REG - Topps Tiles - Annual Financial Results
26/11/2024 07:00
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RNS Number : 5907N Topps Tiles PLC 26 November 2024
26 November 2024
Topps Tiles Plc
Annual Financial Results
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 28 September 2024.
Strategic and Operational Highlights
• Continuing to take market share in a difficult trading environment
• Market c. 20% down on pre-Covid levels, Group revenue +14.9% vs 2019
• New strategic goal, 'Mission 365' launched, to grow Group sales to £365
million, with an adjusted PBT margin of 8-10%
• Strong initial progress made with five key growth areas over last six months
• Trade digital experience improved -trade website relaunched, simpler
registration process and pricing visibility
• B2B growth - CTD brand and certain assets acquired, further strengthening the
Group's trade presence. Actively working with the CMA in respect of their
review process
• Category expansion continuing at pace with trial and roll out of new hard
surface coverings offer
• Pro Tiler, now fully owned, delivered excellent growth with revenue up over
30% and strong profit margins
• Tile Warehouse sales run-rate trebled year on year
• New distribution centre acquired to facilitate further growth of Pro Tiler
Tools and the wider Group
Financial Highlights
52 weeks ended 52 weeks ended YoY
28 September 30 September
2024 2023
Adjusted Measures
Topps Tiles like-for-like revenue year on year(1) (9.1)% 3.1% n/a
Adjusted revenue(2) £248.5 million £262.7 million (5.4)%
Adjusted gross margin %(2) 53.3% 53.0% +0.3%pts
Adjusted operating profit(2) £11.0 million £16.6 million £(5.6) million
Adjusted profit before tax(2) £6.3 million £12.5 million £(6.2) million
Adjusted earnings per share(2) 2.39 pence 4.49 pence (46.8)%
Adjusted net cash at period end(3) £8.7 million £23.4 million £(14.7) million
Statutory Measures
Group revenue £251.8 million £262.7 million (4.1)%
Gross profit £134.3 million £139.2 million (3.5)%
(Loss)/Profit before tax £(16.2) million £6.8 million n/a
Basic (loss)/earnings per share (6.63) pence 1.63 pence n/a
Final dividend per share 1.2 pence 2.4 pence (50.0)%
Total dividend per share 2.4 pence 3.6 pence (33.3)%
Financial Summary
• Adjusted revenue down 5.4% to £248.5 million
• Adjusted gross margin up 0.3%pts to 53.3%, driven by gains in Topps Tiles
• Adjusted operating costs down £1.1 million despite £4.9 million of
inflationary costs
• Adjusted profit before tax down £6.2 million to £6.3 million due to
operational gearing in the business
• Statutory loss before tax of £16.2 million as a result of £19.4 million
non-cash impairment, primarily of right-of-use assets, and £3.1 million
expense relating to purchase of remaining Pro Tiler shares
• Adjusted net cash outflow of £14.7 million, including outflows of £18.9
million relating to the acquisition of CTD Tiles and the remaining shares in
Pro Tiler Limited, and a £6.4 million working capital benefit, driven by
timing of year end
• Adjusted net cash of £8.7 million at year end, with £38.7 million cash
headroom to banking facilities
• Full year dividend of 2.4 pence, at the top end of Group's dividend policy and
1x covered by EPS, reflecting weaker trading in 2024 but also the Board's
confidence in the Group's medium term prospects
Current Trading and Outlook
• Group sales in the first eight weeks returned to growth, up 1.2% year on year
excluding CTD
• Topps Tiles like-for-like sales down 0.4% year on year in the eight-week
period
• Macroeconomic indicators are mixed, with consumer confidence weak but some
housing metrics trending upwards
• Additional cost headwinds from increases in National Living Wage and National
Insurance contributions from April 25
• Significant self-help initiatives in play to deliver Mission 365
• Strategy, core strengths and robust balance sheet leave Group well placed to
deliver significant medium term growth
Commenting on the results, Rob Parker, Chief Executive said:
"2024 has been a challenging year for RMI and especially bigger ticket
spend. In the tile market, volumes remain well below pre-pandemic levels.
Whilst Topps Group is not immune to these pressures, our growth strategy has
served us well and we have continued to outperform the wider tile market.
The start of the new financial year has seen a return to modest sales growth
for the Group, helped by weaker prior year comparatives and the continued
strength of our trade offer. Whilst pleasing, the forward macro indicators
for our market remain mixed, in particular weaker consumer confidence, and we
need to see a sustained improvement in these metrics before we can be
confident of a consumer recovery.
'Mission 365', which sets ambitious revenue and profit medium-term goals, has
focused the business around key areas of growth and we have delivered good
progress against these over the second half - notably our trade digital offer,
our plans to significantly expand our addressable market into hard surface
coverings, trade business to business opportunities with the acquisition of
CTD Tiles and the strong growth in online pureplay. The robust strategic
progress being made now to position the business for the future leaves us
well-placed for a recovery in market volumes and underpins our confidence in
the medium term outlook."
Notes
1 Topps Tiles like-for-like revenue is defined as revenue from Topps Tiles
stores that have been trading for more than 52 weeks and revenue transacted
through Topps Tiles' digital channels.
2 Adjusted revenue, gross margin %, operating profit, profit before tax and
earnings per share exclude 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 more details on each of these measures.
3 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 arising from IFRS 16.
For further information please contact:
Topps Tiles Plc (26/11/24) 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
2024 has been a challenging year for the UK tile industry and many businesses
facing into the wider RMI (repairs, maintenance and improvement) sector.
Following a period of strong growth during the two years after the pandemic,
market activity started to decline in 2023 and this momentum accelerated in
2024. We estimate that the tile market this year will be approximately 20%
smaller than in the pre-pandemic period (2019), whereas Group revenue is up
14.9% since 2019.
Following three consecutive years of record sales between 2021 and 2023, Topps
Group was inevitably impacted by the substantially weaker customer demand this
year and saw adjusted revenue decline 5.4% year on year, a substantial
out-performance of an overall market which we estimate was down 10-15% year on
year. Due to the operational gearing of the Group, adjusted profit before
tax was £6.2 million lower year on year at £6.3 million. On a statutory
basis, the Group reported a loss before tax of £16.2 million, following a
significant impairment of right of use assets.
In this difficult context, we believe that the strategic progress and
financial results delivered by the Group this year represent a creditable
outcome and position the business well for an upturn in the economy, as
macroeconomic indicators improve. Highlights in the year include the
acquisition of the CTD Tiles brand and selected assets, significant digital
developments in Topps Tiles, the continuation of very strong performance in
Pro Tiler (including the acquisition of the remaining share capital), moving
Parkside into profit, progressing plans to strengthen our infrastructure and
supply chain, and the launch of a major new goal for the Group - Mission
365. This exciting and ambitious new goal represents a material step up in
sales and profits from this year's result over the medium term, supported by a
number of key strategic initiatives.
CTD acquisition
In August 2024, CTD Tiles Limited fell into administration and Topps Group
acquired all related intellectual property, CTD's Architectural and
Housebuilder business, selected stock and a licence to occupy 30 stores for
consideration of £9 million. The stores acquired by Topps Group had total
sales of c. £20 million in the year to June 2024, and in addition CTD's
commercial business reported revenues of £8 million from the Architect &
Designer segment and £16 million from the volume housebuilder segment in the
same period (where Topps Group has, respectively, limited or zero
representation). CTD had been losing money and reporting declining sales
levels before entering administration, and therefore required immediate
support to stabilise the business, which was done in the first few weeks of
ownership. Following the acquisition, the Competition and Markets Authority
('CMA') initiated a Phase 1 review of the transaction, including an Initial
Enforcement Order which requires the businesses to be held separately until
the review process is complete. The Group is supporting the CMA with its
review and the process remains ongoing as of the date of this report. The
Group believes that the acquisition has the potential to add £30 - £40
million of profitable sales to the Group over the medium term.
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 who are. This purpose continues to
unite the Group as it has grown into new sectors and added new complementary
brands in recent years.
Following the achievement of the Group's '1 in 5 by 2025' goal last year (two
years ahead of schedule), in 2024 Topps Group announced an exciting and
ambitious new goal - to increase sales to £365 million in the medium term and
deliver an adjusted profit before tax margin of 8-10%. This target implies
that we believe that the Group is capable of delivering adjusted profit before
tax of at least £30 million in the medium term, almost five times the level
of profits this year. We are calling this new goal 'Mission 365 - grow sales,
build profit'.
At the half year results, the Group identified five key areas of growth to
deliver Mission 365. These are to modernise the trader digital experience in
Topps Tiles, expand into new adjacent product categories, develop our
business-to-business sales focus, continue to expand Pro Tiler, and develop
Tile Warehouse to maturity. The performance objectives of Mission 365 are
based on conservative market assumptions and assume only a modest recovery in
tile volumes, with cumulative market and pricing growth over the medium term
of c. 4-8% compared to current levels. Updates against these growth areas
are given in the relevant sections below. The indicative sales uplifts we
expect to deliver from the five growth areas, together with the modest level
of market recovery and business as usual price growth are as follows:
Revenue £m
Group adjusted sales in 2024 248
Market and BAU pricing 10 - 20
Modernise the trade digital experience 15 - 20
Expand into new coverings categories 25 - 30
Business-to-business (B2B) sales focus 15 - 25
Pro Tiler expansion 20 - 25
Tile Warehouse maturity 10 - 15
Mission 365 (medium term) 365
The acquisition of the CTD assets provides a strong boost to revenues of £30
- £40 million in the medium term, accelerating our progress towards Mission
365. Although CTD will contribute to a number of the growth areas, we
believe it will play a particularly important role in the growth of B2B sales,
specifically allowing the Group to enter the national housebuilder market for
the first time, leveraging CTD's strong historic market position in this
space.
As part of the launch of Mission 365, and expansion into new product
categories, we have re-defined the Group's addressable market. Topps Group's
core focus has historically been on tiles and closely associated products, a
market valued at £1.2 billion in 2023. However, the Group already sells a
wider selection of coverings products than just tiles, and the addition of new
categories such as luxury vinyl tiles, wood and laminate, shower panels,
splashbacks and XXL porcelain expands the Group's addressable market to c.
