TIDMTPT
RNS Number : 9120Y
Topps Tiles PLC
18 May 2021
18 May 2021
Topps Tiles Plc
Unaudited Interim Report
Topps Tiles Plc ("Topps", "Topps Tiles", "the Group" or "the
Company"), the UK's largest tile specialist, announces its interim
consolidated results for the 26 weeks ended 27 March 2021.
Strategic and Operational Highlights
-- The Group's first half performance reflects two distinct and contrasting
periods of trading;
-- Q1 saw record sales, with Retail like-for-like sales up 19.9% and margins
in line with our guidance;
-- Q2 was significantly impacted by trading restrictions, with homeowners
(representing nearly half the Group's usual customer base) unable to enter
our stores for three months. While a strong digital performance and operational
flexibility supported sales, Retail like-for-like sales were down 17.3%
in the quarter;
-- Commercial sales down 10% in H1 but with c 35% growth in sectors outside
hospitality and leisure;
-- The Group's stores re-opened to all customers on 12 April and sales and
margins are now recovering strongly - Retail like-for-like sales up 16.8%
on a two-year basis in the five weeks since re-opening;
-- Omni channel Retail proposition and expanding Commercial offer position
the Group strongly to take advantage of an expected increase in consumer
spending moving forward as we focus on our goal of '1 in 5 by 2025'.
Financial Highlights
26 weeks ended 26 weeks ended Year on year
27 March 2021 28 March 2020
(restated)(5)
Statutory Measures
Group revenue GBP103.2 million GBP106.2 million (2.8)%
Gross margin 57.6% 59.2% (1.6) ppts
Profit / (loss) before tax GBP4.0 million GBP(3.2) million +GBP7.2 million
Basic earnings per share 1.55p (1.52)p +3.07p
Interim dividend per share nil nil n/a
Adjusted Measures
Retail like-for-like revenue
year-on-year(1) 2.0% (6.1)% n/a
Adjusted profit before tax(2) GBP5.1 million GBP1.2 million 325%
Adjusted earnings per share(3) 2.11p 0.60p 252%
Adjusted net cash / (debt)(4) GBP15.4 million GBP(17.3) million +GBP32.7 million
Adjusting items are detailed in the notes below - these include
items which are one-off in nature or can fluctuate significantly
from year to year (such as some property-related items).
Financial Summary
-- Group revenue down 2.8%, including Retail like-for-like sales up 2.0%
and total Retail sales down 2.4%, including the impact of store closures;
-- Gross margins at 59.1% in Q1 and 55.4% in Q2 - recovering quickly following
easing of lockdown;
-- Adjusted profit before tax of GBP5.1 million, up significantly year
on year as a result of strong sales in Q1, with trading losses in Q2
partially offset by business rates relief;
-- GBP32.7 million increase in adjusted net cash against H1 2020;
-- No interim dividend declared, however it is the Board's intention to
reinstate dividends by the end of year.
Current Trading and Outlook
-- Rapid increase in sales and gross margins following easing of lockdown
- two-year like-for-like sales +16.8%;
-- Outlook for domestic home improvement remains strong;
-- Commercial forward indicators improving - confident of improved performance
over the second half.
Commenting on the results, Rob Parker, Chief Executive said:
"In another reporting period dominated by the impacts of
Covid-19, Topps has once again shown its flexibility and resilience
and I would like to thank all colleagues across the Group for the
continued hard work and commitment underpinning these results.
"Inevitably, our first half results reflect two sharply
contrasting periods of trading. An exceptionally strong performance
in Q1 demonstrated the ability of the business to bounce back
following the initial lockdown. Our performance in Q2, while
materially stronger than in the first lockdown, was heavily
impacted by the re-imposition of Covid-related trading restrictions
at the start of the period.
"The re-opening of our stores to all customers on 12 April has
once again been received very positively and we have seen a strong
recovery in sales and gross margins, with Retail like-for-like
sales 16.8% ahead of the same period in 2019 in the five weeks
since re-opening. We are confident of a much-improved performance
in the second half and believe the Group remains well positioned to
take advantage of an expected increase in consumer spending as we
focus on our market share goal of '1 in 5 by 2025'."
Notes
(1) Retail like-for-like sales revenues are defined as sales
from online and stores that have been trading for more than 52
weeks.
(2) Adjusted profit before tax excludes several items which are
either one-off in nature or fluctuate significantly from year to
year (such as some property related items). In FY 2020, adjusted
profit excluded the impact of IFRS 16. In FY 2021, the Group has
included the business as usual impact of IFRS 16 in adjusted profit
but continues 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, one-off gains and losses through
sub-lets and onerous lease provision reversals. The adjusting items
in both periods are set out below:
H1 2021 GBPm H1 2020 GBPm
(restated)(5)
Adjusted profit before tax 5.1 1.2
------------- ---------------
Property
------------- ---------------
- Impairment of property, plant, equipment and
movement in onerous lease provision (0.6) (0.9)
------------- ---------------
- Vacant property costs for stores closed as
part of store reduction programme (1.2) (0.7)
------------- ---------------
(1.8) (1.6)
------------- ---------------
Other
------------- ---------------
- Coronavirus Job Retention Scheme support - 1.0 nil
to be repaid
------------- ---------------
IFRS 16
------------- ---------------
IFRS 16 - business as usual adjustments N/A 0.1
------------- ---------------
IFRS 16 - one-off adjustments including impairment
of closure programme stores (0.3) (2.9)
------------- ---------------
(0.3) (2.8)
------------- ---------------
Statutory profit / (loss) before tax 4.0 (3.2)
------------- ---------------
(3) Adjusted earnings per share is adjusted for the items
highlighted above, plus the impact of corporation tax
(4) Adjusted net cash / (debt) is defined as cash and cash
equivalents less bank loans, before unamortised issue costs. It
excludes lease liabilities under IFRS 16.
(5) Prior period restated as a result of the adoption of IFRS 16
and following the audit of the accounts for the 52 weeks ended 26
September 2020. For further information see the Condensed
Consolidated Statement of Financial Performance.
