REG - Topps Tiles - Annual Financial Results
30/11/2021 07:00
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RNS Number : 9431T Topps Tiles PLC 30 November 2021
30 November 2021
Topps Tiles Plc
Annual Financial Results
Topps Tiles Plc ("Topps", "Topps Tiles", "the Company" or the "Group"), the
UK's largest tile specialist, announces its unaudited annual financial results
for the 53 weeks ended 2 October 2021.
Strategic and Operational Highlights
• Record year of revenue for the Group
• Group market share goal of '1 in 5 by 2025' with good progress made in the
year
• Success in strategic initiatives of expanding value offer, launch of
innovative new products and further strengthening our award-winning digital
offer
• Commercial revenue recovering with sales growth in H2 of 55%
• Launch of new environmental goal of being carbon balanced by 2030
Financial Highlights
53 weeks ended 52 weeks ended YoY
2 October 26 September
2021 2020
Statutory Measures
Group revenue £228.0 million £192.8 million +18.3%
Gross margin 57.3% 58.5% (1.2)ppts
Profit / (Loss) before tax £14.3 million £(9.8) million n/a
Basic earnings per share 5.59p (4.11)p n/a
Final dividend per share 3.1p nil n/a
Total dividend per share 3.1p nil n/a
Adjusted Measures
Retail like-for-like revenue year-on-year1 19.6% (12.5)% n/a
Adjusted profit before tax2 £15.3 million £3.6 million +325.0%
Adjusted earnings per share3 6.13p 1.57p +290.0%
Adjusted net cash4 £27.8 million £26.0 million +£1.8 million
Financial Summary
• Retail like-for-like sales up 19.6% despite trade restrictions throughout Q2
• Gross margins of 57.3% (FY20 58.5%), reflecting increased investment into
value and higher shipping costs
• Strong recovery in adjusted profit before tax to £15.3 million (FY20 £3.6
million)
• Underlying net cash generation of £12.5 million including £(10.7) million of
one-offs from 53rd week and deferred VAT repayment
• Business well capitalised with strong balance sheet - £27.8 million net cash
at year end
• Strong returns on invested capital - Group ROCE has increased from 13.1% in
FY19 to 17.5% in FY21
• Dividend reinstated based on 2x full year adjusted EPS cover
Current Trading and Outlook
• Trading remains robust with two-year Retail like-for-like sales growth of
18.4% in first eight weeks (one-year Retail like-for-like sales down 0.7%
against strong comparative period last year)
• Continued trading headwinds from reduced consumer confidence, global supply
chain challenges and cost inflation
• Growth strategy, flexible supply chain and balance sheet strength provide
confidence and platform for growth
Commenting on the results, Rob Parker, Chief Executive said:
"Our full year results demonstrate the strength of our position as the UK's
leading tile specialist and the potential of the business when it has been
able to trade without restriction. Despite significant disruption for a
three month period, during which our stores were unable to welcome homeowners,
we delivered record revenues for the year and made good progress towards our
'1 in 5 by 2025' market share goal.
"We believe this performance underlines the strength of our strategy and the
success of new initiatives including the expansion of our value ranges and the
introduction of innovative new products. The successful development of our
digital offer during the year has been particularly pleasing and we have plans
in place to expand this further in 2022.
"Trading in the initial weeks of the new financial year has been robust with
two-year Retail like-for-like sales growth of 18.4%. While trading headwinds
are likely to continue over the short term, we are confident in our strategy
and our ability to deliver sustainable long term growth."
Notes
(1)Retail like-for-like revenue is defined as sales from online and stores
that have been trading for more than 52 weeks. In 2021 like-for-like revenue
was £216.6 million (2020: £182.3 million), with an average of 331 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.
(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. It excludes lease liabilities under
IFRS 16.
For further information please contact:
Topps Tiles Plc (30/11/21) 020 7638 9571
Rob Parker, CEO (Thereafter) 0116 282 8000
Stephen Hopson, CFO
Citigate Dewe Rogerson 020 7638 9571
Kevin Smith/Ellen Wilton
STRATEGY AND PROGRESS
Summary of performance
2021 was a record-breaking year for the Topps Tiles Group. Our revenue of
£228.0 million, or £223.7 million on a 52-week basis, was the highest we
have ever achieved and Retail like-for-like sales growth was 19.6%. This was
an excellent result, particularly given that our stores were closed to our
homeowner customers for just over three months between January and April due
to Covid-related Government restrictions. Our performance was supported by a
buoyant home improvement market during this period, however we believe this
result also demonstrates the success of our growth strategy and is a good step
towards the achievement of our goal of accounting for £1 in every £5 spent
across the UK tile market by 2025 ('1 in 5 by 2025').
The year started very well, with like-for-like growth in our Retail business
of 19.9% in the first quarter, building further on the strength of the final
quarter of the previous financial year. Commercial sales were also strong
and gross margins were in line with our targets. On 19 December 2020, the
new 'Tier four' restrictions came into effect for large parts of England,
which quickly turned into a new national lockdown early in the new year. As
a result of further changes to regulations, from 5 January to 11 April 2021
all our stores in England were closed to homeowners, with registered traders
allowed to enter the store to visit the trade counter only and no browsing
permitted. Broadly the same restrictions were in place in Wales, Scotland
and Northern Ireland.
This period of trading disruption had a substantial impact on sales, which
were more than £20 million lower in Q2 than Q1. Retail like-for-like sales
were down 17.3% in the second quarter and commercial projects once again
slowed, particularly in the hospitality and leisure sectors. Adjusted profit
before tax in the first half was £5.1 million (2020: £1.2 million; 2019:
£7.0 million(1)) including c. £4.4 million of business rates relief.
Operationally, the business responded with great flexibility to the trading
restrictions. Online sales were up 135% in the second quarter compared to
last year, and our Retail website delivered record weekly performances for
revenue, orders, website traffic and conversion. Our supply chain once again
shifted from a focus on bulk picks for store replenishment to a focus on
single picks for direct customer deliveries. Our Commercial business shifted
its focus into sectors that were less impacted by the lockdown, which offset
the majority of the decline in hospitality and leisure.
The trading period since re-opening on 12 April 2021 was extremely strong.
In Q3, Retail like-for-like sales on a two-year basis were up 18.5% in the 11
weeks after re-opening, and that strengthened to 21.7% growth in the final
quarter. On a one-year basis, Retail like-for-like sales were also in growth
in Q4, up 3.0% against a comparative period last year which saw a strong
bounce back in sales following the initial national lockdown. Commercial
sales in the second half were up 55% year on year and forward indicators are
encouraging as we move into the new financial year.
Profitability rebounded strongly in the second half. Adjusted profit before
tax was £10.2 million (2020: £2.4 million; 2019: £7.0 million(1)), driven
by the strong sales performance, with lower gross margins (2021: 57.1%, 2020:
57.7%, 2019: 62.0%) due to higher shipping costs, our investment into value
and product mix changes, and well controlled operating costs. No government
support was included in our second half adjusted profit before tax.
In aggregate, the business delivered £15.3 million of adjusted profit before
tax (2020: £3.6 million, 2019: £14.0 million(1)).
Our balance sheet has remained strong throughout the year following the move
into a net cash position in FY20, and we finished the year with £27.8 million
of adjusted net cash, with headroom against our banking facilities of £66.8
million. The net cash inflow of £1.8 million includes £10.7 million of
outflows relating to the timing of the 53(rd) week and deferred VAT
repayments, meaning the underlying increase in cash was £12.5m in the year.
With the strong performance in both profit and cash, we are proposing the
resumption of dividend payments to shareholders with a final dividend payment
of 3.1 pence per share.
