REG - Topps Tiles - Interim Financial Report
21/05/2024 07:00
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RNS Number : 1897P Topps Tiles PLC 21 May 2024
21 May 2024
Topps Tiles Plc
Interim Financial Report
Topps Tiles Plc ("Topps Group", the "Company" or the "Group"), the UK's
leading tile specialist, announces its unaudited consolidated interim
financial results for the 26 weeks ended 30 March 2024, together with new
financial goals and an updated strategy for growth in the medium term.
Strategic and Operational Highlights
• H1 trading challenging, sales down 5.8% year-on-year but continuing to take
market share
• Market c. 20% down on pre-covid levels, Group sales +11% vs H1 FY2019
• Further improvements in Topps Tiles customer satisfaction, up 1.2 ppts to
92.5% (H1 2023: 91.3%)
• Pro Tiler buy-out shortly to be completed: c. 5x EBITDA multiple paid for fast
growing business, and founders retained
• Parkside profitable following implementation of business improvement programme
in 2023
• Updated growth strategy, revenue goal and financial targets launched today -
Mission 365
• New goal to grow Group sales to £365 million in the medium term,
with 8-10% adjusted profit before tax margins
• Addressable market expanded to include hard wall and floor surface
coverings and related products
• Development of a significantly upgraded digital offer for Topps
Tiles trade customers
• New, co-ordinated growth strategy for B2B markets, across Topps
Tiles Contracts, Parkside and Pro-Tiler
• Further expansion of online pure-play businesses Pro-Tiler and Tile
Warehouse
Financial Highlights
26 weeks ended 26 weeks ended YoY
30 March 2024 1 April 2023
(H1 2024) (H1 2023)
Adjusted Measures
Topps Tiles like-for-like revenue year on year(1) (9.2)% 4.3% n/a
Adjusted profit before tax(2) £3.1 million £4.4 million (29.5)%
Adjusted earnings per share(3) 1.03p 1.57p (34.4)%
Adjusted net cash at period end(4) £19.3 million £19.9 million £(0.6) million
Statutory Measures
Group revenue £122.8 million £130.3 million (5.8)%
Gross profit £66.2 million £68.7 million (3.6)%
Gross margin % 53.9% 52.8% +1.1 ppts
(Loss)/profit before tax £(1.5) million £1.7 million £(3.2) million
Basic earnings per share (1.12)p 0.25p (1.37)p
Interim dividend per share 1.2p 1.2p Flat
Financial Summary
• Group sales 5.8% lower year-on-year driven by lower footfall in Topps Tiles
• Gross margin up 1.1 percentages points year-on-year, due to recovery in Topps
Tiles gross margin
• Adjusted operating costs £1.1 million lower year-on-year, driven by lower
variable pay and savings
• Adjusted profit before tax down £1.3 million due to sales decline
• Statutory loss of £1.5 million stated after £3.1 million share purchase
provision increase related to the Pro Tiler Limited earn out, reflecting the
very strong performance of the business since acquisition in March 2022
• Cash broadly flat year-on-year at £19.3 million and strong balance sheet
maintained with £49.3 million of headroom to banking facilities (H1 2023:
headroom of £49.9 million)
• Interim dividend maintained at 1.2 pence per share
Current Trading and Outlook
• Group sales over the first seven weeks of the second half were 7.3% lower
year-on-year
• Topps Tiles like-for-like sales were 10.1% lower year-on-year, with no
material changes to trends seen in H1 2024
• Macroeconomic lead indicators such as GDP, mortgage approvals and customer
confidence are all improving however trading results are yet to benefit from
these upsides
• The Group's competitive advantage is driven through market-leading brands,
world-class customer service, specialist expertise, and best in class global
sourcing
• Core strengths and new goal leave the Group well positioned for significant
growth in the medium term
Commenting on the results, Rob Parker, Chief Executive said:
"Trading conditions in the first half have been challenging in a tile market
which is down 20% on 2019. Against this backdrop, we are continuing to take
market share, our online pure play businesses are growing strongly and the
Group remains in a robust financial position. Lead indicators of market
activity such as mortgage approvals, consumer confidence and smaller ticket
DIY spend are improving, and while we are yet to see this feed through into
our customer's spending patterns, as market leader Topps Group remains
well-positioned for recovery.
"Notwithstanding the challenges of current market conditions, we believe that
Topps Group has a substantial opportunity to increase sales and profitability
over the medium term through our new growth strategy of Mission 365.
"Mission 365 includes the development of new digital platforms for Topps Tiles
trade customers; an increase in our addressable market of 75% by entering new
product areas adjacent to our core tile specialism; a drive for accelerated
growth in B2B markets through a more co-ordinated Group-wide approach; and
continued momentum in our high growth online pure play businesses, Pro-Tiler
and Tile Warehouse. Together these initiatives represent an opportunity to
grow sales to £365 million over the medium term, while delivering profit
before tax margins in the range of 8-10%."
Notes
(1)Topps Tiles like-for-like revenue is defined as sales from Topps Tiles
stores that have been trading for more than 52 weeks and online sales made
through the Topps Tiles brand.
(2) Adjusted profit before tax excludes the impact of items which are either
one-off in nature or fluctuate significantly from year to year. See the
financial review section of this document for a reconciliation of adjusted
profit before tax to statutory profit before tax.
(3) Adjusted earnings per share is adjusted for the items highlighted above,
plus the impact of corporation tax.
(4) Adjusted net cash is defined as cash and cash equivalents, less bank
loans, before unamortised issue costs as at the balance sheet date. It
excludes lease liabilities under IFRS 16.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
For further information please contact:
Topps Tiles Plc (21/05/24) 020 7638 9571
Rob Parker, CEO (Thereafter) 0116 282 8000
Stephen Hopson, CFO
Citigate Dewe Rogerson 020 7638 9571
Kevin Smith/Ellen Wilton
INTERIM MANAGEMENT REPORT
Topps Group is the largest specialist distributor of tiles and related
products in the UK. The majority of our revenues are generated from the
domestic market for the renovation, maintenance and improvement (RMI) of UK
homes, through our market-leading, omni-channel brand, Topps Tiles. Our
Parkside brand operates in the commercial sector which includes tiles supplied
across sectors such as leisure, retail, hospitality, transport and new build
residential housing, where product specification is often heavily influenced
by the architect and designer community. The Group also operates in the
Online Pure Play sector through two brands, Pro Tiler Tools and Tile
Warehouse.
All of the brands within the Group derive benefit from the scale of the Group,
the specialist focus of our business model and our passion for tiles. We enjoy
a competitive advantage in sourcing differentiated products from around the
world that we can access on an exclusive basis and deliver world-class
customer service through our store network, digital platforms and commercial
sales teams. We lead the UK tile market in environmental matters, including
our goal of being carbon neutral across Scope 1 and 2 emissions by 2030, and
this year will begin reporting Scope 3 emissions as part of our ongoing drive
to reduce our impact on the environment.
OPERATIONAL REVIEW
As detailed below in the financial review, trading conditions in the first
half of the year have been challenging, against the backdrop of a weak RMI
market. Notwithstanding these challenges, the Group continued to make
progress in a number of areas.
Within Topps Tiles, our market-leading, omni-channel specialist, lower
footfall led to like-for-like sales falling 9.2% year-on-year, although
conversion levels were higher and average transaction values were only
slightly lower. We continue to serve a mix of professional trade customers
and homeowners; trade sales mix increased in the first half to 61.4% of sales
(H1 2023: 59.0%), as sales to our trade customer base outperformed sales to
homeowners. Customer satisfaction scores were a highlight, increasing again
in the period to 92.5% overall satisfaction (H1 2023: 91.3%). Operationally,
we have added new methods of payment including open banking and digital
wallets, and enhanced our trade credit offering. We have continued to evolve
the merchandising of our stores, including more extra-large format stands,
rolled out our new Everscape Solutions outdoor branding, and improved our
online samples process. Our new brand awareness campaign "Because We Know
Tiles" has had 80 million impressions across digital and social channels.
In the period, the trading store estate increased by one to 304 stores (FY
2023 year end: 303 stores), with one new opening at Kingston Park Newcastle,
and one relocation at Brentwood. We retain significant flexibility within
our store estate, with an average unexpired lease term of 3.0 years (H1 2023:
2.9 years), or 2.9 years excluding strategically important stores (H1 2023:
2.7 years). At the period end, there were three closed stores (H1 2023:
eight closed stores), with four closed stores exited in the first half.
