TIDMTPT
RNS Number : 5090M
Topps Tiles PLC
24 May 2022
24 May 2022
Topps Tiles Plc
Interim Financial Report
Topps Tiles Plc (the "Company", the "Group", "Topps Tiles
Group"), the UK's largest tile specialist, announces its unaudited
consolidated interim financial results for the 26 weeks ended 2
April 2022.
Strategic and Operational Highlights
-- Record first half turnover of GBP119 million, supported by ongoing strength
of the UK RMI sector and successful growth strategy to deliver goal of
'1 in 5 by 2025'
-- Creation of significant new online pure play business through acquisition
of Pro Tiler Limited in March and launch today of Tile Warehouse, a new
online-only tile brand targeting the value conscious homeowner
-- Store portfolio enhanced through rightsizing, format development and category
expansion
-- Strong growth in Commercial revenue, up 24% to GBP5.0 million
-- Capital allocation policy updated including increased dividend payments
to shareholders, reflecting strong underlying cash generation and confidence
in the long-term outlook
Financial Summary
26 weeks ended 26 weeks ended Year on year
2 April 2022 27 March 2021
(H1 2022) (H1 2021)
Statutory Measures
Group revenue GBP119.2 million GBP103.2 million 15.5%
Gross margin 56.1% 57.6% (1.5) ppts
Profit before tax GBP5.6 million GBP4.0 million 40.0%
Basic earnings per share 2.14p 1.55p 38.1%
Interim dividend per share 1.0p nil n/a
Adjusted Measures
Topps Tiles like-for-like sales
year-on-year(1) 19.7% 2.0% n/a
Adjusted profit before tax(2) GBP7.0 million GBP5.1 million 37.3%
Adjusted earnings per share(3) 2.79p 2.11p 32.2%
Adjusted net cash(4) GBP13.4 million GBP15.4 million GBP(2.0) million
Financial Highlights
-- Topps Tiles like-for-like sales up 22.7% on a two-year basis in the
first half, and up 19.7% on a one-year basis
-- Group gross margins of 56.1% (H1 2021: 57.6%), reflecting increases
in cost of goods being passed through to customers on a pound for pound
basis, together with mix changes
-- Costs well controlled, with increases due to inflation and normalisation
of business rates expense
-- Adjusted profit up 37% year on year to GBP7.0 million
-- Increased stock holding to support sales in challenging supply chain
environment
-- Cash lower due to acquisition of Pro Tiler, investment in working capital
and repayment of deferred VAT, however expected to improve by year end
-- Interim dividend of 1.0 pence declared (H1 2021: nil)
Current Trading and Outlook
-- Trading remains at good levels within the Topps Tiles brand, with like-for-like
sales growth of 5.7% in the first seven weeks of the second half
-- In the most recent five weeks, where the comparative period in FY21 was
not impacted by trading restrictions, sales on a like-for-like basis have
been slightly below a very strong period last year, as expected
-- Inflationary pressures remain, with gas prices, shipping costs and availability
of raw materials still challenged
-- Our strong brands, operational flexibility and well capitalised balance
sheet leave us well positioned to respond to the more uncertain consumer
outlook
Commenting on the results, Rob Parker, Chief Executive said:
"The Group has delivered record first half revenues against a
backdrop of continued robust demand for home improvements. While
supply chain and inflation headwinds strengthened in the period, we
are managing these challenges effectively overall and believe we
remain well positioned relative to many of our competitors.
"We have continued to develop the Topps Tiles brand, enhancing
our store portfolio and introducing a number of new developments to
our award-winning website to further strengthen our omni-channel
capability.
"We are pleased to announce the launch of Tile Warehouse, a new
online-only brand which brings everyday low prices to homeowners.
This builds on the acquisition of Pro Tiler Ltd in March and forms
the basis for a new, high growth, online-only sales channel,
leveraging our core strengths in product, service and scale.
"Looking ahead, we are mindful of the growing burden on
consumers from inflation and rising interest rates as well as
ongoing supply chain challenges, however, we remain confident in
our strategy and medium term growth prospects."
Notes
Note 1: Topps Tiles like-for-like sales is defined as sales from
online and stores within the Topps Tiles brand that have been
trading for more than 52 weeks. In H1 2022, like-for-like sales was
GBP111.9 million (H1 2021: GBP93.5 million), with an average of 310
stores included in the weekly calculation.
Note 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. See the Financial Review for more details.
Note 3: Adjusted earnings per share is adjusted for the items
highlighted above, plus the impact of corporation tax
Note 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 (24/5/22) 020 7638 9571
Rob Parker, CEO (Thereafter) 0116 282 8000
Stephen Hopson, CFO
Citigate Dewe Rogerson 020 7638 9571
Kevin Smith/Ellen Wilton
INTERIM MANAGEMENT REPORT
The Topps Tiles Group is the largest tile specialist in the UK.
The majority of our revenues are generated from the Topps Tiles
brand which predominantly serves the RMI market (repairs,
maintenance and improvement of UK domestic homes), with sales being
made to professional traders such as tilers, builders and
contractors, as well as direct to homeowners. Over recent years, we
have expanded into the commercial tile market, which approximately
doubled the size of our addressable market while staying within our
core specialism of tiles, through our Parkside and Strata brands.
The commercial market includes tiles supplied for both new build
and refurbishment of commercial premises across sectors such as
leisure, transport, retail and office buildings, and new build
residential housing. In H1 2022, we further expanded and
diversified the business with the acquisition of a majority
shareholding in Pro Tiler Limited, an online specialist supplier of
tiling-related consumables and equipment to trade customers. Also,
today we are announcing the launch of our newest brand, Tile
Warehouse, an online-only supplier of quality tiles at competitive
prices. Targeting the value conscious homeowner, Tile Warehouse has
a complementary positioning to the Topps Tiles brand.
All the trading brands within the Group derive benefit from the
scale of the business, the specialist focus of our business model
and our passion for tiles and closely associated products. We enjoy
a competitive advantage in sourcing differentiated products from
around the world that we can access on an exclusive basis and
deliver world class customer service through our store network,
direct sales teams and digital platforms. We aim to lead the tile
market in environmental matters, including our goal of being carbon
neutral in scope 1 and 2 carbon emissions by 2030.
Summary of performance
Following a record year for sales in 2021, H1 2022 has seen a
further record period of turnover, with revenues of GBP119.2
million being the highest the Group has ever delivered in the first
half of its financial year. This continued period of excellent top
line performance has been supported by the ongoing strength of the
UK RMI sector but also demonstrates the success of our growth
strategy, as we move towards the achievement of our goal of
accounting for GBP1 in every GBP5 spent across the UK market for
tiles and related products by 2025 ('1 in 5 by 2025'). We will
provide an update on progress towards our goal at our year end
results, following the publication of the latest set of independent
market research reports.
Despite the spread of the Omicron variant, the first half of the
financial year was unaffected by trading restrictions relating to
Covid-19, unlike both of the previous two years, and our sales
performance has reflected this. Like-for-like sales in the Topps
Tiles brand were up 21.0% on a two-year basis in the first quarter,
with a particularly strong run in to Christmas, and then up 24.4%
in the second quarter, giving overall growth in the first half of
22.7% on a two-year basis. The two-year like-for-like growth in the
second quarter was flattered by the final week of the comparative
period two years ago being impacted by the first UK lockdown;
excluding this week, the two-year like-for-like growth in the
second quarter was 20.9%. This trading period is the last time that
we will quote Topps Tiles like-for-like sales growth on a two-year
basis as the comparative period two years ago now coincides with
the initial Covid restrictions - our focus will now revert to a
one-year measure.
