REG - Topps Tiles - Final Results <Origin Href="QuoteRef">TPT.L</Origin> - Part 3
25/11/2014 08:50
- Part 3: For the preceding part double click ID:nRSY8673Xb
expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised
cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is
the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or,
where appropriate, a shorter period, to the net carrying amount on initial recognition.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they
expire.
Derivative financial instruments
The Group's activities expose it to the financial risks of changes in foreign currency exchange rates and interest rates.
The Group uses foreign exchange forward contracts to manage its foreign currency risk. The Group does not hold or issue
derivative financial instruments for speculative purposes.
The use of financial derivatives is governed by the Group's policies approved by the board of directors, on the use of
financial derivatives.
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently
re-measured to their fair value at each period end date. The resulting gain or loss is recognised in profit or loss
immediately.
A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is
more than 12 months and it is not expected to be realised or settled within 12 months. Other derivatives are presented as
current assets or current liabilities.
Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their
risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at
fair value with changes in fair value recognised in profit or loss.
An embedded derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the
hybrid instrument to which the embedded derivative relates is more than 12 months and is not expected to be realised or
settled within 12 months. Other derivatives are presented as current assets or current liabilities.
r) Share-based payments
The Group has applied the requirements of IFRS 2 Share-based Payments. In accordance with the transitional provisions, IFRS
2 has been applied to all grants of equity instruments after 7 November 2002 that were unvested as of 1 October 2005.
The Group issues equity settled share based payments to certain employees. Equity settled share based payments are measured
at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. The fair value determined
at the grant date of the share based payment is expensed on a straight line basis over the vesting period, based on the
Group's estimate of shares that will eventually vest. Fair value is measured by use of the Black Scholes model.
The Group provides employees with the ability to purchase the Group's ordinary shares at 80% of the current market value
through the operation of its share save scheme. The Group records an expense, based on its estimate of the 20% discount
related to shares expected to vest on a straight line basis over the vesting period.
s) Trade payables
Trade payables are initially measured at fair value and are subsequently measured at amortised cost, using the effective
interest rate method.
t) Operating profit
Operating profit is stated after charging restructuring costs but before property disposals, investment income, finance
costs and fair value movement in derivative contracts.
u) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, and
it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount
of that obligation. Provisions are measured at the Directors' best estimate of the expenditure required to settle the
obligation at the balance sheet date, and are discounted to present value where the effect is material.
v) Supplier income
Amounts receivable from suppliers are initially held on the balance sheet within the cost of inventory and recognised
within the income statement once the contractual terms of the supplier agreements are met and the corresponding inventory
has been sold.
w) Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group's accounting policies, which are described above, the Directors are required to make
judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent
from other sources. The estimates and associated assumptions are based on historical experience and other factors that are
considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the
revision and future periods if the revision affects both current and future periods.
The critical judgement, apart from those involving estimations (which are dealt with separately below), that the Directors
have made in the process of applying the Group's accounting policies and that has the most significant effect on the
amounts recognised in financial statements is the detailed criteria for the recognition of revenue from the sale of goods
set out in IAS 18 Revenue. In particular the largest judgement is where there are open orders and these goods have not
been delivered to the customer, and in these cases the Directors believe the significant risks and rewards of ownership of
the goods have not been transferred to the buyer and therefore do not recognise revenue on these orders.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the period end date, that
have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next
financial period, are discussed below:
Inventory
At the period end there were £2.2 million (2013: £2.3 million) of overheads and £2.1 million (2013: £1.8 million) of
supplier income (rebates) absorbed into the inventory balance. Additionally there were £0.6 million (2013: 0.8 million) of
provisions against the net realisable value of inventories.
Property provisions
Onerous lease provision - During the period the Group has continued to review the performance of its store portfolio, which
has resulted in two further stores being exited before their lease terms had expired (2012: nil stores). In respect of the
leases in relation to stores exited before lease end dates in prior periods that are still vacant, the Group has provided
for what it considers to be the unavoidable costs prior to lease termination or sublease. The Group has further reviewed
any trading loss making stores and provided for those leases considered to be onerous. These estimates are based upon
available information and knowledge of the property market. The ultimate costs to be incurred in this regard may vary from
the estimates.
Dilapidations provision - The Group has estimated its likely dilapidation charges for its store portfolio and provided
accordingly. This estimate involves an assessment of average costs per store and the expected exit period for the current
portfolio, and is based on management's best estimate, taking into account knowledge of the property market and historical
trends. The ultimate costs to be incurred may vary from the estimates.
