REG - Topps Tiles - Annual Financial Results
28/11/2023 07:00
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RNS Number : 8274U Topps Tiles PLC 28 November 2023
28 November 2023
Topps Tiles Plc
Annual Financial Results
Third consecutive record year of sales, '1 in 5 by 2025' market share goal
delivered two years ahead of schedule
Topps Tiles Plc ("Topps Group", the "Company" or the "Group"), the UK's
leading tile specialist, announces its unaudited consolidated annual financial
results for the 52 weeks ended 30 September 2023.
Strategic and Operational Highlights
• Third consecutive record year of revenue for the Group
• '1 in 5 by 2025' market share goal achieved two years early, with market share
increasing to 22.1% from 19.8% in 2022 (restated)
• New Topps Group branding, underscoring the significant development and
diversification of the Group over recent years
• Record sales in Topps Tiles, with sales per store up 30% compared to
pre-pandemic levels, further improvements to world-class customer service
scores, and successful expansion into new product categories
• Good progress in Topps Tiles' gross margin, with quarter-on-quarter growth
throughout the year (before rebates and other adjustments)
• Excellent progress in Pro Tiler online pure play businesses, with sales up c.
50% year on year and 8-9% profit margins delivered
• Parkside restructure complete and now profitable in the final quarter
• New Chair appointed and new Senior Independent Director Designate announced
Financial Highlights
52 weeks ended 52 weeks ended YoY
30 September 1 October
2023 2022
Adjusted Measures
Topps Tiles like-for-like revenue year on year(1) 3.1% 9.4% n/a
Adjusted profit before tax(2) £12.5 million £15.6 million (19.9)%
Adjusted earnings per share(3) 4.49p 6.14p (26.9)%
Adjusted net cash at period end(4) £23.4 million £16.2 million +£7.2 million
Statutory Measures
Group revenue £262.7 million £247.2 million +6.3%
Gross profit £139.2 million £135.4 million +2.8%
Gross margin % 53.0% 54.8% (1.8)ppts
Profit before tax £6.8 million £10.9 million (37.6)%
Basic earnings per share 1.63p 4.60p (64.6)%
Final dividend per share 2.4p 2.6p (7.7)%
Total dividend per share 3.6p 3.6p Flat
Financial Summary
• Group revenue up 6.3% to £262.7 million
• Group gross profit up 2.8% to £139.2 million
• Group gross margin at 53.0%, with growth through the year driven by increasing
margin in Topps Tiles
• Adjusted profit before tax of £12.5 million due to the impact of cost
inflation
• Cash increased £7.2 million, due to strong operational cash flows and
disciplined working capital management
• Strong balance sheet with £23.4 million net cash and £53.4 million headroom
within committed borrowing facilities
• Final dividend of 2.4 pence per share, maintaining the full year dividend at
3.6 pence, reflecting confidence in the medium-term prospects of the business
Current Trading and Outlook
• Trading in the early weeks of the new financial year has reflected the
well-documented challenges to discretionary consumer spending, especially RMI,
including higher interest rates and prolonged high inflation, falling house
prices and lower housing transactions
• Softer build into the seasonal peak trading period, with Group sales down 3.0%
year on year in first eight weeks of the new financial year with like-for-like
sales in Topps Tiles down 6.1% and strong growth continuing in Pro Tiler Tools
• Well-positioned to continue to take market share due to competitive
advantages, including market-leading brands, world-class customer service,
specialist expertise, strong balance sheet, growing cash position and
ambitious growth strategy
Commenting on the results, Rob Parker, Chief Executive said:
"This has been a further year of strategic progress for the Group and we are
delighted to have delivered a third consecutive year of record sales and to
have achieved our '1 in 5' market share goal two years ahead of schedule.
While profitability for the year reflects the impact of inflation on our cost
base, particularly during the early months of the period, these pressures
began to abate in the second half, with the smaller store estate and the cost
reduction plan at Parkside providing further mitigation.
"As we enter our new financial year, it is clear that there has been a
weakening of discretionary consumer spending. The business is well positioned
to deal with this period, our established brands are market leading, we are
competitively advantaged and we are confident that we will continue to take
market share. When combined with a strong balance sheet, this will support the
Group's ambitions over the medium term. Topps Group continues to develop and
diversify and we remain excited by the opportunities ahead of us."
Notes
(1)Topps Tiles like-for-like revenue is defined as sales from Topps Tiles
stores that have been trading for more than 52 weeks and www.toppstiles.co.uk
(http://www.toppstiles.co.uk) .
(2) Adjusted profit before tax excludes the impact of items which are either
one-off in nature or fluctuate significantly from year to year. See the
financial review section of this document for a reconciliation of adjusted
profit before tax to statutory profit before tax.
(3) Adjusted earnings per share is adjusted for the items highlighted above,
plus the impact of corporation tax. In 2022, adjusted earnings per share also
excluded a £1.2 million deferred tax credit in respect of previous periods
which is not expected to repeat.
(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.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
For further information please contact:
Topps Tiles Plc (28/11/23) 020 7638 9571
Rob Parker, CEO (Thereafter) 0116 282 8000
Stephen Hopson, CFO
Citigate Dewe Rogerson 020 7638 9571
Kevin Smith/Ellen Wilton
Summary of performance and progress
2023 has been a further year of development and progress for the Group. In our
60(th) anniversary year, we were delighted to achieve a number of significant
milestones as well as making substantial strategic and operational progress
across the business. The Group has delivered a third consecutive year of
record sales, and in doing so we achieved our market share goal, two years
ahead of schedule.
This goal, which we set for the business in 2020 and refer to as '1 in 5 by
2025', was to take a 20% market share by 2025, up from 17% at that time. This
year, we increased our market share by 2.3 percentage points, to 22.1% of the
£1.2 billion market for tiles and related products in the UK, and therefore
achieved our goal in just three years, rather than five.
Financial performance in 2023 was robust. Including a full year of performance
from our Online Pure Play businesses, sales were up 6.3% year on year to a new
record of £262.7 million (2022: £247.2 million), more than £40 million
higher than 2019 (the last year before the pandemic). Gross profit was up
2.8% to £139.2 million, also a record for the Group. Gross margins were lower
year on year as a result of business mix and FX movements, but trended upwards
through the period as the most acute levels of product cost inflation abated.
Adjusted operating expenses were 5.7% higher as a result of inflation and a
full year of the cost base relating to Online Pure Play, partially offset with
lower costs from fewer stores year on year and a cost reduction programme in
Parkside. Adjusted profit before tax of £12.5 million was down year on year
(2022: £15.6 million) reflecting the inflationary impacts on costs, and
adjusted EPS was down from 6.14 pence last year to 4.49 pence. The Group's
cash generation in the year was strong, with growth in cash of £7.2 million
over the year, further increasing the strength of the Group's balance sheet.
The full year dividend is being maintained at 3.6 pence per share, in line
with our capital allocation policy, with the Board able to look through short
term periods of macroeconomic weakness with confidence about the Group's
medium-term prospects.
Topps Tiles, our largest brand, had a good year, generating like-for-like
sales growth of 3.1% on the back of two exceptional years of growth. Total
sales were £230.9 million (2022: £227.0 million), a record for the brand,
and with average sales per store now up 30% compared to the pre-pandemic
period of 2019. The business continued to extend its range of products and
achieved world-class customer satisfaction scores whilst doing so. Gross
margins improved sequentially over the course of the year, with each trading
quarter recording higher gross margins (excluding rebates and other
adjustments) than the last. Cost control has been strong over recent years,
with virtually all operating cost inflation since 2019, including energy and
labour costs, offset through efficiencies and the optimisation of our store
network.
Pro Tiler Tools, acquired in March 2022, delivered excellent sales growth and
strong profitability, and, alongside Tile Warehouse, recorded sales of £22.4
million in 2023 in our Online Pure Play channel, up from £9.3 million in the
part-year period last year. We are continuing to pursue aggressive growth in
this area of business and have launched two new business and increased the
range of proprietary brands available to our trade customers in the last
twelve months.