For further information please contact:
Topps Tiles Plc (18/05/21) 020 7638 9571
Rob Parker, CEO (Thereafter) 0116 282 8000
Stephen Hopson, CFO
Citigate Dewe Rogerson 020 7638 9571
Kevin Smith / Lizzy Kittle
A copy of this announcement is available on our website
www.toppstilesplc.com
This announcement contains inside information within the meaning
of the Market Abuse Regulation. The person responsible for
arranging release of this announcement on behalf of Topps Tiles is
Rob Parker, Chief Executive Officer.
INTERIM MANAGEMENT REPORT
Topps Tiles is the largest tile specialist in the UK. The
majority of our revenues are generated from the retail market for
the renovation, maintenance and improvement of UK homes. Over
recent years the business has diversified and expanded into the
commercial tile market, which approximately doubled the size of our
addressable market while staying within our core specialism of
tiles. 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. Both the Retail and Commercial operations
within the Group derive benefit from the scale of the business, the
specialist focus of our business model and our passion for tiles.
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, digital platforms and Commercial sales teams.
Summary of Performance
The first half of the financial year consisted of two periods of
trading with very different financial outcomes. The first quarter
of the financial year (October - December 2020) saw exceptional
trading with Retail like-for-like sales up 19.9%, building further
on the strength of the final quarter of the previous financial
year, with Commercial sales in line with our expectations and gross
margins of 59.1%, in line with our targets. Apart from some
additional flexible labour in the central warehouse to meet demand
for increased picking and some variable remuneration such as staff
commission, there was no need for extra resource to deliver this
result, illustrating the operational gearing within Topps Tiles.
During this time, the vast majority of our stores were open and
trading in a Covid-compliant manner. As a result, excluding
Government support, adjusted profit before tax for the first
quarter of the financial year was GBP6.1 million.
On 19 December, the new 'Tier 4' restrictions came into effect
for large parts of England, followed by the third national lockdown
early in the new year. As a result of further changes to
regulations, including a new legal restriction on 'tile showrooms',
from 5 January to 11 April 2021 all of our stores in England were
closed to homeowners, with registered traders allowed into store to
visit the counter only. Broadly the same restrictions were in place
in Wales, Scotland and Northern Ireland. Generalist DIY stores
which sell tiles to homeowners were allowed to remain fully open
throughout this period.
Our Retail like-for-like sales dropped from approximately +20%
in the first quarter to (25%) initially - a swing of around 45% -
before recovering slightly, with the second quarter (January -
March 2021) down 17.3% overall. Gross margins in the second quarter
fell to 55.4% as a result of the higher mix of trade customers,
higher sales of 'essentials' products and higher direct delivery
costs. Our Commercial business was impacted by the significant
slowdown in the hospitality and leisure sectors together with
delays to project start dates.
As in previous lockdowns, the business responded with great
flexibility. 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. As a
result of the restrictions, and given the largely fixed cost
structure of the business, the Group made an adjusted loss before
tax in for the second quarter of GBP5.4 million, excluding
Government support. By looking at our average weekly sales during
this period compared to quarter one, we estimate that the impact of
the lockdown on gross profit in the second quarter was GBP10.9
million.
During the half year, we benefitted from GBP4.4m of business
rates relief, resulting in an adjusted profit before tax of GBP5.1
million over the period.
Q1 2021 Q2 2021 H1 2021
Retail like-for-like sales +19.9% (17.3)% +2.0%
Gross margin 59.1% 55.4% 57.6%
Adjusted profit before tax before Government GBP6.1 million GBP(5.4) million GBP0.7 million
support
Business rates relief GBP4.4 million
Adjusted profit before tax GBP5.1 million
During the period, we accessed a small amount of support through
the Coronavirus Job Retention Scheme (CJRS). As a result of the
Group's overall performance in the first half, the outlook for
trading and the strength of the Group's financial position, we will
be repaying this in the second half. As a result, we have excluded
the CJRS income from adjusted profit in the period.
In December we repaid a GBP5.0 million term loan drawn as part
of the Coronavirus Large Business Interruption Loan Scheme, and
cancelled an unused GBP5.0 million revolving credit facility under
the same scheme. As such, the Group is now debt free, and at the
half year, had adjusted net cash of GBP15.4 million, compared to
adjusted net debt of GBP17.3 million a year ago, an increase of
GBP32.7 million.
The latest lockdown has once again demonstrated the importance
of our omnichannel Retail business model. Although our stores were
closed to homeowners, 85% of our sales were still collected from
store in the second quarter, and almost all transactions still
involved an interaction with our people in some way - either
through customers speaking to our service specialists on the phone,
or ordering online and choosing to collect from a store at a time
of their choice. At the same time, web traffic increased to record
levels and www.toppstiles.co.uk continues to lead the market in
online visitor numbers amongst our competitor set.
We are confident in our ability to cope with future disruption,
financially and operationally, and we believe our market leading
position will strengthen as we continue to make decisions and
investments in the best long-term interests of the business. The
recovery of the business in the weeks following the lockdown is
early evidence of this, with two-year like-for-like sales growth
increasing to 16.8% in the five weeks since re-opening and rapidly
strengthening gross margins.
Once again, the Board is grateful for the hard work, tenacity
and commitment of all colleagues across the business in another
very challenging trading period and is looking forward to further
lifting of restrictions as the country opens up over the next few
weeks.
Strategic & Operational Update
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 of tiles and encourages all of our colleagues to be
passionate about the products we sell.
At the full year results, we announced a new goal for the
business. Based on market share (including both the domestic and
commercial markets), and encompassing tiles, adhesives and grouts,
the goal is to account for GBP1 in every GBP5 spend 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 the
estimated 2019 market share of 17% and would require an
out-performance of the market by around 3.5% per year. Whilst we
recognise that some competitors that have not faced physical
restrictions on trading are likely to have gained some share over
the last three months, particularly generalist DIY stores and
online only operators, we are confident in the longer-term ambition
of achieving this growth target.
Our Retail and Commercial businesses are both supported by our
Group strategies of "Leading Product" and "Leading People".
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, 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.
At the start of the latest lockdown, we took the decision not to
slow down product development and to press ahead with our plans for
the year. As a result, we have launched 20 new ranges over the
first half, over 40% of which were design-led by Topps Tiles in
collaboration with our supply partners. Highlights include the
doubling of our 2cm porcelain outdoor range Everscape (TM) , new
anti-bacterial tiles and an even stronger value offer across our
Coverings and Essentials categories. Our Commercial product
portfolio is stronger too - Parkside and Strata now have access to
over 8,000 lines from over 160 suppliers globally.