Supplier income
The Group has arrangements with a number of its suppliers which award rebates on satisfaction of purchase thresholds or
discounts against certain inventory lines. At the period end, the Group has invoiced £1.2 million of rebates (2013: £0.5
million) which are still outstanding in receivables and holds £2.1 million (2013: £1.8 million) of rebates within the
inventory balance (as above). The Group does not recognise the amounts received from suppliers within the income statement
until the associated inventories are sold to the customers of the Group.
3 Revenue
An analysis of Group revenue is as follows:
52 weeks ended 27 September 2014 52 weeks ended 28 September 2013
£'000 £'000
Revenue from the sale of goods 195,237 177,849
Fair value gain on forward currency contracts 110 -
Investment revenue 141 170
Total revenue 195,488 178,019
Investment revenue represents bank interest receivable. There are no other gains recognised in respect of loans and
receivables.
4 Profit before taxation
Profit before taxation for the period has been arrived at after charging/(crediting):
52 weeks ended 27 September 2014 52 weeks ended 28 September 2013
£'000 £'000
Depreciation of property, plant and equipment 4,553 4,258
Impairment of property, plant and equipment 399 553
Disposal of property, plant and equipment gain (401) (109)
Property related provisions (released)/ charged (7) 927
Staff costs (see note 5) 45,865 43,123
Operating lease rentals 21,168 20,629
Write down of inventories recognised as an expense 2,584 2,807
Cost of inventories recognised as expense 73,783 68,019
Net foreign exchange gain (268) (11)
Disposal of property plant and equipment gain, relates to the sale of one freehold property (2013: one freehold property).
Analysis of auditor's remuneration is provided below:
52 weeks ended 27 September 2014 52 weeks ended 28 September 2013
£'000 £'000
Fees payable to the Company's auditor with respect to the Company's annual accounts 40 50
Fees payable to the Company's auditor and their associates for other audit services to the Group:Audit of the Company's subsidiaries pursuant to legislation 85 110
Total audit fees 125 160
Audit related assurance services - 5
Taxation compliance services 70 73
Remuneration Committee advice 13 8
Total non audit fees 83 86
208 246
A description of the work of the Audit Committee is set out in the Annual Report and includes an explanation of how auditor
objectivity and independence is safeguarded when non-audit services are provided by the auditor.
5 Staff costs
The average monthly number of persons and their full time equivalents employed by the Group and Company in the UK during
the accounting period (including executive directors) was:
52 weeks ended 27 September 2014 52 weeks ended 28 September 2013
Numberemployed Numberemployed
Selling 1,619 1,556
Administration 175 164
1,794 1,720
2014 2013
£'000 £'000
Their aggregate remuneration comprised:
Wages and salaries (including LTIP, see note 27) 41,577 39,447
Social security costs 3,636 3,466
Other pension costs (see note 26b) 652 210
45,865 43,123
Details of directors' emoluments are disclosed in the Annual Report. Employee profit sharing of £9.8 million (2013: £6.4
million) is included in the above and comprises sales commission and bonuses.
6 Investment revenue, finance costs and fair value loss on interest rate derivatives
52 weeks ended 27 September 2014 52 weeks ended 28 September 2013
£'000 £'000
Investment revenue
Bank interest receivable and similar income 141 170
Fair value gain on forward currency contracts 110 -
251 170
Finance costs
Interest on bank loans and overdrafts (2,042) (2,200)
Interest on interest rate derivatives - (506)
Interest on underpaid tax* (105) (1,000)
Fair value loss on forward currency contracts - (27)
(2,147) (3,733)
*The Group has historically provided for tax on open HMRC enquiries, some of which have now been resolved. As a result,
some historic tax payments have been reallocated between periods which, whilst leading to a net reduction in the overall
level of provision required, has required a reallocation of provision from corporation tax payable to cover interest which
may become due on underpaid tax in earlier periods. In the event that additional tax is ultimately due in those earlier
periods, it is estimated that £1,105,000 of late payment interest would fall due, of which £1,000,000 was provided for in
the prior period.
Held for trading assets and liabilities
Interest rate swaps gain - 210
Forward currency contracts gains/ (losses) 110 (27)
110 183
No finance costs are appropriate to be capitalised in the period, or the prior period.