Parkside, our commercial business focused on architects and designers,
delivered a reduced level of sales of £9.4 million (2022: £10.9 million).
Following a period of losses, the business was restructured at the end of the
third quarter, and moved back into profitability in quarter four. Parkside is
now well set for future growth from a sound financial base.
Headwinds from last year, primarily supply chain difficulties (both logistics
and availability of supply) and recruitment have now eased, with staff
turnover substantially down year on year, stock availability at good levels
and the cost of shipping now returning to pre-pandemic levels.
Having been developed and diversified significantly over recent years, the
business now trades in three related sectors of the UK market for tiles and
associated products - our omni-channel, market leading Topps Tiles business,
our Online Pure Play tile and consumable operations (Pro Tiler Tools and Tile
Warehouse), and our commercial market-focused offer (Parkside). To reflect
this broader base and the strategic journey we are on to continue to grow our
share of the total UK tile market, we believe the time is right to establish a
new identity as Topps Group.
Topps Group retains the rich heritage of Topps Tiles, which has been serving
UK consumers since 1963 and is the clear UK market-leading business in the
domestic tile market, while also encapsulating our ambition and our strategy
to build a diverse ranges of businesses, each with its own specialism within
the market for tiles and closely associated products. The new identity
underscores the greater breadth of opportunities for our key stakeholders,
including colleagues, suppliers and shareholders. For colleagues, this
includes a broader range of career opportunities; for suppliers, the greater
scale of Group-wide sourcing arrangements; and for shareholders, the continued
successful evolution and growth of the Group.
Purpose, goal and strategy
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.
As described above, this year the Group achieved its 2025 market share goal,
two years ahead of schedule. We now account for 22.1% of the £1.2 billion
market for tiles and associated products. However, we believe that there is
much more that the Group can deliver, both in sales and profit.
The Group's strategy remains focused across three business areas -
Omni-channel (Topps Tiles), Commercial (Parkside) and Online Pure Play (Pro
Tiler and Tile Warehouse) - all of which are underpinned by the same three
Group strategies of Leading Product, Leading People and Environmental
Leadership.
Leading Product
Our expertise in the ranging, sourcing and procurement of tiles and associated
products on a global basis is a core specialism of the Group and a significant
driver of our competitive advantage. Our scale allows us to work directly with
carefully selected manufacturing partners from all around the world to develop
and produce differentiated products that are innovative, of high quality and,
often, exclusive to Topps Group. These direct relationships set us apart from
many of our competitors who tend to be more reliant on importers, and may not
enjoy the cost advantage and creative input that direct supplier relationships
give us.
This year we have seen a normalisation of many of the factors that have
negatively impacted global supply chains in the past two years. Shipping costs
and capacity are trending towards pre-pandemic levels, HGV driver availability
has normalised, strikes impacting some ports have been resolved and the
reduction in global gas prices and raw material costs has eased pressure on
manufacturers. The two main impacts on Topps Group from this improving
situation are first that we ended the year in the strongest position for stock
availability since the pandemic, and second that we have been able to reduce
our requirement for sub-contractors within our driver network.
We have remained flexible in our approach to developing new supplier
relationships and reviving old ones in the year, particularly as we actively
resourced product from geographies less impacted by inflationary and supply
chain pressures. Partly as a result of this active management, our strategic
supplier base accounted for a lower mix of purchases in 2023 at 66% (2022:
73%), although our ability to leverage long term relationships with suppliers
and logistics partners has also remained key throughout this period.
We have also retained our focus on new product development, with 63 new
product introductions in the year (2022: 34 new products). We protect the
intellectual property and design assets we create through partner exclusivity
and design registration. Overall, 77% of ranges in Topps Tiles are either
exclusive or own brand (2022: 76%), which forms a key part of our competitive
advantage. This year, in Topps Tiles, we have extended our product offering in
areas such as luxury vinyl tiles; brought in a new range of everyday
mid-priced products to sit alongside our Get the Look for Less ranges;
extended our own brands such as Dex(TM), our tiling tools brand aimed at the
general builder and DIY enthusiast; started rolling out new categories, such
as shower panels and larger format tiles; and launched new branding for
Everscape(TM), our outdoor tiles range. Tile Warehouse has continued to evolve
its range and price points, and Pro Tiler Tools has extended its range of
proprietary brands, including listing Kubala tools and the Weber adhesive
brand. Through Parkside, we continue to supply an industry-leading breadth of
range, including many exclusive products, into the Commercial sector.
Leading People
All of the businesses within Topps Group are supported by our Leading People
strategy. Our product specialism requires both technical knowledge and
inspirational selling, with customers ranging from architects to tradespeople
and homeowners. This variety means that we require our colleagues to be able
to work and communicate effectively across these customer groups, which
requires high levels of capability and engagement. Our Leading People strategy
retained its focus on four existing areas: recruitment & retention,
colleague experience, capability and well-being, with the addition of a fifth
area during the year to reflect a renewed focus on diversity, equity and
inclusion through our 'One Topps' strategy.
We have made excellent progress on recruitment and retention over the course
of the year, with colleague turnover down 7.9 percentage points year on year
to 28.6%. Good progress has been made in reducing churn in key roles such as
Topps Tiles store manager and assistant manager, as well as a reduction in the
number of colleagues who leave within three months of joining the business,
all as a result of a focus on improved recruitment and onboarding processes.
Our colleague retention (the percentage of colleagues who stay with the
business for a year or more) has increased from 77% in 2022 to 80% this year.
Our positive culture, based on small teams with big ambitions, who have high
levels of trust and celebrate success, is also a big part of working for Topps
Group and a key reason why colleagues choose to stay with the business.
Our colleague experience is best measured by our My Voice survey. This year,
1,382 colleagues took part, the highest ever level of colleague participation,
and an 85% response rate (up 6 percentage points against the last survey in
2021). Overall engagement was at 78% (2021: 80%, 2019 pre-pandemic: 75%) with
particularly strong scores around our teams knowing what behaviours and tasks
are expected of them, together with a very strong sense of being committed to
our customers.
We invest in capability through a combination of formal training and on the
job learning, often delivered through our learning experience platform,
'Thrive'. Highlights this year include the launch of our Selling Brilliantly
campaign, where some of our most successful store colleagues share their own
ideas about how to consistently deliver superb customer service through videos
which have been watched thousands of times across the business. We are proud
to promote internally wherever possible, and this year 70% of candidates
appointed to management positions were internal promotions (2022: 65%).
Wellbeing continues to play a major role in our strategy, with a particular
focus this year on mental health and financial health. This year, line
managers have been trained on mental health awareness and our mental health
first aiders continue to play a key role in the business. Our hardship fund
and loans continue to support colleagues' financial health where necessary.
This year, we have launched a new important part of our Leading People
strategy, focusing on diversity, equity and inclusion, called 'One Topps'.
Starting with female colleagues and minority ethnic groups, we will hold
focused listening groups to help us understand the lived experience of a wide
range of colleagues.
Environmental Leadership
Leading our industry in terms of our environmental credentials is becoming
ever more important. This is the third year that Environmental Leadership has
been embedded in our Group strategy and we have continued to make good
progress. Our strategy is based around two pillars - carbon reduction and
circularity - underpinned by strong governance.
We remain committed to carbon neutrality in Scope 1 & 2 by 2030, which
will be achieved through decarbonisation together with offsetting. Complete
decarbonisation will require electrification of all vehicles and heating and
therefore will require significant technological innovation, however, there is
still much we can do in the interim, as described in detail in the
Sustainability Report within the Annual Report and our TCFD disclosure.
