TIDMTPT
RNS Number : 9431T
Topps Tiles PLC
30 November 2021
30 November 2021
Topps Tiles Plc
Annual Financial Results
Topps Tiles Plc ("Topps", "Topps Tiles", "the Company" or the
"Group"), the UK's largest tile specialist, announces its unaudited
annual financial results for the 53 weeks ended 2 October 2021.
Strategic and Operational Highlights
-- Record year of revenue for the Group
-- Group market share goal of '1 in 5 by 2025' with good progress made in
the year
-- Success in strategic initiatives of expanding value offer, launch of innovative
new products and further strengthening our award-winning digital offer
-- Commercial revenue recovering with sales growth in H2 of 55%
-- Launch of new environmental goal of being carbon balanced by 2030
Financial Highlights
53 weeks ended 52 weeks ended YoY
2 October 26 September
2021 2020
Statutory Measures
Group revenue GBP228.0 million GBP192.8 million +18.3%
Gross margin 57.3% 58.5% (1.2)ppts
Profit / (Loss) before tax GBP14.3 million GBP(9.8) million n/a
Basic earnings per share 5.59p (4.11)p n/a
Final dividend per share 3.1p nil n/a
Total dividend per share 3.1p nil n/a
Adjusted Measures
Retail like-for-like revenue
year-on-year1 19.6% (12.5)% n/a
Adjusted profit before tax2 GBP15.3 million GBP3.6 million +325.0%
Adjusted earnings per share3 6.13p 1.57p +290.0%
Adjusted net cash4 GBP27.8 million GBP26.0 million +GBP1.8 million
Financial Summary
-- Retail like-for-like sales up 19.6% despite trade restrictions throughout
Q2
-- Gross margins of 57.3% (FY20 58.5%), reflecting increased investment
into value and higher shipping costs
-- Strong recovery in adjusted profit before tax to GBP15.3 million (FY20
GBP3.6 million)
-- Underlying net cash generation of GBP12.5 million including GBP(10.7)
million of one-offs from 53rd week and deferred VAT repayment
-- Business well capitalised with strong balance sheet - GBP27.8 million
net cash at year end
-- Strong returns on invested capital - Group ROCE has increased from 13.1%
in FY19 to 17.5% in FY21
-- Dividend reinstated based on 2x full year adjusted EPS cover
Current Trading and Outlook
-- Trading remains robust with two-year Retail like-for-like sales growth
of 18.4% in first eight weeks (one-year Retail like-for-like sales down
0.7% against strong comparative period last year)
-- Continued trading headwinds from reduced consumer confidence, global supply
chain challenges and cost inflation
-- Growth strategy, flexible supply chain and balance sheet strength provide
confidence and platform for growth
Commenting on the results, Rob Parker, Chief Executive said:
"Our full year results demonstrate the strength of our position
as the UK's leading tile specialist and the potential of the
business when it has been able to trade without restriction.
Despite significant disruption for a three month period, during
which our stores were unable to welcome homeowners, we delivered
record revenues for the year and made good progress towards our '1
in 5 by 2025' market share goal.
"We believe this performance underlines the strength of our
strategy and the success of new initiatives including the expansion
of our value ranges and the introduction of innovative new
products. The successful development of our digital offer during
the year has been particularly pleasing and we have plans in place
to expand this further in 2022.
"Trading in the initial weeks of the new financial year has been
robust with two-year Retail like-for-like sales growth of 18.4%.
While trading headwinds are likely to continue over the short term,
we are confident in our strategy and our ability to deliver
sustainable long term growth."
Notes
(1) Retail like-for-like revenue is defined as sales from online
and stores that have been trading for more than 52 weeks. In 2021
like-for-like revenue was GBP216.6 million (2020: GBP182.3
million), with an average of 331 stores included in the weekly
calculation.
(2) Adjusted profit before tax excludes the impact of items
which are either one-off in nature or fluctuate significantly from
year to yea r.
(3) Adjusted earnings per share is adjusted for the items
highlighted above, plus the impact of corporation tax
(4) Adjusted net cash is defined as cash and cash equivalents,
less bank loans, before unamortised issue costs. It excludes lease
liabilities under IFRS 16.
For further information please contact:
Topps Tiles Plc (30/11/21) 020 7638 9571
Rob Parker, CEO (Thereafter) 0116 282 8000
Stephen Hopson, CFO
Citigate Dewe Rogerson 020 7638 9571
Kevin Smith/Ellen Wilton
STRATEGY AND PROGRESS
Summary of performance
2021 was a record-breaking year for the Topps Tiles Group. Our
revenue of GBP228.0 million, or GBP223.7 million on a 52-week
basis, was the highest we have ever achieved and Retail
like-for-like sales growth was 19.6%. This was an excellent result,
particularly given that our stores were closed to our homeowner
customers for just over three months between January and April due
to Covid-related Government restrictions. Our performance was
supported by a buoyant home improvement market during this period,
however we believe this result also demonstrates the success of our
growth strategy and is a good step towards the achievement of our
goal of accounting for GBP1 in every GBP5 spent across the UK tile
market by 2025 ('1 in 5 by 2025').
The year started very well, with like-for-like growth in our
Retail business of 19.9% in the first quarter, building further on
the strength of the final quarter of the previous financial year.
Commercial sales were also strong and gross margins were in line
with our targets. On 19 December 2020, the new 'Tier four'
restrictions came into effect for large parts of England, which
quickly turned into a new national lockdown early in the new year.
As a result of further changes to regulations, from 5 January to 11
April 2021 all our stores in England were closed to homeowners,
with registered traders allowed to enter the store to visit the
trade counter only and no browsing permitted. Broadly the same
restrictions were in place in Wales, Scotland and Northern
Ireland.
This period of trading disruption had a substantial impact on
sales, which were more than GBP20 million lower in Q2 than Q1.
Retail like-for-like sales were down 17.3% in the second quarter
and commercial projects once again slowed, particularly in the
hospitality and leisure sectors. Adjusted profit before tax in the
first half was GBP5.1 million (2020: GBP1.2 million; 2019: GBP7.0
million(1) ) including c. GBP4.4 million of business rates
relief.
Operationally, the business responded with great flexibility to
the trading restrictions. Online sales were up 135% in the second
quarter compared to last year, and our Retail website delivered
record weekly performances for revenue, orders, website traffic and
conversion. Our supply chain once again shifted from a focus on
bulk picks for store replenishment to a focus on single picks for
direct customer deliveries. Our Commercial business shifted its
focus into sectors that were less impacted by the lockdown, which
offset the majority of the decline in hospitality and leisure.
The trading period since re-opening on 12 April 2021 was
extremely strong. In Q3, Retail like-for-like sales on a two-year
basis were up 18.5% in the 11 weeks after re-opening, and that
strengthened to 21.7% growth in the final quarter. On a one-year
basis, Retail like-for-like sales were also in growth in Q4, up
3.0% against a comparative period last year which saw a strong
bounce back in sales following the initial national lockdown.
Commercial sales in the second half were up 55% year on year and
forward indicators are encouraging as we move into the new
financial year.
Profitability rebounded strongly in the second half. Adjusted
profit before tax was GBP10.2 million (2020: GBP2.4 million; 2019:
GBP7.0 million(1) ), driven by the strong sales performance, with
lower gross margins (2021: 57.1%, 2020: 57.7%, 2019: 62.0%) due to
higher shipping costs, our investment into value and product mix
changes, and well controlled operating costs. No government support
was included in our second half adjusted profit before tax.
In aggregate, the business delivered GBP15.3 million of adjusted
profit before tax (2020: GBP3.6 million, 2019: GBP14.0 million(1)
).
Our balance sheet has remained strong throughout the year
following the move into a net cash position in FY20, and we
finished the year with GBP27.8 million of adjusted net cash, with
headroom against our banking facilities of GBP66.8 million. The net
cash inflow of GBP1.8 million includes GBP10.7 million of outflows
relating to the timing of the 53(rd) week and deferred VAT
repayments, meaning the underlying increase in cash was GBP12.5m in
the year. With the strong performance in both profit and cash, we
are proposing the resumption of dividend payments to shareholders
with a final dividend payment of 3.1 pence per share.
Note 1 : The Group's adjusted profit before tax in 2019 excluded
Commercial trading losses of GBP1 million in each half of the year.
From 2020, Commercial trading was included in adjusted profit. The
Commercial losses in 2019 have been included in the figures quoted
above to aid comparability over the three year period.
Core purpose, goal and strategy
The core purpose of the Group is to inspire customers through
our love of tiles. This gives us a very clear focus on our chosen
specialism and encourages all of our colleagues to be passionate
about the products we sell.