Interest on bank loans and overdrafts represents gains and losses on financial liabilities measured at amortised cost.
There are no other gains or losses recognised in respect of financial liabilities measured at amortised cost.
7 Taxation
52 weeks ended 27 September 2014 52 weeks ended 28 September 2013
Continuing operations: £'000 £'000
Current tax - charge for the period 4,087 1,799
Current tax - adjustment in respect of previous periods (57) (1,226)
Deferred tax - effect of reduction in UK corporation tax rate (81) -
Deferred tax - charge for period (note 18) 133 875
Deferred tax - adjustment in respect of previous periods (note 18) 97 9
4,179 1,457
Corporation tax in the UK is calculated at 22% (2013: 23.5%) of the estimated assessable profit for the period.
Finance Act 2013 included provision to reduce the rate of corporation tax to 21% with effect from 1 April 2014 and 20% from
1 April 2015.
The charge for the period can be reconciled to the profit per the statement of financial performance as follows:
Continuing operations 52 weeks ended 27 September 2014 52 weeks ended 28 September 2013
£'000 £'000
Profit before taxation 16,691 10,601
Tax at the UK corporation tax rate of 22% (2013: 23.5%) 3,672 2,491
Tax effect of expenses that are not deductible in determining taxable profit 367 16
Tax effect of reduction in UK corporation tax rate (81) -
Tax effect of chargeable gain lower than profit on sale of freehold property (21) (56)
Tax effect of tangible fixed assets which do not qualify for capital allowances 201 222
Tax effect of adjustment in respect of prior periods 41 (1,216)
Tax expense for the period 4,179 1,457
8 Dividends
52 weeks ended 27 September 2014 52 weeks ended 28 September 2013
£'000 £'000
Interim dividend for the period ended 27 September 2014 of £0.0065 (2013: £0.005) per shareProposed final dividend for the period ended 27 September 2014 of £0.016 (2013: £0.01) per share 1,257 3,098 958 1,921
The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included
as a liability in these financial statements.
9 Earnings per share
The calculation of earnings per share is based on the earnings for the financial period attributable to equity shareholders
and the weighted average number of ordinary shares.
2014 2013
Number of Number of
Shares Shares
Weighted average number of shares
For basic earnings per share 192,850,860 192,012,412
Weighted average number of shares under option 1,690,097 1,351,853
For diluted earnings per share 194,540,957 193,364,265
The calculation of the basic and diluted earnings per share used the denominators as shown above for both basic and diluted
earnings per share.
10 Goodwill
£'000
Cost and carrying amount at 29 September 2012, 28 September 2013 and 27 September 2014 245
The balance of goodwill remaining is the carrying value that arose on the acquisition of Surface Coatings Ltd in 1998.
The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be
impaired.
The recoverable amounts are determined from value in use calculations. The key assumptions for the value in use
calculations are those regarding the discount rates, growth rates and expected changes to, selling prices and direct costs
during the period. Management estimates discount rates based on the Group's weighted average cost of capital. The growth
rates are based on industry growth forecasts. Changes in selling prices and direct costs are based on past practices and
expectations of future changes in the market. Discounted cash flows are calculated using a post-tax rate of 12.0% (2013:
13.0%).
The Group prepares cash flow forecasts derived from the most recent financial budgets approved by management for the next
five years and extrapolates cash flows for the following five years. The growth rate applied does not exceed the average
long-term growth rate for the relevant markets. There are no reasonable changes that would result in the carrying value of
goodwill being reduced to its recoverable amount.
The accounting judgements and sources of estimation uncertainty involved in assessing any impairment loss are referred to
in note 2 to the financial statements.
As a result of the annual test of impairment of goodwill, no impairment has been identified for the current period.
