10 Month Results

Topps Tiles PLC
13 May 2003




13 May 2003
Topps Tiles Plc
Second Interim Results for the ten months ended 29 March 2003
Consistently Delivering Growth and Excellent Results


FINANCIAL HIGHLIGHTS

                                              2002/03        2001/02
                                           Ten Months     Ten Months    Change
                                          to 29/03/03    to 30/03/02         %
                                                £'000          £'000

Group Turnover                                 88,950         74,939       +18%
Gross Margin %                                   57.2%          56.2%
Profit before tax                              12,507          8,865       +41%
Net Margin %                                                    14.1%     11.8%
Basic earnings per share (pence)                19.26p         13.83p      +39%
Interim net dividend per share (pence)           6.35p          1.35p     +370%
Net Cash position                               9,023          2,275

OPERATIONAL HIGHLIGHTS

Proven appeal of Topps Tiles continues to shine through

Store opening target well on track with 21 new stores opened in the period

Joint Venture in Holland progressing well - 7 stores trading

Deal completed to acquire a purpose built warehouse facility giving additional
warehousing and distribution to achieve store openings target of 350 outlets

In the first five weeks of the final 6 month period, like for like sales have
shown a 15.1% increase

Commenting on the results Nick Ounstead, Chief Executive said:

'We are delighted to report an excellent ten months performance for the Group.
The Group continues to grow strongly and is a well-established brand in the home
improvement market.

We continue to benefit from the desire of the British householder to improve
their homes and we are strengthening our position in the market through national
television and radio advertising such as 'weather slots', 'Home' on the ITV
network and the UK Living Channel on Sky.

We continue to build and develop our successful consumer franchise thus enabling
us to gain market share and deliver superior shareholder returns.'

Enquiries:

Nick Ounstead, CEO                                                  07768 876321

Barry Bester, Chairman                                              07802 273334

Ann-marie Wilkinson/James Chandler, Beattie Financial 020 7398 3300


EXECUTIVE BOARD STATEMENT

We are delighted to report an excellent ten months performance for the Group.
The Group continues to grow strongly and is a well-established brand in the home
improvements market.

As previously announced we have changed our accounting period end date from the
nearest Saturday to 31 May to the nearest Saturday to 30 September. We are
therefore reporting a second interim announcement to 29 March 2003 (10 months)
and will announce again at the period end of 27 September 2003 (16 months).

FINANCIAL RESULTS

Profit and Loss Account

During the period, overall turnover increased by 18.7% to £88.95 million from
£74.94 million in the same period last year, with like for like sales increasing
by 10.5% for the ten month period.

Gross margins have improved further to 57.2% for the period to date compared
with 56.2% in the same period last year and 57.0% in the six month period to 30
November 2002.

Operating costs as a percentage of sales were 43.4% compared to 44.2% in the
same period last year.

Profit before tax increased by over 41% to £12.51 million compared to £8.86
million in the same period last year.

Net margin, excluding the Holland joint venture, has increased to 14.1% compared
to 11.8% in the same period last year.

Basic earnings per share has increased by over 39% to 19.26 pence compared to
13.83 pence in the same period last year.

Balance Sheet

Capital expenditure, excluding freehold property, amounted to £3.2 million. This
includes expenditure on a total of 23 new stores in the period, of which 21
stores are currently open and trading and two are near completion. There were
also 16 major store refits in the period along with further development and
upgrading of the I.T. infrastructure.

The Group currently owns 10 freehold sites and has one further site still under
development. These sites have a total net book value of £4.0 million. Within the
period three additional freehold sites were acquired at a total cost of £1.7
million and there was further expenditure on the development sites in Erdington
and Mansfield of £191,000.

At the period end cash balances for the Group were £9.0 million compared to £3.1
million for the same period end last year. The Group has no bank loans (2001/02
£781,000) and consequently no balance sheet gearing.

Dividend

We are continuing with our progressive dividend policy and announcing a further
interim dividend of 3.00 pence per share which brings the total interim dividend
for the ten month period to 6.35 pence per share. This interim dividend will be
paid on 30 June 2003 to shareholders on the register as at 30 May 2003.

OPERATIONAL REVIEW

The proven appeal of Topps Tiles has continued to shine through despite the well
documented, challenging conditions faced by some retailers. We are confident of
achieving our store opening target for the 16 month period of a net 24 new
stores. We have opened 21 new stores, closed 5 (in line with our ongoing policy
of reviewing site location and suitability) and sold one store into the joint
venture in Holland, giving a net increase of 15. Of the new stores opened, 14
were Topps and 7 Tile Clearing House, giving a total of 186 stores of which 151
are Topps Tiles and 35 are Tile Clearing House outlets.

Within existing Topps Tiles stores, we have increased the number of floorstores,
which offer an enhanced range of wood flooring products to ten and Tile Studios
which offer a premium range of tiles on a special order basis, to 19. We plan to
roll out both of these concepts into existing and new stores where space
permits.