£2.1 billion, a 75% increase. The Group is now focused on the wider market
of all hard wall and floor surface coverings and related products.
In summary, we expect the Group to deliver the following financial outcomes in
the medium term:
- Sales of £365 million, £117 million higher than adjusted sales in FY24
- Gross margins between 51% and 52%, depending on changes in business mix
- Adjusted profit before tax margin of 8-10%
- Substantial improvements in lease adjusted return on capital employed, given
only relatively modest changes to the store network and some investments in
supply chain and systems.
Following the launch of Mission 365 and the identification of the five key
growth areas defined above, this year we have updated the way that we will
present the Group's overall business strategy going forward. The Group's
goal will be delivered across four main areas - 'First for Tiles', 'Famous for
Hard Surfaces', 'First for Consumer' and 'First for Trade'. These will be
supported by three core areas of strength and focus - 'Topp People, Topp
Service', 'Environmental Leadership', and 'Operational Excellence'. These
categories replace the previous brand-focused reporting disclosure, reflecting
the more integrated approach, our greater scale and increasing complexity.
Sales performance by business area is disclosed in the Financial Review.
First for Tiles
First for Tiles represents our core product strategy, focused on our
specialism of tiles, which is reflected across all the brands in the Group:
Topps Tiles, Pro Tiler Tools, Parkside Architectural Tiles, Tile Warehouse and
CTD Tiles. Our expertise in the ranging, sourcing and procurement of tiles
and associated products on a global basis has been a core specialism of the
Group for 60 years and it remains a significant driver of our competitive
advantage today. Our scale as the largest specialist in the country allows
us to work directly with 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, distributors or agents, and may not enjoy the cost advantage and
creative input that direct supplier relationships give us.
Our strategic supplier base remains key for the Group, accounting for 63% of
purchases in 2024 (2023 restated: 64%), with this metric now including Pro
Tiler Tools. 71 new product launches were completed in Topps Tiles in 2024, up
from 63 in 2023 and 34 in 2022, largely delivered through our strategic
supplier base. When new products are launched, the Group protects the
intellectual property and design assets that are created and, overall, 80% of
tile ranges or closely associated products are either exclusive or own brand
(2023: 79%), creating a compelling reason for customers to shop with Topps
Tiles. This year we have also made progress towards a clearer 'good, better,
best' pricing hierarchy in tiles, with reduced discounting. In addition, we
maintained a strong pipeline of new product development across the Group with
our strategic suppliers, including an outstanding new range of 6mm porcelain
for use in domestic and commercial settings, new exclusive tile cutters,
developed with the world's largest tiling tool manufacturer, new Premtool own
brand preparation products in Pro Tiler, and bespoke terrazzo products for the
hospitality sector through Parkside. These innovations, together with many
more new ranges across the business, help to build differentiated offers for
all the brands in the Group.
Own brands are increasingly important for Topps Group, including Excel
Bond(TM), now one of the leading tile adhesive brands in the UK, Dex(TM), our
tiling tools brand aimed at the general builder and DIY enthusiast, Rise(TM),
our own brand underfloor heating range, and Everscape Solutions(TM), our
outdoor tiling range, now including all the essentials required to do the
job. Own brands now account for 20% of sales in Topps Tiles (2023: 17%).
Famous for Hard Surfaces
As described above, this year the Group has extended its addressable market to
include categories outside tiles and directly associated products, increasing
the addressable market from £1.2 billion to £2.1 billion based on 2023
market data. Given the Group's current very low market share in these
adjacent categories, we believe that expansion into new product categories
will be a key growth lever in the delivery of Mission 365. A 5% market share
in the new categories of luxury vinyl tiles, shower panels, outdoor tiles,
laminate and engineered wood, splashbacks and XXL tiles would represent a £25
- £30 million sales opportunity.
This year, the Group has rolled out its Pronto(TM) own brand luxury vinyl tile
offer into all Topps Tiles stores, Parkside and Tile Warehouse.
Everscape(TM) outdoor tiles are now available in all Topps Tiles stores and
through Parkside. Shower panels and XXL tiles are currently being rolled out
into the business, wood and laminate is currently in trial in 42 stores, and
acoustic panels and splashbacks are available online. In the coming year,
the Group intends to activate more marketing campaigns around these product
groups and build market share.
First for Consumer
First for Consumer refers to the parts of the Group focused on the homeowner
rather than the professional trade customer, led by Topps Tiles, and also
including Tile Warehouse.
Topps Tiles remains the leading brand within the specialist tile sector.
Unprompted awareness is at 33% (source: research commissioned from Two Ears
One Mouth, November 2023), more than six times higher than the next tile
specialist tile retailer and behind only B&Q in the generalist competitor
set. The brand continues to perform very well online, generating high
volumes of web traffic. This year, Topps Tiles launched 'platinum service',
a new customer service platform which supports team members as they walk
through the buying process with homeowner customers, who purchase tiles
infrequently. Early feedback from customers and colleagues has been very
positive. As we maintain our commitment to world class customer service, our
store teams have been more focused on encouraging customers to share their
positive experiences and this has resulted in a significant increase in the
quantity of Google reviews. In 2023, just over 1,000 reviews were left with
an average rating of 4.7 stars, whereas in 2024 over 13,000 reviews were
posted, with an average rating of 5.0 stars out of 5.
Tile Warehouse, the Group's online only, value-oriented tile specialist, has
made good progress this year, with the sales run rate trebling over the course
of the year. We continue to make improvements to website functionality, the
service model and the range offered and believe this business represents a
£10 - £15 million sales opportunity for the Group, making it one of the key
growth drivers referenced above.
First for Trade
The Group has a number of brands and initiatives aimed at the professional
customer, whether a jobbing trader in Topps Tiles, a contractor buying from
Pro Tiler Tools or Parkside, or a housebuilder purchasing from CTD.
Within Topps Tiles, there exists a substantial opportunity to drive additional
sales by improving and modernising the digital experience. At the half year
stage, the Group indicated that it would:
- Relaunch the trade website, making it much easier to complete registration and
transact;
- Improve pricing clarity and reduce confusion with respect to trade prices when
compared to homeowner prices;
- Modernise our trade loyalty scheme and embed this within our app;
- Substantially increase our trade credit offering;
- Launch a new Customer Engagement Platform which will allow us to communicate
far more effectively with trade customers, tailoring our marketing messages
and genuinely adding value for our customers; and
- Launch a modern trade app, with enhanced functionality, making this the
default way of engaging with Topps Tiles for many of our trade customers
Substantial progress has been made in the last six months. The trade website
has been relaunched, with clear and visible pricing available to all potential
customers, even without registration. The process of registering as a trade
customer through the website has been simplified and sped up. Topps have
launched a Trade Club, involving advantageous pricing, instant rewards, a
referral scheme, the opportunity to apply for trade credit and bulk deals.
Since the relaunch of the website, online trader registrations have more than
doubled compared to the pre-relaunch period, with web traffic up in excess of
300% and online spend c. 60% higher. A Customer Engagement Platform provider
has been engaged and work on the trade app has begun, with a launch planned
for 2025. Although it is early in this process, the Group estimates this to
be an opportunity worth £15 - £20 million, one of the key growth drivers
described above.
Pro Tiler continues to perform extremely well, with sales growth of over 30%
this year and an increase in net profit margins, which remain well within the
8-10% net margin target range for all Group businesses. Supported by a
substantial investment in its supply chain (as discussed in the Operational
Excellence section below) and the development of new brands, the Group
believes that Pro Tiler can add an additional £20 - £25 million of sales to
current levels in the medium term. Topps Group was pleased to complete the
acquisition of the remaining 40% of shares in Pro Tiler Limited in May 2024,
becoming 100% owners of the business.
Parkside experienced a difficult market in 2024, with a decline in sales based
on the deferral or cancellation of projects by key clients. Despite this
backdrop, as a result of a restructure of the business in 2023, Parkside moved
out of a loss-making position and into a marginal profit in the year for the
first time.
Across the brands in the Group focused on Commercial Trade, which includes
Parkside, the Topps Tiles contracts team, Pro Tiler's key accounts and now
CTD, the Group believes there exists at least a £15 - £25 million sales
opportunity. The assets which can be deployed by the Group, including a
nationwide store network, c. 290,000 sq ft of central warehousing and a
specialised distribution fleet, £38 million of stock, unrivalled breadth of
product range and world class service will be attractive to both medium and
large contractors. In addition, CTD has a strong heritage in sales to the
national housebuilder market. The Group believes that there is a significant
opportunity to build a market leadership position in this new market,
following the CMA investigation.
Topp People, Topp Service
The provision of world class service has remained a key competitive advantage
of the Group over its history and is a characteristic of all its brands. For
a homeowner customer, buying tiles is a very infrequent activity and so being
supported by teams which have the time to explain the variety of products on
offer, their suitability for different jobs and the other products needed to
complete the job is essential. For trade customers, technical knowledge and
a trusted point of contact is key for maintaining strong relationships.
'Topp Service' can only be delivered by 'Topp People' and the Group is
delighted to retain so many of the leading operators in the industry. This
year, colleague turnover improved by 0.9 percentage points to 28.3% in Topps
Tiles and by 2.3 percentage points to 26.3% at a Group level. Colleague
retention (meaning the percentage of colleagues employed at the year-end that
were employed at the start of the year) improved by 1.5 percentage points to
81.0%.
As a result of our strong teams, the business continued to deliver world class
customer service. In Topps Tiles, overall satisfaction in the year was
92.1%, up again against last year's excellent result of 91.5%. That means
that 92.1% of customers who fill in a survey rate the business as five
stars. In Pro Tiler Tools, online reviews have an average score of 4.9 / 5
and in Tile Warehouse the average score is 4.5 / 5, showing the level of
customer service offered across the Group.
Diversity, equity and inclusion remain central to our people strategy, and
this year saw the launch of the 'One Topps' strategy into the business,
focusing initially on listening groups, and then leading to recommendations to
improve opportunities for everyone to forge a career within Topps Group.
Charity fundraising remains a core part of our engagement strategy and this
year we were delighted to pass the £500,000 fundraising mark for Alzheimer's
Society, as part of our pledge to raise £1 million over five years.