11 Property, plant and equipment
Land and buildings Fixtures
Short and Motor
Freehold leasehold fittings vehicles Total
Cost £'000 £'000 £'000 £'000 £'000
At 29 September 2012 15,801 1,842 53,034 90 70,767
Additions 70 - 5,358 121 5,549
Disposals (511) - (2,042) (45) (2,598)
At 28 September 2013 15,360 1,842 56,350 166 73,718
Additions 2,872 - 8,345 15 11,232
Disposals (281) (10) (1,236) (61) (1,588)
At 27 September 2014 17,951 1,832 63,459 120 83,362
Accumulated depreciation and impairment
At 29 September 2012 1,632 1,611 32,459 49 35,751
Charge for the period 227 67 3,925 39 4,258
Provision for impairment - - 550 3 553
Eliminated on disposals (240) - (1,925) (27) (2,192)
At 28 September 2013 1,619 1,678 35,009 64 38,370
Charge for the period 242 51 4,228 32 4,553
Provision for impairment - - 389 10 399
Eliminated on disposals (94) (10) (1,115) (35) (1,254)
At 27 September 2014 1,767 1,719 38,511 71 42,068
Carrying amount
At 27 September 2014 16,184 113 24,948 49 41,294
At 28 September 2013 13,741 164 21,341 102 35,348
Freehold land and buildings include £4,104,000 of freehold land (2013: £4,104,000) on which no depreciation has been
charged in the current period. There is no material difference between the carrying and market values.
Cumulative finance costs capitalised in the cost of tangible fixed assets amount to £nil (2013: £nil).
Contractual commitments for the acquisition of property, plant and equipment are detailed in note 28.
During the period, the Group has closed nine stores in the UK. As the fixtures and fittings within these stores cannot be
re-used in other locations within the Group, the carrying value of these assets has been fully provided for in the period,
with the associated impairment charge of £389,000 (2013: £550,000) included within other operating expenses.
12 Subsidiaries
A list of the significant subsidiaries, including the name, country of incorporation and proportion of ownership interest
is given in note 3 to the Company's separate financial statements.
13 Trade and other receivables
2014 2013
£'000 £'000
Amounts falling due within one year:
Amounts receivable for the sale of goods 740 714
Allowance for doubtful debts (45) (59)
Other debtors and prepayments
-Rent and rates 3,324 5,072
-Other 1,781 1,984
5,800 7,711
The Directors consider that the carrying amount of trade and other receivables at 27 September 2014 and 28 September 2013
approximates to their fair value on the basis of discounted cash flow analysis.
Credit risk
The Group's principal financial assets are bank balances and cash and trade receivables.
The Group considers that it has no significant concentration of credit risk. The majority of sales in the business are
cash based sales in the stores.
Total trade receivables (net of allowances) held by the Group at 27 September 2014 amounted to £0.7 million (2013: £0.7
million). These amounts mainly relate to sundry trade accounts and Tesco Clubcard Scheme generated sales. In relation to
these sales, the average credit period taken is 61 days (2013: 62 days) and no interest is charged on the receivables.
Trade receivables between aged over 60 days are provided for based on estimated irrecoverable amounts from the sale of
goods, determined by reference to past default experience.
Before accepting any new customer, the Group uses an external credit scoring system to assess the potential customer's
credit quality and defines credit limits by customer. Limits and scoring attributed to customers are reviewed periodically.
Of the trade receivables balance at the end of the year, £120,000 (2013: £161,000) is due from Tesco Plc, the Group's
largest customer.
Included in the Group's trade receivable balance are debtors with a carrying amount of £42,000 (2013: £36,000) which are
past due at the reporting date for which the Group has not provided as there has not been a significant change in credit
quality and the amounts are still considered recoverable. The Group does not hold any collateral over these balances.
Ageing of past due but not impaired receivables
2014 2013
£'000 £'000
Greater than 60 days 42 36
The allowance for doubtful debts was £45,000 by the end of the period (2013: £59,000). Given the minimal receivable balance, the directors believe that there is no further credit provision required in excess of the allowance for doubtful debts.
The allowance for doubtful debts includes £45,000 relating to individually impaired trade receivables (2013: £59,000) which
are due from companies that have been placed into liquidation.
The directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value.
14 Cash and cash equivalents
Cash and cash equivalents comprise cash held by the Group and short term bank deposits (with associated right of set off)
net of bank overdrafts, 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:
2014 2013
£'000 £'000
Sterling 19,367 18,369
US Dollar 31 27
Euro 149 47
Total cash and cash equivalents 19,547 18,443
15 Other financial liabilities
Trade and other payables
2014 2013
£'000 £'000
Amounts falling due within one year
Trade payables 18,193 18,244
Other payables 5,841 5,506
Accruals and deferred income 12,206 12,179
36,240 35,929
Trade payables and accruals principally comprise amounts outstanding for trade purchases and on-going costs. The average
credit period taken for trade purchases is 58 days (2013: 59 days). No interest is charged on these payables.
