Topps Tiles Regulatory News (TPT)

30 September 2020

Topps Tiles Plc

Trading Update

Strong finish to the year, modest pre-tax profits expected

Trading

Topps Tiles Plc (the "Group"), the UK's leading tile specialist, announces a trading update for the 52 week period ended 26 September 2020.

Retail trading over the fourth quarter remained strongly positive and reflected both a robust home improvement market and the strength of the Topps business model. Retail like-for-like sales grew by 16.5% in the 13 weeks to 26 September 2020.

The strong finish to the year, with the Retail like-for-like sales performance being robustly ahead of the comparative period, gives the Board confidence that the Group will generate a modest level of adjusted profit before tax1 for the 52 weeks ended 26 September 2020.

Average Weekly Sales*

* Average weekly sales for Topps Tiles retail business (stores and online business)

Revenues for the 52 week period are expected to be in the region of £192 million (2019: £219 million). Retail like-for-like revenues in the 52 weeks were down by 12.5% when compared to the prior year (2019: +0.6%).

Retail

The Retail business performed robustly across the final quarter, driven by continued strong demand from DIY customers and an accelerating recovery in trade activity which increased steadily across the period. All of our stores are open and operating with social distancing and hygiene protocols in place and the Group ceased to utilise the UK Government's job retention scheme in August. Our website continues to play an important role, with sales remaining above the prior year level throughout the final quarter and customers doing more of their research online before visiting a store. Customers are also returning to pre Covid-19 behaviours with a visit to store being at the heart of the majority of customer journeys.

Our order bay2 at period end was significantly ahead of the prior year level, providing a positive outlook as we start the new financial year.

Commercial

Activity across the Commercial sector has been rebuilding more slowly following the period of Covid-19 related disruption but we are starting to see increased levels of engagement by architects, designers and contractors on new specification projects, and some existing clients are now re-commencing fit-out activity. Despite this significant slowdown in activity we anticipate full year revenue of £7.5 million, which is 53% above the prior year level*, and a small reduction in the full year trading loss compared to the prior year.

Over the course of the fourth quarter we have completed the systems and operational integration of Strata into our Parkside operation, with both brands being retained from a customer perspective but all back office and support activities now operating under a central team based at our Leicestershire headquarters. This initiative will make the business more efficient and remove some costs as we move forward, supporting a further reduction in trading losses in the new financial year.

* Prior year sales only include six months of revenue for Strata Tiles Ltd following the purchase in April 2019

Liquidity

The Group's liquidity position remains very strong following the disposal of the freehold on our head office and warehouse facilities in Enderby for £18.1 million in June and the period of strong retail trading over the fourth quarter. At period end the Group had c.£25 million of net cash and available cash headroom of c.£74 million within its financing facilities. This includes around c.£7 million relating to year end working capital timing and c.£6 million relating to VAT deferrals, both of which will represent cash outflows in the new financial year.

Appointment of CFO

As announced on 4 September 2020, Stephen Hopson joins the Board as Chief Financial Officer on 2 November 2020. An experienced finance professional, Stephen has a strong track record across both consumer and trade facing markets, having held senior finance roles at Molson Coors, BSS, Travis Perkins and Mitchells & Butlers.

Rob Parker, Chief Executive, said: "Our people remain at the heart of our business and I would like to thank all of our colleagues for their unwavering support through the last six months.

"Our Retail business has performed strongly over the final quarter and our order bay provides an encouraging view of the early weeks of the new financial year. While the commercial market is rebuilding more slowly, impacting on the recovery trajectory of our Commercial business, it remains a key part of our longer term growth strategy.

"I remain very positive about the longer term outlook for the Group but also recognise that the continuing impact of the Covid-19 pandemic may lead to more difficult trading conditions over the short to medium term. As market leader, and with our strong balance sheet, the business is well positioned to navigate these conditions and to meet future challenges."

1 Adjusted profit before tax excludes items which are one off in nature or can fluctuate significantly from year to year (such as some property related items - including IFRS16 adjustments)

2 Orders received from customers which are in process but not yet fulfilled

- Ends -

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Note 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 342 nationwide retail stores and four commercial showrooms.

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, please visit http://www.toppstilesplc.com/