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Topps Tiles Reports Resilient First Half

Topps Tiles STockton 725 x 500.jpg

Topps Tiles has reported unaudited interim report for the 26 weeks ended 30th March 2019, advising of a resilient trading performance against a challenging consumer backdrop; consolidation of market leadership position and good progress made in growing commercial operations.

HIGHLIGHTS
Topps Tiles Plc, the UK’s largest tile specialist, announces its interim results for the 26 weeks ended 30 March 2019.

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Adjusting items are detailed in the notes below. These include trading losses from the Parkside business while we go through an initial two year phase of investing in growth plus other items which are either one off in nature or can fluctuate significantly from year to year (such as some property related items).

Financial Summary
• First half like-for-like sales grew by 0.2% (2018: +0.6%);
• Adjusted gross margin of 61.4% (2018: 60.5%) reflects continued benefits of scale and sourcing;
• Adjusted profit before tax of £8.0 million (2018: £7.2 million), the year on year increase being due to higher gross profit and a reduced adjusted cost base;
• Parkside commercial business generated a £1.0 million trading loss (2018: £0.4 million trading loss)
   - which has been excluded from adjusted numbers while we invest in growth (FY18 and FY19);
• When adjusting items (detailed below) are taken into account, the profit before tax on a statutory basis was £5.2 million (2018: £6.4 million);
• Net debt reduced by £7.1 million year-on-year to £18.0 million; and,
• Interim dividend maintained at 1.1p (2018: 1.1p) with full year dividend planned to be paid at a level of approximately 2x cover.

Strategic & Operational Summary Group
• The UK’s leading tile specialist with a core purpose to inspire customers through our love of tiles;
• Competitive advantage generated from our specialist focus - having the best products available for our customers and the very best customer service;
• Buying scale and expertise across both retail and commercial businesses:
   o 20 new ranges launched during H1 including an outdoor porcelain tile range;
   o 90% of our tile range is own brand or exclusive to the Group in the UK; and,
• Our “Leading People” strategy is focussed on colleague engagement and capability.

Retail Business
• Strategy of "Out Specialising the Specialists" remains our key focus in the retail tile market;
• Consumer behaviour is changing such that almost all customers, on a typical shopping journey with us, now utilise both our stores and our website;
• New “Tile Talk” customer feedback system launched, overall satisfaction score of 86% - putting us in the top five of all UK retailers;
• Trade continues to be an important route to market for us – c.99,000 active members now on our Trade Rewards+ loyalty programme (2018: 70,000);
• Continued investment into store estate – half way through a three year programme – in the last 18 months 180 stores have received mini refits, which includes a Design Advice area; and,
• Nationwide store presence critical but our portfolio flexibility is also important in responding to changing consumer needs over time - average unexpired lease term of just over three years excluding strategically important stores.

Commercial Business
• Entry into commercial market has approximately doubled the size of the Group’s addressable UK market whilst maintaining our specialism in tiles;
• Strategy is to disrupt the commercial tile market and construct a new market leader over the medium term;
• Commercial sales over first half have grown by around three times;
• Development of commercial infrastructure on track;
• Flagship design studio opened in March in Clerkenwell, London; and,
• Acquisition of Strata Tiles in April 2019 – key transaction providing further commercial market penetration.

Current Trading and Outlook
• Like for like sales over the seven weeks to 18 May 2019 increased by 1.2% (2018: decreased by 0.2%).

View the Topps Tiles Half-Year Investor Presentation within our Articles section.

Commenting on the results, Matthew Williams, Chief Executive said:
“The Group has delivered a resilient first half performance as we continue to consolidate our position as the UK’s leading tile specialist. Against a consumer backdrop which remains challenging, our trading performance was robust, underpinned by further gains in market share.

“Our commercial tile business continues to grow rapidly, with first half sales more than tripling year-on-year. Expansion of the commercial division was accelerated by the acquisition of Strata Tiles in April. Strata is highly complementary to our existing Parkside commercial business and, together, the two brands provide the Group with a strong base for further expansion into this large and attractive market segment.

“The Group has made an encouraging start to the second half, with trading in the period to date continuing the positive trend seen in Q2. While we are retaining a prudent view of market conditions for the remainder of the year, we remain confident in our ability to continue to extend our market leading position.”

Source : Insight DIY Team and Topps Tiles

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21 May 2019

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