Interim Results

Topps Tiles PLC 22 May 2007 TOPPS TILES PLC The UK's leading tile and wood flooring specialist INTERIM RESULTS FOR THE 26 WEEKS ENDED 31 MARCH 2007 Highlights The Group continues to deliver robust financial results: â€¢ Group revenue increased by 14.9% to Â£101.8m (2006: Â£88.6m) â€¢ Group like-for-like revenue increased by 4.4% â€¢ Gross margin increased to 62.6% (2006: 62.4%) â€¢ Operating profit improvement of 8.8% to Â£21.3m (2006: Â£19.5m) â€¢ Net increase in interest charge of Â£3.3m year on year due to increase in net debt â€¢ Profit before tax Â£18.7m (2006: Â£20.3m) â€¢ Profit before tax margin of 18.4% (2006: 22.9%) â€¢ Basic earnings per share increased 16.5% to 7.50p (2006: 6.44p) â€¢ Tax rate 31.7% (2006: 28.1%) â€¢ Interim net dividend declared of 3.75p (2006: 3.50p) payable 2nd July 2007 â€¢ Net debt position of Â£106.0m (2006: net cash Â£24.9m) due to share buyback â€¢ Acquisition of further 50% holding in Dutch joint venture in October 2006, giving the Company 100% of the shareholding â€¢ UK overall revenue growth of 11.7% (2006: 1.2%) with like-for-like revenue growth of 4.0% (2006: down 4.0%) and Holland overall revenue growth of 35.6% (2006: 21.6%) with like-for-like revenue growth of 18.9% (2006: 8.6%) â€¢ Net 15 new UK stores and net 4 new Dutch stores opened in the period â€¢ On target to open a net 30 new UK stores this financial period, and ahead of target to open net 5 new Dutch stores this financial period Commenting on the results, Nick Ounstead, Chief Executive said: 'Although the retail market continues to be tough, trading has been robust and we have delivered further revenue growth. We are on target with our UK store roll out programme and ahead of target in Holland. We have consolidated our market leading position and with a proven business strategy and a focused management team we are confident of continued progress in the second half of 2007.' For further information please contact: Topps Tiles Plc Nick Ounstead, CEO 01625 446700 Barry Bester, Chairman 0208 269 1900 Bell Pottinger Corporate & Financial Ann-marie Wilkinson/Emma Kent Bell Pottinger 020 7861 3232 EXECUTIVE BOARD STATEMENT We are delighted to report our financial results for the first 26 weeks of 2006/ 2007. Income statement Trading has continued to be robust, despite the consistently tough retail market. Overall sales were up 14.9% compared with the 26 week period last year. Like-for-like revenue increased by 4.4%. Dutch sales are included for the first time post acquisition of the remaining 50% of the business. On a proforma basis, assuming Holland had been included throughout the previous year, total sales increased 12.3% year on year. In the UK business gross margins continue to improve and are up to 62.8% compared with 62.4% last year and 62.7% in the second half of the last financial period. Gross margins in Holland have also improved over the last 6 months. Group gross margin is 62.6%, compared to 62.1% (on a proforma basis, assuming Holland had been included throughout the previous year). Operating costs were 41.7% of revenue compared with 40.3% in the same period last year. Principal drivers are inclusion of Dutch costs, accelerated depreciation on refits and additional bonus charged year on year. Operating profit improvement of 8.8% to Â£21.3m (2006: Â£19.5m). Property disposals in the period generated a gain of Â£282,000 (2006: Â£258,000). The increase in the interest charge of Â£3.3m year on year was due to debt financing for the share buyback and has resulted in a reduction in profit before tax of 7.7% to Â£18.7m (2006: Â£20.3m). The rate of Corporation Tax for the period was 31.7% (2006: 28.1%) which reflects tax efficiencies in previous periods. Basic earnings per share increased 16.5% to 7.50p from 6.44p last year, this reflects the full half year impact of the 3 for 4 share consolidation completed on 31 July 2006. Net assets The Group currently owns 9 freehold sites, 1 development site, and both warehouse and distribution facilities (Topps and Tile Clearing House) with a total net book value