Parkside, our commercial tile business, which focuses on projects where the
architect and designer are key influencers, also experienced a weaker market
in the first half of the year and recorded a fall in sales of 8.7% to £4.2
million. However, following the business improvement programme which was
implemented in the third quarter of FY 2023, significant cost was removed from
the business and, as a result, Parkside made a small profit of £0.2 million
in the first half of the year, compared to a loss of £0.5 million in the same
period last year. We are focused on delivering consistent and profitable
sales growth in this market, working with the other parts of the Group that
service the B2B customer.
Online Pure Play continues to perform very strongly, with sales growing by
39.4% year-on-year, to £13.8 million. Both Pro Tiler Tools and Tile
Warehouse made substantial progress in the period. Pro Tiler Tools is
established as a leader in its sector and continues to innovate and improve
its service model and increase its brand portfolio. Tile Warehouse grew
strongly in the first half, driving increased web traffic and launching a
variety of website optimisations and customer support improvements.
Leading Product refers to our expertise in the ranging, sourcing and
procurement of tiles and related products on a global basis, which remains a
core specialism for the Group and a major source of competitive advantage.
In the first half, we have launched 33 new products (H1 2023: 32 products), of
which 34% were developed in house and are exclusive to the Group. The new
'Pronto' brand was launched for our luxury vinyl tile ranges, and our
Everscape outdoor tile brand was extended to include a market-leading fitting
solutions offer, Everscape Outdoor Solutions. Overall, 77% of ranges in
Topps Tiles are either exclusive or own brand (H1 2023: 74%). Maintaining
close relationships with our strategic supplier base remains key, and in the
first half, 67% of purchases were from this group (H1 2023: 66%).
Leading People refers to our focus on world-class customer service, across all
of our brands. World class levels of customer satisfaction are a cornerstone
of the Topps Tiles offer, and a cornerstone of our success. Maintaining such
high standards requires outstanding people across the business and this year,
we were pleased to see a substantial reduction in employee turnover, down
year-on-year at 26.3% (H1 2023: 34.0%). We continue to develop and promote
from within the Group with 58% of promotions into management positions being
made internally during the first half (H1 2023: 62%) and our diversity, equity
and inclusion programme 'One Topps' launched, with the current focus on female
and ethnicity listening groups.
Environmental Leadership remains a central part of the Group's strategy. The
Group's goal is to be carbon neutral by 2030 across Scope 1 and 2 emissions,
which are currently about 5,000 tonnes per annum. Key initiatives in the
first half were the trial of HVO fuel as a diesel replacement and the
examination of additional store efficiency measures, focused on reducing
emissions from heating. We are on track to report scope 3 emissions at the
full year results. Other areas of focus include the reduction of tile waste
and the Group is on track to achieve a second successive year of more than 10%
reduction in this metric. Finally, we were delighted that Principle(TM) was
awarded Wall Tile of the Year at the Tile Association Awards. This ranges
uses a world leading 90%+ of recycled content, diverting waste from landfill
and also using less energy to produce than traditional tiles. This range was
developed in partnership with Alusid and represents an excellent example of
how tile manufacturing could develop in the future and how the Group is
helping to lead the thinking in this important area.
LAUNCH OF NEW GOAL AND STRATEGIC UPDATE
Last year, the Group delivered a third consecutive year of record sales and
achieved its market share goal of '1 in 5 by 2025', two years ahead of
schedule. Sales increased to £262.7 million and our market share increased
from 17%, when the goal was set in 2019, to 22.1% of the combined domestic and
commercial market for tiles and related products in the UK.
The tile market started to weaken in 2023 after two years of strong growth
following the Covid pandemic, and this trend has accelerated in 2024, in line
with a further step-down in RMI spending. External data is limited, but we
estimate that the UK tile market is currently 20% lower than in the
pre-pandemic period, with Group sales up 11% in the same period.
Macroeconomic indicators such as GDP, mortgage approvals, consumer confidence
and smaller ticket DIY spend now appear to be trending upwards, but we are yet
to see this feed through into our customers' spending patterns.
Notwithstanding these short-term challenges, we believe that the Group has
substantial potential to increase sales, profitability, cash flows and returns
over the medium term through self-help measures. To this end, we are
launching a new financial goal, built upon five strategic growth areas.
The Group's new goal is to increase sales to £365 million in the medium term,
with an adjusted profit before tax margin of 8-10% at a Group level.
Moreover, we believe that each of the businesses in the Group is capable of
delivering operating margins at that level. On that basis, this new goal
implies the delivery of a minimum of £30 million of adjusted profit before
tax in the medium term, which is 2.4x the level of profits in FY 2023, or
approximately double the pre-pandemic profitability of the Group. We are
calling this new goal 'Mission 365 - grow sales, build profit'. The
objectives of Mission 365 are based on conservative assumptions and assume
only a modest recovery in tile market volumes, with cumulative market and
pricing growth over the medium term of c. 4-8%.
As part of the launch of the new goal, we are redefining the scope of the
Group's operations and the market in which we operate. Topps Group has a
core focus on tiles and related products, a market which was measured at £1.2
billion last year. However, the Group sells more than tiles, and the way the
consumer is accessing our market continues to evolve. Traditional uses of
porcelain and ceramic tiles, predominantly as wall and floor coverings in
bathrooms and kitchens, are expanding, with porcelain now representing an
excellent choice for applications such as outdoor areas, countertops, or even
furniture. At the same time, other products such as luxury vinyl tiles, wood
and laminate, can represent good substitutes for tiles in kitchens and
bathrooms and are also suitable for many other rooms in the home, particularly
in living and communal areas. As a result, we are redefining the Group's
addressable market as hard floor and wall surface coverings and related
products. This change increases the scope of our market from c £1.2 billion
to c. £2.1 billion, a 75% increase. There may be the opportunity to expand
the Group's addressable markets still further in future.
In this larger market, the Group has five key areas of focus to help deliver
the 'Mission 365' goal.
KEY FOCUS AREAS
1) Modernise the trader digital experience in Topps Tiles
Selling to trade customers has been a consistent strength of the Topps Tiles
brand in recent years. The percentage of sales made to trade in Topps Tiles
has increased from c. 50% in FY 2015 to 61.4% in H1 2024 and trade sales have
consistently outperformed sales to homeowners in the last 12 months. Trade
customers can offer higher volumes and repeat custom, and can act as brand
ambassadors, both to other traders, and directly influencing homeowners'
purchasing decisions.
The Topps Tiles brand offers traders significant value, including the
convenience of a nationwide store estate, more than three times larger than
any other specialist competitor, technical expertise and strong relationships
that are built up with our store teams, and a very good depth of stock ready
to take away for the consumable items that traders need each day.
However, there is an opportunity to significantly improve our digital
engagement with traders. While Topps Tiles has a trade website and a PWA
(Progressive Web App), usage is currently low by industry standards. The Pro
Tiler Tools acquisition has clearly demonstrated the demand for modern digital
interaction from this customer group and, under the leadership of our new
Sales and Operations Director, Simon Robinson, who was previously Retail
Director at Toolstation, we will develop and improve our digital platform,
addressing frictions in our current processes, whilst offering new
functionality and services to further engage this important customer group.
Specifically, we will:
- Relaunch our trade website, making it much easier to complete registration and
transact with us;
- Launch a modern trade app, with enhanced functionality, making this the
default way of engaging with Topps Tiles for many of our trade customers;
- Improve pricing clarity and reduce confusion with respect to trade prices when
compared to homeowner prices;
- Modernise our trade loyalty scheme and embed this within our app;
- Substantially increase our trade credit offering; and
- Launch a new Customer Engagement Platform (CEP) which will allow us to
communicate far more effectively with trade customers, tailoring our marketing
messages and genuinely adding value for our customers.
Overall, we believe that there is an opportunity to increase trade sales
through this initiative by £15 million - £20 million from current levels.
2) Expand into new product categories
As described above, we have expanded the definition of the Group's addressable
market to include hard floor and wall surface coverings and related products,
which increases its aggregate value from £1.2 billion to £2.1 billion per
year. Approximately half of the sales in Topps Tiles are currently
traditional porcelain and ceramic tiles, with the remainder being other types
of coverings products (for example, natural stone), consumables (for example,
adhesive and grouts), tools, and other fitting and fixing products (for
example, tile backer boards, substrate matting or levelling compounds).