We operate in a large market. In 2019, the value of the UK
market for tiles, adhesives and grouts was around GBP950 million,
and the market for all the products we sell was significantly over
GBP1 billion. Last year, we announced a new goal for the business
based around our market share across both the domestic and
commercial markets, and encompassing tiles, adhesives and grouts.
The goal is to account for GBP1 in every GBP5 spent on tiles and
associated products in the UK by 2025: '1 in 5 by 2025'. A 20%
market share would represent a significant increase from our
estimated 2019 market share of 17% and would require an
out-performance of the market by around 3.5% per year between 2020
and 2025.
In 2021, we recognise that some competitors who did not face
physical restrictions on trading are likely to have gained some
share over the lockdown period, particularly generalist DIY stores
and pure play online operators. We estimate that our market share
in 2021 in periods where we were allowed to trade without
restrictions was c. 17.6%, representing a good initial step towards
our goal, although the circumstances of the year make it
particularly difficult to measure. However, our sales performance
in the period when we traded free of restrictions gives us
confidence in the longer-term ambition of achieving our goal.
Our strategy to deliver our goal in our Retail and Commercial
businesses has been underpinned by our Group strategies of "Leading
Product" and "Leading People", which are described in the following
sections. However, this year has also seen an important expansion
of our strategy, with the inclusion of a new element,
"Environmental Leadership". We aim to be ambitious and lead our
market in this area, working with manufacturers to bring products
to market which will help our customers reduce their environmental
impact on the world. We will also reduce the direct impact of the
Group on the environment, mainly through reductions in our carbon
emissions.
Leading product
As the UK's leading tile specialist, our expertise in the
ranging, sourcing and procurement of tiles on a global basis is a
core part of our competitive advantage. We work with carefully
selected manufacturing partners around the world to develop and
produce differentiated products that are innovative, of high
quality and exclusive to Topps Tiles. We protect the intellectual
property and design assets we create through partner exclusivity
and design registration. With the integration of the Parkside and
Strata commercial brands, we are able to leverage these core
strengths across both sides of the business.
Progress and outlook
This has been an extremely testing year for all supply chains
and we have had to rely on the strength and flexibility of our
supplier relationships and our logistics teams more than ever.
During the various periods of restrictions and releases, sales
volumes have been volatile. In addition, securing supply has, at
times, been challenging, with uncertainty around the availability
of product and shipping capacity as well as significant increases
in the costs of both shipping and transportation. We are well
placed to deal with this uncertain environment due to our scale and
expertise, including our global sourcing capability. We also
leverage our relationships with key suppliers to secure stock. Our
strategic supplier base accounts for c. 70% of our purchases (2020:
80%) reflecting sourcing changes as a result of supply chain
disruption, and particularly our reduced exposure to the Far
East.
Despite the challenges, we have been able to maintain a
continuity of supply to our business. We took the decision to
maintain a higher level of inventory than historical averages
which, we believe, gives us a significant advantage over our
competitors. We ended the year with GBP32.8 million of inventory
across the stores and central warehouse, GBP3.4 million more than
last year. Our 150,000 sq ft warehouse in Leicester forms a key
part of the robustness of our supply chain.
We decided early in the year not to slow down the flow of new
product into our Retail business, despite store trading being
disrupted and delivered 52 new product introductions in the year.
Of these new products, more than one third (38%) were design-led by
us in collaboration with key supply partners. 74% of our Retail
ranges are either own brand or exclusive to us and this remains key
to our product differential. Highlights of the year included
Everscape(TM) , our 2cm porcelain outdoor range, which was doubled
in size to 35 lines, including grouts, trims, pedestals and
primers; the launch of luxury vinyl tiles into 50 stores and
online; the development of new products with high recycled content
and antibacterial properties; and entirely new brands, such as
DEX(TM) , our new tools range.
In our Commercial business, we continue to expand our product
offering into different sectors, for example for use in swimming
pools, dry fix products (largely suitable for transport hubs) and
luxury vinyl tiles. Our Commercial business now has access to over
8,500 lines from over 160 suppliers globally.
Technical authority is a further key aspect of differential in
our market and we are leaders in this field, working closely with
our strategic supplier base to set exacting standards on quality
and performance. We have our own in-house technical team to meet
the demands of our broader customer base and offer key technical
information and on-demand support across all channels through our
dedicated in-house testing facilities and quality control.
Leading people
The Group's success is underpinned by the quality and commitment
of our colleagues. This ensures excellence in both service to our
customers and clients, and in the support provided to store teams
by our Leicester support office, supply chain and field teams. Our
Leading People initiative is about having the best people, leading
the best people, and is focused on three key areas of engagement,
capability and wellbeing.
Progress and outlook
Our focus on colleague engagement has been more important than
ever through the disruption of the last two years. Our annual
MyVoice staff survey gives colleagues the chance to have their say
about the company, its leadership, their work and wellbeing. We had
an excellent response in what was a difficult period operationally
and for the country, with 81% of colleagues responding in FY21 (up
11 ppts from last year), and 80% of colleagues positively engaged
with the business (up 6 ppts from last year). We were also ranked
12(th) in the annual Retail Week and Glassdoor survey of best
retailers to work for in the UK.
We invest in capability through formal training programmes and
through the development opportunities we provide. 50% of vacancies
across the Group are filled internally, enabling us to offer
progression within the business as well as retain the technical
skills of store colleagues.
As we continue to focus on a culture that is open, supportive,
transparent and dedicated to the wellbeing of all of our
colleagues, we are concentrating on five aspects of wellbeing:
physical, mental, social, career and financial. There was a
particular emphasis this year on mental and physical wellbeing,
including further training for our 48 mental health first aiders,
'Tea and Talk' sessions and a company-wide scheme to 'March
forward' which encouraged our colleagues to get physically active
during the month of March, whilst raising money for our corporate
charity, Macmillan Cancer Support.
The recruitment and retention of colleagues has become an ever
more important priority for the Group, particularly with
well-documented shortages of labour across the UK economy and many
people re-evaluating their career and life choices following the
pandemic. Drivers, especially heavy goods vehicle drivers, are in
particularly short supply and at times this year we have relied
more on contract drivers than we would like, which adds cost and
can reduce the reliability of our service. We have increased our
efforts to recruit directly in this area and emphasised the
strength of our overall employment offer to current and future
colleagues. As a result, we are starting the new financial year in
a better position than we finished the last one. Recruitment and
retention of high-quality staff remains one of the top priorities
for the Group.
Environmental leadership
For many years Topps Tiles has been focused on its environmental
impact and for the last two years we have had a cross-functional
Sustainability Council, involving colleagues from all areas of the
organisation, driving change through the business. Significant
progress has already been made on the use of LED lighting in
stores, waste reduction, recycling tiles and pioneering investments
into greater recycled content in tiles and other products through
manufacturing partnerships.
It has, however, become very clear that all businesses need to
do much more and we have challenged ourselves to set a stretching
ambition for our business. Our ambition is to lead our marketplace
in environmental credentials and specifically we intend to become
carbon balanced as a business by 2030. This will mean we will have
measured, reduced and, where required, offset our carbon emissions
to net zero by 2030, ten years ahead of the BRC retail industry
ambition of being Net Zero by 2040.
We have a growing partnership with the World Land Trust and are
working with them to understand our current status and build our
plans to minimise our impact on the environment in the future.
The 2030 target is near enough to create personal ownership
within our management team and is a realistic goal which will
motivate our colleagues. The nine-year time horizon means Topps
Tiles will lead our market in many aspects of sustainability.
Our strategy to drive environmental leadership and achieve our
goal has five main elements:
Ensure we have the right governance in place to deliver the goal, meet
the legislative requirements and regulations. Also, we must ensure we
are measuring our environmental impact and have a road map to the goal;
Work with partners to minimise waste and drive recycling and the use of
recycled materials;
Eliminate as much as possible our current carbon emissions (our focus
will be on scope 1 & 2, whilst working with our business partners to influence
and reduce the scope 3 emissions);
Drive product innovation to increase the use of recycled materials in
tiles and related products and use strategic sourcing to minimise our
environmental impacts; and
Use high quality and auditable carbon offsets to balance our remaining
emissions as part of the pathway to being carbon balanced by 2030.
Topps Tiles has established a new governance structure to
support the carbon balanced goal. Rob Parker, Chief Executive, will
lead the strategy at a Board level, chair our steering group, and
work with the Audit Committee to ensure appropriate measures and
KPI tracking is in place. Dan Little, Managing Director of our
Commercial business, will continue to create the link between the
steering group and the cross-functional Sustainability Council. The
Sustainability Council will continue to work on reducing our
environmental impact across all areas of the organisation.
Retail: Topps Tiles
Last year, we launched a new strategy in our omni-channel Retail
business - "Great Experience, Great Product and Great Value" and we
made substantial progress within the year, delivering an excellent
overall result. We strive to ensure that the journey for all of our
customers starts and ends with a great customer service experience
- whether in-store, online or both - and we complement this with a
range of market-leading products supported by our Leading Product
initiative. Ultimately, these are combined to deliver great value
to our customers.
