Interim Results
Topps Tiles PLC
24 May 2005
TOPPS TILES PLC
the UK's leading tile and wood flooring specialist
INTERIM RESULTS FOR the 26 weeks ended Saturday 2nd april 2005
Highlights
The Group continues to deliver strong financial results
• Group turnover increased by 13.4% to £87.48m (2004: £77.12m for 27 weeks)
• Group like-for-like turnover increased by 8.5%
• Gross margin increased to 61.9% (2004: 59.4%)
• Operating costs excluding exceptional items reduced to 39.4% (2004: 40.0%)
• Profit before tax and exceptional items increased by 30.7% to £20.03m
(2004: £15.32m)
• Profit before tax increased 40.1% to £21.75m (2004: £15.52m for 27
weeks)
• Net margin, excluding joint venture and exceptional items increased to
22.9% (2004: 19.9%)
• Basic earnings per share increased 47.2% to 7.36p (2004: 5.00p)
• Interim net dividend declared of 3.50p (2004: 2.00p) payable 30 June 2005
• Net cash position of £16.73m
• Sales growth continues with overall sales increasing by 10.2% and
like-for-like sales up 1.8% for the first six weeks of the second half
• Net 12 new stores opened in the period
• Five major store refits
• On target to open net 24 new stores this financial period
'Overall we have again made excellent progress in the half year with increased
profits and further margin improvements.
Our store roll-out continues apace and whilst the trading environment has become
more demanding in recent months we believe that our strong competitive position
coupled with the strong underlying drivers of the UK DIY market will enable the
business to continue to deliver benefits to customers and value to
shareholders.'
For further information please contact:
Nick Ounstead, CEO 01625 446700
Barry Bester, Co-Chairman 0208 269 1900
Ann-Marie Wilkinson/Sarah Landgrebe
Bell Pottinger 020 7861 3232
Executive Board Statement
We are delighted to report another set of strong financial results for the first
26 weeks of 2004/2005 continuing our track record of delivering increased
shareholder value.
Financial Results
26 Weeks to 27 Weeks to
2 April 2005 3 April 2004 Change
£'000 £'000 %
Group Turnover 87,482 77,115 +13.4%
---------- ---------- ----------
Gross Margin % 61.9% 59.4%
---------- ---------- ----------
Profit before tax and exceptional items 20,029 15,324 +30.7%
---------- ---------- ----------
Profit before tax 21,748 15,522 +40.1%
---------- ---------- ----------
Net margin % excluding joint venture
and exceptional items 22.9% 19.9%
---------- ---------- ----------
Earnings per share (pence) 7.36p 5.00p +47.2%
---------- ---------- ----------
Interim dividend (pence) 3.50p 2.00p +75.0%
---------- ---------- ----------
Net cash position 16,734 16,140
========== ========== ==========
Profit and loss account
Set against very strong comparatives last year of 22.7% over 2003, growth in
like-for-like sales for the period was 8.5%, with overall sales growth in the
same period at 13.4% compared to the 27 week period last year. Gross margins
have improved to 61.9% compared to 59.4% last year, with operating costs,
excluding exceptional items in the period equivalent to 39.4% of sales compared
to 40.0% in the 27 week period last year.
Profit before tax and exceptional items amounted to £20.03m an increase of 30.7%
over the 27 week period last year. Basic earnings per share rose by 47.2% from
5.00p to 7.36p, which also reflects the share buy-back programme and reduced tax
rate in the period.
The net exceptional items relate to the profit on disposal of fixed assets less
exceptional operating expenses of £1.72m (2004: £198,000).
Profit before tax amounted to £21.75m, an increase of 40.1% over the 27 week
period last year.
Net margin, excluding joint venture and exceptional items has increased to 22.9%
from 19.9% in the 27 week period last year.
The effective rate of Corporation Tax for the period was 23.3% (2004: 26.7%)
which reflects the full provision for 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.
Balance sheet
The Group currently owns five freehold sites, one development site, the new
Topps warehouse facility and the recently acquired Tile Clearing House (TCH)
warehouse facility with a total net book value of £11.36m. Within the period the
TCH warehouse site was acquired at a cost of £2.45m and expenditure on the
development sites totalled £0.68m.
Also in the period the Group completed a transaction for the sale and leaseback
of four freehold properties generating proceeds of £4.16m.
Capital expenditure, excluding freehold property and the TCH warehouse, amounted
to £2.65m. This reflects a total of 12 new stores opened in the period with a
further two being closed and relocated and five major store refits along with
preparatory work for a further three stores and other minor refits as well as
further development and upgrading of the Group's systems infrastructure.
At the period end cash balances for the Group were £22.73m (2004: £22.65m) and
there were long term bank loans of £6.00m (2004: £6.51m). The Group therefore
has a net cash position of £16.73m (2004: £16.14m).
