The Works aims to offer value with £65m London IPO

Value retailer The Works hopes to raise £62.2m, split between the business and selling shareholders, in an initial public offer on the London Stock Exchange's main market.

The Works, which sells cheap toys, books, stationery and arts & crafts goods, will issue 40.77m shares via broker Investec at 160p in the placing, which is expected to raise £28.5m for the company to pay down debt and £36.7m for selling shareholders, including private equity group Endless and the company's management. With 62.5m shares issued in total, the company will have a debut market capitalisation of £100m when it begins trading on 19 July.

Endless, which will retain a 9.8% stake after the IPO, bought the business in 2008 and appointed Kevin Keaney as chief executive three years later, with Card Factory founder Dean Hoyle investing in the business in 2015 when he was appointed chairman.

Claiming to occupy an "attractive position within the high growth discount retail sector" with 399 branded stores and almost 50 concessions in garden centres and large convenience stores, as well the-works.co.uk ecommerce platform, in three years to 29 April the group grew underlying revenue and EBITDA at a compound annual growth rate of 14% to £189.3m and £12.0m respectively. This growth has been helped by the opening a net 134 new retail stores and concessions in the three-year period.

The store roll out programme has been funded internally as store cash margin as a percentage of sales has grown from 61.0% in 2016 to 62.3% in the last full year.

"Today represents a significant milestone for The Works and we're extremely pleased with the level of interest we've received from investors in our business," said Keaney. "They've seen what our customers see every day - a unique and exciting retail experience that combines value, quality and variety that's available online and in-store.

"With a highly experienced management team, energised staff and compelling offer, we are well-positioned for further growth."

A store roll out programme with up to 1,000 potential locations identified across the UK and Ireland, represents a key part of Keaney's growth plans, with a historical payback on new stores of just over 13 months.

Like all the best discounters, the group is proud of its buying team, which boasts key relationships with over 500 suppliers across Europe and Asia and is seen as being able to help management quickly capitalise on market trends across the product formats.

"The group has a proven ability in identifying and exploiting emerging consumer Mega Trends, including fidget spinners, loom bands and adult colouring products. The directors believe the group's buying team and nimble approach to trading to be key strengths of the group."

Furthermore, an in-house design department allows for a more differentiated product proposition and the ability to deliver higher gross margins, with the proportion of own-brand sales grown from 25.7% of overall net sales in 2016 to 27.5% in the the past financial year.