TIDMTPT
RNS Number : 2695A
Topps Tiles PLC
23 May 2023
23 May 2023
Topps Tiles Plc
Interim Financial Report
Record half year sales, profit in line with expectations
Topps Tiles Plc ("Topps Group", the "Company" or the "Group"),
the UK's leading tile specialist, announces its unaudited
consolidated interim financial results for the 26 weeks ended 1
April 2023.
Strategic and Operational Highlights
-- Record six-month period for sales of GBP130.3 million, up 9.3% year on
year
-- Record first half for sales in the Topps Tiles brand, driven by nationwide
store coverage, world class customer service, and strong omni-channel
capability, with average sales per store up 30% compared to 2019
-- Strong results in Online Pure Play brands, with exceptional sales growth
in Pro Tiler Tools
-- Group growth strategy on track to deliver market share goal of '1 in 5
by 2025' ahead of schedule
-- Proud to be celebrating 60 years of trading since the first Topps Tiles
store opened in Sale, Manchester in 1963, in a developed and diversified
Group
Financial Highlights
26 weeks ended 26 weeks ended YoY
1 April 2023 2 April 2022
(H1 2023) (H1 2022)
(restated(5)
)
Adjusted Measures
Topps Tiles like-for-like revenue
year-on-year(1) 4.3% 19.7% n/a
Adjusted profit before tax(2) GBP4.4 million GBP7.1 million (38.0)%
Adjusted earnings per share(3) 1.57p 2.83p (44.5)%
Adjusted net cash at period end(4) GBP19.9 million GBP13.4 million GBP6.5 million
Statutory Measures
Group revenue GBP130.3 million GBP119.2 million 9.3%
Gross profit GBP68.7 million GBP66.9 million 2.7%
Gross margin % 52.8% 56.1% (3.3) ppts
Profit before tax GBP1.7 million GBP5.6 million (69.6)%
Basic earnings per share 0.25p 2.14p (88.3)%
Interim dividend per share 1.2p 1.0p 20.0%
Financial Summary
-- Group revenue up 9.3% to GBP130.3 million
-- Group gross profit up 2.7% to GBP68.7 million
-- Group gross margin lower at 52.8%, due to rapid growth in Pro Tiler Tools,
which operates at a lower gross margin, and adverse FX movements
-- Gross margin percentage within the Topps Tiles brand starting to increase
as shipping and gas prices normalise
-- Adjusted profit before tax of GBP4.4 million, down 38.0% as previously
guided, following adverse exchange rate movements and the impact of inflation
on operating expenses
-- H1 profits were also impacted by a non-cash holiday pay accrual of GBP0.9
million which will reverse in full in H2
-- Cash increased GBP6.5 million against H1 2022, with strong operating cash
flows and positive working capital movements
-- Robust balance sheet with GBP19.9 million net cash and GBP49.9 million
headroom within committed borrowing facilities
-- Interim dividend of 1.2 pence declared (H1 2022: 1.0 pence)
Current Trading and Outlook
-- Like-for-like sales in Topps Tiles over the first seven weeks of the second
half were up 4.1% on an underlying basis, with a negative impact of about
1.3 percentage points due to the additional bank holiday, giving overall
like-for-like sales growth of 2.8%
-- Previous well-documented headwinds in supply chain, inflation and recruitment
are now easing, strengthening our confidence in the gross margin and trading
outlook for the second half
-- Profit in second half expected to increase materially, driven by the growth
of our new businesses, improving gross margins, as well as gas costs reducing
and holiday pay accruals reversing, giving confidence that we will perform
in line with current market expectations for the year as a whole(6)
-- Our strategy is delivering, leaving us well-positioned to deliver our
market share goal of '1 in 5 by 2025' ahead of schedule
Commenting on the results, Rob Parker, Chief Executive said:
"As we mark our 60(th) anniversary, we are pleased to be
reporting record first half revenue for the Topps Group, reflecting
our successful development and diversification as we strengthen our
position as the UK's leading tile specialist. Our Topps Tiles brand
delivered a further period of robust like-for-like sales growth,
with Pro Tiler Tools achieving another exceptional performance, to
maintain its strong track record since acquisition in 2022.
"As expected, our first half profitability reflects the impact
of inflation year on year, including significantly increased energy
costs, and a number of other one offs. These effects are now
reducing or will reverse in full in the second half, underpinning
our confidence in a much stronger profit performance in the balance
of the year. Our strong trading, when combined with our successful
strategy, world class customer service, leading product offer and
strong balance sheet, gives us increasing confidence in our
outlook. We remain confident that we are on track to hit our 20%
market share target ahead of schedule."
Notes
(1) Topps Tiles like-for-like revenue is defined as sales from
online and Topps Tiles stores that have been trading for more than
52 weeks. In H1 2023 like-for-like revenue was GBP115.3 million (H1
2022: GBP111.9 million), with an average of 304 stores included in
the weekly calculation.
(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 to statutory profit before tax.
(3) Adjusted earnings per share is adjusted for the items
highlighted above, plus the impact of corporation tax. See note 5
of the financial statements.
(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.
(5) Prior year values are restated throughout this document
following the adoption of the IFRIC agenda decision in relation to
configuration and customisation expenditure relating to cloud
computing arrangements. See note 1 to the accounts for more
information. The impact on adjusted profit before tax in H1 2022
was GBP0.1 million and the impact on statutory profit before tax
was GBPnil.
(6) Current market expectations as of 22 May 2023 are a range of
GBP10.6 million to GBP12.3 million of adjusted profit before tax,
with a consensus of GBP11.5 million.
For further information please contact:
Topps Tiles Plc (23/5/23) 020 7638 9571
Rob Parker, CEO (Thereafter) 0116 282 8000
Stephen Hopson, CFO
Citigate Dewe Rogerson 020 7638 9571
Kevin Smith/Ellen Wilton
INTERIM MANAGEMENT REPORT
Topps Group is the largest specialist distributor of tiles and
related products in the UK. The majority of our revenues are
generated from the domestic market for the renovation, maintenance
and improvement (RMI) of UK homes, through our market-leading Topps
Tiles brand. Over recent years, the business has diversified and
expanded into the commercial tile market, which approximately
doubled the size of our addressable market while staying within our
core specialism of tiles. The commercial market includes tiles
supplied for both new build and refurbishment of commercial
premises across sectors such as leisure, transport, retail and
office buildings, and new build residential housing. In 2022, the
Group was developed further, with the addition of the Pro Tiler
Tools and Tile Warehouse brands, both of which focus on the Online
Pure Play market.
All of the brands within the Group derive benefit from the scale
of the business, the specialist focus of our business model and our
passion for tiles. We enjoy a competitive advantage in sourcing
differentiated products from around the world that we can access on
an exclusive basis and deliver world class customer service through
our store network, award-winning digital platforms and commercial
sales teams. We aim to lead the tile market in environmental
matters, including our goal of being carbon neutral across scope 1
and 2 emissions by 2030, or earlier.
STRATEGIC AND OPERATIONAL UPDATE
The core purpose of Topps Group is to inspire customers through
our love of tiles. This gives us a very clear focus on our
specialism in tiles and associated products and encourages all our
colleagues to be passionate about the products we sell. It also
puts our customers at the heart of what we do and reminds us that
all roles in the Group are either serving customers directly or
supporting those colleagues that are. We are making good progress
towards the achievement of our market share goal of '1 in 5 by
2025' and this is supported by our growth strategy, with each of
our main business areas, Topps Tiles, Parkside and Online Pure
Play, supported by our Group strategies of Leading Product, Leading
People and Environmental Leadership.
