TIDMTPT
RNS Number : 8516H
Topps Tiles PLC
29 November 2022
29 November 2022
Topps Tiles Plc
Annual Financial Results
Second consecutive record year of revenue and significant market
share gain
Topps Tiles Plc ("Topps Group", the "Company" or the "Group"),
the UK's leading tile specialist, announces its unaudited annual
financial results for the 52 weeks ended 1 October 2022.
Strategic and Operational Highlights
-- Second consecutive record year of revenue for the Group
-- Group market share increased to 19.0% from 17.6% last year - well on track
to achieve '1 in 5 by 2025' goal
-- 62% of Group sales to professional trade customers, up 12ppts since 2015
-- Record sales in the Topps Tiles brand, with right-sized estate and ongoing
growth through format development, category expansion and world class
customer service
-- Average sales per Topps Tiles store up 25.3% compared to 2019 levels
-- A record year of sales for Parkside - now trading at breakeven and forecast
to move into profit in 2023
-- Pro Tiler Tools delivering strong sales and profits since acquisition
in March and Tile Warehouse becoming established after starting trading
in May 2022
-- Strong Group recovery from Covid period - trading ahead of 2019 levels
with all businesses contributing to sales growth in a developed and diversified
Group
Financial Highlights
2022 was a 52 week trading period, 2021 was a 53 week period.
Year on year variances throughout this report are not adjusted for
the different time periods covered in each financial year.
52 weeks ended 53 weeks ended YoY
1 October 2 October
2022 2021
(restated(5)
)
Statutory Measures
Group revenue GBP247.2 million GBP228.0 million +8.4%
Gross profit GBP135.4 million GBP130.7 million +3.6%
Gross margin 54.8% 57.3% (2.5)ppts
Profit before tax GBP10.9 million GBP14.0 million (22.1)%
Basic earnings per share 4.60p 5.47p (15.9)%
Final dividend per share 2.6p 3.1p (16.1)%
Total dividend per share 3.6p 3.1p +16.1%
Adjusted Measures
Topps Tiles like-for-like revenue
year-on-year(1) 9.4% 19.6% n/a
Adjusted profit before tax(2) GBP15.6 million GBP15.0 million +4.0%
Adjusted earnings per share(3) 6.14p 6.02p +2.0%
Adjusted net cash(4) GBP16.2 million GBP27.8 million GBP(11.6) million
Financial Summary
-- Group revenue up 8.4% to GBP247.2 million
-- Group gross profit up 3.6% to GBP135.4 million with gross margin down
due to business mix and inflation
-- Costs well controlled, with increases due to inflation and normalisation
of business rates expense offset by cost savings and reduction in store
numbers
-- Adjusted profit before tax up 4.0% to GBP15.6 million and adjusted EPS
up 2.0% to 6.14 pence
-- Strong operational cash flows - closing net cash lower than last year
largely due to one-off items
-- Strong balance sheet with GBP16.2 million net cash and new GBP30.0 million
revolving credit facility, committed to at least October 2025
-- Proposed final dividend of 2.6 pence per share (2021: 3.1 pence per
share), giving a full year dividend of 3.6 pence per share (2021: 3.1
pence per share), up 16.1% year on year
Current Trading and Outlook
-- Robust trading in the first eight weeks of the new financial year, with
like-for-like sales in Topps Tiles up 3.4% year on year and other parts
of the Group performing in line with our expectations
-- Macroeconomic pressures remain from high inflation, low consumer confidence
and weakening levels of disposable income
-- Our clear growth strategy, operational flexibility and strong balance
sheet leave us well-positioned to respond to a more challenging macroeconomic
environment and continued delivery of our '1 in 5 by 2025' goal
Commenting on the results, Rob Parker, Chief Executive said:
"We are pleased to have delivered a year of strong strategic
progress, with record sales for a second year running and excellent
delivery against our '1 in 5 by 2025' market share goal. We are
continuing to develop and diversify the Group and further
strengthening our position as the UK's leading tile specialist.
"Within our Topps Tiles brand, where the majority of sales are
being made to professional tradespeople, our focus on fewer more
profitable stores and category extensions has driven sales per
store up 25% since 2019. Parkside, our commercial brand, has
delivered a record year of sales and now moved into profit. Pro
Tiler Tools and Tile Warehouse have added a new, high growth,
online-only sales channel to the Group, leveraging our core
strengths in product, service and scale.
"Looking forwards, we are mindful of the macroeconomic headwinds
which will impact both UK consumers and businesses in the year
ahead. Against this backdrop, our trading performance in the early
weeks of the new financial year has been robust, with like-for-like
sales growth in Topps Tiles over the first eight weeks of 3.4%.
"Our market share growth during 2022, combined with our clear
strategy and strong balance sheet, give us confidence that we will
continue to deliver growth and create value over the medium
term."
Notes
(1) Topps Tiles like-for-like revenue is defined as sales from
online and Topps Tiles stores that have been trading for more than
52 weeks. In 2022 like-for-like revenue was GBP225.6 million (2021:
GBP216.6 million), with an average of 310 stores included in the
weekly calculation.
(2) Adjusted profit before tax excludes the impact of items
which are either one-off in nature or fluctuate significantly from
year to yea r.
(3) Adjusted earnings per share is adjusted for the items
highlighted above, plus the impact of corporation tax, and a GBP1.2
million deferred tax credit in respect of previous periods which is
not expected to repeat. See note 7 of the financial statements.
(4) Adjusted net cash is defined as cash and cash equivalents,
less bank loans, before unamortised issue costs as at the balance
sheet date. It excludes lease liabilities under IFRS 16.
(5) Prior year values are restated following the adoption of the
IFRIC agenda decision in relation to configuration and
customisation expenditure relating to cloud computing arrangements.
See note 2(A) in the notes to the financial statements.
For further information please contact:
Topps Tiles Plc (29/11/22) 020 7638 9571
Rob Parker, CEO (Thereafter) 0116 282 8000
Stephen Hopson, CFO
Citigate Dewe Rogerson 020 7638 9571
Kevin Smith/Ellen Wilton
Summary of performance
2022 was a second consecutive record year of sales for Topps
Group. Following a record-breaking 2021, with revenues rising to
GBP228.0 million, 2022 saw the Group deliver a further increase of
8.4%(1) to GBP247.2 million. Adjusted profits before tax rose 4.0%
year on year(1) despite significant inflationary headwinds across
gross margins and operating costs, adjusted EPS was up 2.0%(1) and
the full year dividend has increased 16.1% to 3.6 pence. The
strength of the UK RMI market continued to support our financial
performance, but we believe our Group growth strategy is
delivering. We estimate our market share in the year has increased
from 17.6% in 2021 to 19.0% this year, leaving us well on track to
achieve our 20% market share goal of '1 in 5 by 2025'.
Sales performance was strong over the course of the year.
Like-for-like sales in the Topps Tiles brand were up 22.7% on a
two-year basis in the first half. In the prior year, like-for-like
sales over the second half had been up 17.4% on a two-year basis,
and we had expected that some of this performance would soften this
year as consumer spending on other areas, particularly holidays,
travel and leisure, began to recover. In fact, like-for-like sales
in Topps Tiles continued to grow slightly in the second half of
2022, up 0.8% on a one-year basis. Overall, like-for-like sales in
Topps Tiles were up 9.4% in the year on a one-year basis, and, when
compared to the last pre-pandemic period of 2019, average sales per
store were up 25.3%.
Sales in the Group's other trading businesses were also strong.
Over the year, Parkside, our commercial brand, saw sales growth of
26.7%(1) . Pro Tiler Tools delivered year-on-year sales growth of
32.4% across the twelve-month period and Tile Warehouse generated a
small amount of sales in its first few months of trading.
We have maintained good stock availability over the course of
the year, despite a variety of external factors impacting the
Group, including significant supply chain disruption which included
a dramatic rise in global shipping costs, a national shortage of
HGV drivers and major issues at the UK's ports. The year also saw
significant gas price inflation, which directly increases tile
pricing because gas, which powers kilns, accounts for a very
significant proportion of the cost of manufacturing a tile. Our
response across the year has been to increase the prices of tiles
to pass on this inflation to our customers on a pound-for-pound
basis, which has protected gross profits but impacted the gross
margin percentage. The war in Ukraine also impacted the tile
industry, as Ukraine has traditionally been an important source of
clay for tile manufacturers based in European markets, however we
successfully managed this through our strong supplier
relationships. Wider cost pressures impacted our overheads
including our own gas bill rising substantially, although these
cost pressures were well controlled.
Overall, our sales performance was strong across all our
businesses, our action on pricing, sourcing and cost control was
effective, and adjusted profits before tax were GBP15.6 million, up
4.0% year on year(1) . An important benchmark is to compare our
performance in 2022 to our performance in 2019, the last financial
year before the Covid pandemic. Relative to that trading period,
Group sales in 2022 were GBP28.0 million higher (a 12.8% increase),
adjusted profit before tax was up GBP1.9 million (a 14.1%
increase)(2) and market share has increased 2 percentage
points.
Our balance sheet remains strong. Net cash at year end fell to
GBP16.2 million (2021: GBP27.8 million) due to the acquisition of
Pro Tiler Limited, the timing of dividend payments and a number of
specific outflows, however we have renegotiated our credit
facilities and begin the new financial year with substantial
financial strength. Given our profit performance and the strength
of our balance sheet, we are proposing a final dividend of 2.6
pence per share, taking the full year dividend to 3.6 pence per
share, 16.1% higher than last year.
Note 1: 2021 was a 53 week trading period. Year on year
variances are therefore comparing 52 weeks in 2022 to 53 weeks in
2021.
Note 2: Adjusted profit before tax in 2019 has been restated in
line with the IFRIC agenda decision on cloud computing (see the
Financial Review) and includes the trading loss from the Parkside
brand which was excluded from adjusted profit at the time.