of Â£17.5m. Capital expenditure in the period amounted to Â£5.5m. This reflects 20 new stores opened in the period from a new store opening target of a net 35 new stores for the full financial period, plus 7 major store refits and other minor refits as well as further development of our group's systems infrastructure. We have also acquired further freehold sites in Swansea & Chesham in the period. At the period end cash balances for the Group were Â£9.5m (2006: Â£30.89m) and borrowings were Â£115.5m (2006: Â£6.00m), due to the impact of refinancing for the share buyback. The Group therefore has a net debt position of Â£106.0m (2006: net cash of Â£24.9m). 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 Â£30.3m of inventories (2006: Â£27.4m) which represents 144 inventory days cover (2006: 149 days). Board change In March 2007, we announced the appointment of Robert Parker to the Board as Finance Director, to succeed Andy Liggett on 30 April 2007. Additionally, at the end of March, we announced that Barry Bester will move from the role of Executive Chairman to Non-Executive Chairman, effective from 01 October 2007. Highlights 26 weeks to 26 weeks to 31 March 2007 1 April 2006 Â£'000 Â£'000 ------------------------------ ---------- ----------- Group revenue 101,783 88,568 ------------------------------ ---------- ----------- Like-for-like revenue % change 4.4% -4.0% ------------------------------ ---------- ----------- Gross margin % 62.6% 62.4% ------------------------------ ---------- ----------- Operating profit 21,253 19,531 ------------------------------ ---------- ----------- Operating profit % 20.9% 22.1% ------------------------------ ---------- ----------- Finance costs (3,270) - ------------------------------ ---------- ----------- Profit before tax 18,705 20,269 ------------------------------ ---------- ----------- Net margin % 18.4% 22.9% ------------------------------ ---------- ----------- Basic earnings per share (pence) 7.50p 6.44p ------------------------------ ---------- ----------- Interim dividend (pence) 3.75p 3.50p ------------------------------ ---------- ----------- Net (debt)/cash position (105,999) 24,890 Dividend We are maintaining our dividend policy and announcing an interim dividend of 3.75 pence per share (2006: 3.50p). This will be paid on 2nd July 2007 to shareholders on the register as at 1st June 2007. Operational review Our overall store rollout programme is on track and we are on target to reach our net 30 new UK store openings for the full financial period and ahead of target to reach our net 5 new Dutch store openings for the full financial period. During the period we opened a net 15 new UK stores and four new Dutch stores. At the period end the Group was trading from a total of 286 stores in the UK, 233 Topps and 53 Tile Clearing House, and 19 stores in Holland. We are continually developing and updating our store layout and format and the piloting of our new store layouts which began last year has seen positive customer response. Our advertising campaign continues on both a national and regional level, consolidating brand awareness. We use national television advertising, both terrestrial and digital, and also run regional print and radio advertising campaigns. Alongside our marketing and advertising we continue our involvement with local communities and sponsor over 260 local football teams through our youth football initiative, where each store sponsors a junior football team providing them with new kits and equipment. The Board has 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 1,750 staff across the Group and we continue to invest in training programmes at all levels and across the full range of sales and customer service skills. Holland During the period we completed the acquisition of the remaining 50% of our Dutch joint venture. We are delighted with the performance of our Dutch operation, which has shown strong growth in the period. Overall revenue growth increased by 35.6% (2006: 21.6%) and like-for-like revenue was up 18.9% (2006: 8.6%). We opened a further 4 new