Current trading and outlook

The positive trading momentum since Christmas has continued, with total LFL sales up 5.0% in the first 11 weeks of FY26 and good margin growth. This performance is in line with our expectations, and ahead of the wider non-food retail market(5), reflecting the continued momentum from our strategic and operational progress building through FY25 and into FY26.

The Board continues to be mindful of significant cost headwinds in FY26, primarily related to National Living and Minimum Wage inflation, and employers' National Insurance increases. However, with a clear strategy in place, the Group is well positioned to navigate these challenges and deliver further strategic and financial progress in the year ahead.

In light of the strong FY25 performance, positive momentum that has carried into the new financial year and further cost savings identified for FY26, the Board expects to deliver pre-IFRS 16 Adjusted EBITDA in line with recently upgraded external forecasts of £11.0m. We remain on track to deliver sales in excess of £375m and EBITDA margin of at least 6% within five years.

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

"We are delighted to have ended FY25 in line with recently upgraded market expectations in a year defined by ongoing uncertainty and fragile consumer confidence. This encouraging performance is a huge credit to the early success of our new strategy launched in January 2025, 'Elevating the Works', which is already delivering tangible results. It is also thanks to the continued hard work of our dedicated and passionate colleagues, who have worked hard to drive improvements across the business.

"Guided by our new strategy, we are focusing our efforts on becoming the favourite destination for affordable, screen-free activities for the whole family. This has significant relevance, particularly in a digital age when customers are looking for ways to connect and spend their time away from screens. We are pleased that the ongoing evolution of our proposition and newness throughout our ranges, has already resonated so well with customers.

"The strong trading delivered post-Christmas has continued into the start of our new financial year, with customers clearly loving our new Spring and Summer product ranges. This positive momentum, guided by our transformative strategy and energised team, leaves us well placed for further strategic and financial progress in FY26."

Preliminary results presentation

A copy of the FY25 Preliminary results presentation will shortly 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. Investors can register here:

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

Footnotes:

Notes for editors:

The Works is one of the UK's leading family-friendly value retailers of arts and crafts, stationery, toys, and books, offering customers a differentiated proposition as a value alternative to full price specialist retailers. Our ambition is to become the favourite destination for affordable, screen free activities for the whole family. The Group operates a network of over 500 stores in the UK & Ireland, as well as trading online at TheWorks.co.uk.

Chair report

Introduction

In the 2024 annual report I spoke of the strategy being under review and action being taken at The Works. The last year can be characterised both by significant change and progress across the business. I am very pleased that, under Gavin's leadership and due to the collective efforts of everyone at The Works, we have a new strategy that is starting to deliver tangible results. This is not only benefitting our customers but is enhancing the fundamentals of the business and delivered a significantly improved financial performance in FY25. Momentum built in the second half of FY25, which has carried forward into the new financial year, providing confidence that the business is on the right track to make further gains in the years to come.

FY25 performance

The retail backdrop was challenging throughout FY25, characterised by geopolitical uncertainty, fragile consumer confidence and rising business costs, particularly following the UK Government's Autumn Budget. Despite this, The Works delivered a much-improved FY25 performance by focusing on factors within our control and driving incremental improvements across the business. The underlying performance was strong, driven particularly by our stores, which tracked consistently ahead of the wider market and saw like for like (LFL) store sales accelerate by 6.9% in Q4.

Although the business faced difficulties fulfilling online orders during peak, these issues were contained and the online performance improved significantly in Q4. Decisive action has already been taken, including the appointment of a new third-party provider, positioning the business well for the remainder of FY26 and beyond.

The sustained efforts throughout the year to reduce costs and grow product margins, together with strong sales growth post-Christmas, means The Works delivered profits in line with recently upgraded market expectations for FY25.

Strategy

Our new strategy, 'Elevating The Works', launched in January 2025, ensures the business now has a clear plan and ambitious targets to deliver a step-change in performance.

Excellent initial progress has been made on our three strategic growth drivers: growing our brand fame, improving customer convenience and being a lean and efficient operator. This transformation will take time, but momentum is building. As such, we remain on track to deliver sales in excess of £375m and EBITDA margin of at least 6% within five years.