Note 1 : The Group's adjusted profit before tax in 2019 excluded Commercial
trading losses of £1 million in each half of the year. From 2020,
Commercial trading was included in adjusted profit. The Commercial losses in
2019 have been included in the figures quoted above to aid comparability over
the three year period.
Core purpose, goal and strategy
The core purpose of the Group is to inspire customers through our love of
tiles. This gives us a very clear focus on our chosen specialism and
encourages all of our colleagues to be passionate about the products we sell.
We operate in a large market. In 2019, the value of the UK market for tiles,
adhesives and grouts was around £950 million, and the market for all the
products we sell was significantly over £1 billion. Last year, we announced
a new goal for the business based around our market share across both the
domestic and commercial markets, and encompassing tiles, adhesives and
grouts. The goal is to account for £1 in every £5 spent on tiles and
associated products in the UK by 2025: '1 in 5 by 2025'. A 20% market share
would represent a significant increase from our estimated 2019 market share of
17% and would require an out-performance of the market by around 3.5% per year
between 2020 and 2025.
In 2021, we recognise that some competitors who did not face physical
restrictions on trading are likely to have gained some share over the lockdown
period, particularly generalist DIY stores and pure play online operators.
We estimate that our market share in 2021 in periods where we were allowed to
trade without restrictions was c. 17.6%, representing a good initial step
towards our goal, although the circumstances of the year make it particularly
difficult to measure. However, our sales performance in the period when we
traded free of restrictions gives us confidence in the longer-term ambition of
achieving our goal.
Our strategy to deliver our goal in our Retail and Commercial businesses has
been underpinned by our Group strategies of "Leading Product" and "Leading
People", which are described in the following sections. However, this year
has also seen an important expansion of our strategy, with the inclusion of a
new element, "Environmental Leadership". We aim to be ambitious and lead our
market in this area, working with manufacturers to bring products to market
which will help our customers reduce their environmental impact on the
world. We will also reduce the direct impact of the Group on the
environment, mainly through reductions in our carbon emissions.
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. We work with carefully selected manufacturing partners around the
world to develop and produce differentiated products that are innovative, of
high quality and exclusive to Topps Tiles. We protect the intellectual
property and design assets we create through partner exclusivity and design
registration. With the integration of the Parkside and Strata commercial
brands, we are able to leverage these core strengths across both sides of the
business.
Progress and outlook
This has been an extremely testing year for all supply chains and we have had
to rely on the strength and flexibility of our supplier relationships and our
logistics teams more than ever. During the various periods of restrictions
and releases, sales volumes have been volatile. In addition, securing supply
has, at times, been challenging, with uncertainty around the availability of
product and shipping capacity as well as significant increases in the costs of
both shipping and transportation. We are well placed to deal with this
uncertain environment due to our scale and expertise, including our global
sourcing capability. We also leverage our relationships with key suppliers
to secure stock. Our strategic supplier base accounts for c. 70% of our
purchases (2020: 80%) reflecting sourcing changes as a result of supply chain
disruption, and particularly our reduced exposure to the Far East.
Despite the challenges, we have been able to maintain a continuity of supply
to our business. We took the decision to maintain a higher level of
inventory than historical averages which, we believe, gives us a significant
advantage over our competitors. We ended the year with £32.8 million of
inventory across the stores and central warehouse, £3.4 million more than
last year. Our 150,000 sq ft warehouse in Leicester forms a key part of the
robustness of our supply chain.
We decided early in the year not to slow down the flow of new product into our
Retail business, despite store trading being disrupted and delivered 52 new
product introductions in the year. Of these new products, more than one
third (38%) were design-led by us in collaboration with key supply partners.
74% of our Retail ranges are either own brand or exclusive to us and this
remains key to our product differential. Highlights of the year included
Everscape(TM) , our 2cm porcelain outdoor range, which was doubled in size to
35 lines, including grouts, trims, pedestals and primers; the launch of luxury
vinyl tiles into 50 stores and online; the development of new products with
high recycled content and antibacterial properties; and entirely new brands,
such as DEX(TM), our new tools range.
In our Commercial business, we continue to expand our product offering into
different sectors, for example for use in swimming pools, dry fix products
(largely suitable for transport hubs) and luxury vinyl tiles. Our Commercial
business now has access to over 8,500 lines from over 160 suppliers globally.
Technical authority is a further key aspect of differential in our market and
we are leaders in this field, working closely with our strategic supplier base
to set exacting standards on quality and performance. We have our own
in-house technical team to meet the demands of our broader customer base and
offer key technical information and on-demand support across all channels
through our dedicated in-house testing facilities and quality control.
Leading people
The Group's success is underpinned by the quality and commitment of our
colleagues. This ensures excellence in both service to our customers and
clients, and in the support provided to store teams by our Leicester support
office, supply chain and field teams. Our Leading People initiative is about
having the best people, leading the best people, and is focused on three key
areas of engagement, capability and wellbeing.
Progress and outlook
Our focus on colleague engagement has been more important than ever through
the disruption of the last two years. Our annual MyVoice staff survey gives
colleagues the chance to have their say about the company, its leadership,
their work and wellbeing. We had an excellent response in what was a
difficult period operationally and for the country, with 81% of colleagues
responding in FY21 (up 11 ppts from last year), and 80% of colleagues
positively engaged with the business (up 6 ppts from last year). We were
also ranked 12(th) in the annual Retail Week and Glassdoor survey of best
retailers to work for in the UK.
We invest in capability through formal training programmes and through the
development opportunities we provide. 50% of vacancies across the Group are
filled internally, enabling us to offer progression within the business as
well as retain the technical skills of store colleagues.
As we continue to focus on a culture that is open, supportive, transparent and
dedicated to the wellbeing of all of our colleagues, we are concentrating on
five aspects of wellbeing: physical, mental, social, career and financial.
There was a particular emphasis this year on mental and physical wellbeing,
including further training for our 48 mental health first aiders, 'Tea and
Talk' sessions and a company-wide scheme to 'March forward' which encouraged
our colleagues to get physically active during the month of March, whilst
raising money for our corporate charity, Macmillan Cancer Support.
The recruitment and retention of colleagues has become an ever more important
priority for the Group, particularly with well-documented shortages of labour
across the UK economy and many people re-evaluating their career and life
choices following the pandemic. Drivers, especially heavy goods vehicle
drivers, are in particularly short supply and at times this year we have
relied more on contract drivers than we would like, which adds cost and can
reduce the reliability of our service. We have increased our efforts to
recruit directly in this area and emphasised the strength of our overall
employment offer to current and future colleagues. As a result, we are
starting the new financial year in a better position than we finished the last
one. Recruitment and retention of high-quality staff remains one of the top
priorities for the Group.
Environmental leadership
For many years Topps Tiles has been focused on its environmental impact and
for the last two years we have had a cross-functional Sustainability Council,
involving colleagues from all areas of the organisation, driving change
through the business. Significant progress has already been made on the use
of LED lighting in stores, waste reduction, recycling tiles and pioneering
investments into greater recycled content in tiles and other products through
manufacturing partnerships.
It has, however, become very clear that all businesses need to do much more
and we have challenged ourselves to set a stretching ambition for our
business. Our ambition is to lead our marketplace in environmental
credentials and specifically we intend to become carbon balanced as a business
by 2030. This will mean we will have measured, reduced and, where
required, offset our carbon emissions to net zero by 2030, ten years ahead of
the BRC retail industry ambition of being Net Zero by 2040.
We have a growing partnership with the World Land Trust and are working with
them to understand our current status and build our plans to minimise our
impact on the environment in the future.