We see an opportunity to push much harder into other coverings products, some
of which we sell in small quantities already, and some of which are new
categories. These include luxury vinyl tiles, shower panels, outdoor tiles,
laminate and engineered wood, splashbacks, and extra-large tiles, also known
as porcelain slabs. In many cases, we have already sourced appropriate
product ranges, or have the relevant supplier relationships in place, but have
yet to activate full marketing campaigns to support them, particularly in the
digital space, or refreshed our store merchandising solutions. A 5% market
share in the categories mentioned above would represent at least a £25
million - £30 million sales opportunity and could be largely served from
existing stores and Topps Tiles' current and proposed digital sales channels.
3) Business-to-business sales focus
As described above, we believe there is a substantial opportunity to increase
sales to trade customers in Topps Tiles. There is also a wider opportunity
to increase business-to-business sales elsewhere in the Group. Following the
acquisitions of Parkside in 2017 and Pro Tiler Tools in 2022, the Group now
has three brands with highly complementary offers for business-to-business
customers, allowing us to access this market in different ways:
- Topps Tiles offers the convenience of over 300 stores nationwide, as well as a
central contracts team who are able to form relationships with contractors
buying coverings and consumable items, who value the convenience of a large
store network as well as central support;
- Parkside is highly relevant for projects where the architect or designer is
the key influencer behind the coverings purchasing decision, and where bespoke
or technical products are required;
- Pro Tiler Tools offers modern digital channels to contractors buying
consumable items and technical tools, as well as a direct selling team able to
provide telephone or face to face support for their contractor customers.
These three brand propositions are supported by physical assets including over
300 Topps Tiles stores, 200,000 square feet of central warehousing and a
specialist distribution fleet, £35 million of stock at the latest balance
sheet date, and, in future, a very wide product range, including ceramic and
porcelain tiles, luxury vinyl tiles, engineered wood, laminate, splashbacks,
shower panels, extra-large porcelain and outdoor tiles, supported by a full
range of fitting and fixing products. This offer is competitively advantaged
and, we believe, will prove attractive to medium and large contractors. We
believe this opportunity is worth £15 million - £25 million across the
Group.
4) Continue to support Pro Tiler
Since Topps Group took a controlling share in Pro Tiler Limited in 2022, the
business has continued its exceptional growth trajectory, growing from an
annualised £11 million of sales per year at that time to £25 million in the
year to March 2024. With the buy-out of the remaining 40% of shares shortly
to complete at an overall multiple of c. 5x EBITDA and the two founders (Sam
and Todd Bucknell) retained, we remain focused on providing the support and
resources required to grow the business further.
The key focus will remain supporting the core brand of Pro Tiler Tools.
Although the brand has grown substantially in recent years, we believe its
growth prospects remain exciting, based on the high levels of service, wide
range of brands, and technical expertise provided by the team. A key project
over the next year will be expansion into a larger warehouse, as the current
fifty thousand sq ft warehouse is not large enough to support the next phase
of growth. Secondly, there are other brands within the Pro Tiler portfolio
that have the opportunity to provide material growth opportunities and we will
look to invest in these in future years. Lastly, we believe that, as
described above, Pro Tiler is complementary to other group brands and that
there is the opportunity to cross sell across Pro Tiler, Topps Tiles and
Parkside - where a Pro Tiler customer is buying consumables, other Group
brands can provide covering products, and where other brands are providing
coverings, Pro Tiler may be the perfect partner for consumables or tools.
Pro Tiler has more than doubled in scale since acquisition into the Group and
we see the opportunity for it to double again to £50 million, providing the
opportunity to add another £20 million - £25 million of sales to the Group.
5) Develop Tile Warehouse to maturity
Tile Warehouse, our online pure play brand focused on selling coverings
products to value-conscious homeowners, was established in summer 2022. The
brand combines the relevant parts of the Group's infrastructure, such as the
buying teams, central warehousing and logistics functions, with the specialism
of a focused online team. Following changes to the management team at the
end of 2023, progress this year has been strong, with all metrics moving
positively, and the rate of sales at the end of H1 2024 was almost three times
higher than at the end of FY 2023, although from a low base.
The growth strategy for Tile Warehouse is focused on building high quality
traffic through organic, paid and social media activities, optimising
conversion through a programme of continued web site enhancements and
underpinning the offer with excellent customer service credentials.
The objective for this brand remains the same as when it was launched - to
establish a £15 million business within five years in the £100+ million UK
online pure play tile market.
Indicative financial outcomes
Overall, these five strategic areas of focus underpin a medium term revenue
target of £365 million, alongside a modest level of market and pricing growth
in the medium term:
Revenue £m
Approximate market consensus FY 2024 250
Market and BAU pricing 10 - 20
Modernise the trade digital experience 15 - 20
Expand into new product categories 25 - 30
Business-to-business sales focus 15 - 25
Pro Tiler expansion 20 - 25
Tile Warehouse maturity 10 - 15
Mission 365 365
Mission 365 is very clearly focused on building profit, as well as growing
sales. The Group has been successful in controlling costs over the last four
years, with no growth in adjusted operating and interest costs within the
Topps Tiles brand over the period FY 2019 to FY 2023, despite approximately
£13 million of cost inflation, however adjusted profit before tax margins
have fallen overall. The sales upside contained within the goal, combined
with tight cost control and the Group's operational gearing gives us
confidence that adjusted profit before tax margins can increase to a range of
8-10%, delivering a minimum of £30 million of adjusted profit before tax in
the medium term.
Group gross margins are expected to fall by 2 - 3 percentage points in the
medium term, primarily as a result of changes in business and product mix.
As a result, we believe medium term gross margins for the Group will be
approximately 51 - 52% of sales.
To deliver the plans described above, we will invest into the business,
specifically in the following key areas:
- We will begin a three-year systems investment programme, consisting of a new
ERP system, warehouse management system and new store systems. In addition,
we will invest in a new customer engagement platform (CEP), and a new trade
app, as described above. In total, these investments are expected to cost
less than £3 million over the next three years, which will be largely
classified as operating costs rather than capital expenditure, and will drive
both sales and conversion, as well as improve operational efficiencies,
allowing us to increase our cost base by a lower amount than otherwise would
be required to deliver this level of sales growth.
- We plan to increase marketing expenditure, specifically to drive trade sales
and new product categories, as described in the sections above.
- We will make modest targeted investments to improve our skill base, including
specialist central roles.
- We will invest into the supply chain infrastructure supporting both Pro Tiler
and the rest of the Group.
In the period from FY 2019 to FY 2023, the Group has reduced adjusted
operating costs and interest as a percentage of sales from c. 54% to c. 48%.
Moving forward, due to increased leverage of the existing store network, the
operational gearing inherent in the business, and continued tight cost
control, we believe that operating costs and interest expenses will increase
at a slower rate than sales overall, despite the investments above. As a
result, costs expressed as a percentage of sales are expected to fall in the
medium term to approximately 42-44% of sales.
We do not anticipate a significant step-up in capital expenditure, however the
demands on capital expenditure in excess of normal spending will be in two
areas. First, as part of the ERP upgrade, the Topps Tiles brand will replace
its till systems, which is likely to cost less than £1 million and be
incurred over FY 2025 - FY 2026. Second, as described above, the warehousing
facilities supporting both Pro Tiler Tools and the main Group facilities in
Leicester will need to be upgraded over the life of these strategic
proposals. The level and timing of the of capital expenditure required to
support these plans is not yet certain, but our current view is that we will
invest approximately £5 million across both warehouses. In addition,
working capital will flex up in line with sales.
Given the improved operating margins and the limited amounts of additional
capital expenditure required, the Group's return on invested capital should
increase materially on delivery of the medium term goal.
Summary
Topps Group has delivered three record years of sales and a strong increase in
market share, however it has the potential to deliver much more. By focusing
on self-help and five clear areas of strategic growth, and assuming only a
modest improvement in the market, the Group has identified an opportunity to
grow sales to £365 million over the medium term. This, combined with an
adjusted profit before tax margin of 8-10%, represents a minimum of a £30
million profit opportunity, which would offer attractive returns to
shareholders, new employment opportunities for our teams and excellent,
modernised, levels of service to our customers and clients.