Supply chain resilience and flexibility have been core enablers
of the business's success in the first half. Despite the challenges
of Covid-19 and Brexit, we maintained continuity of supply to our
stores and customers. As part of Brexit planning, we increased our
inventory levels by GBP2.6 million (around 9%) as at 31 December
2020, including the use of third-party warehousing. We were able to
utilise this stock, together with our strategic supplier
partnerships, during periods of disruption at ports to maintain a
good service to our customers and stores throughout the period. We
finished the first half with GBP2.6 million more stock than at the
year end, which will be sold through over the second half.
Leading People
The Group's success is underpinned by industry-leading levels of
capability and engagement from our colleagues. This ensures we
deliver world-class customer service, and excellent support from
our Leicester support office and field teams. The Leading People
initiative encourages colleagues to lead the thinking, lead the
pace and, for our managers, to lead the team.
Our focus on colleague wellbeing and engagement has been more
important than ever through the disruption of the last year. Our
annual My Voice 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 (up 11 ppts from last year), and 80% of colleagues
positively engaged with the business (up 5 ppts from last
year).
As we continue to focus on an environment 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 in the first half 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.
Colleague turnover was substantially down in the first half to
21.4% (2020: 28.8%), no doubt influenced by the pandemic. However,
there were year on year improvements in turnover in every category
of store colleague role (store managers, assistant managers and
service specialists), which, combined with a big increase in
internal progression and engagement, give us a great opportunity to
develop our teams further as we maintain and improve our colleague
engagement and capability.
Environment, Social and Governance
Building on some key steps forward in the last financial year,
we have continued to make meaningful progress in reducing our
impact on the environment. These steps cover the products we sell,
the way we deliver them to customers and the physical environment
in which we sell them. Highlights from the first half include
development of a new range of tiles manufactured from 98% waste
material (such as old TV screens, sanitary ware and waste materials
from other production by-products), through an industrialised
production process, which will launch in the second half. Trials of
gas hybrid delivery vehicles were completed in the first half,
giving the Group increasing options at the time of fleet renewal.
The roll out of in-store LED lighting continued and will conclude
by the end of the year, saving 1,400 tonnes of CO2 as well as
reducing running costs by GBP1 million per annum. We are also
forming partnerships with external organisations including the
World Land Trust, to assist us with our efforts towards carbon
balancing.
We have found that colleagues are truly engaged in this area and
our Sustainability Council is in its second year of operation. This
body includes representatives from all areas of the business, to
provide cross functional input, guide our thinking and establish
and monitor KPIs.
Two new independent Non-executive Directors have joined the
Board during the first half, Diana Breeze and Kari Daniels. Having
served for nine years, the Board would like to thank both Andy King
and Claire Tiney for their valued contribution and to welcome Diana
and Kari into the business.
Retail
Last year, we launched a new strategy in our Retail business -
"Great Experience, Great Product and Great Value" and despite the
external challenges in the period, we have made substantial
progress in the first half.
In the first half, customers responded well to the great value
that we offer. Our 'Get the Look for Less' ranges, keenly priced
bulk deals for our trade customers, promotions at great discounts
and investment into reduced prices across our essentials ranges are
all reinforcing our value credentials and delivering a broad appeal
across all customer groups.
A great customer experience has always been central to the Topps
offer. Many of our customers shop with us infrequently and often
require support and advice. Despite our stores being closed to
homeowners for most of the second quarter, our customer
satisfaction scores remained at exceptionally high levels during
the first half, with overall satisfaction at 87.5% (2020: 88.3%).
In a period when our stores were closed for three months to
homeowners, it was naturally more difficult to demonstrate our
world class service, so this is an exceptional performance.
We provide a genuinely omni-channel offer to our retail
customers. Across an average week, we welcome approximately 450,000
visitors - split broadly evenly across our website and our 331
stores.
The www.toppstiles.co.uk website accounts for approximately 25%
of tile-related search traffic in the UK and our visitor traffic
grew by 40% year on year. We also achieve the highest ranking in
Search Engine Optimisation (SEO) for 16 out of the top 20
tile-related search terms. Our website remains key for brand
introduction, research, samples and ordering but what we also know
is that the majority of our customers will visit a store at some
stage in their shopping journey with us - with less than 2% of
sales not involving a store at all. Facebook impressions and
Instagram engagement were up 100% year on year and we have an
engaged audience of 600k on Pinterest and 65k Instagram
followers.
The quality of our website was recognised in February 2021 in
Internet Retailing's annual "RetailX Top 500" report, ranking
retail websites across all sectors in the UK. We were delighted to
be placed in the top 50 online retailers in the country, based on
criteria such as strategy & innovation, footprint, the
customer, operations & logistics, merchandising, brand
engagement and mobile & cross channel. Topps Tiles was ranked
as a top 25 retailer in the customer dimension alongside brands
like M&S and Boots. We were the only tile specialist in the top
350, and the top 50 includes brands such as Currys PC World,
Toolstation and Very.
Our stores remain absolutely central to our omni-channel offer
and customer convenience. In normal times, 98% of sales involve a
store in some way, whether for research, ordering, payment or
collection, and, even during lockdown, our customers chose to pick
up their goods from a store rather than take delivery at home 85%
of the time. We also continue to actively manage the physical store
estate, and over recent years have identified the opportunity to
reduce the core estate to around 300 stores. At the period end, we
had 331 stores (FY 2020 year end: 342 stores), having closed 13 and
opened 2 in the period. Three of the closed Retail stores have
since reopened as design studios within our Commercial business.
When we close a store, we measure the transference of sales into
neighbouring stores, which gives us confidence that this programme
continues to drive profitability of the overall business. Our
relatively short unexpired lease term of 3.2 years provides us with
flexibility to continue to develop our estate.
Commercial
Our Commercial business, delivered through our Parkside and
Strata brands, has continued to build its capability and
proposition. There are now 55 colleagues in the business, including
a sales force of 30. As at the period end, we operated four design
studios (2020: four), which are creative spaces to engage with
architects and designers. 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.
Sales in the first half were GBP4.1m, down 10% year on year.
