Final Results
Topps Tiles PLC
30 November 2004
Topps Tiles Plc
Preliminary Results
Topps Tiles Plc ('Topps'), the UK's largest tile and wood flooring specialist
with 220 stores, announces preliminary results for the 53 weeks ended 2 October
2004.
Financial Highlights
* Group turnover up 32.5% to £157.6 million (2003: £118.9 million*)
* Like for like sales increased 21.5%
* Core store (stores opened pre September 2002) like for like sales up
20.3%
* Gross margin improved to 60.5% (2003: 57.5%*)
* Operating costs decreased to 39.9% of Group turnover (2003: 41.9%*)
* Profit Before Tax up 78.9% to £33.8 million (2003: £18.9 million*)
* Group profit before tax margin 21.4% (2003: 15.9%*)
* Basic EPS of 11.30 p (2003:5.82 p *+)
* Dividend policy changed to 1.41 x cover (2003: 1.67 x cover)
* Final net dividend of 6.00p payable 31 January 2005
* Total dividend of 8.00p per share (2003: 3.48p *+) up 130%
Operational Highlights
* 27 new stores opened (net 24 new stores)
* 24 Topps Tiles
* 3 Tile Clearing House
* New Distribution and Marketing Centre fully operational
* Now a national brand name with a 20% UK market share
* Market continues to grow - forecast 26% over next 4 years
* First seven weeks of new financial year, overall turnover increased by
over 25% with like for like sales showing over 16% increase
* Comparatives are made to the unaudited information for the 52 weeks ended 27
September 2003
+ adjusted for share sub- division of 5: 1 in May 2004
Commenting on the results, Nick Ounstead, Chief Executive said:
'We have had another excellent period of strong sales and profit growth and we
are delighted to announce another record performance for the Group. Topps is now
a truly recognised national brand and we are confident that we have the right
strategies, management and people to deliver another period of growth and
progress.'
For further information:
Nick Ounstead, CEO 020 7861 3232 on 30 November or
Barry Bester, Co-Chairman 01625 446 720 thereafter
Ann-marie Wilkinson/Sarah Landgrebe,
Bell Pottinger 020 7861 3232
CHAIRMEN'S STATEMENT
We are pleased to report another record performance for the Group underpinned by
a strong financial position. Since flotation in 1997 we have achieved consistent
double digit growth in both turnover and profits whilst keeping tight controls
over costs. The key to our continued success is our commitment to the highest
levels of customer service and both the range and quality of products that we
offer. This period saw the completion and opening of our new purpose built
distribution and marketing centre at Grove Park in Leicestershire. The new
facility was officially opened on 28 May 2004 by the Right Honourable Patricia
Hewitt, Secretary of State for Trade and Industry. This now gives us the
capacity to achieve our target of over 350 stores on the UK mainland and also to
distribute more product ourselves thereby cutting down on the number of third
party distributors that we use.
Financial results*
Group turnover has increased by 32.5% over the period to £157.6 million with
profit before tax increasing by over 78% to £33.8 million. We again experienced
strong growth in like-for-like sales for the period of 21.5% demonstrating the
strength of our brand and the underlying continued growth in the ceramic tile
and laminate and wood flooring markets. This is particularly encouraging given
that prior period like-for-like sales growth was challenging at over 15%. Our
business is highly cash generative and at the period end we had net cash
balances of £23.1 million.
Dividend
The Board is committed to a progressive dividend policy and is recommending a
final dividend of 6.00 pence per share, which together with the interim dividend
of 2.00 pence per share, brings the total dividend for the period to 8.00 pence
per share, an increase of over 130% compared to the unaudited proforma dividend
for the 52 week period to 27 September 2003. The dividend will be paid on 31
January 2005 to all shareholders on the register as at 14 January 2005.
People
During the period we created a further 161 new jobs through our expansion
programme and we are delighted to have this opportunity to welcome those who
have joined our team as well as to thank all our people for their individual
contribution to another record set of results.
Outlook
We enjoy the market leading position as a specialist for ceramic tiles in the UK
and we have emerged this year as a truly recognised national brand. We are
confident that we have the right strategies, management and people to deliver
another period of growth and progress for Topps Tiles Plc.
*Comparatives are made up of the unaudited proforma information for the 52 weeks
ended 27 September 2003 (See Profit and Loss Account).