2023 is the 60(th) anniversary of the first Topps Tiles store
opening in Sale, Manchester in 1963 and we are pleased to have
delivered a record six-month period for sales in this anniversary
year.
Leading Product
As the UK's leading tile specialist, our expertise in the
ranging, sourcing and procurement of tiles on a global basis is a
core part of our competitive advantage. The last three years have
seen us leverage this advantage significantly, as we have resourced
multiple ranges from around the world in response to volatile
conditions in the tile supply chain. As a result, we have continued
to maintain competitive cost prices whilst securing good inventory
availability to support the high levels of demand in the business.
Supply chain pressures now appear to be reducing, with shipping and
gas prices falling and availability of tile supply improving.
The ability of Topps Group to introduce new, exclusive products
continues to be central to our Leading Product strategy. In the
first half of the year, we introduced 32 new products into Topps
Tiles (H1 2022: 13 new products), with over a third of these ranges
developed by Topps Group, as well as new ranges across Tile
Warehouse and Parkside. Within Pro Tiler Tools, the introduction of
new trade-focused brands such as Kubala tools continues to drive
growth and provide an unrivalled trade product offer. Trade brand
authority continues to be a major focus for Topps Group, with over
50 proprietary and owned brands for tilers to choose from across
the Group.
A highlight has been the continued success of new product
categories in Topps Tiles, such as outdoor tiles, luxury vinyl
tiles (LVT), and large format tiles, which have delivered
significant growth year on year. Owned brands such as Excel Bond,
Dex, Rise and Regenr8 now contribute over GBP30 million of sales
and are portable across the Group's various trading entities.
Leading People
Our performance across all of our businesses is underpinned by
world-class customer service, delivered through engaged and highly
skilled colleagues. Vacancy rates fell across the first half and
overall staff turnover is now 34.0% (H1 2022: 37.8%). Staff
turnover across Topps Tiles store managers has fallen
substantially, which is particularly important given the critical
role that these colleagues play in delivering our customer
experience across our store network. A significant driver of the
improvement year on year has been our focus on recruiting the right
people into the business through an improved recruitment and
induction process, as well as lessening of pressure in the
employment market more generally.
Our focus on wellbeing continues, with a particular emphasis on
mental health. In the first half, in partnership with Mental Health
First Aid England, our 64 mental health first aiders were trained
or reaccredited, including colleagues from Pro Tiler Tools, and
line manager training on mental health has been rolled out across
the organisation. Our corporate partnership with Alzheimer's
Society, which commenced in 2022, is gathering momentum and we have
raised over GBP150k to date in support of this important cause.
Both customers and colleagues continue to give generously through
micro donations and fund raising.
Diversity and inclusion represents an ever increasing area of
importance for our business and, following a focus on increasing
the accuracy of our data in the first half, we are preparing to
roll out our D&I strategy in the second half, which will
include colleague engagement, recruitment processes and the
creation of colleague resource groups.
Delivering great service depends on an ongoing investment into
the capability of our people. In the first half, we have made good
steps forward, including utilising the Apprentice Levy to support
our training programmes, with 15 store managers and 15 deputy
managers now enrolled on our Retail Management qualification,
accredited by the Institute of Leadership and Management, to
support their development through the organisation. We also retain
our focus on sales training for colleagues in stores, as well as
our senior management development programme.
Environmental Leadership
Our environmental leadership strategy is based around two
pillars: carbon neutrality and supporting circularity. Our goal is
to be carbon balanced across scope 1 and 2 emissions by 2030, or
earlier, and we have partnered with the World Land Trust to support
this objective. Parkside, our Commercial business, is already
carbon neutral. The Group's total scope 1 and 2 emissions are
currently approximately 4,800 tonnes per annum. Following the
actions reported in last year's annual report, this year we have
installed solar panels on the roof of our head office and main
distribution centre, which should reduce electricity usage on these
sites by approximately 70% and save approximately 340,000 kWh of
electricity per annum. Our environmental focus is now switching to
measuring our scope 3 emissions, which is a significant challenge
due to the complexity of our global supply chain. Scope 3 will be
an order of magnitude higher than scope 1 and 2 emissions, and we
are currently selecting a partner to help us with this exercise. We
have committed to report scope 3 emissions as part of our TCFD
reporting by the end of 2024.
Supporting circularity is largely about minimising waste and
recycling, as well as product and packaging innovation and
sourcing. A major target this year, which forms part of the Group's
strategic objectives and therefore executive remuneration, is to
reduce tile waste by 10% and performance in the first half is in
line with the delivery of this goal.
Omnichannel: Topps Tiles
Topps Tiles is our market leading, omni-channel specialist
business, which serves the domestic RMI market and has significant
opportunities for profitable growth.
Sales continue to perform well, with like-for-like sales growth
in the first half of 4.3%. This resulted in a record first half
year performance for the brand with revenue of GBP115.8 million.
Average sales per store are now up 30% compared to the pre-pandemic
period as a result of our successful store rationalisation
programme which saw customers transfer from closed stores, as well
as significant underlying sales growth. The rationalisation
programme was completed at the end of the last financial year and
we believe that the current store estate of 304 stores, offering
nationwide coverage, is approximately the right size moving
forward, meaning that like-for-like sales growth will broadly
mirror total sales growth in future years.
Our customer mix continues to be a mix of professional trade
customers and homeowners. The relationship between the two groups
is very close - often a professional installer will use a Topps
Tiles store as an extension of their own workspace, visiting the
store with the customer or simply referring them to us. However,
the way the professional trader and the homeowner use the various
parts of the omni-channel Topps Tiles offer can be quite
different.
Homeowners will almost always use both our award-winning website
and the store as part of their purchasing journey. We know that 98%
of customers will use a store at some point, either to see the
product, engage with our teams for advice, inspiration, service or
aftersales, or to collect their order at a time convenient for
them. In addition, almost all customers will use the website for
research, to order samples or to place their order. Online sales
made up 18% of tile sales to homeowners in the period, up from 9%
in 2015 and comparable to other retailers in our industry, and we
continue to invest in incremental improvements to our digital
platforms.
For professional trade customers, a dedicated website and trade
app is available, as well as key digital services such as click and
collect. However, trade customers retain a very strong preference
for the physical store, with strong relationships built on trust
and high levels of technical advice and service. Trade customers
can offer high levels of repeat custom and we focus on offering
price competitiveness, a loyalty scheme and excellent
representation from key trade focused brands. Trade customers made
up 59% of sales in Topps Tiles in the first half (H1 2022: 58%)
and, as such, Topps Tiles is more of a merchant than a retail
business. For trade customers and contractors, Topps Tiles offers a
dedicated direct sales operation which continues to deliver
excellent growth. Supported from a central team, this operation
grew sales by 23% year on year to GBP7.0 million in the first half
and we continue to believe this model offers further growth
opportunities.
As well as financial performance, our key measure of success is
customer satisfaction, which we measure through our Tile Talk
surveys. Overall satisfaction increased again in the first half, by
1.7 percentage points, meaning that 91.3% of the 8,500 surveys
completed in the half year rated Topps Tiles as 5 star for overall
satisfaction. In addition, 6.8% of the survey responses scored the
business as 4-star, and just 1.9% of respondents rated the business
as 3-star or lower. Our data suggests that this performance is
genuinely world-class, and scores higher than a number of other
leading consumer-facing brands (source: the United Kingdom Customer
Service Institute, Jan 2023).