Key Performance Indicators ("KPIs")
As set out in our most recent Annual Report, we monitor our performance
implementing our strategy with reference to a clearly defined set of financial
and non-financial key performance indicators ("KPIs"). Our performance in
the 26 weeks to 30 March 2024 is set out in the table below, together with the
prior year performance data. One KPI, carbon emissions per store, is only
available on an annual basis and so is not disclosed here. The source of
data and calculation methods are consistent with those described in the 2023
Annual Report. Further information on adjusted performance measures can be
found on page 2 of this document.
26 weeks to 26 weeks to YoY
30 March 1 April
2024 2023
Financial KPIs
Group revenue growth/(decline) year on year (5.8)% 9.3% n/a
Topps Tiles like-for-like sales growth year on year* (9.2)% 4.3% n/a
Group gross margin % 53.9% 52.8% +1.1 ppts
Adjusted profit before tax* £3.1 million £4.4 million (29.5)%
Adjusted earnings per share* 1.03 pence 1.57 pence (34.4)%
Adjusted net cash* £19.3 million £19.9 million £(0.6) million
Inventory days 108 117 (9) days
Non-financial KPIs
Square metres of tiles sold in Topps Tiles (thousand) 2,088 2,352 (11.2)%
Topps Tiles customer overall satisfaction score 92.5% 91.3% +1.2 ppts
Colleague turnover 26.3% 34.0% (7.7) ppts
Number of Topps Tiles stores at period end 304 304 0
* as defined in the Financial Review
FINANCIAL REVIEW
Consolidated Statement of Profit or Loss
Following a record first half for revenue in 2023, the weakening of the UK
tile market seen in 2023 has continued into 2024, resulting in challenging
trading conditions in the first half of this financial year. Total Group
sales were 5.8% lower year-on-year at £122.8 million. The year-on-year
decline was largely due to a reduction in sales in the Topps Tiles brand,
which saw like-for-like sales decline 9.2% over the half. Our estimate is
that the UK tile market is currently approximately 20% lower than the
pre-pandemic period of 2019, whereas sales in Topps Tiles in H1 2024 were
approximately 4% lower than H1 2019, and overall Group sales were
approximately 11% higher. Sales in Parkside were £0.4 million lower
year-on-year at £4.2 million and the strong growth in Online Pure Play
continued, with sales growth of 39.4% year-on-year to £13.8 million,
including positive year-on-year contributions from both Pro Tiler and Tile
Warehouse. Revenue consolidated into the Group accounts by business area was
as follows:
Revenue by brand (£m) H1 2024 H1 2023 Variance
Topps Tiles 104.8 115.8 (9.5)%
Parkside 4.2 4.6 (8.7)%
Online Pure Play* 13.8 9.9 +39.4%
Topps Group 122.8 130.3 (5.8)%
*Online Pure Play includes Pro Tiler Tools and its associated brands, which
were acquired in March 2022, and Tile Warehouse, which was launched in May
2022.
The Group's gross margin increased year-on-year by 1.1 percentage points to
53.9%, as expected, following the progress made in the second half of last
year. Within this, gross margin in Topps Tiles increased 2.4 percentage
points year-on-year, driven by the normalisation of shipping and product
costs, as well as modest gains from mark-to-market movements on forward
foreign currency contracts and retranslation variances. The gross margin in
the Topps Tiles brand was also higher in H1 2024 than in H2 2023, although
these gains are likely to moderate moving forward as cost prices have now
largely normalised. Growth in other parts of the Group, specifically Online
Pure Play, had the impact of offsetting some of the gains in Topps Tiles, as
these businesses operate at a lower gross margin than the Group average. In
total, Group gross profit was £66.2 million (H1 2023: £68.7 million).
Operating costs were £65.4 million compared to £64.9 million in H1 2023.
Excluding adjusting items, which are explained below, operating expenses
decreased by £1.1 million compared to the prior year period to £61.0
million, explained by the following key items:
£ million
HY 2023 adjusted operating expenses 62.1
Inflationary costs 2.2
Reduced variable remuneration (2.9)
Cost savings (1.5)
Online Pure Play cost investment 0.5
Other 0.6
HY 2024 adjusted operating expenses 61.0
Net cost inflation in the period ran at about 3.5%, including a 5% salary
increase for colleagues not paid at the National Living Wage from October
2023, elements of property cost inflation, an increase in the electricity
expense due to the end of a longer-term fixed-price contract at the start of
the financial year and, conversely, an approximate halving of the Group's gas
expense based on the rapid fall in international gas prices year-on-year.
All colleagues across the Group have the ability to earn variable
remuneration, and the significant savings in these lines are as a result of
the weaker sales and profit performance against last year. Savings of £1.5
million include c. £0.7m in Parkside, which was restructured in H2 2023,
moving Parkside into a profitable position in the first half. The increase
in costs across Online Pure Play represents continued investment in growth in
these brands.
The first half contains a non-cash expense of £0.8 million relating to
holiday pay accruals (H1 2023: £0.9 million expense), which will reverse in
full over the second half of the financial year (resulting in a £1.6 million
increase in half-on-half profits). Gas usage in the business will also be
lower in the second half, however the quantum of the Group's gas expense is
significantly smaller year on year so the impact will be less than in FY
2023. The increase in National Living Wage of almost 10% will also impact
the second half cost base. The Forward Guidance section below sets out in
more detail some of the factors influencing operating costs in H2 compared to
H1.
Adjusted net finance costs were £2.1 million in H1 2024 (H1 2023: £2.2
million), with higher interest earned on bank balances offset by a higher
IFRS16 interest expense. Statutory interest costs were £2.3 million (H1
2023: £2.2 million.
As a result of the above, adjusted profit before tax for the period was £3.1
million (H1 2023: £4.4 million and, after including the adjusting items
described in the next section, the statutory loss before tax was £1.5 million
(H1 2023: profit before tax of £1.7 million).
Adjusting items
The Group's management uses adjusted performance measures, to plan for,
control and assess the performance of the Group. Adjusted profit before tax
differs from the statutory profit before tax as it excludes the effect of
one-off or fluctuating items, allowing stakeholders to understand results
across years in a more consistent manner. In line with prior years, we have
included the business-as-usual impact of IFRS 16 in adjusted profit but
continue to adjust for any impairment charges or impairment reversals of
right-of-use assets, derecognition of lease liabilities where we have exited a
store, and one-off gains and losses through sub-lets. We have also excluded
property costs in relation to the store closure programme, which ended with
stores closed in 2022, as well as restructuring costs. In the period between
H2 2022 and H1 2024 we have excluded the cost relating to the 40% purchase of
shares of Pro Tiler Limited which we expect to make early in the second half
of 2024, which, under IFRS 3, is treated as a remuneration expense rather than
a cost relating to the acquisition of the relevant shares. Please see the
2022 Annual Financial Results statement for a full description of this
transaction and its accounting treatment, and the relevant section of this
report for more information on the final values involved in the share
purchase.
An analysis of movements from adjusted profit before tax to statutory profit
before tax is given below:
H1 2024 £m H1 2023 £m
Adjusted profit before tax 3.1 4.4
Property
Vacant property and closure costs (0.3) (0.7)
Store impairment and lease exit gains and losses (1.1) 0.1
(1.4) (0.6)
Business development
Pro Tiler Limited share purchase provision (3.1) (1.7)
Restructuring and other one-off costs (0.1) (0.4)
(3.2) (2.1)
Statutory (loss) / profit before tax (1.5) 1.7
Tax and earnings per share
The tax expense was £0.5 million (H1 2023: £1.0 million). Tax rates are
based on expectations for the full year and then adjusted for the impact of
items which are not deductible for corporation tax purposes, notably in this
half year by the Pro Tiler Limited share purchase provision increase, which is
treated as an acquisition of shares under the UK tax code but as a
remuneration expense under IFRS 3. On an adjusted basis, the effective tax
rate for the period was 28.9% (H1 2023: 24.7%), higher than the headline rate
of corporation tax in the UK of 25% as a result of certain disallowable
expenses such as share based payment expenses and the net impact of
depreciation compared to capital allowances.
After taxation and the removal of non-controlling interests, the basic loss
per share was 1.12 pence (H1 2023: profit per share of 0.25 pence).