Margin continues to move forward, now 57.2% compared with 56.2% for the same
period last year achieved through the benefits of bigger volumes and buying
outside the EU feeding through our own warehouse.

Operating costs in the period represented 43.4% compared with 44.2% for the same
period last year and we continue to look at ways to improve this further. Stock
cover is now 158 days compared to 172 for the same period last year as the core
range initiative and enhanced I.T. systems start to show benefits.

We are pleased with the progress of our joint venture in Holland and now have
seven stores trading. Tiles have now been introduced complimenting the
established offer of laminate and wood flooring products and early signs are
encouraging. We continue to benefit throughout the Group from the improved
margin, gained through the knowledge of our co-investor on laminate and wood
flooring products.

In April the Group completed a deal to acquire a purpose built warehouse
facility in close proximity to the current facilities in Leicestershire. This
will be operationally available from early 2004 and will give the business the
additional warehousing and distribution capacity it requires to achieve its
stated store target of 250 Topps Tiles Stores and 100 Tile Clearing House
Stores.

The Market

The desire of the British householder to improve their homes continues to fuel
the growth in the tile market with the 'improve not move' mentality continuing.
Topps are strengthening their position in the market by sponsoring 'Home' on the
ITV network and the UK Living Channel on Sky, which features Changing Rooms and
Ground Force amongst its shows. We are also extending our sponsorship of the
weather on Carlton Television, which is proving successful, along with our
regular radio and press advertising.

The UK non-contract ceramic tile market is valued at £430 million, at retail
selling prices, and is forecast to grow 16% by 2006, along with the laminate and
wood flooring market which is also forecast to grow by 35% in value terms,
between 2003 and 2007 (source MSI).

Current trading and prospects

In the first five weeks of the final 6 month period, like for like sales have
shown a 15.1% increase with overall sales showing an increase of 25.3%, although
this does reflect the sales benefit from a later Easter period this year. We
have also opened a further 3 new stores and we continue on course to meet the
target of a net 24 new stores, in the UK, this financial period.

Demand for ceramic tiles and wood flooring products continues to grow strongly
and represents an increasing share of the floor and wall coverings market.

The Board therefore remains confident that our growth is sustainable. We shall
continue to build and develop our successful consumer franchise thus enabling us
to gain market share and deliver superior shareholder returns.

Consolidated Group Profit and Loss Account

For the ten months ended 29 March 2003

                                    Ten months       Ten months         Period
                                         ended            ended          ended
                                 29 March 2003    30 March 2002    1 June 2002
                                     Unaudited        Unaudited        Audited
                                         £'000            £'000          £'000

Turnover, including joint               90,214           74,939         91.026
venture
Share of turnover of joint              (1,264)               -              -
venture
Group turnover                          88,950           74,939         91,026
Cost of Sales                          (38,054)         (32,835)       (40,029)
Gross Profit                            50,896           42,104         50,997

Operating Expenses
- employee profit                       (3,296)          (2,559)        (2,859)
sharing
- other operating                      (35,274)         (30,527)       (36,478)
expenses

Operating Profit                        12,326            9,018         11,660
Share of joint venture's                    (1)               -              -
operating loss

Profit on ordinary                      12,325            9,018         11,660
activities before
interest
Interest receivable and                    209               42             57
similar income
Interest payable and                       (27)            (195)          (201)
similar charges

Profit on ordinary          1           12,507            8,865         11,516
activities before
taxation
Tax on profit on ordinary               (3,839)          (2,659)        (3,477)
activities

Profit on ordinary                       8,668            6,206          8,039
activities after
taxation

Dividends                               (2,860)            (607)        (3,208)
Transfer to reserves                     5,808            5,599          4,831

Earnings per share
-Basic                                   19.26p           13.83p         17.92p
-Diluted                                 19.16p           13.76p         17.83p


Note 1

Topps Tiles has no recognised gains or losses in the period other than those
reflected in the profit and loss account.

All activity arose from continuing operations.

Consolidated Group Balance Sheet
As at 29 March 2003
                                          29 March    30 March 2002     1 June
                                             2003                         2002
                                         Unaudited        Unaudited    Audited
                                             £'000            £'000      £'000

Fixed assets
Goodwill                                       603              288        285
Tangible assets                             18,123           15,266     15,044
Joint Venture undertaking
- Share of assets                              759                -          -
- Share of liabilities                        (635)               -          -
                                               124
                                            18,850           15,554     15,329

Current assets
Stocks                                      19,591           18,842     19,019
Debtors                                      4,294            4,669      3,802
Cash at bank and in hand                     9,023            3,056      5,142
                                            32,908           26,567     27,963

Creditors: Amounts falling due
within one year
                                           (21,001)         (16,266)   (17,935)
Net current assets                          11,907           10,301     10,028
Total assets less current                   30,757           25,855     25,357
liabilities
Creditors: Amounts falling due
after more than one year
                                                 -             (577)      (526)
Provisions for liabilities and              (1,033)            (893)    (1,007)
charges
Net assets                                  29,724           24,385     23,824