OPERATING REVIEW
Store openings
Our controlled store opening programme continues with 27 new stores (24 Topps
and 3 Tile Clearing House) opened in this financial year. This now gives us an
overall total of 220 trading stores (187 Topps and 33 Tile Clearing House) with
three stores being closed or relocated giving us a net 24 new stores opened in
the period. We have re-fitted 14 outlets in line with our policy of continuous
review to ensure we achieve the maximum potential from our sites. We now have 69
stores with our tile studio concept of extra choice of up-market tiles available
on a special order basis and 16 floorstores with an enhanced stock range of
laminate and real wood flooring. The rollout of the Stoneworks concept within
the stores continues as consumers' appetite for natural product grows. This area
of the market is growing rapidly and we are well placed to take advantage of
this trend with 17 stores now open.
New distribution and marketing centre
We successfully completed the move to our new central distribution and marketing
centre in April this year, without any disruption to trading. The tripling of
capacity will be sufficient to take us from our current store number of 220
through to our stated target of over 350 stores in the UK.
Holland
We now have a total of eleven stores trading in Holland under our 50/50 joint
venture including three new stores opened in the period. It is our intention to
open a further two stores in the next financial period.
Marketing and advertising
We operate two brands in the market, Topps Tiles and Tile Clearing House. Topps
is Britain's biggest tile and wood flooring specialist group with the largest
choice in the UK to suit all tastes and budgets. Tile Clearing House is a true
'cash and carry' tile store selling end of lines, job lots and seconds,
appealing to small builders, local contractors and bulk purchasers. Over the
past 18 months, Topps has undertaken a significant programme of sponsorships
across various broadcast channels including GMTV National Weather, UK Style and
Carlton Weather.
Customer service
Across both our brands, we differentiate ourselves from the competition not only
by the range and availability of our stock but also, most importantly, by the
standard of customer service provided by our high quality, well trained staff.
We have a teamwork policy at Topps of which training is a key feature. We train
all staff on both existing and new product and procedure developments within the
business thus equipping them with the necessary tool kit to serve our customers.
We have our own training department and training centres along with in-store
training via our e-learning software and our radio station Tiles FM.
The Market
The tile market continues to grow with the non-contract sector estimated at 43.1
million square metres (source: MSI) for 2004. Growth is forecast to reach 54.5
million square metres by 2008, an increase of 26%. The UK has traditionally had
a very low usage per capita of ceramic tiles compared with our European
neighbours but this is now changing with tiles becoming increasingly more
popular. The continued growth in the market is driven by a number of factors, in
particular the increase in second bathrooms and shower areas, conservatories and
utility rooms and the trend for larger kitchens at the expense of formal dining
rooms. Consumers today are increasingly aware of health and hygiene issues in
the home and are replacing traditional soft flooring products with easy to clean
ceramic floor tiles or wood and laminate flooring. There is also an increase in
the use of under floor heating systems in family rooms where hard flooring is
now becoming more popular. The Alliance & Leicester's Moving Improving Index
revealed that Britons were forecast to spend a record £17 billion on their homes
during summer 2004. A record number of people are getting into DIY, more are
planning serious projects and the average expenditure on DIY will rise by 23%
during summer 2004.
Current trading
In the first seven weeks of the new financial period we have recorded a
like-for-like sales increase of over 16% and overall sales have increased by
over 25%. This period's target expansion is for another net 24 new stores and we
have already opened stores in Barnsley, Edinburgh, Clacton and Camberley. Topps
has had another excellent period of strong sales and profit growth. The first
few weeks of the new financial period have begun well and we are confident of
delivering continued growth to our shareholders.
FINANCIAL REVIEW*
Profit and Loss Account
Turnover
During the period Group turnover increased by 32.5% to £157.6 million from
£118.9 million last year. Like-for-like sales increased by 21.5%, with new store
openings contributing a further 8.2% increase, with the remaining 2.8% increase
due to the 53rd week in this period.
Gross margin
Overall gross margin was 60.5% compared to 57.5% last year. At the interim point
of this period gross margin was 59.4%. The second half has shown a gross margin
of 61.5%.
Operating expenses
Costs as a percentage of sales were 39.9% compared to 41.9% last year. This
reduction is mainly due to the economies of scale that the business is now
benefiting from as it continues to grow.
Profit before tax
We have achieved an overall increase in profit before tax of 78.9% to £33.8
million compared to a profit before tax of £18.9 million last year.