This year, we have agreed a new 100% renewable electricity contract, installed
914 solar panels onto the roof of our main office and warehousing facilities
in Leicester which should generate approximately 70% of the site's electricity
needs, launched an energy aware campaign to promote energy saving practices
among colleagues, and increased the electric/hybrid car mix in our company car
fleet to 51% (2022: 24%). Further plans are in place for 2024 including a
trial of HVO diesel replacement fuel in our transport fleet, examining
opportunities for solar panels across some of our store network, and
developing our Scope 3 reporting in conjunction with Normative, the acclaimed
carbon consultancy.
Circularity is largely concerned with waste, recycling and product innovation.
This year, we have exceeded our target to reduce the amount of tile waste
generated across the business (through damage, store display changes and so
on), delivering a year on year reduction of 12%, or 303 tonnes. We have also
seen an increase in sales of tiles which have a 50% or greater recycled
content by 21.8% year on year. This included the launch of Principle(TM), a
tile which is made from a remarkable 91.3% of recycled industrial waste, among
the highest levels globally, and the continued expansion of Regenr8(TM), our
eco-adhesive, which contains up to 53% recycled content. We are also focused
on pallet recovery and reducing packaging materials across the supply chain.
Underpinning these initiatives is a strong governance structure, with Rob
Parker leading at a Board level and also chairing the Sustainability Council,
a cross-functional committee tasked with innovating and implementing ideas
which will support our environmental goals.
Omni-channel: Topps Tiles
Topps Tiles opened its first store in 1963 and, 60 years on, is the leading,
omni-channel tile specialist in the UK, focused on the domestic RMI market,
and still retaining significant opportunities for further profitable growth.
2023 saw another year of strong progress in Topps Tiles. Sales of £230.9
million were once again at record levels, £3.9 million higher than the
previous record set in 2022, with like-for-like sales growth of 3.1%. Sales
per store were 30% higher than the pre-pandemic period of 2019 as a result of
the successful store rationalisation programme which saw customers transfer
from closed stores, as well as market growth and self-help measures such as
new product category launches.
The Topps Tiles brand has high levels of brand recognition and, with more than
three times as many stores as the next specialist competitor, it enjoys a very
strong national presence. This year, we conducted proprietary research through
a third-party market research agency, to measure this recognition. On an
unprompted basis, against our tile specialist competitors, Topps Tiles has
around 25 times greater brand recognition. Even when prompted, Topps Tiles has
approximately 2.4 times more brand awareness than the next tile competitor.
The research also found that customers have more favourable sentiments about
Topps Tiles if they have ever visited a store. Given our world class customer
service, this was reassuring but not unexpected. This year, Topps Tiles'
overall customer satisfaction scores increased again, up 1.6 percentage points
year on year to 91.5%, meaning that 91.5% of the 16,000 customers who filled
in a survey in the year gave Topps Tiles a 5* review. When combined with 4*
reviews, the score increased to 98% of customers.
Our customer mix continues to be one of professional trade customers and
homeowners. We have been actively growing our sales to trade customers in
recent years and last year 59.6% of sales were to trade customers (2022:
58.9%). 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 referring them directly
to us. A key strength of the Topps operating model is that both customer
groups can use the different elements of the brand in different ways.
For homeowners, the omni-channel nature of the Topps Tiles offer is key. Our
award-winning website plays a key role in their purchasing journey, with
customers using the website for initial research, inspiration, or to transact.
Almost all homeowners also interact with our stores at some stage, for advice,
customer service, to transact or to collect their orders at the most
convenient time for them. Online sales made up 19% of tile sales to homeowners
in the year, comparable to other retailers in our industry, and we continue to
invest in our digital platforms. This year, we have improved site speed,
redesigned the samples purchasing journey, implemented guest check out, added
new payment methods and many other improvements.
For trade customers, we offer differentiated pricing, bulk deals, a loyalty
scheme and increasing numbers of proprietary brands, but most importantly, the
convenience of over 300 local stores, enabling traders to form strong
relationships with colleagues, built on trust and high levels of technical
advice and service. In recent years we have also established a trade contracts
team to manage higher value sales to our larger customers. This part of the
business allows for a further route into the Commercial tile market, in
addition to our Parkside business.
At the end of the year, the Topps Tiles store estate consisted of 303 stores
(2022: 304 stores), following one closure in the year and three relocations.
The flexibility of this estate remains key, and the average unexpired lease
term to the next break opportunity is just 2.9 years (2022: 2.8 years), or 2.8
years excluding strategically important stores (2022: 2.6 years). Following
a reduction in store numbers in recent years, the management of lease exits
and assignments has been a key focus area. At year end, there were just five
closed Topps Tiles stores remaining in the estate, with a further two leases
with expiry dates before the end of the first half of 2024. Another key aspect
of estate management has been the re-negotiation of leases during their term
to generate value, which has been very successful in a number of instances,
securing our tenure in profitable sites whilst generating upside through
reduced rent.
We continue to invest in the Topps Tiles store estate and have converted
another eight stores to our 'Superstore' format this year, taking the total to
41. These stores offer the widest breadth of product and high-quality
amenities and are performing well following what was a relatively modest
investment. Our 14 clearance stores continue to provide even greater value to
customers, whilst providing an operational outlet for discontinued lines.
Our 248 core stores continue to deliver excellent products and service to both
homeowner and trade customers and we will continue to invest in our store
network to support our future plans and new product roll out in 2024.
Topps Tiles has had another strong year, delivering another year of record
sales, a further increase in world-class customer satisfaction scores and
seeing further improvements in our digital offering and our physical store
estate.
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,
it is now a top-five competitor within the sector.
After five sequential years of sales growth, sales in Parkside in 2023 of
£9.4 million were down 13.8% year on year, with the market remaining
substantially smaller when compared to the pre-pandemic period. Given a weaker
period of trading in the first half, and the lack of an expected near-term
market recovery, a business improvement plan was implemented in the third
quarter of the year. As a result, approximately 35% of the cost base of the
business was removed, largely through a reduction in headcount of about 45%.
The focus was on retaining the sales whilst driving efficiency.
As a result of this restructure, no material clients have been lost and the
business was profitable in each of the final three months of the financial
year. Parkside has now been right-sized and is positively focused on
delivering consistent profitable growth in this large and attractive market,
which is almost the same size as the residential RMI market. The ambition for
Parkside is to utilise the scale and expertise of the Group to create a
business delivering at least £20 million of profitable sales in the
commercial tile market.
Online Pure Play: Pro Tiler brands and Tile Warehouse
Our Online Pure Play business now consists of six brands. Five of them
(www.protilertools.co.uk (http://www.protilertools.co.uk) ,
www.premiumtiletrim.co.uk (http://www.premiumtiletrim.co.uk) ,
www.northantstools.co.uk (http://www.northantstools.co.uk) ,
www.warmfloorstore.co.uk (http://www.warmfloorstore.co.uk) ,
www.flooringmaterials.co.uk (http://www.flooringmaterials.co.uk) ) are
trade-focused, digital-only consumables and tools brands, operated by the Pro
Tiler management team. Tile Warehouse is a homeowner-oriented, value-focused,
digital-only tiles business, offering a complementary positioning to Topps
Tiles. In total, Online Pure Play delivered sales of £22.4 million, up from
£9.3 million in the post-acquisition period of 2022. Sales were up 52% year
on year when compared to the previous twelve-month period, including the
period before the acquisition of Pro Tiler Limited.
Since the acquisition of 60% of the equity in Pro Tiler Limited in March 2022,
the business has delivered an excellent performance, and Pro Tiler Tools is
now well established as the market leading player in this sector. This year,
sales and profit growth has been strong, driven by continuous improvement to
all aspects of the offer, including listing more trade-focused brands such as
Raimondi, Kubala Tools and Weber, an enhanced service proposition including
extended opening hours, and delivering more growth through larger customers.
Pro Tiler is an excellent fit with Topps Group, with a shared ethos around
product knowledge twinned with high levels of customer service. The business
is highly respected by trade customers, with over 5,000 reviews online, and an
average score of 4.8 / 5. It also delivers good financial returns, with net
margins of 8-9% already being achieved despite gross margins of around 30%.