Purpose, goal and strategy
The core purpose of Topps Group is to inspire customers through
our love of tiles. This gives us a very clear focus on our
specialism in tiles and associated products, and encourages all our
colleagues to be passionate about the products we sell. It also
puts our customers at the heart of what we do and reminds us that
all roles in the Group are either serving customers directly or
supporting those colleagues that are.
The value of the UK market for tiles, adhesives, grouts and
tools is slightly over GBP1 billion, and the market for all the
products we sell is around GBP1.3 billion, across the residential
and commercial sectors. In 2020, we announced a new goal for the
business based on our market share, which was to account for GBP1
in every GBP5 spent on tiles and associated products in the UK by
2025: '1 in 5 by 2025'. A 20% market share would represent a
significant increase from our estimated 2019 market share of 17%
and would require an out-performance of the market by around 3.5%
per year between 2020 and 2025.
In 2021, we estimated that our market share in periods where we
were allowed to trade without restrictions was approximately 17.6%,
representing a good initial step towards our goal. This year,
including the addition of Pro Tiler Tools into the Group, we have
estimated our market share at 19.0%, leaving us well on track to
deliver our goal by 2025. Given the growth in the market since
2020, our strategic moves into new areas and the recent success of
the core business, our revenues are already almost at the level we
set out for 2025 when the goal was launched, GBP250 million, with
three years to go.
In 2020, our strategy consisted of four elements - Retail,
Commercial, Leading Product and Leading People. However, over the
past two years, the Group has continued to develop and diversify.
Our growth strategy to deliver our goal now consists of three
business areas - Omnichannel (Topps Tiles), Commercial (Parkside)
and Online Pure Play (Pro Tiler Tools and Tile Warehouse) - all of
which are underpinned by our three Group strategies of Leading
Product, Leading People and Environmental Leadership.
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. Over the last 18 months,
the numerous pressures on the end-to-end supply chain for tiles has
made this advantage more important than ever. Manufacturers have
faced dramatic increases in the cost of production relating to gas
prices and raw material inflation. Supply chains have been
disrupted by HGV driver shortages, strikes in our ports and
significant increases in global shipping costs.
Our ability to rely on long term strategic relationships with
our strategic supplier base, freight forwarding and logistics
partners in this environment has been key. In the year, we sourced
73% of our supply from our strategic supplier base (2021: 70%). We
have also responded by resourcing products towards suppliers or
regions of the world which are less impacted by the factors above,
as well as maintaining a strong inventory position.
As well as responding to the factors described above, we
continued our iterative programme to develop and produce
differentiated products that are innovative, of high quality and
exclusive to Topps Group. During the year, we launched 34 new
products into Topps Tiles (2021: 52 product introductions) and 76%
of ranges within Topps Tiles are either exclusive or own brand
(2021: 74%). We also curated a new product range for Tile
Warehouse, significantly extended our range of Everscape(TM)
outdoor tiles, rolled out Luxury Vinyl Tiles to the majority of
Topps Tiles stores, and are now trialling more category expansion
in XXL tiles and shower panels.
The role of product brands within the business has been an area
of focus. First, we have created own brands which are portable
across the Group, such as:
-- DexTM, our tiling tools brand aimed at the general builder and DIY
enthusiast;
-- Regenr8TM, our sustainable adhesive containing up to 53% recycled content;
-- Excel BondTM, our core own brand of adhesive; and
-- RiseTM, our new underfloor heating brand.
Secondly, we are increasing our understanding of the role of
proprietary brands within non-tile products aimed at our trade
customer base. Our acquisition of Pro Tiler Tools has increased our
access to a very wide variety of trade-focused brands and we are
currently working to understand the opportunity that these products
may provide for trade customers within our Topps Tiles stores,
where trade sales accounted for 59% of total sales in 2022,
increasing to 60% in the final quarter.
Leading People
The Group's success is underpinned by industry-leading levels of
customer service. Our core product is both a building material,
requiring technical knowledge, and a decorative item, requiring
inspirational selling, and we need our colleagues to be able to
work and communicate effectively across both areas, requiring high
levels of capability and engagement.
Our Leading People strategy is based around four key areas:
recruitment and retention, colleague experience, capability and
well-being.
Recruitment and retention has been a challenge for many
companies over the last year. Given the tightness of the UK labour
market, we have focused on improving our recruitment processes and
better communicating our employer brand. Our compensation strategy
for service specialists within Topps Tiles includes an average of
GBP2,500 per year in commission on top of basic salary, as well as
pension contributions, an employee discount scheme and no evening,
late night or Christmas working (which are common in equivalent
jobs in retail and hospitality). Our culture, based around small
teams with big ambitions, who have high levels of trust and who
celebrate success, is also a big part of the attraction of working
for Topps Group.
Other highlights in the year include the launch of our new
charity relationship with Alzheimer's Society and an ongoing focus
on colleague engagement through our Team-Talk employee forums. We
also launched our new learning experience platform and extended our
coaching programme across middle and senior managers. We aim to
promote internally wherever possible, and we were pleased that last
year, 65% of candidates appointed to management positions were
internal promotions.
Our ongoing focus on well-being continues. A highlight last year
was the launch of our new partnership with Bupa, which provides
colleagues with occupational health support, an improved employee
assistance programme and access to Bupa's wealth of resources on
wellbeing. Much more information can be found on colleague
experience, capability and wellbeing in the Sustainability section
of the Annual Report.
The success of our Leading People strategy is evidenced by our
customer satisfaction scores, and seen directly in our Employee
Engagement scores which we measure through our annual MyVoice staff
survey. Overall colleague engagement was at 80% in the last annual
survey (FY 2021: 80%) compared to the UK average of 68%.
Environmental Leadership
Topps Group has a long history of considering its environmental
impact. In 2004, we established our first environmentally focused
working group; in 2010, we partnered with the Carbon Trust,
implementing lighting energy efficiency upgrades which we have
subsequently improved upon, year by year; and, in 2013, we began
reporting carbon emissions in our Annual Report, providing a key
metric for investors to evaluate the Group's environmental
performance.
However, the severity of the global climate crisis is growing
and the requirements for all businesses to do much more to limit
their environmental impact is clear.
As such, in recent years, Topps Group has been accelerating its
environmental agenda. In 2019, we established our Sustainability
Council, a cross-functional committee now chaired by our Chief
Executive, Rob Parker, which was tasked with aligning the business
to a low carbon model. In 2021, we placed Environmental Leadership
front and centre as part of the core strategy of Topps Group and we
challenged ourselves with an ambitious goal of becoming carbon
neutral across Scopes 1 and 2 by 2030, five years ahead of the
BRC's equivalent target for the wider retail industry. This year we
are delighted that our Commercial business has become carbon
balanced - the first part of the Group to reach this milestone.
Other improvements have included the addition of EV chargers at our
Head Office and the renewal of our commercial fleet with more
efficient, lower polluting vehicles, which, alongside improved
driver training and the latest route planning software, led to our
fleet using 6% less fuel than the previous year (despite covering
23% more miles). Carbon emissions per store are down 35.4%
year-on-year as a result of the Group moving to a renewable source
of electricity in 2022. We believe the Scope 3 emissions are far
more significant than Scope 1 and 2 whilst being harder to monitor
and influence. As such we will start to report the Group's Scope 3
emissions from 2024.
In 2022, we have added a second pillar to our Environmental
Leadership strategy: supporting circularity. As part of this, we
have signed up to WRAP's Plastic Pact UK, obligating us to
eliminate non-recyclable plastic packaging, and we have begun
promoting recycled content in products at the point of sale, both
online and in-store, to help customers make environmentally
conscious choices.
We have reformatted the five elements of our Environmental
Leadership strategy from 2021 into two main pillars, governed by
our executive-led Sustainability Council. These are:
1. Achieving carbon balance (Scopes 1 & 2)
-- Reduce as much as possible our current carbon emissions
-- Use high quality, auditable carbon offsets to balance the remainder
by 2030
2. Supporting circularity
-- Work with partners to minimise waste and manage the remainder responsibly,
with a focus on recycling
-- Drive innovation to increase the use of recycled and recyclable materials
in tiles, related products, and packaging (e.g. through the Plastic
Pact UK).
Omni-channel: Topps Tiles
Topps Tiles is our well-established, market-leading,
omni-channel specialist, serving the domestic RMI market, with
significant opportunities for further profitable growth.
This year saw record sales in Topps Tiles of GBP227.0 million
(2021: GBP219.4 million over 53 weeks), with like-for-like sales
growth of 9.4%. Sales per store were 25.3% higher than in the
pre-pandemic period of 2019 and total profit in Topps Tiles has
increased despite having 15% fewer stores compared to that year.
Our strategy for future growth focuses on three main areas:
increasing customer numbers, online and in store, delivering world
class customer service, and management of our physical store
portfolio.
Our customer base continues to be a mix of professional trade
customers and homeowners. Trade customers are key as they provide
repeat custom and also form an important link to homeowners, both
in terms of recommendation and also direct sales on behalf of
homeowners who prefer to transact through their fitter rather than
with us directly. We have been actively growing our sales to trade
customers over recent years, as follows:
FY15 FY19 FY22 Q4 FY22
Trade customers:
% of sales in Topps Tiles 50% 56% 59% 60%
---- ---- ---- -------
As such, the business is now more of a merchant than a retailer,
with the majority of sales being made to professional
tradespeople.
This year, our sales of products other than tiles (such as
adhesives and grouts) have been encouraging and we have maintained
good levels of stock and offered particularly keen value to our
trade customers across these product areas, including trade
pricing, bulk deals and a trade loyalty scheme. We also provide a
direct sales team, which offers contractors and larger trade
customers an enhanced service.
Growing customer numbers is a key function of our digital
operations, as we know that many purchasing journeys start with
research online. This year we have made various technical
improvements to our multiple award-winning website, for example
halving page load speeds and adding new payment methods. We have
launched a new app for trade customers and extended our social
media presence, including a launch on TikTok. At the end of the
year, we launched a Topps Tiles range on Very.co.uk - this is Topps
Tiles' first move into marketplaces and is a good fit given Very's
core customer group is complementary to Topps Tiles' customer
base.