Progress and outlook
The Retail business had an excellent year, delivering sales of
GBP219.4 million over 53 weeks (GBP215.3 million on a 52-week
basis; 2020: GBP185.3 million).
The experience we offer our customers is central to our offer.
The majority of our customers shop infrequently for tiles which
means that when they do, they value our advice and expertise,
whether in a store or online. Overall, despite our stores being
closed to homeowners for a quarter of the year, our customer
satisfaction scores remained at world class levels. Our overall
satisfaction score for the year was 88.4% (2020: 88.5%) and we were
delighted to win The Tile Association's 2021 award for Excellence
in National Retail.
Our digital offer also provides a great experience to our
customers and this year, this was evidenced by a significant number
of awards, recognising the quality of our offer, as follows:
Winner of 'The Mastermind' award at the Adobe Experience Maker Awards
B2C Ecommerce Website of the Year at the UK Digital Growth Awards
Global DIY, Home, Furniture and Interior Design eCommerce Website of the
Year at the Global eCommerce Awards 2021
Best Use of Search B2C award at the European Search Awards
Best Wholesale & Trade eCommerce and Best B2B eCommerce site at the Ecommerce
Awards 2021
We were also ranked as one of the Top 50 retailers in the UK in Internet
Retailing's annual "RetailX Top 500" report, ranking retail websites across
all sectors in the UK
Our performance online has continued to be very strong. Our
Retail website had 12.3 million unique visitors in the year, up 31%
against 2019, which we believe is approximately three times the
level of our next biggest competitor. On social media, our Facebook
and Instagram impressions were up 184% year on year. On Pinterest,
we have an engaged audience of over 900 thousand people, up from
600 thousand at the half year. Across Facebook, Instagram,
Pinterest and YouTube channels, social media continues to become an
increasingly important area of focus.
Our customer base splits into two distinct but related groups -
professional fitters (trade) and homeowners. Trade customers
represent 57% of our total sales (2020: 55%) and provide a vital
link to homeowners who prefer to transact through their fitter
rather than with us directly. During the second quarter, this link
was especially valuable as only registered traders were able to
enter our stores due to lockdown restrictions.
Our stores remain central to our omni-channel offer and driving
customer convenience, particularly for our trade customers. Almost
every customer visits a store at some point in their purchase
journey, and almost all customers use the web at some stage too. We
offer the ability to collect online orders from stores, and
approximately 30% of online sales are collected.
We have continued to review our store footprint, identifying
areas of overlap and taking opportunities to consolidate stores
where these exist, to enhance store profitability and returns.
During the year we closed 31 stores, opened two new stores and
relocated two stores, finishing the year with 313 Retail stores
(2020 year end: 342 stores). We continue to target a core estate
size of approximately 300 stores, having reduced the size of the
estate from 372 units at the end of 2017. The reduction in store
numbers has helped to drive incremental profits as we are able to
transition sales from a closed store to other stores in the
area.
We continue to actively manage our store estate, and our
relatively short unexpired lease term to the next break opportunity
of 3.3 years (2020: 3.4 years) provides us with good flexibility
within our portfolio. Removing stores which are strategically
important (where we have proactively taken longer terms to secure
our tenure) from that calculation reduces the average unexpired
lease term to break to 3.0 years (2020: 3.3 years). Of the 49
non-trading stores in the estate during 2021, 30 were disposed by
year end, and 15 others have lease breaks in 2022.
This year we have also made substantial progress with our value
offer. In our 2020 strategy review we identified an opportunity to
take a greater share of the market for lower priced tiles,
specifically one million square metres of tiles with a selling
price of under GBP20 per square metre. As a result, we launched our
'Get the Look for Less' ranges, which we have extended further over
time and from which we have seen good success in the year. We have
also maintained keen pricing for essentials ranges, including bulk
deals for trade customers, and delivered some compelling
promotions, including 'up to 50%' off sales.
We are trialling a new 'Topps Tiles Clearance' concept, which
gives us the opportunity to offer even better value to customers,
whilst allowing us to clear discontinued lines and mixed batch
stock, within the overall Topps Tiles brand. At the end of the year
we had converted eight stores to this format with resulting
like-for-like sales growth in excess of the overall estate.
Commercial: Parkside and Strata
The commercial tile market is significant, and fragmented - at
around 45% of the overall UK tile market, in a normal year it is
worth in excess of GBP400 million, with no company having a
significant share - and with our entry into this market in 2017 we
approximately doubled the size of our addressable market whilst
maintaining our specialism in tiles and related products. Our entry
started with the acquisition of the Parkside business in September
2017 and in April 2019 we purchased the Strata business which was
complimentary to Parkside. Our strategy of "Disrupt and Construct"
means that we plan to 'disrupt' the existing fragmented competitive
landscape and put in place the building blocks to 'construct' a new
market leader. Our tile expertise, supplier relationships, size and
scale as a Group is central to this plan - giving us the resources
to recruit a talented sales team, invest in market-leading pricing
and access the broadest range of products, often on an exclusive
basis.
Progress and outlook
We are continuing to build the capability and proposition of our
Commercial business. There are now 59 colleagues in the business
(2020: 52), including a sales force of 29 (2020: 26). We are
establishing a strong reputation for quality and reliability with
high levels of loyalty across different customer groups such as
architects, designers and contractors.
Performance over the course of the year has varied, based on
conditions in the various market sectors we service. Sales in the
first half of GBP4.1 million were down 10% year on year, with a
significant impact from the Covid-related disruption in key sectors
such as hospitality and leisure during that time period. Sales in
the second half were up 55% year on year, to finish the year at
GBP8.6 million, 15% higher than 2020. This is a significant
outperformance of the market, which was down 7.2% (source: ONS).
Trading losses in the year were GBP1.6 million (2020: GBP1.9
million trading loss) however our Commercial business is scaled to
construct a market leader and we continue to invest in people and
resources to enable to grow significantly as key sectors fully
re-open.
Environmental leadership is particularly important in the
commercial market and we have made significant progress this year.
Our Commercial business is now ISO14001 accredited, externally
certifying that we have an effective environmental management
system, we are leading the Group environmental engagement with the
World Land Trust, we have launched new packaging for our samples
made from 100% recycled and 100% recyclable material, we have
worked with suppliers on launch of innovative new products such as
Criaterra, a zero-waste tile made with 100% natural materials with
a 90% energy saving over ceramic products, and we have relaunched
our Clerkenwell showroom as a Sustainability and Design Studio,
where we can showcase all of the innovative work we are doing in
this area to our architect and designer client base.
At the end of the year, there are some positive signs for the
recovery of key commercial market sectors such as travel and
leisure, and our order bay is at its highest ever level. As a
result, we are optimistic that next year our sales will materially
move forward and trading losses will continue to narrow as we
construct an industry-leading business.
Key Performance Indicators ("KPIs")
The Board monitors a number of financial and non-financial
metrics and KPIs both for the Group and by individual store. This
information is reviewed and updated as the Directors feel
appropriate. Specific measures include:
53 weeks to 52 weeks to YoY
2 October 26 September
2021 2020
Financial KPIs
Group revenue growth year-on-year 18.3% (12.0)% n/a
Retail like-for-like sales growth
year-on-year* 19.6% (12.5)% n/a
Group gross margin 57.3% 58.5% (1.2)ppts
Adjusted profit before tax* GBP15.3m GBP3.6m 325.0%
Adjusted earnings per share* 6.13 pence 1.57 pence 290.4%
Adjusted net cash* GBP27.8m GBP26.0m +GBP1.8m
Inventory days 123 134 (11)
Non-financial KPIs
Retail customer overall satisfaction
score 88.4% 88.5% (0.1)ppts
Colleague turnover 31.2% 28.8% 2.4ppts
Carbon emissions per store (tonnes
per annum) 27.2 24.7 10.1%
Number of retail stores at year end 313 342 (29)
* as defined in the Financial Review
Notes: Customer overall satisfaction scores are calculated from
the responses we receive through our TileTalk customer feedback
programme. Overall satisfaction (OSAT) is the percentage of
customers that score us 5 in the scale of 1 - 5, where 1 is highly
dissatisfied, and 5 is highly satisfied. Energy carbon emissions
have been compiled in conjunction with our electricity and gas
suppliers. This is based on the actual energy consumed multiplied
by Environment Agency approved emissions factors. Vehicle emissions
have been calculated by our in-house transport team based on
mileage covered multiplied by manufacturer quoted emission
statistics. The comparative period in 2020 includes a period of
complete store closure due to Covid-19, resulting in lower
emissions per store. Carbon emissions per store in 2019 were 32.0
tonnes per annum.