Adjusting for the post-tax impact of the adjusting items detailed above, the
adjusted basic earnings per share were 1.03 pence (H1 2023: 1.57 pence).
Dividend
The Group's capital allocation and dividend policy was updated as part of the
Interim Results in 2022. Interim dividends will be set at one third of the
full year dividend from the previous year, and as such, an interim dividend of
1.2 pence has been declared by the Board (H1 2023: 1.2 pence). The shares
will trade ex-dividend on 7 June 2024 and the dividend will be paid on 12 July
2024.
Consolidated Statement of Financial Position and Consolidated Cash Flow
Statement
Capital Expenditure
Capital expenditure in the first half was £1.9 million (H1 2023: £2.0
million). £1.7 million of the capital expenditure was on the Topps Tiles
store estate, including a store relocation in Brentwood, the opening of a new
store in Newcastle Kingston Park, and general refurbishment and merchandising
across the estate.
The Board expects capital expenditure in the full year to be between £6
million and £8 million, including further refits, relocations and new store
openings.
Inventory
Inventory at the period end was £35.1 million (H1 2023: £38.8 million),
representing 108 stock days (H1 2023: 117 stock days). This includes £3.1m
million of stock held in Pro Tiler (H1 2023: £2.7 million), representing 62
stock days (H1 2023: 78 stock days). At the last year end, inventory was
£36.4 million, equivalent to 107 days turnover.
Consolidated Cash Flow Statement
The Group's cash balance decreased in the period by £4.1 million from £23.4
million at year end to £19.3 million at the half year end. Adjusted net
cash is defined as cash and cash equivalents, less bank loans, before
unamortised issue costs. The table below analyses the Group's adjusted cash
flow:
HY 2024 HY 2023
£m £m
Cash generated by operations, including interest and capital elements of 5.9 7.2
leases, before WC movements*
Changes in working capital* (1.7) 5.7
Capital expenditure (1.9) (2.0)
Interest 0.3 -
Tax (1.9) (2.0)
Other (0.1) (0.1)
Free cash flow 0.6 8.8
Dividends (4.7) (5.1)
Change in adjusted net cash (4.1) 3.7
Adjusted net cash at start of period 23.4 16.2
Adjusted net cash at end of period 19.3 19.9
* Certain items within cash generated by operations and working capital have
been re-categorised to enhance comparability between periods.
Cash generated by operations in the first half before working capital
movements was £5.9 million (H1 2023: £7.2 million), with the £1.3 million
year-on-year movement reflective of the movement in adjusted profit, given
that the adjusting items in the period were largely non-cash. The working
capital outflow of £1.7 million was driven by a decrease in payables,
including a lower VAT creditor, lower accruals for variable pay and lower
trade payables, and an increase in trade receivables, as the Group pushes more
into offering trade credit. As reported above, inventory was well-controlled
with a decrease of £1.2 million over the first half. Capital expenditure
and cash tax payments were similar to H1 2023, with interest income slightly
higher year on year due to higher interest received on cash balances.
Return on Capital Employed
Lease adjusted returns on capital employed in the first half were 16.4% (H1
2023: 15.5%), based on a reduction in the average capital employed over the
half, compared to the previous year. Specifically, lease liabilities have
reduced from an average of £101.2 million in H1 2023 to £92.0 million in H1
2024.
Acquisition of remaining shares in Pro Tiler Limited
The Group acquired 60% of the shares in Pro Tiler Limited in March 2022 for
£5.3 million on a debt-free, cash-free basis. After a two-year earn out
period, Topps Group will shortly acquire the remaining 40% of the shares in
the company from the existing shareholders at an agreed multiple of earnings.
This is expected to be at a value of £8.7 million, taking the total
consideration to £14.0 million on a debt-free, cash free basis. The £8.7
million has been accrued as an employment cost over the two-year period as
required under IFRS 3, forming an earn-out provision on the balance sheet.
Over the two-year period, Pro Tiler has generated £2.8 million of post-tax
earnings, and the Group's share will be remitted to the plc as a dividend
shortly before the conclusion of the earn-out, with the other 40% being paid
to the existing shareholders. The Group's share will be £1.7 million, giving
an 'all-in' cost of £12.3 million, representing 5.1x the rolling 12-month
EBITDA to March 2024 generated by Pro Tiler Limited. There will be a cash
outflow in the second half of £9.8 million, being the £8.7 million value of
the share purchase, and £1.1 million of dividends due to the current 40%
shareholders.
Banking Facilities
The Group maintains a very robust balance sheet, providing resilience and
allowing investment in growth opportunities. A £30.0 million revolving
credit facility is in place which is committed to October 2026 with extension
options for a further year (H1 2023: £30.0 million facility, committed to
October 2025). At the half year, none of this facility was drawn (H1 2023:
£nil drawn). Based on net cash excluding lease liabilities of £19.3
million, the Group has £49.3 million of headroom to its banking facilities at
the period end (H1 2023: £49.9 million).
Forward Guidance
Certain factors will impact the second half, as described below:
· The first half contained a £0.8 million expense relating to holiday pay
accruals, which will reverse in the second half, resulting in a £1.6 million
increase in half on half profits in the second half;
· The Group's gas expense has increased from approximately £0.4 million in
recent years to an estimated £1.0 million this year, of which c £0.8m fell
into the first half, resulting in an increase in profits of c £0.6 million in
the second half; and
· The increase in the national living wage will impact employment costs in the
second half by approximately £0.8 million.
Current Trading and Outlook
The first seven weeks of the second half has seen trading continue in a
similar manner to the first half. Group sales were 7.3% lower year-on-year,
and like-for-like sales in Topps Tiles were 10.1% lower. Although a number
of macroeconomic lead indicators are improving, such as GDP, real wages,
inflation, mortgage approvals and consumer confidence, trading results are yet
to benefit from these upsides.
The Group's competitive advantage is driven through a combination of
market-leading brands, world-class customer service, specialist expertise, and
best in class global sourcing, and these strengths have enabled it to take
substantial market share in recent years. Combined with our ambitious new
goal and strong balance sheet, the Group remains well-positioned to deliver
significant growth in both sales and profits in the medium term.
Risks and Uncertainties
The Board continues to monitor the key risks and uncertainties of the Group.
Since the 2023 Annual Report, the Board has added an additional risk to the
risk register concerning political tensions in the Red Sea, which may result
in increased cost of goods, or lower availability for products which
traditionally were shipped through this area. The Board believes that the
other principal risks remain largely as documented in the 2023 Annual Report,
by nature and scale. These key risks and uncertainties include:
macroeconomic changes and consumer confidence; aging systems; cyber security;
inflationary cost increases of goods not for resale; sustainability and
climate change; artificial intelligence; development and delivery of group
strategy; critical asset failure; health and safety; growth through mergers
and acquisitions; quality and ethical sourcing.
Going concern
When considering the going concern assertion, the Board reviews several
factors including a review of risks and uncertainties, the ability of the
Group to meet its banking covenants and operate within its banking facilities
based on current financial plans, along with a detailed review of more
pessimistic trading scenarios that are deemed severe but plausible. The two
downside scenarios modelled include a moderate decline in sales and a more
severe decline in sales, which result in much lower sales and gross profit
than the base scenario, resulting in worse profit and cash outcomes. The more
severe downside scenario modelled this year was based on a prolonged period of
macroeconomic stress in the UK, lasting for more than one year, with sales
falling 15% year-on-year across the remainder of FY24 and then a further 10%
decline year-on-year in FY25, in our main brand, Topps Tiles. The scenario
also assumes declines in gross margins across the remainder of FY24 equating
to a year-on-year decrease of approximately 0.5 percentage points, followed by
a further 1-percentage point decline year-on-year in FY25. This scenario also
assumes that variable costs would reduce in line with sales and also includes
direct mitigating cost reduction actions, which would be taken if such a
downturn occurred.
The Group has already taken a number of actions to strengthen its liquidity
over recent years, and the scenarios start from a position of relative
strength. The going concern review also outlined a range of additional
mitigating actions that could be taken in a severe but plausible trading
scenario. These included, but were not limited to, savings on store employee
costs, savings on central support costs, reduced marketing activity, a
reduction of capital expenditure, management of working capital and suspension
of the dividend. The Group's cash headroom and covenant compliance was
reviewed against current lending facilities in both the base case and the
severe but plausible downside scenarios. The current lending facility, of
£30.0 million, was refinanced in October 2022 and expires at the earliest in
October 2026.