The output of this work is that we enjoy high levels of brand
awareness online. Our website, toppstiles.co.uk, has higher brand
searches than any other flooring retailer in the UK, we have the
second highest brand awareness (behind SCS) and the third highest
visibility (behind SCS and Carpetright) (Source: "Flooring -
Salience Index 2022"). We also 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 in that report.
Our stores remain central to our omni-channel offer,
particularly for our trade customers. Given the nationwide coverage
of our store estate, almost every customer will visit a store at
some point in their purchasing journey, and almost all customers
will visit the website too. This year we have established three
store formats within Topps Tiles. 33 of our largest stores are
branded as 'Topps Tiles Superstores'. These larger stores contain
the widest breadth of Topps' range of products as well as further
amenities and are now, following modest investment, outperforming
the rest of the estate. Our 14 'Topps Tiles Clearance' stores
provide even greater value to customers, whilst allowing us to
clear mixed batch and discontinued lines. The balance of 257 stores
are core stores, which will continue to deliver excellent service
and range for trade and homeowner customers.
This year we completed our multi-year programme of store
closures, and we believe our estate is now right-sized. During the
year we closed ten stores and opened one. The Topps Tiles store
estate has reduced from 372 stores at the end of 2017, to 304
stores at the end of 2022, a reduction of 18%, and this reduction
in stores has helped drive incremental profits as we transitioned
sales from closed stores to other local stores whilst reducing our
cost base. Our estate management has been strong throughout the
process, and we finished the year with 11 closed Topps Tiles sites
(down from 21 at the start of the year, despite ten additional
Topps Tiles store closures in the year), of which four more are
expected to exit the business in the first half of 2023. We retain
a flexible property portfolio, with an average unexpired lease term
to the next break opportunity of 2.8 years (2021: 3.3 years), or
2.6 years excluding strategically important stores (2021: 3.0
years).
Through the quality of our digital operations, our store estate
and our colleagues, we aim to deliver world class service.
Homeowners shop with us infrequently and require advice and
expertise, whether in store or online, and trade customers value
strong local relationships and technical knowledge. We were
delighted that our customer satisfaction levels improved again in
2022, from 88% last year to 90% this year. That means that 90% of
the c.17,000 customer surveys which we collect each year rated us
as five out of five - we believe this is a genuinely world-class
result.
Overall, Topps Tiles has had a very strong year both financially
and strategically, with good growth in sales and profits, a
right-sized estate with new formats in place, further developments
in digital, a move into marketplaces in place with Very, growth in
trade sales and even higher satisfaction scores from our
customers.
Commercial: Parkside
Parkside is a specialist tile distributor, aimed at architects,
designers and contractors in the commercial market. Becoming part
of Topps Group in 2017, Parkside is now a top-five competitor
within the sector and is established as one of the fastest growing
brands in this market.
This year, Parkside delivered a fifth consecutive year of record
sales, up 26.7% to GBP10.9 million (2021: GBP8.6 million over 53
weeks). This represents a significant out-performance of the new
build commercial market, which was up 2.5% in the year (across all
product types) but remains 21.7% lower than its level before the
Covid pandemic (source: ONS). We estimate that the element of the
commercial market for tiles and associated products which is
attractive for us to address is worth approximately GBP200 million.
On that basis, Parkside represents at least a GBP25 million sales
opportunity for the Group.
In the year, Parkside acquired more than 120 new clients,
ranging from one-off purchases to repeat business across multi-site
locations, and continued to push forward in its specialist sectors
of retail and leisure, hotels, infrastructure and transport, and
residential. The business is building a strong sales culture and
has further opportunity to leverage the Group's scale and
infrastructure, in areas such as brands, supply chain and
inventory.
Environmental credentials are particularly important to
architects and designers focused on the commercial market, and we
work with them to build sustainability into their projects. This
year, Parkside became the first part of the Group to become carbon
neutral across Scope 1 and 2 emissions, building on our ISO14001
accreditation, recycled and recyclable samples packaging,
commitment to sustainable products, our various CPD sessions at our
Clerkenwell Sustainability and Design Studio and many other
initiatives.
Parkside's financial performance is improving at pace. Trading
losses in the year halved to GBP0.8 million (2021: GBP1.6 million
loss), however GBP0.7 million of that was from the first half year,
and the business was trading at breakeven by the final quarter. We
expect Parkside to deliver a positive contribution to the Group's
profitability in 2023.
Online Pure Play: Pro Tiler Tools and Tile Warehouse
In 2021 we identified a significant opportunity to add
complementary trading businesses which operate solely online,
serving different customer groups with different needs, but always
focused on our specialism of tiles and associated products, to
Topps Group. These businesses can benefit from the Group's scale,
flexible supply chain, financial resources and operational
expertise, and in turn the rest of the business can benefit from
the specialist knowledge and experience of new colleagues from
these successful online businesses as they join the Group. In 2022,
we added two new Online Pure Play trading businesses to the Group -
Pro Tiler Tools and Tile Warehouse - and we see the potential for
more in time.
Pro Tiler Tools
The Group acquired 60% of the issued share capital of Pro Tiler
Limited in March 2022, with a contract to acquire the remaining 40%
in 2024. Pro Tiler Tools is an online specialist supplier of
tiling-related consumables and equipment to trade customers. Pro
Tiler is highly complementary to the existing Group's operations,
enabling us to serve trade customers both physically (through Topps
Tiles) and online (through Pro Tiler Tools).
Trading post acquisition has been strong. On acquisition, we
reported that Pro Tiler's sales in the 12 months to January 2022
were GBP11.9 million. Sales in the 12 months to September 2022 were
GBP14.7 million and sales in the second half of the Group's
financial year annualise at GBP16.5 million. Year on year sales
growth across the full year was 32.4%. The business runs at a gross
margin of approximately 30% meaning that continued growth will have
a dilutive impact to the Group's percentage gross margins, but will
provide incremental gross profits. We are targeting sales in excess
of GBP25 million over time from Pro Tiler Tools.
The Pro Tiler Tools platform, management and team also allow us
the opportunity to grow in other areas of the online market and the
Group is encouraging the team to deliver additional value where
appropriate. Additionally, Pro Tiler Tools has access to a
significant number of proprietary brands which we believe will
present opportunities for further long term value creation for the
wider Group.
Tile Warehouse
Tile Warehouse was launched in May 2022 as a new online-only
brand built from the ground up to offer homeowners everyday low
pricing on a focused range of tiles and associated products. Tile
Warehouse focuses on quality tiles at very competitive price points
and is complementary to Topps Tiles as it will target a different
customer group, whilst leveraging the Group's scale, supplier
relationships, digital expertise and financial resources. The
market for online-only tiles in the UK is estimated to be worth
more than GBP100 million and we are targeting sales of
approximately GBP15 million from Tile Warehouse within the first
five years. We expect to make small losses in the first few years
as the brand is established but believe it will play a significant
role in the Group as we move forward.
The first few months of trading have been focused on
establishing the technical aspects of the offer including product
range, samples, online functionality, search strategies, SEO
content and supply chain solutions. The brand has been developed at
a low cost however the investment in growth will start in 2023 as
we start to invest in pay per click to drive traffic in a more
meaningful way.
Key Performance Indicators ("KPIs")
The Board monitors a number of financial and non-financial
metrics and KPIs both for the Group and by individual store. This
information is reviewed and updated as the Directors feel
appropriate. Specific measures include:
52 weeks to 53 weeks to YoY
1 October 2 October
2022 2021
(restated)
Financial KPIs
Group revenue growth year-on-year 8.4% 18.3% n/a
Topps Tiles like-for-like sales growth
year-on-year* 9.4% 19.6% n/a
Group gross margin 54.8% 57.3% (2.5)ppts
Adjusted profit before tax* GBP15.6m GBP15.0m +4.0%
Adjusted earnings per share* 6.14 pence 6.02 pence +2.0%
Adjusted net cash* GBP16.2m GBP27.8m GBP(11.6)m
Inventory days 126 123 +3 days
Non-financial KPIs
Topps Tiles customer overall satisfaction
score 89.9% 88.4% +1.5 ppts
Colleague turnover 36.5% 31.2% +5.3 ppts
Carbon emissions per store (tonnes
per annum) 15.5 24.0 (35.4)%
Number of Topps Tiles stores at year
end 304 313 (9)
* as defined in the Financial Review
Notes: Customer overall satisfaction scores are calculated from
the responses we receive through our TileTalk customer feedback
programme. Overall satisfaction (OSAT) is the percentage of
customers that score us 5 in the scale of 1 - 5, where 1 is highly
dissatisfied, and 5 is highly satisfied. Energy carbon emissions
have been compiled in conjunction with our electricity and gas
suppliers. This is based on the actual energy consumed multiplied
by Environment Agency approved emissions factors. Vehicle emissions
have been calculated by our in-house transport team based on
mileage covered multiplied by manufacturer quoted emission
statistics. Carbon emissions per store for FY21 have been restated
to remove emissions connected with sub-contractors, which classify
as scope 3 emissions and do not form part of this metric.
FINANCIAL REVIEW
The 2022 financial year covers the 52 weeks to 1 October 2022.
The previous financial year covers the 53 weeks to 2 October
2021.
Adjusted Measures
The Group's management uses adjusted performance measures, to
plan for, control and assess the performance of the Group.
Adjusted profit before tax differs from the statutory profit
before tax as it excludes the effect of one-off or fluctuating
items, allowing stakeholders to understand results across years in
a more consistent manner. In line with the prior year, we have
included the business-as-usual impact of IFRS 16 in adjusted profit
but continue to adjust for any impairment charges or impairment
reversals of right of use assets, derecognition of lease
liabilities where we have exited a store, and one-off gains and
losses through sub-lets. In the period 2022 - 2024 we will also
exclude the cost relating to the 40% purchase of shares of Pro
Tiler Limited which we expect to make from March 2024, which under
IFRS 3 is treated as a remuneration expense rather than an
acquisition cost, and this period we have excluded deal costs
related to the Pro Tiler Limited acquisition and set up costs
relating to Tile Warehouse.