Profit before tax margin
Group profit before tax margin has increased to 21.4% from 15.9% last year. This
increase of 5.5 percentage points has been achieved primarily by an increase in
gross margin of 3.0 percentage points and a reduction in operating costs of 2.0
percentage points with the remainder being reflected in the profit on disposal
of fixed assets and interest receivable.
Taxation
The effective rate of Corporation Tax was 24.1% (69 weeks ended 27 September
2003: 30.4%)
and we continued to fully provide for deferred taxation in line with FRS19. The
effective rate of tax for this financial period has been favourably affected by
a statutory deduction for share options exercised of 4.2%.
Earnings and dividends
Our earnings per share has grown to 11.30 pence compared to 5.82 pence last
year, an increase of 94.2%. The Board is recommending a final dividend of 6.00
pence per share, which will give a total dividend for the period of 8.00 pence
compared to 3.48 pence last year, an increase of 130%. This gives a dividend
cover of 1.41 times compared to 1.67 times for the 69 week period ended 27
September 2003. The Board is confident in this further reduction in cover as the
business continues to demonstrate its ability to generate free cash and
considers this reduction to be a sustainable level.
Balance Sheet
Fixed assets
Capital expenditure in the period amounted to £11.7 million. This reflects the
cost of acquiring two freehold sites for £0.8 million, further development costs
on four sites of £1.1 million and the completion costs of the new distribution
and marketing centre of £5.1 million. We have also opened 27 new stores at a
cost of £2.3 million and undertaken major refurbishment of a further 14 stores
at a cost of £0.5 million and other minor re-fit costs of £0.9 million. We
continue to update and expand our IT systems within the business and this
coupled with some motor vehicle renewals accounted for £1.0 million. At the
period end the Group owned nine freehold sites, two development sites and the
new distribution and marketing centre which have a total net book value of
£10.9m.
*Comparatives are made up of the unaudited proforma information for the 52 weeks
ended 27 September 2003 (See Profit and Loss Account)
Stock
Stock at the period end represents 143 days turnover compared to 147 days for
the same period last year.
Cash reserves
Cash reserves at the period end were £29.6 million and borrowings were £6.5
million, the latter being primarily for the new distribution and marketing
centre. This gives the Group a net funds position of £23.1 million compared to
£15.2 million as at 27 September 2003. The highly cash generative nature of our
business means that the Group has always been able to fund its entire new store
expansion programme from its own resources and to purchase freehold sites as
suitable opportunities arise.
Share buy-backs
In the financial period the Group has bought back 5,878,920 Ordinary Shares at a
cost of £8.64 million. This primarily is to stop any dilution occurring as
employee share options are exercised and sold. However the Group has also, on
occasion, acquired shares when the Board considers there is an opportunity to do
so in the market. To date 5,471,120 of the shares acquired have been cancelled
leaving 407,800 held as Treasury Shares.
Share split
In May 2004 the Company completed a share sub-division whereby each Ordinary
Share of 12.5 pence was sub-divided into five Ordinary Shares of 2.5 pence each.
The Board believes the share split will increase the marketability and liquidity
of the shares by accommodating investors who could be deterred by the pre share
split price level. The Board considered this particularly important, since the
Company had recently become a FTSE 250 quoted company.
Joint venture in Holland
The joint venture in Holland continues to develop with three new stores opened
in the period to bring the total to eleven stores. The Group owns 50% in the
joint venture with the other 50% owned by the Dutch management team. The Group's
Profit and Loss Account shows turnover of £1.8 million and the operating profit
before tax of £39,000 from the venture which reflects the Group's 50% holding.
International Financial Reporting Standards (IFRS)
The Group is working closely with its auditors to implement these proposed
changes. The Group is required to adopt IFRS for the financial period commencing
2 October 2005.
Annual General Meeting
The Annual General Meeting for the period to 2 October 2004 will be held on 11
January 2005 at 10.30am at Topps Tiles Plc, Thorpe Way, Grove Park, Enderby,
Leicestershire LE19 1SU, which is our new distribution and marketing centre.