On a one-year basis, Topps Tiles like-for-like sales were up
1.0% in the first quarter, against a very strong comparative period
in 2021 (FY21: +19.9%), and then up 45.5% in the second quarter,
compared to the prior period which included the third national
lockdown (FY21: -17.3%), when homeowners were not permitted to
enter our Topps Tiles stores. One-year like-for-like sales were up
19.7% in the first half overall.
Commercial sales were up 24% in the first half, as existing
customers started to re-order and the customer base grew. The trend
was positive across the half, with sales growth of c 21% in the
first quarter and c. 26% in the second quarter.
Despite the very strong sales performance across the Group, the
first half saw the business face a new set of challenges. The
financial year started with significant supply chain disruption,
including a national shortage of HGV drivers, major logistical
issues in the UK's ports, and a dramatic increase in global
shipping costs. The global gas price also rose to many times its
historical average, directly impacting the manufacturing cost of
tiles around the world. As a result, it was necessary to increase
selling prices across many of our ranges at the end of the first
quarter. In the second quarter, the tragic events in Ukraine
increased gas prices still further, and Ukraine itself is a
significant global supplier of clay, limiting the supply of raw
materials for many tile manufacturers across Europe and pushing
more cost inflation into the market.
Against this exceptional backdrop, we are passing through
increases in cost of goods to customers on a pound for pound basis,
thereby protecting gross profit whilst continuing to offer
customers great value. As a result, our sales prices have increased
by a lower percentage than our cost prices over the first half,
leading to lower gross margins as a percentage of sales. We will
keep our prices under continuous review in what remains a volatile
market, always ensuring we remain competitive.
As a result of these supply chain challenges, we have actively
invested in our stock holding, which has increased from GBP32.8
million at year end to GBP35.6 million at half year in the existing
business, together with a further GBP1.4 million of inventory in
Pro Tiler. Despite significant supply chain challenges through the
autumn and winter, our significant stock holding, strong
relationships with manufacturers and shipping agents, and dedicated
supply chain team have maintained good continuity of supply to our
stores and customers over the first half, in contrast, we believe,
to some parts of the market.
Cost pressures are also impacting our overheads, with our
utilities and employment costs increasing, however our firm
management of costs continues to be a strength of the Group and the
inflationary costs in the first half have been offset by further
savings, particularly from our store closure programme. Please see
the sections below on Topps Tiles and the Financial Review for more
information on this.
The other significant challenge in the first half as been
availability of labour. Although the level of staff absence due to
Covid-19 has been falling across the first half, our vacancies were
higher than we would have liked, reflecting the declining size of
the UK workforce set against an economy which was still expanding,
and for some people a reassessment of their career choices
following the disruption of the last few years. Our turnover of
staff has normalised back to pre-Covid levels, but the challenge of
recruitment and retention will remain for some time to come.
Overall, our strong sales recovery and tight control of costs
led to an increase in adjusted profit before tax of 37.3% to GBP7.0
million in the first half despite the pressures described
above.
The Group's cash balance reduced from GBP27.8 million of
adjusted net cash at year end to GBP13.4 million at the half year
end. The underlying cash generation of the business remains strong
and this decrease was largely as a result of a number of one off
factors which are fully described in the Financial Review.
Online Pure Play - Pro Tiler Tools and Tile Warehouse
The Topps Tiles brand is an omni-channel business with an
award-winning digital presence and a nationwide store network. We
see a significant opportunity to add complementary brands to the
Group which operate solely online, serving different customer
groups with different needs, but always focused on our core
specialism of tiles and closely associated products. These
businesses can be supported through the Group's scale, flexible
supply chain, financial resources and operational expertise, and in
turn the rest of the Group can benefit from the knowledge and
specialist experience of successful colleagues as they join the
Group.
Earlier this year, we acquired Pro Tiler Tools and today we have
launched a new online pure play tile brand, Tile Warehouse.
Pro Tiler Tools
As reported in March, in the first half year we acquired 60% of
the issued share capital of Pro Tiler Limited, with an option to
acquire the remaining 40% in 2024. The bulk of the sales are made
through the Pro Tiler Tools brand, with smaller contributions from
the Premium Tile Trim and Northants Tools brands. Two of the
original family shareholders, Sam and Todd Bucknall, are now
employed by the Group and initial performance since the acquisition
has been strong. We have consolidated sales of GBP1.1 million and a
small trading profit into the Group accounts at half year from the
first three and a half weeks of ownership. In that time, sales were
up 36% against last year, and the sales since acquisition are
running at a level equivalent to annual sales of over GBP15
million. On top of what is already an excellent level of sales
growth, we see significant opportunity to grow more value in this
business over time through leveraging the complementary strengths
of Pro Tiler Tools and Topps Tiles, accessing new business
opportunities, and buying synergies. Please see the Financial
Review section of this document for information on the acquisition
accounting for Pro Tiler Limited.
Tile Warehouse
Today, we are launching www.tilewarehouse.co.uk , a new
online-only brand which we have built from the ground up to offer
homeowners every day low pricing on a focused range of tiles and
associated products, with an average price point of less than GBP20
per square metre. This brand will focus on quality tiles at very
competitive prices and will offer a simple brand proposition which
will give homeowners the confidence, value and choice to tackle
their next tiling project. Tile Warehouse will be complementary to
the Topps Tiles brand and will target a different customer group,
whilst leveraging the Group's scale, supplier relationships,
financial resources and digital know-how, as well as modern web
design and technical infrastructure. The brand has been developed
at a low cost and initially will be serviced from our existing
supply chain facilities to minimise incremental overhead cost to
the Group. We intend to invest in digital marketing to achieve
rapid growth and therefore expect the brand to be modestly loss
making in the first few years as we build scale.
Pro Tiler Tools and Tile Warehouse form the basis of a third
sales channel, already of scale and with the potential for fast
growth, which attracts a complementary customer group to our store
and direct sales channels.
Omni-channel - Topps Tiles
Our omni-channel market leading brand Topps Tiles is the engine
of sales, profit and cash generation within the Group. Following an
excellent performance last year, sales in the first half year were
GBP113.1 million, up 14% year on year. Our strategy within Topps
Tiles is to deliver "Great Experience, Great Product and Great
Value" and further progress was made against this in the first
half.
The key measure of the experience we offer is our Overall
Satisfaction score, which increased significantly in the first half
to 89.6% (H1 2021: 87.5%). This is a world class level of customer
satisfaction and is especially important in a business such as
Topps Tiles, where customers, particularly homeowners, may shop
with us relatively infrequently, and value the support and advice
that we can offer. For clarity, this means that 89.6% of customers
who fill in a survey, which is about thirty thousand data points
annually, score us as five out of five, an outstanding result. Our
net promoter score in the first half was 85% which we believe is
approximately double the average score in UK retail.
Our customer base continues to be a mix of professional fitters
(traders) and homeowners. Trade customers represented 58% of our
sales in the first half (H1 2021: 58%) and we continue to focus on
providing great value and service to these customers, who provide
repeat custom and are also an important link to homeowners who
prefer to transact through their fitter rather than with us
directly. One aspect of our trade business which has been
especially strong is our sales of products other than tiles such as
adhesives, grouts, and boards, where we have had a good supply of
product and offer particularly keen value to our trade customers.
This year we have also seen excellent sales growth from a direct
sales operation which was set up to offer contractors and trade
customers in particular an enhanced service from a central team and
which, over the last 12 months, has delivered sales of over GBP10
million.