In all scenarios, the Board has concluded that there is sufficient available
liquidity, with no utilisation of the current lending facility, and sufficient
covenant headroom for the Group to continue to meet all of its financial
commitments as they fall due for the foreseeable future, a period of not less
than 12 months from the date of this report. Accordingly, the Board continues
to adopt the going concern basis in preparing the financial statements.
Responsibility Statement
We confirm that to the best of our knowledge:
(a) the condensed set of financial statements has been prepared in accordance
with IAS 34 'Interim Financial Reporting' as contained in UK-adopted IFRS;
(b) the interim management report includes a fair review of the information
required by DTR 4.2.7R (indication of important events during the first six
months and description of principal risks and uncertainties for the remaining
six months of the year); and
(c) the interim management report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related parties' transactions and
changes therein).
Rob Parker Stephen Hopson
Chief Executive Officer Chief Financial Officer
21 May 2024
Condensed Consolidated Statement of Profit or Loss
for the 26 weeks ended 30 March 2024
26 weeks 26 weeks 52 weeks
ended ended ended
30 March 1 April 30 September
2024 2023 2023
£'000 £'000 £'000
Note (Unaudited) (Unaudited) (Audited)
Group revenue 122,774 130,310 262,714
Cost of sales (56,542) (61,569) (123,466)
Gross profit 66,232 68,741 139,248
Distribution and selling costs* (48,021) (46,549) (93,800)
Other operating expenses (3,850) (3,634) (6,846)
Administrative costs (9,945) (11,610) (21,493)
Sales and marketing costs (3,833) (3,463) (6,582)
Other income* 214 402 579
Group operating profit 797 3,887 11,106
Net finance costs (2,266) (2,203) (4,291)
(Loss)/profit before taxation (1,469) 1,684 6,815
Taxation 3 (514) (978) (2,896)
(Loss)/profit for the period (1,983) 706 3,919
(Loss)/profit is attributable to:
Owners of Topps Tiles Plc (2,195) 482 3,206
Non-controlling interests 212 224 713
(1,983) 706 3,919
* Other income has been reclassified from Distribution and Selling costs, see
note 1 for more details
All results relate to continuing operations of the Group.
Earnings per ordinary share
- Basic 5 (1.12p) 0.25p 1.63p
- Diluted 5 (1.10p) 0.24p 1.61p
There are no other recognised gains and losses for the current and preceding
financial periods other than the results shown above. Accordingly, a separate
Condensed Consolidated Statement of Comprehensive Income has not been
prepared.
Condensed Consolidated Statement of Financial Position
as at 30 March 2024
30 March 1 April 30 September
2024 2023 2023
£'000 £'000 £'000
Note (Unaudited) (Unaudited) (Audited)
Non-current assets
Goodwill 2,101 2,101 2,101
Intangible assets 4,458 5,087 4,755
Property, plant and equipment 18,793 19,998 19,306
Other financial assets 1,691 1,700 1,847
Deferred tax assets 84 152 68
Right-of-use assets 74,910 86,329 80,921
102,037 115,367 108,998
Current assets
Inventories 35,130 38,842 36,351
Other financial assets 320 487 327
Trade and other receivables 6,599 6,160 5,284
Derivative financial instruments - - 74
Current tax asset 976 122 -
Cash and cash equivalents 19,319 19,911 23,368
62,344 65,522 65,404
Total assets 164,381 180,889 174,402
Current liabilities
Trade and other payables (43,599) (50,047) (45,066)
Lease liabilities (16,868) (17,420) (15,649)
Derivative financial instruments (200) (158) -
Current tax liabilities - - (368)
Provisions (8,985) (346) (5,865)
Total current liabilities (69,652) (67,971) (66,948)
Net current liabilities (7,308) (2,449) (1,544)
Non-current liabilities
Lease liabilities (72,543) (82,096) (78,853)
Provisions (2,441) (5,483) (2,213)
Total liabilities (144,636) (155,550) (148,014)
Net assets 19,745 25,339 26,388
Equity
Share capital 8 6,556 6,556 6,556
Share premium 2,636 2,636 2,636
Own shares (2) (192) (112)
Merger reserve (399) (399) (399)
Share-based payment reserve 6,129 5,837 6,035
Capital redemption reserve 20,359 20,359 20,359
Accumulated losses (18,928) (12,151) (11,869)
Capital and reserves attributable to owners of Topps Tiles Plc 16,351 22,646 23,206
Non-controlling interests 3,394 2,693 3,182
Total equity 19,745 25,339 26,388
Condensed Consolidated Statement of Changes in Equity
For the 26 weeks ended 30 March 2024
Equity attributable to equity holders of the parent
Share Share Own Merger Share-based payment Capital redemption Accum-ulated Non-controlling Total
capital premium shares reserve reserve reserve losses interest equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at
30 September 6,556 2,636 (112) (399) 6,035 20,359 (11,869) 3,182 26,388
2023 (Audited)
(Loss)/profit and total comprehensive income
for the period - - - - - - (2,195) 212 (1,983)
Issue of share capital - - - - - - - - -
Dividends - - - - - - (4,717) - (4,717)
Own shares purchased of in the period - - (53) - - - - - (53)
Own shares disposed of in the period - - 163 - - - (163) - -
Credit to equity for equity-settled share based payments - - - - 94 - - - 94
Deferred tax on share-based payment transactions - - - - - - 16 - 16
Non-controlling interest on business combination - - - - - - - - -
Balance at
30 March 2024
(Unaudited) 6,556 2,636 (2) (399) 6,129 20,359 (18,928) 3,394 19,745
Condensed Consolidated Statement of Changes in Equity (continued)
For the 26 weeks ended 1 April 2023
Equity attributable to equity holders of the parent
Share Share Own Merger Share-based payment Capital redemption Accum-ulated Non-controlling Total
capital premium shares reserve reserve reserve losses interest equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at
1October 2022 (Audited) 6,556 2,636 (415) (399) 5,162 20,359 (7,319) 2,469 29,049
Profit and total comprehensive income
for the period - - - - - - 482 224 706
Issue of share capital - - - - - - - - -
Dividends - - - - - - (5,104) - (5,104)
Own Shares disposed of in the period - - 223 - - - (216) - 7
Credit to equity for equity-settled share based payments - - - - 675 - - - 675
Deferred tax on share-based payment transactions - - - - - - 6 - 6
Non-controlling interest on business combination - - - - - - - - -
Balance at
1April 2023
(Unaudited) 6,556 2,636 (192) (399) 5,837 20,359 (12,151) 2,693 25,339
Condensed Consolidated Statement of Changes in Equity (continued)
For the 52 weeks ended 30 September 2023
Equity attributable to equity holders of the parent
Share Share Own Merger Share-based payment Capital redemption Accum-ulated Non-controlling Total
capital premium shares reserve reserve reserve losses interest equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at
1October 2022 (Audited) 6,556 2,636 (415) (399) 5,162 20,359 (7,319) 2,469 29,049
Profit and total comprehensive expense
for the period - - - - - - 3,206 713 3,919
Dividends - - - - - - (7,462) - (7,462)
Issue of share capital - - - - - - - - -
Own shares purchased in the period - - - - - - - - -
Own shares issued in the period - - 303 - - - (303) - -
Credit to equity for equity-settled share based payments - - - - 873 - - - 873
Current Tax on share-based payment transactions - - - - - - 1 - 1
Deferred tax on share-based payment transactions - - - - - - 8 - 8
Acquisition of non-controlling interest on business combination - - - - - - - - -
Balance at
30 September 2023
(Audited) 6,556 2,636 (112) (399) 6,035 20,359 (11,869) 3,182 26,388
Condensed Consolidated Statement of Changes in Equity (continued)
For the 26 weeks ended 1 April 2023
Equity attributable to equity holders of the parent
Share Share Own Merger Share-based payment Capital redemption Accum-ulated Non-controlling Total
capital premium shares reserve reserve reserve losses interest equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at
1 October 2022 (Audited) 6,556 2,636 (415) (399) 5,162 20,359 (7,319) 2,469 29,049
Profit and total comprehensive income
for the period - - - - - - 482 224 706
Issue of share capital - - - - - - - - -
Dividends - - - - - - (5,104) - (5,104)
Own Shares disposed of in the period - - 223 - - - (216) - 7
Credit to equity for equity-settled share based payments - - - - 675 - - - 675
Deferred tax on share-based payment transactions - - - - - - 6 - 6
Non-controlling interest on business combination - - - - - - - - -
Balance at
1 April 2023
(Unaudited) 6,556 2,636 (192) (399) 5,837 20,359 (12,151) 2,693 25,339
Condensed Consolidated Statement of Changes in Equity (continued)
For the 52 weeks ended 30 September 2023
Equity attributable to equity holders of the parent