Environmental Leadership
Environmental Leadership remains a central part of the Group's strategy, with
two key focus areas of carbon reduction and circularity. The Group's goal is
to be carbon neutral by 2030 across Scope 1 and 2 emissions, which in 2024
were 4,886 tonnes (2023: 5,034 tonnes), showing a slight decrease due to
efficiency upgrades and a 2% improvement in miles per gallon on our vehicle
fleet. In 2024 we conducted a successful trial of Hydrotreated Vegetable Oil
('HVO') as a replacement for diesel fuel and are investigating the possibility
of rolling this out further in 2026, after the installation of an HVO bunker
at one of the Group's central supply chain facilities. In addition, new
tractor units for the primary fleet will be delivered, which will increase
fuel economy by approximately 5%. At the store level, we replaced 22
inefficient gas heaters with modern systems, with further upgrades planned.
This year, we will establish science-based GHG reduction targets, aligned with
limiting global warming to 1.5 degrees. These will be submitted to the
Science Based Targets Initiative (SBTi) for validation within 24 months.
This year, we completed the first measurement of scope 3 emissions, supported
by Normative. Our Scope 3 emissions were reported as 176,718 tonnes, some 36
times greater than scope 1 and 2 emissions. The two main sources of
emissions are from purchased goods (principally tiles and adhesives) and usage
of purchased products (in particular underfloor heating). With the
Government committed to 100% renewable energy generation by 2035, the usage
aspect of our Scope 3 emissions should reduce to zero by that date. Please
see the Sustainability and TCFD reports in the Annual Report for more
information on this subject.
Circularity is the other key focus area in our Environmental Leadership
strategy. Reduction of waste is a key focus and, over the last two years,
the Group has targeted a reduction in tile waste in particular. This year,
the Group decreased tile waste by 9%, following a 12% reduction in 2023,
equivalent to 497 fewer tonnes of tile waste over the two-year period.
Additionally, the group doubled its volume of recycled baled cardboard by
improving the segregation of waste and recycled 112,000 pallets for reuse in
the operation, return to suppliers or sale back to pallet suppliers.
Operational Excellence
Underpinning our successful businesses are strong operational disciplines.
This area of the strategy covers support functions such as supply chain,
property, IT, finance, legal, central operations, marketing and so on.
Despite the difficult economic environment, investing in the future growth of
the business is key and the Group has agreed two significant steps in this
area over the last year.
Pro Tiler Tools has been a remarkable growth story in the last two years,
growing from £11.9 million of revenue in the 12-month period to January 2022
to £28.8 million in 2024. As such, the demands on the existing c. 56,000 sq
ft Pro Tiler warehousing and supply chain operation in Northampton have become
too great, with significant levels of operational inefficiency in recent
months, as well as an inability to continue to grow the business past current
levels. The Group therefore committed to a new warehouse in October 2024,
agreeing a lease on a 140,000 sq ft facility at the Prologis Park Pineham,
next to the M1, also in Northampton. This move will unlock operational
efficiencies and, more importantly, additional growth opportunities for Pro
Tiler and will be operational by January 2025. This new facility will also
provide operational capacity for future Group growth initiatives, including
the planned integration of CTD. The capital cost of fit out will be c. £2 -
£2.5 million in 2025 and additional operational costs for Pro Tiler relating
to the new property will be c. £0.4 million per year. The initial impact on
the Group statement of profit or loss will be c. £0.7 million due to the
front loading of lease costs under IFRS 16, reducing to £0.1 million by the
end of the 15 year period. The operational costs for CTD will be similar to
its existing site in Kings Norton.
The second investment into operational excellence is the replacement of the
main Enterprise Resource Planning (ERP) software in the Group, which supports
the Topps Tiles business and central functions. The business will move onto
the latest Microsoft Dynamics 365 Business Central system, provided as a
Software as a Service (SaaS) solution and hosted in the cloud. This will
modernise the business's systems and future proof the operations, as well as
enhance security and provide resilience and scalability. The project will
start in January 2025 and go live in 2026. The cost of implementation is
estimated at £1.2 million of additional operating costs, spread over 2025 and
2026 and the increased licencing costs at the conclusion of the project are
expected to be offset through operating efficiencies. In addition, new IT
hardware for stores will be purchased to unlock operating efficiencies and
further sales opportunities, at a capital cost of less than £1.0 million,
spread across the next two financial years.
Through these two significant programmes, the business is investing in its
core supply chain and systems infrastructure, providing a sound basis for
future growth.
Summary
2024 has been a year of substantial strategic progress, including the launch
of our new goal, 'Mission 365'. The Group has significantly outperformed a
very tough market and outlined a pathway to increased sales and profit over
the medium term with a focus on five key areas of future growth. In
addition, we acquired the assets of CTD Tiles and the remaining shares in Pro
Tiler, and made good strategic progress across the business. Although our
financial performance has inevitably been impacted by the weak market
backdrop, the hard work done this year to lay the foundations for our future
growth has ensured that the Group remains well positioned for the recovery as
a broader and more closely integrated business with a significantly expanded
addressable market.
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, the Board has reviewed
the KPIs and updated them in line with the updated goal and strategy. The
metrics have changed as follows:
- Group revenue growth year on year has been replaced with Group adjusted
revenue growth year on year to exclude the small impact of CTD in the final
weeks of the year, as discussed in the financial review;
- Group gross margin % has been replaced with Group adjusted gross margin % to
exclude the small impact of CTD in the final weeks of the year, as discussed
in the financial review;
- Group colleague turnover has been replaced by Group colleague retention,
reflecting the Group's strategy of attempting to retain staff for longer
periods to improve knowledge and customer service;
- Carbon emissions per store has been replaced with total scope 1 and 2 net
carbon emissions to align with the Group goal of reducing that number to zero
by 2030;
- Store numbers within Topps has been removed as the Board do not regard this to
be a key indicator of performance.
52 weeks to 52 weeks to YoY
28 September 30 September
2024 2023
Financial KPIs
Group adjusted revenue growth year on year* (5.4)% 6.3% n/a
Topps Tiles like-for-like sales growth year on year* (9.1)% 3.1% n/a
Group adjusted gross margin %* 53.3% 53.0% +0.3 ppts
Adjusted profit before tax* £6.3m £12.5m £(6.2)m
Adjusted earnings per share* 2.39 pence 4.49 pence (46.8)%
Adjusted net cash* £8.7m £23.4m £(14.7)m
Inventory days 118 days 107 days +11 days
Non-financial KPIs
Square metres of tiles sold in Topps Tiles (thousand) 4,222 4,569 (7.6)%
Topps Tiles customer overall satisfaction score 92.1% 91.5% +0.6 ppts
Group colleague retention 81.0% 79.5% +1.5 ppts
Total scope 1 and 2 net carbon emissions (tonnes per annum) 4,886 5,034 (2.9)%
* as defined in the Financial Review
Notes: Topps Tiles 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. Group colleague retention represents the percentage of employees
employed by the Group at the end of the period that were also employed at the
start of the period. Total scope 1 and 2 carbon emissions have been compiled
in conjunction with our carbon consultancy partner, Normative. 2023 carbon
emissions have been restated due to a change in the Normative methodology (GHG
Protocol aligned).
FINANCIAL REVIEW
The 2024 financial year covers the 52 weeks to 28 September 2024. The
previous financial year covers the 52 weeks to 30 September 2023. Following
three consecutive record years for revenue, weaker market demand led to
challenging financial performance over the most recent period, although the
Group did outperform the market overall and saw strong performance in some of
the newer business areas. In addition, the Group made two strategically
important acquisitions, the purchase of the final 40% of shares in Pro Tiler
Limited and the acquisition of the brand and certain assets from CTD Tiles
Limited (in administration), bringing the CTD brand into the Group and
establishing an opportunity to grow in new, complementary areas of the tile
market in future.
Acquisition of CTD
On 19 August 2024, the Group acquired the brand and certain assets from CTD
Tiles Limited (in administration) including the right to occupy 30 stores,
selected stock, intellectual property and branding for consideration of £9.0
million. The Group recognised plant, property and equipment assets of £0.9
million, £2.2 million of net working capital, £0.4 million of provisions and
£6.3 million of goodwill on acquisition. These values are provisional and
will be re-examined during the measurement period as defined in IFRS 3. The
business's performance, transaction costs and costs of the ongoing CMA
investigation have all been treated as an adjusting item within the
consolidated statement of profit of loss, as detailed in the Adjusting Items
section below.
Acquisition of remaining shares in Pro Tiler Limited
As previously reported, the Group acquired the remaining 40% of the shares in
Pro Tiler Limited in May 2024, valuing the business at a previously agreed
multiple of EBITDA. As a result, there was an £8.8 million cash outflow in
May 2024 which is represented in the cash flow statement as a reduction in
provisions, together with a £1.1 million dividend payment to the
non-controlling interests, representing the relevant share of post-tax profits
during the two-year earn out period. As a result of the transaction, the
Group became the 100% owner of the business, meaning there is no longer a
non-controlling interest relating to Pro Tiler Limited, with all profits
attributable to the owners of Topps Tiles plc from the second half of 2024.
As outlined in the Adjusting Items section below, there was a £3.2 million
expense recognised in the first half year relating to the Pro Tiler share
purchase.
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
This section provides an analysis of the business's financial performance over
the last year. Generally, adjusted measures are used, with a full
description of adjusting items in the relevant section below. Alongside the
usual adjustments, the financial performance of CTD has been excluded from
adjusted measures this year, as explained in the Adjusting Items section
below.
Revenue
Total Group revenue for the 52-week period decreased by 4.1% to £251.8
million (2023: £262.7 million). Excluding the £3.3 million revenue
contribution from CTD in the six weeks of ownership, adjusted revenue
decreased by 5.4% to £248.5 million. Revenue consolidated into the Group
accounts by business area was as follows:
£m 2024 2023 Variance
Topps Tiles 210.4 230.9 (8.9)%
Parkside 7.6 9.4 (19.1)%
Online Pure Play* 30.5 22.4 +36.2%
Adjusted revenue 248.5 262.7 (5.4)%
CTD** 3.3 -
Group revenue 251.8 262.7 (4.1)%
*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.