stores during the period and now trade from 19 stores, selling a combination of tiles, stone and wood flooring. We have a store opening target of five new stores before the financial period end, and are therefore ahead of target. Current trading and future prospects In the first 6 weeks of the current period revenue growth has continued with overall Group revenue increasing by 10.8% and like-for-like revenue up 4.4%. We have also opened new stores in Byfleet and Chesham. We are pleased with our first half performance and with a market leading position, proven business strategy and a focused management team we are confident of continued progress in the second half of 2007. Barry Bester Nicholas Ounstead Rob Parker Executive Chairman Chief Executive Officer Finance Director CONSOLIDATED GROUP INCOME STATEMENT For the 26 weeks ended 31 March 2007 26 weeks ended 26 weeks ended 52 weeks ended 31 March 2007 1 April 2006 30 September Â£'000 2006 Â£'000 Â£'000 ---------------------------- --------- ---------- ---------- Group revenue - continuing operations 101,783 88,568 180,180 Cost of sales (38,076) (33,333) (67,470) ---------------------------- --------- ---------- ---------- Gross profit - continuing operations 63,707 55,235 112,710 Operating expenses - employee profit sharing (3,734) (3,018) (5,907) - distribution costs (29,698) (24,433) (50,901) - other operating expenses (9,022) (8,278) (17,091) Share of results of joint venture 0 25 58 ---------------------------- --------- ---------- ---------- Group operating profit 21,253 19,531 38,869 ---------------------------- --------- ---------- ---------- Other gains and losses 282 258 258 Investment revenue 440 480 1,276 Finance costs (3,270) - (1,339) ---------------------------- --------- ---------- ---------- Profit before taxation 18,705 20,269 39,064 Taxation (5,925) (5,686) (11,260) Profit for the period attributable to equity holders of the company 12,780 14,583 27,804 ---------------------------- --------- ---------- ---------- Earnings per ordinary share - basic 7.50p 6.44p 12.80p - diluted 7.46p 6.41p 12.74p CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE For the 26 weeks ended 31 March 2007 ------------------------- ----------- ----------- ---------- 26 weeks ended 26 weeks ended 52 weeks ended 31 March 2007 1 April 2006 30 September 2006 Â£'000 Â£'000 Â£'000 ------------------------- ----------- ----------- ---------- Exchange rate gain / (loss) - 4 (2) ------------------------- ----------- ----------- ---------- Deferred tax on sharesave scheme taken directly to equity 145 - 304 Profit after tax for the period 12,780 14,583 27,804 ------------------------- ----------- ----------- ---------- Recognised income and expense for the period 12,925 14,587 28,106 ------------------------- ----------- ----------- ---------- CONSOLIDATED BALANCE SHEET As at 31 March 2007 --------------------------- ---------- ---------- ---------- 31 March 2007 1 April 2006 30 September 2006 Â£'000 Â£'000 Â£'000 --------------------------- ---------- ---------- ---------- Non-current assets Goodwill 1,430 551 551 Property plant & equipment 40,564 32,167 36,857 Joint venture undertaking - 254 281 --------------------------- ---------- ---------- ---------- 41,994 32,972 37,689 Current assets Inventories 30,265 27,365 27,031 Trade and other receivables within one year 6,803 5,207 5,528 Cash and cash equivalents 9,501 30,890 16,533 --------------------------- ---------- ---------- ---------- 46,569 63,462 49,092 Total assets 88,563 96,434 86,781 Current liabilities Trade and other payables (25,175) (27,587) (25,837) Bank loans (4,900) - (4,900) Current tax liabilities (7,848) (7,476) (7,507) --------------------------- ---------- ---------- ---------- (37,923) (35,063) (38,244) --------------------------- ---------- ---------- ---------- Net current assets 8,646 28,399 10,848 --------------------------- ---------- ---------- ---------- Non-current liabilities Bank loans (110,600) (6,000) (110,600) Deferred tax liabilities (1,347) (1,919) (1,233) --------------------------- ---------- ---------- ---------- (111,947) (7,919) (111,833) --------------------------- ---------- ---------- ---------- Total liabilities (149,870) (42,982) (150,077) --------------------------- ---------- ---------- ---------- Net (liabilities) / assets (61,307) 53,452 (63,296) --------------------------- ---------- ---------- ---------- Equity Share capital 5,791 5,665 5,773 Share premium 1,309 5,746 531 Merger reserve (399) (399) (399) Share based payment reserve 202 137 166 Foreign currency translation reserve - (4) - Capital redemption reserve 20,254 190 20,254 Retained earnings (88,464) 42,117 (89,621) --------------------------- ---------- ---------- ---------- Total (deficit) / equity (61,307) 53,452 (63,296) --------------------------- ---------- ---------- ---------- CONSOLIDATED CASHFLOW STATEMENT For the 26 weeks ended 31 March 2007 26 weeks ended 26 weeks ended 52 weeks ended 31 March 2007 1 April 2006 30 September 2006 Â£'000 Â£'000 Â£'000 ------------------------ ------------ ----------- ---------- Cashflow from operating activities Group and share of joint venture operating profit before taxation 21,253 19,531 38,869 Adjustments for: Depreciation 2,003 2,010 3,718 Share option charge 36 37 66 Loss on sale of fixed assets 82 - - Increase in receivables (109) (1,021) (1,342) Increase in inventories (1,826) (2,027) (1,693) (Decrease)/increase in payables (2,272) 1,055 (1,949) Share of results of joint venture - (25) (58) ------------------------ ------------ ----------- ---------- Cash generated by operations 19,167 19,560 37,611 Interest paid (3,270) (103) (683) Taxation paid (5,325) (1,730) (7,655) ------------------------ ------------ ----------- ---------- Net cash from operating activities 10,572 17,727 29,273 Cashflows from investing activities Interest received 405 583 1,276 Purchase of property, plant and equipment (5,200) (2,385) (8,410) Acquisition of joint venture (1,286) - - Proceeds of sale of property plant & equipment 97 538 573 ------------------------ ------------ ----------- ---------- Net cash used in investment activities (5,984) (1,264) (6,561) Cashflows from financing activities Proceeds from issue of share capital 147 181 222 Repayment of loans - - (6,000) New loans - - 115,500 Share buy back - - (122,216) Dividends paid (11,767) (13,583) (21,514) ------------------------ ------------ ----------- ---------- Net cash used in financing activities (11,620) (13,402) (34,008) Net (decrease)/increase in cash equivalents (7,032) 3,061 (11,296) Cash and cash equivalents at beginning of period 16,533 27,829 27,829 ------------------------ ------------ ----------- ---------- Cash and cash equivalents at end of period 9,501 30,890 16,533 ------------------------ ------------ ----------- ---------- RECONCILIATION OF MOVEMENTS IN EQUITY For the 26 weeks ended 31 March 2007 26 weeks to 31 March 2007 Â£'000 ------------- --------------- At 1 October 2006 (63,296) Recognised income and expense for the period 12,925 Issue of shares 795 Share option charge 36 Dividend paid (11,767) ----------------- -------- ------------- --------------- At 31 March 2007 (61,307) ----------------- -------- ------------- --------------- NOTES TO THE FINANCIAL STATEMENTS 1. Basis of Preparation The accounting policies adopted in the preparation of the interim financial statements are consistent with those disclosed in the annual report and accounts for the 52 week period ended 30 September 2006. a) The interim report was approved by the Board on 21 May 2007. The financial information for the 26 weeks ended 31 March 2007 and similarly the 26 weeks ended 1 April 2006 has neither been audited nor reviewed. The financial information for the 52 week period ended 30 September 2006 has been based on information in 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 52 week period ended 30 September 2006 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. In preparing the interim financial statements the Board has not sought to implement the early adoption of IAS 34 'Interim Financial Reporting'. 