Topps Tiles maintains cautious outlook

Earlier today, Topps Tiles Plc, the UK’s largest tile specialist, announced its interim results for the 26 weeks ended 31 March 2018.

Financial Summary

• First half like-for-like sales grew by 0.6%, reflecting strong trading in Q1 (+3.4%) followed by a more challenging market in Q2 (-2.2%) when sales were also impacted by adverse weather conditions and an earlier Easter.

• Industry leading gross margin of 60.3% (2017: 61.2%) as a result of our buying scale and advantage; despite continued investment into stronger promotional positioning and trade loyalty.

• Adjusted profit before tax of £7.2 million (2017: £10.1 million), the reduction being due to a decline in gross profit, combined with an increased investment in marketing and inflationary cost pressures.

• Parkside commercial business generated £1.0m of sales and a £0.4m trading loss - which have been excluded from adjusted numbers while we invest in growth (FY18 and FY19).

• Free cash flow of £6.8 million (2017: £3.0 million) due to improved operational cash flow and reduced investments.

• Net debt reduced by £1.5 million year-on-year to £25.1 million.

• Interim dividend maintained at 1.1p (2017: 1.1p) with full year dividend planned to be paid at a level of 2x cover.

Strategic & Operational Summary

Retail Business

• Core business strategy of "Out-specialising the Specialists" remains our key focus in the retail tile market, where Topps Tiles is the market leader.

• Trade Rewards+ loyalty programme now has 70,000 active members (2017: 40,000).

• Specialist service provided by colleagues in our 375 retail stores remains a crucial part of our customer offer, with almost all customers visiting a store at some point in their transaction for advice and support.

• Updated store catchment analysis has identified a further 20-25 priority new store opportunities in locations where we are not currently represented.

• Seamless integration of digital and stores continues, with growing confidence in the direct linkage between online traffic and store footfall.

• Continued new product development – proportion of sales from our new tile ranges grew to 15% of overall sales (2017: 10.2%) in the first half with 95% of our range being own brand or exclusive.

Commercial Business

• Entry into commercial market through the Parkside acquisition has approximately doubled the size of the Group’s addressable UK market whilst maintaining our specialism in tiles.

• Good progress being made with recruitment of talented sales teams and establishing central capability.

• One new commercial showroom opened in Chelsea, with a plan to open two more in Clerkenwell and the Midlands during the second half.

• Plan to disrupt the commercial tile market and construct a new market leader over the medium term.

Current Trading and Outlook

• Like for like sales over the 7 weeks to 19 May 2018 decreased by 0.2% (2017: decreased by 5.8%).

• We continue to take a prudent view of the second half outlook and expect that pre-tax profits for the full year will be within the current range of market expectations.

Commenting on the results, Matthew Williams, Chief Executive said:

“After a strong start to the year, market conditions became more challenging over the second quarter, when our like-for-like sales performance was also impacted by the adverse weather and the earlier timing of Easter. Against this background, our clear strategic focus, coupled with strong promotional positioning, enabled us to outperform the overall UK tile market.

“We continue to strengthen our position as the UK’s leading tile specialist. Our entry into the commercial tile segment approximately doubles the size of our addressable market while staying within our core specialism of tiles.

“Trading in the first seven weeks of the second half has improved on Q2, with like-for-like sales down by 0.2%. While we are retaining a cautious view of market conditions for the remainder of the year, we remain confident in our ability to continue to extend our market leading position.” 

Source: Insight DIY Team & Topps Tiles Press Release.

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