** CTD was acquired on 19 August 2024. Please see the relevant section below
for further information.
Topps Tiles like-for-like sales were 9.1% lower than the prior year, with
similar rates of decline in both halves of the year but with a slightly better
trend in the fourth quarter (down 8.2%) improving further into the new
financial year. Total revenue in Topps Tiles was 8.9% lower year on year at
£210.4 million. Throughout the year, sales to trade customers have been
significantly stronger than sales to homeowners and, as a result, trade mix in
Topps Tiles increased notably from 59.6% of sales in 2023 to 62.8% of sales in
2024. Trade customers bring repeat purchases and high degrees of loyalty,
and as a result benefit from advantaged pricing which therefore delivers lower
gross margins than homeowner customers.
The commercial market continued to be very challenging with sales to our
clients through Parkside down 19.1% year on year to £7.6 million. Sales in
Online Pure Play continue to be extremely strong, led by Pro Tiler Tools, and
in total grew 36.2% to £30.5 million (2023: £22.4 million), with £28.8
million from Pro Tiler and £1.7m from Tile Warehouse, which almost tripled
its sales year on year.
Gross Margin and Gross Profit
Group gross profits decreased by 3.5% from £139.2 million to £134.3 million,
including a contribution of £1.8 million from CTD. Adjusted gross profit
was therefore £132.5 million and adjusted gross margins as a percentage of
sales were 53.3% (2023: 53.0%), an increase of 0.3 percentage points.
The change in adjusted gross margin on an annual basis was due to four main
factors. Within Topps Tiles, there were net price, COGS and product mix
benefits worth 1.4 percentage points to the Group margin, as shipping and
product costs normalised when compared to last year, and with buying gains in
some newer product categories. The strong growth in trade customers, buying
higher levels of essentials products, reduced Group margin by 0.5 percentage
points. The continuing growth in the Online Pure Play brands resulted in a
1.2 percentage point decline in Group gross margins, as these brands operate
at a structurally lower gross margin than the rest of the Group. There was
also a 0.6 percentage point gain from other factors, predominantly lower stock
losses. The impact of mark-to-market movements on unrealised foreign
currency transactions and retranslation of monetary items was a £0.7 million
loss, similar to the prior year.
Adjusted gross margins in the Group fell from 53.9% in the first half year to
52.7% in the second half year as a result of the continued growth in Online
Pure Play relative to the rest of the Group and some price investment in Topps
Tiles.
Operating Expenses and Other Income
Operating expenses and other income were £145.7 million compared to £128.1
million in 2023, including the cost of right of use and fixed asset impairment
(see the section on Store Impairment below). Excluding adjusting items,
which are explained below, operating expenses decreased from £122.6 million
in 2023 to £121.5 million in 2024.
The £1.1 million decrease in adjusted operating expenses is explained by the
following key items:
£ million
2023 adjusted operating expenses 122.6
Cost inflation 4.9
Online Pure Play 1.2
Parkside cost reduction (1.2)
Profit share (4.4)
Other savings (1.6)
2024 adjusted operating expenses 121.5
Cost inflation was spread across a number of lines, include wage inflation
(including the impact of the National Living Wage increase of 9.8% in April
2024), property, IT costs and insurance. The cost increase in Online Pure
Play represents ongoing investment in that business to generate profitable
growth, especially in Pro Tiler Tools. The year on year saving in Parkside
includes the annualisation of actions taken last financial year to right size
the business and follows a saving of £1.0 million reported in 2023,
generating a total saving of £2.2 million over two years, and resulting in
Parkside delivering a small profit, for the first time, in 2024. Profit
share represents year on year savings from lower variable payments to
colleagues across the Group as a result of the financial performance compared
to targets. Other savings include savings in supply chain and stores due to
lower volumes.
Finance Income and Costs
Total net finance costs were £4.8 million (2023: £4.3 million) and adjusted
net finance costs (which exclude the interest expense representing the unwind
of the discount applied to the Pro Tiler Limited earn out liability) were
£4.7 million (2023: £4.1 million. The adjusted net finance costs consisted
of interest payable on lease liabilities of £4.7 million (2023: £4.2
million) which have increased as a result of rising interest rates,
amortisation of banking fees relating to the revolving credit facility and
bank interest payable of £0.5 million (2023: £0.3 million) and interest
receivable on credit balances and finance lease receivables of £0.5 million
(2023: £0.4 million).
Profit or Loss Before Tax
Excluding the items detailed in the Adjusting Items section below, adjusted
profit before tax was £6.3 million (2023: £12.5 million. The Group
adjusted profit before tax margin was 2.5% (2023: 4.8%) as a result of the
lower sales and operational gearing inherent in the Group.
On a statutory basis, the loss before tax was £16.2 million (2023: profit
before tax of £6.8 million), with reported profits significantly impacted by
the accounting requirement to treat the purchase of the remaining Pro Tiler
Limited shares as an employment cost under IFRS 3, and the requirement under
IAS 36 to review right of use assets and fixtures & fittings for
impairment. More information is provided in the Adjusting Items and Store
Impairment sections below.
Taxation
On an adjusted basis, the effective rate of corporation tax for the period was
22.3% (2023: 24.9%), slightly lower than the headline rate of corporation tax
as a result of utilisation of prior year tax losses.
The effective rate of corporation tax for the period on a statutory basis was
21.0% (2023: 42.5%). The statutory rate of tax is substantially lower than
the previous year due to the tax treatment of the Pro Tiler Limited share
purchase expense. This is not treated as an allowable remuneration expense
from a tax perspective, instead it is treated as an acquisition of shares.
In the prior year this had the impact of increasing the effective rate on
statutory profit considerably above the headline rate of Corporation Tax. In
the current year it has the impact of reducing the tax credit on the statutory
loss before tax. This position has now normalised following the completion
of the purchase of remaining shares in Pro Tiler Limited in May 2024.
Earnings per share
Adjusted earnings per share were 2.39 pence (2023: 4.49 pence). Basic losses
per share were 6.63 pence (2023: basic earnings per share of 1.63 pence).
Diluted losses per share were 6.63 pence (2023: diluted earnings per share of
1.61 pence).
Adjusting Items
The Group's management uses adjusted performance measures to plan for, control
and assess the performance of the Group.
Adjusted profit before tax differs from the statutory profit before tax as it
excludes the effect of one-off or fluctuating items, allowing stakeholders to
understand results across years in a more consistent manner. In line with
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 (which were material this year and
are further explained in the section below), derecognition of lease
liabilities where we have exited a store, and one-off gains and losses through
sub-lets. From this year, the Group has also decided to exclude impairment
and impairment reversals of plant, property and equipment from adjusted
profit, as the impairment of these assets is a result of the same impairment
review process applied to right of use assets, implying the same accounting
presentation. Please see the section below on store impairments for further
details.
In the period 2022 - 2024 we excluded the cost relating to the purchase of the
remaining 40% of shares in Pro Tiler Limited which was completed in May 2024,
which under IFRS 3 is treated as a remuneration expense, rather than a cost
relating to the acquisition of the relevant shares. We have also excluded
the remaining costs relating to the store closure programme which ended in
2022, as well as restructuring costs.
Finally, this year, the CTD brand and certain assets were acquired from
administration and the financial impact of this business, including trading
performance, acquisition costs, and the initial costs of the CMA
investigation, have been excluded from adjusted profit. CTD's trading in the
six weeks of ownership was not representative of its ongoing position due to
significant disruption and recovery from administration. It is expected that
CTD's trading performance will be included in adjusted profit from 2025, but
any remaining costs relating to the transaction or to the ongoing CMA
investigation will be excluded until the conclusion of these processes.
An analysis of movements from adjusted profit before tax to statutory
(loss)/profit before tax is presented below:
2024 £m 2023 £m
Adjusted profit before tax 6.3 12.5
Property
- Vacant property and closure costs (0.3) (1.1)
- Store impairments and lease exit gains and losses (18.8) 0.2
(19.1) (0.9)
Business Development
- Pro Tiler Limited share purchase expense (3.2) (4.1)
- CTD trading, transaction costs and CMA investigation costs (0.2) -
- Restructuring and other one-off costs - (0.7)
(3.4) (4.8)
Statutory (loss)/profit before tax (16.2) 6.8
Adjusted earnings per share is adjusted for the items listed above, as well as
the impact of corporation tax. Further information is given in the earnings
per share note to the accounts.
Store Impairments
Store impairments have been particularly material this year, against the
backdrop of the significant downturn in market conditions. The impairments
relate to the notional 'right of use' (ROU) assets which are created as part
of IFRS 16 accounting, representing the business's right to use assets it does
not own (in this case physical stores which are leased by the Group), as well
as the fixtures and fittings contained in them. Under IAS 36, the Group is
required to assess these assets for indicators of impairment, such as the
generally weak market environment, and then, where relevant, impair the value
of the assets to the higher of the asset's value-in-use and its fair value
less costs of disposal. Value-in-use calculations require estimates of
future cash flows to be made, which are based on the current period of trading
and then extrapolated forward using a series of assumptions. As a result of
this review, a non-cash impairment of £17.1 million has been recognised
against ROU assets and £2.3 million against fixtures and fittings. In
future years, an assessment will be made to see if a reversal of this
impairment is required. As explained in the section above, these impairments
are treated as adjusting items and are included in the 'store impairments and
lease exits gains and losses' line in the table above.
In addition, the impact of these impairments will be excluded from adjusted
profit in future years. The impairments imply that these assets will not
incur a depreciation charge moving forward in reported profits, and the impact
of this is currently estimated at an increase in reported profits before tax
of £5.2 million in 2025. However, the Group's adjusted profit before tax
measure will carry a notional depreciation charge, as if the assets had not
been impaired in 2024, meaning that adjusted profit before tax will continue
to be comparable year on year, and is more reflective of the actual lease
payments made by the Group. None of these changes has any cash impact, in
2024 or in future periods.
Dividend and Dividend Policy
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 (EPS) 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. A limit on this flexibility was applied, at
100% of adjusted EPS in any given year.