Analysis of movements from adjusted profit before tax to
statutory profit before tax are detailed below:
2022 GBPm 2021 GBPm
(restated)
Adjusted profit before tax 15.6 15.0
---------- ------------
Property
---------- ------------
Accelerated depreciation and impairment of
property, plant and equipment (0.5) (1.0)
---------- ------------
Vacant property and closure costs (1.7) (2.1)
---------- ------------
Store impairments and lease gains and losses (0.2) (0.2)
---------- ------------
(2.4) (3.3)
---------- ------------
Business Development
---------- ------------
Pro Tiler Tools deal costs (0.2) nil
---------- ------------
Pro Tiler Tools share purchase expense (1.6) nil
---------- ------------
Tile Warehouse set up costs (0.5) nil
---------- ------------
(2.3) nil
---------- ------------
Other
---------- ------------
Business rates relief from April to September
2021* nil 2.3
---------- ------------
nil 2.3
---------- ------------
Statutory profit before tax 10.9 14.0
---------- ------------
* In the second half of the prior year we included a normal
level of business rates within adjusted profit, despite business
rates relief of GBP2.3 million over this period, to allow improved
comparison with the future and prior years. The business traded
without material restrictions in the second half of the prior year,
and not including a business rates expense within adjusted profit
for this period would be unrepresentative of our underlying
performance. This contrasts with the first half of the prior year
where we suffered material trading restrictions and so no
adjustment for business rates relief was made.
Adjusted earnings per share is adjusted for the items listed
above, as well as the impact of corporation tax. In addition,
adjusted earnings per share excludes a non-repeating credit of
GBP1.2 million relating to deferred tax adjustments in respect of
previous periods.
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 GBP0.2 million. The Group will
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.
Following the completion of a purchase price allocation exercise
over the second half year, the Group recognised the following
amounts on acquisition: tangible assets of GBP1.6 million,
including GBP0.9 million of net cash, GBP0.2 million of net working
capital and GBP0.5 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 over 10 years in line with
it's useful economic life.
The purchase of the remaining 40% of shares in Pro Tiler Limited
will be accounted for as a remuneration expense over the earn out
period, 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 has increased
the Group's effective rate of corporation tax in FY22 and over 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
GBP9.2 million and profit before tax of GBP0.6 million. Acquisition
costs of GBP0.2 million and remuneration costs of GBP1.6 million in
relation to the 40% share purchase were treated as adjusting
items.
Configuration Costs in a Cloud Computing Arrangement
Following the IFRS Interpretations Committee (IFRIC) agenda
decision in relation to configuration and customisation expenditure
relating to cloud computing arrangements, including Software as a
Service (SaaS), the Group has reviewed and revised its accounting
policy relating to IAS 38 Intangible Assets. This has resulted in
reclassifying expenditure that was previously capitalised as an
intangible asset in previous years and expensing this to the
Consolidated Statement of Profit or Loss as administrative costs.
The impact on profit before tax for the 53-week period ended 2
October 2021 is a reduction in statutory profit before tax and
adjusted profit before tax of GBP0.3 million. All comparatives in
the Financial Review and the financial statements have been
restated and further details are given in the notes to the
accounts.
STATEMENT OF FINANCIAL PERFORMANCE
Revenue
Total revenue for the 52-week period increased by 8.4% to
GBP247.2 million (2021: GBP228.0 million). Revenue consolidated
into the Group accounts by brand was as follows:
Revenue by brand 2022 (52 weeks) 2021 (53 weeks) Variance
(GBPm)
Topps Tiles 227.0 219.4 +3.5%
--------------- --------------- --------
Parkside 10.9 8.6 +26.7%
--------------- --------------- --------
Pro Tiler Tools 9.2 0.0 n/a
--------------- --------------- --------
Tile Warehouse 0.1 0.0 n/a
--------------- --------------- --------
Topps Group 247.2 228.0 +8.4%
--------------- --------------- --------
Topps Tiles like-for-like sales were 9.4% higher than the prior
year, which consisted of a 19.7% increase in the first half of the
financial year and a 0.8% increase in the second half.
Total revenue in Topps Tiles was up 3.5% year on year to
GBP227.0 million. There was a net closure of 9 Topps Tiles stores
in the year and the brand finished the trading period with 304
trading stores. Prior year revenue was impacted by trading
restrictions related to the Covid-19 pandemic in the second
quarter, when homeowners were unable to go inside our stores and
registered traders were allowed to enter to visit the trade counter
only.
In the commercial market, sales to our clients through Parkside
were up 26.7% year on year to GBP10.9 million. The Group
consolidated sales of GBP9.2 million from the seven months of
ownership of Pro Tiler Tools and recorded a further GBP0.1 million
of sales in the start-up period of Tile Warehouse.
Overall, we estimate that 62% of sales in the Group are made to
trade or professional customers, with 38% of sales direct to
homeowners.
Gross Margin and Gross Profit
Group gross margin was 54.8%, a decrease from 57.3% in the prior
year. Group gross profits increased GBP4.7 million to GBP135.4
million, including GBP3.2 million relating to Parkside, Pro Tiler
Tools and Tile Warehouse.
The change in gross margin was due to three main factors. Within
Topps Tiles, the impact of higher cost of goods following increases
in gas prices, other raw materials and shipping costs in the year
have been passed through to customers on a pound-for-pound basis.
Our pricing response has protected gross profits but impacted the
gross margin percentage by (0.9) percentage points. Secondly, there
have been changes in customer and product mix, specifically
improved sales to trade customers, more sales of products other
than tiles, and new product areas including outdoor tiles and
luxury vinyl tiles, which impacted gross margins by (0.5)
percentage points. Finally, the growth in our other trading
businesses, specifically the acquisition of Pro Tiler Tools and the
growth in sales from Parkside, reduced Group gross margin by (1.3)
percentage points. Other minor changes increased gross margins by
the balance of 0.2 percentage points.
Gross profits increased across each of the three business areas
due to the positive sales impact of the factors above.
Operating Expenses
Operating expenses were GBP120.6 million compared to GBP112.7
million in FY21 (restated), which included c. GBP6.7 million of
Business Rates Relief. On an adjusted basis, operating expenses
increased from GBP111.7 million in FY21 to GBP116.0 million in
FY22.
The GBP4.3 million increase in adjusted operating costs is
explained by the following key items:
GBP million
FY 2021 adjusted operating expenses (restated) 111.7
Reversal of H1 2021 business rates relief 4.4
Reverting to a 52-week accounting period (2.0)
Holiday pay accrual normalisation 1.4
Increased utilities expense 1.0
Other regulatory and inflationary cost increases 3.5
Reduced store space (310 stores on average vs 331 in
2021) (4.3)
Other savings (2.0)
Commercial and Online Pure Play 2.3
FY 2022 adjusted operating expenses 116.0
Finance income and costs
Interest on bank loans and overdrafts, net of bank interest
receivable, was GBP0.3 million (2021: GBP0.4 million), relating to
commitment fees payable on the revolving credit facility.
Net interest payable under IFRS 16 was GBP3.6 million, resulting
in total net finance costs of GBP3.9 million (2021: GBP4.1
million).
Profit Before Tax
Excluding the items detailed in the Adjusted Measures section
above, adjusted profit before tax was GBP15.6 million (2021
restated: GBP15.0 million). The Group adjusted profit before tax
margin was 6.3% (2021: 6.6%).
Statutory profit before tax was GBP10.9 million (2021 restated:
GBP14.0 million).
Tax
On an adjusted basis, the effective rate of corporation tax for
the period was 21.8% (2021: 21.6%).
The effective rate of corporation tax for the period on a
statutory basis was 16.0 % (2021: 23.5%). The tax expense includes
a one-off deferred tax credit in relation to previous periods of
GBP1.2 million which is excluded from adjusted earnings per share
metrics.
Earnings Per Share
Adjusted earnings per share were 6.14 pence (2021 restated: 6.02
pence). Basic earnings per share were 4.60 pence (2021 restated:
5.47 pence). Diluted earnings per share were 4.55 pence (2021
restated: 5.41 pence).
Dividend and Dividend Policy
In the 2022 Interim Results, the Group outlined a new Capital
Allocation and Dividend Policy. We indicated that we would
prioritise the following:
1) Business resilience - we are an operationally geared business 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 indicated that over the period from 2021 to 2023, it
intended to increase the dividend payout ratio from around 50% of
adjusted earnings per share to around 67%. As such, this year, the
Board is proposing a final dividend of 2.6 pence per share,
bringing the full year dividend to 3.6 pence per share, a year on
year increase of 16.1%. This represents 59% of the adjusted
earnings per share of 6.14 pence.
The shares will trade ex-dividend on 22 December 2022 and,
subject to approval at the Annual General Meeting, the dividend
will be payable on 3 February 2023.
STATEMENT OF FINANCIAL POSITION
Acquisitions & Disposals
The most significant acquisition in the period was the purchase
of 60% of the shares of Pro Tiler Limited, as described in the
section above.
In the prior year we disposed of three freehold or long
leasehold stores for GBP2.1 million. There were no freehold or long
leasehold store disposal or acquisitions in the current year.
At the period end the Group held two freehold or long leasehold
sites, with a total carrying value of GBP1.0 million (2021: two
freehold or long leasehold sites valued at GBP1.0 million). The
carrying value is based on the historic purchase cost and capital
expenditure less accumulated depreciation.
Capital Expenditure
Capital expenditure in the period amounted to GBP3.2 million
(2021: GBP4.4 million), a reduction of 27% year on year.
Key investments were as follows:
-- Topps Tiles stores - including one new opening, store improvements, merchandising
and maintenance - GBP2.5 million
-- LED store improvement programme GBP0.3 million
-- Group IT developments GBP0.4 million
The Board expects capital expenditure in the year ahead to be
between GBP6 million and GBP7 million. This compares to an average
of GBP8.1 million in the four years before the pandemic (FY16 to
FY19) and is broadly in line with depreciation on property, plant
and equipment and intangible assets. This amount will cover our
core investment plans - any acquisitions that the Group may
consider as part of its growth plans would be additional to this
guidance.
