TheWorks.co.uk Reports 58% EBITDA Surge and Strong Start to FY26

Well, well, well. TheWorks.co.uk has just dropped its preliminary results for FY25, and colour me intrigued. In a retail landscape that’s felt like navigating an obstacle course blindfolded, this value retailer’s managed to pull off a rather nifty trick: a 58% surge in pre-IFRS 16 Adjusted EBITDA. That’s not just a win – it’s a full-throated declaration that their new strategy is gaining serious traction. Let’s unpack this, shall we?

The Headline Act: Profitability Leaps Forward

First, the numbers that’ll make your eyebrows climb. For the 52 weeks ending 4 May 2025:

• Pre-IFRS 16 Adjusted EBITDA hit £9.5m – up a stonking 58% from £6.0m in FY24. That’s not just growth; it’s acceleration.
• Profit Before Tax jumped 20.3% to £8.3m (FY24: £6.9m). Adjusted PBT? A healthier £4.6m versus £3.2m.
• Net Cash ballooned to £4.1m – more than doubling from £1.6m last year. Cash is oxygen in retail, and The Works is breathing deeply.

Now, revenue dipped 2% to £277m. But before you frown – context matters. FY24 had a 53-week year (that extra week’s worth about £2.8m). Strip that out, and underlying trading held firm. Crucially, Total Like-for-Like (LFL) sales grew 0.8%, outpacing a flattish non-food retail market. The real hero? Stores delivered 2.3% LFL growth, driving over 90% of sales. Online took a 12.1% hit (more on that shortly), but even that improved markedly post-Christmas.

The Margin Magic

Here’s where it gets juicy. Product margins expanded by 210 basis points (that’s 2.1 percentage points for the uninitiated). How?

• Savvier supplier negotiations.
• Reduced reliance on knee-jerk markdowns.
• Tighter control on promotional activity and product mix.

Combined with £2m+ of identified annualised cost savings rolling into FY26, this margin resilience absorbed inflationary punches – particularly wage hikes – and still left room for that EBITDA knockout.

“Elevating The Works”: Strategy Paying Dividends

January 2025 saw the launch of their refreshed strategy – and it’s clearly not just PowerPoint fluff. CEO Gavin Peck’s three-pronged approach is bearing fruit:

1. Growing Brand Fame: Making Noise Offline

The Works leaned hard into becoming the “favourite destination for affordable, screen-free activities.” Clever, timely events like the “Kids Favourites Event” (featuring Bluey and Peppa Pig) and the “Books are Magic” campaign around World Book Day drove footfall. Newness in ranges, especially Adult Fiction (hello, BookTok!) and Toys & Games, resonated. This isn’t just selling stuff; it’s creating reasons to visit.

2. Improving Customer Convenience: Stores Sharpened

They’ve been ruthlessly optimising the estate: 7 openings, 15 closures, 4 relocations. The result? A leaner, more profitable portfolio of 503 stores (down from 511). Crucially, store standards and product availability improved significantly – a core driver of that 2.3% store LFL growth. Online fulfilment issues (a third-party provider headache during peak) hurt the digital channel, but a new provider is now in place for FY26.

3. Lean & Efficient Operator: Squeezing Every Penny

Beyond the margin gains, they’ve embedded cost discipline: restructuring the DC, ending the Together Rewards scheme, board streamlining, and moving to AIM all contributed savings. The new EPoS system rollout is a key enabler for future efficiencies. This operational grit is fundamental when facing wage inflation headwinds.

FY26: Off to a Flyer & Future Gazing

This isn’t just a backward-looking victory lap. The first 11 weeks of FY26 have seen LFL sales surge 5.0% – continuing the strong momentum from Q4 FY25. Margins are still growing. The Board is now “comfortable” with market forecasts of £11.0m pre-IFRS 16 Adjusted EBITDA for FY26.

Yes, challenges loom: National Living/Minimum Wage rises and Employers’ NI increases are real cost pressures. But the message is clear: the strategy, cost savings, and sales momentum are expected to offset them.

The ambition? £375m+ sales and a 6%+ EBITDA margin within five years. Ambitious? Absolutely. Achievable? The foundations laid in FY25 suggest it’s more than plausible.

The Verdict: A Retailer Finding Its Groove

TheWorks.co.uk feels like a retailer finally clicking into gear. The “Elevating The Works” strategy isn’t just words; it’s translating into tangible profit growth and cash generation. They’ve doubled down on what works (stores, events, value), tackled what didn’t (online fulfilment, unprofitable stores), and managed costs with grit.

Gavin Peck’s closing remarks nail the sentiment: “Guided by our new strategy… energised team, leaves us well placed for further strategic and financial progress.” For investors tired of retail sob stories, The Works offers a refreshing narrative of resilience, execution, and – crucially – rising profits. One to watch closely as FY26 unfolds.