Adjusted EPS this year were 2.4 pence, materially lower than the 3.6 pence
dividend which was paid last year. The Board has applied the dividend policy
as stated above and proposed a full year dividend at the upper limit in the
policy of 100% of adjusted EPS (2.4 pence per share), implying a final
dividend payment of 1.2 pence per share. This reflects the weaker trading in
2024 but also the Board's confidence in the Group's medium-term prospects.
The shares will trade ex-dividend on 19 December 2024 and, subject to approval
from shareholders at the Annual General Meeting in January 2025, the dividend
will be paid on 30 January 2025.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AND CONSOLIDATED CASH FLOW
STATEMENT
Capital Expenditure and Fixed Assets
Capital expenditure in the period amounted to £4.5 million (2023: £4.2
million), an increase of £0.3 million year on year.
Key investments were as follows:
• £0.9 million on a new Topps Tiles store at Kingston Park, Newcastle and a
relocation at Brentwood Hutton
• £3.0 million on store improvements, merchandising and maintenance, including
5 store refits
• £0.3 million on further LED lighting projects
• £0.3 million on IT projects.
The Board expects capital expenditure in the year ahead to be between £8
million and £9 million. This includes £2 - 2.5 million relating to the fit
out of the new warehouse servicing Pro Tiler and CTD and compares to an
average of £8.1 million in the four years before the pandemic (2016 to 2019).
Within the Topps Tiles brand, there was one new store opening, one relocation
and three store closures in the year, and the brand finished the trading
period with 301 trading stores (2023: 303 stores). On average, Topps Tiles
traded from 303 stores over the year (2023: 304 stores).
CTD ended the trading period with 30 trading stores as well as a trade counter
retained at the Kings Norton distribution centre.
Right of Use Assets and Leases
As described in the sections above, following an impairment review under the
IAS 36 accounting standard, an impairment of £17.1 million was recognised
against the Group's ROU assets in the period, as a result of the projected
cash flows of each cash generating unit not being sufficient to support the
ROU asset. ROU assets reduced from £80.9 million at the start of the year
to £55.3 million at the period end as a result of this impairment, £17.6
million of depreciation, £3.5 million of disposals and £12.6 million of
additions in the period.
Lease liabilities, representing the discounted lease liabilities the Group
holds within the scope of IFRS 16, decreased from £94.5 million at the start
of the year to £86.0 million at the period end, as a result of £21.8 million
of lease repayments, £3.8 million of disposals, £12.4 million of additions
(i.e. new leases) and £4.7 million of interest.
Topps retains significant flexibility within its store estate, with an average
unexpired lease term until the next break of 2.8 years (2023: 2.9 years), or
2.6 years excluding strategically important stores (2023: 2.8 years). At the
period end, there were two closed stores (2023: five closed stores), all of
which have lease exits in 2025.
Inventory
Inventory at the period end was £37.9 million (2023: £36.4 million).
Inventory recognised after stock provisions relating to CTD was £2.9
million, with inventory across the rest of the Group of £35.0 million, a
decrease of £1.4 million on a like-for-like basis. Inventory days excluding
CTD were 110 (2023: 107 inventory days) but were 118 days on a reported basis,
distorted by the short period of CTD trading included in the results.
Net Cash Flow
The Group's cash balance increased in the period by £0.3 million from £23.4
million at the start of the financial year to £23.7 million at the year
end. Adjusted net cash, defined as cash and cash equivalents, less bank
loans before unamortised costs, decreased by £14.7 million from £23.4
million to £8.7 million.
The table below analyses the Group's adjusted net cash flow:
2024 2023
£m £m
Cash generated from operations, before movements in working capital, tax, 34.9 41.1
interest and CTD cash flows
Changes in working capital (excluding CTD) 6.4 4.1
Outflow for leases in scope of IFRS 16 (21.8) (23.0)
CTD cash generated by operations (1.5) -
Capital expenditure (4.5) (4.2)
Net bank interest (0.1) 0.1
Tax (2.3) (3.3)
Other 0.2 (0.1)
Free cash flow 11.3 14.7
Dividends paid to owners of Topps Tiles plc (7.1) (7.5)
Change in adjusted net cash before acquisitions 4.2 7.2
Acquisition of CTD (9.0) -
Acquisition of remaining 40% of shares in Pro Tiler Limited including (9.9) -
dividends paid to non-controlling interest
Change in adjusted net cash (14.7) 7.2
Adjusted net cash at start of period 23.4 16.2
Adjusted net cash at end of period 8.7 23.4
The business's underlying cash flows were representative of the changes in
adjusted profits. Working capital (excluding the impact of CTD) showed an
inflow of £6.4 million, including the impact of the timing of the year end
(which increased the closing trade payables balance by c. £9 million due to
payroll, VAT and supplier payment runs falling due on 30 September, just after
the year end date), lower performance-based pay accruals, lower stock and a
higher trade debtor balance. The CTD cash outflow generated by operations
includes trading losses, a working capital investment related to trade debtors
and a delay in cash receipts due to banking changes following the
acquisition. As described above, the Group conducted two transactions in the
year: the purchase of the remainder of the shares in Pro Tiler Limited and the
acquisition of certain assets from CTD Tiles Limited. Total dividend
payments of £8.2 million consisted of £7.1 million paid to shareholders of
Topps Tiles plc and £1.1 million to the previous owners of the 40%
shareholding in Pro Tiler Limited, representing 40% of the post-tax profits of
that business during the earn out period.
Return on Capital Employed
The Group's return on capital employed, including the impact of leases,
decreased from 15.7% in 2023 to 12.2% in 2024, due to a 33.7% year on year
reduction in adjusted operating profit to £11.0 million (2023: £16.6
million). Closing capital employed was 15.0% lower than opening capital
employed as a result of lower lease liabilities and net assets, however net
cash was also lower. 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). At the balance sheet
date, lease adjusted capital employed consisted of £5.6 million of net
assets, £86.0 million of lease liabilities, offset by £8.7 million of net
cash, giving total capital employed of £82.9 million (2023: £97.5 million).
Banking Facilities
The Group retains modest adjusted net cash on its balance sheet (i.e. cash net
of bank loans), with the reduction compared to last year as a result of the
two acquisitions and the weaker trading environment. A £30.0 million
revolving credit facility is in place which has now been extended to October
2027 (2023: £30.0 million facility committed to October 2026), providing
resilience and allowing investment in growth opportunities. At the year end,
£15.0 million of this facility was drawn (2023: £nil drawn). Based on net
cash excluding lease liabilities of £8.7 million, the Group has £38.7
million of headroom to its banking facilities at the period end (2023: £53.4
million headroom to the facility).
Forward Guidance
Despite the return of CPI inflation to around 2%, there remain significant
inflationary challenges facing the business in FY25. Specifically, the
recently announced changes in the National Living Wage (up 6.7% from April
2025) and the changes in both the secondary threshold and the rate of
employers' national insurance contributions will drive almost £4 million of
additional costs into the business on an annual basis from April 2025, of
which c. £2 million will impact the FY25 financial year. Given these cost
increases represent a high proportion of the current level of profitability in
the Group, they will need to be managed very carefully, and the business is
currently formulating plans to mitigate these costs as far as possible. When
combined with other general inflation in the market, the Group is expecting
around £5 million of inflationary costs in FY25 compared to FY24. In
addition, it is expected that FY25 will see a return to normal levels of
performance related pay across the Group, subject to the relevant targets
being met.
The Group's profits in 2025 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
financial year.
As described above, the Board expects capital expenditure of between £8
million and £9 million in FY25, including £2 - £2.5 million relating to the
fit out of the new warehouse.
Current Trading and Outlook
Trading in the first eight weeks of the new financial year has seen the Group
return to modest levels of sales growth. Group sales were up 1.2% year on
year excluding CTD, with like-for-like sales in Topps Tiles down 0.4%. This
performance has been supported by the continued strength of sales made to
trade customers, as well as the weaker prior year comparative performance.
Whilst some macroeconomic indicators suggest a more favourable outlook into
FY25, including mortgage approvals up substantially year on year, overall
there remains significant uncertainty around the timing of any recovery,
particularly whilst consumer confidence remains weak and interest rates
relatively high.
The Group is focused on significant self-help measures, in particular the five
key areas of growth supporting Mission 365 which will drive material upside to
both revenue and profit in the medium term. Therefore, despite our caution
with respect to the short term outlook, the Group's strategy, together with
its robust balance sheet, gives us confidence that the Group remains well
placed for a recovery in market volumes.
Rob Parker Stephen Hopson
Chief Executive Officer Chief Financial Officer
26 November 2024
Unaudited Consolidated Statement of Profit or Loss
For the 52 weeks ended 28 SEPTEMBER 2024
Notes 52 weeks 52 weeks
ended ended
28 September 30 September
2024 2023
£'000 £'000
Group revenue 2 251,756 262,714
Cost of sales (117,434) (123,466)
Gross profit 134,322 139,248
Distribution and selling costs (93,426) (93,573)
Other operating expenses (5,918) (6,846)
Administrative costs (19,492) (21,493)
Marketing and online costs (7,944) (6,582)
Property related impairments* 11, 12 (19,360) (227)
Other income 12 401 579
Group operating (loss)/profit (11,417) 11,106
Finance income 5 665 408
Finance costs 5 (5,480) (4,699)
(Loss)/profit before taxation 3 (16,232) 6,815
Taxation 6 3,412 (2,896)
(Loss)/profit for the period (12,820) 3,919
(Loss)/profit is attributable to:
Owners of Topps Tiles Plc (13,033) 3,206
Non-controlling interests 213 713
(12,820) 3,919
All results relate to continuing operations of the Group.
*In the prior period, Property related impairments were included within
Distribution and selling costs.