Share Share Own Merger Share-based payment Capital redemption Accum-ulated Non-controlling Total
capital premium shares reserve reserve reserve losses interest equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at
1 October 2022 (Audited) 6,556 2,636 (415) (399) 5,162 20,359 (7,319) 2,469 29,049
Profit and total comprehensive expense
for the period - - - - - - 3,206 713 3,919
Dividends - - - - - - (7,462) - (7,462)
Issue of share capital - - - - - - - - -
Own shares purchased in the period - - - - - - - - -
Own shares issued in the period - - 303 - - - (303) - -
Credit to equity for equity-settled share based payments - - - - 873 - - - 873
Current Tax on share-based payment transactions - - - - - - 1 - 1
Deferred tax on share-based payment transactions - - - - - - 8 - 8
Acquisition of non-controlling interest on business combination - - - - - - - - -
Balance at
30 September 2023
(Audited) 6,556 2,636 (112) (399) 6,035 20,359 (11,869) 3,182 26,388
Condensed Consolidated Cash Flow Statement
for the 26 weeks ended 30 March 2024
52 weeks
26 weeks 26 weeks
ended ended ended
30 March 1 April 30 September
2024 2023 2023
£'000 £'000 £'000
(Unaudited) (Unaudited) (Audited)
Cash flow from operating activities
(Loss)/profit for the period (1,983) 706 3,919
Taxation 514 978 2,896
Finance costs 2,620 2,301 4,699
Finance income (354) (98) (408)
Group operating profit 797 3,887 11,106
Adjustments for:
Depreciation of property, plant and equipment 2,251 2,686 5,024
Depreciation of right-of-use assets 8,865 9,012 18,157
Amortisation of intangible assets 339 386 767
Loss on disposal of property, plant and equipment and intangibles 25 69 224
Loss/(gain) on sublease (153) 101 (240)
Impairment of property, plant and equipment 23 54 91
Impairment of right-of-use assets 569 5 346
Loss/(gain) on lease disposal 660 (240) (100)
Share option charge 94 675 873
Increase in earn out liability and other provisions* 3,207 1,633 3,780
Non-cash loss on derivative contracts 274 676 444
(Increase)/decrease in receivables (1,404) (139) 761
(Increase)/decrease in inventories* 1,221 (237) 2,255
Increase/(decrease) in payables* (1,526) 6,085 1,079
Cash generated by operations 15,242 24,653 44,567
Interest paid (67) (82) (161)
Interest received on operational cash balances 351 50 305
Interest element of lease liabilities paid (2,294) (1,997) (4,176)
Taxation paid (1,858) (1,991) (3,301)
Net cash from operating activities 11,374 20,633 37,234
Investing activities
Interest received on sublease assets 29 29 58
Receipt of capital element of sublease assets 318 213 555
Purchase of property, plant, equipment (1,802) (1,931) (4,017)
Direct costs relating to right-of-use assets (84) - (133)
Purchase of intangibles (42) (50) (99)
Proceeds on disposal of property, plant and equipment 9 - 25
Net cash used in investment activities (1,572) (1,739) (3,611)
Financing activities
Payment of capital element of lease liabilities (9,081) (9,977) (18,841)
Dividends paid (4,717) (5,104) (7,462)
Financing arrangement fees - (150) (200)
Purchase of own shares (53) - -
Receipt on disposal of own shares - 7 7
Net cash used in financing activities (13,851) (15,224) (26,496)
Net increase/(decrease) in cash and cash equivalents (4,049) 3,670 7,127
Cash and cash equivalents at beginning of period 23,368 16,241 16,241
Cash and cash equivalents at end of period 19,319 19,911 23,368
* Certain items within cash generated by operations for the 26 weeks ended 1
April 2023 have been re-categorised to enhance comparability between periods
1. General information
The interim report was approved by the Board on 21 May 2024. The financial
information for the 52 week period ended 30 September 2023 has been based on
information in the audited financial statements for that period.
The comparative figures for the 52 week period ended 30 September 2023 are an
abridged version of the Group's full financial statements and, together with
other financial information contained in these interim results, do not
constitute statutory financial statements of the Group as defined in section
434 of the Companies Act 2006. A copy of the statutory accounts for that 52
week period has been delivered to the Registrar of Companies. The auditor
has reported on those accounts: their report was unqualified, did not draw
attention to any matters by way of emphasis and did not contain a statement
under s498 (2) or (3) of the Companies Act 2006.
This condensed set of consolidated financial statements has been prepared for
the 26 weeks ended 30 March 2024 and the comparative period has been prepared
for the 26 weeks ended 1 April 2023.
The interim financial statements have not been audited or reviewed by auditors
pursuant to the Auditing Practices Board guidance on "Review of interim
financial information" and do not include all of the information required for
full annual financial statements.
Basis of preparation and accounting policies
The financial statements of Topps Tiles Plc have been prepared in accordance
with UK-adopted International Accounting Standards in conformity with the
requirements of the Companies Act 2006 and the disclosure guidance and
transparency rules sourcebook of the United Kingdom's Financial Conduct
Authority. The unaudited condensed consolidated set of financial statements
included in this half-yearly financial report has been prepared in accordance
with International Accounting Standard 34 'Interim Financial Reporting', as
adopted by the European Union and in conformity with the requirements of the
Companies Act 2006. The same accounting policies, presentation and methods of
computation are followed in the condensed set of financial statements as
applied in the Group's latest annual audited financial statements.
New and amended standards adopted by the Group
The Group continues to monitor the potential impact of other new standards and
interpretations which have been or may be endorsed and require adoption by the
Group in future reporting periods.
Going concern
When considering the going concern assertion, the Board reviews several
factors including a review of risks and uncertainties, the ability of the
Group to meet its banking covenants and operate within its banking facilities
based on current financial plans, along with a detailed review of more
pessimistic trading scenarios that are deemed severe but plausible. The two
downside scenarios modelled include a moderate decline in sales and a more
severe decline in sales, which result in much lower sales and gross profit
than the base scenario, resulting in worse profit and cash outcomes. The more
severe downside scenario modelled this year was based on a prolonged period of
macroeconomic stress in the UK, lasting for more than one year, with sales
falling 15% year-on-year across the remainder of FY24 and then a further 10%
decline year-on-year in FY25, in our main brand, Topps Tiles. The scenario
also assumes declines in gross margins across the remainder of FY24 equating
to a year-on-year decrease of approximately 0.5 percentage points, followed by
a further 1-percentage point decline year-on-year in FY25. This scenario also
assumes that variable costs would reduce in line with sales and also includes
direct mitigating cost reduction actions, which would be taken if such a
downturn occurred.
The Group has already taken a number of actions to strengthen its liquidity
over the recent years, and the scenarios start from a position of relative
strength. The going concern review also outlined a range of additional
mitigating actions that could be taken in a severe but plausible trading
scenario. These included, but were not limited to, savings on store employee
costs, savings on central support costs, reduced marketing activity, a
reduction of capital expenditure, management of working capital and suspension
of the dividend. The Group's cash headroom and covenant compliance was
reviewed against current lending facilities in both the base case and the
severe but plausible downside scenarios. The current lending facility, of
£30.0 million, was refinanced in October 2022 and expires at the earliest in
October 2026. In all scenarios, the Board has concluded that there is
sufficient available liquidity, with no utilisation of the current lending
facility, and sufficient covenant headroom for the Group to continue to meet
all of its financial commitments as they fall due for the foreseeable future,
a period of not less than 12 months from the date of this report. Accordingly,
the Board continues to adopt the going concern basis in preparing the
financial statements.
