Topps Tiles reports full-year growth but downbeat outlook

(Sharecast News) - Topps Tiles reported a 6.3% increase in group revenue in its annual results on Tuesday, reaching £262.7m. The London-listed firm said group gross profit was ahead 2.8% at £139.2m, with a gross margin of 53%, primarily driven by increasing margins in Topps Tiles.

Adjusted profit before tax fell 19.9% to £12.5m, attributed to the impact of cost inflation.

The company saw a £7.2m increase in cash thanks to strong operational cash flows and disciplined working capital management.

Topps Tiles said it had a strong balance sheet with £23.4m in net cash and £53.4m in headroom within committed borrowing facilities.

It also announced a final dividend of 2.4p per share, maintaining the full-year dividend at 3.6p, reflecting confidence in the medium-term prospects of the business.

Strategically, Topps Tiles said it achieved its '1 in 5 by 2025' market share goal two years ahead of schedule, increasing market share to 22.1% from 19.8% in 2022.

The company introduced new Topps Group branding, while the Topps Tiles unit saw record sales, with sales per store up by 30% compared to pre-pandemic levels, improved customer service scores, and successful expansion into new product categories.

There was also notable progress in Topps Tiles' gross margin throughout the year.

The Pro Tiler online pure-play businesses reported sales growth of about 50% year-on-year, with 8% to 9% profit margins.

Parkside's restructuring was completed and became profitable in the final quarter.

The company also announced the appointment of a new chair and a new senior independent director designate during the period.

Looking ahead, Topps Tiles said it faced challenges related to discretionary consumer spending, including higher interest rates, prolonged high inflation, falling house prices and lower housing transactions.

Early trading in the new financial year reflected those challenges, with group sales down 3.0% yearly in the first eight weeks.

Like-for-like sales in Topps Tiles decreased by 6.1%, while Pro Tiler Tools continued to experience substantial growth.

Despite the challenges, Topps Tiles said it was well-positioned to capture market share due to its competitive advantages, including market-leading brands, customer service, specialist expertise, a strong balance sheet, a growing cash position, and an ambitious growth strategy.

"This has been a further year of strategic progress for the group and we are delighted to have delivered a third consecutive year of record sales and to have achieved our '1 in 5' market share goal two years ahead of schedule," said chief executive officer Rob Parker.

"While profitability for the year reflects the impact of inflation on our cost base, particularly during the early months of the period, these pressures began to abate in the second half, with the smaller store estate and the cost reduction plan at Parkside providing further mitigation.

"As we enter our new financial year, it is clear that there has been a weakening of discretionary consumer spending."

Parker said the business was well-positioned to deal with the period, adding that its brands were market-leading, with the company confident that it would continue to take market share.

"When combined with a strong balance sheet, this will support the group's ambitions over the medium term.

"Topps Group continues to develop and diversify and we remain excited by the opportunities ahead of us."

At 0839 GMT, shares in Topps Tiles were down 0.97% at 45.5p.

Reporting by Josh White for Sharecast.com.