Topps Tiles: Profits Down 25% As Store Investments Rise

Topps Tiles has announced its annual financial results for the 52 weeks ended 29 September 2018.  

Review the full financial report here 

Financial Summary

-          Total revenue for the period ended 29 September 2018 increased by 2.4% to £216.9 m (2017: £211.8 m).

-          Adjusted revenue increased by 1.5% to £214.8 m (2017: £211.7 m).  We believe that the sales performance represents an outperformance of our market and is an endorsement of our strategy.

-          Strong free cash flow of £17.9m (2017: £4.2m) due to improved operational cash flow, and more targeted investments;

-          Net debt reduced by £11.3m year-on-year to £16.2m with a £35.0m loan facility now in place to June 2021;

-          Final dividend maintained at 2.3 pence per share (2017: 2.3 pence per share), making a total for the year of 3.4 pence per share (2017: 3.4 pence per share);

-          Like-for-like sales were flat for the year when compared to the prior year, which consisted of a 0.6% increase in the first half of the financial period and a 0.6% decrease in the second half

-          The Group has continued to deliver industry leading adjusted gross margins of 61.3% (2017: 61.1%) primarily as a result of sourcing gains;

-          Adjusted profit before tax of £16.0 million (2017: £18.6 million), the profit reduction being due to additional costs as a result of new stores and inflationary pressures;

-          The Parkside commercial business generated £2.1m of sales and, as expected, a £1.1m trading loss. 

-          Statutory profit before tax of £12.7m (2017: £17.0m), reflecting £2.6m fall in adjusted pre tax profit, £1.1m investment in growth of the Parkside commercial business and a net increase in property based provisions.

Strategic & Operational Summary – Group

-       The UK's leading tile specialist with a core purpose to inspire customers through our love of tiles;

-       Competitive advantage as a result of specialist focus, buying scale and expertise across both retail and commercial businesses: 

• 25 new ranges launched and further 10 ranges relaunched over the year;
• 90% of range is own brand or exclusive to the Group in the UK;

-       Further investment in Group Learning and Development to enhance colleague capability and engagement;

-       Focus on programme of simplifying business processes to improve colleague and customer experience.

Retail  

-       Strategy of "Out-specialising the Specialists" remains our key focus in the retail tile market, where consumer behaviour is changing;

-       Digital experience continues to grow in importance as part of our multi-channel offering;

-       Almost all of our customers come to store and experience the world class specialist service provided by colleagues in our 368 retail stores;

-       We can also refer customers to a professional fitter and now have more than 85,000 active members (2017: 55,000) on our Trade Rewards+ loyalty programme;

-       While a nationwide store presence remains critical we continue to review the efficiency of our portfolio and have a high degree of flexibility (average unexpired lease term of 3.4 years excluding strategically important stores) to respond to changing consumer needs over time. 

Commercial  

-       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;

-       Development of commercial infrastructure on track - good progress being made with recruitment of talented sales teams with over 275 years of combined experience and establishing central capability;

-       Commercial customer response to Group's tile specialism has been very positive;

-       Commercial showrooms opened in Chelsea and Leicester during the year, with a plan to open two more in the year ahead;

-       Strategy is to disrupt the commercial tile market and construct a new market leader over the medium term.

Current Trading and Outlook

-       In the first eight weeks of the new financial period, Group revenues, stated on a like-for-like basis, decreased by 1.9% (2017: increase of 3.2%)

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

"This has been an important year of strategic progress for the Topps Tiles Group, in which our expansion into commercial has seen us double our addressable market while remaining firmly within our tile specialism, where our buying scale and expertise gives us a significant competitive advantage.  Against a challenging market backdrop, the Group delivered a robust trading performance for the year with flat like-for-like sales and market-leading gross margins in retail, and the foundations laid for significant sales growth in commercial in the year ahead.

"At the start of the new financial year, trading conditions remain challenging and like-for-like sales in the first eight weeks have been negative against a strong prior year comparator.  Whilst retaining a cautious view on the outlook, we remain confident that our expansion into the commercial tile market, coupled with our market-leading retail operation, gives us a solid platform for future growth."

Source : Topps Tiles

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