52 weeks 52 weeks
ended ended
28 September 30 September
2024 2023
Earnings per ordinary share: Notes £'000 £'000
- Basic 8 (6.63p) 1.63p
- Diluted 8 (6.63p) 1.61p
Unaudited Consolidated Statement of Comprehensive Income
For the 52 weeks ended 28 SEPTEMBER 2024
52 weeks 52 weeks
ended ended
28 September 30 September
2024 2023
£'000 £'000
(Loss)/profit for the period (12,820) 3,919
Total comprehensive (loss)/income for the period is attributable to:
Owners of Topps Tiles Plc (13,033) 3,206
Non-controlling interests 213 713
(12,820) 3,919
Unaudited Consolidated Statement of Financial Position
as at 28 SEPTEMBER 2024
Notes 2024 2023
£'000 £'000
Non-current assets
Goodwill 9 8,365 2,101
Intangible assets 10 4,161 4,755
Property, plant and equipment 11 17,328 19,306
Deferred tax assets 4,461 68
Right-of-use assets 12 55,325 80,921
Other financial assets 12 1,653 1,847
91,293 108,998
Current assets
Inventories 37,850 36,351
Other financial assets 12 210 327
Trade and other receivables 13,350 5,284
Current tax debtors 1,015 -
Derivative financial instruments - 74
Cash and cash equivalents 13 23,682 23,368
76,107 65,404
Total assets 167,402 174,402
Current liabilities
Trade and other payables (57,463) (45,066)
Lease liabilities 12 (14,584) (15,649)
Derivative financial instruments (378) -
Current tax liabilities - (368)
Provisions (714) (5,865)
(73,139) (66,948)
Net current assets/(liabilities) 2,968 (1,544)
Non-current liabilities
Lease liabilities 12 (71,381) (78,853)
Provisions (2,299) (2,213)
Bank loans 14 (14,996) -
Total liabilities (161,815) (148,014)
Net assets 5,585 26,388
Equity
Share capital 6,556 6,556
Share premium 2,636 2,636
Own shares (7) (112)
Merger reserve (399) (399)
Share-based payment reserve 6,349 6,035
Capital redemption reserve 20,359 20,359
Accumulated losses (29,909) (11,869)
Capital and reserves attributable to owners of Topps Tiles Plc 5,585 23,206
Non-controlling interests - 3,182
Total equity 5,585 26,388
Unaudited Consolidated Statement of Changes in Equity
For the 52 weeks ended 28 SEPTEMBER 2024
Share Share Own Merger Share-based Capital Accumulated losses Total
capital premium shares reserve Payment reserve Redemption reserve £'000 Non-controlling interest equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
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
(Loss)/profit and total comprehensive loss for the period - - - - - - (13,033) 213 (12,820)
Dividends - - - - - - (7,077) (1,111) (8,188)
Transfer on acquisition of non-controlling interest - - - - - - 2,284 (2,284) -
Own shares purchased in the period - - (105) - - - - - (105)
Own shares disposed of on issue in the period - - 210 - - - (210) - -
Credit to equity for equity-settled share-based payments - - - - 314 - - - 314
Deferred tax on share-based payment transactions - - - - - - (4) - (4)
Balance at 28 September 2024 6,556 2,636 (7) (399) 6,349 20,359 (29,909) - 5,585
Unaudited Consolidated Cash Flow Statement
For the 52 weeks ended 28 SEPTEMBER 2024
Notes 52 weeks 52 weeks
ended ended
28 September 30 September
2024 2023
£'000 £'000
Cash flow from operating activities
(Loss)/profit for the period (12,820) 3,919
Taxation 6 (3,412) 2,896
Finance costs 5 5,480 4,699
Finance income 5 (665) (408)
Group operating (loss)/profit (11,417) 11,106
Adjustments for:
Depreciation of property, plant and equipment 11 4,667 5,024
Depreciation of right-of-use assets 12 17,630 18,157
Amortisation of intangible assets 10 683 767
Loss on disposal of property, plant and equipment 160 224
Loss/(gain) on sublease 20 (240)
Impairment of property, plant and equipment 11 2,290 91
Impairment of right-of-use assets 12 17,094 346
Gain on lease disposal (526) (100)
Share option charge 314 873
Increase in earn out liability and other provisions (excluding CTD acquired 3,394 4,264
balances)
Non-cash loss on derivative contracts 452 444
Cash generated from operations before movements in working capital, tax and 34,761 40,956
interest
(Increase)/decrease in trade and other receivables (8,066) 761
Decrease in inventories (excluding CTD acquired balances) 670 2,255
Increase in payables 12,344 1,079
Cash generated from operations before tax and interest 39,709 45,051
Interest paid on borrowings (666) (161)
Interest received on operational cash balances 610 305
Interest element of lease liabilities paid 12 (4,731) (4,176)
Settlement of earn out liability and other provisions (8,838) (484)
Taxation paid (2,314) (3,301)
Net cash generated from operating activities 23,770 37,234
Investing activities
Interest received on sublease assets 12 55 58
Receipt of capital element of sublease assets 467 555
Purchase of property, plant and equipment (excluding CTD acquired balances) 11 (4,193) (4,017)
Direct costs relating to right-of-use assets (188) (133)
Purchase of intangibles 10 (89) (99)
Purchase of business 15 (9,000) -
Proceeds on disposal of property, plant and equipment - 25
Net cash used in investment activities (12,948) (3,611)
Financing activities
Payment of capital element of lease liabilities (17,059) (18,841)
Dividends paid 7 (8,188) (7,462)
Financing arrangement fees (152) (200)
Purchase of own shares (105) -
Receipt on disposal of own shares - 7
Proceeds from borrowings 15 23,500 -
Repayment of bank loans 15 (8,504) -
Net cash used in financing activities (10,508) (26,496)
Net increase in cash and cash equivalents 314 7,127
Cash and cash equivalents at beginning of period 23,368 16,241
Cash and cash equivalents at end of period 14 23,682 23,368
Notes to the Unaudited Financial Statements
For the 52 weeks ended 28 SEPTEMBER 2024
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 30 September 2023
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 28 September 2024 will be
delivered to the Registrar of Companies following the Company's Annual General
Meeting.
These audited 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.
- Amendments to IAS 1 Presentation of Financial Statements; disclosure of
accounting policies;
- Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors; definition of accounting estimates;
- Amendments to IAS 12 Income Taxes; deferred tax related to assets and
liabilities arising from a single transaction;
- Amendments to IAS 12 International Tax Reform Pillar Two Model Rules;
- IFRS 17 Insurance Contracts; original issue;
- IFRS 17 Insurance Contracts (Amendment); Initial Application of IFRS 17;
- IFRS 9 Financial Instruments; Comparative Information.
2 GROUP REVENUE
An analysis of Group revenue is as follows:
52 weeks 52 weeks
ended ended
28 September 30 September
2024 2023
£'000 £'000
Revenue from the sale of goods 251,756 262,714
Total revenue 251,756 262,714
The Group trades in four related sectors which are Topps Tiles, Parkside, CTD
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
28 September 30 September
2024 2023
£'000 £'000
UK 251,511 262,315
EU 176 267
Rest of World 69 132
Total 251,756 262,714
Revenue can be split into the following business areas:
52 weeks 52 weeks
ended ended
28 September 30 September
2024 2023
£'000 £'000
Topps Tiles 210,367 230,905
Parkside 7,592 9,369
CTD 3,303 -
Online Pure Play 30,494 22,440
Total 251,756 262,714
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.
3 LOSS/PROFIT BEFORE TAXATION
(Loss)/profit before taxation for the period has been arrived at after
charging/(crediting):
Notes 52 weeks 52 weeks
ended ended
28 September 30 September
2024 2023
£'000 £'000
Depreciation of property, plant and equipment 11 4,667 5,024
Depreciation of right-of-use assets 12 17,630 18,157
Operating lease costs accounted for per IFRS 16 para 6 - low value and short 2,917 3,235
term rentals
Gain on lease disposal (506) 124
Impairment charge of property, plant and equipment 11 2,290 91
Impairment charge of right-of-use assets 12 17,094 346
Loss on disposal of property, plant and equipment and intangibles 160 224
Amortisation of intangibles 10 683 767
Staff costs 4 60,173 61,052
Exchange losses recognised in profit or loss 746 970
Cost of inventories recognised as an expense 113,996 119,103
Write-down of inventories to net realisable value 2,693 3,393
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 includes an adjusted profit before
tax as a key performance indicator within the Strategic Report as one of the
measures by which investors can assess the performance of the Group.
The reconciliation of Adjusted Profit Before Tax to Statutory (Loss)/Profit
Before Tax is as follows:
Notes 52 weeks 52 weeks
ended ended
28 September 30 September 2023
2024 £'000
£'000
Adjusted Profit Before Tax 6,319 12,514
Property
Vacant property and closure costs (333) (1,098)
Store impairments and lease exit gains and losses (18,854) 192
Business development
Pro Tiler Tools deal costs - (5)
Pro Tiler Tools share purchase expense (3,166) (4,054)
Tile Warehouse set up costs - (11)
Restructuring and other one-off costs - (723)
CTD trading, transaction costs and CMA investigation costs 15 (198) -
Statutory (Loss)/Profit Before Tax (16,232) 6,815
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 include charges relating to the acquisition of Pro
Tiler, including the cost associated with the purchase of the remaining 40% of
shares which completed in March 2024, and the financial impact of CTD,
including trading performance, acquisition and integration costs, and the
initial costs of the CMA investigation. 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
28 September 30 September
2024 2023
£'000 £'000
Fees payable to the Company's auditors with respect to the Company's annual 486 155
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
Total audit fees 486 376
Total non-audit fees - -
Total fees payable to the Company's auditors 486 376
Additional fees of £125,000 were incurred as part of the finalisation of the
audit in 2023.
4 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
28 September 30 September
2024 2023
Number employed Number employed
Selling and distribution 1,385 1,388
Administration 381 360
1,766 1,748
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
28 September 30 September
2024 2023
Number Number employed
employed
Selling and distribution 1,297 1,303
Administration 377 354
1,674 1,657
2024 2023
£'000 £'000
Their aggregate remuneration comprised:
Wages and salaries (including LTIP) 54,191 55,261
Social security costs 4,736 4,654
Other pension costs 1,246 1,137
60,173 61,052
Employee profit sharing of £4.1 million (2023: £8.5 million) is included in
the above and comprises sales commission and bonuses.
The total charge for share based payments recognised during the year was £0.3
million (2023: £0.9 million)
5 FINANCE INCOME AND FINANCE COSTS
52 weeks 52 weeks
ended ended
28 September 30 September
2024 2023
£'000 £'000
Finance income
Bank interest receivable 610 350
Interest income from finance lease receivables 55 58
665 408
Finance costs
Interest on bank loans and overdrafts (749) (523)
Interest payable on lease liabilities (4,731) (4,176)
(5,480) (4,699)
No finance costs have been capitalised in the period, or the prior period.