The Topps Tiles store estate has remained at 304 trading stores
over the course of the first half year, with two relocations
completed, at Guildford and Aintree. Our three store formats -
superstores (37 stores), core stores (253 stores) and clearance (14
stores) continue to offer the most relevant offer for the local
catchment and physical site. We retain a flexible property
portfolio, with an average unexpired lease term to the next break
opportunity of 2.9 years (H1 2022: 3.2 years), or 2.7 years
excluding strategically important stores (H1 2022: 2.9 years).
Following the conclusion of the store rationalisation programme, we
had 8 closed Topps Tiles stores at the end of the trading period,
reduced from 11 at the start of the financial year, and expect to
exit a further 3 stores by year end.
Topps Tiles continues to perform very strongly, with world-class
service and a leading product offer, an increasing trade mix, a
right-sized store estate, and further opportunities for growth in
the period ahead.
Commercial: Parkside
Parkside is a specialist tile distributor, aimed at architects,
designers and contractors in the commercial market. Becoming part
of Topps Group in 2017, Parkside is now a top-five competitor
within the sector.
After five consecutive years of sequential sales growth,
Parkside has experienced a tougher period of trading. The market
remains substantially smaller when compared to the pre-covid
period. Sales were down GBP0.4 million year-on-year to GBP4.6
million in the first half year due to delays in projects from key
clients. With performance below expectations, a business
improvement plan has been launched.
The commercial market for tiles, which is almost the same size
as the domestic RMI market, is an important part of our B2B
operations and as such remains a strategic priority for Topps
Group.
Online Pure Play: Pro Tiler brands and Tile Warehouse
Our Online Pure Play business now consists of five brands. Four
of these (Pro Tiler Tools, Northants Tools, Premium Tile Trim and
Warm Floor Store, collectively the 'Pro Tiler brands') are
trade-focused, digital-only consumables and tools brands, operated
by the Pro Tiler management team. Tile Warehouse is a
homeowner-orientated, value-focused, digital-only tiles business,
offering a complimentary positioning to Topps Tiles.
Performance has been exceptionally strong in the first half,
with excellent sales growth and net margin in line with our
expectations. The Pro Tiler brands have delivered year on year
growth in excess of 40% (including the pre-acquisition period in
the comparative period) as a result of exceptionally strong
customer focus (average review score 4.8/5 as of May 2023), further
extensions of trade brands, and investments in marketing and stock.
In the first half, the newest brand launched, warmfloorstore.co.uk,
specialising in wet and dry underfloor heating products, including
industry-leading brands such as WarmUp, Schluter and Devi. Further
opportunities for material growth exist within these brands and
from further new brand launches. We believe the Pro Tiler brands
collectively represent in excess of a GBP30 million sales
opportunity for the Group.
Tile Warehouse provides an entry into the GBP100m online pure
play tile market, with a range of quality tiles at very competitive
price points, leveraging the Group's scale, supplier relationships,
digital expertise and financial resources. In its first year, the
focus has been on refining the technical proposition and building
the digital strategy and customer offer. We believe that this
business provides an opportunity to deliver sales of GBP15 million
within a five-year time frame, but will require investment,
primarily in digital marketing, in the initial stages.
Key Performance Indicators
As set out in our most recent Annual Report, we monitor our
performance implementing our strategy with reference to a clearly
defined set of financial and non-financial key performance
indicators ("KPIs"). Our performance in the 26 weeks to 1 April
2023 is set out in the table below, together with the prior year
performance data. The source of data and calculation methods are
consistent with those used in the 2022 Annual Report. Further
information on adjusted performance measures can be found on page
2.
26 weeks to 26 weeks to YoY
1 April 2 April
2023 2022
(restated(5)
)
Financial KPIs
Group revenue growth year-on-year 9.3% 15.5% n/a
Topps Tiles like-for-like sales growth
year-on-year 4.3% 19.7% n/a
Group gross margin 52.8% 56.1% (3.3) ppts
Adjusted profit before tax GBP4.4 million GBP7.1 million (38.0)%
Adjusted earnings per share 1.57 pence 2.83 pence (44.5)%
Adjusted net cash GBP19.9 million GBP13.4 million GBP6.5 million
Inventory days 117 127 (10) days
Non-financial KPIs
Topps Tiles customer overall satisfaction
score 91.3% 89.6% 1.7 ppts
Colleague turnover 34.0% 37.8% (3.8) ppts
Number of Topps Tiles stores at year
end 304 312 (8)
FINANCIAL REVIEW
Consolidated Statement of Profit or Loss
Sales growth in the period was strong, with total Group sales up
9.3% to GBP130.3 million in the first half, representing a record
six-month trading period for the Group. Within this, the Topps
Tiles brand delivered like-for-like sales growth of 4.3% against H1
2022, which was itself an extremely strong trading period with
sales +22.7% on a two-year like-for-like basis. As a result,
average sales per store in Topps Tiles were 30% higher in the first
half of FY 2023 than the pre-pandemic period of 2019. Sales in
Parkside were down GBP0.4 million, and sales in Online Pure Play
were exceptionally strong, driven by the ongoing success of Pro
Tiler Tools. Revenue consolidated into the Group accounts by
business area was as follows:
Revenue by brand (GBPm) H1 2023 H1 2022 Variance
Topps Tiles 115.8 113.1 +2.4%
-------- -------- ---------
Parkside 4.6 5.0 -8.0%
-------- -------- ---------
Online Pure Play* 9.9 1.1 +800%
-------- -------- ---------
Topps Group 130.3 119.2 +9.3%
-------- -------- ---------
*Online Pure Play includes Pro Tiler Tools and its associated
brands, which were acquired in March 2022, and Tile Warehouse,
which was launched in May 2022.
This strong sales growth, partly driven by the acquisition of
Pro Tiler Tools last year, also reflects the success of our growth
strategy, as we continue to progress towards the delivery of our
goal of accounting for GBP1 in every GBP5 spend across the UK
market for tiles and related products by 2025 ('1 in 5 by 2025').
With our market share increasing to 19.0% in 2022 (2021: 17.6%), we
are confident that we will achieve our goal ahead of schedule. We
will provide a further update on our progress towards our target in
our 2023 full year results, following the publication of the latest
independent market research reports.
Overall, we estimate that 63% of sales in the Group were made to
trade or professional customers in the period (H1 2022: 60%), with
37% of sales made direct to homeowners (H1 2022: 40%), which is
important given the high levels of repeat custom that trade and
professional customers can offer.
The Group's gross margin of 52.8% was down 3.3 percentage points
against H1 2022, with 2.1 percentage points of the decline due to
business mix changes, specifically the rapid growth in Online Pure
Play which operates at a structurally lower gross margin than the
rest of the Group, 1.0 percentage point due to mark-to-market
movements on foreign currency transactions and retranslation of
monetary items, and 0.2 percentage points due to changes in the
margins in individual brands. The mark-to-market and retranslation
movements in the period were unusually large, caused by the
revaluation of our forward currency contracts, under which we
contract to buy foreign currency in advance of our requirements. As
the pound recovered from its lows against the dollar and euro in
late September 2022, these contracts are revalued, resulting in a
significant non-cash charge in the first half. In addition,
monetary items such as foreign currency and trade payables are
revalued based on the exchange rates in place at the end of the
trading period.
The gross margin within Topps Tiles, which has been impacted in
recent years by inflationary pressures, product and customer mix
movements and the introduction of new product categories, improved
modestly over the period as inflationary pressures abated or in
some cases reversed. We are confident that the gross margin within
the Topps Tiles brand will increase sequentially in the second half
year compared to the first half.
