Topps Tiles Regulatory News (TPT)

6 October 2021

Topps Tiles Plc

Q4 Trading Update

Record year for sales; full year profits slightly ahead of forecasts

Topps Tiles Plc ("Topps" or the "Group"), the UK's leading tile specialist, announces a trading update for the 53-week period ended 2 October 2021.

Group revenues in the 53-week period1 were approximately £227.5 million, or £222.5 million on a comparable 52-week basis (FY20: £192.8 million), a record year of turnover for the Group. Supported by a buoyant home improvement market in the UK, this record performance is even more notable given that one quarter of the year included significant trading restrictions and a national lockdown. We believe it demonstrates the success of our growth strategy and is a good step towards the achievement of our market share goal of '1 in 5 by 2025'2.

Our omni-channel Retail business has continued to perform well over the final quarter of the year. On a two-year basis, Retail like-for-like sales were up 21.7% in quarter four, which is an acceleration from the 18.5% growth reported in the Q3 Trading Update (for the period after the lifting of trading restrictions). On a one-year basis, Retail like-for-like sales were up 3.0% in the final quarter, against a comparative period last year which saw a strong bounce back in sales following the initial national lockdown.

We believe that our excellent omni-channel retail offer, award-winning website, strengthened value position, world class customer service and good stock availability have all contributed to this result.

As highlighted in the Q3 Trading Update, our percentage gross margins are lower than last year due to higher shipping costs, product mix changes and our continued investment into value, however gross profits were strong, and costs were well controlled. We have invested in higher levels of inventory over the current period, which we believe is a significant competitive advantage in a market which is facing well-documented supply chain challenges.

In the Commercial business, sales have continued to grow as key market sectors re-open, and, in the year as a whole, sales1 were approximately 15% higher than last year at c. £8.6 million (FY20: £7.5 million), a result we believe is ahead of the market.

As a result, adjusted profit before tax3 is now expected to be slightly above consensus forecasts4 for the financial year.

Our balance sheet has remained strong and the business is debt-free, with adjusted net cash of c. £28 million at the year end, slightly higher than last year (FY20: £26.0 million), despite an £11 million outflow of working capital due to the timing of the 53rd week and the repayment of deferred VAT relating to the period April - June 2020.

The Group remains confident in its strategy and outlook but is continuing to monitor the impact of rising levels of input cost inflation and supply chain disruption closely, with mitigation or pass through of the associated cost pressures remaining a key focus for the business as it begins the new financial year.

As previously disclosed, the Board expects to reinstate dividend payments at the end of the year, with a final dividend payment relating to the whole financial year, rather than just the second half.

Rob Parker, CEO, said: "The Group has delivered an excellent final quarter and we have achieved a record level of annual revenue, despite operating with trading restrictions for significant parts of the year. These results are testament to the hard work and commitment of our colleagues, and I thank them again for their unwavering dedication and support.

"Like-for-like sales were strongly ahead of 2019 in the final quarter but were also above the same period in 2020, when our sales bounced back strongly following the first national lockdown. This performance reflects a robust level of consumer demand but also underlines the strength of our growth strategy and the success of initiatives such as our improved value range and investment in our award-winning digital offer. We remain confident on the outlook, against a backdrop of strong demand for DIY products and continued investment into home improvements."

The Group will announce its results for the 53 weeks ended 2 October 2021 on 30 November 2021.

1 Before year end accounting adjustments including revenue recognition and customer returns provisions.

2 Refers to Topps' goal of accounting for £1 in every £5 spent on tiles and associated products in the UK by 2025, thereby increasing its market share to 20% from approximately 17% in 2019 - see the FY20 year end results for more information.

3 Adjusted profit before tax excludes items which are one-off in nature or can fluctuate significantly from year to year.

4 Market expectations for adjusted profit before tax for the 53 week period ended 2 October 2021 are in the range £13.2 million to £14.0 million, with a consensus of £13.6 million. These forecasts exclude the benefit of any Covid-related government support in the second half.

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Notes to editors

Topps Tiles Plc is the UK's largest specialist supplier of tiles and associated products, targeting the UK domestic refurbishment and commercial market and serving a retail and trade customer base from 313 nationwide Retail stores, 7 Commercial showrooms and three trading websites: www.toppstiles.co.uk, www.parkside.co.uk and www.stratatiles.co.uk.

Since opening its first store in 1963, Topps has maintained a simple operating philosophy ‐ inspiring customers with unrivalled product choice and providing exceptional levels of customer service. For further information on the Group, please visit http://www.toppstilesplc.com/