Reclassification of Lease Income and Finance Lease Income
During the period to 30 September 2023, the Group reclassified income received
as a lessor set out in the Consolidated Statement of Profit or Loss from
distribution and selling costs into other income. This reclassification has
been reflected in the Consolidated Statement of Profit or Loss for the period
ended 1 April 2023 resulting in an increase of £402,000 in distribution and
selling costs and a corresponding entry into other income of £402,000. There
is no impact on operating profit for the 26 weeks to 1 April 2023 as
presented, however, the updated presentation more clearly discloses the income
received where the Group acts as a lessor from both operating and finance
leases. There is no impact on the Consolidated Statement of Financial Position
or the Consolidated Cash Flow Statement.
2. Business segments
The Group trades in three related sectors, which are Omni-Channel, Commercial
and Online Pureplay. The Board receives monthly financial information at this
level and uses this information to monitor performance, allocate resources and
make operational decisions. The Group sells tiles and tile-associated products
in each of these sectors, predominantly to UK-based retail, trade and
commercial customers, and offers a range of delivery and collection options
for orders.
Revenue can be split by the following geographical regions:
26 weeks 26 weeks 52 weeks
ended
ended ended 30 September
2023
30 March 1 April £'000
(Audited)
2024 2023
£'000 £'000
(Unaudited) (Unaudited)
UK 122,444 130,003 262,315
EU 179 255 267
Rest of World 151 52 132
Total 122,774 130,310 262,714
UK
122,444
130,003
262,315
EU
179
255
267
Rest of World
151
52
132
Total
122,774
130,310
262,714
3. Taxation
26 weeks 26 weeks 52 weeks
ended ended ended
30 March 1 April 30 September
2024 2023 2023
£'000 £'000 £'000
(Unaudited) (Unaudited) (Audited)
Current tax - debit for the period 513 1,010 2,768
Current tax - adjustment in respect of prior periods - - 74
Deferred tax - debit / (credit) for the period 1 (32) (64)
Deferred tax - adjustment in respect of previous periods - - 118
Effect of tax rate change on opening balance - - -
514 978 2,896
4. Interim dividend
An interim dividend of 1.20p (2023: 1.20p) per ordinary share has been
declared. A final dividend of 2.40p per ordinary share was approved and paid
in the period, in relation to the 52-week period ended 30 September 2023.
5. Earnings per share
The calculation of earnings per share is based on the earnings for the
financial period attributable to equity shareholders and the weighted average
number of ordinary shares.
26 weeks 52 weeks
26 weeks
ended ended ended
30 March 1 April 30 September
2024 2023 2023
(Unaudited) (Unaudited) (Audited)
Weighted average number of issued shares for basic earnings per share 196,681,818 196,681,818 196,681,818
Weighted average impact of treasury shares for basic earnings per share (108,287) (525,062) (381,300)
Total weighted average number of shares for basic earnings per share 196,573,531 196,156,756 196,300,518
Weighted average number of shares under option 2,616,664 1,025,157 2,973,070
For diluted earnings per share 199,190,195 197,181,913 199,273,588
£'000 £'000 £'000
(Loss)/profit for the period (2,195) 482 3,206
Adjusting items 4,221 2,605 5,599
Adjusted profit for the period 2,026 3,087 8,805
Earnings per ordinary share - basic (1.12p) 0.25p 1.63p
Earnings per ordinary share - diluted (1.10p) 0.24p 1.61p
Earnings per ordinary share - adjusted 1.03p 1.57p 4.49p
The calculation of the basic and diluted earnings per share used the
denominators as shown above for both basic and diluted earnings per share.
Adjusted earnings per share for the 26 weeks ended 30 March 2024 were
calculated after adjusting for the post-tax impact of the following items:
vacant property and closure costs of £0.3m (2023: £0.6m), impairment of
right-of-use assets and lease exit gains and losses of £0.8m cost (2023:
£0.1m gain), Pro Tiler Limited share purchase expense of £3.1m (2023:
£1.7m) and restructuring and other one-off costs of nil (2023: £0.4m).
6. Bank loans
` 26 weeks 26 weeks 52 weeks
ended ended ended
30 March 1 April 30 September
2024 2023 2023
£'000 £'000 £'000
(Unaudited) (Unaudited) (Audited)
Bank loans (all sterling) - - -
The borrowings are repayable as follows:
On demand or within one year - - -
In the second year - - -
In the third to fifth year - - -
- - -
Less: total unamortised issue costs (213) (250) (200)
(213) (250) (200)
Issue costs to be amortised within 12 months 125 100
(Unaudited) (Unaudited) (Audited)
Bank loans (all sterling) - - -
The borrowings are repayable as follows:
On demand or within one year - - -
In the second year - - -
In the third to fifth year - - -
- - -
Less: total unamortised issue costs (213) (250) (200)
(213) (250) (200)
Issue costs to be amortised within 12 months 125 100
The Group has a revolving credit facility to October 2026 of £30.0 million.
As at 30 March 2024, £nil of this facility was drawn (1 April 2023: £nil).
The loan facility contains financial covenants, which are tested on a
bi-annual basis. The Group did not breach any covenants in the period.
7. Financial instruments
The Group has the following financials instruments which are categorised as
fair value through profit and loss:
Carrying value and fair value
26 weeks 26 weeks 52 weeks
ended ended ended
30 March 1 April 30 September
2024 2023 2023
£'000 £'000 £'000
(Unaudited) (Unaudited) (Audited)
Financial assets
Fair value through profit and loss (200) (158) 74
Financial liabilities
Fair value through profit and loss - - -
(Unaudited) (Unaudited) (Audited)
Financial assets
Fair value through profit and loss (200) (158) 74
Financial liabilities
Fair value through profit and loss - - -
The fair values of financial assets and financial liabilities are determined
as follows:
Foreign currency forward contracts are measured using quoted forward exchange
rates and yield curves derived from quoted interest rates matching maturities
of the contracts.
The fair values are therefore categorised as Level 2 (2023: Level 2), based on
the degree to which the fair value is observable. Level 2 fair value
measurements are those derived from inputs other than unadjusted quoted prices
in active markets (Level 1 categorisation) that are observable for the asset
or liability, either directly (i.e. as prices) or indirectly (i.e. derived
from prices).
At 30 March 2024 the fair value of the Group's currency derivatives is a loss
of £200,000 within trade and other receivables (1 April 2023: £158,000).
These amounts are based on the market value of equivalent instruments at the
Statement of Financial Position date.
Losses of £274,000 are included in cost of sales in the 26 weeks ended 30
March 2024 (26 weeks ended 1 April 2023: £676,000).
8. Share capital
The issued share capital of the Group as at 30 March 2024 amounted to
£6,556,000 (1 April 2023: £6,556,000). The number of shares at 30 March 2024
were 196,681,818 (1 April 2023: 196,681,818).
9. Seasonality of sales
Historically there has not been any material seasonal difference in sales
between the first and second half of the reporting period, with approximately
50% of annual sales arising in the period from October to March.
10. Related party transactions
MS Galleon AG is a related party by virtue of their 29.8% shareholding
(58,569,649 ordinary shares) in the Group's total voting rights (1 April 2023:
29.8% shareholding).
MS Galleon AG is the owner of Cersanit, a supplier of ceramic tiles with whom
the Group made purchases of £474,000 during the first half of the year which
is 0.8% of cost of goods sold (2023: purchases of £659,000 during the first
half of the year which is 1.1% of cost of goods sold).
An amount of £262,000 was outstanding with Cersanit at 30 March 2024 (1 April
2023: £303,000). All transactions were conducted on commercial arm's length
terms.
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note, in accordance with the exemption available under IAS 24.
11. Pro Tiler acquisition
The Group acquired a controlling 60% shareholding of Pro Tiler Limited on 9
March 2022, for total consideration of £5.5 million, of which £5.3 million
was cash paid. The Group will acquire the remaining 40% of the issued share
capital early in the second half of 2024, based on an agreed multiple of
profits for the 12-month period to March 2024. At the balance sheet date, the
value of the earn-out provision totalled £8.7m. In addition, immediately
prior to the acquisition of the remaining 40% of Pro Tiler Limited, a dividend
of £1.1m is expected to be declared and paid to the outgoing 40% shareholders
of Pro Tiler Limited, representing 40% of the post-tax profits of the business
in the period between March 2022 and March 2024.
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