Our Board and leadership

There have been a number of changes to the leadership at The Works over the last year. Our more streamlined Operating Board was embedded at the start of FY25 and we have also seen changes at PLC Board level.

I joined The Works in July 2024, succeeding Carolyn Bradley as Chair, and have worked closely with Gavin and the leadership team to develop and ensure delivery of the new strategic plans and targets.

Three other Board members left The Works in FY25. I would like to thank Catherine Glickman for her six-year contribution to The Works and John Goold and Mark Kirkland who joined the Board on a temporary basis to provide additional guidance during a period of change.

We further strengthened the PLC Board, with Simon Hathway joining as an Independent Non-Executive Director in November 2024. His retail experience and counsel has already proved invaluable, including in the development and roll-out of our new strategy.

Since the period end, Harry Morley announced his intention to step down as Senior Independent Non-Executive Director at the upcoming AGM. In line with the Board's succession plans, a recruitment process to identify Harry's successor is well advanced.

We wish Harry, and all our departed Board members, well and are confident that our refreshed Board will continue to deliver for the business and shareholders, in the years ahead.

Capital distributions

We have not declared a final dividend for FY25 as we are focussed on investing in our business and delivering our new strategy. Future shareholder distributions, including share buybacks, will continue to be assessed as profitability further improves, investment priorities develop and funding allows.

Outlook

The Board is mindful of continued cost headwinds in the year ahead, however, we are confident that we will see further LFL sales growth, realise further benefits from action to grow product margins, reduce costs and execute our new strategy effectively. As such, we expect further profit growth and are comfortable with external forecasts of pre-IFRS 16 Adjusted EBITDA of £11.0m in FY26.

Steve Bellamy

Chair

22 July 2025

CEO report

Introduction

We made significant strategic and financial progress in FY25, which was particularly pleasing given the challenging retail backdrop. Our underlying performance was strong, with momentum building steadily throughout the year and our new strategy launched in January 2025, 'Elevating The Works', has already started to deliver tangible results. Our sustained efforts to reduce costs and grow product margins, together with strong sales growth post-Christmas, means we delivered profits in line with recently upgraded market expectations in FY25.

Everyone at The Works is focussed on fulfilling our ambition to become the favourite destination for affordable, screen-free activities for the whole family and this collective drive, coupled with our strong trading momentum, stands us in good stead to deliver further profit growth and shareholder value in FY26 and beyond.

FY25 performance

The backdrop to FY25 was challenging, with consumer confidence remaining fragile throughout, particularly following the government's Autumn Budget, ongoing geopolitical uncertainty and significant cost headwinds. Despite this, we made significant financial progress in FY25, particularly in the second half of the year.

Total revenue was lower by 2.0% at £277m (FY24: £283m) due to the prior year benefitting from an additional trading week and the continued optimisation of the store estate (a net 8 store closures in FY25). Our FY25 underlying performance was strong, with total like for like (LFL) sales up 0.8%, and ahead of the wider non-food retail market, which saw a LFL sales reduction of 0.1% over the period.

Our stores, which comprise over 90% of sales, saw LFL sales up 2.3%. Store performance was driven by the execution of our strategic plans, including more customer-focussed events, new products across all categories, improved store standards and product availability. Online sales declined by 12.1% due to the online fulfilment issues experienced during the festive period and our focus on driving profitable growth through this channel.

Our LFL performance improved throughout the year, with particularly strong growth post-Christmas, reflecting the momentum from our strategic and operational progress building through the year. In Q4, total LFL sales grew by 6.4%, store LFL sales by 6.9% and online improved to flat sales, with the online capacity issues largely resolved post-Christmas. 

We faced rising cost headwinds in FY25, which we were able to offset due to ongoing cost-saving action and sustained product margin growth (+210bps vs. FY24) driven by supplier negotiations, reduced markdown activity through better stock management, more targeted promotional activity and control of product mix. Whilst stocks were higher at year end, the overall quality improved significantly year-on-year and there was no need for a Spring sale.