The remaining 40% of the shares in Pro Tiler Limited will be acquired
following the end of the earn-out period in March 2024.
In addition, this year, two further brands have been launched under the
leadership of the Pro Tiler team. Warm Floor Store is a specialist underfloor
heating business and Flooring Materials supplies professional floor fitters
with everything needed to fit a variety of floor coverings, including vinyl,
lino, carpet, tile and wood. Both are in their early stages but represent an
opportunity to leverage a core digital skill set and trade focused service
proposition to different markets. In all, the Pro Tiler brands represent at
least a £30 million sales opportunity for the Group.
Tile Warehouse has been operating for just over a year and provides an entry
into the £100 million online pure play tile market. It offers a core range of
quality tiles at very competitive price points, utilising the Group's scale,
supplier relationships, financial strength and digital expertise. Progress in
the first year has been slower than planned, reflecting the impact of a
variety of technical issues and offer refinements. Following recent changes to
the management team, the business has been refocused, and we expect stronger
progress to be made in 2024. We continue to believe that the brand offers the
prospect of £15 million of annual sales in the medium term.
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. This year, an additional
non-financial KPI has been included, the square meters of tiles sold in Topps
Tiles. This metric essentially measures the volume performance of our key
product and is regarded by the Board as a key metric.
52 weeks to 52 weeks to YoY
30 September 1 October
2023 2022
Financial KPIs
Group revenue growth year on year 6.3% 8.4% n/a
Topps Tiles like-for-like sales growth year on year* 3.1% 9.4% n/a
Group gross margin % 53.0% 54.8% (1.8)ppts
Adjusted profit before tax* £12.5m £15.6m (19.9)%
Adjusted earnings per share* 4.49 pence 6.14 pence (26.9)%
Adjusted net cash* £23.4m £16.2m +£7.2m
Inventory days 107 126 (19) days
Non-financial KPIs
Square metres of tiles sold in Topps Tiles (thousand) 4,569 4,804 (4.9)%
Topps Tiles customer overall satisfaction score 91.5% 89.9% +1.6ppts
Colleague turnover 28.6% 36.5% (7.9)ppts
Carbon emissions per store (tonnes per annum) 16.9 15.6 +8.3%
Number of Topps Tiles stores at year end 303 304 (1)
* 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. Carbon emissions per store for
2022 vary slightly from the result previously reported (15.5) as we are now
reporting CO2e rather than CO2, as per SECR requirements.
FINANCIAL REVIEW
The 2023 financial year covers the 52 weeks to 30 September 2023. The previous
financial year covers the 52 weeks to 1 October 2022. Overall, the year saw
strong sales growth including a meaningful contribution from the newer
businesses within Topps Group, profits reflecting the impact of inflationary
pressures, good cash generation and the maintenance of a very robust balance
sheet.
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 line with the
prior year, 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, and one-off gains and losses through
sub-lets. In the period 2022 - 2024 we will also exclude the cost relating to
the purchase of the remaining 40% of shares in Pro Tiler Limited which we
expect to make from March 2024, which under IFRS 3 is treated as a
remuneration expense, rather than a cost relating to the acquisition of the
relevant shares. This cost is significantly higher year on year, both because
it relates to a full year period in 2023 compared to a part year period in
2022, and because the performance of the Pro Tiler Tools business has
continued to improve over time. We have also excluded costs relating to the
store closure programme which ended in 2022, as well as restructuring costs.
An analysis of movements from adjusted profit before tax to statutory profit
before tax is presented below:
2023 £m 2022 £m
Adjusted profit before tax 12.5 15.6
Property
- Vacant property and closure costs (1.1) (1.7)
- Store impairments and lease exit gains and losses 0.2 (0.7)
(0.9) (2.4)
Business Development
- Pro Tiler Tools deal costs - (0.2)
- Pro Tiler Tools share purchase expense (4.1) (1.6)
- Tile Warehouse set up costs - (0.5)
- Restructuring and other one-off costs (0.7) -
(4.8) (2.3)
Statutory profit before tax 6.8 10.9
Adjusted earnings per share is adjusted for the items listed above, as well as
the impact of corporation tax. In 2022, adjusted earnings per share also
excluded a £1.2 million deferred tax credit in respect of previous periods
which is not expected to repeat. Further information is given in the earnings
per share note to the accounts.
STATEMENT OF PROFIT OR LOSS
Revenue
Total revenue for the 52-week period increased by 6.3% to £262.7 million
(2022: £247.2 million). Revenue consolidated into the Group accounts by
business area was as follows:
£m 2023 2022 Variance
Topps Tiles 230.9 227.0 +1.7%
Parkside 9.4 10.9 (13.8)%
Online Pure Play* 22.4 9.3 +141%
Group 262.7 247.2 +6.3%
*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.
Topps Tiles like-for-like sales were 3.1% higher than the prior year, which
consisted of a 4.3% increase in the first half of the financial year and a
1.9% increase in the second half.
Total revenue in Topps Tiles was up 1.7% year on year to £230.9 million, a
record for the brand. There was one store closure and three relocations in the
year and the brand finished the trading period with 303 trading stores (2022:
304 stores). On average, Topps Tiles traded from 304 stores over the year
(2022: 310 stores).
In the commercial market, sales to our clients through Parkside were down
13.8% year on year to £9.4 million. The Group consolidated a full year of
sales from Pro Tiler Tools following its acquisition in March 2022, as well as
a full year of trading from Tile Warehouse, leading to revenue from Online
Pure Play of £22.4 million, compared to a part year period in 2022. When
compared to the previous twelve-month period, including the period before
acquisition, sales in Online Pure Play were up 52% year on year, a very strong
result.
Gross Margin and Gross Profit
Group gross profits increased 2.8%, or £3.8 million to £139.2 million,
including a £0.9 million increase relating to Topps Tiles and a £2.9 million
increase relating Parkside, Pro Tiler Tools and Tile Warehouse. Group gross
margin as a percentage of sales decreased 1.8 percentage points year on year
to 53.0%, with improvement throughout the year as inflation pressures abated
(H1 gross margin: 52.8%, H2 gross margin 53.3%).
The change in gross margin on an annual basis was due to three main factors.
1.2 percentage points of the overall fall of 1.8 percentage points was due to
changing business mix, specifically the growth in Online Pure Play, which
operates at a structurally lower gross margin than the rest of the Group. In
addition, there was a 0.8 percentage point fall due to mark-to-market
movements on unrealised foreign currency transactions and retranslation of
monetary items, and a gain of 0.2 percentage points due to other factors,
including improvements in the gross margins in the individual brands.
The mark-to-market and retranslation movements in the year were driven 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 year. 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.
Gross margin within the Topps Tiles brand grew year on year and, as expected,
improved with each trading quarter showing higher gross margins (excluding
rebates, FX and other adjustments) than the last. The margin in Topps Tiles
has been impacted by higher shipping and product costs in recent years,
however these pressures have now abated or in some cases reversed, leading to
an improvement in gross margins over the financial year.
Operating Expenses
Operating expenses were £128.1 million compared to £120.6 million in 2022.
Excluding adjusting items, which were explained above, operating expenses
increased from £116.0 million in 2022 to £122.6 million in 2023.
The £6.6 million increase in adjusted operating expenses is explained by the
following key items:
£ million
2022 adjusted operating expenses 116.0
Cost inflation 5.5
Store space (1.3)
Parkside cost reduction (1.0)
Online Pure Play 3.1
Other 0.3
2023 adjusted operating expenses 122.6
Cost inflation relates to a wide range of the cost base, including increases
to people, energy, property, IT, insurance and other central costs. Store
space refers to savings from operating an average of 304 stores in 2023
compared to 310 in 2022. Parkside cost reduction includes the business
restructure carried out in the year and Online Pure Play reflects the cost
base of the business being included for a full year, compared to approximately
six months in 2022 in the period following the acquisition of Pro Tiler Tools
and the launch of Tile Warehouse.