Inventory
Inventory at the period end was GBP38.6 million (2021: GBP32.8
million) representing 126 inventory days (2021: 123 inventory
days). The GBP5.8 million year-on-year increase in stock includes
GBP2.6 million of additional stock relating to Pro Tiler Tools and
Tile Warehouse, an increase of GBP4.2 million due to higher cost
prices and a slight reduction of GBP1.0 million relating to the
volume of stock in Topps Tiles.
Cash flow
On a statutory basis, net cash from operating activities was
GBP22.9 million, compared to GBP26.4 million in the prior year.
The table below analyses changes in adjusted net cash flow:
2022 2021
(restated)
GBPm GBPm
Cash generated by operations, including interest
and capital elements of leases, before WC movements 18.5 20.7
Payment of deferred VAT (2.1) (3.7)
Other changes in working capital (8.9) (10.9)
Capital expenditure (3.2) (4.4)
Disposals 0.2 2.1
Interest (0.3) (0.5)
Tax (3.5) (1.5)
Other 0.1 0.0
Free cash flow 0.8 1.8
Acquisition of Pro Tiler Limited, net of cash and
debt acquired (4.4) 0.0
Dividends (8.0) 0.0
Change in adjusted net cash (11.6) 1.8
Adjusted net cash at end of period 16.2 27.8
Adjusted net cash reduced by GBP11.6 million (2021: GBP1.8
million increase). This reduction was driven the following main
factors: a GBP11.0 million outflow in working capital including a
GBP4.4 million increase in inventory, the repayment of GBP2.1
million of deferred VAT, decrease of GBP3.5 million in other
payables and an increase of GBP1.0 million in receivables; the
purchase of 60% shares of Pro Tiler Limited at a cash cost of
GBP4.4 million net of cash acquired and including the repayment of
a loan immediately following acquisition; and the payment of GBP8.0
million of dividends, which included the full year payment relating
to FY21 as well as the interim dividend from FY22.
Cash and cash equivalents at the period end were GBP16.2 million
(2021: GBP27.8 million) with nil borrowings (2021: nil).
Return on capital employed
The Group's return on capital employed, including the impact of
leases, improved from 17.2% in 2021 to 17.3% in 2022 following a
slight increase in adjusted profit. Lease adjusted capital employed
increased GBP7.2 million over the financial year as a result of a
GBP4.0 million increase in total equity and a GBP11.6 million
reduction in adjusted net cash, partially offset by a GBP8.4
million reduction in lease liabilities year-on-year. The Group
defines return on capital employed as the annual adjusted operating
profit divided by the average capital employed (net assets plus net
debt, including lease liabilities).
Banking Facilities
On 21 October 2022, the Group entered a new syndicated GBP30.0
million revolving credit facility with two banks, which is
committed to October 2025 with extension options for a further two
years available. The new facility contains a slightly favourable
interest rate structure compared to our previous GBP39.0 million
banking facility, which was due to expire in June 2023, and
provides continued balance sheet strength and financial resilience
for the Group into the medium term. At the year end, no banking
facilities were drawn (2021: nil). Based on our year end net cash
of GBP16.2 million we have GBP46.2 million of headroom to our new
banking facility at year end (2021: headroom of GBP66.8 million
against the GBP39.0 million facility in place at that time).
Forward guidance
Increased cost pressures will impact the profitability of the
business in 2023. Overall, we expect around GBP5.0 million of
inflationary pressures year on year across our overhead base, in
utilities, employment costs, property costs and other expenses. We
will be able to offset some but not all of this through efficiency
savings and as a result believe our profitability may modestly fall
next year, in line with current market expectations.
Whilst the Group has not historically demonstrated much
seasonality in sales or profits across the two halves of the
financial year, in 2023 we expect Group profitability to be more
weighted towards the second half. The key drivers of this are: a
gas expense which we expect to be approximately GBP1.7 million in
the first half and GBP0.8 million in the second half; a normalised
holiday pay accrual, with a debit in the first half of GBP0.7
million and a credit in the second half of GBP0.7m; continued
growth in the newer parts of the Group across the course of the
year; and some easing in elements of supply chain costs as the year
progresses.
Current Trading and Market Conditions for the Year Ahead
There are substantial macroeconomic headwinds impacting both UK
consumers and businesses. Consumer confidence is currently near to
record lows and Government forecasts suggest the country is
entering a recession which will continue throughout 2023 and
possibly into 2024, impacting real incomes for UK consumers.
Against this backdrop, our trading performance has been robust,
with like-for-like sales growth in Topps Tiles over the first eight
weeks of the new financial year of 3.4% and other parts of the
Group performing in line with our expectations. Our market share
growth during 2022 and our progress towards our goal of '1 in 5 by
2025', combined with our clear strategy and strong balance sheet,
give us confidence that we will continue to deliver growth and
create value over the medium term.
Rob Parker Stephen Hopson
Chief Executive Officer Chief Financial Officer
29 November 2022
Unaudited Consolidated Statement of Profit or Loss
For the 52 weeks ended 1 OCTOBER 2022
53 weeks
52 weeks ended
ended 2 October
1 October 2021
2022 (restated)(1)
Notes GBP'000 GBP'000
------------------------------------------------- ------------- ------------------ --------------
Group revenue 3 247,241 227,997
Cost of sales (111,818) (97,297)
------------------------------------------------- ------------- ------------------ --------------
Gross profit 135,423 130,700
Distribution and selling costs (89,316) (83,591)
Other operating expenses (5,953) (6,100)
Administrative costs (19,827) (18,419)
Sales and marketing costs (5,495) (4,564)
------------------------------------------------- ------------- ------------------ --------------
Group operating profit 14,832 18,026
Finance income 6 123 87
Finance costs 6 (4,010) (4,158)
------------------------------------------------- ------------- ------------------ --------------
Profit before taxation 4 10,945 13,955
Taxation 7 (1,754) (3,279)
------------------------------------------------- ------------- ------------------ --------------
Profit for the period 9,191 10,676
------------------------------------------------- ------------- ------------------ --------------
Profit is attributable to:
Owners of Topps Tiles Plc 9,005 10,648
Non-controlling interests 186 28
------------------------------------------------- -------------------- ----------- --------------
9,191 10,676
------------------------------------------------- -------------------- ----------- --------------
All results relate to continuing operations of
the Group.
1 See note 2(A) for an explanation of the prior
year restatement
53 weeks
52 weeks ended
ended 2 October
1 October 2021
Earnings per ordinary share: Notes 2022 (restated)(1)
GBP'000 GBP'000
- Basic 9 4.60p 5.47p
- Diluted 9 4.55p 5.41p
Unaudited Consolidated Statement of Comprehensive Income
For the 52 weeks ended 1 OCTOBER 2022
53 weeks
52 weeks ended
ended 2 October
1 October 2021
2022 (restated)(1)
GBP'000 GBP'000
----------------------------------------------------------- ---------- --------------
Profit for the period 9,191 10,676
Total comprehensive income for the period is attributable
to:
Owners of Topps Tiles Plc 9,005 10,648
Non-controlling interests 186 28
----------------------------------------------------------- ---------- --------------
9,191 10,676
1 See note 2(A) for an explanation of the prior year
restatement
Unaudited Consolidated Statement of Financial Position
as at 1 OCTOBER 2022
2021
2022 (restated)(1)
Notes GBP'000 GBP'000
----------------------------------------------------- ----- --------- --------------
Non-current assets
Goodwill 2,101 -
Intangible assets 5,423 468
Property, plant and equipment 20,888 23,680
Other financial assets 1,947 2,335
Deferred tax assets 114 564
Right-of-use assets 88,545 95,418
----------------------------------------------------- ----- --------- --------------
119,018 122,465
----------------------------------------------------- ----- --------- --------------
Current assets
Inventories 38,605 32,758
Other financial assets 542 518
Trade and other receivables 6,419 4,538
Cash and cash equivalents 10 16,241 27,789
----------------------------------------------------- ----- --------- --------------
61,807 65,603
----------------------------------------------------- ----- --------- --------------
Total assets 180,825 188,068
Current liabilities
Bank loans 11 - -
Trade and other payables (43,650) (47,425)
Lease liabilities (18,187) (19,521)
Current tax liabilities (1,152) (2,027)
Provisions (352) (353)
----------------------------------------------------- ----- --------- --------------
(63,341) (69,326)
----------------------------------------------------- ----- --------- --------------
Net current liabilities (1,534) (3,723)
Non-current liabilities
Lease liabilities (84,741) (91,817)
Provisions (3,694) (1,969)
----------------------------------------------------- ----- --------- --------------
Total liabilities (151,776) (163,112)
----------------------------------------------------- ----- --------- --------------
Net assets 29,049 24,956
----------------------------------------------------- ----- --------- --------------
Equity
Share capital 6,556 6,555
Share premium 2,636 2,625
Own shares (415) (1,216)
Merger reserve (399) (399)
Share-based payment reserve 5,162 4,642
Capital redemption reserve 20,359 20,359
Accumulated losses (7,319) (7,610)
----------------------------------------------------- ----- --------- --------------
Capital and reserves attributable to owners of Topps
Tiles Plc 26,580 24,956
Non-controlling interests 2,469 -
----------------------------------------------------- ----- --------- --------------
Total equity 29,049 24,956
----------------------------------------------------- ----- --------- --------------
1 See note 2(A) for an explanation of the prior year restatement
Unaudited Consolidated Statement of Changes in Equity
For the 52 weeks ended 1 october 2022
Share-based Capital
Share Share Own Merger payment redemption Accumulated Non-controlling Total
capital premium shares reserve reserve reserve losses interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ------- ------- ------- ------- ----------- ---------- ----------- ---------------- -------------
Balance at 26
September
2020 as
originally
presented 6,548 2,492 (1,483) (399) 3,965 20,359 (17,400) (28) 14,054
Correction of
error
(net of tax) - - - - - - (390) - (390)
Restated balance
at 26 September
2020
(1) 6,548 2,492 (1,483) (399) 3,965 20,359 (17,790) (28) 13,664
---------------- ------- ------- ------- ------- ----------- ---------- ----------- ---------------- -------------
Profit and total
comprehensive
income for the
period
(restated) (1) - - - - - - 10,648 28 10,676
---------------- ------- ------- ------- ------- ----------- ---------- ----------- ---------------- -------------
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 as
originally
presented 6,555 2,625 (1,216) (399) 4,642 20,359 (6,992) - 25,574
Correction of
error
(net of tax) - - - - - - (618) - (618)