This, combined with the improved sales performance in Q4, resulted in pre-IFRS 16 Adjusted EBITDA up 58% to £9.5m (FY24: £6.0m), which was in line with recently upgraded market expectations of £9.5m.

Strategy

With a new leadership structure in place, including a more streamlined Operating Board and refreshed plc Board, we took the decision to evolve our former 'Better, not just Bigger' strategy. We recognised the need for a clear plan to transform the business with the ambition of driving sales growth, improving profit margins and delivering strong shareholder returns.

In January 2025 we announced our new strategy, 'Elevating The Works', which is focussed on The Works becoming the favourite destination for affordable, screen free activities for the whole family and is underpinned by three strategic drivers: growing our brand fame, improving customer convenience and being a lean and efficient operator.

The successful execution of this strategy will have a transformative impact on the business, enabling us to deliver sales in excess of £375m and an EBITDA margin of at least 6% within five years. There remains much to do to reach these targets, however, with the early progress made following the launch of the new strategy, we have a clear runway to achieve these plans.

Growing brand fame

We know The Works is a favourite destination amongst our loyal customers, but we want even more people to discover us and love what we do. We have made great progress on clarifying what we want to be known for as a brand and to bring this to life with our customers, as outlined below, which has been a key driver of the strong in-store sales and building momentum post-Christmas.

Improving customer convenience

We want to attract and retain loyal customers by making it even easier to shop with us. Progress in FY25 included:

Being a lean and efficient operator

To continue offering customers great value and making sustainable profits, we need to keep our costs low and be an increasingly lean and efficient business. Progress includes:

Board and leadership changes

We embedded our restructured Operating Board at the beginning of the financial year, strengthening the leadership of the business as we developed, and now implement, our new strategy. Doing so has enabled more streamlined decision making and ways of working, supported better cross-functional collaboration and enabled Senior Leaders to step up, grow and take on more responsibility.

There have also been a number of changes in our PLC Board during FY25. I would like to take this opportunity to thank those who have departed and to welcome our new Board members, who bring a wealth of experience.

Colleagues

I am proud that The Works placed 10th in the 'Best Big Companies to Work For', up from 15th the previous year. This is particularly impressive given the significant amount of change the business has undergone over recent years. It is credit to our leadership and to everyone at The Works for the way in which colleagues have rallied together during times of difficulty and delivered such significant financial and strategic progress in FY25. The unique culture we have at The Works is something we must never take for granted. It is our collective responsibility to nurture it and ensure it continues to grow.

ESG

Underpinning our new strategy are our People and Planet commitments - our way of making positive and sustainable changes for our people, our communities and our planet. We pride ourselves on being an ethical and efficient business, and during FY25 expanded our sourcing function to support the continued delivery of our supplier strategy, engagement and performance. We also rolled out the next phase of our Ethical Compliance Programme across our entire active supplier base, which will help to ensure we maintain our commitment to sourcing our products ethically and in a legally compliant way.

Good progress has also been made against our Diversity and Inclusion (D&I) strategy. Our wellbeing-related blogs on MyWorks and enhanced D&I training has been well-received by colleagues, as evidenced by improved results of our FY25 D&I survey. 

Outlook

We are mindful of significant cost headwinds in FY26, primarily due to changes to employers' National Insurance contributions and higher National Living and Minimum Wages. However, by maintaining our focus on the factors within our control, and continuing to execute our new strategy, we expect to offset these headwinds in the year ahead.

We have fantastic new products landing throughout the year, which, coupled with the steps we are taking to improve customer experience, will help to drive further sales growth. Alongside ongoing action to grow margins and reduce costs, this positions us well to deliver further strategic and financial progress in the year ahead.

As such, we expect further profit growth and are comfortable with external forecasts of pre-IFRS 16 Adjusted EBITDA of £11.0m in FY26. Our strong FY25 performance and the forward momentum we have carried into FY26, supported by early delivery on our new strategy, also gives us confidence that we can deliver on our five-year targets, transform the business and deliver shareholder returns.