FINANCIAL REVIEW
Adjusted Measures
The Group's management uses adjusted performance measures, to
plan for, control and assess the performance of the Group.
Adjusted profit before tax differs from the statutory profit
before tax as it excludes the effect of one off or fluctuating
items, allowing stakeholders to understand results across years in
a more consistent manner. In the prior year we fully excluded the
impact of IFRS 16 from adjusted profit. In 2021, we have included
the business as usual impact of IFRS 16 in adjusted profit but
continue to adjust for any impairment charges or impairment
reversals of right of use assets, derecognition of lease
liabilities where we have exited a store, significant transactions
such as sale and lease backs and one-off gains and losses through
sub-lets.
Analysis of movements from adjusted profit to statutory profit
are detailed below, noting that we have updated the presentation of
adjusting items to include the impact of IFRS16 in both periods,
restating the 2020 comparative to be on a consistent basis:
2021 GBPm 2020 GBPm
Adjusted profit before tax 15.3 3.6
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Property
---------- ----------
- Impairment of property, plant, equipment (1.0) (1.8)
---------- ----------
- Vacant property and closure costs (2.1) (0.9)
---------- ----------
- Store closure impairments and lease gains
and losses (0.2) (5.0)
---------- ----------
- IFRS16 BAU adjustments* nil 0.4
---------- ----------
(3.3) (7.3)
---------- ----------
Commercial
---------- ----------
- Commercial impairment of goodwill, intangibles
and property, plant and equipment** nil (5.6)
---------- ----------
nil (5.6)
---------- ----------
Other
---------- ----------
- Costs related to business restructure nil (0.5)
---------- ----------
- Business rates relief from April to September 2.3 nil
2021***
---------- ----------
2.3 (0.5)
---------- ----------
Statutory profit / (loss) before tax 14.3 (9.8)
---------- ----------
* In the prior year we treated the total impact of IFRS16 as an
adjusting item, in the current year we have taken the impact of
IFRS16 business as usual into our adjusted profit.
** In the prior year, we impaired commercial goodwill,
intangibles and property, plant and equipment, recognising the risk
of a slower growth profile following the impact of Covid-19 on
sectors that the Parkside and Strata businesses serve.
*** In the second half year we have included a normal level of
business rates expense within our adjusted profit to improve
comparison with the prior year. Business rates relief of GBP6.7
million was received over the full year, including GBP2.3 million
in the second half, which we estimate is significantly lower than
the negative profit impact of trading restrictions during the year
as a whole.
STATEMENT OF FINANCIAL PERFORMANCE
Revenue
Total revenue for the period ended 2 October 2021 increased by
18.3% to GBP228.0 million (2020: GBP192.8 million). Revenue in the
year was impacted by trading restrictions related to the Covid-19
pandemic in the second quarter, when homeowners were unable to go
inside our stores and registered traders were only allowed to enter
to visit the trade counter. The prior year was materially impacted
by temporary store closures in the third quarter, also relating to
the pandemic. In addition, there was a net closure of 29 Retail
stores in the year.
Retail like-for-like sales were 19.6% higher than the prior
year, which consisted of a 2.0% increase in the first half of the
financial period and a 39.8% increase in the second half. The
growth in the second half was comparing against a period which
included a full store lockdown in 2020 during the first wave of the
pandemic.
On a two-year basis, Retail like-for-like sales were up 6.3%
against 2019, including a decline of 4.5% in the first half (which
included the lockdown in the early part of 2021) and then very
strong growth of 17.4% in the second half (which compares two
periods without trading restrictions).
Sales to our Commercial customers were up 15% year on year to
GBP8.6 million, with growth of 55% in the second half year as key
sectors began to open up for business.
Gross Margin
Total gross margin was 57.3%, a decrease from 58.5% in the prior
year.
Gross margin in the Retail business decreased from 59.2% in the
prior year to 58.1% in the current year. This was driven by a
continued focus on pricing competitiveness, changes in product mix,
customer mix and NPD, and increased shipping costs, which became
particularly significant in the second half year. Partially
offsetting these downward pressures, there were lower expenses from
stock provisions and delivery than in the prior year. The impact of
foreign exchange movements on cost of goods sold this year was
immaterial.
Operating Expenses
Operating expenses were GBP112.4 million compared to GBP118.8
million in FY20 however the year on year change is distorted as a
result of significant one-off expenses in the prior year relating
to the adoption of IFRS 16 and the impairment of Commercial assets.
On an adjusted basis, operating expenses increased from GBP108.4
million in FY20 to GBP111.4 million in FY21.
The movement in adjusted operating costs is explained by the
following key items:
Underlying cost increases of GBP1.5 million, consisting of increases in
-- the National Living Wage (GBP0.6 million), supply chain increases due
to higher volumes and subcontractor costs (GBP2.3 million), employee profit
share (GBP4.0 million) and other costs (GBP0.2 million) offset by lower
costs due to fewer stores (GBP3.7 million) and the annualisation of cost
reductions implemented in the previous year (GBP1.9 million);
-- The reversal of the majority of the holiday pay accrual from the end of
the prior year had the impact of decreasing adjusted operating costs by
GBP3.6 million year on year;
-- The impact of including IFRS 16 in adjusted operating costs is a decrease
in costs of GBP3.3 million year on year;
-- Changes in Government support have increased adjusted operating costs
by GBP6.3 million year on year;
-- The 53(rd) week in this accounting period increased costs by GBP2.1 million.
In FY20 our adjusted profit included GBP10.7 million of
government support (through the Coronavirus Job Retention Scheme
(CJRS) GBP5.3 million, Business Rates Relief GBP4.7 million and
local authority Covid-19 grants of GBP0.7 million). In FY21,
adjusted profit included GBP4.4 million of government support from
Business Rates Relief. The Company has repaid all CJRS support
relating to FY21. Business rates relief of GBP6.7 million was
received over the full year, including GBP2.3 million in the second
half, which we estimate is significantly lower than the negative
profit impact of trading restrictions during the year as a
whole.
Financing
Interest on bank loans and overdrafts, net of bank interest
receivable, was GBP0.4 million (2020: GBP0.8 million). In 2020 the
business moved to a net cash position, in part due to the sale of
and leaseback our head office and central warehouse buildings for
GBP18.1 million, and interest costs have fallen as we have repaid
all outstanding loans and facilities in the year.
IFRS 16 has had the impact of increasing finance costs by GBP3.7
million, resulting in total net finance costs of GBP4.1 million
(2020: GBP3.8 million).
Profit Before Tax
Profit before tax was GBP14.3 million (2020: GBP9.8 million
loss).
Excluding the adjusting items detailed above, profit before tax
was GBP15.3 million (2020: GBP3.6 million). The Group adjusted
profit before tax margin was 6.7% (2020: 1.9%).
Tax
The effective rate of corporation tax for the period was 23.6 %
(2020: 18.4%).
Earnings Per Share
Basic earnings per share were 5.59 pence (2020: loss of 4.11
pence). Diluted earnings per share were 5.52 pence (2020: loss of
4.11 pence). Excluding adjusting items, adjusted earnings per share
were 6.13 pence (2020: 1.57 pence).
Dividend and Dividend Policy
Following consideration of the financial position and
performance of the Group, the Board has decided to propose the
resumption of dividend payments and to readopt the previous policy
of paying approximately half of adjusted EPS as dividends. Moving
forward, the interim dividend would be set at approximately one
third of the prior full year dividend. The Group will evaluate its
capital allocation policy in the coming year.
This year, the Board is recommending to shareholders a final
dividend of 3.1 pence per share, which will cost GBP6.1 million.
The shares will trade ex-dividend on 23 December 2021 and, subject
to approval at the Annual General Meeting, the dividend will be
paid on 31 January 2022.
STATEMENT OF FINANCIAL POSITION
Capital Expenditure
Capital expenditure in the period amounted to GBP4.7 million
(2020: GBP4.4 million excluding freehold acquisition in the prior
year), an increase of 7% year on year.
Key investments are as follows:
-- New retail stores GBP1.0 million - four new openings (including two relocations)
(2020: GBP1.3 million)
-- Store improvements, merchandising and maintenance GBP0.8 million (2020:
GBP0.9 million)
-- LED store improvement programme GBP2.3 million (2020: GBP0.6 million)
-- Central office refurbishment nil (2020: GBP1.3 million)
-- Group IT developments (including web site) GBP0.3 million (2020: GBP0.3
million)
-- Other expenditure GBP0.3 million (2020: nil)
In the prior year we also purchased two freehold properties for
GBP2.3 million.
The Board expects capital expenditure in the year ahead to be
between GBP6 million and GBP7 million which will cover our core
investment plans. Any acquisitions that the Group may consider as
part of its growth plans would be additional to this guidance.