The Group has maintained a strong focus on cost management over recent years,
and has managed to offset virtually all of the inflationary pressures since
2019, including payroll and energy inflation, through a combination of the
profitable store closure programme and other self-help measures, as shown
below. The bridge combines operating expenses and interest due to the
transition from IAS 17 to IFRS 16 reporting over this period. In 2019,
operating expenses relating to Parkside were excluded from adjusted profit, so
the table below restates 2019 operating expenses to include the cost base of
Parkside at that time.
£ million
2019 adjusted opex and interest (Topps Tiles and Group costs only) 117.0
2019 Parkside opex 4.2
2019 restated (Topps Tiles, Parkside and Group costs) 121.2
2019 restatement due to SaaS accounting changes 0.3
Inflation 2019 - 2023 13.3
Net savings including store closures and efficiency programmes (13.1)
2023 adjusted opex and interest (ex change in Parkside and Online Pure Play) 121.7
Change in Parkside and Online Pure Play cost base 2019 to 2023 5.0
2023 adjusted opex and interest (Group) 126.7
Finance income and costs
Total net finance costs were £4.3 million (2022: £3.9 million), consisting
of interest receivable on credit balances of £0.3 million (2022: £0.1
million), interest income from finance lease receivables of £0.1 million
(2022: £0.1 million), interest payable on lease liabilities of £4.2 million
(2022: £3.6 million), discount unwind costs of £0.2 million (2022: £nil)
and amortisation of banking fees relating to the revolving credit facility of
£0.3 million (2022: £0.4 million).
Profit before tax
Excluding the items detailed in the Adjusted Measures section above, adjusted
profit before tax was £12.5 million (2022: £15.6 million. The Group adjusted
profit before tax margin was 4.8% (2022: 6.3%) as a result of the lower gross
margins and higher adjusted operating expenses described above.
On a statutory basis, profit before tax was £6.8 million (2022: £10.9m),
with the year on year decline particularly impacted by the accounting
treatment of the Pro Tiler Limited share purchase expense under IFRS 3.
Tax
On an adjusted basis, the effective rate of corporation tax for the period was
24.9% (2022: 21.8%), driven by the increase in the UK Corporation Tax rate
from 19% to 25% from 1 April 2023.
The effective rate of corporation tax for the period on a statutory basis was
42.5% (2022: 16.0%). The statutory rate of tax is substantially higher than
previous years because the Pro Tiler Limited share purchase expense is not
treated as an allowable expense from a tax perspective, instead it is treated
as an acquisition of shares. This position will normalise following the
completion of the share purchase following March 2024. The tax expense in
the prior year included a one-off deferred tax credit of £1.2 million which
is excluded from adjusted earnings per share metrics.
Earnings per share
Adjusted earnings per share were 4.49 pence (2022: 6.14 pence). Basic
earnings per share were 1.63 pence (2022: 4.60 pence). Diluted earnings per
share were 1.61 pence (2022: 4.55 pence).
Dividend
In 2022, the Board outlined a new Capital Allocation and Dividend policy. In
the Policy, the Board indicated that it expected to increase the dividend by
2023 to 67% of the adjusted earnings per share generated in the year. The
policy was designed to have some flexibility and, in particular, the Board
indicated that it did not intend to reduce the dividend year on year due to
short term performance or macroeconomic issues, even if that meant increasing
the payout ratio in some years. As such, this year the Board is proposing a
final dividend of 2.4 pence, bringing the full year dividend to 3.6 pence, in
line with last year and representing 80% of adjusted earnings per share.
The shares will trade ex-dividend on 21 December 2023 and, subject to approval
from shareholders at the Annual General Meeting in January 2024, the dividend
will be payable on 2 February 2024.
STATEMENT OF FINANCIAL POSITION
Capital Expenditure
Capital expenditure in the period amounted to £4.2 million (2021: £3.2
million), an increase of £1.0 million year on year.
Key investments were as follows:
• Topps Tiles stores - including 3 relocations, store improvements,
merchandising and maintenance - £3.5 million
• LED store improvement programme £0.4 million
• Group IT developments £0.3 million
The Board expects capital expenditure in the year ahead to be between £6
million and £8 million. This compares to an average of £8.1 million in the
four years before the pandemic (2016 to 2019) and is broadly in line with
depreciation and amortisation of property, plant and equipment and intangible
assets, respectively. This amount 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.
Inventory
Inventory at the period end was £36.4 million (2022: £38.6 million)
representing 107 inventory days (2022: 126 inventory days). The significant
reduction in inventory days is driven by both a reduction in inventory days
and absolute inventory value relating to Topps Tiles, and the increase in
business mix relating to Pro Tiler Tools (which has a materially lower number
of inventory days due to its operating model).
Cash Flow Statement
The Group's cash balance increased in the period by £7.2 million from £16.2
million at the start of the financial year to £23.4 million at the year
end. The table below analyses the Group's adjusted cash flow:
2023 2022
£m £m
Cash generated by operations, including interest and capital elements of 18.9 18.5
leases, before WC movements
Changes in working capital 3.4 (11.0)
Capital expenditure (4.2) (3.2)
Disposals - 0.2
Interest 0.1 (0.3)
Tax (3.3) (3.5)
Other (0.2) 0.1
Free cash flow 14.7 0.8
Acquisition of Pro Tiler Limited, net of cash and debt acquired - (4.4)
Dividends (7.5) (8.0)
Change in adjusted net cash 7.2 (11.6)
Adjusted net cash at start of period 16.2 27.8
Adjusted net cash at end of period 23.4 16.2
The business continues to generate good levels of cash from operations,
including a working capital inflow in the year of £3.4 million driven by a
reduction in inventory, a slight reduction in receivables and a minor increase
in payables. With £4.2 million of capital expenditure, well under the level
of depreciation and amortisation of plant, property and equipment and
intangible assets, respectively, the business generated free cash flow in the
year of £14.7 million. Even after an increased level of dividend payments
year on year, overall cash balances increased by £7.2 million to £23.4
million by year end.
Looking forward, 2024 is forecast to include a working capital inflow due to
the year end date falling before the end of September, worth approximately
£7.0 million, however the purchase of the remaining 40% of shares in Pro
Tiler Limited will also be made in the new financial year, largely offsetting
this inflow.
Return on Capital Employed
The Group's return on capital employed, including the impact of leases,
decreased from 17.3% in 2022 to 15.7% in 2023, due to a 14.1% year on year
reduction in adjusted operating profit. Strong cash generation led to a
reduction in lease adjusted capital employed of 15.7%, or £18.2 million over
the financial year, including a £7.2 million increase in adjusted net cash, a
£2.6 million reduction in total equity, and a £8.4 million reduction in
lease liabilities year on year. The Group defines return on capital employed
as the annual adjusted operating profit divided by the average capital
employed (net assets plus net debt, including lease liabilities).
Banking Facilities
The Group maintains a very robust balance sheet, providing resilience and
allowing investment in growth opportunities. A £30.0 million revolving credit
facility is in place which is committed to October 2026 with an extension
option for a further year (2022: £30.0 million facility agreed following year
end, committed to October 2025). At the year end, none of this facility was
drawn (2022: £nil drawn). Based on net cash excluding lease liabilities of
£23.4 million, the Group has £53.4 million of headroom to its banking
facilities at the period end (2022: £46.2 million headroom to the new
facility).
Forward Guidance
Cost pressures will continue to impact the profitability of the business in
2024. Overall, we expect around £5.0 million of inflationary pressures year
on year across our overhead base, primarily employment costs including the
impact of increases in the National Living Wage, property costs and other
expenses. Utility costs are now expected to fall modestly based on the new
annual contracts signed by the Group.
The Group's profits in 2024 will continue to show a degree of seasonality
based on a number of factors including the impact of the holiday pay accrual
together with higher energy costs in the autumn and winter months, which will
reduce the proportion of annual profits made in the first half of the year.