Gavin Peck

Chief Executive Officer

22 July 2025

Financial Report

Overview

This report covers the 52-week period ended 4 May 2025 ("FY25", or "the period") and refers to the comparative "FY24" period of the 53 weeks ended 5 May 2024. Significant financial and strategic progress was made during FY25 against a challenging consumer backdrop.

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

Total revenue was lower by 2.0% to £277m (FY24: £283m), due to:

Total LFL sales increased by 0.8%, ahead of the wider non-food retail market(1), with store LFLs increasing by 2.3% and online sales decreasing by 12.1%.

Store numbers

We traded from 503 stores at the period end (FY24: 511 stores), of which 98% are profitable on an annual basis. Our store estate represents over 90% of sales and recorded a strong LFL performance in the period. We continued to optimise our store estate during FY25, which included closing low-profit and loss-making stores where we were unable to agree suitable terms with landlords, whilst continuing to open new stores that fit our profile. The 11 new stores opened in the period (including relocations) performed well overall and we anticipate that they will see a typical payback of around eighteen months.

Gross profit

Product gross margin increased to 59.4% in FY25 (FY24: 57.3%), reflecting action taken to prioritise margin growth from the end of FY24, with notable factors as follows:

Store payroll costs decreased by £0.3m, in part due to 52 weeks of trading in FY25 (53 weeks in FY24). The one-week shorter period reduced costs by £0.9m but was partially offset by the impact of the 9.8% increase in the National Living and Minimum Wage ('NLMW') in April 2024. This created an additional cost of £4.0m, which was mostly offset by a store labour hours efficiency programme.

Store property and establishment costs increased by £1.0m. FY24 was a 53-week period and the underlying increase in costs was £2.1m as a result of:

Online variable costs decreased by £2.0m. During the first half of the year, efficiencies were delivered as a result of the move to an automated picking process for online fulfilment, however, during the second half of the period our third-party online fulfilment centre faced significant and unexpected operational challenges. This affected capacity and resulted in significantly increased costs per order. Due to these operational challenges, we proactively optimised online sales which resulted in a saving in digital marketing costs, and lower parcel delivery and packaging costs due to significantly reduced outbound volumes year-on-year. 

£1.2m of exceptional fulfilment costs were incurred in relation to higher costs per order versus planned levels due to the third-party service disruption and these have been included as an adjusting item in the period. See Notes 3 (Adjusting items) of the attached condensed financial statements.

Operating profit

Distribution costs (before depreciation and IFRS 16), comprising picking stock and delivering it to stores, decreased by £1.1m compared with the prior period. Efficiencies continued to be driven from implementation of improved ways of working in the retail Distribution Centre offsetting the April 2024 NLMW increases, with costs also benefiting from 52 weeks of trading in FY25 (53 weeks in FY24).

Administration costs (before depreciation and IFRS 16) increased by £1.3m, due in part to £0.8m of bonuses payable to colleagues reflecting the improved performance year-on-year (FY24: nil). The prior period costs were also flattered by a release of a VAT provision and lower long term incentive employee share plan charges.

Operating profit reconciliation to pre-IFRS 16 Adjusted EBITDA

Depreciation, amortisation and IFRS 16 adjustments

Depreciation and amortisation increased £0.5m year-on-year as a result of lower impairment charges.

The impact of IFRS 16 adjustments were £1.3m lower year-on-year primarily due to lower rental charges and therefore a lower IFRS16 adjustment. Refer to Note 2 (Alternative performance measures ("APMs")) of the attached condensed financial statements for a reconciliation of pre-IFRS 16 EBITDA to operating profit.

Adjusting items were a £3.8m credit in FY25 (FY24: £3.7m credit) and include exceptional fulfilment costs of £1.2m (FY24: nil) as noted above. Other exceptional items include £0.7m of central support centre restructuring costs as part of the Group's cost saving actions. These costs are more than offset by a credit of £6.5m (FY24: credit £1.4m), due to the reversal of impairment charges relating to the notional right-of-use assets created as a result of application of the IFRS 16 accounting standard and a loss of £0.8m (FY24: £3.5m profit) on disposal of right-of-use assets and lease liabilities, with these two items requiring elimination in the calculation of Pre-IFRS 16 Adjusted EBITDA. This is described in note 10 of the condensed financial statements included in this announcement.