Acquisitions & Disposals
During the year we disposed of three freehold properties for
GBP2.1 million, two of which that were held for sale at the end of
2020. In the prior year we entered into a sale and leaseback
arrangement for our head office and central warehouse buildings for
a price of GBP18.1 million before costs (GBP17.9 million net of
costs).
At the period end the Group held two freehold or long leasehold
sites, with a total carrying value of GBP1.0 million (2020: five
freehold or long leasehold sites valued at GBP3.1 million). The
carrying value is based on the historic purchase cost and capital
expenditure less accumulated depreciation.
Inventory
Inventory at the period end was GBP32.8 million (2020: GBP29.3
million) representing 123 days turnover (2020: 134 days turnover).
The higher levels of stock at year end reflect a decision to hold
additional stock in light of supply chain challenges. Stock days in
2020 were higher than normal due to lower sales following lockdown
restrictions.
Cash flow
On a statutory basis, net cash from operating activities was
GBP26.7 million, compared to GBP51.0 million in the prior year
period.
The table below analyses changes in adjusted net cash flow and
has been prepared on a post IFRS16 basis, with 2020 values restated
to aid comparability:
2021 2020
GBPm GBPm
Cash generated by operations before WC movements 47.0 35.1
Changes in working capital (14.6) 20.8
Interest including interest element of lease liabilities (4.2) (3.9)
Tax (1.5 ) (1.0 )
Net cash from operating activities 26.7 51.0
Capital expenditure excluding investments (4.7) (4.4)
Freehold and leasehold investments - (2.3)
Disposals 2.1 18.6
Payment of capital element of lease liabilities (23.0) (21.5)
Other 0.7 0.4
Free cash flow 1.8 41.8
Dividends 0.0 (4.5)
Change in adjusted net cash 1.8 37.3
Adjusted net cash at end of period 27.8 26.0
Adjusted net cash increased by GBP1.8 million (2020: GBP37.3
million). This increase included a GBP10.7 million negative impact
within working capital caused by two specific factors which are not
representative of the underlying cash performance of the
period:
-- the change of the financial year end due to the 53(rd) trading week,
resulted in a GBP7 million cash outflow in the final days of the
period as a result of the timing of supplier payment runs and our
payroll; and
-- we repaid VAT of GBP3.7 million deferred from 2020 as part of the
Government's Covid-19 support package.
Working capital also includes an outflow due to stock movements
of GBP3.4 million as we chose to hold higher levels of key stock
lines as part of our response to the global supply chain
challenges.
Cash and cash equivalents at the period end were GBP27.8 million
(2020: GBP31.0 million) with nil borrowings (2020: GBP5.0 million),
resulting in adjusted net cash of GBP27.8 million (2020: GBP26.0
million).
Return on Capital Employed
As a result of strong cash generation as well as the store
consolidation programme, over the two year period from 2019 to
2021, the Group's lease adjusted return on capital employed
(LAROCE) has improved from 13.1% to 17.5%, whilst lease adjusted
capital employed has reduced by GBP43 million.
Banking Facilities
The Group has a GBP39.0 million revolving credit facility in
place which is committed to July 2023 (2020: GBP39.0 million). At
the year end, none of this was drawn (2020: nil). During 2021, we
repaid GBP5.0 million and cancelled a further GBP5.0 million of
credit facilities through the Coronavirus Large Business
Interruption Loan Scheme and none of these facilities remain active
at the end of the period (2020: GBP5.0 million drawn). As a result,
the Group had GBP39.0 million of undrawn committed banking
facilities at the end of the financial year.
Current Trading and Outlook
In the first eight weeks of the new financial year, trading has
remained robust. However, macroeconomic indicators such as consumer
confidence have softened and global supply chain challenges and
cost inflation will continue to provide trading headwinds. Against
this backdrop, Retail like-for-like sales have increased by 18.4%
on a two-year basis and decreased by 0.7% on a one-year basis. We
remain confident that our market-leading Retail offer and
Commercial growth strategy, along with our flexible supply chain
and balance sheet strength, give us a solid platform from which to
deliver sustainable long-term growth.
Going concern
When considering the going concern assertion, the Board reviews
several factors including a review of risks and uncertainties, the
ability of the Group to meet its banking covenants and operate
within its banking facilities based on current financial plans,
along with a detailed review of a more pessimistic trading scenario
that was deemed severe but plausible. The more pessimistic trading
scenario was based on a further national lockdown related to the
Covid-19 pandemic during quarter 2 of FY22 that would see our
Retail stores closed to homeowners for a further three months.
The Group has already taken a number of actions to strengthen
its liquidity during the Covid-19 pandemic, including the sale and
leaseback of the Group's head office and central warehouse
buildings in Enderby in June 2020. The going concern review also
outlined a range of other mitigating actions that could be taken in
a severe but plausible trading scenario. These included, but were
not limited to, savings on store employee costs, savings on central
support costs, reduced marketing activity, a reduction of capital
expenditure, management of working capital and suspension of the
dividend.
The Group's cash headroom and covenant compliance was reviewed
against current lending facilities in both the base case and the
severe but plausible downside scenario. The current lending
facility was refinanced in July 2018 and expires in July 2023. In
all scenarios, the Board have concluded that there is sufficient
available liquidity and covenant headroom for the Group to continue
to meet all of its financial commitments as they fall due for the
foreseeable future, a period of not less than 12 months from the
date of this report. Accordingly, the Board continue to adopt the
going concern basis in preparing the financial statements.
Long Term Viability
The Board have also considered the Longer Term Viability ("LTV")
of the business. Based on this review, the Directors confirm that
they have a reasonable expectation that the Group will continue to
operate and meet its liabilities, as they fall due, for the next
four years. The full LTV statement can be found in our Annual
Report.
Rob Parker Stephen Hopson
Chief Executive Officer Chief Financial Officer
30 November 2021
Unaudited Consolidated Statement of Financial Performance
For the 53 weeks ended 2 OCTOBER 2021
53 weeks 52 weeks
ended ended
2 October 26 September
2021 2020
Notes GBP'000 GBP'000
----------------------------------------------- -------------- ----------------- -------------
Group revenue 3 227,997 192,813
Cost of sales (97,297) (80,001)
----------------------------------------------- -------------- ----------------- -------------
Gross profit 130,700 112,812
Distribution and selling costs (83,591) (80,971)
Other operating expenses (6,100) (10,105)
Administrative costs (18,100) (23,178)
Sales and marketing costs (4,564) (4,587)
----------------------------------------------- -------------- ----------------- -------------
Group operating profit/(loss) 18,345 (6,029)
Finance income 6 87 101
Finance costs 6 (4,158) (3,901)
----------------------------------------------- -------------- ----------------- -------------
Profit/(loss) before taxation 4 14,274 (9,829)
Taxation 7 (3,370) 1,811
----------------------------------------------- -------------- ----------------- -------------
Profit/(loss) for the period 10,904 (8,018)
----------------------------------------------- -------------- ----------------- -------------
Profit/(loss) is attributable to:
Owners of Topps Tiles Plc 10,876 (7,966)
Non-controlling interests 28 (52)
----------------------------------------------- -------------------- ----------- -------------
10,904 (8,018)
----------------------------------------------- -------------------- ----------- -------------
All results relate to continuing operations of
the Group.