Against this, the ONS reported new build construction output in the
private commercial sector down 17.5% year on year in the same
period. Importantly, the business has been flexible in its response
to the pandemic, whilst setting itself up for future growth. In the
first half of last year, approximately 40% of Commerical sales were
generated through sales into hospitality and leisure. This year,
just over 10% of sales have come from these sectors as the business
refocused into areas that offered greater short-term potential. As
the consumer economy recovers, we expect to be well placed to
recover sales levels in the hospitality and leisure sectors, as
well as benefitting from the greater penetration of new
sectors.
H1 2020 Approx year on year sales H1 2021
growth
Hospitality & leisure c. 40% of sales c. (80)% c. 10% of sales
Other sectors c. 60% of sales c. +35% c. 90% of sales
Total GBP4.5 million c. (10)% GBP4.1 million
The trading loss in the first half of GBP0.9 million is a slight
improvement on last year (2020: loss of GBP1.0 million) however we
expect that to improve in the second half as sales build.
Key Performance Indicators
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 27 March
2021 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 2020 Annual report. Further
information on adjusted performance measures can be found on page
2.
26 weeks to 26 weeks to Year on year
27 March 28 March
2021 2020
Financial KPIs
Group revenue growth year-on-year (2.8)% (3.8)% +1.0 ppt
Retail like-for-like sales growth
year-on-year +2.0% (6.1)% n/a
Group gross margin 57.6% 59.2% (1.6) ppts
Adjusted profit before tax GBP5.1m GBP1.2m +325%
Adjusted earnings per share 2.11 pence 0.60 pence +252%
Adjusted net cash / (net debt) GBP15.4m GBP(17.3)m +GBP32.7m
Inventory days 138 132 +6
Non-financial KPIs
Customer overall satisfaction score 87.5% 88.3% (0.8)%
Colleague turnover 21.4% 28.8% (7.4) ppts
Number of retail stores at period
end 331 359 (28)
Note: 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.
FINANCIAL REVIEW
The Group's management uses adjusted performance measures to
plan for, assess and control the performance of the Group.
Adjusted profit before tax differs from statutory profit before
tax as it excludes the effect of one-off or fluctuating items,
allowing stakeholders to understand results in a more meaningful
way. Following the adoption of IFRS 16 in the previous financial
year, adjusted measures from FY 2021 onwards include the business
as usual element of IFRS 16. However, the Group will 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, one-off gains and losses through sub-lets and onerous lease
provision reversals.
For the first half of the year, the following items have been
excluded from adjusted profit:
-- Losses related to movement in property related provisions (including
onerous lease movements and provision against fixed assets in loss
making stores) of GBP0.6 million (2020: losses of GBP0.9 million);
-- Vacant property costs of GBP1.2 million (2020: GBP0.7 million) for
stores closed as part of store reduction programme;
-- A credit of GBP1.0 million, resulting from claims made against the
Coronavirus Job Retention Scheme (CJRS) during the most recent lockdown.
Due to the strength of the financial position of the business upon
exit from lockdown, this will be repaid in the second half (2020:
GBPnil);
-- One-off IFRS 16 related expenses of GBP0.3 million, including impairment
of right of use assets and derecognition of lease liabilities where
the Group has successfully exited a lease before its end date (2020:
expenses of GBP2.8 million, including business as usual income of
GBP0.1 million).
Results for the prior period have been restated as a result of
the adoption of IFRS 16 and following the audit of the accounts for
the period ended 26 September 2020. The net impact on the loss
before tax is an improvement of GBP0.8 million to GBP3.2 million.
There are no changes to any adjusted performance metrics as a
result of this restatement.
Statement of Financial Performance
Total revenue for the period decreased by 2.8% against last year
to GBP103.2 million (2020: GBP106.2 million). As stated above, this
was a highly volatile period of trade, with revenues in the first
quarter significantly up year on year and second quarter revenues
impacted substantially by the closure of the Retail stores to
homeowners, who in FY 2020 represented 45% of our Retail sales.
The average number of Retail stores fell by 21 from 360 in the
prior year period to 339 in this period. Retail like-for-like sales
increased 2.0% over the period, with growth of 19.9% in the first
quarter, followed by a decrease of 17.3% in the second quarter.
Total Retail sales were GBP99.1 million (2020: GBP101.7 million)
and Commercial sales were GBP4.1 million (2020: GBP4.5
million).
Gross margin for the period was 57.6% (2020: 59.2%), with gross
margin in quarter one of 59.1%, in line with guidance, before
falling to 55.4% in the second quarter, due to the impact of
customer, product and delivery mix during the period of lockdown.
Retail gross margins were 58.5% in the first half, down from 60.1%
in the prior year. We expect gross margins to improve sharply as
trade normalises in the second half, and in the most recent weeks,
gross margins have been trending back to our guidance for the year
of 59% - 60%.
Adjusted operating costs were GBP52.3 million, compared to
GBP61.2 million in the prior period. The principle drivers of
changes in adjusted operating costs were as follows:
GBP million
HY20 adjusted operating expenses 61.2
Regulatory and inflationary cost increases 0.5
Employee profit share following strong Q1 performance 1.0
Head office and warehouse rental costs following sale
and lease back last year 0.6
Annualisation of cost reduction programme from FY20 (1.9)
Decrease in number of stores trading (average of 339
vs 360 in prior year) (2.3)
Other variances (0.4)
HY20 adjusted operating expenses, excluding Government
support and IFRS 16 58.7
Business rates relief (4.4)
HY21 adjusted operating expenses, before IFRS 16 54.3
Impact of BAU IFRS 16 on operating expenses (2.0)
HY21 adjusted operating expenses 52.3
After including the adjusting items described above, total
operating costs were GBP53.4 million (2020: GBP64.3 million).
The net interest expense for the Group before IFRS 16 was GBP0.2
million (2020: GBP0.4 million). IFRS 16 has the impact of
increasing interest costs by GBP1.9 million, resulting in an
overall net interest expense for the half of GBP2.1 million (2020:
GBP1.8 million).
Adjusted profit before tax was GBP5.1 million (2020: GBP1.2
million), representing an increase of 325% on the prior year.
Statutory profit before tax was GBP4.0 million compared to a
loss before tax of GBP3.2 million last year.