A reconciliation of operating profit to EBITDA can be found in note 2 of the condensed financial statements included in this announcement.

Net financing expense

Net financing costs in the period were £4.8m (FY24: £4.5m), mostly relating to IFRS 16 notional interest on the calculated lease liability.

Interest expense relating to bank facilities was £0.7m (FY24: £0.5m) and included facility availability charges and amortisation of the cost of setting up the facility. The higher interest charge reflects usage of the rolling credit facility to manage the timing of stock intake so that trading was not adversely impacted as a result of longer transit times from China due to the disruption in the Red Sea.

Profit before tax

Profit before tax was £8.3m (FY24: £6.9m) which includes the £3.8m credit (FY24: £3.7m credit) for Adjusting items (described above and in Note 3 (Adjusting items)).

Tax

The Group's total income tax charge in respect of the period was £0.2m (FY24: £0.5m). The effective tax rate on the total profit before tax was 2.0% (FY24: 7.8%) whilst the effective tax rate on the total profit before Adjusting items was 3.6% (FY24: 17.0%). The difference between the total effective tax rate and the Adjusted tax rate relates to fixed asset impairment charges and reversals within Adjusting items being non-deductible for tax purposes.

The current year tax charge recognised is driven by deferred tax movements related to lease balances.

Earnings per share

The basic and diluted earnings per share for the period were 13.1 pence (FY24: 10.2 pence). Adjusted basic and diluted earnings per share for the period were 7.1 pence (FY24: 4.2 pence).

Capital expenditure

Capital expenditure in the period was £5.0 million (FY24: £5.8m).

Inventory

Stock was valued at £35.0m at the end of the period (FY24: £31.4m), an increase of £3.6m. The increased gross stock level compared to the prior period reflects investment in new stock across strong performing ranges to support higher sales and increased freight rates within average cost prices. The stock value represents a lower stock provision due to the timing of four-wall stock counts in stores occurring closer to the year-end (which reduces the shrinkage provision year-on-year) and less terminal stock than the prior year resulting in a lower obsolescence provision. Increased stock in transit reflects longer transit times from China due to the continued challenges in the Red Sea.

Cash flow

The Group ended the period with net cash at bank of £4.1m (FY24: £1.6m cash), The table below shows a summarised pre IFRS 16 presentation of cash flow. The net cash inflow before exchange rate movements for the period was £2.9m (FY24: outflow of £7.9m).

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. We will be seeking a similar facility during FY26.

Capital distributions

The Board is not proposing a final dividend. Future shareholder distributions, including share buybacks, continue to be assessed as profitability improves and funding allows.

Employee Benefit Trust funding for the purposes of share schemes

To avoid dilution of existing shareholder interests, the Board's intention is to continue providing funding to the Company's Employee Benefit Trust. 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.

Rosie Fordham

Chief Financial Officer

22 July 2025

Consolidated income statement

For the period ended 4 May 2025

Profit for the period is attributable to equity holders of the Parent.

Consolidated statement of comprehensive income

For the period ended 4 May 2025

Consolidated statement of financial position

As at 4 May 2025

These financial statements were approved by the Board of Directors on 22 July 2025 and were signed on its behalf by:

Rosie Fordham

Chief Financial Officer

Company registered number: 11325534

Consolidated statement of changes in equity

1 Share-based payment reserve includes a transfer of £662k (FY24: £nil) to retained earnings in relation to closed schemes (all shares have been granted, lapsed or forfeited).

2 Hedging reserve includes £330k (FY24: £410k) 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.

3 Hedging reserve contains a £nil (FY24: £290k) transfer from retained earnings in relation to a historical tax charge for financial derivatives that had previously been recognised in the consolidated income statement.

Consolidated cash flow statement

For the period ended 4 May 2025

Notes to the consolidated financial statements

(Forming part of the financial statements)

1. Accounting policies

Where accounting policies are particular to an individual note, narrative regarding the policy is included with the relevant note; for example, the accounting policy in relation to inventory is detailed in Note 13 (Inventories).