The 2030 target is near enough to create personal ownership within our
management team and is a realistic goal which will motivate our colleagues.
The nine-year time horizon means Topps Tiles will lead our market in many
aspects of sustainability.
Our strategy to drive environmental leadership and achieve our goal has five
main elements:
˗ Ensure we have the right governance in place to deliver the goal, meet the
legislative requirements and regulations. Also, we must ensure we are
measuring our environmental impact and have a road map to the goal;
˗ Work with partners to minimise waste and drive recycling and the use of
recycled materials;
˗ Eliminate as much as possible our current carbon emissions (our focus will be
on scope 1 & 2, whilst working with our business partners to influence and
reduce the scope 3 emissions);
˗ Drive product innovation to increase the use of recycled materials in tiles
and related products and use strategic sourcing to minimise our environmental
impacts; and
˗ Use high quality and auditable carbon offsets to balance our remaining
emissions as part of the pathway to being carbon balanced by 2030.
Topps Tiles has established a new governance structure to support the carbon
balanced goal. Rob Parker, Chief Executive, will lead the strategy at a
Board level, chair our steering group, and work with the Audit Committee to
ensure appropriate measures and KPI tracking is in place. Dan Little,
Managing Director of our Commercial business, will continue to create the link
between the steering group and the cross-functional Sustainability
Council. The Sustainability Council will continue to work on reducing our
environmental impact across all areas of the organisation.
Retail: Topps Tiles
Last year, we launched a new strategy in our omni-channel Retail business -
"Great Experience, Great Product and Great Value" and we made substantial
progress within the year, delivering an excellent overall result. We strive
to ensure that the journey for all of our customers starts and ends with a
great customer service experience - whether in-store, online or both - and we
complement this with a range of market-leading products supported by our
Leading Product initiative. Ultimately, these are combined to deliver great
value to our customers.
Progress and outlook
The Retail business had an excellent year, delivering sales of £219.4 million
over 53 weeks (£215.3 million on a 52-week basis; 2020: £185.3 million).
The experience we offer our customers is central to our offer. The majority
of our customers shop infrequently for tiles which means that when they do,
they value our advice and expertise, whether in a store or online. Overall,
despite our stores being closed to homeowners for a quarter of the year, our
customer satisfaction scores remained at world class levels. Our overall
satisfaction score for the year was 88.4% (2020: 88.5%) and we were delighted
to win The Tile Association's 2021 award for Excellence in National Retail.
Our digital offer also provides a great experience to our customers and this
year, this was evidenced by a significant number of awards, recognising the
quality of our offer, as follows:
˗ Winner of 'The Mastermind' award at the Adobe Experience Maker Awards
˗ B2C Ecommerce Website of the Year at the UK Digital Growth Awards
˗ Global DIY, Home, Furniture and Interior Design eCommerce Website of the Year
at the Global eCommerce Awards 2021
˗ Best Use of Search B2C award at the European Search Awards
˗ Best Wholesale & Trade eCommerce and Best B2B eCommerce site at the
Ecommerce Awards 2021
˗ We were also ranked as one of the Top 50 retailers in the UK in Internet
Retailing's annual "RetailX Top 500" report, ranking retail websites across
all sectors in the UK
Our performance online has continued to be very strong. Our Retail website
had 12.3 million unique visitors in the year, up 31% against 2019, which we
believe is approximately three times the level of our next biggest
competitor. On social media, our Facebook and Instagram impressions were up
184% year on year. On Pinterest, we have an engaged audience of over 900
thousand people, up from 600 thousand at the half year. Across Facebook,
Instagram, Pinterest and YouTube channels, social media continues to become an
increasingly important area of focus.
Our customer base splits into two distinct but related groups - professional
fitters (trade) and homeowners. Trade customers represent 57% of our total
sales (2020: 55%) and provide a vital link to homeowners who prefer to
transact through their fitter rather than with us directly. During the
second quarter, this link was especially valuable as only registered traders
were able to enter our stores due to lockdown restrictions.
Our stores remain central to our omni-channel offer and driving customer
convenience, particularly for our trade customers. Almost every customer
visits a store at some point in their purchase journey, and almost all
customers use the web at some stage too. We offer the ability to collect
online orders from stores, and approximately 30% of online sales are
collected.
We have continued to review our store footprint, identifying areas of overlap
and taking opportunities to consolidate stores where these exist, to enhance
store profitability and returns. During the year we closed 31 stores, opened
two new stores and relocated two stores, finishing the year with 313 Retail
stores (2020 year end: 342 stores). We continue to target a core estate size
of approximately 300 stores, having reduced the size of the estate from 372
units at the end of 2017. The reduction in store numbers has helped to drive
incremental profits as we are able to transition sales from a closed store to
other stores in the area.
We continue to actively manage our store estate, and our relatively short
unexpired lease term to the next break opportunity of 3.3 years (2020: 3.4
years) provides us with good flexibility within our portfolio. Removing
stores which are strategically important (where we have proactively taken
longer terms to secure our tenure) from that calculation reduces the average
unexpired lease term to break to 3.0 years (2020: 3.3 years). Of the 49
non-trading stores in the estate during 2021, 30 were disposed by year end,
and 15 others have lease breaks in 2022.
This year we have also made substantial progress with our value offer. In
our 2020 strategy review we identified an opportunity to take a greater share
of the market for lower priced tiles, specifically one million square metres
of tiles with a selling price of under £20 per square metre. As a result,
we launched our 'Get the Look for Less' ranges, which we have extended further
over time and from which we have seen good success in the year. We have also
maintained keen pricing for essentials ranges, including bulk deals for trade
customers, and delivered some compelling promotions, including 'up to 50%' off
sales.
We are trialling a new 'Topps Tiles Clearance' concept, which gives us the
opportunity to offer even better value to customers, whilst allowing us to
clear discontinued lines and mixed batch stock, within the overall Topps Tiles
brand. At the end of the year we had converted eight stores to this format
with resulting like-for-like sales growth in excess of the overall estate.
Commercial: Parkside and Strata
The commercial tile market is significant, and fragmented - at around 45% of
the overall UK tile market, in a normal year it is worth in excess of £400
million, with no company having a significant share - and with our entry into
this market in 2017 we approximately doubled the size of our addressable
market whilst maintaining our specialism in tiles and related products. Our
entry started with the acquisition of the Parkside business in September 2017
and in April 2019 we purchased the Strata business which was complimentary to
Parkside. Our strategy of "Disrupt and Construct" means that we plan to
'disrupt' the existing fragmented competitive landscape and put in place the
building blocks to 'construct' a new market leader. Our tile expertise,
supplier relationships, size and scale as a Group is central to this plan -
giving us the resources to recruit a talented sales team, invest in
market-leading pricing and access the broadest range of products, often on an
exclusive basis.
Progress and outlook
We are continuing to build the capability and proposition of our Commercial
business. There are now 59 colleagues in the business (2020: 52), including
a sales force of 29 (2020: 26). We are establishing a strong reputation for
quality and reliability with high levels of loyalty across different customer
groups such as architects, designers and contractors.
Performance over the course of the year has varied, based on conditions in the
various market sectors we service. Sales in the first half of £4.1 million
were down 10% year on year, with a significant impact from the Covid-related
disruption in key sectors such as hospitality and leisure during that time
period. Sales in the second half were up 55% year on year, to finish the
year at £8.6 million, 15% higher than 2020. This is a significant
outperformance of the market, which was down 7.2% (source: ONS). Trading
losses in the year were £1.6 million (2020: £1.9 million trading loss)
however our Commercial business is scaled to construct a market leader and we
continue to invest in people and resources to enable to grow significantly as
key sectors fully re-open.