The Directors consider that the carrying amount of trade payables at 27 September 2014 and 28 September 2013 approximates
to their fair value on the basis of discounted cash flow analysis.
16 Bank loans
2014 2013
£'000 £'000
Bank loans (all sterling) 49,467 54,555
The borrowings are repayable as follows:
On demand or within one year - -
In the second year - -
In the third to fifth year 50,000 55,000
50,000 55,000
Less: total unamortised issue costs (533) (445)
49,467 54,555
Issue costs to be amortised within 12 months 114 265
Amount due for settlement after 12 months 49,581 54,820
The Directors consider that the carrying amount of the bank loan at 27 September 2014 and 28 September 2013 approximates to
its fair value since the amounts relate to floating rate debt.
The average weighted interest rates paid on the loan were as follows:
2014 2013
% %
Loans 3.05 3.30
The Group borrowings are arranged at floating rates, thus exposing the Group to cash flow interest rate risk.
During the period the Group agreed a new five year revolving credit facility of £50.0 million, expiring 1 June 2019. As at
the financial period end £50.0 million of this facility was drawn. The loan facility contains financial covenants which are
tested on a bi-annual basis.
At 27 September 2014, the Group had available £nil million (2013: £10 million) of undrawn committed banking facilities.
17 Financial instruments
Financial liabilities held for trading were reclassified in the prior period in order to more appropriately reflect the
requirements of IAS1. Classification as non-current liabilities ensures the instrument mirrors the cash flows of the loan
facility, which it is in place to hedge against.
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while
maximising the return to stakeholders through the optimisation of the debt and equity balance. The Group's overall
strategy remains unchanged from 2013. The capital structure of the Group consists of debt, which includes the borrowings
disclosed in note 16, cash and cash equivalents disclosed in note 14 and equity attributable to equity holders of the
parent, comprising issued capital, reserves and retained earnings as disclosed in notes 19 to 25.
The Group is not subject to any externally imposed capital requirements.
Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset,
financial liability and equity instrument are disclosed in note 2q to the financial statements.
Categories of financial instruments
Carrying Value and Fair Value
2014 2013
£'000 £'000
Financial assets
Loans and receivables (including cash and cash equivalents) 20,242 19,098
Financial liabilities
Held for trading - -
Fair value through profit and loss 18 129
Amortised cost 66,579 72,935
The Group considers itself to be exposed to risks on financial instruments, including market risk (including currency
risk), credit risk, liquidity risk and cash flow interest rate risk.
The Group seeks to mitigate the effects of these risks by using derivative financial instruments to hedge these risk
exposures economically. The use of financial derivatives is governed by the Group's policies approved by the Board of
Directors, which provide written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial
derivatives and non-derivative financial instruments, and the investment of excess liquidity. The Group does not enter into
or trade financial instruments, including derivative financial instruments, for speculative purposes.
Market risks
The Group's activities expose it primarily to the financial risks of changes in foreign currency exchange rates and
interest rates. The Group enters into forward foreign exchange contracts to hedge the exchange rate risk arising on the
import of goods.
Foreign currency risk management
The Group undertakes certain transactions denominated in foreign currencies. Hence, exposures to exchange rate fluctuations
arise. Exchange rate exposures are managed within approved policy parameters utilising forward foreign exchange contracts.
The carrying amounts of the Group's foreign currency denominated monetary assets and monetary liabilities at the reporting
date are as follows:
Assets Liabilities
2014 2013 2014 2013
£'000 £'000 £'000 £'000
Euro 149 47 1,502 801
US dollar 31 135 792 -
Foreign currency sensitivity analysis
The Group is mainly exposed to the currency of China and Brazil (US dollar currency) and to various European countries
(Euro) as a result of inventory purchases. The following table details the Group's sensitivity to a 10% increase and
decrease in Sterling against the relevant foreign currencies. 10% represents management's assessment of the reasonably
possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated
monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. A positive
number below indicates an increase in profit and other equity where Sterling strengthens 10% against the relevant
currency.
2014 2013
£000 £000
Profit or Loss movement on a 10% strengthening in Sterling against the Euro 123 68
Profit or Loss movement on a 10% strengthening in Sterling against the US Dollar 69 (12)
Profit or Loss movement on a 10% weakening in Sterling against the Euro (150) (84)
Profit or Loss movement on a 10% weakening in Sterling against the US Dollar (85) 15
Currency derivatives
The Group utilises currency derivatives to hedge significant future transactions and cash flows. The Group uses foreign
currency forward contracts in the management of its exchange rate exposures. The contracts are denominated in US dollars
and Euros.