Restated balance
at 2 October
2021
(1) 6,555 2,625 (1,216) (399) 4,642 20,359 (7,610) - 24,956
---------------- ------- ------- ------- ------- ----------- ---------- ----------- ---------------- -------------
Profit and total
comprehensive
income for the
period - - - - - - 9,005 186 9,191
---------------- ------- ------- ------- ------- ----------- ---------- ----------- ---------------- -------------
Dividends - - - - - - (8,015) - (8,015)
Issue of share
capital 1 11 - - - - - - 12
Own shares
purchased
in the period - - (207) - - - - - (207)
Own shares
issued
in the period - - 1,008 - - - (699) - 309
Credit to equity
for
equity-settled
share-based
payments - - - - 520 - - - 520
Acquisition of
non-controlling
interest on
business
combination - - - - - - - 2,283 2,283
---------------- ------- ------- ------- ------- ----------- ---------- ----------- ---------------- -------------
Balance at 1
October
2022 6,556 2,636 (415) (399) 5,162 20,359 (7,319) 2,469 29,049
---------------- ------- ------- ------- ------- ----------- ---------- ----------- ---------------- -------------
1 See note 2(A) for an explanation of the prior year restatement
Unaudited Consolidated Cash Flow Statement
For the 52 weeks ended 1 OCTOBER 2022
53 weeks
52 weeks ended
ended 2 October
1 October 2021
2022 (restated)(1)
GBP'000 GBP'000
------------------------------------------------------------------ ---------- --------------
Cash flow from operating activities
Profit for the period 9,191 10,676
Taxation 1,754 3,279
Finance costs 4,010 4,158
Finance income (123) (87)
------------------------------------------------------------------ ---------- --------------
Group operating profit 14,832 18,026
Adjustments for:
Depreciation of property, plant and equipment 5,609 6,268
Depreciation of right-of-use assets 18,212 20,508
Amortisation of intangible assets 500 186
Loss on disposal of property, plant and equipment and intangibles 394 1,736
(Gain)/loss on sublease (88) 134
Impairment charge/(reversal) of property, plant and equipment 240 (604)
Impairment of right-of-use assets 1,473 2,402
Gain on lease disposal (1,544) (2,563)
Share option charge 520 677
Increase in earn out liability provision 1,581 -
Non-cash gain on derivative contracts (455) -
(Increase)/decrease in trade and other receivables (1,080) 7
Increase in inventories (4,362) (3,421)
Decrease in payables (5,603) (11,209)
------------------------------------------------------------------ ---------- --------------
Cash generated from operations 30,229 32,147
Interest paid (354) (468)
Interest received on operational cash balances 58 -
Interest element of lease liabilities paid (3,626) (3,728)
Taxation paid (3,453) (1,535)
------------------------------------------------------------------ ---------- --------------
Net cash generated from operating activities 22,854 26,416
Investing activities
Interest received - 11
Interest received on sublease assets 65 76
Receipt of capital element of sublease assets 493 629
Purchase of property, plant and equipment (3,090) (4,221)
Purchase of intangibles (115) (194)
Proceeds on disposal of property, plant and equipment 183 2,096
Acquisition of subsidiary, net of cash acquired (3,968) (154)
Net cash used in investment activities (6,432) (1,757)
Financing activities
Payment of capital element of lease liabilities (19,601) (23,026)
Dividends paid (8,015) -
Proceeds from issue of share capital 12 133
Purchase of own shares (207) -
Receipt on disposal of own shares 309 -
Repayment of bank loans (468) (4,995)
------------------------------------------------------------------ ---------- --------------
Net cash used in financing activities (27,970) (27,888)
Net decrease in cash and cash equivalents (11,548) (3,229)
------------------------------------------------------------------ ---------- --------------
Cash and cash equivalents at beginning of period 27,789 31,018
------------------------------------------------------------------ ---------- --------------
Cash and cash equivalents at end of period 16,241 27,789
------------------------------------------------------------------ ---------- --------------
1 See note 2(A) for an explanation of the prior year restatement
Notes to the Unaudited Financial Statements
For the 52 weeks ended 1 OCTOBER 2022
1 GENERAL INFORMATION
Topps Tiles Plc is a public limited company, limited by shares,
incorporated and domiciled in the United Kingdom and registered in
England under the Companies Act 2006.
The consolidated financial statements are unaudited and do not
constitute statutory accounts of the Company within the meaning of
Section 434(3) of the companies Act 2006. Statutory accounts for
the year ended 2 October 2021 have been delivered to the Registrar
of Companies. The audit report for those accounts was unqualified,
did not draw attention to any matters by way of emphasis and did
not contain a statement under 498(2) or (3) of the Companies Act
2006.
Statutory accounts for the 52-week period ended 1 October 2022
will be delivered to the Registrar of Companies following the
Company's Annual General Meeting.
These financial statements are presented in pounds sterling
because that is the currency of the primary economic environment in
which the Group operates.
ADOPTION OF NEW AND REVISED STANDARDS
In the current period, other than the IFRIC regarding cloud
computing (see note 2A), there were no new or revised standards and
interpretations adopted that have a material impact on the
financial statements. The Group has not early adopted any other
standard, interpretation or amendment that has been issued but is
not yet effective.
STANDARDS ADOPTED IN CURRENT PERIOD
The following new and revised standards and interpretations have
been adopted in the current year. Their adoption has not had any
significant impact on the amounts reported in these financial
statements that may impact the accounting for future transactions
and arrangements.
IFRS 17, 'Insurance contracts' (effective 1 January 2023 or when
IFRS 9 is applied) subject to endorsement
Amendments to IFRS 16 Leases: Covid-19-Related rent concessions
beyond 30 June 2021 - (effective 1 April 2021)
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
Interest Rate Benchmark Reform - Phase 2 (effective 1 January
2021)
Annual Improvements 2018-2020 (effective 1 January 2022)
Narrow scope amendments to IFRS 3, IAS 16 and IAS 37 (effective
1 January 2022)
2 ACCOUNTING POLICIES
The principal accounting policies adopted are set out below.
A) BASIS OF ACCOUNTING
The condensed financial statements of Topps Tiles Plc have been
prepared in accordance with UK-adopted International Accounting
Standards and with the requirements of the Companies Act 2006 as
applicable to companies reporting under those standards. On 31
December 2020, IFRS as adopted by the European Union at that date
was brought into UK law and became UK-adopted international
accounting standards, with future changes being subject to
endorsement by the UK Endorsement Board.
Topps Tiles Plc transitioned to UK-adopted International
Accounting Standards in its consolidated financial statements on 3
October 2021. This change constitutes a change in accounting
framework. However, there is no impact on recognition, measurement
or disclosure in the period reported as a result of the change in
framework.
The condensed financial statements have been prepared on the
historical cost basis, except for the revaluation of derivative
financial instruments. Historical cost is generally based on the
fair value of the consideration given in exchange for goods and
services.
The accounting policies set out below have, unless otherwise
stated, been applied consistently to all periods presented in these
Group financial statements.
IFRIC: Configuration or Customisation Costs in a Cloud Computing
Arrangement (IAS38 Intangible Assets)
During the current year management has re-evaluated the impact
of the IFRIC guidance released during the prior year relating to
accounting for cloud-based SaaS arrangements. This guidance was
incorrectly applied in the prior year, resulting in costs
associated with a cloud-based SaaS being capitalised and not
expensed as incurred in the consolidated statement of financial
performance. During 2020 GBP456k was capitalised with no
amortisation being charged. During the prior period a further
GBP319k was capitalised again with no amortisation being charged.
As a result of this error, the intangible assets as at 26 September
2020 were overstated by GBP456k and operating costs for the period
understated by the same amount. As at 2 October 2021, the
intangible assets and net assets were overstated by GBP775k and
operating costs were understated by GBP319k for the period then
ended. In addition, during the period ended 26 September 2020
operating cashflows were overstated by GBP456k and investing
cashflows overstated by the same amount. Likewise, for the period
ended 2 October 2021 the operating cashflows were overstated by
GBP319k and the investing cashflows overstated by the same amount.
A summary of the impact, including taxation, is included in the
following tables:
2021 2021
(previously Restatement Restated
reported)
GBP'000 GBP'000 GBP'000
-------------------------------------- ------------- ------------- ----------
Consolidated Statement of Profit or Loss impact
Administrative costs (18,100) (319) (18,419)
Profit before taxation 14,274 (319) 13,955
Tax charge (3,370) 91 (3,279)
Basic earnings per ordinary share
(pence) 5.59 (0.12) 5.47
Diluted earnings per ordinary share
(pence) 5.52 (0.11) 5.41
Consolidated Statement of Financial Position
impact
Intangible assets 1,243 (775) 468
Deferred tax asset 407 157 564
Total assets 188,686 (618) 188,068
Net assets 25,574 (618) 24,956
Accumulated losses (6,992) (618) (7,610)
Total equity 25,574 (618) 24,956
Consolidated Cash Flow Statement
Profit for the period 10,904 (228) 10,676
Taxation 3,370 (91) 3,279
Net cash from operating activities 26,735 (319) 26,416
Purchase of intangibles (513) 319 (194)
Net cash used in investing activities (2,076) 319 (1,757)
-------------------------------------- ------------- ------------- ----------
2020 Restatement 2020 Restated
(previously
reported)
GBP'000 GBP'000 GBP'000
--------------------------- ------------------ ------------ --------------
Consolidated Statement of Financial Position
impact
Intangible assets 916 (456) 460
Deferred tax asset 1,406 66 1,472
Total assets 205,080 (390) 204,690
Net assets 14,054 (390) 13,664
Accumulated losses (17,400) (390) (17,790)
Total equity 14,054 (390) 13,664
--------------------------- ------------------ ------------ --------------
B) GOING CONCERN
When considering the going concern assertion, the Board reviews
several factors including a review of risks and uncertainties, the
ability of the Group to meet its banking covenants and operate
within its banking facilities based on current financial plans,
along with a detailed review of more pessimistic trading scenarios
that are deemed severe but plausible. The two downside scenarios
modelled include a moderate decline in sales and a more severe
decline in sales, which result in much lower sales and gross profit
than the base scenario, resulting in worse profit and cash
outcomes. The more severe downside scenario modelled this year was
based on a prolonged period of macroeconomic stress in the UK,
lasting for two years, with sales falling substantially in each
year in our main brand, Topps Tiles, as well as year on year
declines in gross margins.
