Topps Tiles Sees Half-Year Sales Decline; Launches New Strategy

Topps Tiles Plc, 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

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

¹Topps 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.

Source : Topps Tiles 

Image : Topps Tiles Watford / Peter Fleming / iStockphotodotcom / 1418450114

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