At the balance sheet date, the total notional amounts of outstanding forward foreign exchange contracts that the Group has
committed to are as below:
2014 2013
£'000 £'000
Forward foreign exchange contracts 5,766 4,828
These arrangements are designed to address significant exchange exposures for the first half of 2014 and are renewed on a
revolving basis as required.
At 27 September 2014 the fair value of the Group's currency derivatives is a £18,000 liability within accruals and deferred
income (note 15) (2013: a liability of £128,000). These amounts are based on the market value of equivalent instruments at
the balance sheet date.
Gains of £110,000 are included in finance costs (note 7) (2013: £27,000 loss).
Interest rate risk management
The Group is exposed to interest rate risk as entities in the Group borrow funds at floating interest rates. Due to the
reduced level of floating rate borrowings and the current low level of interest rates, management have not deemed it
necessary to implement measures that would mitigate this risk. The Group's exposures to interest rates on financial assets
and financial liabilities are detailed in the liquidity risk management section of this note.
Interest rate sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to interest rates for both derivatives and
non-derivative instruments at the balance sheet date. For floating rate liabilities, the analysis is prepared assuming the
amount of liability outstanding at the balance sheet date was outstanding for the whole year. A 50 basis points increase or
decrease is used when reporting interest rate risk internally to key management personnel and represents management's
assessment of the possible change in interest rates.
If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Group's profit
would be impacted as follows:
50 basis points increase in interest rates 50 basis points decrease in interest rates
2014 2013 2014 2013
£'000 £'000 £'000 £'000
(Loss) or profit (195) (187) 195 187
The Group's sensitivity to interest rates mainly relates to the revolving credit facility.
Interest rate derivatives
In the prior period the Group used interest rate derivatives to manage its exposure to interest rate movements on its bank
borrowings.
The Group's interest rate derivative, which was closed during the prior period, comprised of a 10 year cancellable collar
with a notional value of £nil (2013: £nil) with a cap of 5.6% and a floor of 4.49%. The interest rate within this range was
LIBOR less 0.4%. Where LIBOR fell below the floor the interest rate was reset to a fixed level of 5.55%.
The fair value liability of the swaps entered into at 27 September 2014 is estimated at £nil (2013: £nil). An amount of
£nil has been credited to the statement of financial performance in the period (2013: £210,000 charge).
On 30 April 2013 the Group settled the 10 year cancellable collar, for a consideration of £5,897,000.
Credit risk management
Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss
to the Group. Management has considered the counterparty risk associated with the cash and derivative balances and do not
consider there to be a material risk. The Group has a policy of only dealing with creditworthy counterparties. The Group's
exposure to its counterparties is reviewed periodically. Trade receivables are minimal consisting of a number of insurance
companies and sundry trade accounts, further information is provided in note 14.
The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents
the Group's maximum exposure to credit risk without taking account of the value of any collateral obtained.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors. The Group manages liquidity risk
by maintaining adequate reserves, banking facilities and borrowing facilities by continuously monitoring forecast and
actual cash flows and matching the maturity profiles of financial assets and liabilities.
Liquidity and interest risk tables
The following tables detail the Group's remaining contractual maturity for its non-derivative financial liabilities. The
tables have been drawn up based on the undiscounted cash flows (and on the assumption that the variable interest rate
remains constant at the latest fixing level of 2.45694% (2013: 3.01688%)) of financial liabilities based on the earliest
date on which the Group can be required to pay. The table includes both interest and principal cash flows.
2014 Less than 1 month 1-3 months 3 months to 1 year 1-5 Years Total
£'000 £'000 £'000 £'000 £'000
Non-interest bearing 24,034 - - - 24,0340
Variable interest rate instruments 95 5,199 882 49,210 55,386
2013 Less than 1 month 1-3 months 3 months to 1 year 1-5 Years Total
£'000 £'000 £'000 £'000 £'000
Non-interest bearing 23-750 - - - 23,750
Variable interest rate instruments 5,131 289 1,254 51,130 57,804
The Group is financed through a £50 million (2013 £65 million), revolving credit facility of which £50 million (2013 £55
million) was utilised. At the balance sheet date the total unused amount of financing facilities was £nil (2013 £10
million). The Group expects to meet its other obligations from operating cash flows and proceeds of maturing financial
assets.
