Interim Results

Topps Tiles PLC 23 May 2006 TOPPS TILES PLC The UK's leading tile and wood flooring specialist INTERIM RESULTS FOR THE 26 WEEKS ENDED 1 APRIL 2006 Highlights The Group continues to deliver robust financial results: • Group revenue increased by 1.2% to £88.57m (2005: £87.48m) • Group like-for-like revenue decreased by 4.0% • Gross margin increased to 62.4% (2005: 61.9%) • Operating costs represent 40.3% of revenue (2005: 39.4%) • Profit before tax, excluding property disposals, increased to £20.01m (2005: £20.0m) • Property profits on sale and leaseback of one freehold property of £258k (2005: £1.72m) • Profit before tax decreased 6.7% to £20.27m (2005: £21.72m) • Net margin* 22.6% (2005: 22.9%) • Basic earnings per share decreased to 6.44p (2005: 7.36p) • Tax rate 28.1% (2005: 23.3%) • Interim net dividend declared of 3.50p (2005: 3.50p) payable 30 June 2006 • Net cash position of £24.89m (2005: £16.73m) • Revenue growth continues with overall revenue increasing by 4.8% and like-for-like revenues improving in the second half - first 6 weeks marginally down 0.8% and for the first 7 weeks marginally up 0.2% • Net 14 new stores opened in the period • On target to open a net 24 new stores this financial period * excluding joint venture and property disposal Commenting on the results, Nick Ounstead, Chief Executive said: 'Despite the consistently tough trading environment, trading has continued to be robust, reflecting the resilience of our business model. We believe our competitive position and experienced management team will enable us to continue to grow market share and achieve further progress in the second half of 2006.' For further information please contact: Nick Ounstead, CEO 01625 446700 Barry Bester, Co-Chairman 0208 269 1900 Sarah Landgrebe/Alex Walton Bell Pottinger 020 7861 3232 EXECUTIVE BOARD STATEMENT We are delighted to report our financial results for the first 26 weeks of 2005/ 2006. Income statement Trading has continued to be robust, despite the consistently tough trading environment. Overall sales growth was up 1.2% compared with the 26 week period last year. Like-for-like revenue were 4.0% below the same period last year, reflecting a particularly weak UK customer environment. However, the final five weeks of the period were encouraging with like-for-like revenue up 0.9%. Gross margins continue to improve and are up to 62.4% compared with 61.9% last year and 60.7% in the second half of the last financial period. Operating costs, were equivalent to 40.3% of revenue compared with 39.4% in the same period last year. Profit before tax, excluding property disposals was marginally up against last year at £20,011k (2005: £20,001k). Basic earnings per share are down 12.5% to 6.44p from 7.36p last year, this reflects the lower level of profit this year on disposal of fixed assets of £258k (2005: £1.72m) and the higher tax rate of 28.1% compared to 23.3% last year. Profit before tax amounted to £20.27m (2005: £21.72m) a decrease of 6.7%. Net margin, excluding property disposals was 22.6% from 22.9% in the same period last year. The rate of Corporation Tax for the period was 28.1% (2005: 23.3%) which reflects the full provision of deferred tax and the favourable effects of the statutory deductions for share options exercised and tax savings as a result of intra-Group restructuring changes, particularly in the previous period. Net assets The Group currently owns 6 freehold sites, 2 development sites, and both warehouse and distribution facilities (Topps and Tile Clearing House) with a total net book value of £12.4m. Capital expenditure, in the period amounted to £2.4m. This reflects 14 new stores opened in the period from a new store opening target of a net 24 new stores for the full financial period, plus one major store refit and other minor refits as well as further development of our Group's systems infrastructure. We have also acquired a further freehold site in Kidderminster. At the period end cash balances for the Group were £30.89m (2005: £22.73m) and borrowings were £6.00m (2005: £6.00m). The Group therefore has a net cash position of £24.89m (2005: £16.73m). The Group remains highly cash generative and continues to fund its controlled new store expansion programme from its own resources and to purchase freehold sites as suitable opportunities arise. At the period end the Group had £27.4m of inventories which represents 149 inventory days cover (2005: 158 days). Board change We have strengthened the Executive Board by appointing Matthew Williams our Chief Operating Officer, as a main Board director from 1 April 2006. Matthew has acted as Chief Operating Officer at Operational Director level since December 2004. Highlights 26 weeks to 2 April 2005 26 weeks to Unaudited 1 April 2006 and Unaudited restated £'000 £'000 ----- ----- Group revenue 88,568 87,482 Like-for-like revenue -4.00% +8.50% Gross margin % 62.4% 61.9% Profit before tax and property disposals 20,011 20,001 Profit before tax 20,269 21,720 Net margin % excluding property disposals 22.6% 22.9% Basic earnings per share (pence) 6.44p 7.36p Interim dividend (pence) 3.50p 3.50p Net cash position 24,890 16,734 Dividend We are maintaining our dividend policy and announcing an interim dividend of 3.50 pence per share (2005: 3.50p). This will be paid on 30 June 2006 to shareholders on the register as at 2 