UK DIY News
Topps Tiles hit by tough market conditions
Topps Tiles Plc, the UK's largest tile specialist, announces a trading update for the 26 week period ending 1 April 2017. The Board will announce interim results for the period on 23 May 2017. Total revenues for the 26 week period were £106.5 million (2016: £108.0 million). Like-for-like revenues for the 26 week period decreased by 1.9%.
Trading in the second quarter reflected softer market conditions and the Group is also reporting against a stronger period from the prior year when housing transactions accelerated ahead of the Stamp Duty changes in April 2016.
Lower sales growth over the first half will primarily be offset by reduced operating expenditure. Based on an improving trend across the second quarter and a prudent view of the second half, management expectations for full year profits are within the current range of analyst forecasts.
Analysis of LFL sales by quarter
| Q1 | Q2 | First Half |
FY 2017 | +0.3%1 | -4.1% 2 | -1.9% 3 |
FY 2016 | +4.4% | +4.9% | +4.7% |
1 Quarter 1 in 2017 includes one additional trading day due to the timing of public holidays which we estimate will have increased LFL sales growth in the quarter by c.0.6%. This effect reversed during the second quarter.
2 Quarter 2 includes the loss of a trading day explained in (1) above and also the effect of a later Easter which generates one additional trading day. These two adjustments broadly offset each other over the quarter.
3 The net impact of (1) and (2) over the first half is one additional trading day which benefits LFL sales growth by c.0.3%.
Strategic Progress
We continue to invest in the business and make good progress with our strategy of "Out-Specialising the Specialists", with specific initiatives in the period including:
· | Inspiration - the Rewards+ trade loyalty programme continued to gain traction and we now have over 35,000 traders actively collecting points, an increase of 11,000 traders since the end of the first quarter.
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· | Range - we have delivered good growth over the period from our new XL tile range and extensions to our wood effect tile offer. These gains have helped to offset the lost sales following the exit from the low margin wood flooring category. We estimate the net position is around 1% less sales and a small positive on a gross profit basis.
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· | Convenience - we opened 10 new stores in the core estate over the first half and closed three. The Group is currently trading from 358 stores, including 15 Boutique stores (2016: 340 stores including 13 Boutique stores). We expect to open circa 15 net new stores in the current financial year.
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· | People - during the first half we completed the implementation of a new Learning Management System and launched our new employer brand campaign. These initiatives will help to both increase our attractiveness to new candidates and retain and develop our existing colleagues over the longer term.
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Matthew Williams, Chief Executive Officer, said: "Market conditions over the second quarter have been tougher, but the business has responded well with tight control of costs. While we are taking a prudent view on the outlook for the balance of 2017, an improving trend over the second quarter provides some encouragement. We will continue to invest in the business and focus on executing our strategy of Out Specialising the Specialists to extend our market leading position in the second half of the year."
1 The current range of analyst expectations for underlying profit before tax for the year ended 30 September 2017 is £21.0m to £22.3m, with consensus at £21.8m.
Source: Topps Tiles Press Release
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