The following table details the Group's liquidity analysis for its derivative financial instruments. The table has been
drawn up based on the undiscounted net cash inflows/(outflows) on the derivative instruments that settle on a net basis and
the undiscounted gross inflows and (outflows) on those derivatives that require gross settlement. When the amount payable
or receivable is not fixed, the amount disclosed has been determined by reference to the projected interest and foreign
currency rates as illustrated by the yield curves existing at the reporting date.
2014 Less than 1 month 1-3 Months 3 months to 1 year 1-5 Years 5+ Years Total
£'000 £'000 £'000 £'000 £'000 £'000
Foreign exchange forward contracts payments - (2,903) (2,864) - - (5,767)
Foreign exchange forward contracts receipts - 2,884 2,888 - - 5,772
2013 Less than 1 month 1-3 Months 3 months to 1 year 1-5 Years 5+ Years Total
£'000 £'000 £'000 £'000 £'000 £'000
Foreign exchange forward contracts payments - (1,956) (2,872) - - (4,828)
Foreign exchange forward contracts receipts - 1,878 2,819 - - 4,697
Fair value of financial instruments
The fair values of financial assets and financial liabilities are determined as follows:
· Foreign currency forward contracts are measured using quoted forward exchange rates and yield curves derived from
quoted interest rates matching maturities of the contracts.
The fair values are therefore categorised as Level 2 (2013: Level 2), based on the degree to which the fair value is
observable. Level 2 fair value measurements are those derived from inputs other than unadjusted quoted prices in active
markets (level 1 categorisation) that are observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices).
18 Provisions
2014 2013
£'000 £'000
Onerous lease provision 1,493 1,973
Dilapidations provision 1,426 1,245
2,919 3,218
Current 876 1,014
Non-current 2,043 2,204
2,919 3,218
Onerous lease Dilapidations
provision provision Total
£'000 £'000 £'000
At 28 September 2013 1,973 1,245 3,218
Additional provision in the period 409 642 1,051
Utilisation of provision (796) (308) (1,104)
Release of provision in the period (93) (153) (246)
At 27 September 2014 1,493 1,426 2,919
The onerous lease provision relates to estimated future unavoidable lease costs in respect of closed, non-trading and loss
making stores. The provision is expected to be utilised over the following four financial periods. The dilapidations
provision represents management's best estimate of the Group's liability under its property lease arrangements based on
past experience and is expected to be utilised over the following six financial periods.
The following are the deferred tax liabilities/(assets) recognised by the Group and movements thereon during the current
and prior reporting period.
Accelerated tax depreciation Other short term timing differences Share-based payments Exchange rate differences Interest rate hedging Rent free Total
£000 £000 £000 £000 £000 £000 £000
As at 29 September 2012 1,719 (54) (140) (23) (1,063) (578) (139)
(Credit)/charge to income (155) 31 (19) (5) 1,061 (38) 875
Charge in respect of previous periods 9 - - - - - 9
Credit to equity - - (319) - - - (319)
As at 28 September 2013 1,573 (23) (478) (28) (2) (616) 426
Charge to income 26 - 80 22 2 4 134
Charge in respect of previous periods 74 23 - - - - 97
Impact of rate change (215) - 50 4 - 80 (81)
Credit to equity - - (315) - - - (315)
As at 27 September 2014 1,458 - (663) (2) - (532) 261
Finance Act 2013, which was substantively enacted in July 2013, included provisions to reduce the rate of corporation tax
to 21% with effect from 1 April 2014 and 20% from 1 April 2015. Deferred tax balances have been revalued to the lower rate
of 20% in these accounts. To the extent that the deferred tax reverses before 1 April 2015 then the impact on the net
deferred tax liability will be reduced.
19 Called-up share capital
- More to follow, for following part double click ID:nRSY8673XdRecent news on Topps Tiles
See all newsREG - Topps Tiles - Investor Presentation via Investor Meet Company
AnnouncementREG - Topps Tiles - Issued Share Capital and Total Voting Rights
AnnouncementREG - Competition and Mkts - Merger Update: Topps Tiles/CTD Tiles
AnnouncementREG - Topps Tiles - Conclusion of CMA investigation - CTD Tiles
AnnouncementREG - Topps Tiles - First Half Trading Update
Announcement