Environmental leadership is particularly important in the commercial market
and we have made significant progress this year. Our Commercial business is
now ISO14001 accredited, externally certifying that we have an effective
environmental management system, we are leading the Group environmental
engagement with the World Land Trust, we have launched new packaging for our
samples made from 100% recycled and 100% recyclable material, we have worked
with suppliers on launch of innovative new products such as Criaterra, a
zero-waste tile made with 100% natural materials with a 90% energy saving over
ceramic products, and we have relaunched our Clerkenwell showroom as a
Sustainability and Design Studio, where we can showcase all of the innovative
work we are doing in this area to our architect and designer client base.
At the end of the year, there are some positive signs for the recovery of key
commercial market sectors such as travel and leisure, and our order bay is at
its highest ever level. As a result, we are optimistic that next year our
sales will materially move forward and trading losses will continue to narrow
as we construct an industry-leading business.
Key Performance Indicators ("KPIs")
The Board monitors a number of financial and non-financial metrics and KPIs
both for the Group and by individual store. This information is reviewed and
updated as the Directors feel appropriate. Specific measures include:
53 weeks to 52 weeks to YoY
2 October 26 September
2021 2020
Financial KPIs
Group revenue growth year-on-year 18.3% (12.0)% n/a
Retail like-for-like sales growth year-on-year* 19.6% (12.5)% n/a
Group gross margin 57.3% 58.5% (1.2)ppts
Adjusted profit before tax* £15.3m £3.6m 325.0%
Adjusted earnings per share* 6.13 pence 1.57 pence 290.4%
Adjusted net cash* £27.8m £26.0m +£1.8m
Inventory days 123 134 (11)
Non-financial KPIs
Retail customer overall satisfaction score 88.4% 88.5% (0.1)ppts
Colleague turnover 31.2% 28.8% 2.4ppts
Carbon emissions per store (tonnes per annum) 27.2 24.7 10.1%
Number of retail stores at year end 313 342 (29)
* as defined in the Financial Review
Notes: Customer overall satisfaction scores are calculated from the responses
we receive through our TileTalk customer feedback programme. Overall
satisfaction (OSAT) is the percentage of customers that score us 5 in the
scale of 1 - 5, where 1 is highly dissatisfied, and 5 is highly satisfied.
Energy carbon emissions have been compiled in conjunction with our electricity
and gas suppliers. This is based on the actual energy consumed multiplied by
Environment Agency approved emissions factors. Vehicle emissions have been
calculated by our in-house transport team based on mileage covered multiplied
by manufacturer quoted emission statistics. The comparative period in 2020
includes a period of complete store closure due to Covid-19, resulting in
lower emissions per store. Carbon emissions per store in 2019 were 32.0
tonnes per annum.
FINANCIAL REVIEW
Adjusted Measures
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 the prior
year we fully excluded the impact of IFRS 16 from adjusted profit. In 2021,
we have included the business as usual impact of IFRS 16 in adjusted profit
but 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, significant transactions such as sale and lease backs and one-off gains
and losses through sub-lets.
Analysis of movements from adjusted profit to statutory profit are detailed
below, noting that we have updated the presentation of adjusting items to
include the impact of IFRS16 in both periods, restating the 2020 comparative
to be on a consistent basis:
2021 £m 2020 £m
Adjusted profit before tax 15.3 3.6
Property
- Impairment of property, plant, equipment (1.0) (1.8)
- Vacant property and closure costs (2.1) (0.9)
- Store closure impairments and lease gains and losses (0.2) (5.0)
- IFRS16 BAU adjustments* nil 0.4
(3.3) (7.3)
Commercial
- Commercial impairment of goodwill, intangibles and property, nil (5.6)
plant and equipment**
nil (5.6)
Other
- Costs related to business restructure nil (0.5)
- Business rates relief from April to September 2021*** 2.3 nil
2.3 (0.5)
Statutory profit / (loss) before tax 14.3 (9.8)
* In the prior year we treated the total impact of IFRS16 as an adjusting
item, in the current year we have taken the impact of IFRS16 business as usual
into our adjusted profit.
** In the prior year, we impaired commercial goodwill, intangibles and
property, plant and equipment, recognising the risk of a slower growth profile
following the impact of Covid-19 on sectors that the Parkside and Strata
businesses serve.
*** In the second half year we have included a normal level of business rates
expense within our adjusted profit to improve comparison with the prior
year. Business rates relief of £6.7 million was received over the full
year, including £2.3 million in the second half, which we estimate is
significantly lower than the negative profit impact of trading restrictions
during the year as a whole.
STATEMENT OF FINANCIAL PERFORMANCE
Revenue
Total revenue for the period ended 2 October 2021 increased by 18.3% to
£228.0 million (2020: £192.8 million). Revenue in the year was impacted by
trading restrictions related to the Covid-19 pandemic in the second quarter,
when homeowners were unable to go inside our stores and registered traders
were only allowed to enter to visit the trade counter. The prior year was
materially impacted by temporary store closures in the third quarter, also
relating to the pandemic. In addition, there was a net closure of 29 Retail
stores in the year.
Retail like-for-like sales were 19.6% higher than the prior year, which
consisted of a 2.0% increase in the first half of the financial period and a
39.8% increase in the second half. The growth in the second half was
comparing against a period which included a full store lockdown in 2020 during
the first wave of the pandemic.
On a two-year basis, Retail like-for-like sales were up 6.3% against 2019,
including a decline of 4.5% in the first half (which included the lockdown in
the early part of 2021) and then very strong growth of 17.4% in the second
half (which compares two periods without trading restrictions).
Sales to our Commercial customers were up 15% year on year to £8.6 million,
with growth of 55% in the second half year as key sectors began to open up for
business.
Gross Margin
Total gross margin was 57.3%, a decrease from 58.5% in the prior year.
Gross margin in the Retail business decreased from 59.2% in the prior year to
58.1% in the current year. This was driven by a continued focus on pricing
competitiveness, changes in product mix, customer mix and NPD, and increased
shipping costs, which became particularly significant in the second half
year. Partially offsetting these downward pressures, there were lower
expenses from stock provisions and delivery than in the prior year. The
impact of foreign exchange movements on cost of goods sold this year was
immaterial.
Operating Expenses
Operating expenses were £112.4 million compared to £118.8 million in FY20
however the year on year change is distorted as a result of significant
one-off expenses in the prior year relating to the adoption of IFRS 16 and the
impairment of Commercial assets. On an adjusted basis, operating expenses
increased from £108.4 million in FY20 to £111.4 million in FY21.
The movement in adjusted operating costs is explained by the following key
items:
• Underlying cost increases of £1.5 million, consisting of increases in the
National Living Wage (£0.6 million), supply chain increases due to higher
volumes and subcontractor costs (£2.3 million), employee profit share (£4.0
million) and other costs (£0.2 million) offset by lower costs due to fewer
stores (£3.7 million) and the annualisation of cost reductions implemented in
the previous year (£1.9 million);
• The reversal of the majority of the holiday pay accrual from the end of the
prior year had the impact of decreasing adjusted operating costs by £3.6
million year on year;
• The impact of including IFRS 16 in adjusted operating costs is a decrease in
costs of £3.3 million year on year;
• Changes in Government support have increased adjusted operating costs by £6.3
million year on year;
• The 53(rd) week in this accounting period increased costs by £2.1 million.