The effective tax rate for the 26 weeks to 27 March 2021 was
24.1% (2020: 8.5%). Tax rates are based on expectations for the
full year and are impacted by non-chargeable items.
Basic earnings per share were 1.55p (2020: loss of 1.52p).
Adjusting for the post tax impact of the adjusting items detailed
above, the adjusted basic earnings per share were 2.11p (2020:
0.60p), an increase of 252%.
Dividend and Dividend Policy
Given the ongoing level of uncertainty caused by the Covid-19
pandemic and the very recent emergence of the business from a
sustained period of trading restrictions, the Board has decided
that it is not appropriate to restart the payment of dividends at
the interim stage.
However, the Board is mindful of the role that dividends play in
overall shareholder returns. By the end of the year we expect to
reinstate dividend payments, and we will make a payment relating to
the whole financial year, rather than just the second half. Moving
forward, our intention is to reinstate our previous dividend policy
of remitting approximately half of the annual adjusted earnings per
share back to shareholders.
Statement of Financial Position and Statement of Cash Flows
Capital Expenditure and Disposals
Capital expenditure in the period amounted to GBP2.5 million
(2020: GBP3.1 million). The majority of this related to two new
store openings, the continuation of the LED lighting roll-out to a
further 100 stores and the store improvement programme. We estimate
full year total capital expenditure in the region of GBP5.5 million
(2020 full year: GBP6.7 million).
In the period, we disposed of the freehold or long leasehold
interest in two properties for GBP1.7 million (2020: GBPnil) which
were purchased in the prior period. We retain a short leasehold
interest in these sites moving forward.
Cash Flow
On a statutory basis, net cash from operating activities was
GBP1.3 million, compared to GBP12.3 million in the prior year
period. To support comparability with prior years, an analysis of
free cash flow and changes in adjusted net cash is presented below,
which excludes the impact of IFRS 16.
Free cash flow was (GBP10.6) million (2020: (GBP1.6) million),
analysed in the table below:
H1 21 H1 20
GBP million GBP million
Cash generated by operations before WC movements 8.9 5.0
Changes in working capital (18.4) (2.0)
Interest (0.3) (0.5)
Tax - (1.0)
(9.8) 1.5
Capital expenditure excluding investments (2.5) (2.8)
Freehold and leasehold investments - (0.3)
Disposals and other investments 1.7 -
Free cash flow (10.6) (1.6)
Dividends - (4.5)
Change in adjusted net cash / (debt) (10.6) (6.1)
Adjusted net cash / (debt) at the start of period 26.0 (11.3)
Adjusted net cash / (debt) at end of period 15.4 (17.3)
The working capital outflow was driven by GBP13.7 million of
reductions in payables representing a swing from the very strong
trading position at the full year to the subdued trading before
half year due to the lockdown, GBP2.6 million of higher inventory
which we will sell through in the second half and GBP2.1 million
changes in accrual and other items. Working capital is expected to
improve substantially in the second half as sales improve and
creditor balances normalise. However, FY21 is a 53 week year and
the additional week will include a number of additional payment
runs, for suppliers and payroll. As a result, the full year cash
flow will include c GBP7 million of working capital outflows which
will unwind over future years. We will also be repaying GBP6
million of deferred VAT relating to April-June 2020 in the period
April 2021 to March 2022 which will further reduce payables by year
end.
Adjusted net cash at the period end was GBP15.4 million,
compared to adjusted net debt of GBP17.3 million at the end of
first half of FY 2020, an increase of GBP32.7 million compared to a
year ago.
Banking Facilities
The Group has a GBP39.0 million revolving credit facility in
place which is committed to July 2022 (2020: GBP39.0 million). At
the year end, none of this was drawn (2020: GBP39.0 million was
drawn).
Inventory
Inventory at the period end was GBP32.0 million (2020: GBP30.6
million) representing 138 days turnover (2020: 132 days turnover).
The increase in the 2021 value is driven by additional stock
brought in before the 31 December Brexit deadline to ensure
continuity of supply to our stores. This stock has sold through
more slowly than planned due to the lockdown but it will sell
through before the end of the year.
Current Trading and Outlook
During the first two weeks post period end, the trading
restrictions in force for most of the second quarter remained in
place, with Retail like-for-like sales on a two-year basis down
17.1%.
However, trading since the full re-opening of our Retail
business on 12 April 2021 has been very encouraging with two-year
like-for-like sales up 16.8% in the five-week period and gross
margins recovering rapidly as trading conditions return to normal.
Once again, the business is demonstrating that it can recover
strongly when restrictions are no longer in place, just as it did
following the end of the first lockdown in summer 2020.
The outlook for the domestic home improvement market is strong.
With our market leading offer, we are well placed to benefit from
these market dynamics and we are confident that we will continue to
trade strongly throughout this period.
Risks and Uncertainties
The Board continues to monitor the key risks and uncertainties
of the Group. The risk around the long-term impact of the current
global pandemic, including any potential future trading
restrictions remains the most significant in our minds, with other
risks documented in the 2020 Annual Report and Accounts as relevant
now as they were at the time the Report was published. These key
risks and uncertainties include: general economic and consumer
confidence; corporate reputation, particularly in relation to
sustainability; delivery optimisation; store portfolio; loss of key
personnel; cyber security; maintaining an appropriate customer
offer; value erosion through M&A; major reputational damage
through, for example, a failure of a core process around our
products, stores, supply chain or people; and delivery of our
commercial strategy.
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
scenarios 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 our busiest
trading period 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 2022, with
an opportunity to extend in June 2021 for a further year, so a
potential full term of five years ending 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 condensed 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).
By order of the Board,
Rob Parker Stephen Hopson
Chief Executive Officer Chief Financial Officer
18 May 2021
Cautionary statement
This Interim Management Report ("IMR") has been prepared solely
to provide additional information to shareholders to assess the
Group's strategies and the potential for those strategies to
succeed. The IMR should not be relied on by any other party or for
any other purpose.
The IMR contains certain forward-looking statements. These
statements are made by the directors in good faith based on the
information available to them up to the time of their approval of
this report but such statements should be treated with caution due
to the inherent uncertainties, including both economic and business
risk factors, underlying any such forward-looking information.