6 TAXATION
52 weeks 52 weeks
ended ended
28 September 30 September
2024 2023
£'000 £'000
Current tax - charge for the period 265 2,768
Current tax - adjustment in respect of prior periods 720 74
Deferred tax - credit for the period (3,201) (64)
Deferred tax - adjustment in respect of prior periods (1,196) 118
Total tax (credit)/charge (3,412) 2,896
The (credit)/charge for the period can be reconciled to the (loss)/profit per
the statement of profit or loss as follows:
52 weeks 52 weeks
ended ended
28 September 30 September
2024 2023
£'000 £'000
Continuing operations:
(Loss)/profit before taxation (16,232) 6,815
Tax at the UK corporation tax rate of 25.0% (2023: 22.0%) (4,052) 1,499
Expenses that are not deductible in determining taxable profit 896 1,165
Fixed asset differences (non-deductible expenses) 220 24
Remeasurement of deferred tax for changes in tax rates - 16
Adjustment in respect of prior periods 720 74
Adjustments to tax charge in respect of prior periods - deferred tax (1,196) 118
Tax (credit)/expense for the period (3,412) 2,896
In the period, the Group has recognised a corporation tax credit directly to
equity of £nil (2023: £1,000) and a deferred tax charge to equity of £4,000
(2023: £8,000) in relation to the Group's share option schemes.
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 £1,071,000 (2023: £1,017,000).
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 in the
prior period was 22%.
7 DIVIDENDS
Amounts recognised as distributions to equity holders in the period:
52 weeks 52 weeks
ended ended
28 September 30 September
2024 2023
£'000 £'000
Final dividend for the period ended 30 September 2023 of £0.024 (2022: 4,717 5,104
£0.026) per share
Interim dividend for the period ended 28 September 2024 of £0.012 (2023: 2,360 2,358
£0.012) per share
Total dividend paid in the period 7,077 7,462
Proposed final dividend for the period ended 28 September 2024 of £0.012 2,360 4,716
(2023: £0.024) per share
The proposed final dividend for the period ended 28 September 2024 is subject
to approval by shareholders at the Annual General Meeting and has not been
included as a liability in these financial statements.
Dividends of £1.1 million were paid to non-controlling interests in the
period ended 28 September 2024.
8 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
28 September 30 September
2024 2023
Weighted average number of issued shares for basic earnings per share 196,681,818 196,681,818
Weighted average impact of treasury shares for basic earnings per share (64,344) (381,300)
Total weighted average number of shares for basic earnings per share 196,617,474 196,300,518
Weighted average number of shares under option 2,116,731 2,973,070
For diluted earnings per share 198,734,205 199,273,588
52 weeks ended 52 weeks ended
28 September 30 September
2024 2023
£'000 £'000
(Loss)/profit after tax for the period attributable to the parent (13,033) 3,206
Adjusting items 17,730 5,599
Adjusted profit after tax for the period attributable to the parent 4,697 8,805
Earnings per ordinary share - basic (6.63p) 1.63p
Earnings per ordinary share - diluted (6.63p) 1.61p
Earnings per ordinary share - adjusted* 2.39p 4.49p
* 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.
Diluted earnings per share for the period is not adjusted for the impact of
the potential future conversion of preferred equity due to this instrument
having an anti-dilutive effect, whereby the positive impact of adding back the
associated financial costs to earnings outweighs the dilutive impact of
conversion/exercise. Diluted adjusted earnings per share does take into
account the impact of this instrument as shown in the table above setting out
the weighted average number of shares. Due to the loss incurred in the year,
in calculating the diluted loss per share, the share options, warrants and
preferred equity are considered to be non-dilutive.
Adjusted earnings per share were calculated after adjusting for the post-tax
impact of the following items: vacant property and closure costs of £273,000
(2023: £943,000), store impairments and lease exit gains and losses of
£14,140,000 loss (2023: £150,000 gain), Pro Tiler Tools deal costs of £nil
(2023: £5,000), Pro Tiler Tools share purchase expense of £3,166,000 (2023:
£4,053,000), Tile Warehouse set up costs of £nil (2023: £11,000), CTD
trading, transaction costs and CMA investigation costs of £151,500 (2023:
£nil), restructuring and other one-off costs of £nil (2023: £618,000) and a
deferred tax charge in respect of previous periods of £nil (2023: £119,000).
9 GOODWILL
Notes £'000
Cost
At 30 September 2023 5,450
Acquisition of business 15 6,264
At 28 September 2024 11,714
Accumulated impairment losses
At 30 September 2023 3,349
At 28 September 2024 3,349
Carrying amount
At 28 September 2024 8,365
At 30 September 2023 2,101
On 19 August 2024, the Group acquired certain trade and assets from CTD Tiles
Limited. This included property, tangible assets and inventory. The excess of
consideration paid against the fair value of assets and liabilities acquired
was recognised as goodwill. Whilst the Group is recognising the fair values of
assets acquired on a provisional basis in accordance with IFRS 3, the goodwill
and related assets are being allocated as one single cash-generating unit.
This may be revisited in the subsequent period. Further information in
relation to the acquired assets is described within Note 15. The remaining
carrying value of goodwill relates to the acquisition of Pro Tiler Limited.
The accumulated impairment losses relate to the goodwill recognised on the
acquisition of Parkside Ceramics Limited in 2017 and Strata Tiles Limited in
2019, that were written down to £nil in a prior year.
10 INTANGIBLE ASSETS
Brand Customer relationships Total
£'000 £'000 Software £'000
£000
Cost
At 1 October 2022 6,405 1,042 1,285 8,732
Additions - - 99 99
At 30 September 2023 6,405 1,042 1,384 8,831
Additions - - 89 89
Disposals - - (156) (156)
At 28 September 2024 6,405 1,042 1,317 8,764
Accumulated amortisation
At 1 October 2022 1,356 1,042 911 3,309
Amortisation charge for the period 542 - 225 767
At 30 September 2023 1,898 1,042 1,136 4,076
Amortisation charge for the period 532 - 151 683
Elimination on disposal - - (156) (156)
At 28September 2024 2,430 1,042 1,131 4,603
Carrying amount
At 28 September 2024 3,975 - 186 4,161
At 30 September 2023 4,507 - 248 4,755
The carrying value of the brand assets were recognised on the acquisition of
Pro Tiler Limited in 2022. Other brand and customer relationships assets
relating to the acquisition of Parkside Ceramics Limited in 2017 and Strata
Tiles Limited in 2019 were written down to £nil in a prior year.
Software is amortised on a straight-line basis over its estimated useful life
of four years.
The Pro Tiler brand is amortised over a period of ten years on a straight-line
basis.
Amortisation is included within Other Operating Expenses within the
Consolidated Statement of Profit or Loss.
11 PROPERTY, PLANT AND EQUIPMENT
Freehold Short Fixtures and fittings Motor Total
land and buildings leasehold improvements £'000 £'000 vehicles Plant and £'000
£'000 £'000 Machinery
£'000
Cost
At 1 October 2022 1,304 1,675 86,975 109 301 90,364
Reclassification(1) - (114) 114 - - -
Additions - - 4,005 - 12 4,017
Disposals - - (5,770) (35) - (5,805)
Transfer to right-of-use-asset - (297) - - - (297)
At 30 September 2023 1,304 1,264 85,324 74 313 88,279
Additions - 42 4,101 50 - 4,193
Additions from business combinations 390 475 81 - - 946
Disposals - (81) (2,440) - (44) (2,565)
At 28 September 2024 1,694 1,700 87,066 124 269 90,853
Accumulated depreciation
At 1 October 2022 315 1,005 68,118 25 13 69,476
Reclassification(1) - 6 (6) - - -
Charge for the period 26 23 4,920 18 37 5,024
Impairment charge - - 91 - - 91
Eliminated on disposals - - (5,548) (8) - (5,556)
Transfer to right-of-use-asset - (62) - - - (62)
At 30 September 2023 341 972 67,575 35 50 68,973
Charge for the period 32 77 4,505 15 38 4,667
Impairment charge - - 2,290 - - 2,290
Eliminated on disposals - (81) (2,287) - (37) (2,405)
At 28 September 2024 373 968 72,083 50 51 73,525
Carrying amount
At 28 September 2024 1,321 732 14,983 74 218 17,328
At 30 September 2023 963 292 17,749 39 263 19,306
Cumulative finance costs capitalised in the cost of tangible fixed assets
amount to £nil (2023: £nil). At the end of the period there were capital
commitments contracted of £nil (2023: £62,972). Details of the impairment
recognised are included in note 12.
All assets classified as property, plant and equipment are UK based.
(1)In the prior period, £114,000 of cost and £6,000 of accumulated
depreciation has been reclassified from Short leasehold improvements to
Fixtures & fittings for presentational purposes.
12 LEASES
As a lessee
Right-of-use assets included in the Consolidated Statement of Financial
Position were as follows:
Land and buildings Total
£'000
Equipment £'000
£'000
At 1 October 2022 86,207 2,338 88,545
Additions 9,113 1,950 11,063
Disposals (416) (3) (419)
Transfer from property, plant and equipment 235 - 235
Depreciation (16,811) (1,346) (18,157)
Impairment (346) - (346)
At 30 September 2023 77,982 2,939 80,921
Additions 10,947 1,624 12,571
Disposals (3,419) (24) (3,443)
Depreciation (16,006) (1,624) (17,630)
Impairment (17,094) - (17,094)
At 28 September 2024 52,410 2,915 55,325
During the period, the Group has continued to review the performance of its
store portfolio and the Group has provided for the net book value of
right-of-use assets in relation to 159 stores (2023: 4 stores) and property,
plant and equipment in relation to 63 stores (2023: 3 stores) that are
impaired. The carrying value of these assets that has been impaired, including
both property, plant and equipment and right-of-use assets, is £68.1 million
(2023: £96.9 million). Due to forecast sales performance being inadequate to
ensure that future expected cashflows support the carrying values of their
assets, impairments have been recognised to the right-of-use assets of £17.1
million (2023: £0.3 million) and to the property, plant and equipment of
£2.3 million (2023: £0.1 million). There are other assets that are not
linked to the store portfolio.