*Comparatives are made up of the unaudited proforma information for the 52 weeks
ended 27 September 2003 (See Profit and Loss Account)
Consolidated Group Profit and Loss Account
For the 53 week period ended 2 October 2004
Proforma
information
(see note 1)
53 weeks 69 weeks 52 weeks
ended ended ended
02-Oct 27-Sep 27-Sep
2004 2003 2003
Audited Audited Unaudited
£'000 £'000 £'000
Turnover, group and share of joint
venture 159,430 154,297 120,032
Less: share of joint venture turnover (1,818) (2,087) (1,135)
-------- -------- ---------
Group turnover 157,612 152,210 118,897
Cost of sales (62,282) (64,737) (50,587)
-------- -------- ---------
Gross profit 95,330 87,473 68,310
Operating expenses
- employee profit sharing (7,853) (5,450) (4,271)
- other operating expenses (54,968) (58,881) (45,534)
-------- -------- ---------
Group operating profit 32,509 23,142 18,505
Share of operating profit in joint
venture 39 64 64
-------- -------- ---------
Group and share of joint venture
operating profit 32,548 23,206 18,569
Exceptional profit on disposal of fixed
assets 542 - -
-------- -------- ---------
Profit on ordinary activities before net
finance income 33,090 23,206 18,569
Net finance income 704 348 319
-------- -------- --------
Profit on ordinary activities before
taxation 33,794 23,554 18,888
Tax on profit on ordinary activities (8,146) (7,168) (5,769)
-------- -------- --------
Profit on ordinary activities after
taxation 25,648 16,386 13,119
Dividends (18,155) (9,832) (7,871)
-------- -------- ---------
Transfer to reserves 7,493 6,554 5,248
======== ======== =========
Earnings per Ordinary Share*
- basic 11.30p 7.28p 5.82p
- diluted 11.12p 7.20p 5.76p
======== ======== =========
*adjusted for share sub-division of 5:1 in May 2004.
There are no recognised gains or losses in either period other than the profit
for the financial period and a foreign exchange gain of £9,000 (69 weeks ended
27 September 2003: £15,564). Accordingly, no separate Statement of Total
Recognised Gains and Losses is presented. All activity arose from continuing
operations.
Consolidated Group Balance Sheet
As at 2 October 2004
Group Group
02-Oct 27-Sep
2004 2003
£'000 £'000
Fixed assets
Goodwill 551 586
Tangible assets 29,236 23,252
Investments - -
Joint venture undertaking
- share of assets 1,059 946
- share of liabilities (866) (773)
-------- --------
29,980 24,011
Current assets
Stocks 24,373 19,713
Debtors due within one year 3,809 4,712
Debtors after one year 110 -
Cash at bank and in hand 29,624 18,580
-------- --------
57,916 43,005
Creditors: amounts falling due within one year (45,452) (31,920)
-------- --------
Net current assets 12,464 11,085
-------- --------
Total assets less current liabilities 42,444 35,096
Creditors: amounts falling due
after more than one year (7,571) (2,925)
Provisions for liabilities and charges (1,864) (1,349)
-------- --------
Net assets 33,009 30,822
======== ========
Capital and reserves
Called-up share capital 5,673 5,659
Share premium 4,889 1,715
Merger reserve (399) (399)
Special reserve - -
Treasury Shares (733) -
Capital redemption reserve 137 -
Other reserve - -
Profit and Loss Account 23,442 23,847
-------- --------
Equity shareholders' funds 33,009 30,822
======== ========
Consolidated Cash Flow Statement
For the 53 week period ended 2 October 2004
53 weeks 69 weeks
ended ended
02-Oct 27-Sep
2004 2003
Notes £'000 £'000
Net cash inflow from
operating activities (a) 37,770 33,723
Returns on investments and
servicing of finance (b) 530 312
Taxation (5,236) (7,104)
Capital expenditure and financial investment (c) (8,266) (10,653)
Acquisitions and disposals (d) - (486)
Equity dividends paid (11,534) (5,469)
-------- ---------
Cash inflow before financing 13,264 10,323
Financing (e) (2,220) 3,115
-------- ---------
Increase in cash in the period (f) 11,044 13,438
======== =========
a) Reconciliation of operating profit to operating cash
flows
53 weeks 69 weeks
ended ended
02-Oct 27-Sep
2004 2003
£'000 £'000
Operating profit 32,509 23,184
Depreciation 2,729 3,045
Loss on disposal of fixed assets 269 217
Goodwill amortisation 35 54
Increase in stocks (4,660) (694)
Decrease/(increase) in debtors 793 (1,728)
Increase in creditors 6,095 9,645
-------- --------
Net cash inflow from operating
activities 37,770 33,723
======== =========
b) Returns on investments and servicing of finance
53 weeks 69 weeks
ended ended
02-Oct 27-Sep
2004 2003
£'000 £'000
Interest received 930 363
Interest paid (400) (51)
-------- ---------
Net cash inflow from returns on
investments and servicing of finance 530 312
======== =========