This interim management report has been prepared for the Group
as a whole and therefore gives greater emphasis to those matters
which are significant to Topps Tiles Plc and its subsidiary
undertakings when viewed as a whole.
Condensed Consolidated Statement
of Financial Performance
for the 26 weeks ended 27 March 2021
Restated*
26 weeks 26 weeks 52 weeks
ended ended ended
27 March 28 March 26 September
2021 2020 2020
GBP'000 GBP'000 GBP'000
Note (Unaudited) (Unaudited) (Audited)
Group revenue 103,247 106,188 192,813
Cost of sales (43,738) (43,372) (80,001)
-------------------------------------- ----- ------------ ------------ -------------
Gross profit 59,509 62,816 112,812
Distribution and selling costs (39,248) (47,541) (80,971)
Other operating expenses (3,682) (4,829) (10,105)
Administrative costs (8,151) (8,781) (23,178)
Sales and marketing costs (2,350) (3,115) (4,587)
Group operating profit/(loss) 6,078 (1,450) (6,029)
Net finance costs (2,099) (1,787) (3,800)
-------------------------------------- ----- ------------ ------------ -------------
Profit/(loss) before taxation 3,979 (3,237) (9,829)
Taxation 3 (960) 275 1,811
-------------------------------------- ----- ------------ ------------ -------------
Profit/(loss) for the period 3,019 (2,962) (8,018)
-------------------------------------- ----- ------------ ------------ -------------
Profit/(loss) is attributable to:
Owners of Topps Tiles Plc 3,041 (2,921) (7,966)
Non-controlling interests (22) (41) (52)
-------------------------------------- ----- ------------ ------------ -------------
3,019 (2,962) (8,018)
-------------------------------------- ----- ------------ ------------ -------------
All results relate to continuing
operations of the Group.
Earnings per ordinary share
- Basic 5 1.55p (1.52)p (4.11)p
- Diluted 5 1.55p (1.52)p (4.11)p
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.
* The amounts for the 26 weeks ended 28 March 2020 have been
restated to correct an error in the prior year as a result of the
adoption of IFRS 16 and following the audit of the accounts for the
52 weeks ended 26 September 2020. This restatement brings the
reported results for the 26 weeks ended 28 March 2020 in to line
with the final treatment of IFRS 16 as reflected in the audited
results for the 52 weeks ended 26 September 2020.
The previously reported loss for the period of GBP3,622,000 has
been restated to GBP2,962,000 which is a reduction of GBP660,000.
The restatement is primarily driven by a lower depreciation charge
as a result of changes in applying the IFRS 16 methodology
following the audit of the accounts for the 52 weeks ended 26
September 2020. As part of the restatement, both depreciation of
GBP10,759,000 and impairment charges of GBP3,306,000 have been
reclassified to Distribution and selling costs. In the previously
reported amounts, depreciation was recognised in Other operating
expenses and the impairment charges were recognised in Impairment
of right-of-use assets and property, plant and equipment. This cost
reallocation is in line with the cost classification reflected in
the accounts for the 52 weeks ended 26 September 2020.
Condensed Consolidated Statement
of Financial Position
as at 27 March 2021
Restated*
27 March 28 March 26 September
2021 2020 2020
GBP'000 GBP'000 GBP'000
Note (Unaudited) (Unaudited) (Audited)
------------------------------------------- ----- ------------ -------------- -------------
Non-current assets
Goodwill - 3,104 -
Intangible assets 1,006 2,651 916
Property, plant and equipment 25,296 44,763 27,170
Investment properties - 750 -
Other financial assets 2,463 2,496 2,749
Deferred tax assets 1,333 706 1,406
Right-of-use assets 97,200 106,235 106,258
------------------------------------------- ----- ------------ -------------- -------------
127,298 160,705 138,499
------------------------------------------- ----- ------------ -------------- -------------
Current assets
Assets classified as held for sale - - 1,786
Inventories 31,966 30,602 29,337
Other financial assets 667 806 873
Trade and other receivables 4,051 5,711 3,567
Cash and cash equivalents 15,351 21,673 31,018
------------------------------------------- ----- ------------ -------------- -------------
52,035 58,792 66,581
------------------------------------------- ----- ------------ -------------- -------------
Total assets 179,333 219,497 205,080
Current liabilities
Bank loans 6 - - (4,981)
Trade and other payables (42,832) (38,473) (58,446)
Lease liabilities (24,483) (23,200) (25,520)
Current tax liabilities (2,000) (801) (1,114)
Provisions (498) (320) (462)
Total current liabilities (69,813) (62,794) (90,523)
------------------------------------------- ----- ------------ -------------- -------------
Net current liabilities (17,778) (4,002) (23,942)
------------------------------------------- ----- ------------ -------------- -------------
Non-current liabilities
Bank loans 6 - (38,944) -
Lease liabilities (90,386) (95,507) (98,636)
Deferred tax liabilities - (1,149) -
Provisions (1,835) (1,922) (1,867)
------------------------------------------- -----
Total liabilities (162,034) (200,316) (191,026)
------------------------------------------- ----- ------------ -------------- -------------
Net assets 17,299 19,181 14,054
------------------------------------------- ----- ------------ -------------- -------------
Equity
Share capital 8 6,548 6,548 6,548
Share premium 2,492 2,492 2,492
Own shares (1,351) (1,482) (1,483)
Merger reserve (399) (399) (399)
Share-based payment reserve 4,191 3,960 3,965
Capital redemption reserve 20,359 20,359 20,359
Accumulated losses (14,491) (12,254) (17,400)
------------------------------------------- ----- ------------ -------------- -------------
Capital and reserves attributable
to owners of Topps Tiles Plc 17,349 19,224 14,082
Non-controlling interests (50) (43) (28)
Total equity 17,299 19,181 14,054
------------------------------------------- ----- ------------ -------------- -------------
* Prior period restated to correct an error in the prior year as a result of the adoption of IFRS 16 and following the audit of the accounts for the 52 weeks
ended 26 September 2020. For further information see the Condensed Consolidated Statement of Financial Performance.