In FY20 our adjusted profit included £10.7 million of government support
(through the Coronavirus Job Retention Scheme (CJRS) £5.3 million, Business
Rates Relief £4.7 million and local authority Covid-19 grants of £0.7
million). In FY21, adjusted profit included £4.4 million of government
support from Business Rates Relief. The Company has repaid all CJRS support
relating to FY21. Business rates relief of £6.7 million was received over
the full year, including £2.3 million in the second half, which we estimate
is significantly lower than the negative profit impact of trading restrictions
during the year as a whole.
Financing
Interest on bank loans and overdrafts, net of bank interest receivable, was
£0.4 million (2020: £0.8 million). In 2020 the business moved to a net
cash position, in part due to the sale of and leaseback our head office and
central warehouse buildings for £18.1 million, and interest costs have fallen
as we have repaid all outstanding loans and facilities in the year.
IFRS 16 has had the impact of increasing finance costs by £3.7 million,
resulting in total net finance costs of £4.1 million (2020: £3.8 million).
Profit Before Tax
Profit before tax was £14.3 million (2020: £9.8 million loss).
Excluding the adjusting items detailed above, profit before tax was £15.3
million (2020: £3.6 million). The Group adjusted profit before tax margin
was 6.7% (2020: 1.9%).
Tax
The effective rate of corporation tax for the period was 23.6% (2020: 18.4%).
Earnings Per Share
Basic earnings per share were 5.59 pence (2020: loss of 4.11 pence). Diluted
earnings per share were 5.52 pence (2020: loss of 4.11 pence). Excluding
adjusting items, adjusted earnings per share were 6.13 pence (2020: 1.57
pence).
Dividend and Dividend Policy
Following consideration of the financial position and performance of the
Group, the Board has decided to propose the resumption of dividend payments
and to readopt the previous policy of paying approximately half of adjusted
EPS as dividends. Moving forward, the interim dividend would be set at
approximately one third of the prior full year dividend. The Group will
evaluate its capital allocation policy in the coming year.
This year, the Board is recommending to shareholders a final dividend of 3.1
pence per share, which will cost £6.1 million. The shares will trade
ex-dividend on 23 December 2021 and, subject to approval at the Annual General
Meeting, the dividend will be paid on 31 January 2022.
STATEMENT OF FINANCIAL POSITION
Capital Expenditure
Capital expenditure in the period amounted to £4.7 million (2020: £4.4
million excluding freehold acquisition in the prior year), an increase of 7%
year on year.
Key investments are as follows:
• New retail stores £1.0 million - four new openings (including two
relocations) (2020: £1.3 million)
• Store improvements, merchandising and maintenance £0.8 million (2020: £0.9
million)
• LED store improvement programme £2.3 million (2020: £0.6 million)
• Central office refurbishment nil (2020: £1.3 million)
• Group IT developments (including web site) £0.3 million (2020: £0.3 million)
• Other expenditure £0.3 million (2020: nil)
In the prior year we also purchased two freehold properties for £2.3 million.
The Board expects capital expenditure in the year ahead to be between £6
million and £7 million which will cover our core investment plans. Any
acquisitions that the Group may consider as part of its growth plans would be
additional to this guidance.
Acquisitions & Disposals
During the year we disposed of three freehold properties for £2.1 million,
two of which that were held for sale at the end of 2020. In the prior year we
entered into a sale and leaseback arrangement for our head office and central
warehouse buildings for a price of £18.1 million before costs (£17.9 million
net of costs).
At the period end the Group held two freehold or long leasehold sites, with a
total carrying value of £1.0 million (2020: five freehold or long leasehold
sites valued at £3.1 million). The carrying value is based on the historic
purchase cost and capital expenditure less accumulated depreciation.
Inventory
Inventory at the period end was £32.8 million (2020: £29.3 million)
representing 123 days turnover (2020: 134 days turnover). The higher levels of
stock at year end reflect a decision to hold additional stock in light of
supply chain challenges. Stock days in 2020 were higher than normal due to
lower sales following lockdown restrictions.
Cash flow
On a statutory basis, net cash from operating activities was £26.7 million,
compared to £51.0 million in the prior year period.
The table below analyses changes in adjusted net cash flow and has been
prepared on a post IFRS16 basis, with 2020 values restated to aid
comparability:
2021 2020
£m £m
Cash generated by operations before WC movements 47.0 35.1
Changes in working capital (14.6) 20.8
Interest including interest element of lease liabilities (4.2) (3.9)
Tax (1.5) (1.0)
Net cash from operating activities 26.7 51.0
Capital expenditure excluding investments (4.7) (4.4)
Freehold and leasehold investments - (2.3)
Disposals 2.1 18.6
Payment of capital element of lease liabilities (23.0) (21.5)
Other 0.7 0.4
Free cash flow 1.8 41.8
Dividends 0.0 (4.5)
Change in adjusted net cash 1.8 37.3
Adjusted net cash at end of period 27.8 26.0
Adjusted net cash increased by £1.8 million (2020: £37.3 million). This
increase included a £10.7 million negative impact within working capital
caused by two specific factors which are not representative of the underlying
cash performance of the period:
• the change of the financial year end due to the 53(rd) trading week, resulted
in a £7 million cash outflow in the final days of the period as a result of
the timing of supplier payment runs and our payroll; and
• we repaid VAT of £3.7 million deferred from 2020 as part of the Government's
Covid-19 support package.
Working capital also includes an outflow due to stock movements of £3.4
million as we chose to hold higher levels of key stock lines as part of our
response to the global supply chain challenges.
Cash and cash equivalents at the period end were £27.8 million (2020: £31.0
million) with nil borrowings (2020: £5.0 million), resulting in adjusted net
cash of £27.8 million (2020: £26.0 million).
Return on Capital Employed
As a result of strong cash generation as well as the store consolidation
programme, over the two year period from 2019 to 2021, the Group's lease
adjusted return on capital employed (LAROCE) has improved from 13.1% to 17.5%,
whilst lease adjusted capital employed has reduced by £43 million.
Banking Facilities
The Group has a £39.0 million revolving credit facility in place which is
committed to July 2023 (2020: £39.0 million). At the year end, none of this
was drawn (2020: nil). During 2021, we repaid £5.0 million and cancelled a
further £5.0 million of credit facilities through the Coronavirus Large
Business Interruption Loan Scheme and none of these facilities remain active
at the end of the period (2020: £5.0 million drawn). As a result, the Group
had £39.0 million of undrawn committed banking facilities at the end of the
financial year.
Current Trading and Outlook
In the first eight weeks of the new financial year, trading has remained
robust. However, macroeconomic indicators such as consumer confidence have
softened and global supply chain challenges and cost inflation will continue
to provide trading headwinds. Against this backdrop, Retail like-for-like
sales have increased by 18.4% on a two-year basis and decreased by 0.7% on a
one-year basis. We remain confident that our market-leading Retail offer and
Commercial growth strategy, along with our flexible supply chain and balance
sheet strength, give us a solid platform from which to deliver sustainable
long-term growth.
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 a more
pessimistic trading scenario that was deemed severe but plausible. The more
pessimistic trading scenario was based on a further national lockdown related
to the Covid-19 pandemic during quarter 2 of FY22 that would see our Retail
stores closed to homeowners for a further three months.
The Group has already taken a number of actions to strengthen its liquidity
during the Covid-19 pandemic, including the sale and leaseback of the Group's
head office and central warehouse buildings in Enderby in June 2020. 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 July 2018 and
expires in July 2023. In all scenarios, the Board have 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 continue to adopt the going concern basis in
preparing the financial statements.
Long Term Viability
The Board have also considered the Longer Term Viability ("LTV") of the
business. Based on this review, the Directors confirm that they have a
reasonable expectation that the Group will continue to operate and meet its
liabilities, as they fall due, for the next four years. The full LTV
statement can be found in our Annual Report.