Operating costs were GBP64.9 million compared to GBP59.3 million
in H1 2022. Excluding adjusting items which are explained below,
operating expenses increased by GBP4.3 million compared to the
prior year period to GBP62.1 million, explained by the following
key items:
GBP million
HY 2022 adjusted operating expenses (restated) 57.8
Increased utilities expense (gas) 0.6
Other inflation 2.2
Reduced store space (304 stores on average vs 314 in
HY 2022) (1.1)
Online Pure Play including Pro Tiler Tools brand amortisation 2.6
HY 2023 adjusted operating expenses 62.1
In line with our expectations, the high levels of inflationary
costs (approximately 5% operating cost inflation, across utilities
costs, employment costs, property costs and other expenses) have
impacted profit in the first half. As previously noted, we have
been able to offset some but not all of these costs through our
smaller store estate and efficiency programmes.
The first half contains a non-cash expense of GBP0.9 million
relating to holiday pay accruals (H1 2022: GBP0.7 million expense),
which will reverse in full over the second half of the financial
year (resulting in a GBP1.8 million increase in half-on-half
profits); and in addition, gas usage in the business will also
reduce substantially in the second half, leading to a smaller
adjusted cost base in the second half compared to the first half
year. The Forward Guidance section below sets out in more detail
some of the factors influencing operating costs in H2 compared to
H1.
Adjusted net finance costs increased from GBP1.9 million in H1
2022 to GBP2.2 million in H1 2023 as a result of increased IFRS 16
lease interest costs and the unwind of various discounted balance
sheet liabilities.
As a result of the above, and in line with our expectations,
adjusted profit before tax for the period was GBP4.4 million (H1
2022 restated: GBP7.1 million), however profitability in the second
half is expected to be substantially higher.
Looking further forward, we expect cost inflation to start to
reduce, with the exception of our utilities expense, where at the
end of this financial year the Group will exit its current fixed
price contracts. Based on forward utilities contract pricing, we
currently expect our energy costs across gas and electricity to
increase by approximately GBP0.5 million in FY 2024 compared to the
current financial year, with significant increases in electricity
pricing compared to our current two-year contract more than
offsetting the recent falls in the gas price.
Adjusting items
The Group's management uses adjusted performance measures, to
plan for, control and assess the performance of the Group. Adjusted
profit before tax differs from the statutory profit before tax as
it excludes the effect of one-off or fluctuating items, allowing
stakeholders to understand results across years in a more
consistent manner. In line with prior years, we continue to adjust
for any impairment charges or impairment reversals of right of use
assets, derecognition of lease liabilities where we have exited a
store, and one-off gains and losses through sub-lets. We have also
excluded property costs in relation to store closures which formed
part of the store rationalisation programme which ended in FY 2022.
Property costs relating to store closures moving forward will form
part of adjusted profit. In the period 2022 - 2024 we will exclude
the cost relating to the 40% purchase of shares of Pro Tiler
Limited which we expect to make from March 2024, which, under IFRS
3, is treated as a remuneration expense rather than an acquisition
cost. Please see the 2022 Annual Financial Results statement for a
full description of this transaction and its accounting
treatment.
An analysis of movements from adjusted profit before tax to
statutory profit before tax is given below:
H1 2023 GBPm H1 2022 GBPm
(restated(5)
)
Adjusted profit before tax 4.4 7.1
------------- --------------
Property
------------- --------------
Vacant property and closure costs (0.7) (1.0)
------------- --------------
Impairment of property, plant and equipment nil (0.1)
------------- --------------
Right-of-use asset impairment and lease exit
gains and losses 0.1 0.2
------------- --------------
(0.6) (0.9)
------------- --------------
Business development
------------- --------------
Pro Tiler Limited share purchase provision (1.7) (0.2)
------------- --------------
Tile Warehouse set up costs and Pro Tiler
Limited acquisition expenses nil (0.4)
------------- --------------
Restructuring and other one-off costs (0.4) nil
------------- --------------
(2.1) (0.6)
------------- --------------
Statutory profit before tax 1.7 5.6
------------- --------------
The effective tax rate for the 26 weeks to 1 April 2023 was
58.1% (H1 2022: 25.4%). Tax rates are based on expectations for the
full year and then adjusted for the impact of items which are not
deductible for corporation tax purposes, notably in this half year
by the Pro Tiler Limited share purchase provision increase. On an
adjusted basis, the effective tax rate for the period was 24.7% (H1
2022: 22.1%), with the year-on-year increase reflecting the
increase in the main rate of UK corporation tax from 19% to 25% as
of 1 April 2023.
Basic earnings per share were 0.25 pence (H1 2022: 2.14 pence).
Adjusting for the post-tax impact of the adjusting items detailed
above, the adjusted basic earnings per share were 1.57 pence (H1
2022: 2.83 pence).
Dividend
The Group's capital allocation and dividend policy was updated
as part of the Interim Results in 2022. Interim dividends will be
set at one third of the full year dividend from the previous year,
and as such, an interim dividend of 1.2 pence has been declared by
the Board (H1 2022: 1.0 pence). The shares will trade ex-dividend
on 8 June 2023 and the dividend will be paid on 14 July 2023.
Consolidated Statement of Financial Position
Capital Expenditure
Capital expenditure in the first half was GBP2.0 million (H1
2022: GBP1.0 million). The majority of this expenditure was on the
Topps Tiles store estate, including two store relocations,
conversions of four more of our larger stores to superstore status,
and general refurbishment.
The Board expects capital expenditure in the full year to be
between GBP5 million and GBP6 million, including further
relocations and merchandising for new products in the core Topps
Tiles stores, together with further investment into our
superstores. Any acquisitions that the Group may consider as part
of its growth plans would be additional to this guidance.
Inventory
Inventory at the period end was GBP38.8 million (H1 2022:
GBP37.0 million) including GBP2.7 million held within Pro Tiler
Limited, representing 117 stock days (H1 2021: 127 stock days). At
the last year end, inventory was GBP38.6 million, representing 126
days turnover, with the movement over the half year explained by a
GBP0.4 million increase in the stock held at Pro Tiler and a GBP0.2
million decrease in stock held across the rest of the Group
businesses.
Consolidated Cash Flow Statement
The Group's cash balance increased in the period by GBP3.7
million from GBP16.2 million at year end to GBP19.9 million at the
half year end. The table below analyses the Group's adjusted cash
flow:
HY 2023 HY 2022
(restated)(5)
GBPm GBPm
Cash generated by operations, including interest
and capital elements of leases, before WC movements 8.8 9.4
Changes in working capital 4.2 (10.1)
Capital expenditure (2.0) (1.0)
Disposals - 0.1
Interest - (0.1)
Tax (2.0) (2.1)
Other (0.2) (0.1)
Free cash flow 8.8 (3.9)
Acquisition of Pro Tiler Limited, net of cash and
debt acquired - (4.4)
Dividends (5.1) (6.1)
Change in adjusted net cash 3.7 (14.4)
Adjusted net cash at start of period 16.2 27.8
Adjusted net cash at end of period 19.9 13.4
The strong level of cash generated by operations, combined with
a GBP4.2 million inflow from working capital movements, led to good
free cash generation in the period, and ultimately to an increase
in adjusted net cash of GBP3.7 million in the first six months of
the year, after payment of the final dividend relating to 2022. The
cash generated by operations excludes a number of non-cash items
which reduced profit before tax in the first half, including a
GBP0.9 million holiday pay accrual, non-cash movements on the value
of foreign currency contracts, an increase in the share purchase
provision in relation to the future purchase of the remaining
shares in Pro Tiler Limited and share option charges. The working
capital inflow largely related to increases in payables, including
higher trade payables and a higher VAT creditor.