Condensed Consolidated Statement of Changes in Equity
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 26 weeks ended 28 March 2020 (Restated*)
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
28 September
2019 (Audited) 6,548 2,490 (1,548) (399) 3,962 20,359 (1,178) (2) 30,232
Impact of
change
in accounting
policy (IFRS
16)* - - - - - - (3,605) - (3,605)
---------------- -------- -------- -------- -------- ------------ ----------- ------------- ---------------- --------
Adjusted
balance
at 29
September
2019
(Audited)* 6,548 2,490 (1,548) (399) 3,962 20,359 (4,783) (2) 26,627
---------------- -------- -------- -------- -------- ------------ ----------- ------------- ---------------- --------
Loss and total
comprehensive
expense
for the period* - - - - - - (2,921) (41) (2,962)
Issue of share
capital - 2 - - - - - - 2
Dividends - - - - - - (4,484) - (4,484)
Own shares
issued in the
period - - 66 - - - (66) - -
Credit to
equity
for
equity-settled
share based
payments - - - - (2) - - - (2)
Balance at
28 March 2020
(Unaudited) 6,548 2,492 (1,482) (399) 3,960 20,359 (12,254) (43) 19,181
---------------- -------- -------- -------- -------- ------------ ----------- ------------- ---------------- --------
* Prior period restated to correct an error in the prior year as a result of the adoption of IFRS 16 and following the audit of the accounts for the 52 weeks
ended 26 September 2020. For further information see the Condensed Consolidated Statement of Financial Performance.
For the 52 weeks ended 26 September 2020
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
28 September
2019 (Audited) 6,548 2,490 (1,548) (399) 3,962 20,359 (1,178) (2) 30,232
Impact of change
in accounting
policy (IFRS
16) - - - - - - (3,605) - (3,605)
------------------ -------- -------- -------- -------- ------------ ------------ ------------- ---------------- --------
Adjusted balance
at
29 September
2019 (Audited) 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
(Audited) 6,548 2,492 (1,483) (399) 3,965 20,359 (17,400) (28) 14,054
------------------ -------- -------- -------- -------- ------------ ------------ ------------- ---------------- --------
Condensed Statement of Cash Flows
for the 26 weeks ended 27 March 2021
Restated*
26 weeks 26 weeks 52 weeks
ended ended ended
27 March 28 March 26 September
2021 2020 2020
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
------------------------------------------------- ------------ ------------ -------------
Cash flow from operating activities
Profit/(loss) for the period 3,019 (2,962) (8,018)
Taxation 960 (275) (1,811)
Finance costs 2,146 1,834 3,901
Finance income (47) (47) (101)
Group operating profit/(loss) 6,078 (1,450) (6,029)
Adjustments for:
Depreciation of property, plant and equipment 3,240 3,571 7,145
Depreciation of right-of-use assets 10,659 10,759 21,080
Amortisation of intangible assets 91 137 477
Loss on disposal of property, plant and
equipment 237 318 338
Loss/(gain) on sublease 145 - (150)
Impairment charge of property, plant
and equipment 730 372 1,155
Fair value adjustment for asset held
for sale - - 558
Impairment of right-of-use assets 687 3,306 5,411
Impairment of goodwill - - 3,104
Impairment of intangible assets - - 1,687
Gain on lease disposal (937) (201) (388)
Receipt of lease incentives - - 173
Decrease in fair value of investment
properties - 483 -
Loss on disposal of investment properties - - 483
Share option charge/(credit) 226 (2) 3
(Increase)/decrease in receivables (819) (1,114) 252
(Increase)/decrease in inventories (2,629) 324 1,589
(Decrease)/increase in payables (14,255) (1,271) 18,990
------------------------------------------------- ------------ ------------ -------------
Cash generated by operations 3,453 15,232 55,878
Interest paid (258) (488) (856)
Interest element of lease liabilities
paid (1,901) (1,402) (3,033)
Taxation paid - (999) (999)
------------------------------------------------- ------------ ------------ -------------
Net cash from operating activities 1,294 12,343 50,990
Investing activities
Interest received 7 6 20
Interest received on sublease assets 40 41 81
Receipt of capital element of sublease
assets 372 187 343
Purchase of property, plant, equipment (2,298) (3,072) (6,290)
Purchase of intangibles (178) - (417)
Proceeds on disposal of property, plant
and equipment 1,749 - 18,552
Acquisition of subsidiary, net of cash
acquired - - (74)
Net cash (used in)/from investment activities (308) (2,838) 12,215
Financing activities
Payment of capital element of lease liabilities (11,653) (11,097) (21,452)
Dividends paid - (4,484) (4,484)
Proceeds from issue of share capital - 2 2
Drawdown of bank loans - 9,000 20,000
Repayment of bank loans (5,000) - (45,000)
Net cash used in financing activities (16,653) (6,579) (50,934)
Net (decrease)/increase in cash and cash
equivalents (15,667) 2,926 12,271
------------------------------------------------- ------------ ------------ -------------
Cash and cash equivalents at beginning
of period 31,018 18,747 18,747
------------------------------------------------- ------------ ------------ -------------
Cash and cash equivalents at end of period 15,351 21,673 31,018
------------------------------------------------- ------------ ------------ -------------
* Prior period restated to correct an error in the prior year as
a result of the adoption of IFRS 16 and following the audit of the
accounts for the 52 weeks ended 26 September 2020. For further
information see the Condensed Consolidated Statement of Financial
Performance.
1. General Information
The interim report was approved by the Board on 18 May 2021. The
financial information for the 52 week period ended 26 September
2020 has been based on information in the audited financial
statements for that period.
The comparative figures for the 52 week period ended 26
September 2020 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 52
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 27 March 2021 and the comparative
period has been prepared for the 26 weeks ended 28 March 2020.
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 further national lockdown related to the
Covid-19 pandemic during our busiest trading period 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 2022, with
an opportunity to extend in June 2021 for a further year, so a
potential full term of five years ending 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 condensed 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 52 weeks
ended ended ended
27 March 28 March 26 September
2021 2020 2020
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
-------------------------------------- ------------ ------------ -------------
Current tax - charge/(credit) for
the period 887 (256) (48)
Current tax - adjustment in respect
of previous periods - - 134
Deferred tax - charge/(credit)
for the period 73 (19) (2,028)
Deferred tax - adjustment in respect
of previous periods - - 42
Effect of tax rate change on opening
balance - - 89
960 (275) (1,811)
-------------------------------------- ------------ ------------ -------------
4. Interim Dividend
An interim dividend of GBPnil (2020: GBPnil) per ordinary share
has been declared. No final dividend was paid in the period, in
relation to the 52 week period ended 26 September 2020.