Earnings per ordinary share:
- Basic 9 5.59p (4.11)p
- Diluted 9 5.52p (4.11)p
Unaudited Consolidated Statement of Comprehensive Income
For the 53 weeks ended 2 OCTOBER 2021
53 weeks 52 weeks
ended ended
2 October 26 September
2021 2020
GBP'000 GBP'000
--------------------------------------------------------------------- ---------- -------------
Profit/(loss) for the period 10,904 (8,018)
Total comprehensive income/(expense) for the period is attributable
to:
Owners of Topps Tiles Plc 10,876 (7,966)
Non-controlling interests 28 (52)
--------------------------------------------------------------------- ---------- -------------
10,904 (8,018)
Unaudited Consolidated Statement of Financial Position
as at 2 OCTOBER 2021
2021 2020
Notes GBP'000 GBP'000
----------------------------------------------------- ----- --------- ---------
Non-current assets
Goodwill - -
Intangible assets 1,243 916
Property, plant and equipment 23,680 27,170
Investment properties - -
Other financial assets 2,335 2,749
Deferred tax assets 407 1,406
Right-of-use assets 95,418 106,258
----------------------------------------------------- ----- --------- ---------
123,083 138,499
----------------------------------------------------- ----- --------- ---------
Current assets
Assets classified as held for sale - 1,786
Inventories 32,758 29,337
Other financial assets 518 873
Trade and other receivables 4,538 3,567
Cash and cash equivalents 10 27,789 31,018
----------------------------------------------------- ----- --------- ---------
65,603 66,581
----------------------------------------------------- ----- --------- ---------
Total assets 188,686 205,080
Current liabilities
Bank loans 11 - (4,981)
Trade and other payables (47,425) (58,446)
Lease liabilities (19,521) (25,520)
Current tax liabilities (2,027) (1,114)
Provisions (353) (462)
----------------------------------------------------- ----- --------- ---------
(69,326) (90,523)
----------------------------------------------------- ----- --------- ---------
Net current liabilities (3,723) (23,942)
Non-current liabilities
Lease liabilities (91,817) (98,636)
Provisions (1,969) (1,867)
----------------------------------------------------- ----- --------- ---------
Total liabilities (163,112) (191,026)
----------------------------------------------------- ----- --------- ---------
Net assets 25,574 14,054
----------------------------------------------------- ----- --------- ---------
Equity
Share capital 6,555 6,548
Share premium 2,625 2,492
Own shares (1,216) (1,483)
Merger reserve (399) (399)
Share-based payment reserve 4,642 3,965
Capital redemption reserve 20,359 20,359
Accumulated losses (6,992) (17,400)
----------------------------------------------------- ----- --------- ---------
Capital and reserves attributable to owners of Topps
Tiles Plc 25,574 14,082
Non-controlling interests - (28)
----------------------------------------------------- ----- --------- ---------
Total equity 25,574 14,054
----------------------------------------------------- ----- --------- ---------
Unaudited Consolidated Statement of Changes in Equity
For the 53 weeks ended 2 october 2021
Share-based Capital
Share Share Own Merger payment redemption Accumulated Non-controlling Total
capital premium shares reserve reserve reserve losses interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ------- ------- ------- ------- ----------- ---------- ----------- ---------------- -------------
Balance at 29
September
2019 6,548 2,490 (1,548) (399) 3,962 20,359 (4,783) (2) 26,627
---------------- ------- ------- ------- ------- ----------- ---------- ----------- ---------------- -------------
Loss and total
comprehensive
expense for the
period - - - - - - (7,966) (52) (8,018)
---------------- ------- ------- ------- ------- ----------- ---------- ----------- ---------------- -------------
Dividends - - - - - - (4,484) - (4,484)
Issue of share
capital - 2 - - - - - - 2
Own shares
issued
in the period - - 65 - - - (65) - -
Credit to equity
for
equity-settled
share-based
payments - - - - 3 - - - 3
Deferred tax on
share-based
payment
transactions - - - - - - (2) - (2)
Acquisition of
non-controlling
interest on
business
combination - - - - - - (100) 26 (74)
---------------- ------- ------- ------- ------- ----------- ---------- ----------- ---------------- -------------
Balance at 26
September
2020 6,548 2,492 (1,483) (399) 3,965 20,359 (17,400) (28) 14,054
---------------- ------- ------- ------- ------- ----------- ---------- ----------- ---------------- -------------
Profit and total
comprehensive
income for the
period - - - - - - 10,876 28 10,904
---------------- ------- ------- ------- ------- ----------- ---------- ----------- ---------------- -------------
Dividends - - - - - - - - -
Issue of share
capital 7 133 - - - - - - 140
Own shares
issued
in the period - - 267 - - - (267) - -
Credit to equity
for
equity-settled
share-based
payments - - - - 677 - - - 677
Deferred tax on
share-based
payment
transactions - - - - - - (47) - (47)
Acquisition of
non-controlling
interest on
business
combination - - - - - - (154) - (154)
---------------- ------- ------- ------- ------- ----------- ---------- ----------- ---------------- -------------
Balance at 2
October
2021 6,555 2,625 (1,216) (399) 4,642 20,359 (6,992) - 25,574
---------------- ------- ------- ------- ------- ----------- ---------- ----------- ---------------- -------------
Unaudited Consolidated Cash Flow Statement
For the 53 weeks ended 2 OCTOBER 2021
53 weeks 52 weeks
ended ended
2 October 26 September
2021 2020
GBP'000 GBP'000
-------------------------------------------------------------- ---------- -------------
Cash flow from operating activities
Profit/(loss) for the period 10,904 (8,018)
Taxation 3,370 (1,811)
Finance costs 4,158 3,901
Finance income (87) (101)
-------------------------------------------------------------- ---------- -------------
Group operating profit/(loss) 18,345 (6,029)
Adjustments for:
Depreciation of property, plant and equipment 6,268 7,145
Depreciation of right-of-use assets 20,508 21,080
Amortisation of intangible assets 186 477
Loss on disposal of property, plant and equipment 1,736 338
Loss/(gain) on sublease 134 (150)
Impairment (reversal)/charge of property, plant and equipment (604) 1,155
Fair value adjustment for asset held for sale - 558
Impairment of right-of-use assets 2,402 5,411
Impairment of goodwill - 3,104
Impairment of intangible assets - 1,687
Gain on lease disposal (2,563) (388)
Receipt of lease incentives - 173
Loss on disposal of investment properties - 483
Share option charge 677 3
Decrease in trade and other receivables 7 252
(Increase)/decrease in inventories (3,421) 1,589
(Decrease)/increase in payables (11,209) 18,990
-------------------------------------------------------------- ---------- -------------
Cash generated by operations 32,466 55,878
Interest paid (468) (856)
Interest element of lease liabilities paid (3,728) (3,033)
Taxation paid (1,535) (999)
-------------------------------------------------------------- ---------- -------------
Net cash from operating activities 26,735 50,990
Investing activities
Interest received 11 20
Interest received on sublease assets 76 81
Receipt of capital element of sublease assets 629 343
Purchase of property, plant and equipment (4,221) (6,290)
Purchase of intangibles (513) (417)
Proceeds on disposal of property, plant and equipment 2,096 18,552
Acquisition of subsidiary, net of cash acquired (154) (74)
Net cash (used in)/generated from investment activities (2,076) 12,215
Financing activities
Payment of capital element of lease liabilities (23,026) (21,452)
Dividends paid - (4,484)
Proceeds from issue of share capital 133 2
Drawdown of bank loans - 20,000
Repayment of bank loans (4,995) (45,000)
-------------------------------------------------------------- ---------- -------------
Net cash used in financing activities (27,888) (50,934)
Net (decrease)/increase in cash and cash equivalents (3,229) 12,271
-------------------------------------------------------------- ---------- -------------
Cash and cash equivalents at beginning of period 31,018 18,747
-------------------------------------------------------------- ---------- -------------
Cash and cash equivalents at end of period 27,789 31,018
-------------------------------------------------------------- ---------- -------------
Notes to the Unaudited Financial Statements
For the 53 weeks ended 2 OCTOBER 2021
1 GENERAL INFORMATION
Topps Tiles Plc is a public company, limited by shares,
incorporated and domiciled in the United Kingdom under the
Companies Act 2006.
The consolidated financial statements are unaudited and do not
constitute statutory accounts of the Company within the meaning of
Section 434(3) of the companies Act 2006. Statutory accounts for
the year ended 26 September 2020 have been delivered to the
Registrar of Companies. The audit report for those accounts was
unqualified, did not draw attention to any matters by way of
emphasis and did not contain a statement under 498(2) or (3) of the
Companies Act 2006.
These financial statements are presented in pounds sterling
because that is the currency of the primary economic environment in
which the Group operates.
ADOPTION OF NEW AND REVISED STANDARDS
In the current period, there were no new or revised standards
and interpretations adopted that have a material impact on the
financial statements. The Group has not early adopted any other
standard, interpretation or amendment that has been issued but is
not yet effective.
STANDARDS ADOPTED IN CURRENT PERIOD
The following new and revised standards and interpretations have
been adopted in the current year. Their adoption has not had any
significant impact on the amounts reported in these financial
statements that may impact the accounting for future transactions
and arrangements.
Amendments to References to the Conceptual Framework in IFRS
Standards
Amendments to IFRS 9, IAS 39 and IFRS 7 - Interest rate
benchmark reform
Amendments to IFRS 16 - COVID-19 concessions
2 ACCOUNTING POLICIES
The principal accounting policies adopted are set out below.
A) BASIS OF ACCOUNTING
These condensed financial statements have been prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 ('IFRS') and the
applicable legal requirements of the Companies Act 2006. In
addition to complying with international accounting standards in
conformity with the requirements of the Companies Act 2006, the
consolidated financial statements also comply with international
financial reporting standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union. The financial
statements have been prepared on the historical cost basis, except
for the revaluation of derivative financial instruments and
investment property. Historical cost is generally based on the fair
value of the consideration given in exchange for goods and
services.
The accounting policies set out below have, unless otherwise
stated, been applied consistently to all periods presented in these
Group financial statements.