Lease liabilities included in the Consolidated Statement of Financial Position
were as follows:
Land and buildings Total
£'000
Equipment £'000
£'000
At 1 October 2022 (100,698) (2,230) (102,928)
Additions (9,278) (1,904) (11,182)
Disposals 764 3 767
Interest (4,043) (133) (4,176)
Repayment of lease liabilities 21,848 1,169 23,017
At 30 September 2023 (91,407) (3,095) (94,502)
Additions (10,729) (1,624) (12,353)
Disposals 3,807 24 3,831
Interest (4,492) (239) (4,731)
Repayment of lease liabilities 19,889 1,901 21,790
At 28 September 2024 (82,932) (3,033) (85,965)
The maturity analysis of the lease liabilities is as follows:
2024 2023
£'000 £'000
Current (14,584) (15,649)
Non-current (71,381) (78,853)
(85,965) (94,502)
The remaining contractual maturities of the lease liabilities, which are gross
and undiscounted, are as follows:
2024 2023
£'000 £'000
Less than one year 21,890 21,339
One to five years 54,737 59,554
More than five years 34,524 38,269
Total undiscounted lease liability 111,151 119,162
The following amounts have been recognised in the Consolidated Statement of
Profit or Loss:
Land and buildings Total
2024
Equipment 2024
£'000
2024 £'000
£'000
Depreciation of right-of-use assets 16,006 1,624 17,630
Impairment of right-of-use assets 17,094 - 17,094
Interest expense 4,492 239 4,731
Expenses relating to short-term leases - 27 27
Holdover lease expense 2,736 154 2,890
Land and buildings Total
2023
Equipment 2023
£'000
2023 £'000
£'000
Depreciation of right-of-use assets 16,811 1,346 18,157
Impairment of right-of-use assets 346 - 346
Interest expense 4,043 133 4,176
Expenses relating to short-term leases - 104 104
Holdover lease expense 2,660 471 3,131
The total cash outflow for leases in scope of IFRS 16 during the financial
period was £21.8 million (2023: £23.0 million). Cash outflow for leases
outside the scope of IFRS 16 was £2.9 million (2023: £3.2 million).
As a lessor
Lease income from lease contracts in which the Group acts as a lessor is as
below:
2024 2023
£'000 £'000
Lease income (from operating leases) 401 579
Finance income (from finance leases) 55 58
The Group leases out a small number of properties, some of which are
classified as operating leases, as they do not transfer substantially all of
the risks and rewards incidental to the ownership of the assets.
In order to manage the risk associated with any rights retained in the
underlying leased assets, the Group ensures that appropriate due diligence is
undertaken in advance of formalising a lease arrangement with a lessee.
The carrying value of lease receivables is considered to be materially
reflective of their fair value.
The following table sets out a maturity analysis of operating lease payments,
showing the undiscounted lease payments to be received after the reporting
date:
2024 2023
£'000 £'000
Less than one year - 87
Total undiscounted lease payments receivable - 87
Some of the properties that the Group leases out are classified as finance
leases. These are shown as other financial assets on the Consolidated
Statement of Financial Position.
The following table sets out a maturity analysis of lease receivables, showing
the undiscounted finance lease payments to be received after the reporting
date:
2024 2023
£'000 £'000
Less than one year 317 391
One to five years 1,323 1,594
More than five years 452 401
Total undiscounted lease payments receivable 2,092 2,386
Less: unearned finance income (226) (205)
Less: expected credit loss provision (3) (7)
Present value of minimum lease payments receivable 1,863 2,174
Current 210 327
Non-current 1,653 1,847
1,863 2,174
Impairment
At the end of the financial year the carrying value of assets, including
right-of-use lease assets, was assessed against their recoverable amount
determined by reference to their value-in-use. Assets and expected cashflows
were assessed at the lowest identifiable level of Cash Generating Unit ("CGU")
where the expected cash inflows of each CGU were expected to be independent of
those incurred by other CGUs. Individual retail stores are considered to be
separate CGUs, which includes income from online orders that are
click-and-collect. Pro Tiler Limited and the CTD trade and assets acquired are
treated as separate CGUs as described in Note 9 and no impairment has been
recognised.
The Group has determined that the macro-economic challenges in the current
financial year are an indicator for potential impairment across the store
estate. As a consequence, all stores have been assessed for impairment,
leading to an impairment to the value of Right-Of-Use Assets of £17,094,000
in the current year. The impairment reviews include management's assessment of
current economic factors, such as rises in inflation, interest rates and
macro-economic challenges. For stores that have been opened less than two
years prior to the balance sheet date, a separate indicator assessment is
performed whereby the actual cash inflows are compared against investment
appraisals. Impairments are recognised if there are significant variances
against expected cash flow profiles.
The value-in-use calculations require the application of a number of
assumptions. The key assumptions used in the estimation of recoverable amounts
are set out below:
Assumption Description Sensitivity
Pre-tax discount rate This is calculated by reference to the weighted average cost of capital of the An increase in pre-tax discount rate of 100bps at year-end would lead to an
Group. At the year-end, the pre-tax discount rate applied to forecast additional £0.3 million (2023: £0.1 million) impairment in the year.
cashflows was 29.1% (2023: 17.6%).
Cashflow forecasts Cashflows are derived from extrapolation of trading performance of identified A decrease in short-term/ budgeted growth rates of 100bps (2023: no reasonable
CGUs. Management prepares growth rates applicable in the first five forecasted decrease) at year-end would lead to an additional £0.5 million impairment in
years based on expected year-on-year growth in cash contributions for stores. the year.
The long-term growth rate is applied to future years where relevant, however
given the period of assessment does not always exceed five years, this is not
considered to be a key assumption.
13 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:
2024 2023
£'000 £'000
Sterling 22,814 23,028
US dollar 735 327
Euro 133 13
Total cash and cash equivalents 23,682 23,368
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.
14 BANK LOANS
2024 2023
£'000 £'000
Revolving credit facility (all sterling) 14,996 -
2024 2023
£'000 £'000
The borrowings are repayable as follows:
Greater than one year 15,000 -
- -
Less: total unamortised issue costs (4) (200)
14,996 (200)
The Directors consider that the carrying amount of the revolving credit
facility at 28 September 2024 and 30 September 2023 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 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
Repayment of lease liabilities (21,790) - - -
Non-cash movement - Lease additions and disposals 8,522 - - -
Interest accrued on lease liabilities 4,731 - - -
Proceeds from revolving credit facility - - 23,500 -
Repayment of revolving credit facility - - (8,500) -
Unamortised issue costs - - (4) -
Issue costs incurred in the year - - - (100)
Amortisation of issue costs - - - 150
As at 28 September 2024 85,965 - 14,996 150
At 28 September 2024, 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. On 9 October 2024, the Group extended the facility by one year, with
this expiring in October 2027. As at the financial period end, £15.0 million
of this was drawn (2023: £nil), leaving £15.0 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.
15 ACQUISITIONS
On 19 August 2024, the Group acquired certain intellectual property, tangible
assets and inventory of CTD Tiles Limited (in administration), for cash
consideration of £9 million which is deemed to be the fair value of the
consideration. The business was acquired to add to the existing store
portfolio of the Group, in addition to the commercial business and to enter
into the housebuilder segment where the Group has limited or zero
representation.
On acquisition, the Group recognised property, plant and equipment of £0.9
million, £2.2 million of inventory, £0.4 million of provisions, and
intangible assets consisting of the goodwill of £6.3 million. The goodwill
generated on acquisition reflects the expected synergies from combining
operations between the Group and the existing CTD trading operations as a
result of leveraging the Group's supply chain and operations.
Inventories were subject to a small fair value adjustment of a £8,000
decrease, which relates to management's assessment of the price that would be
paid for the acquired assets in an orderly transaction between market
participants at the acquisition date. The fair value was calculated as the
estimated selling price less the estimated costs necessary to make the sale
and a reasonable profit allowance for the selling effort. At 28 September
2024, the fair values assigned to all of the acquired assets has been
determined on a provisional basis in accordance with IFRS 3 'Business
Combinations' given the ongoing CMA enquiries discussed elsewhere in the
Annual Report. The fair values together with an assessment of goodwill and
intangible assets acquired will be completed within the 12 month fair value
period, as permitted by IFRS 3.
The fair value of the net assets acquired and liabilities assumed at the
acquisition date were:
Notes Provisional Fair Value
£'000
Property, Plant and Equipment 11 946
Inventories 2,169
Provisions (379)
Fair value of assets acquired 2,736
Total consideration 9,000
Goodwill 6,264
Transaction costs of the acquisition of the assets totalled £0.1m and these
were recognised within administrative costs in the period. Since the date of
control, the following amounts have been included within the Group's financial
statements for the period:
£'000
Revenue 3,303
Loss before tax 68
Given the limited trading period since acquisition, the nature of the
transaction and significant differences between current and previous
operations, it is impracticable to determine the revenue and profit or loss
had the acquisition been included from the start of the period.
16 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 (2023: 29.8%
shareholding of 58,569,649 ordinary shares).
At 28 September 2024 MS Galleon AG is the owner of Cersanit, a supplier of
ceramic tiles with whom the Group made purchases of £786,732 during the year
which is 0.7% of cost of goods sold (2023: purchases of £1,303,861 during
year which is 1.1% of cost of goods sold).
An amount of £145,008 was outstanding with Cersanit at 28 September 2024
(2023: £278,815).
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.
17 POST BALANCE SHEET EVENTS
On 30 September 2024, the Group agreed a lease for a new 140,000 sq ft
facility at the Prologis Park Pineham. This will be operational by January
2025 will provide operational capacity for Pro Tiler and future growth in the
Group. The capital cost of fit out will be £2 - £2.5 million in 2025 and
additional operational costs for Pro Tiler relating to the new property will
be £0.4 million per year. The initial impact on the Group statement of
profit or loss will be £0.7 million, reducing to £0.1 million by the end of
the 15 year period.
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