As mentioned above, the Board expects capital expenditure of between £6
million and £8 million in 2024. 2024 will include a cash inflow relating to
the timing of year end and an outflow relating to the purchase of the
remaining shares in Pro Tiler Limited, also as described above.
Current Trading and Outlook
Trading in the early weeks of the new financial year has reflected the
well-documented challenges to discretionary consumer spending, especially RMI,
including higher interest rates and prolonged high inflation, falling house
prices and lower housing transactions. In particular, since the end of the
summer, the market has been subdued, with a softer build into the usual
seasonal peak trading period, as noted in a variety of corporate and
macroeconomic reporting. Group sales in the first eight weeks are down 3.0%
year on year, including like-for-like sales in Topps Tiles down 6.1% and
strong growth continuing in Pro Tiler Tools.
Topps Group has delivered consistent growth in market share over recent years,
from a combined share of 17% in 2019 as reported at the launch of the '1 in 5
by 2025' goal, to 22.1% in 2023. This growth has been achieved as a result of
the competitive advantages enjoyed by the Group, including market-leading
brands, world-class customer service, specialist expertise, a strong balance
sheet including a growing cash position, and an ambitious growth strategy. The
Group remains well positioned to continue to take market share in all market
conditions due to these factors.
Rob Parker Stephen Hopson
Chief Executive Officer Chief Financial Officer
28 November 2023
Unaudited Consolidated Statement of Profit or Loss
For the 52 weeks ended 30 SEPTEMBER 2023
Notes 52 weeks 52 weeks
ended ended
30 September 1 October
2023 2022
£'000 £'000
Group revenue 3 262,714 247,241
Cost of sales (123,466) (111,818)
Gross profit 139,248 135,423
Distribution and selling costs* (93,800) (89,746)
Other operating expenses (6,846) (5,953)
Administrative costs (21,493) (19,827)
Marketing and online costs (6,582) (5,495)
Other income* 579 430
Group operating profit 11,106 14,832
Finance income 6 408 123
Finance costs 6 (4,699) (4,010)
Profit before taxation 4 6,815 10,945
Taxation 7 (2,896) (1,754)
Profit for the period 3,919 9,191
Profit is attributable to:
Owners of Topps Tiles Plc 3,206 9,005
Non-controlling interests 713 186
3,919 9,191
All results relate to continuing operations of the Group.
*Other income has been reclassified from Distribution and selling costs see
note 12 for more details.
52 weeks 52 weeks
ended ended
30 September 1 October
2023 2022
Earnings per ordinary share: Notes £'000 £'000
- Basic 9 1.63p 4.60p
- Diluted 9 1.61p 4.55p
Unaudited Consolidated Statement of Comprehensive Income
For the 52 weeks ended 30 SEPTEMBER 2023
52 weeks 52 weeks
ended ended
30 September 2023 1 October
£'000 2022
£'000
Profit for the period 3,919 9,191
Total comprehensive income for the period is attributable to:
Owners of Topps Tiles Plc 3,206 9,005
Non-controlling interests 713 186
3,919 9,191
Unaudited Consolidated Statement of Financial Position
as at 30 SEPTEMBER 2023
Notes 2023 2022
£'000 £'000
Non-current assets
Goodwill 2,101 2,101
Intangible assets 4,755 5,423
Property, plant and equipment 19,306 20,888
Deferred tax assets 68 114
Right-of-use assets 80,921 88,545
Other financial assets 1,847 1,947
108,998 119,018
Current assets
Inventories 36,351 38,605
Other financial assets 327 542
Trade and other receivables 5,284 5,901
Derivative financial instruments 74 518
Cash and cash equivalents 10 23,368 16,241
65,404 61,807
Total assets 174,402 180,825
Current liabilities
Bank loans 11 - -
Trade and other payables (45,066) (43,650)
Lease liabilities (15,649) (18,187)
Current tax liabilities (368) (1,152)
Provisions (5,865) (352)
(66,948) (63,341)
Net current liabilities (1,544) (1,534)
Non-current liabilities
Lease liabilities (78,853) (84,741)
Provisions (2,213) (3,694)
Total liabilities (148,014) (151,776)
Net assets 26,388 29,049
Equity
Share capital 6,556 6,556
Share premium 2,636 2,636
Own shares (112) (415)
Merger reserve (399) (399)
Share-based payment reserve 6,035 5,162
Capital redemption reserve 20,359 20,359
Accumulated losses (11,869) (7,319)
Capital and reserves attributable to owners of Topps Tiles Plc 23,206 26,580
Non-controlling interests 3,182 2,469
Total equity 26,388 29,049
Unaudited Consolidated Statement of Changes in Equity
For the 52 weeks ended 30 SEPTEMBER 2023
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 2 October 2021 as originally presented 6,555 2,625 (1,216) (399) 4,642 20,359 (6,992) - 25,574
Correction of error (net of tax) - - - - - - (618) - (618)
Restated balance at 2 October 2021(1) 6,555 2,625 (1,216) (399) 4,642 20,359 (7,610) - 24,956
Profit and total comprehensive income 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 6,556 2,636 (415) (399) 5,162 20,359 (7,319) 2,469 29,049
Profit and total comprehensive income for the period - - - - - - 3,206 713 3,919
Dividends - - - - - - (7,462) - (7,462)
Own shares issued in the period - - 303 - - - (303) - -
Credit to equity for equity-settled share-based payments - - - - 873 - - - 873
Current tax on share-based payment transactions - - - - - - 1 - 1
Deferred tax on share-based payment transactions - - - - - - 8 - 8
Balance at 30 September 2023 6,556 2,636 (112) (399) 6,035 20,359 (11,869) 3,182 26,388
1 During the prior year, management has re-evaluated the impact of the
IFRIC guidance released during the prior year relating to accounting for
cloud-based SaaS arrangements. This guidance was incorrectly applied in prior
years, resulting in costs associated with a cloud-based SaaS being capitalised
and not expensed as incurred in the consolidated statement of profit or loss.
As at 2 October 2021, Accumulated Losses were understated by £618k.
Unaudited Consolidated Cash Flow Statement
For the 52 weeks ended 30 SEPTEMBER 2023
Notes 52 weeks 52 weeks
ended ended
30 September 1 October
2023 2022
£'000 £'000
Cash flow from operating activities
Profit for the period 3,919 9,191
Taxation 7 2,896 1,754
Finance costs 6 4,699 4,010
Finance income 6 (408) (123)
Group operating profit 11,106 14,832
Adjustments for:
Depreciation of property, plant and equipment 5,024 5,609
Depreciation of right-of-use assets 18,157 18,212
Amortisation of intangible assets 767 500
Loss on disposal of property, plant and equipment 224 394
Gain on sublease (240) (88)
Impairment of property, plant and equipment 91 240
Impairment of right-of-use assets 346 1,473
Gain on lease disposal (100) (1,544)
Share option charge 873 520
Increase in earn out liability provision 3,946 1,581
Change in other provisions 564 -
Non-cash loss/(gain) on derivative contracts 444 (455)
(Increase)/decrease in trade and other receivables 761 (1,080)
(Increase)/decrease in inventories 1,525 (4,362)
Increase/(decrease) in payables 1,079 (5,603)
Cash generated from operations 44,567 30,229
Interest paid (161) (354)
Interest received on operational cash balances 305 58
Interest element of lease liabilities paid 14 (4,176) (3,626)
Taxation paid (3,301) (3,453)
Net cash generated from operating activities 37,234 22,854
Investing activities
Interest received on sublease assets 58 65
Receipt of capital element of sublease assets 555 493
Purchase of property, plant and equipment (4,017) (3,090)
Direct costs relating to right-of-use assets (133) -
Purchase of intangibles (99) (115)
Proceeds on disposal of property, plant and equipment 25 183
Acquisition of subsidiary, net of cash acquired - (3,968)
Net cash used in investment activities (3,611) (6,432)
Financing activities
Payment of capital element of lease liabilities (18,841) (19,601)
Dividends paid (7,462) (8,015)
Financing arrangement fees 11 (200) -
Proceeds from issue of share capital - 12
Purchase of own shares - (207)
Receipt on disposal of own shares 7 309
Repayment of bank loans 11 - (468)
Net cash used in financing activities (26,496) (27,970)
Net decrease in cash and cash equivalents 7,127 (11,548)
Cash and cash equivalents at beginning of period 16,241 27,789
Cash and cash equivalents at end of period 10 23,368 16,241
Notes to the Unaudited Financial Statements
For the 52 weeks ended 30 SEPTEMBER 2023
1 GENERAL INFORMATION
Topps Tiles Plc is a public limited company, limited by shares, incorporated
and domiciled in the United Kingdom and registered in England 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 1 October 2022 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.