Topps Tiles has continued to develop its digital offer. In the
first half, we added additional customer credit options, halved
page load speeds, launched a new partnership with Dulux in our room
visualiser and increased online visibility of stock levels to
customers. We maintained our position as the leading tile
specialist in Internet Retailing's annual "RetailX Top 500" report
and were ranked in the top 100 websites across the whole of the UK
retail sector. We have also been very active on social media,
including launching on TikTok to go alongside all of our other
social platforms.
The store experience is central to our omni-channel offer and we
now have three store formats within Topps Tiles designed to meet
customer needs. 31 of our largest stores are now branded as 'Topps
Tiles Superstores'. These stores have received initial investment
on store externals, with further investment in additional ranges,
service and amenity planned in the second half to showcase the best
of Topps Tiles. We have also developed a 'Topps Tiles Clearance'
model, now consisting of 14 stores, which provide great value to
consumers whilst allowing us to clear mixed batch tiles and
discontinued lines. The balance of 267 stores are core stores,
which will continue to deliver excellent service and range for our
trade and homeowner customers. We will keep the numbers of
Superstores, core stores, and Clearance Stores under review, but
our current expectation is that there is the potential for more
Superstores over time, either through investment, relocation or new
sites where appropriate.
During the first half, we closed two stores and opened one,
ending the period at 312 Topps stores (2021 year-end: 313 stores).
We expect to close another eight stores over the course of the
second half, which will bring us close to our target of around 300
stores, down from 372 units at the end of 2017. This closure
programme has significantly enhanced Group profits as we have
successfully transitioned sales from closed stores to other stores
in the area.
Estate management remains a key focus and the first half saw us
exit leases in 15 locations out of 26 closed sites, leaving 11 at
half year. We expect further lease exits in the second half,
leaving only a small number of closed stores within the Group at
year end. Our relatively short unexpired lease term to the next
break opportunity of 3.2 years (H1 2021: 3.2 years) provides us
with good flexibility in managing our estate. Removing
strategically important stores, where we have taken steps to extend
the lease to provide us with security of tenure, this period
reduces even further, to just 2.9 years (H1 2021: 2.9 years).
Commercial - Parkside and Strata
Our Parkside and Strata brands have seen strong year on year
sales growth of 24% to GBP5.0 million in the first half, indicating
substantial market share growth in a Commercial new build market
which was down 2% in the first half and remains some 24% lower than
its level before the Covid pandemic(5) . Despite the recent market
declines, our latest estimates are that the commercial market is
worth approximately GBP350 million annually, giving substantial
room for these businesses to grow.
Highlights in the first half under our new Managing Director,
Dan Little, include continued success in the retail, hotel,
restaurant, residential and infrastructure sectors, where we have
retained existing clients through the commercial slow down and
added more than 50 new clients in the first half. We have
established our partnership with Stratis, the pre-eminent tile
distributor into the commercial sector in Scotland. In addition, we
are focusing on our systems and processes to provide a seamless
service to our clients. Our product offering continues to expand,
now including Aquatechnica(TM) , a full technical range for
swimming pools, as well as a full range of outdoor tiles suitable
for the Commercial market through our Everscape(TM) brand.
This improved sales performance led to a reduction in trading
losses to GBP0.7 million in the first half (H1 2021: losses of
GBP0.9 million), with gross margins challenged due to cost price
increases but improving as the half progressed. We now expect our
Commercial business to break even in the second half of the year
and then move into profit next year.
Note 5: Source - ONS "Output in the Construction Industry",
value non-seasonally adjusted data, Private Commercial New Work,
March 2022 data.
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. This advantage has been
more important than ever in the last year given the global
challenges in shipping, the national shortage of HGV drivers in the
UK, the impact of high gas prices on the tile supply chain and the
war in Ukraine. Economic pressures on producers have been so severe
that in some cases factories have reduced or paused
manufacturing.
Our response to this has been to secure stock early and to work
closely with our manufacturing and shipping partners to ensure
continuity of supply. We have increased our stock holding across
Topps Tiles and the Commercial brands from GBP32.8 million at year
end to GBP35.6 million at half year, an increase of 9%. We sourced
66% of our supply from our strategic supplier base (H1 2020: 64%)
with the strength of these relationships partially protecting us
from stock shortages. We have also re-sourced major ranges out of
countries which have become uneconomic and will continue to do so
while the supply situation remains volatile.
We also continue to work hard to retain our core competitive
advantage through product knowledge, innovation and deep supplier
relationships. In the first half, we have delivered 13 new product
introductions into the Topps Tiles business, curated an entirely
new range for the Tile Warehouse business, extended our highly
successful outdoor range Everscape(TM) , and rolled out our Luxury
Vinyl Tile offer across the whole of the Topps Tiles store estate.
73% of our sales within Topps Tiles are from ranges which are
either own brand or exclusive to us and this remains key to our
differential.
Leading People
The Group's success is underpinned by industry-leading levels of
capability and engagement from our colleagues. Our product is both
a building material, requiring technical knowledge, and a
decorative item, requiring inspirational selling, and we need our
employees to be able to work and communicate effectively across
both areas. Following a period of low staff turnover during the
period of the pandemic, it has normalised back to pre-Covid levels,
and the wider employment market in the UK is very tight. As a
result, the challenge of recruitment and retention is a key focus
for the Group.
Our compensation strategy for our Topps Tiles colleagues is
based on the National Living Wage for our service specialists as a
base wage, plus a further c.GBP2,500 per year in commission, and
pension contributions plus an employee discount scheme. In
addition, our employer brand is strengthened by Topps Tiles
colleagues not having to work evenings, late nights or over
Christmas - all of which are common in retail and hospitality. Our
culture, based around small teams, is also a big part of the
attraction of working for the Topps Tiles Group.
The success of our Leading People strategy is evidenced by our
customer satisfaction scores, discussed in the Topps Tiles section
above, and seen directly in our Employee Engagement scores which we
measure through our annual MyVoice staff survey. Overall engagement
was at 80% in the last annual survey (2021: 80%) compared to the UK
average of 68%.
Specific areas of focus in the first half of the year have been
improved support for mental health through a new outsourced
partner, an improved induction programme for colleagues joining
Topps Tiles, a focus on driver recruitment and improvements in our
recruitment platform.
Environmental Leadership
In our last Annual Report, we set out our goal of making the
business carbon neutral in terms of scope 1 and 2 emissions by
2030. Our plan has five elements: a) governance; b) minimise waste
and maximise recycling; c) reduce carbon emissions; d) drive
product innovation and the use of recycled materials; and finally,
e) the use of high quality and auditable carbon offsets. While the
advent of war in Europe and extreme levels of cost inflation have
resulted in some of our suppliers needing to prioritise other areas
in the short term, good progress was made towards our goal in a
number of areas over the first half of this year.
At a Group level, all our electricity is now sourced from
renewable sources. We are trialling our first Liquefied Natural Gas
fuelled truck and upgraded the rest of our fleet to Euro 6 engines
and have adopted route optimisation planning software to minimise
milage. In addition, we have committed to WRAP's UK Plastic Pact
which seeks to eliminate or reduce plastic waste. Our Commercial
businesses lead the way for the Group on environmental matters, and
in this part of the business we are ISO14001 accredited, we have a
formal environmental policy, we partner with the Word Land Trust,
we operate a donation scheme whereby we donate funds to
environmental causes when customers purchase products with high
recycled content, and we specify a minimum of 20% recycled content
in all new products. In the Topps Tiles business, we have completed
our roll out of LED lighting, we now display the recycled content
on product price tickets in stores, we have launched our new
environmental adhesive product range (Regenr8) and our most recent
store opening reused 98% of the fixturing from previous stores.