The Group has already taken a number of actions to strengthen
its liquidity over the recent years, 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 October 2022 and expires at the earliest
in October 2025. In all scenarios, the Board have concluded that
there is sufficient available liquidity and covenant headroom for
the Group to continue to meet all of its financial commitments as
they fall due for the foreseeable future, a period of not less than
12 months from the date of this report. Accordingly, the Board
continue to adopt the going concern basis in preparing the
financial statements.
C) REVENUE RECOGNITION
Revenue is measured at the transaction price received or
receivable and represents amounts receivable for goods in the
normal course of business, net of discounts, VAT and other
sales-related taxes.
Revenue from the sale of goods is recognised on the collection
or delivery of goods, when all the following conditions are
satisfied:
-- the Group has satisfied its performance obligations to external customers,
being the date goods are collected from store or received by the customers;
and
-- the customer has obtained control of the goods being transferred.
These conditions are met, predominantly, at the point of sale.
The exceptions to this are for: goods ordered in advance of
collection, where revenue is recognised at the point that the goods
are collected; sales of goods that result in award credits for
customers (see below); and web sales, where revenue is recognised
at the point of delivery.
Sales of goods that result in award credits for customers, under
the Company's Trader Loyalty Scheme, are accounted for as multiple
element revenue transactions and the fair value of the
consideration received or receivable is allocated between the goods
supplied and the award credits granted. The consideration allocated
to the award credits is measured by reference to their fair value
being the amount for which the award credits could be sold
separately. Such consideration is not recognised as revenue at the
time of the initial sale transaction, but is deferred and
recognised as revenue when the award credits are redeemed and the
Company's performance obligations have been satisfied.
The level of sales returns is closely monitored by management,
and as such, the Group holds a sales return provision in the
Consolidated Statement of Financial Position to provide for the
expected level of returns. The sales value of the expected returns
is recognised within Accruals, with the cost value of the goods
expected to be returned recognised as a current asset within
Inventories.
d) TAXATION
The tax expense represents the sum of the tax currently payable
and deferred tax.
The tax currently payable is based on taxable profit for the
period. Taxable profit differs from net profit as reported in the
statement of financial performance because it excludes items of
income or expense that are taxable or deductible in other periods
and it further excludes items that are never taxable or deductible.
The Group's liability for current tax is calculated using tax rates
that have been enacted or substantively enacted by the balance
sheet date.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and
liabilities are not recognised if the temporary difference arises
from the initial recognition of goodwill or from the initial
recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the tax
profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries, except where
the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will
not reverse in the foreseeable future.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised based on tax laws and rates that have been enacted at the
balance sheet date. Deferred tax is charged or credited in the
statement of financial performance, except when it relates to items
charged or credited directly to equity, in which case the deferred
tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
E) OPERATING COSTS
Restructuring costs relate to board approved decisions such as
business closures or major organisational changes. Operating profit
is stated after charging/(crediting) restructuring costs but before
investment income and finance costs.
Employee profit sharing costs are classified as distribution and
selling costs and administrative costs.
3 GROUP REVENUE
An analysis of Group revenue is as follows:
52 weeks 53 weeks
ended ended
1 October 2 October
2022 2021
GBP'000 GBP'000
------------------------------- ---------- ----------
Revenue from the sale of goods 247,241 227,997
------------------------------- ---------- ----------
Total revenue 247,241 227,997
------------------------------- ---------- ----------
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.
Revenue can be split by the following geographical regions:
52 weeks 53 weeks
ended ended
1 October 2 October
2022 2021
GBP'000 GBP'000
UK 246,866 227,997
EU 240 -
Rest of
World 135 -
-------- ---------- ----------
Total 247,241 227,997
-------- ---------- ----------
The Group's revenue is driven by the consolidation of individual
small value transactions and as a result, Group revenue is not
reliant on a major customer or group of customers.
4 PROFIT/(LOSS) BEFORE TAXATION
Profit/(loss) before taxation for the period has been arrived at
after charging/(crediting):
52 weeks 53 weeks
ended ended
1 October 2 October
2022 2021
GBP'000 GBP'000
------------------------------------------------------------------ ---------- ----------
Depreciation of property, plant and equipment 5,609 6,268
Depreciation of right-of-use assets 18,212 20,508
Operating lease costs not within the scope of IFRS 16 -
low value and short term rentals 2,201 953
Impairment charge/(reversal) of property, plant and equipment 240 (604)
Impairment of right-of-use assets 1,473 2,402
Loss on disposal of property, plant and equipment and intangibles 394 1,736
Amortisation of intangibles 500 186
Staff costs (see note 5) 57,096 57,955
Exchange (gains)/ losses recognised in profit or loss (1,060) 145
Write-down of inventories recognised as an expense 4,254 4,598
Cost of inventories recognised as an expense 108,622 92,554
------------------------------------------------------------------ ---------- ----------
During the year the business disposed of nil freehold properties
(2021: three freehold properties).
Analysis of the auditors' remuneration is provided below:
52 weeks 53 weeks
ended ended
1 October 2 October
2022 2021
GBP'000 GBP'000
------------------------------------------------------------ ---------- -----------
Fees payable to the Company's auditors with respect to the
Company's annual accounts 111 74
Fees payable to the Company's auditors and their associates
for other audit services to the Group:
Audit of the Company's subsidiaries pursuant to legislation 262 229
------------------------------------------------------------ ---------- -----------
Total audit fees 373 303
------------------------------------------------------------ ---------- -----------
Total non-audit fees - -
------------------------------------------------------------ ---------- -----------
Total fees payable to the Company's auditors 373 303
------------------------------------------------------------ ---------- -----------
5 STAFF COSTS
The average monthly number of persons employed by the Group in
the UK during the accounting period (including Executive Directors)
was:
52 weeks 53 weeks
ended ended
1 October 2 October
2022 2021
Number Number
employed employed
--------------- ---------- ----------
Selling 1,390 1,533
Administration 361 314
--------------- ---------- ----------
1,751 1,847
--------------- ---------- ----------
The average monthly number of persons (full-time equivalents)
employed by the Group in the UK during the accounting period
(including Executive Directors) was:
52 weeks 53 weeks
ended ended
1 October 2 October
2022 2021
Number Number
employed employed
--------------- ---------- ----------
Selling 1,311 1,455
Administration 355 283
--------------- ---------- ----------
1,666 1,738
--------------- ---------- ----------
2022 2021
GBP'000 GBP'000
---------------------------------------- -------- --------
Their aggregate remuneration comprised:
Wages and salaries (including LTIP) 51,585 52,348
Social security costs 4,472 4,498
Other pension costs 1,039 1,109
---------------------------------------- -------- --------
57,096 57,955
---------------------------------------- -------- --------
The total charge for Share Based Payments recognised during the
year was GBP0.5m (2021: GBP0.7m)
6 FINANCE INCOME AND FINANCE COSTS
52 weeks 53 weeks
ended ended
1 October 2 October
2022 2021
GBP'000 GBP'000
----------------------------------------------- ---------- ----------
Finance income
Bank interest receivable 58 11
Interest income from finance lease receivables 65 76
----------------------------------------------- ---------- ----------
123 87
----------------------------------------------- ---------- ----------
Finance costs
Interest on bank loans and overdrafts (384) (430)
Interest payable on lease liabilities (3,626) (3,728)
(4,010) (4,158)
----------------------------------------------- ---------- ----------
No finance costs have been capitalised in the period, or the
prior period.
Interest on bank loans and overdrafts represents gains and
losses on financial liabilities measured at amortised cost. There
are no other gains or losses recognised in respect of financial
liabilities measured at amortised cost.
7 TAXATION
53 weeks
52 weeks ended
ended 2 October
1 October 2021
2022 (restated)(1)
GBP'000 GBP'000
------------------------------------------------------ ---------- --------------
Current tax - charge for the period 2,577 2,418
Deferred tax - charge for the period 360 1,143
Deferred tax - adjustment in respect of prior periods (1,183) 145
Effect of tax rate change on opening balance - (427)
------------------------------------------------------ ---------- --------------
Total tax charge 1,754 3,279
------------------------------------------------------ ---------- --------------
The charge for the period can be reconciled to the profit/(loss)
per the statement of financial performance as follows:
53 weeks
52 weeks ended
ended 2 October
1 October 2021
2022 (restated)(1)
GBP'000 GBP'000
---------------------------------------------------------- ---------- --------------
Continuing operations:
Profit before taxation 10,945 13,955
Tax at the UK corporation tax rate of 19.0% (2021: 19.0%) 2,080 2,651
Expenses that are not deductible in determining taxable
profit 8 11
Other movements 391 (36)
Fixed asset differences (non-deductible expenses) 657 709
Increase/(Reduction) in UK corporation tax rate - (29)
Non-taxable income (199) (172)
Adjustment in respect of prior periods (1,183) 145
---------------------------------------------------------- ---------- --------------
Tax expense for the period 1,754 3,279
---------------------------------------------------------- ---------- --------------
In the period, the Group has recognised a corporation tax credit
directly to equity of GBPnil (2021: GBPnil) and a deferred tax
charge to equity of GBPnil (2021: GBP46,701) in relation to the
Group's share option schemes.