c) Capital expenditure and financial
investment
53 weeks 69 weeks
ended ended
02-Oct 27-Sep
2004 2003
£'000 £'000
Purchase of tangible fixed assets (11,491) (11,655)
Sale proceeds of tangible fixed assets 3,225 1,002
-------- ---------
Net cash outflow from capital expenditure
and financial investment (8,266) (10,653)
======== =========
d) Acquisitions and disposals
53 weeks 69 weeks
ended ended
02-Oct 27-Sep
2004 2003
£'000 £'000
Acquisition of joint venture - (486)
======== =========
e) Financing
53 weeks 69 weeks
ended ended
02-Oct 27-Sep
2004 2003
£'000 £'000
Proceeds from issue of Ordinary Share
capital 3,325 444
New loans 3,095 3,422
Purchase of Treasury Shares (8,640) -
Repayment of loans - (746)
Capital element of hire purchase rentals - (5)
-------- ---------
Net cash (outflow)/inflow from financing (2,220) 3,115
======== =========
f) Analysis and reconciliation of net funds
At At
27-Sep 02-Oct
2003 Cash flow 2004
£'000 £'000 £'000
Cash at bank and in hand 18,580 11,044 29,624
Debt due within one year (497) (20) (517)
Due debt after one year (2,925) (3,075) (6,000)
-------- -------- ---------
Net funds 15,158 7,949 23,107
======== ======== =========
f) Analysis and reconciliation of net funds
53 weeks 69 weeks
ended ended
02-Oct 27-Sep
2004 2003
£'000 £'000
Increase in cash in the period 11,044 13,438
Cash outflow from increase in
debt and finance leasing (3,095) (2,676)
-------- ---------
Movements in net funds in the period 7,949 10,762
Net funds at start of period 15,158 4,396
-------- ---------
Net funds at end of period 23,107 15,158
======== =========
NOTES TO FINANCIAL STATEMENTS
For the 53 week period ended 2 October 2004
1 Basis of Preparation
The accounting policies used in preparation of the accounts for the period ended
2 October 2004 are consistent with those applied in the preceding period.
The unaudited profit and loss account is based on management accounts
information and has been presented for the benefit of the principal users of the
financial statements as in the opinion of the Directors it forms a more
appropriate basis for making comparisons of profit and loss performance. The
proforma information is not audited.
2 Turnover
Turnover and profit before taxation are attributable to one activity, the sales
of ceramic tiles, wood flooring and related products, and arises predominantly
within the UK.
3 Dividends
An interim dividend of 2.00 pence per ordinary share was paid to shareholders of
the company on the 30 June 2004. The Directors recommend a final dividend of
6.00 pence per ordinary share to be paid on 31 January 2005 to shareholders on
the register on 14 January 2005, making a total dividend for the period of 8.00
pence (2003: 3.48 pence+) per ordinary share.
4 Earnings per share
The calculation of earnings per share is based on profit of ordinary activities
after taxation for the financial period attributable to equity shareholders and
the weighted average number of ordinary shares as follows:
At 2 October At 27 September
2004 2003**
Number of Number of
Shares Shares
Weighted average number of shares:
For basic earnings per share 226,881,069 225,287,980
Weighted average number of shares
under option 3,868,815 2,173,000
-------------- --------------
For diluted earnings per share 230,749,884 227,460,980
-------------- --------------
+Adjusted for share sub division of 5:1 in May 2004
5 Financial information
The financial information set out above does not constitute the Group's
statutory financial statements for the 53 week period ended 2 October 2004 or
the 69 week period ended 27 September 2003 but is derived from those statements.
Statutory financial statements for the 69 week period ended 27 September 2003
have been delivered to the Registrar of Companies and those for the 53 week
period ended 2 October 2004 will be delivered following the Company's Annual
General Meeting to be held on 11 January 2005. The Auditors have reported on the
accounts to 27 September 2003 and 2 October 2004 and their report was
unqualified and did not contain statements under section 237(2) or 237(3) of the
Companies Act 1985.
The Report and Financial Statements for the 53 week period ended 2 October 2004
will be posted to Shareholders on 3 December 2004 and additional copies will be
available from the Company Secretary at the Company's registered office; Topps
Tiles Plc, Rushworth House, Handforth, Wilmslow, Cheshire, SK9 3HJ.
* Comparatives are made to the unaudited information for the 52 weeks ended 27
September 2003 (see Profit & Loss Account).
This information is provided by RNS
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