Statutory accounts for the 52-week period ended 30 September 2023 will be
delivered to the Registrar of Companies following the Company's Annual General
Meeting.
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.
IAS 16 Property, Plant and Equipment (Amendment): Proceeds Before Intended Use
IAS 37 Provisions, Contingent Liabilities and Contingent Assets (Amendment):
Onerous Contracts - Cost of Fulfilling a Contract
IFRS 3 Business Combinations (Amendment): Reference to the Conceptual
Framework
Annual Improvements to IFRSs (2018 - 2020 cycle)
2 ACCOUNTING POLICIES
The principal accounting policies adopted are set out below.
A) BASIS OF ACCOUNTING
The financial statements of Topps Tiles Plc have been prepared in accordance
with UK-adopted International Accounting Standards in conformity with the
requirements of the Companies Act 2006 and the disclosure guidance and
transparency rules sourcebook of the United Kingdom's Financial Conduct
Authority. On 31 December 2020, IFRS as adopted by the European Union at that
date was brought into UK law and became UK-adopted international accounting
standards, with future changes being subject to endorsement by the UK
Endorsement Board.
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 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 prolonged period of
macroeconomic stress in the UK, lasting for more than one year, with sales in
FY24 falling 20% year-on-year in our main brand, Topps Tiles, as well as a two
percentage point year-on-year decline in gross margins in FY24. The more
severe downside scenario assumes the Topps Tiles business recovers back to
FY23 levels of sales and gross margins by FY26. This scenario also assumes
that variable costs would reduce in line with sales and also includes
mitigating cost reduction actions, which would be taken if such a downturn
occurred.
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
scenarios. The current lending facility, of £30.0 million, was refinanced in
October 2022 and expires at the earliest in October 2026.
In all scenarios, the Board has concluded that there is sufficient available
liquidity, with no utilisation of the current lending facility, and sufficient
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.
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 refund liability in the Consolidated Statement of Financial
Position to provide for the expected level of returns. The expected level of
returns is an estimate based on historic returns data, expressed as a
percentage of sales, limited by an average total sales value for the number of
days available to return goods, stated in the Company's return policies. 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.
All elements of revenue that are considered variable, such as customer rebate
arrangements and the Trader Loyalty Scheme, are recognised as revenue to the
extent they are highly probable not to reverse.
d) TAXATION
The tax expense represents the sum of current tax 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 profit or loss
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.
Management periodically evaluates positions taken in tax returns with respect
to situations in which applicable tax regulation is subject to interpretation
and considers whether it is probable that a taxation authority will accept an
uncertain tax treatment. The group measures its tax balances either based on
the most likely amount or the expected value, depending on which method
provides a better prediction of the resolution of the uncertainty.
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 profit or loss, 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.
3 GROUP REVENUE
An analysis of Group revenue is as follows:
52 weeks 52 weeks
ended ended
30 September 1 October
2023 2022
£'000 £'000
Revenue from the sale of goods 262,714 247,241
Total revenue 262,714 247,241
The Group trades in three related sectors which are Omni-Channel, Commercial
and Online Pure Play. The Board receives monthly financial information at this
level and uses this information to monitor performance, allocate resources and
make operational decisions. These sectors are considered to meet the
aggregation criteria as set out in IFRS 8 since the nature of the products,
customer base and distribution methods are consistent with each other and the
have similar economic characteristics. The Group sells Tiles and Tile
associated products in each of these sectors, predominantly to UK-based
retail, trade and commercial customers and offers a range of delivery and
collection options for orders.
Revenue can be split by the following geographical regions:
52 weeks 52 weeks
ended ended
30 September 1 October
2023 2022
£'000 £'000
UK 262,315 246,866
EU 267 240
Rest of World 132 135
Total 262,714 247,241
Revenue can be split into the following business areas:
52 weeks 52 weeks
ended ended
30 September 1 October
2023 2022
£'000 £'000
Topps Tiles 230,905 227,069
Parkside 9,369 10,874
Online Pure Play 22,440 9,298
Total 262,714 247,241
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 BEFORE TAXATION
Profit before taxation for the period has been arrived at after
charging/(crediting):
Notes 52 weeks 52 weeks
ended ended
30 September 1 October
2023 2022
£'000 £'000
Depreciation of property, plant and equipment 5,024 5,609
Depreciation of right-of-use assets 18,157 18,212
Operating lease costs not within the scope of IFRS 16 - low value and short 3,235 2,201
term rentals
Impairment charge of property, plant and equipment 91 240
Impairment charge of right-of-use assets 346 1,473
Loss on disposal of property, plant and equipment and intangibles 224 394
Amortisation of intangibles 767 500
Staff costs 5 61,052 57,096
Exchange losses/(gains) recognised in profit or loss 970 (1,060)
Cost of inventories recognised as an expense 119,103 108,622
Write-down of inventories to net realisable value 3,393 4,254
In the reporting of financial information the Group uses certain measures that
are not required under IFRS, the generally accepted accounting principles
('GAAP') under which the Group reports.
Adjusted profit before tax excludes the effect of one-off or fluctuating
items, allowing stakeholders to understand results across years in a more
consistent manner. The Group's management uses Adjusted profit before tax
as a key performance indicator and a measure by which the Chief Operating
Decision Maker, collectively the Board, to plan for, control and assess the
performance of the Group.
The reconciliation of Adjusted Profit Before Tax to Statutory Profit Before
Tax is as follows:
52 weeks 52 weeks
ended ended
30 September 1 October
2023 2022
£'000 £'000
Adjusted Profit Before Tax 12,514 15,597
Property
Vacant property and closure costs (1,098) (1,657)
Right-of-use asset impairment and lease exit gains and losses 192 (650)
Business development
Pro Tiler Tools deal costs (5) (242)
Pro Tiler Tools share purchase expense (4,054) (1,581)
Tile Warehouse set up costs (11) (522)
Restructuring and other one-off costs (723) -
Statutory Profit Before Tax 6,815 10,945
Property related costs includes impairment charges or impairment reversals of
right of use assets, derecognition of lease liabilities where we have exited a
store, one-off gains and losses through sub-lets as well as costs relating to
the store closure programme which ended in 2022.
Business development costs includes charges relating to the acquisition of Pro
Tiler, including the cost associated with the purchase of the remaining 40% of
shares which we expect to make from March 2024. Other costs include charges
incurred in the set-up of Tile Warehouse and as well as restructuring costs.
Restructuring costs relate to board approved decisions such as business
closures or major organisational changes.