B) GOING CONCERN
When considering the going concern assertion, the Board reviews
several factors including a review of risks and uncertainties, the
ability of the Group to meet its banking covenants and operate
within its banking facilities based on current financial plans,
along with a detailed review of a more pessimistic trading scenario
that was deemed severe but plausible. The more pessimistic trading
scenario was based on a further national lockdown related to the
Covid-19 pandemic during quarter 2 of FY22 that would see our
Retail stores closed to homeowners for a further three months.
The Group has already taken a number of actions to strengthen
its liquidity during the Covid-19 pandemic, including the sale and
leaseback of the Group's head office and central warehouse
buildings in Enderby in June 2020. The going concern review also
outlined a range of other mitigating actions that could be taken in
a severe but plausible trading scenario. These included, but were
not limited to, savings on store employee costs, savings on central
support costs, reduced marketing activity, a reduction of capital
expenditure, management of working capital and suspension of the
dividend.
The Group's cash headroom and covenant compliance was reviewed
against current lending facilities in both the base case and the
severe but plausible downside scenario. The current lending
facility was refinanced in July 2018 and expires in July 2023. In
all scenarios, the Board have concluded that there is sufficient
available liquidity and covenant headroom for the Group to continue
to meet all of its financial commitments as they fall due for the
foreseeable future, a period of not less than 12 months from the
date of this report. Accordingly, the Board continue to adopt the
going concern basis in preparing the financial statements.
C) REVENUE RECOGNITION
Revenue is measured at the transaction price received or
receivable and represents amounts receivable for goods in the
normal course of business, net of discounts, VAT and other
sales-related taxes.
Revenue from the sale of goods is recognised on the collection
or delivery of goods, when all the following conditions are
satisfied:
-- the Group has satisfied its performance obligations to external customers,
being the date goods are collected from store or received by the customers;
and
-- the customer has obtained control of the goods being transferred.
These conditions are met, predominantly, at the point of sale.
The exceptions to this are for: goods ordered in advance of
collection, where revenue is recognised at the point that the goods
are collected; sales of goods that result in award credits for
customers (see below); and web sales, where revenue is recognised
at the point of delivery.
Sales of goods that result in award credits for customers, under
the Company's Trader Loyalty Scheme, are accounted for as multiple
element revenue transactions and the fair value of the
consideration received or receivable is allocated between the goods
supplied and the award credits granted. The consideration allocated
to the award credits is measured by reference to their fair value
being the amount for which the award credits could be sold
separately. Such consideration is not recognised as revenue at the
time of the initial sale transaction, but is deferred and
recognised as revenue when the award credits are redeemed and the
Company's performance obligations have been satisfied.
The level of sales returns is closely monitored by management,
and as such, the Group holds a sales return provision in the
Consolidated Statement of Financial Position to provide for the
expected level of returns. The sales value of the expected returns
is recognised within Accruals, with the cost value of the goods
expected to be returned recognised as a current asset within
Inventories.
d) TAXATION
The tax expense represents the sum of the tax currently payable
and deferred tax.
The tax currently payable is based on taxable profit for the
period. Taxable profit differs from net profit as reported in the
statement of financial performance because it excludes items of
income or expense that are taxable or deductible in other periods
and it further excludes items that are never taxable or deductible.
The Group's liability for current tax is calculated using tax rates
that have been enacted or substantively enacted by the balance
sheet date.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and
liabilities are not recognised if the temporary difference arises
from the initial recognition of goodwill or from the initial
recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the tax
profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries, except where
the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will
not reverse in the foreseeable future.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised based on tax laws and rates that have been enacted at the
balance sheet date. Deferred tax is charged or credited in the
statement of financial performance, except when it relates to items
charged or credited directly to equity, in which case the deferred
tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
E) OPERATING COSTS
Restructuring costs relate to board approved decisions such as
business closures or major organisational changes. Operating profit
is stated after charging/(crediting) restructuring costs but before
investment income and finance costs.
Employee profit sharing costs are classified as distribution and
selling costs and administrative costs.
3 REVENUE
An analysis of Group revenue is as follows:
53 weeks 52 weeks
ended ended
2 October 26 September
2021 2020
GBP'000 GBP'000
------------------------------- ---------- -------------
Revenue from the sale of goods 227,997 192,813
------------------------------- ---------- -------------
Total revenue 227,997 192,813
------------------------------- ---------- -------------
The Group has one reportable segment in accordance with IFRS 8 -
Operating Segments, which encompasses the Topps Tiles Group revenue
generated instore and online from retail and commercial customers.
The Board receives monthly financial information at this level and
uses this information to monitor performance, allocate resources
and make operational decisions. All revenue is derived from sales
in the UK.
The Group's revenue is driven by the consolidation of individual
small value transactions and as a result, Group revenue is not
reliant on a major customer or group of customers.
4 PROFIT/(LOSS) BEFORE TAXATION
Profit/(loss) before taxation for the period has been arrived at
after charging/(crediting):
53 weeks 52 weeks
ended ended
2 October 26 September
2021 2020
GBP'000 GBP'000
-------------------------------------------------------------- ---------- -------------
Depreciation of property, plant and equipment 6,268 7,145
Depreciation of right-of-use assets 20,508 21,080
Impairment (reversal)/charge of property, plant and equipment (604) 1,155
Fair value adjustment for asset held for sale - 558
Impairment of right-of-use assets 2,402 5,411
Loss on disposal of property, plant and equipment 1,736 338
Amortisation of intangibles 186 477
Impairment of intangibles - 1,687
Impairment of goodwill - 3,104
Loss on disposal of investment properties - 483
Staff costs (see note 5) 57,955 49,638
Furlough income received - (5,228)
Government grants received - (700)
Exchange losses recognised in profit or loss 145 94
Write-down of inventories recognised as an expense 4,598 4,331
Cost of inventories recognised as an expense 92,554 75,573
-------------------------------------------------------------- ---------- -------------
During the year the business disposed of three freehold
properties (2020: three freehold properties).
Analysis of the auditors' remuneration is provided below:
53 weeks 52 weeks
ended ended
2 October 26 September
2021 2020
GBP'000 GBP'000
------------------------------------------------------------ ---------- --------------
Fees payable to the Company's auditors with respect to the
Company's annual accounts 74 49
Fees payable to the Company's auditors and their associates
for other audit services to the Group:
Audit of the Company's subsidiaries pursuant to legislation 229 184
------------------------------------------------------------ ---------- --------------
Total audit fees 303 233
------------------------------------------------------------ ---------- --------------
Total non-audit fees 0 0
------------------------------------------------------------ ---------- --------------
Total fees payable to the Company's auditors 303 233
------------------------------------------------------------ ---------- --------------
5 STAFF COSTS
The average monthly number of persons employed by the Group in
the UK during the accounting period (including Executive Directors)
was:
53 weeks
ended 52 weeks
2 October ended
2021 26 September
Number 2020
employed Number employed
--------------- ---------- ----------------
Selling 1,533 1,661
Administration 314 340
--------------- ---------- ----------------
1,847 2,001
--------------- ---------- ----------------
The average monthly number of persons (full-time equivalents)
employed by the Group in the UK during the accounting period
(including Executive Directors) was:
53 weeks
ended 52 weeks
2 October ended
2021 26 September
Number 2020
employed Number employed
--------------- ---------- ----------------
Selling 1,455 1,573
Administration 283 332
--------------- ---------- ----------------
1,738 1,905
--------------- ---------- ----------------
2021 2020
GBP'000 GBP'000
---------------------------------------- -------- --------
Their aggregate remuneration comprised:
Wages and salaries (including LTIP) 52,348 44,865
Social security costs 4,498 3,779
Other pension costs 1,109 994
---------------------------------------- -------- --------
57,955 49,638
---------------------------------------- -------- --------
6 FINANCE INCOME AND FINANCE COSTS
53 weeks 52 weeks
ended ended
2 October 26 September
2021 2020
GBP'000 GBP'000
----------------------------------------------- ---------- -------------
Finance Income
Bank interest receivable 11 20
Interest income from finance lease receivables 76 81
----------------------------------------------- ---------- -------------
87 101
----------------------------------------------- ---------- -------------
Finance costs
Interest on bank loans and overdrafts (430) (868)
Interest payable on lease liabilities (3,728) (3,033)
(4,158) (3,901)
----------------------------------------------- ---------- -------------
No finance costs have been capitalised in the period, or the
prior period.
Interest on bank loans and overdrafts represents gains and
losses on financial liabilities measured at amortised cost. There
are no other gains or losses recognised in respect of financial
liabilities measured at amortised cost.