(a) General information

TheWorks.co.uk plc is a leading UK multi-channel value retailer of arts and crafts, stationery, toys, games and books, offering customers a differentiated proposition as a value alternative to full price specialist retailers. The Group operates a network of over 500 stores in the UK, Ireland and online.

TheWorks.co.uk plc (the Company) is a UK-based public limited company (11325534) with its registered office at Boldmere House, Faraday Avenue, Hams Hall Distribution Park, Coleshill, Birmingham B46 1AL.

These consolidated financial statements for the 52 weeks ended 4 May 2025 (FY25 or the period) comprise the results of the Company and its subsidiaries (together referred to as the Group) and are presented in pounds sterling. All values are rounded to the nearest thousand (£000), except when otherwise indicated.

(b) Basis of preparation

The Group financial statements have been prepared on a historical cost basis, except for financial assets at fair value through profit and loss including derivatives. The financial statements are in accordance with UK-adopted International Accounting Standards.

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the application of policies, and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience, future budgets and forecasts, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The Group's significant judgements and estimates relate to going concern, fixed asset impairment and inventory; these are described in Note 1(e).

(i) Going concern

The 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 documented in the Strategic report on pages 1 to 43 of the Annual Report and Accounts. The financial statements have been prepared on a going concern basis, which the Directors consider appropriate having made this assessment.

The Group performed a detailed strategic review during the second half of FY25 and produced a five-year plan to support the new strategy, 'Elevating The Works'. This five-year plan is referred to as the 'Base Case', from which the Group has prepared cash flow forecasts for a period of at least 12 months from the date of approval of these financial statements (the going concern assessment period). In addition, a 'severe but plausible' 'Downside Case' sensitivity has been 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 have considered:

• The external environment.

• The Group's financial position including the quantum and expectations regarding 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 mirrors the Group's five-year plan and therefore represents its estimate of the most likely financial performance over the forecast 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.

Going concern and basis of preparation conclusion

The retail backdrop was challenging throughout FY25, characterised by geopolitical uncertainty, fragile consumer confidence, continued high inflation and rising business costs. Despite this, the Group delivered a much-improved FY25 performance by focusing on factors within its control and driving incremental improvements across the business. The Board is mindful of continued cost pressures in the year ahead. However, the Group is confident that it will see further LFL sales growth, realise further benefits from action to grow product margins and reduce costs and execute the new strategy effectively. It is expected to offset the significant cost pressures and deliver further profit growth and strategic development in FY26 which will continue into the remainder of the five-year plan. There is sufficient cash 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) New accounting standards

The Group has applied the following new standards and interpretations for the first time for the annual reporting period commencing 6 May 2024:

· Non-Current Liabilities with Covenants - Amendments to IAS 1 and Classifications of Liabilities as Current or Non-Current - Amendments to IAS 11.

· Lease Liability in a Sale and Leaseback - Amendments to IFRS 161.

· Supplier Finance Agreements - Amendments to IAS 7 and IFRS 71.

The adoption of the standards and interpretations listed above has not led to any changes to the Group's accounting policies or had any other material impact on the financial position or performance of the Group.

As at the date of approval of these financial statements, the following standards and interpretations, which have not been applied in these financial statements, were in issue, but not yet effective:

· Amendments to IAS 21 Lack of Exchangeability2.

· Amendment to IFRS 9 and IFRS 7 Classification and Measurement of Financial Instruments3.

· IFRS 18 Presentation and Disclosure in Financial Statements4.

· IFRS 19 Subsidiaries without Public Accountability: Disclosures4.

1 Effective for annual periods commencing after 1 January 2024.

2 Effective for annual periods commencing after 1 January 2025.

3 Effective for annual periods commencing after 1 January 2026.

4 Effective for annual periods commencing after 1 January 2027.

The adoption of the standards and interpretations listed above is not expected to have a material impact on the financial position or performance of the Group.

(c) Accounting convention

The consolidated financial statements have been prepared under the historical cost convention, except for certain financial assets and financial liabilities (including derivative instruments), which are held at fair value.