The Group continue to fully provide within current tax
liabilities for a historic tax claim relating to EU loss relief in
relation to the closed Dutch business of GBP988,000 (2021:
GBP988,000).
1 See note 2(A) for an explanation of the prior year
restatement
8 DIVIDS
Amounts recognised as distributions to equity holders in the
period:
52 weeks 53 weeks
ended ended
1 October 2 October
2022 2021
GBP'000 GBP'000
--------------------------------------------------------------- ---------- ----------
Final dividend for the period ended 2 October 2021 of GBP0.031
(2020: GBPnil) per share 6,057 -
Interim dividend for the period ended 1 October 2022 of
GBP0.01 (2021: GBPnil) per share 1,958 -
--------------------------------------------------------------- ---------- ----------
Total dividend paid in the period 8,015 -
--------------------------------------------------------------- ---------- ----------
Proposed final dividend for the period ended 2 October 2022
of GBP0.026 (2021: GBP0.031) per share 5,093 6,057
--------------------------------------------------------------- ---------- ----------
The proposed final dividend for the period ended 1 October 2022
is subject to approval by shareholders at the Annual General
Meeting and has not been included as a liability in these financial
statements.
9 EARNINGS PER SHARE
The calculation of earnings per share is based on the earnings
for the financial period attributable to equity shareholders and
the weighted average number of ordinary shares.
52 weeks 53 weeks
ended ended
1 October 2 October
2022 2021
-------------------------------------------------------------- ----------- -----------
Weighted average number of issued shares for basic earnings
per share 196,681,007 196,508,867
Weighted average impact of treasury shares for basic earnings
per share (1,099,370) (1,344,844)
-------------------------------------------------------------- ----------- -----------
Total weighted average number of shares for basic earnings
per share 195,581,637 195,164,023
-------------------------------------------------------------- ----------- -----------
Weighted average number of shares under option 2,165,790 2,274,713
-------------------------------------------------------------- ----------- -----------
For diluted earnings per share 197,747,427 197,438,736
-------------------------------------------------------------- ----------- -----------
52 weeks 53 weeks
ended ended
1 October 2 October
2022 2021 (restated)(1)
GBP'000 GBP'000
--------------------------------------- ---------- -------------------
Profit for the period 9,005 10,676
Adjusting items 3,005 1,067
--------------------------------------- ---------- -------------------
Adjusted profit for the period 12,010 11,743
--------------------------------------- ---------- -------------------
Earnings per ordinary share - basic 4.60p 5.47p
Earnings per ordinary share - diluted 4.55p 5.41p
Earnings per ordinary share - adjusted 6.14p 6.02p
--------------------------------------- ---------- -------------------
1 See note 2(A) for an explanation of the prior year
restatement
The calculation of the basic and diluted earnings per share used
the denominators as shown above for both basic and diluted earnings
per share. The number of potentially exercisable shares is
2,165,790 (2021: 2,274,713).
Adjusted earnings per share were calculated after adjusting for
the post-tax impact of the following items: rates relief GBPnil
benefit (2021: GBP1,839,000), impairment of property, plant,
equipment of GBP393,000 (2021: GBP1,202,000), vacant property costs
for stores closed as part of store reduction programme of
GBP1,402,000 (2021: GBP1,704,000), IFRS 16 one off changes
including the impairment of closure programme stores of GBP104,000
(2021: GBPnil), restructuring costs of GBP42,000 (2021: GBPnil),
project and acquisition costs of GBP2,246,000 (2021: GBPnil) and a
deferred tax credit in respect of previous periods of GBP1,183,000
(2021: GBPnil).
10 CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash held by the Group and
short-term bank deposits net of bank overdrafts, where there is a
right of offset, with an original maturity of three months or less.
The carrying amount of these assets approximates their fair value.
A breakdown of significant bank and cash balances by currency is as
follows:
2022 2021
GBP'000 GBP'000
-------------------------------- -------- --------
Sterling 15,543 27,064
US dollar 391 495
Euro 307 230
-------------------------------- -------- --------
Total cash and cash equivalents 16,241 27,789
-------------------------------- -------- --------
Cash and cash equivalents are in the scope of the expected
credit loss model under IFRS 9, however balances are held with
recognised financial institutions and therefore the expected
impairment loss is considered to be minimal.
11 BANK LOANS
2022 2021
GBP'000 GBP'000
-------------------------- --------- --------
Bank loans (all sterling) - (106)
-------------------------- --------- --------
2022 2021
GBP'000 GBP'000
----------------------------------------- --------- --------
The borrowings are repayable as follows:
On demand or within one year - -
- -
Less: total unamortised issue costs - (106)
----------------------------------------- --------- --------
- (106)
--------------------------------------------------- --------
The Directors consider that the carrying amount of the bank loan
at 1 October 2022 and 2 October 2021 approximates to its fair value
since the amounts relate to floating rate debt.
The average interest rates paid on the loan were as follows:
2022 2021
% %
----- ----- ----
Loans - -
----- ----- ----
The following is a reconciliation of changes in financial
liabilities to movement in cash from financing activities:
Lease Unamortised
liabilities Current Non-current issue
GBP'000 borrowings borrowings costs
GBP'000 GBP'000 GBP'000
------------------------------------------ ------------ ----------- ----------- -----------
As at 26 September 2020 124,156 5,000 - (134)
Repayment of bank loan - (5,000) - -
Repayment of lease liabilities (26,754) - - -
Additions/disposals of lease liabilities 10,208 - - -
Interest accrued on lease liabilities 3,728 - - -
Issue costs incurred in the year - - - (98)
Amortisation of issue costs - - - 126
------------------------------------------ ------------ ----------- ----------- -----------
As at 2 October 2021 111,338 - - (106)
------------------------------------------ ------------ ----------- ----------- -----------
Repayment of lease liabilities (23,253) - - -
Non-cash movement - Lease additions
and disposals 9,062 - - -
Non-cash movement - leases acquired
with business combination 2,155
Interest accrued on lease liabilities 3,626 - - -
Debt acquired through company acquisition - (468) - -
Repayment of debt - 468 - -
Amortisation of issue costs - - - 106
------------------------------------------ ------------ ----------- ----------- -----------
As at 1 October 2022 102,928 - - -
------------------------------------------ ------------ ----------- ----------- -----------
At 2 October 2022, the Group had a revolving credit facility to
June 2023 of GBP39.0 million. As at the financial period end,
GBPnil of this was drawn (2021: GBPnil), leaving GBP39.0m of
undrawn committed banking facilities. The loan facility contains
financial covenants which are tested on a bi-annual basis. The
Group did not breach any covenants in the period.
On 21 October 2022, the Group entered into a new three-year
revolving credit facility arrangement for GBP30.0m, expiring in
October 2025 with an option to extend for a further two years.
12 ACQUISITION OF SUBSIDIARY
The Group acquired a controlling 60% shareholding of Pro Tiler
Limited on 9 March 2022, for consideration of GBP5.5 million, of
which GBP5.3m was cash paid. The Group will 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 the Pro Tiler brand.
On acquisition, the Group recognised tangible assets of GBP1.6
million, including GBP1.4 million of cash, GBP0.2 million of net
working capital, GBP0.5m loan and GBP0.5 million of Property, Plant
and Equipment, 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 over 10 years, in line
with our accounting policies.
The future 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
GBP1.6 million in relation to the 40% share purchase were treated
as adjusting items within adjusted profit.
The fair value of the net assets acquired and liabilities
assumed at the acquisition date were:
GBP'000
Property, Plant and Equipment 543
Inventories 1,485
Trade and other receivables 460
Trade and other payables (1,749)
Loan (468)
Cash and cash equivalents 1,368
Right-of-use lease asset 2,155
Lease liability (2,155)
Brand valuation 5,341
Deferred tax (1,273)
Non-controlling interest (2,283)
------------------------------- --------
Fair value of assets acquired 3,424
------------------------------- --------
Total consideration 5,525
------------------------------- --------
Goodwill 2,101
------------------------------- --------
The residual goodwill recognised on the acquisition of Pro Tiler
Limited represents the proportion of consideration attributable to
value acquired in excess of the separately identified assets and
liabilities presented above.
Consideration comprised:
GBP'000
Cash 5,336
Directors' loan payable
to Pro Tiler Limited 189
------------------------ -------
Total consideration 5,525
------------------------ -------
The net cash outflow in the cash flow statement in the period
was as follows:
GBP'000
Cash consideration 5,336
Cash acquired (1,368)
----------------------------------- --------
Net cash outflow in the cash flow
statement 3,968
----------------------------------- --------
Since the date of control, the following amounts have been
included within the Group's financial statements for the period
(excluding amortisation of the Pro Tiler brand):
GBP'000
Revenue 9,196
Profit before
tax 576
Had the acquisition been included from the start of the period,
GBP14,673,000 of revenue and GBP705,000 of profit before tax would
have been included in the Group's financial statements for the
period.
13 RELATED PARTY TRANSACTIONS
MS Galleon AG is a related party by virtue of their 29.9%
shareholding (58,569,649 ordinary shares) in the Group's issued
share capital (2021: 20% shareholding of 38,992,750 ordinary
shares).
At 1 October 2022 MS Galleon AG is the owner of Cersanit, a
supplier of ceramic tiles with whom the Group made purchases of
GBP1,253,296 during the year which is 1.1% of cost of goods sold
(2021: purchases of GBP460,000 during year which is 0.5% of cost of
goods sold).
An amount of GBP113,718 was outstanding with Cersanit at 1
October 2022 (2021: GBP60,000). 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.
The remuneration of the Board of Directors, who are considered
key management personnel of the Group, was GBP1.4 million (2021:
GBP1.2 million) including share-based payments of GBP0.1 million
(2021: GBPnil).
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END
FR LVLLLLFLXFBZ
(END) Dow Jones Newswires
November 29, 2022 02:00 ET (07:00 GMT)
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