7 TAXATION
53 weeks 52 weeks
ended ended
2 October 26 September
2021 2020
GBP'000 GBP'000
--------------------------------------------------------- ---------- -------------
Current tax - debit/(credit) for the period 2,418 (48)
Current tax - adjustment in respect of previous periods - 134
Deferred tax - debit/(credit) for the period 1,234 (2,028)
Deferred tax - adjustment in respect of previous periods 145 42
Effect of tax rate change on opening balance (427) 89
--------------------------------------------------------- ---------- -------------
3,370 (1,811)
--------------------------------------------------------- ---------- -------------
The charge for the period can be reconciled to the profit/(loss)
per the statement of financial performance as follows:
53 weeks 52 weeks
ended ended
2 October 26 September
2021 2020
GBP'000 GBP'000
---------------------------------------------------------- ---------- -------------
Continuing operations:
Profit/(loss) before taxation 14,274 (9,829)
Tax at the UK corporation tax rate of 19.0% (2020: 19.0%) 2,712 (1,868)
Expenses that are not deductible in determining taxable
profit 11 966
Other movements (36) (49)
Fixed asset timing differences 739 (1,104)
Difference between IFRS 2 and corporation tax relief - (7)
(Reduction)/increase in UK corporation tax rate (29) 91
Non-taxable income (172) (17)
Tax effect of adjustment in respect of prior periods 145 177
---------------------------------------------------------- ---------- -------------
Tax expense for the period 3,370 (1,811)
---------------------------------------------------------- ---------- -------------
In the period, the Group has recognised a corporation tax credit
directly to equity of GBPnil (2020: GBPnil) and a deferred tax
charge to equity of GBP46,701 (2020: GBP1,622) in relation to the
Group's share option schemes.
The Group continue to fully provide within current tax
liabilities for a historic tax claim relating to EU loss relief in
relation to the closed Dutch business of GBP988,000 (2020:
GBP957,000).
8 DIVIDS
Amounts recognised as distributions to equity holders in the
period:
53 weeks 52 weeks
ended ended
2 October 26 September
2021 2020
GBP'000 GBP'000
------------------------------------------------------------ ---------- -------------
Final dividend for the period ended 26 September 2020 of
GBP0.000 (2019: GBP0.023) per share - 4,484
Interim dividend for the period ended 2 October 2021 of - -
GBP0.000 (2020: GBP0.000) per share
------------------------------------------------------------ ---------- -------------
- 4,484
------------------------------------------------------------ ---------- -------------
Proposed final dividend for the period ended 2 October 2021
of GBP0.031 (2020: GBP0.000) per share 6,057 -
------------------------------------------------------------ ---------- -------------
The proposed final dividend for the period ended 2 October 2021
is subject to approval by shareholders at the Annual General
Meeting and has not been included as a liability in these financial
statements.
9 EARNINGS PER SHARE
The calculation of earnings per share is based on the earnings
for the financial period attributable to equity shareholders and
the weighted average number of ordinary shares.
53 weeks 52 weeks
ended ended
2 October 26 September
2021 2020
-------------------------------------------------------------- ----------- -------------
Weighted average number of issued shares for basic earnings
per share 196,508,867 196,443,323
Weighted average impact of treasury shares for basic earnings
per share (1,344,844) (1,472,264)
-------------------------------------------------------------- ----------- -------------
Total weighted average number of shares for basic earnings
per share 195,164,023 194,971,059
-------------------------------------------------------------- ----------- -------------
Weighted average number of shares under option 2,274,713 -
-------------------------------------------------------------- ----------- -------------
For diluted earnings per share 197,438,736 194,971,059
-------------------------------------------------------------- ----------- -------------
53 weeks 52 weeks
ended ended
2 October 26 September
2021 2020
GBP'000 GBP'000
--------------------------------------- ---------- -------------
Profit/(loss) for the period 10,904 (8,018)
Adjusting items 1,067 11,076
--------------------------------------- ---------- -------------
Adjusted profit for the period 11,971 3,058
--------------------------------------- ---------- -------------
Earnings per ordinary share - basic 5.59p (4.11)p
Earnings per ordinary share - diluted 5.52p (4.11)p
Earnings per ordinary share - adjusted 6.13p 1.57p
--------------------------------------- ---------- -------------
The calculation of the basic and diluted earnings per share used
the denominators as shown above for both basic and diluted earnings
per share. The number of potentially exercisable shares is
2,274,713 (2020: 1,758,101 anti-dilutive shares).
Adjusted earnings per share were calculated after adjusting for
the post-tax impact of the following items: rates relief from April
2020 to September 2021 GBP1,839,000 benefit (2020: GBPnil),
impairment of property, plant, equipment and movement in onerous
lease provision of GBP1,202,000 (2020: GBP1,781,000), vacant
property costs for stores closed as part of store reduction
programme of GBP1,704,000 (2020: GBP771,000), IFRS 16 one off
changes including the impairment of closure programme stores of
GBPnil (2020: GBP2,474,000), commercial impairment GBPnil
(2020:GBP5,618,000) and restructuring costs GBPnil
(2020:GBP432,000).
10 CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash held by the Group and
short-term bank deposits net of bank overdrafts, where there is a
right of offset, with an original maturity of three months or less.
The carrying amount of these assets approximates their fair value.
A breakdown of significant bank and cash balances by currency is as
follows:
2021 2020
GBP'000 GBP'000
-------------------------------- -------- --------
Sterling 27,064 28,862
US dollar 495 1,701
Euro 230 456
-------------------------------- -------- --------
Total cash and cash equivalents 27,789 31,018
-------------------------------- -------- --------
Cash and cash equivalents are in the scope of the expected
credit loss model under IFRS 9, however balances are held with
recognised financial institutions and therefore the expected
impairment loss is considered to be minimal.
11 BANK LOANS
2021 2020
GBP'000 GBP'000
-------------------------- -------- --------
Bank loans (all sterling) (106) 4,866
-------------------------- -------- --------
2021 2020
GBP'000 GBP'000
--------------------------------------------- -------- --------
The borrowings are repayable as follows:
On demand or within one year - 5,000
Less: total unamortised issue costs (106) (134)
--------------------------------------------- -------- --------
(106) 4,866
Issue costs to be amortised within 12 months 36 115
--------------------------------------------- -------- --------
Amount due for settlement within 12 months - 4,981
--------------------------------------------- -------- --------
The Directors consider that the carrying amount of the bank loan
at 2 October 2021 and 26 September 2020 approximates to its fair
value since the amounts relate to floating rate debt.
The average interest rates paid on the loan were as follows:
2021 2020
% %
------ ---- ----
Loans - 2.11
------ ---- ----
The Group borrowings are arranged at floating rates, thus
exposing the Group to cash flow interest rate risk.
The following is a reconciliation of changes in financial
liabilities to movement in cash from financing activities:
Lease Non-current Unamortised
liabilities Current borrowings borrowings issue costs
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------- ------------ ------------------ ----------- ------------
As at 29 September 2019 128,245 - 30,000 (238)
Repayment of bank loan - (1,000) (44,000) -
Drawdown of bank loan - 6,000 14,000 -
Repayment of lease liabilities (24,484) - - -
Additions/disposals of lease liabilities 17,362 - - -
Interest accrued on lease liabilities 3,033 - - -
Issue costs incurred in the year - - - (22)
Amortisation of issue costs - - - 126
----------------------------------------- ------------ ------------------ ----------- ------------
As at 26 September 2020 124,156 5,000 - (134)
----------------------------------------- ------------ ------------------ ----------- ------------
Repayment of bank loan - (5,000) - -
Drawdown of bank loan - - - -
Repayment of lease liabilities (26,754) - - -
Additions/disposals of lease liabilities 10,208 - - -
Interest accrued on lease liabilities 3,728 - - -
Issue costs incurred in the year - - - (98)
Amortisation of issue costs - - - 126
----------------------------------------- ------------ ------------------ ----------- ------------
As at 2 October 2021 111,338 - - (106)
----------------------------------------- ------------ ------------------ ----------- ------------
The Group has a revolving credit facility to June 2023 of
GBP39.0 million. As at the financial period end, GBPnil of this was
drawn (2020: GBPnil). The loan facility contains financial
covenants which are tested on a bi-annual basis. The Group did not
breach any covenants in the period.
During the year the Group repaid the remaining GBP5.0 million
loan relating to the Coronavirus Large Business Interruption Loan
Scheme ("CLBILS"), which facilitated access to finance for
medium-sized and larger businesses affected by the coronavirus
outbreak. The Group had a credit facility to June 2021 of GBP10.0
million, which has now expired.
At 2 October 2021, the Group had available GBP39.0 million
(2020: GBP44.0 million) of undrawn committed banking
facilities.
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END
FR DKLFLFFLXFBL
(END) Dow Jones Newswires
November 30, 2021 02:00 ET (07:00 GMT)
Grafico Azioni Topps Tiles (LSE:TPT)
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Grafico Azioni Topps Tiles (LSE:TPT)
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