Return on Capital Employed
Lease adjusted returns on capital employed in the first half
were 15.5% (H1 2022: 15.6%), based on the average capital employed
over the half and the annualised profit delivered over the last
twelve-month period.
Banking Facilities
The Group maintains a very robust balance sheet, providing
resilience and allowing investment in growth opportunities. A
GBP30.0 million revolving credit facility is in place which is
committed to October 2025 with extension options for a further two
years (H1 2022: GBP39.0 million facility, committed to June 2023).
At the half year, none of this facility was drawn (H1 2022: GBPnil
drawn). Based on net cash excluding lease liabilities of GBP19.9
million, the Group has GBP49.9 million of headroom to its banking
facilities at the period end (H1 2022: GBP52.4 million).
Forward Guidance
The first half year was a period of record sales for the Group,
however profits were impacted by a number of factors described
above, principally inflationary pressure on operating expenses. We
have confidence that profits in the second half will be materially
stronger, as a result of the following factors:
-- The Group's gas expense has increased from approximately GBP0.4
million in recent years to an estimated GBP2.4 million this
year. Gas is primarily used for heating purposes and therefore
disproportionately impacts the colder months which fall into
the Group's first half. The gas expense in the first half
was GBP1.7 million with an estimated expense in the second
half of GBP0.7 million, resulting in a GBP1.0 million increase
in half on half profits in the second half;
-- The first half contained a GBP0.9 million expense relating
to holiday pay accruals, which will reverse in the second
half, resulting in a GBP1.8 million increase in half on half
profits in the second half;
-- Gross margins within Topps Tiles are starting to improve as
the cost of shipping and production starts to fall and we
expect margins within Topps Tiles to be sequentially higher
in the second half compared to the first half;
-- Newer parts of the Group are expected to contribute more profit
in the second half compared to the first half.
As a result of these factors, we remain confident that the Group
will perform in line with current market expectations for the year
as a whole(6) .
Current Trading and Outlook
The second half has started well with like-for-like sales in
Topps Tiles in the first seven weeks up 4.1% on an underlying
basis, in line with the first half. The additional bank holiday
reduced like-for-like sales by an estimated 1.3 percentage points
in the period, resulting in overall like-for-like sales growth in
the first seven weeks of 2.8%.
Our key areas of focus in previous periods have been managing
and reducing cost inflation, dealing with supply chain challenges
and meeting staff recruitment targets. Whilst we are maintaining a
keen focus on all of these areas moving forward, the near-term
pressure from inflation appears to be abating, we have maintained
good levels of inventory throughout the period, staff turnover is
reducing and vacancy levels are slightly below the longer-term
average. As explained in the section above, we expect profit in the
second half to increase materially, and these factors, when
combined with our successful strategy, world class customer
service, leading product offer and strong balance sheet, give us
increasing confidence as we look forward.
Risks and Uncertainties
The Board continues to monitor the key risks and uncertainties
of the Group. The main risks considered by the Board remain as
documented in the 2022 Annual Report and Accounts. These key risks
and uncertainties include: macroeconomic changes and consumer
confidence; inflationary cost increases of products for resale and
not for resale; sustainability and climate change; attracting and
retaining talent / loss of key personnel; cyber security; warehouse
capacity; growth strategy through diversification; global pandemic
including Covid-19; and global supply chain. Whilst all key risks
remain, the Board considers that the scale of the risks associated
with attracting and retaining talent / loss of key personnel,
inflationary cost increases of products for resale and not for
resale, and global supply chains have all reduced since the
publication of that Report.
Going concern
When considering the going concern assertion, the Board reviews
several factors including a review of risks and uncertainties, the
ability of the Group to meet its banking covenants and operate
within its banking facilities based on current financial plans,
along with a detailed review of more pessimistic trading scenarios
that are deemed severe but plausible. The two downside scenarios
modelled include a moderate decline in sales and a more severe
decline in sales, which result in much lower sales and gross profit
than the base scenario, resulting in worse profit and cash
outcomes. The more severe downside scenario modelled this year was
based on a severe prolonged period of macroeconomic stress in the
UK, lasting for more than two years, with sales falling
substantially in each year in our main brand, Topps Tiles, as well
as year-on-year declines in gross margins.
The Group has already taken a number of actions to strengthen
its liquidity over the recent years, and the scenarios start from a
position of relative strength. The going concern review also
outlined a range of other mitigating actions that could be taken in
a severe but plausible trading scenario. These included, but were
not limited to, savings on store employee costs, savings on central
support costs, reduced marketing activity, a reduction of capital
expenditure, management of working capital and suspension of the
dividend. The Group's cash headroom and covenant compliance was
reviewed against current lending facilities in both the base case
and the severe but plausible downside scenario. The current lending
facility was refinanced in October 2022 and expires at the earliest
in October 2025.
In all scenarios, the Board has concluded that there is
sufficient available liquidity and covenant headroom for the Group
to continue to meet all of its financial commitments as they fall
due for the foreseeable future, a period of not less than 12 months
from the date of this report. Accordingly, the Board continues to
adopt the going concern basis in preparing the financial
statements.
Responsibility Statement
We confirm that to the best of our knowledge:
(a) the condensed set of financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting' as
contained in UK-adopted IFRS;
(b) the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
(c) the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
Rob Parker Stephen Hopson
Chief Executive Officer Chief Financial Officer
23 May 2023
Condensed Consolidated Statement
of Profit or Loss
for the 26 weeks ended 1 April
2023
Restated*
26 weeks 26 weeks 52 weeks
ended ended ended
1 April 2 April 1 October
2023 2022 2022
GBP'000 GBP'000 GBP'000
Note (Unaudited) (Unaudited) (Audited)
Group revenue 130,310 119,222 247,241
Cost of sales (61,569) (52,366) (111,818)
---------------------------------- ----- ------------ ------------ ----------
Gross profit 68,741 66,856 135,423
Distribution and selling costs (46,147) (44,929) (89,316)
Other operating expenses (3,634) (1,549) (5,953)
Administrative costs (11,610) (10,291) (19,827)
Sales and marketing costs (3,463) (2,579) (5,495)
Group operating profit 3,887 7,508 14,832
Net finance costs (2,203) (1,908) (3,887)
---------------------------------- ----- ------------ ------------ ----------
Profit before taxation 1,684 5,600 10,945
Taxation 3 (978) (1,422) (1,754)
---------------------------------- ----- ------------ ------------ ----------
Profit for the period 706 4,178 9,191
---------------------------------- ----- ------------ ------------ ----------
Profit is attributable to:
Owners of Topps Tiles Plc 482 4,174 9,005
Non-controlling interests 224 4 186
---------------------------------- ----- ------------ ------------ ----------
706 4,178 9,191
---------------------------------- ----- ------------ ------------ ----------
All results relate to continuing
operations of the Group.
Earnings per ordinary share
- Basic 5 0.25p 2.14p 4.60p
- Diluted 5 0.24p 2.10p 4.55p
There are no other recognised gains and losses for the current
and preceding financial periods other than the results shown above.
Accordingly, a separate Condensed Consolidated Statement of
Comprehensive Income has not been prepared.
* See note 1 for an explanation of the prior period
restatement.