Key Performance Indicators ("KPIs")
As set out in our most recent Annual Report, we monitor our
performance implementing our strategy with reference to a clearly
defined set of financial and non-financial key performance
indicators ("KPIs"). Our performance in the 26 weeks to 2 April
2022 is set out in the table below, together with the prior year
performance data. The source of data and calculation methods are
consistent with those used in the 2021 Annual report. Further
information on adjusted performance measures can be found in the
Financial Review section below.
26 weeks to 26 weeks to Year on
year
2 April 27 March
2022 2021
Financial KPIs
Group revenue growth year-on-year 15.5% (2.8)% n/a
Topps Tiles like-for-like sales year-on-year* 19.7% 2.0% n/a
Group gross margin 56.1% 57.6% (1.5) ppts
Adjusted profit before tax* GBP7.0 million GBP5.1 million 37.3%
Adjusted earnings per share* 2.79p 2.11p 32.2%
Adjusted net cash* GBP13.4 million GBP15.4 million GBP(2.0)
million
Inventory days 127 138 (11)
Non-financial KPIs
Topps Tiles customer overall satisfaction
score 89.6% 87.5% 2.1 ppts
Colleague turnover 37.8% 21.4% 16.4 ppts
Number of Topps Tiles stores at period
end 312 331 (19)
* as defined in the Financial Review
FINANCIAL REVIEW
Adjusted Measures
The Group's management uses adjusted performance measures, to
plan for, control and assess the performance of the Group.
Topps Tiles like-for-like sales is defined as sales from online
and stores within the Topps Tiles brand that have been trading for
more than 52 weeks.
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.
An analysis of movements from adjusted profit before tax to
statutory profit before tax is shown below, noting that we have
adjusted the presentation of adjusting items to include IFRS 16 in
both periods, restating the H1 2021 comparative to be on a
consistent basis:
H1 2022 H1 2021
GBPm GBPm
Adjusted profit before tax 7.0 5.1
Property
- Impairment of PPE & ROU assets and gain on lease
disposals 0.1 (1.4)
- Vacant property and closure costs (1.0) (0.7)
(0.9) (2.1)
Other
- Tile Warehouse start-up costs and Pro Tiler Limited (0.3) nil
acquisition expenses
- Pro Tiler Limited - remuneration cost relating to (0.2) nil
future share purchase
- Coronavirus Job Retention Scheme support - to be
repaid nil 1.0
(0.5) 1.0
Statutory profit before tax 5.6 4.0
Adjusted earnings per share is defined as earnings per share,
adjusted for the post-tax impact of the items listed above.
Adjusted net cash is defined as cash and cash equivalents, less
bank loans, before unamortised issue costs. It excludes lease
liabilities under IFRS 16.
Acquisition of Pro Tiler Limited
The Group acquired a controlling 60% shareholding of Pro Tiler
Limited on 9 March 2022, for consideration of GBP5.3 million in
cash, plus a closing adjustment of GBP0.3 million. The Group
intends to acquire the remaining 40% of the issued share capital
from March 2024, based on an agreed multiple of profits for the
12-month period to March 2024.
On acquisition, the Group recognised tangible assets of GBP1.7
million, including GBP0.9 million of net cash, GBP0.2 million of
net working capital and GBP0.6 million of fixed assets, and
intangible assets consisting of the brand value of GBP4.1 million
net of deferred tax and goodwill of GBP2.1 million, together with a
non-controlling interest of GBP2.3 million. The acquisition
accounting will be finalised over the forthcoming period in line
with IFRS 3, and the brand asset will be amortised in line with our
accounting policies.
The proposed purchase of the remaining 40% of shares in Pro
Tiler Limited will be accounted for as a remuneration expense
rather than contingent consideration, as required by IFRS 3, due to
certain conditions placed on the selling shareholders to remain
employed by the Group during this time. This expense will be
treated as an adjusting item over the next two years and will
therefore reduce the Group's statutory profit in forthcoming
trading periods. This expense is not treated as a deductible
expense for corporation tax purposes and therefore the Group's
effective rate of corporation tax will increase in FY22 and the
next two financial years as a result of this accounting
treatment.
The Group has consolidated the financial performance of Pro
Tiler Limited from the date of acquisition, including revenue of
GBP1.1 million and a small trading profit recognised in adjusted
profit. Acquisition costs of GBP0.2 million and remuneration costs
of GBP0.2 million in relation to the 40% share purchase were
treated as adjusting items within statutory profit.
Capital Allocation and Dividend Policy
The Topps Tiles Group is a highly cash generative organisation,
with cash conversion(6) over the period from FY10 to FY21 of 77%.
Over this time, the cash position of the Group has improved from a
net debt of GBP49 million at the end of FY10 to a net cash position
of GBP28 million at the end of FY21, excluding lease liabilities.
Even over the last three years, the cash generation of the Group
has remained positive due to tight operational controls, the sale
and leaseback of our head office and warehousing facilities in FY20
and our decision to suspend dividend payments as the global
pandemic closed down the economy in the same year. We expect good
levels of operational cash generation in future years, subject to
the macroeconomic environment.
This improvement in cash has been achieved for the most part
whilst the Group has been maintaining or increasing its dividend
payments, from an EPS cover of approximately four times a decade
ago to the current policy of a two times cover.
Moving forward, our capital allocation policy will prioritise
the following:
1) Business resilience - we are an operationally geared business
with significant lease liabilities and our balance sheet and
banking facilities must be strong enough to withstand cyclical
economic downturns and unexpected shocks like Covid-19;
2) Investment in the core business - we operate a physical store
estate which requires investment to remain attractive to customers,
and we will support our strategy through merchandising, store
refits and relocations;
3) Value creative opportunities - we believe it is beneficial to
retain some cash to take advantage of value creation opportunities,
such as bolt on M&A deals or other investments in growth;
4) Dividends - we recognise that equity has a cost, and we
understand the importance of regular dividend payments to our
shareholders.
The Board intends to increase the dividend payout ratio over the
next two years from around 50% of adjusted earnings per share to
around 67% (equivalent to reducing dividend cover from 2x to 1.5x).
This policy will have some flexibility and, in particular, we do
not plan to decrease dividend payments year on year due to any
short-term performance or macroeconomic issues, even if that means
further increasing the payout ratio in some years. However, the
Group will only pay dividends based on earnings made in the year,
and therefore there is an upper bound on dividend payments of 100%
of annual adjusted earnings per share, equivalent to a minimum
dividend cover of 1.0x. Interim dividends will be set at one third
of the full year dividend from the previous year. Even after these
increased dividend payments, our expectations are that the level of
lease adjusted net debt to EBITDA will continue to fall modestly
over time, and if lease adjusted net debt falls below 1x adjusted
EBITDA then we will return excess cash to shareholders(7) .
The Board is declaring an interim dividend of 1.0 pence per
share (H1 2021: nil). The shares will trade ex-dividend on 9 June
2022 and the dividend will be paid on 15 July 2022.
Note 6: 'Cash conversion' is defined as the sum of the change in
net debt / cash, before interest and dividend payments, and also
excluding the proceeds of GBP18 million relating to the sale and
lease back of the Group's head office and warehousing facilities in
FY20, compared to the sum of the Group's adjusted operating
profit.
Note 7: Lease adjusted net debt is defined as cash and cash
equivalents, less bank loans, before unamortised issue costs plus
current and non-current lease liabilities. EBITDA refers to the
last twelve months adjusted operating profit, before depreciation
and amortisation, including depreciation of right of use assets. At
the half year, lease adjusted net debt was GBP93.2 million and
EBITDA was GBP46.2 million, hence lease adjusted net debt to EBITDA
was 2.0x.