Rob Parker Stephen Hopson
Chief Executive Officer Chief Financial Officer
30 November 2021
Unaudited Consolidated Statement of Financial Performance
For the 53 weeks ended 2 OCTOBER 2021
Notes 53 weeks 52 weeks
ended ended
2 October 26 September
2021 2020
£'000 £'000
Group revenue 3 227,997 192,813
Cost of sales (97,297) (80,001)
Gross profit 130,700 112,812
Distribution and selling costs (83,591) (80,971)
Other operating expenses (6,100) (10,105)
Administrative costs (18,100) (23,178)
Sales and marketing costs (4,564) (4,587)
Group operating profit/(loss) 18,345 (6,029)
Finance income 6 87 101
Finance costs 6 (4,158) (3,901)
Profit/(loss) before taxation 4 14,274 (9,829)
Taxation 7 (3,370) 1,811
Profit/(loss) for the period 10,904 (8,018)
Profit/(loss) is attributable to:
Owners of Topps Tiles Plc 10,876 (7,966)
Non-controlling interests 28 (52)
10,904 (8,018)
All results relate to continuing operations of the Group.
Earnings per ordinary share:
- Basic 9 5.59p (4.11)p
- Diluted 9 5.52p (4.11)p
Unaudited Consolidated Statement of Comprehensive Income
For the 53 weeks ended 2 OCTOBER 2021
53 weeks 52 weeks
ended ended
2 October 26 September
2021 2020
£'000 £'000
Profit/(loss) for the period 10,904 (8,018)
Total comprehensive income/(expense) for the period is attributable to:
Owners of Topps Tiles Plc 10,876 (7,966)
Non-controlling interests 28 (52)
10,904 (8,018)
Unaudited Consolidated Statement of Financial Position
as at 2 OCTOBER 2021
Notes 2021 2020
£'000 £'000
Non-current assets
Goodwill - -
Intangible assets 1,243 916
Property, plant and equipment 23,680 27,170
Investment properties - -
Other financial assets 2,335 2,749
Deferred tax assets 407 1,406
Right-of-use assets 95,418 106,258
123,083 138,499
Current assets
Assets classified as held for sale - 1,786
Inventories 32,758 29,337
Other financial assets 518 873
Trade and other receivables 4,538 3,567
Cash and cash equivalents 10 27,789 31,018
65,603 66,581
Total assets 188,686 205,080
Current liabilities
Bank loans 11 - (4,981)
Trade and other payables (47,425) (58,446)
Lease liabilities (19,521) (25,520)
Current tax liabilities (2,027) (1,114)
Provisions (353) (462)
(69,326) (90,523)
Net current liabilities (3,723) (23,942)
Non-current liabilities
Lease liabilities (91,817) (98,636)
Provisions (1,969) (1,867)
Total liabilities (163,112) (191,026)
Net assets 25,574 14,054
Equity
Share capital 6,555 6,548
Share premium 2,625 2,492
Own shares (1,216) (1,483)
Merger reserve (399) (399)
Share-based payment reserve 4,642 3,965
Capital redemption reserve 20,359 20,359
Accumulated losses (6,992) (17,400)
Capital and reserves attributable to owners of Topps Tiles Plc 25,574 14,082
Non-controlling interests - (28)
Total equity 25,574 14,054
Unaudited Consolidated Statement of Changes in Equity
For the 53 weeks ended 2 october 2021
Share Share Own Merger Share-based Capital Accumulated losses Total
capital premium shares reserve payment redemption £'000 Non-controlling interest equity
£'000 £'000 £'000 £'000 reserve reserve £'000 £'000
£'000 £'000
Balance at 29 September 2019 6,548 2,490 (1,548) (399) 3,962 20,359 (4,783) (2) 26,627
Loss and total comprehensive expense for the period - - - - - - (7,966) (52) (8,018)
Dividends - - - - - - (4,484) - (4,484)
Issue of share capital - 2 - - - - - - 2
Own shares issued in the period - - 65 - - - (65) - -
Credit to equity for equity-settled share-based payments - - - - 3 - - - 3
Deferred tax on share-based payment transactions - - - - - - (2) - (2)
Acquisition of non-controlling interest on business combination - - - - - - (100) 26 (74)
Balance at 26 September 2020 6,548 2,492 (1,483) (399) 3,965 20,359 (17,400) (28) 14,054
Profit and total comprehensive income for the period - - - - - - 10,876 28 10,904
Dividends - - - - - - - - -
Issue of share capital 7 133 - - - - - - 140
Own shares issued in the period - - 267 - - - (267) - -
Credit to equity for equity-settled share-based payments - - - - 677 - - - 677
Deferred tax on share-based payment transactions - - - - - - (47) - (47)
Acquisition of non-controlling interest on business combination - - - - - - (154) - (154)
Balance at 2 October 2021 6,555 2,625 (1,216) (399) 4,642 20,359 (6,992) - 25,574
Unaudited Consolidated Cash Flow Statement
For the 53 weeks ended 2 OCTOBER 2021
53 weeks 52 weeks
ended ended
2 October 26 September
2021 2020
£'000 £'000
Cash flow from operating activities
Profit/(loss) for the period 10,904 (8,018)
Taxation 3,370 (1,811)
Finance costs 4,158 3,901
Finance income (87) (101)
Group operating profit/(loss) 18,345 (6,029)
Adjustments for:
Depreciation of property, plant and equipment 6,268 7,145
Depreciation of right-of-use assets 20,508 21,080
Amortisation of intangible assets 186 477
Loss on disposal of property, plant and equipment 1,736 338
Loss/(gain) on sublease 134 (150)
Impairment (reversal)/charge of property, plant and equipment (604) 1,155
Fair value adjustment for asset held for sale - 558
Impairment of right-of-use assets 2,402 5,411
Impairment of goodwill - 3,104
Impairment of intangible assets - 1,687
Gain on lease disposal (2,563) (388)
Receipt of lease incentives - 173
Loss on disposal of investment properties - 483
Share option charge 677 3
Decrease in trade and other receivables 7 252
(Increase)/decrease in inventories (3,421) 1,589
(Decrease)/increase in payables (11,209) 18,990
Cash generated by operations 32,466 55,878
Interest paid (468) (856)
Interest element of lease liabilities paid (3,728) (3,033)
Taxation paid (1,535) (999)
Net cash from operating activities 26,735 50,990
Investing activities
Interest received 11 20
Interest received on sublease assets 76 81
Receipt of capital element of sublease assets 629 343
Purchase of property, plant and equipment (4,221) (6,290)
Purchase of intangibles (513) (417)
Proceeds on disposal of property, plant and equipment 2,096 18,552
Acquisition of subsidiary, net of cash acquired (154) (74)
Net cash (used in)/generated from investment activities (2,076) 12,215
Financing activities
Payment of capital element of lease liabilities (23,026) (21,452)
Dividends paid - (4,484)
Proceeds from issue of share capital 133 2
Drawdown of bank loans - 20,000
Repayment of bank loans (4,995) (45,000)
Net cash used in financing activities (27,888) (50,934)
Net (decrease)/increase in cash and cash equivalents (3,229) 12,271
Cash and cash equivalents at beginning of period 31,018 18,747
Cash and cash equivalents at end of period 27,789 31,018
Notes to the Unaudited Financial Statements
For the 53 weeks ended 2 OCTOBER 2021
1 GENERAL INFORMATION
Topps Tiles Plc is a public company, limited by shares, incorporated and
domiciled in the United Kingdom under the Companies Act 2006.