Condensed Consolidated Statement
of Financial Position
as at 1 April 2023
Restated*
1 April 2 April 1 October
2023 2022 2022
GBP'000 GBP'000 GBP'000
Note (Unaudited) (Unaudited) (Audited)
------------------------------------------ ----- ------------ -------------- ----------
Non-current assets
Goodwill 2,101 2,118 2,101
Intangible assets 5,087 5,825 5,423
Property, plant and equipment 19,998 21,755 20,888
Other financial assets 1,700 2,104 1,947
Deferred tax assets 152 401 114
Right-of-use assets 86,329 91,817 88,545
------------------------------------------ ----- ------------ -------------- ----------
115,367 124,020 119,018
------------------------------------------ ----- ------------ -------------- ----------
Current assets
Inventories 38,842 36,989 38,605
Other financial assets 487 458 542
Trade and other receivables 6,002 5,618 6,419
Current tax asset 122 - -
Cash and cash equivalents 19,911 13,415 16,241
------------------------------------------ ----- ------------ -------------- ----------
65,364 56,480 61,807
------------------------------------------ ----- ------------ -------------- ----------
Total assets 180,731 180,500 180,825
Current liabilities
Bank loans 6 - (4) -
Trade and other payables (50,047) (43,245) (43,650)
Lease liabilities (17,420) (19,641) (18,187)
Current tax liabilities - (2,461) (1,152)
Provisions (346) (346) (352)
Total current liabilities (67,813) (65,697) (63,341)
------------------------------------------ ----- ------------ -------------- ----------
Net current liabilities (2,449) (9,217) (1,534)
------------------------------------------ ----- ------------ -------------- ----------
Non-current liabilities
Bank loans 6 - - -
Lease liabilities (82,096) (86,965) (84,741)
Provisions (5,483) (2,027) (3,694)
------------------------------------------ -----
Total liabilities (155,392) (154,689) (151,776)
------------------------------------------ ----- ------------ -------------- ----------
Net assets 25,339 25,811 29,049
------------------------------------------ ----- ------------ -------------- ----------
Equity
Share capital 8 6,556 6,556 6,556
Share premium 2,636 2,636 2,636
Own shares (192) (1,216) (415)
Merger reserve (399) (399) (399)
Share-based payment reserve 5,837 5,053 5,162
Capital redemption reserve 20,359 20,359 20,359
Accumulated losses (12,151) (9,494) (7,319)
------------------------------------------ ----- ------------ -------------- ----------
Capital and reserves attributable
to owners of Topps Tiles Plc 22,646 23,495 26,580
Non-controlling interests 2,693 2,316 2,469
Total equity 25,339 25,811 29,049
------------------------------------------ ----- ------------ -------------- ----------
* See note 1 for an explanation of the prior period
restatement.
Condensed Consolidated Statement of Changes in Equity
For the 26 weeks ended 1 April 2023
Equity attributable to equity holders of the parent
----------------- ---------------------------------------------------------------------------------
Share-based Capital
Share Share Own Merger payment redemption Accum-ulated Non-controlling Total
capital premium shares reserve reserve reserve losses interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ -------- -------- -------- -------- ------------ ----------- ------------- ---------------- --------
Balance
at
1 October
2022 (Audited) 6,556 2,636 (415) (399) 5,162 20,359 (7,319) 2,469 29,049
------------------ -------- -------- -------- -------- ------------ ----------- ------------- ---------------- --------
Profit and
total
comprehensive
income
for the
period - - - - - - 482 224 706
Issue of
share capital - - - - - - - - -
Dividends - - - - - - (5,104) - (5,104)
Own shares
disposed
of in the
period - - 223 - - - (216) - 7
Credit to
equity for
equity-settled
share based
payments - - - - 675 - - - 675
Deferred
tax on
share-based
payment
transactions - - - - - - 6 - 6
Non-controlling
interest
on business
combination - - - - - - - - -
Balance
at
1 April
2023
(Unaudited) 6,556 2,636 (192) (399) 5,837 20,359 (12,151) 2,693 25,339
------------------ -------- -------- -------- -------- ------------ ----------- ------------- ---------------- --------
Condensed Consolidated Statement of Changes in Equity (continued)
For the 26 weeks ended 2 April 2022
Equity attributable to equity holders of the parent
----------------- --------------------------------------------------------------------------------
Share-based Capital
Share Share Own Merger payment redemption Accum-ulated Non-controlling Total
capital premium shares reserve reserve reserve losses interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- -------- -------- -------- -------- ------------ ----------- ------------- ---------------- --------
Restated*
balance at
2 October
2021 (Audited) 6,555 2,625 (1,216) (399) 4,642 20,359 (7,610) - 24,956
----------------- -------- -------- -------- -------- ------------ ----------- ------------- ---------------- --------
Profit and
total
comprehensive
income
(restated)*
for the
period - - - - - - 4,174 4 4,178
Issue of
share capital 1 11 - - - - - - 12
Dividends - - - - - - (6,058) - (6,058)
Credit to
equity for
equity-settled
share based
payments - - - - 411 - - - 411
Non-controlling
interest
on business
combination - - - - - - - 2,312 2,312
Restated*
balance at
2 April
2022
(Unaudited) 6,556 2,636 (1,216) (399) 5,053 20,359 (9,494) 2,316 25,811
----------------- -------- -------- -------- -------- ------------ ----------- ------------- ---------------- --------
Condensed Consolidated Statement of Changes in Equity (continued)
For the 52 weeks ended 1 October 2022
Equity attributable to equity holders of the parent
------------- ----------------------------------------------------------------------------------------
Share-based Capital
Share Share Own Merger payment redemption Accum-ulated Non-controlling Total
capital premium shares reserve reserve reserve losses interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- --------- -------- -------- -------- ------------ ----------- ------------- ---------------- --------
Restated* balance
at
2 October 2021
(Audited) 6,555 2,625 (1,216) (399) 4,642 20,359 (7,610) - 24,956
--------------------- -------- -------- -------- -------- ------------ ----------- ------------- ---------------- --------
Profit and total
comprehensive
expense
for the period - - - - - - 9,005 186 9,191
Dividends - - - - - - (8,015) - (8,015)
Issue of share
capital 1 11 - - - - - - 12
Own shares purchased
in the period - - (207) - - - - - (207)
Own shares issued
in the period - - 1,008 - - - (699) - 309
Credit to equity
for equity-settled
share based
payments - - - - 520 - - - 520
Acquisition of
non-controlling
interest on
business
combination - - - - - - - 2,283 2,283
--------------------- -------- -------- -------- -------- ------------ ----------- ------------- ---------------- --------
Balance at
1 October 2022
(Audited) 6,556 2,636 (415) (399) 5,162 20,359 (7,319) 2,469 29,049
--------------------- -------- -------- -------- -------- ------------ ----------- ------------- ---------------- --------
* See note 1 for an explanation of the prior period restatement.