Capital and reserves
Called-up share capital                      5,630            5,610      5,623
Share premium account                        1,392            1,113      1,307
Merger reserve                                (399)            (399)      (399)
Profit and loss account
- brought forward                           17,293           12,462     12,462
- current year                               5,808            5,599      4,831
Equity shareholders' funds                  29,724           24,385     23,824



Consolidated Group Cashflow Statement
As at 29 March 2003
                                                29 March    30 March    1 June
                                                    2003        2002      2002
                                               Unaudited   Unaudited   Audited
                                                   £'000       £'000     £'000

Net cash inflow from operating activities         17,391       8,526    10,426
Returns on investment and servicing of               182        (153)     (163)
finance
Taxation                                          (4,164)     (3,005)   (3,005)
Capital expenditure                               (4,275)       (363)     (163)
Acquisitions and disposals                          (480)          -         -
Equity dividends paid                             (4,119)     (2,332)   (2,323)
                                                   4,535       2,673     4,772

Financing                                           (654)     (1,823)   (1,836)
Increase in cash                                   3,881         850     2,936

Reconciliation of operating profit to net cash
inflow from operating activities

Operating profit                                  12,326       9,018    11,660
Depreciation charges                               1,851       1,579     1,912
Loss on disposal of fixed assets                     162          28         -
Goodwill amortisation                                 37           -        17
(Increase) in stocks                                (572)     (1,461)   (1,726)
(Increase)/decrease in debtors                    (1,310)         32       338
Increase/(decrease) in creditors                   4,897        (671)   (1,775)
                                                  17,391       8,526    10,426

Return on investments and servicing of
finance
Interest received                                    209          42        57
Interest paid                                        (27)       (195)     (213)
Interest element of hire purchase rentals              -           -        (7)
Interest capitalised                                   -           -         -
                                                     182        (153)     (163)

Capital expenditure
Payments to acquire tangible fixed assets         (5,093)     (2,746)   (3,954)
Receipts from sales of tangible fixed assets         818       2,383     3,791
                                                  (4,275)       (363)     (163)

Financing
Proceeds from issue of ordinary share                 92         117       324
capital
Expenses in connection with issue of share             -           -         -
capital
New loans                                              -           -         -
Repayment of loans                                  (746)     (1,940)   (1,976)
Capital element of hire purchase rentals               -           -      (184)
                                                    (654)     (1,823)   (1,836)
Summary
Opening cash position                              5,142       2,206     2,206
Movement                                           3,881         850     2,936
Closing cash position                              9,023       3,056     5,142



Notes to the Interim Financial Information

For the ten months ended 29 March 2003

1. Basis of preparation
        
(a) The interim report was approved by the board on 12 May 2003. The 
    financial information for the ten months ended 29 March 2003 and similarly 
    the financial information for the ten months ended 30 March 2002 have not 
    been audited. The financial information for the period ended 1 June 2002 has 
    been extracted from the audited financial statements for that period.


(b) The financial information contained in the interim report does not 
    constitute statutory accounts as defined in section 240 of the Companies Act 
    1985. Statutory accounts for the year ended 1 June 2002 incorporating an 
    unqualified audit report, which did not contain statements under section 
    237(2) or (3) of the Companies Act 1985, have been filed with the Registrar 
    of Companies.


(c) The financial information contained in this interim report has been prepared 
    on the basis of the accounting policies set out in the Group's statutory 
    accounts for the period ended 1 June 2002.


2.  Taxation

    Corporation Tax for the ten months ended 29 March 2003 has been provided for 
    at the estimated effective rate of 30%.

3.  Interim dividend

    An interim net dividend of 3.00 pence per Ordinary Share has been declared
    payable on 30 June 2003 to shareholders on the register on 30 May 2003. This
    interim dividend brings the period to date dividend level to 6.35 pence per
    share for the ten month period.

4. Earnings per share

    Basic earnings per share for the ten months ended 29 March 2003 have been
    calculated on earnings (after the deduction of taxation) of £8,668,000 
    (2002: £6,206,000) and on Ordinary Shares of 45,012,230 (2002: 44,862,743), 
    being the weighted average of Ordinary Shares in issue during the period.

    Diluted earnings per share for the ten months ended 29 March 2003 have been
    calculated on earnings (after the deduction of taxation) of £8,668,000 
    (2002: £6,206,000) and on Ordinary Shares of 45,234,025 (2002: 45,096,340) 
    being the weighted average of Ordinary Shares and Share Options in issue 
    during the period.

5.  Copies of the interim results

    Copies of the interim results have been sent to shareholders, and further 
    copies can be obtained from the Company's Registered Office at Topps Tiles 
    Plc., Rushworth House, Wilmslow Road, Handforth, Wilmslow, Cheshire, SK9 
    3HJ.

Details are also available on our Website.

www.ToppsTiles.co.uk


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