Topps Tiles Reports Tough Pre-COVID-19 Trading; Phased Reopening Underway

Topps Tiles Plc, the UK’s largest tile specialist, announces its interim results for the 26 weeks ended 28 March 2020.

First half performance primarily reflects tough pre-COVID-19 trading: business responding well to pandemic challenges, with liquidity strengthened, new operating procedures in place and a phased programme of store re-openings underway

HIGHLIGHTS 

Financial Summary 

• First half like-for-like sales declined by 6.1% (2019: +0.2%), with like-for-like sales excluding week 26 when all stores were closed due to COVID-19 down by 4.3% due to challenging trading environment;
• Gross margin of 59.2% (2019: 61.2%) reflects first time inclusion of commercial operation (with a dilution of 80bps), trade mix, and increased competitiveness on pricing;
• Adjusted profit before tax of £1.2 million (2019: £8.0 million), the year on year decrease being due to the above items, and the inclusion of £1.0 million of trading losses from the commercial business which had been excluded in FY19;

COVID-19 Update

• Health and safety of colleagues, customers and business partners is paramount;
• Retail stores closed from 23 March 2020 to safeguard colleagues and customers;
• Strength of supplier relationships demonstrated by flexible arrangements and continued supply – nature of product means minimal obsolescence from disruption;
• Recently re-launched website has performed well, with revenues c.3x pre-crisis levels, but overall retail sales down significantly during period of store closures;
• Trials of new safe operating procedures commenced 22 April 2020 – 250 stores currently offering a click and collect service, and of those 130 are also allowing controlled customer entry, with strict social distancing and other protective measures in place;
• Commercial business has seen a material impact from COVID-19 but has continued to trade and build new customer relationships over this period;
• Board and senior management agreed a voluntary 20% reduction in base pay from April;
• UK Government support schemes utilised – 90% of colleagues furloughed at peak, business rates relief and VAT deferral;
• Additional £10 million loan facility through existing lenders and backed by the UK Government Coronavirus Large Business Interruption Loan Scheme (“CLBILS”) credit approved and to be finalised shortly, including a substantial relaxing or removal of covenant conditions over the next 12 months; and
• Robust liquidity position with option for further funding through asset sales in event of extended disruption. Cash headroom as at 28 March 2020 stood at £21.7 million, and is currently at £14.0 million, cash consumption since the half year primarily driven by unwinding of working capital cycle and the earlier timing of the half year end date. 

Strategic & Operational Summary

• UK’s leading tile specialist with a core purpose to inspire customers through our love of tiles;
• Competitive advantage generated from our specialist focus – market leading product development and sourcing capability, combined with world class customer service;
• Trade customer base key – loyalty scheme allows active communication and retention;
• Well invested and flexible store estate with average unexpired lease term of just over three years;
• Entry into commercial market has approximately doubled the size of the Group’s addressable UK market whilst maintaining our specialism in tiles;
• Commercial strategy is to disrupt the commercial tile market and construct a new market leader over the medium term;
• Commercial sales of £4.5 million, an increase of 246% year on year, led by Parkside which more than doubled sales over the period; and
• Commercial breakeven profit target deferred to FY21 reflecting first half performance and uncertainty in outlook.

Current Trading and Outlook

• Primary focus is navigating the current crisis and ensuring the Group emerges in the strongest possible position;
• Material trading impact during April but gradual re-opening of stores is generating an improving trend – expect to have 250 stores fully opened by end of May, with remaining 100 stores opened by the end of June;
• Robust liquidity position following £10 million of additional lender support; and
• Topps remains a resilient, market-leading business with a strong management team and the Board is confident that the Group is well positioned to recover once the situation normalises.

Commenting on the results, Rob Parker, Chief Executive said:

"COVID-19 has created a complex and extremely challenging trading environment and I am pleased by the way the Group has responded to this crisis so far.  We are prioritising the safety of our colleagues and customers, protecting the business and working hard to ensure we emerge from this period in the strongest possible position. The strong growth of our online business, the development of a collection-only store model, and the encouraging initial customer response to our phased programme of store re-openings, all demonstrate our resilience in the face of the COVID-19 threat. 

“The response of our colleagues throughout these most testing times has been fantastic and I would like to thank them all for their unwavering support.  The health and safety of employees, customers and business partners will remain our top priority as we continue to progress our plans for a safe return to work.

“Having taken steps to strengthen our financial liquidity over recent weeks we believe our resources are sufficient to address the current challenge.  Looking further ahead, as the UK’s leading tile specialist, Topps remains well-positioned as the economy begins to recover.”

Source : Topps Tiles

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