Condensed Consolidated Cash Flow Statement
for the 26 weeks ended 1 April 2023
Restated*
26 weeks 26 weeks 52 weeks
ended ended ended
1 April 2 April 1 October
2023 2022 2022
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
------------------------------------------------- ------------ ------------ ----------
Cash flow from operating activities
Profit for the period 706 4,178 9,191
Taxation 978 1,422 1,754
Finance costs 2,301 1,945 4,010
Finance income (98) (37) (123)
Group operating profit 3,887 7,508 14,832
Adjustments for:
Depreciation of property, plant and equipment 2,686 2,830 5,609
Depreciation of right-of-use assets 9,012 9,181 18,212
Amortisation of intangible assets 386 101 500
Loss on disposal of property, plant and
equipment and intangibles 69 - 394
Loss/(gain) on sublease 101 36 (88)
Impairment charge of property, plant
and equipment 54 427 240
Impairment of right-of-use assets 5 1,771 1,473
Gain on lease disposal (240) (2,265) (1,544)
Share option charge 675 411 520
Increase in earn out liability provision 1,589 - 1,581
Increase in provisions and accruals 1,595 693 -
Non-cash loss/(gain) on derivative contracts 676 - (455)
(Increase)/decrease in receivables (139) 456 (1,080)
Increase in inventories (848) (2,794) (4,362)
Increase/(decrease) in payables 5,145 (7,810) (5,603)
------------------------------------------------- ------------ ------------ ----------
Cash generated by operations 24,653 10,545 30,229
Interest paid (82) (138) (354)
Interest received on operational cash
balances 50 - 58
Interest element of lease liabilities
paid (1,997) (1,777) (3,626)
Taxation paid (1,991) (2,085) (3,453)
------------------------------------------------- ------------ ------------ ----------
Net cash generated from operating activities 20,633 6,545 22,854
Investing activities
Interest received - 4 -
Interest received on sublease assets 29 34 65
Receipt of capital element of sublease
assets 213 247 493
Purchase of property, plant, equipment (1,931) (938) (3,090)
Purchase of intangibles (50) (92) (115)
Proceeds on disposal of property, plant
and equipment - 131 183
Acquisition of subsidiary, net of cash
acquired - (4,436) (3,968)
Net cash used in investment activities (1,739) (5,050) (6,432)
Financing activities
Payment of capital element of lease liabilities (9,977) (9,822) (19,601)
Dividends paid (5,104) (6,058) (8,015)
Financing arrangement fees (150) - -
Proceeds from issue of share capital - 11 12
Purchase of own shares - - (207)
Receipt on disposal of own shares 7 - 309
Repayment of bank loans - - (468)
Net cash used in financing activities (15,224) (15,869) (27,970)
Net increase/(decrease) in cash and cash
equivalents 3,670 (14,374) (11,548)
------------------------------------------------- ------------ ------------ ----------
Cash and cash equivalents at beginning
of period 16,241 27,789 27,789
------------------------------------------------- ------------ ------------ ----------
Cash and cash equivalents at end of
period 19,911 13,415 16,241
------------------------------------------------- ------------ ------------ ----------
* See note 1 for an explanation of the prior period
restatement.
1. General information
The interim report was approved by the Board on 23 May 2023. The
financial information for the 52 week period ended 1 October 2022
has been based on information in the audited financial statements
for that period.
The comparative figures for the 52 week period ended 1 October
2022 are an abridged version of the Group's full financial
statements and, together with other financial information contained
in these interim results, do not constitute statutory financial
statements of the Group as defined in section 434 of the Companies
Act 2006. A copy of the statutory accounts for that 52 week period
has been delivered to the Registrar of Companies. The auditor has
reported on those accounts: their report was unqualified, did not
draw attention to any matters by way of emphasis and did not
contain a statement under s498 (2) or (3) of the Companies Act
2006.
This condensed set of consolidated financial statements has been
prepared for the 26 weeks ended 1 April 2023 (H1 2023) and the
comparative period has been prepared for the 26 weeks ended 2 April
2022 (H1 2022).
The interim financial statements have not been audited or
reviewed by auditors pursuant to the Auditing Practices Board
guidance on "Review of interim financial information" and do not
include all of the information required for full annual financial
statements.
Basis of preparation and accounting policies
The annual financial statements of Topps Tiles Plc are prepared
in accordance with IFRSs as adopted by the European Union. The
unaudited condensed consolidated set of financial statements
included in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34 'Interim
Financial Reporting', as adopted by the European Union and in
conformity with the requirements of the Companies Act 2006. The
same accounting policies, presentation and methods of computation
are followed in the condensed set of financial statements as
applied in the Group's latest annual audited financial
statements.
New and amended standards adopted by the Group
The Group continues to monitor the potential impact of other new
standards and interpretations which have been or may be endorsed
and require adoption by the Group in future reporting periods.
Going concern
When considering the going concern assertion, the Board reviews
several factors including a review of risks and uncertainties, the
ability of the Group to meet its banking covenants and operate
within its banking facilities based on current financial plans,
along with a detailed review of more pessimistic trading scenarios
that are deemed severe but plausible. The two downside scenarios
modelled include a moderate decline in sales and a more severe
decline in sales, which result in much lower sales and gross profit
than the base scenario, resulting in worse profit and cash
outcomes. The more severe downside scenario modelled this year was
based on a severe prolonged period of macroeconomic stress in the
UK, lasting for more than two years, with sales falling
substantially in each year in our main brand, Topps Tiles, as well
as year-on-year declines in gross margins.
The Group has already taken a number of actions to strengthen
its liquidity over the recent years, and the scenarios start from a
position of relative strength. The going concern review also
outlined a range of other mitigating actions that could be taken in
a severe but plausible trading scenario. These included, but were
not limited to, savings on store employee costs, savings on central
support costs, reduced marketing activity, a reduction of capital
expenditure, management of working capital and suspension of the
dividend. The Group's cash headroom and covenant compliance was
reviewed against current lending facilities in both the base case
and the severe but plausible downside scenario. The current lending
facility was refinanced in October 2022 and expires at the earliest
in October 2025.
In all scenarios, the Board has concluded that there is
sufficient available liquidity and covenant headroom for the Group
to continue to meet all of its financial commitments as they fall
due for the foreseeable future, a period of not less than 12 months
from the date of this report. Accordingly, the Board continues to
adopt the going concern basis in preparing the financial
statements.
IFRIC: Configuration or Customisation Costs in a Cloud Computing
Arrangement (IAS38 Intangible Assets)
During the prior year, management re-evaluated the impact of the
IFRIC guidance released during 2021 relating to accounting for
cloud-based SaaS arrangements. Further details of the impact of
this re-evaluation can be found in the 2022 Annual Report and
Accounts.
During the first half of 2022, GBP100k was capitalised in
relation to cloud-based SaaS with GBP98k amortisation being
charged. The H1 2022 Consolidated Statement of Profit or Loss and
the Consolidated Cash Flow Statement have been restated to
recognise the post-tax impact of GBP100k SaaS costs being
recognised as an operating expense and the reversal of GBP98k
amortisation.
The H1 2022 Consolidated Statement of Financial Position has
been restated to de-recognise the post-tax impact of previously
capitalised SaaS costs.
A summary of the impact, including taxation, is included in the
following table:
H1 2022 H1 2022
(previously Restatement Restated
reported)
GBP'000 GBP'000 GBP'000
-------------------------------------- -------------- ------------- -----------
Consolidated Statement of Profit or Loss
impact
Administrative costs (10,288) (3) (10,291)
Profit before taxation 5,603 (3) 5,600
Tax charge (1,423) 1 (1,422)
Adjusted earnings per ordinary
share (pence) 2.79 0.04 2.83
Consolidated Statement of Financial Position
impact
Intangible assets 6,603 (778) 5,825
Deferred tax asset 243 158 401
Total assets 181,120 (620) 180,500
Net assets 26,431 (620) 25,811
Accumulated losses (8,874) (620) (9,494)
Total equity 26,431 (620) 25,811
Consolidated Cash Flow Statement impact
Profit for the period 4,180 (2) 4,178
Taxation (1,423) 1 (1,422)
Amortisation of intangible assets 199 (98) 101
Cash generated by operations 10,645 (100) 10,545
Net cash from operating activities 6,645 (100) 6,545
Purchase of intangibles (192) 100 (92)
Net cash used in investing activities (5,150) 100 (5,050)
-------------------------------------- -------------- ------------- -----------
In addition to the above, the prior period Consolidated Cash
Flow Statement has been restated by GBP693k to reflect a
recategorisation of movements from Payables to Provisions and
Accruals.