(d) Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to direct the activities that affect those returns through its power over the entity. Consolidation of a subsidiary begins from the date control commences and continues until control ceases. The Company reassesses whether or not it controls an investee if circumstances indicate that there are changes to the elements of control detailed above.

An Employee Benefit Trust operated on the Group'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 reserves.

(e) 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 financial statements are described in the context of the matters to which they relate, in the following notes:

2. Alternative performance measures (APMs)

Sales APM

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.

A reconciliation of IFRS revenue to sales on an LFL basis is set out below:

FY24 was a 53-week period; therefore, the LFL sales APM compares 52 weeks of FY25 to the equivalent 52 weeks of FY24.

Profit APMs

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 3.

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.

3. Adjusting items

Adjusting items are unusual in nature or incidence and sufficiently material in size that in the judgement of the Directors they merit disclosure 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.

The Directors believe that the Adjusted profit and earnings per share measures included in this report provide additional useful information to users of the accounts. These measures are consistent with how business performance is measured internally. The profit before tax and Adjusting items measures are not recognised profit measures under IFRS and may not be directly comparable with Adjusted profit measures used by other companies.

If a transaction or related series of transactions has been treated as Adjusting in one accounting period, the same treatment will be applied consistently year on year.

Impairment charges and reversals of prior year impairment charges relate to fixed assets (see Notes 9, 10 and 11).

Profit on disposal of right-of-use assets and lease liabilities relate to leases (see Note 11).

Other exceptional items in FY25 comprise £1.2m (FY24: £nil) in relation to the transition of the online sales Distribution Centre and £0.6m (FY24: £nil) related to the review of the cost base of the Group, which includes £0.4m of redundancy costs. In FY24, other exceptional items comprise £0.5m of professional fees and other costs related to the listing of the Company on AIM and £0.7m of redundancy costs related to the restructure of the Operating Board, which were included within cost of sales in the prior year.

4. Operating profit

Operating profit before Adjusting items is stated after charging the following items:

Auditor's remuneration

5. Staff numbers and costs

The average number of people employed by the Group (including Directors) during the period, analysed by category, were as follows:

The corresponding aggregate payroll costs were as follows:

The Directors' remuneration for the period was as follows:

The following number of Directors were members of:

The highest paid Director's remuneration and contributions to defined contribution plans during the year were as follows:

6. Taxation

Recognised in consolidated income statement

The UK corporation tax rate for FY25 was 25.0% (FY24: 25.0%). Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

As the deferred tax assets and liabilities should be recognised based on the corporation tax rate applicable when they are anticipated to unwind, the assets and liabilities on UK operations have been recognised at a rate of 25.0% (FY24: 25.0%). Assets and liabilities arising on foreign operations have been recognised at the applicable overseas tax rates.

Reconciliation of effective tax rate

The Group's total income tax charge in respect of the period was £165k (FY24: £541k charge). The effective tax rate on the total profit before tax was 2.0% (FY24: 7.8%) whilst the effective tax rate on the total profit before Adjusting items was 3.6% (FY24: 17.0%). The difference between the total effective tax rate and the Adjusted tax rate relates to fixed asset impairment charges and reversals within Adjusting items being non-deductible for tax purposes.

The current year tax charge recognised above is predominantly driven by deferred tax movements related to lease balances.

There is also a tax charge of £409k (FY24: £323k) shown in the statement of comprehensive income for fair value movements on derivatives which impacts the deferred tax balance (Note 12).

Consolidated statement of financial position

Included in the consolidated statement of financial position is a current tax debtor of £1,603k (FY24: £1,189k) resulting from the overpayment of taxation in prior periods.

7. Dividends

The Board has not recommended the payment of a dividend in respect of FY25 (FY24: nil).

8. 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 is based on the weighted average number of shares in issue for the period, adjusted for the dilutive effect of potential ordinary shares. Potential ordinary shares represent shares that may be issued in connection with employee share incentive awards.

The Group has chosen to present an Adjusted earnings per share measure, with profit adjusted for Adjusting items (see Note 3 for further details) to reflect the Group's underlying profit for the period.

9. Intangible assets