Statement of Financial Performance
Total revenue for the 26 weeks ended 2 April 2022 increased by
15.5% year on year to GBP119.2 million (2021: GBP103.2 million),
which is the highest revenue ever delivered by the Group in the
first half of a financial year. The prior year was impacted by
trading restrictions related to the Covid-19 pandemic in the second
quarter, when homeowners were unable to visit our stores and
registered traders were only allowed to enter to visit the trade
counter.
The Topps Tiles brand delivered revenue of GBP113.1 million, up
14.1% year on year. Like-for-like sales were up 19.7% on a one-year
basis, with an average of 314 stores trading this year compared to
339 in the same period last year. On a two-year basis,
like-for-like sales were up 22.7%. Sales to our Commercial
customers were up 24% year on year to GBP5.0 million. Pro Tiler
Limited contributed revenue of GBP1.1 million in the brief period
since acquisition.
Total gross margin was 56.1%, a decrease from 57.6% in the prior
year. Gross margin in the Topps Tiles brand decreased from 58.5% in
the prior year to 57.4% in the current year. As noted above, there
have been exceptional increases in cost of goods this year and we
are passing them on to customers on a pound for pound basis,
protecting gross profits but leading to lower gross margins as a
percentage of sales. There have also been mix changes, including
particularly good sales growth in new product areas such as outdoor
and luxury vinyl tiles, which attract a lower gross margin but are
incremental to the Group. Finally, new businesses such as Pro Tiler
Tools and our Commercial business run at a lower gross margin than
the Topps Tiles brand and, as they continue to grow, this will
reduce Group gross margins. Providing a slight offset to these
factors, the high impact of delivery costs last year when the
stores were closed has somewhat reversed. The impact of foreign
exchange movements on cost of goods sold in the first half was a
gain of GBP0.5 million.
Adjusted operating expenses in the period were GBP57.9 million,
compared to GBP52.3 million in the prior period. The main drivers
of changes in adjusted operating expenses were as follows:
GBP million
H1 2021 adjusted operating expenses 52.3
Reversal of H1 2021 business rates relief 4.4
Holiday pay accrual 1.4
Increased utilities expense 0.8
Other regulatory and inflationary cost increases 2.1
Profit share 0.6
Reduced store space (2.5)
Other savings (1.2)
H1 2022 adjusted operating expenses 57.9
After including the adjusting items described above, total
operating costs were GBP59.3 million (H1 2021: GBP53.4
million).
Interest on bank loans and overdrafts, net of bank interest
receivable, was GBP0.2 million (H1 2021: GBP0.2 million). Net
finance costs for the Group including interest on the IFRS 16 lease
liabilities was GBP1.9 million (H1 2021: GBP2.1 million).
Adjusted profit before tax was GBP7.0 million (H1 2021: GBP5.1
million), representing an increase of 37.3% on the prior year. The
Group's adjusted profit before tax margin was 5.9% (H1 2021:
4.9%).
Statutory profit before tax, after including the adjusting items
described above, was GBP5.6 million, compared to GBP4.0 million
last year.
The effective tax rate for the 26 weeks to 2 April 2022 was
25.4% (H1 2021: 24.1%). Tax rates are based on expectations for the
full year and are impacted by items which are not deductible for
corporation tax purposes.
Basic earnings per share were 2.14 pence (H1 2021: 1.55 pence).
Adjusting for the post-tax impact of the adjusting items detailed
above, adjusted earnings per share in the first half year were 2.79
pence (H1 2021: 2.11 pence), an increase of 32.2%.
Statement of Financial Position
Capital Expenditure
Capital expenditure in the period was GBP1.1 million (H1 2021:
GBP2.5 million). The majority of this related to store
improvements, merchandising and maintenance capital, together with
one new opening.
The Board expects capital expenditure in the full year to be
between GBP5 million and GBP6 million, including further
relocations and merchandising for new products in the core Topps
Tiles stores, together with further investment into our
Superstores. Any acquisitions that the Group may consider as part
of its growth plans would be additional to this guidance.
Inventory
Inventory at the period end was GBP37.0 million (H1 2021:
GBP32.0 million) including GBP1.4 million held within Pro Tiler
Limited, representing 127 days turnover (H1 2021: 138 days
turnover). Excluding the Pro Tiler inventory, inventory was GBP35.6
million. At the last year end, inventory was GBP32.8 million,
representing 123 days turnover, and the higher current levels of
stock reflect a decision to hold additional stock given the ongoing
supply chain challenges.
Cash flow
On a statutory basis, net cash from operating activities was
GBP6.6 million, compared to GBP1.3 million in the prior half year
period.
The table below analyses changes in adjusted net cash flow:
H1 2022 H1 2021
GBPm GBPm
Cash generated by operations before WC movements 20.1 21.2
Changes in working capital (9.5) (17.7)
Interest including interest element of lease liabilities (1.9) (2.2)
Tax (2.1) -
Net cash from operating activities 6.6 1.3
Acquisition, net of cash acquired (4.4) -
Capital expenditure excluding investments (1.1) (2.5)
Disposals 0.1 1.7
Payment of capital element of lease liabilities (9.8) (11.7)
Other 0.3 0.6
Free cash flow (8.3) (10.6)
Dividends (6.1) -
Change in adjusted net cash (14.4) (10.6)
Adjusted net cash at start of period 27.8 26.0
Adjusted net cash at end of period 13.4 15.4
Adjusted net cash decreased by GBP14.4 million over the first
half year (H1 2021: reduction of GBP10.6 million). This decrease
included a number of factors which are useful to disclose
separately:
-- we repaid VAT of GBP2.1 million deferred from 2020 as part of
the Government's Covid-19 support package - this deferred VAT is
now fully repaid;
-- we paid a dividend of GBP6.1 million representing the full
year dividend from FY21 (normally only the final dividend would be
paid during the first half of the following year);
-- we acquired 60% of the equity of Pro Tiler Limited, leading
to a cash outflow of GBP4.4 million;
-- we increased our stock balance during the first half by
GBP2.8 million (excluding stock held in Pro Tiler).
Cash and cash equivalents at the period end were GBP13.4 million
(H1 2021: GBP15.4 million) with nil borrowings (H1 2021: nil),
resulting in adjusted net cash of GBP13.4 million (H1 2021: GBP15.4
million).
Return on Capital Employed
Lease adjusted returns on capital employed in the first half
were 15.6%, based on the average capital employed over the half and
the annualised profit delivered in the first half of the year.
Banking Facilities
The Group has a GBP39.0 million revolving credit facility in
place which is committed to July 2023 (H1 2021: GBP39.0 million).
At the half year, none of this was drawn (H1 2021: GBPnil). As a
result, the Group had GBP39.0 million of undrawn committed banking
facilities at the end of the financial year. The Group will be
discussing the refinancing of its credit facility with its banks
over the next few months.
Current Trading and Outlook
Trading remains at good levels within the Topps Tiles brand,
with like-for-like sales growth of 5.7% in the first seven weeks of
the second half. In the most recent five weeks, where the
comparative period in FY21 was not impacted by trading
restrictions, sales on a like-for-like basis have been slightly
below a very strong period last year, as expected.
The consumer outlook remains uncertain. In the tiling industry,
upward pressures on cost of goods remain from high levels of energy
prices, shipping costs and other raw materials, and ensuring good
availability of product remains a key area of focus for the Group.
Across the wider economy, the well documented pressures on the
consumer from rising inflation and falling confidence may impact
consumer spending at some stage. However, the Group is well
positioned given the strength of our brands, operational
flexibility and well capitalised balance sheet.