The consolidated financial statements are unaudited and do not constitute
statutory accounts of the Company within the meaning of Section 434(3) of the
companies Act 2006. Statutory accounts for the year ended 26 September 2020
have been delivered to the Registrar of Companies. The audit report for those
accounts was unqualified, did not draw attention to any matters by way of
emphasis and did not contain a statement under 498(2) or (3) of the Companies
Act 2006.
These financial statements are presented in pounds sterling because that is
the currency of the primary economic environment in which the Group operates.
ADOPTION OF NEW AND REVISED STANDARDS
In the current period, there were no new or revised standards and
interpretations adopted that have a material impact on the financial
statements. The Group has not early adopted any other standard, interpretation
or amendment that has been issued but is not yet effective.
STANDARDS ADOPTED IN CURRENT PERIOD
The following new and revised standards and interpretations have been adopted
in the current year. Their adoption has not had any significant impact on the
amounts reported in these financial statements that may impact the accounting
for future transactions and arrangements.
Amendments to References to the Conceptual Framework in IFRS Standards
Amendments to IFRS 9, IAS 39 and IFRS 7 - Interest rate benchmark reform
Amendments to IFRS 16 - COVID-19 concessions
2 ACCOUNTING POLICIES
The principal accounting policies adopted are set out below.
A) BASIS OF ACCOUNTING
These condensed financial statements have been prepared in accordance with
international accounting standards in conformity with the requirements of the
Companies Act 2006 ('IFRS') and the applicable legal requirements of the
Companies Act 2006. In addition to complying with international accounting
standards in conformity with the requirements of the Companies Act 2006, the
consolidated financial statements also comply with international financial
reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union. The financial statements have been prepared on
the historical cost basis, except for the revaluation of derivative financial
instruments and investment property. Historical cost is generally based on the
fair value of the consideration given in exchange for goods and services.
The accounting policies set out below have, unless otherwise stated, been
applied consistently to all periods presented in these Group financial
statements.
B) 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 a more
pessimistic trading scenario that was deemed severe but plausible. The more
pessimistic trading scenario was based on a further national lockdown related
to the Covid-19 pandemic during quarter 2 of FY22 that would see our Retail
stores closed to homeowners for a further three months.
The Group has already taken a number of actions to strengthen its liquidity
during the Covid-19 pandemic, including the sale and leaseback of the Group's
head office and central warehouse buildings in Enderby in June 2020. 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 July 2018 and expires
in July 2023. In all scenarios, the Board have 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 continue to adopt the going concern basis in preparing
the financial statements.
C) REVENUE RECOGNITION
Revenue is measured at the transaction price received or receivable and
represents amounts receivable for goods in the normal course of business, net
of discounts, VAT and other sales-related taxes.
Revenue from the sale of goods is recognised on the collection or delivery of
goods, when all the following conditions are satisfied:
• the Group has satisfied its performance obligations to external customers, being the date goods are collected from store or received by the customers; and
• the customer has obtained control of the goods being transferred.
These conditions are met, predominantly, at the point of sale. The
exceptions to this are for: goods ordered in advance of collection, where
revenue is recognised at the point that the goods are collected; sales of
goods that result in award credits for customers (see below); and web sales,
where revenue is recognised at the point of delivery.
Sales of goods that result in award credits for customers, under the Company's
Trader Loyalty Scheme, are accounted for as multiple element revenue
transactions and the fair value of the consideration received or receivable is
allocated between the goods supplied and the award credits granted. The
consideration allocated to the award credits is measured by reference to their
fair value being the amount for which the award credits could be sold
separately. Such consideration is not recognised as revenue at the time of the
initial sale transaction, but is deferred and recognised as revenue when the
award credits are redeemed and the Company's performance obligations have been
satisfied.
The level of sales returns is closely monitored by management, and as such,
the Group holds a sales return provision in the Consolidated Statement of
Financial Position to provide for the expected level of returns. The sales
value of the expected returns is recognised within Accruals, with the cost
value of the goods expected to be returned recognised as a current asset
within Inventories.
d) TAXATION
The tax expense represents the sum of the tax currently payable and deferred
tax.
The tax currently payable is based on taxable profit for the period. Taxable
profit differs from net profit as reported in the statement of financial
performance because it excludes items of income or expense that are taxable or
deductible in other periods and it further excludes items that are never
taxable or deductible. The Group's liability for current tax is calculated
using tax rates that have been enacted or substantively enacted by the balance
sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities are not
recognised if the temporary difference arises from the initial recognition of
goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that affects
neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries, except where the Group is able to
control the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised based on tax
laws and rates that have been enacted at the balance sheet date. Deferred tax
is charged or credited in the statement of financial performance, except when
it relates to items charged or credited directly to equity, in which case the
deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation
authority and the Group intends to settle its current tax assets and
liabilities on a net basis.
E) OPERATING COSTS
Restructuring costs relate to board approved decisions such as business
closures or major organisational changes. Operating profit is stated after
charging/(crediting) restructuring costs but before investment income and
finance costs.
Employee profit sharing costs are classified as distribution and selling costs
and administrative costs.
3 REVENUE
An analysis of Group revenue is as follows:
53 weeks 52 weeks
ended ended
2 October 26 September
2021 2020
£'000 £'000
Revenue from the sale of goods 227,997 192,813
Total revenue 227,997 192,813
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. All revenue is
derived from sales in the UK.
The Group's revenue is driven by the consolidation of individual small value
transactions and as a result, Group revenue is not reliant on a major customer
or group of customers.
4 PROFIT/(LOSS) BEFORE TAXATION
Profit/(loss) before taxation for the period has been arrived at after
charging/(crediting):
53 weeks 52 weeks
ended ended
2 October 26 September
2021 2020
£'000 £'000
Depreciation of property, plant and equipment 6,268 7,145
Depreciation of right-of-use assets 20,508 21,080
Impairment (reversal)/charge of property, plant and equipment (604) 1,155
Fair value adjustment for asset held for sale - 558
Impairment of right-of-use assets 2,402 5,411
Loss on disposal of property, plant and equipment 1,736 338
Amortisation of intangibles 186 477
Impairment of intangibles - 1,687
Impairment of goodwill - 3,104
Loss on disposal of investment properties - 483
Staff costs (see note 5) 57,955 49,638
Furlough income received - (5,228)
Government grants received - (700)
Exchange losses recognised in profit or loss 145 94
Write-down of inventories recognised as an expense 4,598 4,331
Cost of inventories recognised as an expense 92,554 75,573
During the year the business disposed of three freehold properties (2020:
three freehold properties).
Analysis of the auditors' remuneration is provided below:
53 weeks
ended 52 weeks
2 October ended
2021 26 September
£'000 2020
£'000
Fees payable to the Company's auditors with respect to the Company's annual 74 49
accounts
Fees payable to the Company's auditors and their associates for other audit
services to the Group:
Audit of the Company's subsidiaries pursuant to legislation 229 184
Total audit fees 303 233
Total non-audit fees 0 0
Total fees payable to the Company's auditors 303 233
5 STAFF COSTS
The average monthly number of persons employed by the Group in the UK during
the accounting period (including Executive Directors) was:
53 weeks 52 weeks
ended ended
2 October 26 September
2021 2020
Number employed Number employed
Selling 1,533 1,661
Administration 314 340
1,847 2,001
The average monthly number of persons (full-time equivalents) employed by the
Group in the UK during the accounting period (including Executive Directors)
was:
53 weeks 52 weeks
ended ended
2 October 26 September
2021 2020
Number employed Number employed
Selling 1,455 1,573
Administration 283 332
1,738 1,905
2021 2020
£'000 £'000
Their aggregate remuneration comprised:
Wages and salaries (including LTIP) 52,348 44,865
Social security costs 4,498 3,779
Other pension costs 1,109 994
57,955 49,638
6 FINANCE INCOME AND FINANCE COSTS
53 weeks 52 weeks
ended ended
2 October 26 September
2021 2020
£'000 £'000
Finance Income
Bank interest receivable 11 20
Interest income from finance lease receivables 76 81
87 101
Finance costs
Interest on bank loans and overdrafts (430) (868)
Interest payable on lease liabilities (3,728) (3,033)
(4,158) (3,901)
No finance costs have been capitalised in the period, or the prior period.