2. Business segments
The Group has one reportable segment in accordance with IFRS 8 -
Operating Segments, which encompasses the Topps Tiles Group revenue
generated instore and online from retail and commercial customers.
The Board receives monthly financial information at this level and
uses this information to monitor performance, allocate resources
and make operational decisions.
Revenue can be split by the following geographical regions:
26 weeks 26 weeks
ended ended
1 April 2 April
2023 2022
GBP'000 GBP'000
UK 130,003 119,222
EU 255 -
Rest of World 52 -
-------------- -------- --------
Total 130,310 119,222
-------------- -------- --------
3. Taxation
Restated
26 weeks 26 weeks 52 weeks
ended ended ended
1 April 2 April 1 October
2023 2022 2022
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
-------------------------------------- ------------ ------------ ----------
Current tax - debit for the period 1,010 1,520 2,577
Deferred tax - (credit) / debit
for the period (32) (98) 360
Deferred tax - adjustment in respect
of previous periods - - (1,183)
978 1,422 1,754
-------------------------------------- ------------ ------------ ----------
4. Interim dividend
An interim dividend of 1.20p (2022: 1.00p) per ordinary share
has been declared. A final dividend of 2.60p per ordinary share was
approved and paid in the period, in relation to the 52-week period
ended 1 October 2022.
5. Earnings per share
The calculation of earnings per share is based on the earnings
for the financial period attributable to equity shareholders and
the weighted average number of ordinary shares.
26 weeks 26 weeks 52 weeks
ended ended ended
1 April 2 April 1 October
2023 2022 2022
(Unaudited) (Unaudited) (Audited)
---------------------------------------- ------------ ------------ ------------
Weighted average number of issued
shares for basic earnings per share 196,681,818 196,680,195 196,681,007
Weighted average impact of treasury
shares for basic earnings per share (525,062) (1,259,275) (1,099,370)
---------------------------------------- ------------ ------------ ------------
Total weighted average number of
shares for basic earnings per share 196,156,756 195,420,920 195,581,637
---------------------------------------- ------------ ------------ ------------
Weighted average number of shares
under option 1,025,157 3,171,408 2,165,790
---------------------------------------- ------------ ------------ ------------
For diluted earnings per share 197,181,913 198,592,328 197,747,427
---------------------------------------- ------------ ------------ ------------
Restated
GBP'000 GBP'000 GBP'000
Profit for the period 482 4,174 9,005
Adjusting items 2,605 1,348 3,005
---------------------------------------- ------------ ------------ ------------
Adjusted profit for the period 3,087 5,522 12,010
---------------------------------------- ------------ ------------ ------------
Earnings per ordinary share - basic 0.25p 2.14p 4.60p
Earnings per ordinary share - diluted 0.24p 2.10p 4.55p
Earnings per ordinary share - adjusted 1.57p 2.83p 6.14p
---------------------------------------- ------------ ------------ ------------
The calculation of the basic and diluted earnings per share used
the denominators as shown above for both basic and diluted earnings
per share.
Adjusted earnings per share for the 26 weeks ended 1 April 2023
were calculated after adjusting for the post-tax impact of the
following items: vacant property and closure costs of GBP0.6m
(2022: GBP0.8m), impairment of property, plant and equipment of nil
(2022: GBP0.1m), impairment of right-of-use assets and lease exit
gains and losses of GBP0.1m gain (2022: GBP0.2m gain), Pro Tiler
Limited earn out provision increase of GBP1.7m (2022: GBP0.2m),
Tile Warehouse set up costs and Pro Tiler Limited acquisition
expenses of nil (2022: GBP0.4m), and restructuring and other
one-off costs of GBP0.4m (2022: nil).
6. Bank loans
26 weeks 26 weeks 52 weeks
ended ended ended
1 April 2 April 1 October
2023 2022 2022
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
------------------------------- ------------ ------------ ----------
Bank loans (all sterling) - (4) -
------------------------------- ------------ ------------ ----------
The borrowings are repayable
as follows:
On demand or within one year - (4) -
In the second year - - -
In the third to fifth year - - -
------------------------------- ------------ ------------ ----------
- - -
Less: total unamortised issue
costs (250) (76) -
------------------------------- ------------ ------------ ----------
(250) (76) -
Issue costs to be amortised
within 12 months 100 64 -
------------------------------- ------------ ------------ ----------
The Group has a revolving credit facility to October 2025 of
GBP30.0 million. As at 1 April 2023, GBPnil of this facility was
drawn (2022: GBPnil). The loan facility contains financial
covenants, which are tested on a bi-annual basis. The Group did not
breach any covenants in the period.
7. Financial instruments
The Group has the following financials instruments which are
categorised as fair value through profit and loss:
Carrying value and fair value
26 weeks 26 weeks 52 weeks
ended ended ended
1 April 2 April 1 October
2023 2022 2022
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
------------------------------------ ------------ ------------ ----------
Financial assets
Fair value through profit and loss (158) 54 518
Financial liabilities
Fair value through profit and loss - - -
------------------------------------ ------------ ------------ ----------
The fair values of financial assets and financial liabilities
are determined as follows:
Foreign currency forward contracts are measured using quoted
forward exchange rates and yield curves derived from quoted
interest rates matching maturities of the contracts.
The fair values are therefore categorised as Level 2 (2022:
Level 2), based on the degree to which the fair value is
observable. Level 2 fair value measurements are those derived from
inputs other than unadjusted quoted prices in active markets (Level
1 categorisation) that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from
prices).
At 1 April 2023 the fair value of the Group's currency
derivatives is a loss of GBP158,000 within trade and other
receivables (2022: GBP54,000 gain). These amounts are based on the
market value of equivalent instruments at the Statement of
Financial Position date.
Losses of GBP676,000 are included in cost of sales in the 26
weeks ended 1 April 2023 (2022: GBP9,000 loss).
8. Share capital
The issued share capital of the Group as at 1 April 2023
amounted to GBP6,556,000 (2 April 2022: GBP6,556,000). During the
period the Group issued nil shares (2 April 2022: 19,687 shares),
and therefore the number of shares at 1 April 2023 were 196,681,818
(2 April 2022: 196,681,818).
9. Seasonality of sales
Historically there has not been any material seasonal difference
in sales between the first and second half of the reporting period,
with approximately 50% of annual sales arising in the period from
October to March.
10. Related party transactions
MS Galleon AG is a related party by virtue of their 29.8%
shareholding (58,569,649 ordinary shares) in the Group's total
voting rights (2 April 2022: 20.1% shareholding).
MS Galleon AG is the owner of Cersanit, a supplier of ceramic
tiles with whom the Group made purchases of GBP659,000 during the
first half of the year which is 1.1% of cost of goods sold (2022:
purchases of GBP424,000 during the first half of the year which is
0.8% of cost of goods sold).
An amount of GBP303,000 was outstanding with Cersanit at 1 April
2023 (2 April 2022: GBP205,000). All transactions were conducted on
commercial arm's length terms.
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note, in accordance with the exemption available
under IAS 24.
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END
IR FLLLLXELEBBL
(END) Dow Jones Newswires
May 23, 2023 02:00 ET (06:00 GMT)
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