Analysis of the auditors' remuneration is provided below:
52 weeks 52 weeks
ended ended
30 September 1 October
2023 2022
£'000 £'000
Fees payable to the Company's auditors with respect to the Company's annual 155 111
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 221 262
Total audit fees 376 373
Total non-audit fees - -
Total fees payable to the Company's auditors 376 373
5 STAFF COSTS
The average monthly number of persons employed by the Group in the UK during
the accounting period (including Executive Directors) was:
52 weeks 52 weeks
ended ended
30 September 1 October
2023 2022
Number employed Number employed
Selling and distribution 1,388 1,390
Administration 360 361
1,748 1,751
The average monthly number of persons (full-time equivalents) employed by the
Group in the UK during the accounting period (including Executive Directors)
was:
52 weeks 52 weeks
ended ended
30 September 1 October
2023 2022
Number employed Number employed
Selling and distribution 1,303 1,311
Administration 354 355
1,657 1,666
2023 2022
£'000 £'000
Their aggregate remuneration comprised:
Wages and salaries (including LTIP) 55,261 51,585
Social security costs 4,654 4,472
Other pension costs 1,137 1,039
61,052 57,096
The total charge for Share Based Payments recognised during the year was
£0.9m (2022: £0.5m).
6 FINANCE INCOME AND FINANCE COSTS
52 weeks 52 weeks
ended ended
30 September 1 October
2023 2022
£'000 £'000
Finance income
Bank interest receivable 350 58
Interest income from finance lease receivables 58 65
408 123
Finance costs
Interest on bank loans and overdrafts (523) (384)
Interest payable on lease liabilities (4,176) (3,626)
(4,699) (4,010)
No finance costs have been capitalised in the period, or the prior period.
7 TAXATION
52 weeks 52 weeks
ended ended
30 September 1 October
2023 2022
£'000 £'000
Current tax - charge for the period 2,768 2,577
Current tax - adjustment in respect of prior periods 74 -
Deferred tax - (credit)/charge for the period (64) 360
Deferred tax - adjustment in respect of prior periods 118 (1,183)
Total tax charge 2,896 1,754
The charge for the period can be reconciled to the profit per the statement of
profit or loss as follows:
52 weeks 52 weeks
ended ended
30 September 1 October
2023 2022
£'000 £'000
Continuing operations:
Profit before taxation 6,815 10,945
Tax at the UK corporation tax rate of 22.0% (2022: 19.0%) 1,499 2,080
Expenses that are not deductible in determining taxable profit 1,165 8
Other movements - 391
Fixed asset differences (non-deductible expenses) 24 657
Remeasurement of deferred tax for changes in tax rates 16 -
Non-taxable income - (199)
Adjustment in respect of prior periods 74 (1,183)
Adjustments to tax charge in respect of prior periods - deferred tax 118 -
Tax expense for the period 2,896 1,754
In the period, the Group has recognised a corporation tax credit directly to
equity of £1,000 (2022: £nil) and a deferred tax credit to equity of £8,000
(2022: nil) in relation to the Group's share option schemes.
The adjustment of £1,183,000 in respect of prior periods in the prior year,
arises from the correction of errors and adjustments arising from the
finalisation of tax computations.
The Group continue to fully provide within current tax liabilities and other
creditors for a historic tax claim relating to EU loss relief in relation to
the closed Dutch business of £1,017,000 (2022: £988,000).
The applicable UK Corporation tax rate to end of March 2023 was 19%, with 25%
being applicable from 1(st) April 2023. The blended statutory rate for the
period is 22%.
8 DIVIDENDS
Amounts recognised as distributions to equity holders in the period:
52 weeks 52 weeks
ended ended
30 September 1 October
2023 2022
£'000 £'000
Final dividend for the period ended 1 October 2022 of £0.026 (2021: £0.031) 5,104 6,057
per share
Interim dividend for the period ended 30 September 2023 of £0.012 (2022: 2,358 1,958
£0.01) per share
Total dividend paid in the period 7,462 8,015
Proposed final dividend for the period ended 30 September 2023 of £0.024 4,716 5,093
(2022: £0.026) per share
The proposed final dividend for the period ended 30 September 2023 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.
52 weeks 52 weeks
ended ended
30 September 1 October
2023 2022
Weighted average number of issued shares for basic earnings per share 196,681,818 196,681,007
Weighted average impact of treasury shares for basic earnings per share (381,300) (1,099,370)
Total weighted average number of shares for basic earnings per share 196,300,518 195,581,637
Weighted average number of shares under option 2,973,070 2,165,790
For diluted earnings per share 199,273,588 197,747,427
52 weeks ended 52 weeks ended
30 September 1 October
2023 2022
£'000 £'000
Profit after tax for the period attributable to the parent 3,206 9,005
Adjusting items 5,599 3,005
Adjusted profit after tax for the period attributable to the parent 8,805 12,010
Earnings per ordinary share - basic 1.63p 4.60p
Earnings per ordinary share - diluted 1.61p 4.55p
Earnings per ordinary share - adjusted* 4.49p 6.14p
* Adjusted earning per share is an adjusted performance measure used by the
Group's management to plan for, control and assess the performance of the
Group.
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 2,973,070 (2022: 2,165,790).
Adjusted earnings per share were calculated after adjusting for the post-tax
impact of the following items: vacant property and closure costs of £943,000
(2022: £1,402,000), right-of-use asset impairment and lease exit gains and
losses of £150,000 gain (2022: £540,000 loss), Pro Tiler Tools deal costs of
£5,000 (2022: £242,000), Pro Tiler Tools share purchase expense of
£4,053,000 (2022: £1,581,000), Tile Warehouse set up costs of £11,000
(2022: £423,000), restructuring and other one-off costs of £618,000 (2022:
£nil) and a deferred tax charge in respect of previous periods of £119,000
(2022: £1,183,000 credit).
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:
2023 2022
£'000 £'000
Sterling 23,028 15,543
US dollar 327 391
Euro 13 307
Total cash and cash equivalents 23,368 16,241
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
2023 2022
£'000 £'000
Bank loans (all sterling) - -
2023 2022
£'000 £'000
The borrowings are repayable as follows:
On demand or within one year - -
- -
Less: total unamortised issue costs (200) -
(200) -
The Directors consider that the carrying amount of the bank loan at 30
September 2023 and 1 October 2022 approximates to its fair value since the
amounts relate to floating rate debt.
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 2 October 2021 111,338 - - (106)
Repayment of lease liabilities (23,253) - - -
Non-cash movement - lease additions and disposals 9,062 - - -
Non-cash movement - leases acquired with business combination 2,155
Interest accrued on lease liabilities 3,626 - - -
Debt acquired through company acquisition - (468) - -
Repayment of debt - 468 - -
Amortisation of issue costs - - - 106
As at 1 October 2022 102,928 - - -
Repayment of lease liabilities (23,017) - - -
Non-cash movement - Lease additions and disposals 10,415 - - -
Interest accrued on lease liabilities 4,176 - - -
Amortisation of issue costs - - - 100
As at 30 September 2023 94,502 - - 100
At 30 September 2023, the Group had a revolving credit facility of £30.0
million, expiring in October 2026 with an option to extend for a further one
year. As at the financial period end, £nil of this was drawn (2022: £nil),
leaving £30.0 million of undrawn committed banking facilities. The loan
facility contains financial covenants which are tested on a bi-annual basis.
The Group did not breach any covenants in the period.
12 OTHER INCOME
During the period the Group has reclassified income received as a lessor set
out in the table above from Distribution and Selling Costs into Other Income
on the face of the Consolidated Statement of Profit or Loss. There is an
increase in Distribution and Selling Costs of £579,000 (2022 £430,000) and a
corresponding entry into Other Income of £579,000 (2022 £430,000). There is
no net impact on the 2023 or 2022 operating profit as presented however the
updated presentation more clearly discloses the income received where the
Group acts as a lessor from both operating and finance leases.
There is no impact on the Consolidated Statement of Financial Position or the
Consolidated Cashflow Statement.
13 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 issued share capital (2022: 29.9%
shareholding of 58,569,649 ordinary shares).
At 30 September 2023 MS Galleon AG is the owner of Cersanit, a supplier of
ceramic tiles with whom the Group made purchases of £1,302,861 during the
year which is 1.1% of cost of goods sold (2022: purchases of £1,253,296
during year which is 1.1% of cost of goods sold).
An amount of £278,815 was outstanding with Cersanit at 30 September 2023
(2022: £113,718).
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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