June 2006. Operational review Our national store opening programme remains on track and we are ahead of target to reach our net 24 new store openings for the full financial period having opened 14 new stores in the first half. We officially opened our landmark 250th store in April 2006. At the period end the Group was trading from a total of 258 stores, 217 Topps and 41 Tile Clearing House. We continually develop and update our store layout and format and are currently introducing a new store layout to selected new stores and refurbished stores. This includes updated point of sale displays and merchandising modernisation. We are pleased with the progress of our joint venture in Holland, which continues to trade profitably. We now trade from 13 stores which sell a combination of ceramic tiles and wood and laminate flooring. We plan to open a further 2 new stores before the year end, the first of which opened in May 2006. We continue to invest in national advertising and also build local brand awareness through our involvement with local communities where each store sponsors a junior football team providing them with new kits and equipment. The Board has developed an integrated Corporate and Social Responsibility policy that targets and measures the performance of the Group. The policy is published on our website at www.toppstiles.co.uk. We now employ over 1,600 staff across the Group and we continue to invest in training programmes at all levels. We have a policy of internal promotion and maintain a strong culture of rewarding performance. Current trading and future prospects In the first 6 weeks of the current period revenue growth has continued with overall revenue increasing by 4.8% and like-for-like revenue down 0.8%. Whilst trading conditions continue to be tough the strength of these results demonstrate the resilience of our business model. We believe that the combination of our competitive position and the experience of the management team will enable us to continue to grow market share and achieve further progress in the second half of the year. Barry Bester Nicholas Ounstead Andrew Liggett Executive Chairman Chief Executive Officer Finance Director CONSOLIDATED GROUP INCOME STATEMENT For the 26 weeks ended 1 April 2006 26 weeks ended 52 weeks 26 weeks 2 April 2005 ended ended Unaudited 1 October 1 April 2006 and 2005 Unaudited restated Restated £'000 £'000 £'000 ----- ----- ----- Group revenue - continuing operations 88,568 87,482 173,326 Cost of sales (33,333) (33,359) (67,146) -------- -------- -------- Gross profit - continuing operations 55,235 54,123 106,180 Operating expenses - employee profit sharing (3,018) (4,307) (7,502) - distribution costs (24,433) (22,442) (46,348) - other operating expenses (8,278) (7,765) (15,521) Share of results of joint venture 25 5 13 ------- ------- -------- Group and share of joint venture operating profit 19,531 19,614 36,822 Other gains and losses 258 1,719 1,700 Investment revenue 480 387 669 Profit before taxation Before profit on disposal of fixed assets 20,011 20,001 37,491 Profit on disposal of fixed assets 258 1,719 1,700 ------ ------ ------ 20,269 21,720 39,191 Taxation (5,686) (5,051) (9,009) ------- ------- ------- Profit for the period attributable to equity holders of the company 14,583 16,669 30,182 ------ ------ ------ Earnings per ordinary share -basic 6.44p 7.36p 13.33p -diluted 6.41p 7.29p 13.24p CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE For the 26 weeks ended 1 April 2006 26 weeks ended 1 April 2006 Unaudited £'000 -------------- Exchange rate gain 4 Profit for the period attributable to equity holders of the company 14,583 ------ Recognised income and expense for the period 14,587 CONSOLIDATED BALANCE SHEET As at 1 April 2006 2 April 2005 Unaudited 1 October 1 April 2006 and 2005 Unaudited restated Restated £'000 £'000 £'000 ----- ----- ----- Non-current assets Goodwill 551 551 551 Property plant & equipment 32,167 30,914 32,072 Joint venture undertaking 254 208 225 ------ ------ ------ 32,972 31,673 32,848 Current assets Inventories 27,365 27,606 25,338 Trade and other receivables within one year 5,207 4,113 4,071 Trade and other receivables after one - - 115 Cash and cash equivalents 30,890 22,734 27,829 ------ ------ ------ 63,462 54,453 57,353 Total assets 96,434 86,126 90,201 Current liabilities Trade and other payables (17,874) (17,515) (18,503) Current tax liabilities (7,476) (3,841) (3,640) Other current liabilities (9,713) (7,799) (4,635) ------- ------- ------- (35,063) (29,155) (26,778) -------- -------- -------- Net current assets 28,399 25,298 30,575 ------ ------ ------ Non-current liabilities (6,000) (8,582) (9,394) Deferred tax liabilities (1,919) (1,484) (1,799) ------- ------- ------- Total liabilities (42,982) (39,221) (37,971) -------- -------- -------- Net assets 53,452 46,905 52,230 ------ ------ ------ Equity Share capital 5,665 5,698 5,655 Share premium 5,746 5,384 5,575 Merger reserve (399) (399) (399) Share based payment reserve 137 67 100 Foreign currency translation reserve (4) - - Treasury shares - (4,183) - Capital redemption reserve 190 137 190 Retained earnings 42,117 40,201 41,109 ------ ------ ------ Total equity 53,452 46,905 52,230 ------ ------ ------ CONSOLIDATED CASHFLOW STATEMENT For the 26 weeks ended 1 April 2006 26 weeks 52 weeks 26 weeks ended ended ended 2 April 2005 