Risks and Uncertainties
The Board continues to monitor the key risks and uncertainties
of the Group. The risk around falling consumer demand based on the
current high levels of inflation, falling consumer confidence and
the risk of the UK entering a period of low growth or even a
recession has significantly increased in importance since the 2021
Annual Report and Accounts, with other risks documented in that
document as relevant now as they were at the time the Report was
published. These key risks and uncertainties include: supply chain
- short-term pressure and long-term outlook; macroeconomic and
consumer confidence; corporate reputation - sustainability;
delivery optimisation; attracting and retaining talent/loss of key
personnel; Covid-19 - further trading restrictions; cyber security;
appropriate customer offer; value erosion through M&A; major
reputational damage; delivery of commercial strategy; and store
portfolio.
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 15% decline in the tile market in which we
operate, taking it back down to 2018 levels but with significant
inflationary pressures remaining over the course of 2022 and 2023.
This results in much lower sales and margins than the base
scenario, resulting in worse profit and cash outcomes.
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, and therefore the scenarios
start from a position of relative strength. The going concern
review also outlined a range of other mitigating actions that could
be taken in a severe but plausible trading scenario. These
included, but were not limited to, savings on store employee costs,
savings on central support costs, reduced marketing activity, a
reduction of capital expenditure, management of working capital and
suspension of the dividend.
The Group's cash headroom and covenant compliance was reviewed
against current lending facilities in both the base case and the
severe but plausible downside scenario. The current lending
facility was refinanced in July 2018 and expires in July 2023. In
all scenarios, the Board has 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 statement. Accordingly, the Board continues to adopt
the going concern basis in preparing the financial statements.
Responsibility Statement
We confirm that to the best of our knowledge:
(a) the condensed set of financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting' as
contained in UK-adopted IFRS;
(b) the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
(c) the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
Rob Parker Stephen Hopson
Chief Executive Officer Chief Financial Officer
24 May 2022
Condensed Consolidated Statement
of Financial Performance
for the 26 weeks ended 2 April
2022
26 weeks 26 weeks 53 weeks
ended ended ended
2 April 27 March 2 October
2022 2021 2021
GBP'000 GBP'000 GBP'000
Note (Unaudited) (Unaudited) (Audited)
Group revenue 119,222 103,247 227,997
Cost of sales (52,366) (43,738) (97,297)
---------------------------------- ----- ------------ ------------ ----------
Gross profit 66,856 59,509 130,700
Distribution and selling costs (44,929) (39,248) (83,591)
Other operating expenses (1,549) (3,682) (6,100)
Administrative costs (10,288) (8,151) (18,100)
Sales and marketing costs (2,579) (2,350) (4,564)
Group operating profit 7,511 6,078 18,345
Net finance costs (1,908) (2,099) (4,071)
---------------------------------- ----- ------------ ------------ ----------
Profit before taxation 5,603 3,979 14,274
Taxation 3 (1,423) (960) (3,370)
---------------------------------- ----- ------------ ------------ ----------
Profit for the period 4,180 3,019 10,904
---------------------------------- ----- ------------ ------------ ----------
Profit/(loss) is attributable
to:
Owners of Topps Tiles Plc 4,176 3,041 10,876
Non-controlling interests 4 (22) 28
---------------------------------- ----- ------------ ------------ ----------
4,180 3,019 10,904
---------------------------------- ----- ------------ ------------ ----------
All results relate to continuing
operations of the Group.
Earnings per ordinary share
- Basic 5 2.14p 1.55p 5.59p
- Diluted 5 2.10p 1.55p 5.52p
There are no other recognised gains and losses for the current
and preceding financial periods other than the results shown above.
Accordingly, a separate Condensed Consolidated Statement of
Comprehensive Income has not been prepared.
Condensed Consolidated Statement
of Financial Position
as at 2 April 2022
2 April 27 March 2 October
2022 2021 2021
GBP'000 GBP'000 GBP'000
Note (Unaudited) (Unaudited) (Audited)
------------------------------------------ ----- ------------ -------------- ----------
Non-current assets
Goodwill 9 2,118 - -
Intangible assets 6,603 1,006 1,243
Property, plant and equipment 21,755 25,296 23,680
Other financial assets 2,104 2,463 2,335
Deferred tax assets 243 1,333 407
Right-of-use assets 91,817 97,200 95,418
------------------------------------------ ----- ------------ -------------- ----------
124,640 127,298 123,083
------------------------------------------ ----- ------------ -------------- ----------
Current assets
Inventories 36,989 31,966 32,758
Other financial assets 458 667 518
Trade and other receivables 5,618 4,051 4,538
Cash and cash equivalents 13,415 15,351 27,789
------------------------------------------ ----- ------------ -------------- ----------
56,480 52,035 65,603
------------------------------------------ ----- ------------ -------------- ----------
Total assets 181,120 179,333 188,686
Current liabilities
Bank loans 6 (4) - -
Trade and other payables (43,245) (42,832) (47,425)
Lease liabilities (19,641) (24,483) (19,521)
Current tax liabilities (2,461) (2,000) (2,027)
Provisions (346) (498) (353)
Total current liabilities (65,697) (69,813) (69,326)
------------------------------------------ ----- ------------ -------------- ----------
Net current liabilities (9,217) (17,778) (3,723)
------------------------------------------ ----- ------------ -------------- ----------
Non-current liabilities
Bank loans 6 - - -
Lease liabilities (86,965) (90,386) (91,817)
Provisions (2,027) (1,835) (1,969)
------------------------------------------ -----
Total liabilities (154,689) (162,034) (163,112)
------------------------------------------ ----- ------------ -------------- ----------
Net assets 26,431 17,299 25,574
------------------------------------------ ----- ------------ -------------- ----------
Equity
Share capital 8 6,556 6,548 6,555
Share premium 2,636 2,492 2,625
Own shares (1,216) (1,351) (1,216)
Merger reserve (399) (399) (399)
Share-based payment reserve 5,053 4,191 4,642
Capital redemption reserve 20,359 20,359 20,359
Accumulated losses (8,874) (14,491) (6,992)
------------------------------------------ ----- ------------ -------------- ----------
Capital and reserves attributable
to owners of Topps Tiles Plc 24,115 17,349 25,574
Non-controlling interests 2,316 (50) -
Total equity 26,431 17,299 25,574
------------------------------------------ ----- ------------ -------------- ----------
Condensed Consolidated Statement of Changes in Equity
For the 26 weeks ended 2 April 2022
Equity attributable to equity holders of the parent
----------------- -----------------------------------------------------------------------------------------------------------------
Share-based Capital
Share Share Own Merger payment redemption Accum-ulated 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
2 October
2021 (Audited) 6,555 2,625 (1,216) (399) 4,642 20,359 (6,992) - 25,574
----------------- -------- -------- -------- -------- ------------ ------------ ------------- ---------------- --------
Profit and
total
comprehensive
income
for the
period - - - - - - 4,176 4 4,180
Issue of
share capital 1 11 - - - - - - 12
Dividends - - - - - - (6,058) - (6,058)
Credit to
equity for
equity-settled
share based
payments - - - - 411 - - - 411
Non-controlling
interest
on business
combination - - - - - - - 2,312 2,312
Balance
at
2 April
2022
(Unaudited) 6,556 2,636 (1,216) (399) 5,053 20,359 (8,874) 2,316 26,431
----------------- -------- -------- -------- -------- ------------ ------------ ------------- ---------------- --------
For the 26 weeks ended 27 March 2021
Equity attributable to equity holders of the parent
---------------- -----------------------------------------------------------------------------------------------------------------
Share-based Capital
Share Share Own Merger payment redemption Accum-ulated 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
26 September
2020 (Audited) 6,548 2,492 (1,483) (399) 3,965 20,359 (17,400) (28) 14,054