Interest on bank loans and overdrafts represents gains and losses on financial
liabilities measured at amortised cost. There are no other gains or losses
recognised in respect of financial liabilities measured at amortised cost.
7 TAXATION
53 weeks 52 weeks
ended ended
2 October 26 September
2021 2020
£'000 £'000
Current tax - debit/(credit) for the period 2,418 (48)
Current tax - adjustment in respect of previous periods - 134
Deferred tax - debit/(credit) for the period 1,234 (2,028)
Deferred tax - adjustment in respect of previous periods 145 42
Effect of tax rate change on opening balance (427) 89
3,370 (1,811)
The charge for the period can be reconciled to the profit/(loss) per the
statement of financial performance as follows:
53 weeks 52 weeks
ended ended
2 October 26 September
2021 2020
£'000 £'000
Continuing operations:
Profit/(loss) before taxation 14,274 (9,829)
Tax at the UK corporation tax rate of 19.0% (2020: 19.0%) 2,712 (1,868)
Expenses that are not deductible in determining taxable profit 11 966
Other movements (36) (49)
Fixed asset timing differences 739 (1,104)
Difference between IFRS 2 and corporation tax relief - (7)
(Reduction)/increase in UK corporation tax rate (29) 91
Non-taxable income (172) (17)
Tax effect of adjustment in respect of prior periods 145 177
Tax expense for the period 3,370 (1,811)
In the period, the Group has recognised a corporation tax credit directly to
equity of £nil (2020: £nil) and a deferred tax charge to equity of £46,701
(2020: £1,622) in relation to the Group's share option schemes.
The Group continue to fully provide within current tax liabilities for a
historic tax claim relating to EU loss relief in relation to the closed Dutch
business of £988,000 (2020: £957,000).
8 DIVIDENDS
Amounts recognised as distributions to equity holders in the period:
53 weeks 52 weeks
ended ended
2 October 26 September
2021 2020
£'000 £'000
Final dividend for the period ended 26 September 2020 of £0.000 (2019: - 4,484
£0.023) per share
Interim dividend for the period ended 2 October 2021 of £0.000 (2020: - -
£0.000) per share
- 4,484
Proposed final dividend for the period ended 2 October 2021 of £0.031 (2020: 6,057 -
£0.000) per share
The proposed final dividend for the period ended 2 October 2021 is subject to
approval by shareholders at the Annual General Meeting and has not been
included as a liability in these financial statements.
9 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.
53 weeks 52 weeks
ended ended
2 October 26 September
2021 2020
Weighted average number of issued shares for basic earnings per share 196,508,867 196,443,323
Weighted average impact of treasury shares for basic earnings per share (1,344,844) (1,472,264)
Total weighted average number of shares for basic earnings per share 195,164,023 194,971,059
Weighted average number of shares under option 2,274,713 -
For diluted earnings per share 197,438,736 194,971,059
53 weeks ended 52 weeks
2 October ended
2021 26 September
£'000 2020
£'000
Profit/(loss) for the period 10,904 (8,018)
Adjusting items 1,067 11,076
Adjusted profit for the period 11,971 3,058
Earnings per ordinary share - basic 5.59p (4.11)p
Earnings per ordinary share - diluted 5.52p (4.11)p
Earnings per ordinary share - adjusted 6.13p 1.57p
The calculation of the basic and diluted earnings per share used the
denominators as shown above for both basic and diluted earnings per share. The
number of potentially exercisable shares is 2,274,713 (2020: 1,758,101
anti-dilutive shares).
Adjusted earnings per share were calculated after adjusting for the post-tax
impact of the following items: rates relief from April 2020 to September 2021
£1,839,000 benefit (2020: £nil), impairment of property, plant, equipment
and movement in onerous lease provision of £1,202,000 (2020: £1,781,000),
vacant property costs for stores closed as part of store reduction programme
of £1,704,000 (2020: £771,000), IFRS 16 one off changes including the
impairment of closure programme stores of £nil (2020: £2,474,000),
commercial impairment £nil (2020:£5,618,000) and restructuring costs £nil
(2020:£432,000).
10 CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash held by the Group and short-term bank
deposits net of bank overdrafts, where there is a right of offset, with an
original maturity of three months or less. The carrying amount of these assets
approximates their fair value. A breakdown of significant bank and cash
balances by currency is as follows:
2021 2020
£'000 £'000
Sterling 27,064 28,862
US dollar 495 1,701
Euro 230 456
Total cash and cash equivalents 27,789 31,018
Cash and cash equivalents are in the scope of the expected credit loss model
under IFRS 9, however balances are held with recognised financial institutions
and therefore the expected impairment loss is considered to be minimal.
11 BANK LOANS
2021 2020
£'000 £'000
Bank loans (all sterling) (106) 4,866
2021 2020
£'000 £'000
The borrowings are repayable as follows:
On demand or within one year - 5,000
Less: total unamortised issue costs (106) (134)
(106) 4,866
Issue costs to be amortised within 12 months 36 115
Amount due for settlement within 12 months - 4,981
The Directors consider that the carrying amount of the bank loan at 2 October
2021 and 26 September 2020 approximates to its fair value since the amounts
relate to floating rate debt.
The average interest rates paid on the loan were as follows:
2021 2020
% %
Loans - 2.11
The Group borrowings are arranged at floating rates, thus exposing the Group
to cash flow interest rate risk.
The following is a reconciliation of changes in financial liabilities to
movement in cash from financing activities:
Lease Current borrowings Non-current borrowings Unamortised
liabilities £'000 £'000 issue costs
£'000 £'000
As at 29 September 2019 128,245 - 30,000 (238)
Repayment of bank loan - (1,000) (44,000) -
Drawdown of bank loan - 6,000 14,000 -
Repayment of lease liabilities (24,484) - - -
Additions/disposals of lease liabilities 17,362 - - -
Interest accrued on lease liabilities 3,033 - - -
Issue costs incurred in the year - - - (22)
Amortisation of issue costs - - - 126
As at 26 September 2020 124,156 5,000 - (134)
Repayment of bank loan - (5,000) - -
Drawdown of bank loan - - - -
Repayment of lease liabilities (26,754) - - -
Additions/disposals of lease liabilities 10,208 - - -
Interest accrued on lease liabilities 3,728 - - -
Issue costs incurred in the year - - - (98)
Amortisation of issue costs - - - 126
As at 2 October 2021 111,338 - - (106)
The Group has a revolving credit facility to June 2023 of £39.0 million. As
at the financial period end, £nil of this was drawn (2020: £nil). The loan
facility contains financial covenants which are tested on a bi-annual basis.
The Group did not breach any covenants in the period.
During the year the Group repaid the remaining £5.0 million loan relating to
the Coronavirus Large Business Interruption Loan Scheme ("CLBILS"), which
facilitated access to finance for medium-sized and larger businesses affected
by the coronavirus outbreak. The Group had a credit facility to June 2021 of
£10.0 million, which has now expired.
At 2 October 2021, the Group had available £39.0 million (2020: £44.0
million) of undrawn committed banking facilities.
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