2. Business Segments The Group is currently organised into two retail operating divisions, Topps Tiles (Topps) and Tile Clearing House (TCH). 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 26 weeks ended 26 weeks ended 52 weeks ended 31 March 2007 1 April 2006 30 September 2006 Â£'000 Â£'000 Â£ '000 ---------- ---------- ---------- Revenue Topps 89,763 78,670 159,482 TCH 12,020 9,898 20,698 ---------------------------- ---------- ---------- ---------- Total revenue 101,783 88,568 180,180 ---------------------------- ---------- ---------- ---------- Operating profit Topps 19,687 17,681 35,887 TCH 2,444 1,986 4,685 Other central costs (878) (136) (1,703) ---------------------------- ---------- ---------- ---------- Total operating profit 21,253 19,531 38,869 Other gains and losses 282 258 258 Finance income less finance costs (2,830) 480 (63) ---------------------------- ---------- ---------- ---------- Profit before taxation 18,705 20,269 39,064 ---------------------------- ---------- ---------- ---------- 3. Acquisition of Subsidiary On 1st October 2006 the Group acquired the remaining 50% of the issued share capital of Topps Tiles Holdings BV (TTHBV) for cash consideration of Â£522,000 and 250,000 shares with a fair value of Â£647,500, based on the market value on 1st October 2006. The transaction has been accounted for using the purchase method of accounting. Book & provisional 50% fair value Acquired Â£'000 Â£'000 ------- ------- Net assets acquired Property,plant & equipment 1,352 676 Inventories 1,412 706 Trade and other receivables 186 93 Cash and cash equivalents 4 2 Trade and other payables (1,480) (740) Current tax liabilities (130) (65) Bank loans (768) (384) Deferred tax liabilities - - --------- ---------------- ------- -------- ------- 576 288 ------- -------- ------- Goodwill 882 --------- ------- -------- ------- Total Consideration 1,170 ------------- ------- -------- ------- Satisfied by: Cash 522 Shares 648 --------- ------- -------- ------- 1,170 --------- ------- -------- ------- Net Cash outflow arising on acquisition Cash consideration 522 Net overdraft acquired 764 --------- ------- -------- ------- 1,286 --------- ------- -------- ------- In the period since acquisition the revenue of TTHBV was Â£3.1m and operating profit was Â£0.2m. The excess of consideration over net assets acquired has been initially recognised as goodwill. A formal intangible asset valuation exercise is currently being performed. 4. Taxation 26 weeks ended 26 weeks ended 52 weeks ended 31 March 2007 1 April 2006 30 September 2006 Â£'000 Â£'000 Â£'000 -------------------------- ----------- ---------- ---------- Current tax - charge for the period 5,647 6,046 11,179 Current tax - adjustment in respect of previous years 164 (360) 343 Deferred tax - charge for period 114 - 1,082 Deferred tax - adjustment in respect of previous years - - (1,344) -------------------------- ----------- ---------- ---------- 5,925 5,686 11,260 -------------------------- ----------- ---------- ---------- 5. Interim dividend An interim dividend of 3.75p per ordinary share has been declared payable on 2 July 2007 to shareholders on the register at 1 June 2007, in accordance with IFRS this dividend will be recorded in the financial statements in the second half of the period. 6. Earnings per share Basic earnings per share for the 26 weeks ended 31 March 2007 have been calculated on earnings (after deducting taxation) of Â£12,780,000 (2006: Â£14,583,000) and on ordinary shares of 170,506,682 (2006: 226,559,534), being the weighted average of ordinary shares in issue during the period. Diluted earnings per share for the 26 weeks ended 31 March 2007 have been calculated on earnings (after deducting taxation) of Â£12,780,000 (2006: Â£14,583,000) and on ordinary shares of 171,335,921 (2006: 227,539,013), being the weighted average of ordinary shares in issue during the period. 7. 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, Thorpe Way, Grove Park, Enderby, Leicestershire LE19 1SU. 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

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