---------------- -------- -------- -------- -------- ------------ ------------ ------------- ---------------- --------
Profit and
total
comprehensive
income
for the
period - - - - - - 3,041 (22) 3,019
Own shares
issued in
the period - - 132 - - - (132) - -
Credit to
equity for
equity-settled
share based
payments - - - - 226 - - - 226
Balance
at
27 March
2021
(Unaudited) 6,548 2,492 (1,351) (399) 4,191 20,359 (14,491) (50) 17,299
---------------- -------- -------- -------- -------- ------------ ------------ ------------- ---------------- --------
For the 53 weeks ended 2 October 2021
Equity attributable to equity holders of the parent
----------------- --------------------------------------------------------------------------------------------------------------------------------------------- ------- --- ----
Share-based Capital
Share Share Own Merger payment redemption Accum-ulated 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
26 September
2020 (Audited) 6,548 2,492 (1,483) (399) 3,965 20,359 (17,400) (28) 14,054
------------------ -------- -------- -------- -------- ------------ ------------- ------------- ---------------- --------
Profit and total
comprehensive
expense
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
(Audited) 6,555 2,625 (1,216) (399) 4,642 20,359 (6,992) - 25,574
------------------ -------- -------- -------- -------- ------------ ------------- ------------- ---------------- --------
Condensed Statement of Cash Flows
for the 26 weeks ended 2 April 2022
26 weeks 26 weeks 53 weeks
ended ended ended
2 April 27 March 2 October
2022 2021 2021
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
------------------------------------------------- ------------ ------------ ----------
Cash flow from operating activities
Profit for the period 4,180 3,019 10,904
Taxation 1,423 960 3,370
Finance costs 1,945 2,146 4,158
Finance income (37) (47) (87)
Group operating profit 7,511 6,078 18,345
Adjustments for:
Depreciation of property, plant and equipment 2,830 3,240 6,268
Depreciation of right-of-use assets 9,181 10,659 20,508
Amortisation of intangible assets 199 91 186
Loss on disposal of property, plant and
equipment - 237 1,736
Loss on sublease 36 145 134
Impairment charge/(reversal) of property,
plant and equipment 427 730 (604)
Impairment of right-of-use assets 1,771 687 2,402
Gain on lease disposal (2,265) (937) (2,563)
Share option charge 411 226 677
(Increase)/decrease in receivables 456 (819) 7
Increase in inventories (2,795) (2,629) (3,421)
Decrease in payables (7,117) (14,255) (11,209)
------------------------------------------------- ------------ ------------ ----------
Cash generated by operations 10,645 3,453 32,466
Interest paid (138) (258) (468)
Interest element of lease liabilities
paid (1,777) (1,901) (3,728)
Taxation paid (2,085) - (1,535)
------------------------------------------------- ------------ ------------ ----------
Net cash from operating activities 6,645 1,294 26,735
Investing activities
Interest received 4 7 11
Interest received on sublease assets 34 40 76
Receipt of capital element of sublease
assets 247 372 629
Purchase of property, plant, equipment (938) (2,298) (4,221)
Purchase of intangibles (192) (178) (513)
Proceeds on disposal of property, plant
and equipment 131 1,749 2,096
Acquisition of subsidiary, net of cash
acquired (4,436) - (154)
Net cash used in investment activities (5,150) (308) (2,076)
Financing activities
Payment of capital element of lease liabilities (9,822) (11,653) (23,026)
Dividends paid (6,058) - -
Proceeds from issue of share capital 11 - 133
Repayment of bank loans - (5,000) (4,995)
Net cash used in financing activities (15,869) (16,653) (27,888)
Net decrease in cash and cash equivalents (14,374) (15,667) (3,229)
------------------------------------------------- ------------ ------------ ----------
Cash and cash equivalents at beginning
of period 27,789 31,018 31,018
------------------------------------------------- ------------ ------------ ----------
Cash and cash equivalents at end of
period 13,415 15,351 27,789
------------------------------------------------- ------------ ------------ ----------
1.General information
The interim report was approved by the Board on 24 May 2021. The
financial information for the 53 week period ended 2 October 2021
has been based on information in the audited financial statements
for that period.
The comparative figures for the 53 week period ended 2 October
2021 are an abridged version of the Group's full financial
statements and, together with other financial information contained
in these interim results, do not constitute statutory financial
statements of the Group as defined in section 434 of the Companies
Act 2006. A copy of the statutory accounts for that 53 week period
has been delivered to the Registrar of Companies. The auditor has
reported on those accounts: their report was unqualified, did not
draw attention to any matters by way of emphasis and did not
contain a statement under s498 (2) or (3) of the Companies Act
2006.
This condensed set of consolidated financial statements has been
prepared for the 26 weeks ended 2 April 2022 and the comparative
period has been prepared for the 26 weeks ended 27 March 2021.
The interim financial statements have not been audited or
reviewed by auditors pursuant to the Auditing Practices Board
guidance on "Review of interim financial information" and do not
include all of the information required for full annual financial
statements.
Basis of preparation and accounting policies
The annual financial statements of Topps Tiles Plc are prepared
in accordance with IFRSs as adopted by the European Union. The
unaudited condensed consolidated set of financial statements
included in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34 'Interim
Financial Reporting', as adopted by the European Union and in
conformity with the requirements of the Companies Act 2006. The
same accounting policies, presentation and methods of computation
are followed in the condensed set of financial statements as
applied in the Group's latest annual audited financial
statements.
New and amended standards adopted by the Group
The Group continues to monitor the potential impact of other new
standards and interpretations which have been or may be endorsed
and require adoption by the Group in future reporting periods.
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 15% decline in the tile market in which we
operate, taking it back down to 2018 levels but with significant
inflationary pressures remaining over the course of 2022 and 2023.
This results in much lower sales and margins than the base
scenario, resulting in worse profit and cash outcomes.
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, and the scenarios start from a
position of relative strength. The going concern review also
outlined a range of other mitigating actions that could be taken in
a severe but plausible trading scenario. These included, but were
not limited to, savings on store employee costs, savings on central
support costs, reduced marketing activity, a reduction of capital
expenditure, management of working capital and suspension of the
dividend.
The Group's cash headroom and covenant compliance was reviewed
against current lending facilities in both the base case and the
severe but plausible downside scenario. The current lending
facility was refinanced in July 2018 and expires in July 2023. In
all scenarios, the Board has 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 statement. Accordingly, the Board continues to adopt
the going concern basis in preparing the financial statements.
2. Business segments
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 the UK
and is from one class of business.
3. Taxation
26 weeks 26 weeks 53 weeks
ended ended ended
2 April 27 March 2 October
2022 2021 2021
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
-------------------------------------- ------------ ------------ ----------
Current tax - debit for the period 1,520 887 2,418
Deferred tax - (credit) / debit
for the period (97) 73 1,234
Deferred tax - adjustment in respect
of previous periods - - 145
Effect of tax rate change on opening
balance - - (427)
1,423 960 3,370
-------------------------------------- ------------ ------------ ----------
4. Interim dividend
An interim dividend of 1.00p (2021: GBPnil) per ordinary share
has been declared. A final dividend of 3.10p per ordinary share was
approved paid in the period, in relation to the 53 week period
ended 2 October 2021.
5. 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.