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.
Restated*
26 weeks 26 weeks 52 weeks
ended ended ended
27 March 28 March 26 September
2021 2020 2020
(Unaudited) (Unaudited) (Audited)
---------------------------------------- ------------ ------------ -------------
Weighted average number of issued
shares for basic earnings per share 196,443,323 196,443,323 196,443,323
Weighted average impact of treasury
shares for basic earnings per share (1,454,958) (1,474,021) (1,472,264)
---------------------------------------- ------------ ------------ -------------
Total weighted average number of
shares for basic earnings per share 194,988,365 194,969,302 194,971,059
---------------------------------------- ------------ ------------ -------------
Weighted average number of shares
under option 321,247 - -
---------------------------------------- ------------ ------------ -------------
For diluted earnings per share 195,309,612 194,969,302 194,971,059
---------------------------------------- ------------ ------------ -------------
GBP'000 GBP'000 GBP'000
Profit/(loss) for the period 3,019 (2,962) (8,018)
Adjusting items 1,093 4,128 11,076
---------------------------------------- ------------ ------------ -------------
Adjusted profit for the period 4,112 1,166 3,058
---------------------------------------- ------------ ------------ -------------
Earnings per ordinary share - basic 1.55p (1.52)p (4.11)p
Earnings per ordinary share - diluted 1.55p (1.52)p (4.11)p
Earnings per ordinary share - adjusted 2.11p 0.60p 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 were
1,462,043 for the 26 weeks ended 28 March 2020 and were 1,758,101
for the 52 weeks ended 26 September 2020 but were not included as
they were anti-dilutive.
Adjusted earnings per share for the 26 weeks ended 27 March 2021
were calculated after adjusting for the post-tax impact of the
following items: impairment of property, plant, equipment and
movement in onerous lease provision of GBP643,000 (2020:
GBP919,000), vacant property costs for stores closed as part of
store reduction programme of GBP1,026,000 (2020: GBP597,000),
furlough claim to be repaid in the second half of GBP812,000 (2020:
GBPnil), and IFRS 16 one off changes including the impairment of
closure programme stores of GBP236,000 (2020: GBP2,612,000).
* Prior period restated to correct an error in the prior year as
a result of the adoption of IFRS 16 and following the audit of the
accounts for the 52 weeks ended 26 September 2020. For further
information see the Condensed Consolidated Statement of Financial
Performance.
6. Bank Loans
26 weeks 26 weeks 52 weeks
ended ended ended
27 March 28 March 26 September
2021 2020 2020
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
---------------------------------- ------------ ------------ -------------
Bank loans (all sterling) - 38,822 4,866
---------------------------------- ------------ ------------ -------------
The borrowings are repayable
as follows:
On demand or within one year - - 5,000
In the second year - - -
In the third to fifth year - 39,000 -
---------------------------------- ------------ ------------ -------------
- 39,000 5,000
Less: total unamortised issue
costs (56) (178) (134)
---------------------------------- ------------ ------------ -------------
(56) 38,822 4,866
Issue costs to be amortised
within 12 months 50 122 115
---------------------------------- ------------ ------------ -------------
Amount due for settlement after - 38,944 -
12 months
Amount due for settlement within
12 months - - 4,981
The Group has a revolving credit facility to 29 June 2022 of
GBP39.0 million. As at 27 March 2021, GBPnil of this facility was
drawn (2020: GBP39.0 million). The loan facility contains financial
covenants which are tested on a bi-annual basis. In light of
Covid-19 the March 2021 covenants have been relaxed. The Group did
not breach any covenants in the period.
7. Financial Instruments
The Group has the following financials instruments which are
categorised as fair value through profit and loss:
Carrying value and fair value
------------------------------- ---------------------------------------
26 weeks 26 weeks 26 weeks
ended ended ended
27 March 27 March 27 March
2021 2021 2021
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
------------------------------- ------------- ------------ ----------
Financial assets
Fair value through profit and
loss - 442 23
Financial liabilities
Fair value through profit and 324 - -
loss
------------------------------- ------------- ------------ ----------
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 (2020:
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 27 March 2021 the fair value of the Group's currency
derivatives is a loss of GBP324,000 within trade and other payables
(2020: GBP442,000 gain). These amounts are based on the market
value of equivalent instruments at the Statement of Financial
Position date.
Losses of GBP348,000 are included in cost of sales (2020:
GBP353,000 gain).
8. Share Capital
The issued share capital of the Group as at 27 March 2021
amounted to GBP6,548,000 (2020: GBP6,548,000). During the period
the Group issued nil shares (2020: nil shares), and therefore the
number of shares at 27 March 2021 were 196,443,323 (2020:
196,443,323).
9. 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.
10. Related Party Transactions
MS Galleon AG is a related party by virtue of their 20.0%
shareholding (38,992,750 ordinary shares) in the Group's issued
share capital (2020: less than 3.0% shareholding).
At 27 March 2021 MS Galleon AG is the owner of Cersanit, a
supplier of ceramic tiles with whom the Group made purchases of
GBP163,000 during the first half of the year which is 0.4% of cost
of goods sold (2020: purchases of GBP4,000 during the first half of
the year which is 0.0% of cost of goods sold).
An amount of GBP7,000 was outstanding with Cersanit at 27 March
2021 (2020: GBPnil). All transactions were conducted on commercial
arm's length terms.
S.K.M Williams is a related party by virtue of his 9.2%
shareholding (18,160,278 ordinary shares) in the Group's issued
share capital (2020: 10.3% shareholding of 20,160,278 ordinary
shares).
At 27 March 2021 S.K.M Williams was the landlord of one property
leased to Multi Tile Limited, a trading subsidiary of Topps Tiles
Plc, for GBP59,000 (2020: one property for GBP65,000) per
annum.
No amounts were outstanding with S.K.M. Williams at 27 March
2021 (2020: GBPnil). The lease agreements on all properties are
operated 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 VDLFFFELLBBE
(END) Dow Jones Newswires
May 18, 2021 02:00 ET (06:00 GMT)
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