1 October 1 April 2006 Unaudited and 2005 Unaudited restated Restated £'000 £'000 £'000 ----- ----- ----- Cashflow from operating activities Group and share of joint venture operating profit before taxation 19,531 19,614 36,822 Adjustments for: Depreciation 2,010 1,682 3,363 Share option charge 37 32 65 (Increase)/decrease in receivables (1,021) (189) (267) Increase in inventories (2,027) (3,233) (965) Increase/(decrease) in payables 1,055 (2,431) (3,239) Share of results of joint venture (25) (5) (13) ------- ------- ------- Cash generated by operations 19,560 15,470 35,766 Interest paid (103) (165) (308) Taxation paid (1,730) (4,362) (8,864) ------- ------- ------- Net cash from operating activities 17,727 10,943 26,594 Cashflows from investing activities Purchase of treasury shares - (3,450) (3,774) Interest received 583 522 942 Purchase of property/plant/equipment (2,385) (5,781) (8,564) Other gains and losses 538 4,157 4,292 ------- ------- ------- Net cash used in investment activities (1,264) (4,552) (7,104) ------- ------- ------- Cashflows from financing activities Proceeds from issue of share capital 181 521 721 Repayment of loans - (517) (517) Dividends paid (13,583) (13,285) (21,489) -------- -------- -------- Net cash used in financing activities (13,402) (13,281) (21,285) -------- -------- -------- Net Increase in cash equivalents 3,061 (6,890) (1,795) Cash and cash equivalents at beginning of period 27,829 29,624 29,624 ------ ------ ------ Cash and cash equivalents at end of period 30,890 22,734 27,829 ------ ------ ------ NOTES TO THE FINANCIAL STATEMENTS 1. Basis of Preparation The financial information in this document has been prepared in accordance with all International Financial Reporting Standards (IFRS) that are expected to be applicable for the Group's 2006 reporting. These are subject to an ongoing review and possible amendments. The interim financial statements have been prepared on the basis of IFRS that the Directors expect to be applied when the first audited IFRS statements are completed for the period ending 30 September 2006. Details of the changes in accounting policies arising from the adoption of IFRS, together with restated information for the accounting period of 26 weeks to 2 April 2005 and for the 52 weeks to 1 October 2005, have been published on Topp's website www.toppstiles.co.uk. a) The interim report was approved by the Board on 22 May 2006. The financial information for the 26 weeks ended 1 April 2006 and similarly the 26 weeks ended 2 April 2005 has neither been audited nor reviewed. The financial information for the 52 week period ended 1 October 2005 has been based on info rmation in the audited financial statements for that period, restated for IFRS. 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 52 week period ended 1 October 2005 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 in accordance with IFRS. 2. Business Segments For management purposes, the group is currently organised into two retail operating divisions, Topps Tiles (Non-Trade) and Tile Clearing House (Trade). These divisions are the basis on which the group reports its primary segment information. Segmental revenue and profit before taxation by business activity were as follows 2 April 2005 1 unaudited October 1 April 2006 and 2005 Unaudited restated Restated £'000 £'000 £'000 ----- ----- ----- Revenue Non-Trade customers 78,670 77,545 153,489 Trade customers 9,898 9,937 19,837 ----- ----- ------ Total revenue 88,568 87,482 173,326 ------ ------ ------- Group and share of joint venture operating profit Non-Trade customers 17,681 18,398 34,119 Trade customers 1,986 2,237 4,575 Other central costs (136) (1,021) (1,872) ----- ------- ------- Total Group and share of joint venture operating profit 19,531 19,614 36,822 ------ ------ ------ Profit on disposal of fixed assets 258 1,719 1,700 Net investment revenue 480 387 669 ------ ------ ------ Profit before taxation 20,269 21,720 39,191 ------ ------ ------ 3. Taxation Although the Corporate tax rate for the 26 weeks ended 1 April 2006 is 30% and deferred tax has been provided for in full, provision has been made at the underlying rate of 28.1% (2005: 23.3%) reflecting intra-Group restructuring benefits and savings from share symmetry on options exercised. 4. Interim dividend An interim dividend of 3.50p per ordinary share has been declared payable on 30 June 2006 to shareholders on the register at 2 June 2006, in accordance with IFRS this dividend will be recorded in the financial statements in the second half of the period. 5. Earnings per share Basic earnings per share for the 26 weeks ended 1 April 2006 have been calculated on earnings (after deducting taxation) of £14,583,000 (2005: £16,669,000) and on ordinary shares of 226,559,534 (2005: 226,615,590), being the weighted average of ordinary shares in issue during the period. Diluted earnings per share for the 26 weeks ended 1 April 2006 have been calculated on earnings (after deducting taxation) of £14,583,000 (2005: £16,669,000) and on ordinary shares of 227,539,013 (2005: 228,732,706), being the weighted average of ordinary shares in issue during the period. 6. 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. This information is provided by RNS The company news service from the London Stock Exchange D

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