26 weeks 26 weeks 53 weeks
ended ended ended
2 April 27 March 2 October
2022 2021 2021
(Unaudited) (Unaudited) (Audited)
---------------------------------------- ------------ ------------ ------------
Weighted average number of issued
shares for basic earnings per share 196,680,195 196,443,323 196,508,867
Weighted average impact of treasury
shares for basic earnings per share (1,259,275) (1,454,958) (1,344,844)
---------------------------------------- ------------ ------------ ------------
Total weighted average number of
shares for basic earnings per share 195,420,920 194,988,365 195,164,023
---------------------------------------- ------------ ------------ ------------
Weighted average number of shares
under option 3,171,408 321,247 2,274,713
---------------------------------------- ------------ ------------ ------------
For diluted earnings per share 198,592,328 195,309,612 197,438,736
---------------------------------------- ------------ ------------ ------------
GBP'000 GBP'000 GBP'000
Profit for the period 4,176 3,019 10,904
Adjusting items 1,277 1,093 1,067
---------------------------------------- ------------ ------------ ------------
Adjusted profit for the period 5,453 4,112 11,971
---------------------------------------- ------------ ------------ ------------
Earnings per ordinary share - basic 2.14p 1.55p 5.59p
Earnings per ordinary share - diluted 2.10p 1.55p 5.52p
Earnings per ordinary share - adjusted 2.79p 2.11p 6.13p
---------------------------------------- ------------ ------------ ------------
The calculation of the basic and diluted earnings per share used
the denominators as shown above for both basic and diluted earnings
per share.
Adjusted earnings per share for the 26 weeks ended 2 April 2022
were calculated after adjusting for the post-tax impact of the
following items: impairment of property, plant, equipment of
GBP380,000 (2021: GBP643,000), vacant property costs for stores
closed as part of store reduction programme of GBP772,000 (2021:
GBP1,026,000), project and acquisition costs of GBP497,000 (2021:
GBPnil), IFRS 16 one off credits including the impairment of
closure programme stores of GBP372,000 (2021: GBP236,000 cost) and
furlough claim to be repaid in the second half of GBPnil (2021:
GBP812,000).
6. Bank loans
26 weeks 26 weeks 53 weeks
ended ended Ended
2 April 27 March 2 October
2022 2021 2021
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Unaudited)
------------------------------------ ----------- ----------- -----------
Bank loans (all sterling) (4) - (106)
------------------------------------ ----------- ----------- -----------
The borrowings are repayable as
follows:
On demand or within one year (4) - -
In the second year - - -
In the third to fifth year - - -
------------------------------------ ----------- ----------- -----------
- - -
Less: total unamortised issue costs (76) (56) (106)
------------------------------------ ----------- ----------- -----------
(76) (56) (106)
Issue costs to be amortised within
12 months 64 50 36
------------------------------------ ----------- ----------- -----------
The Group has a revolving credit facility to June 2023 of
GBP39.0 million. As at 2 April 2022, GBPnil of this facility was
drawn (2021: 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.
7. Financial instruments
The Group has the following financial instruments which are
categorised as fair value through profit and loss:
26 weeks 26 weeks 53 weeks
ended ended Ended
2 April 27 March 2 October
2022 2021 2021
GBP'000 GBP'000 GBP'000
Financial assets
Fair value through profit and loss 54 - 63
Financial liabilities
Fair value through profit and loss - 324 -
----------------------------------- -------- -------- ---------
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 (2021:
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).
At 2 April 2022 the fair value of the Group's currency
derivatives is a gain of GBP54,000 within trade and other
receivables (2021: GBP324,000 loss). These amounts are based on the
market value of equivalent instruments at the Statement of
Financial Position date.
Losses of GBP9,000 are included in cost of sales (2021:
GBP348,000 loss).
8. Share capital
The issued share capital of the Group as at 2 April 2022
amounted to GBP6,556,000 (27 March 2021: GBP6,548,000). During the
period the Group issued 19,687 shares (27 March 2021: nil shares),
and therefore the number of shares at 2 April 2022 were 196,681,818
(27 March 2021: 196,443,323).
9. Acquisition of subsidiaries
The Group acquired a controlling 60% shareholding of Pro Tiler
Limited on 9 March 2022, for consideration of GBP5.3 million in
cash, plus a closing adjustment of GBP0.3 million. The Group
intends to acquire the remaining 40% of the issued share capital
from March 2024, based on an agreed multiple of profits for the
12-month period to March 2024.
The Group performed a purchase price allocation exercise on Pro
Tiler Limited to restate assets and liabilities at their fair
value. Separately identifiable intangible assets were recognised in
relation to Pro Tiler's brand.
On acquisition, the Group recognised tangible assets of GBP1.7
million, including GBP0.9 million of net cash, GBP0.2 million of
net working capital and GBP0.6 million of fixed assets, and
intangible assets consisting of the brand value of GBP4.1 million
net of deferred tax and goodwill of GBP2.1 million, together with a
non-controlling interest of GBP2.3 million. The brand asset will be
amortised in line with our accounting policies.
The proposed purchase of the remaining 40% of shares in Pro
Tiler Limited will be accounted for as a remuneration expense
rather than contingent consideration, as required by IFRS 3, due to
certain conditions placed on the selling shareholders to remain
employed by the Group during this time. This expense will be
treated as an adjusting item over the next two years and will
therefore reduce the Group's statutory profit in forthcoming
trading periods. This expense is not treated as a deductible
expense for corporation tax purposes and therefore the Group's
effective rate of corporation tax will increase in FY22 and the
next two financial years as a result of this accounting
treatment.
Acquisition costs of GBP0.2 million and remuneration costs of
GBP0.2 million in relation to the 40% share purchase were treated
as adjusting items within statutory profit.
The fair value of the net assets acquired and liabilities
assumed at the acquisition date were:
GBP'000
Property, Plant and Equipment 565
Inventories 1,436
Trade and other receivables 463
Trade and other payables (1,637)
Loan (5)
Cash and cash equivalents 900
Brand valuation 5,367
Deferred tax (1,310)
Non-controlling interest (2,311)
------------------------------- --------
Fair value of assets acquired 3,467
------------------------------- --------
Total consideration 5,585
------------------------------- --------
Goodwill 2,118
------------------------------- --------
The net cash outflow in the cash flow statement in the period
was as follows:
GBP'000
Cash consideration 5,336
Cash acquired (900)
----------------------------------- --------
Net cash outflow in the cash flow
statement 4,436
----------------------------------- --------
Since the date of control, the following amounts have been
included within the Group's financial statements for the
period:
GBP'000
Revenue 1,068
Profit before
tax 16
Had the acquisition been included from the start of the period,
GBP6,545,000 of revenue and GBP157,000 of profit before tax would
have been included in the Group's financial statements for the
period.
10. Seasonality of sales
Historically there has not been any material seasonal difference
in sales between the first and second half of the reporting period,
with approximately 50% of annual sales arising in the period from
October to March.
11. Related party transactions
MS Galleon AG is a related party by virtue of their 21.1%
shareholding (41,234,924 ordinary shares) in the Group's issued
share capital (27 March 2021: 20.0% shareholding).
MS Galleon AG is the owner of Cersanit, a supplier of ceramic
tiles with whom the Group made purchases of GBP424,000 during the
first half of the year which is 0.8% of cost of goods sold (27
March 2021: purchases of GBP163,000 during the first half of the
year which is 0.4% of cost of goods sold).
An amount of GBP205,000 was outstanding with Cersanit at 2 April
2022 (27 March 2021: GBP7,000). All transactions were conducted on
commercial arm's length terms.
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note, in accordance with the exemption available
under IAS 24.
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END
IR QXLFLLELEBBX
(END) Dow Jones Newswires
May 24, 2022 02:00 ET (06:00 GMT)
Grafico Azioni Topps Tiles (LSE:TPT)
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Da Mar 2024 a Apr 2024
Grafico Azioni Topps Tiles (LSE:TPT)
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