We continue to buy-back shares when employees dispose of shares acquired
following the exercise of their share options under the Group approved and
unapproved executive share option schemes and when the Board considers there is
an opportunity to do so in the open market. In the period the Group purchased
1,550,045 shares at a cost of £3.45m and now holds 1,957,845 shares as treasury
shares.
At the period end the Group had £27.61m of stock which represents 158 days stock
cover (2004: 135 days). The increase in days stock cover is as expected and is
due to the transitional switch from UK third party distributors to our Topps
warehouse facility. This will allow us to do more direct product sourcing from
countries of origin.
Board change
As announced at our Annual General Meeting on 11 January 2005, Stuart Williams
has stepped down as a Board Director and Co-Chairman with effect from 31 March
2005 and assumed the newly created position of President.
Barry Bester will continue his role as Executive Chairman.
Dividend
We are continuing with our progressive dividend policy and announcing an interim
dividend of 3.50p per share (2004: 2.00p), an increase of 75%. This will be paid
on 30 June 2005 to shareholders on the register as at 3 June 2005. The current
dividend policy of 1.41 times cover is being maintained and will be applied to
the full period dividend.
International Financial Reporting Standards (IFRS)
The Group will be 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.
Operational review
We continue to make good progress with our national store expansion programme
opening 12 Topps Tiles stores and Tile Clearing House in the period. We have
also relocated two stores and completely refurbished five stores in the period.
We are the market leader and remain on track to achieve our UK store target of a
minimum of 350 outlets nationwide.
Our joint venture in Holland is trading profitably and beginning to build a
solid foundation for expansion. We have opened one new store in the period and
are currently trading from 12 stores which sell a combination of ceramic tiles
and wood and laminate flooring. We plan to open a further store before the year
end.
We continue to invest in national advertising and are currently running
campaigns with GMTV, Sky's UK Living channel and Carlton TV weather. We also
build local brand awareness through
our involvement not only in advertising, but also in working with the local
community where we provide new kits and equipment to junior football teams in
the towns and cities where we have stores.
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 1,500 staff across the business and we endeavour to train and
support all staff as well as maintaining a strong culture of rewarding
performance.
In March 2005 Topps was voted Company of the Year at Price Waterhouse Coopers
PLC Awards for the second consecutive year and we were delighted to walk away
with the top prize again this year.
Current trading and future prospects
In the first six weeks of the current period sales growth has continued with
overall sales increasing by 10.2% and like-for-like sales up 1.8%.
Our store roll-out continues apace and whilst the trading environment has become
more demanding in recent months we believe that our strong competitive position
coupled with the strong underlying drivers of the UK DIY market will enable the
business to continue to deliver benefits to customers and value to shareholders.
Barry Bester Nicholas Ounstead Andrew Liggett
Executive Chairman Chief Executive Officer Finance Director
Consolidated Profit and Loss Account
For the 26 weeks ended 2 April 2005
26 weeks ended 27 weeks ended 53 weeks ended
2 April 2005 3 April 2004 2 October 2004
Unaudited Unaudited Audited
Notes £'000 £'000 £'000
Turnover, Group and share
of joint venture 88,584 78,015 159,430
Less: share of joint venture turnover (1,102) (900) (1,818)
Group turnover 87,482 77,115 157,612
Cost of sales (33,359) (31,325) (62,282)
----------- ------------ ------------
Gross Profit 54,123 45,790 95,330
Operating expenses
- employee profit sharing (4,307) (4,074) (7,853)
- other operating expenses (30,187) (27,152) (54,968)
----------- ------------ ------------
(34,494) (31,226) (62,821)
Group operating profit
Group operating profit before
exceptional operating expenses 19,629 14,908 32,853
Exceptional operating expenses - (344) (344)
----------- ------------ -----------
19,629 14,564 32,509
Share of operating profit in joint
venture 26 19 39
----------- ------------ ------------
Group and share of joint
venture of operating profit 19,655 14,583 32,548
Exceptional profit on disposal of
fixed assets 1,719 542 542
----------- ------------ ------------
Profit on ordinary activities
before finance income 21,374 15,125 33,090
Net finance income 374 397 704
Profit on ordinary activities before
taxation
Before exceptional items 20,029 15,324 33,596
Net exceptional items 2 1,719 198 198
----------- ------------ ------------
1 21,748 15,522 33,794
Tax on profit on ordinary activities (5,071) (4,139) (8,146)
----------- ------------ ------------
Profit on ordinary activities after
taxation 16,677 11,383 25,648
Dividends (7,870) (4,557) (18,155)
----------- ------------ ------------
Retained profit transferred to reserves 8,807 6,826 7,493
=========== ============ ============
Earnings per Ordinary share
- basic 7.36p 5.00p 11.30p
- diluted 7.29p 4.95p 11.12p
=========== ============ ============
Note 1: Topps Tiles has no recognised gains or losses in the period other than
those reflected in the profit and loss account and accordingly a Statement of
Total Recognised Gains and Losses has not been prepared. All activity arose from
continuing operations.
Note 2: Comprises exceptional profit on disposal of fixed assets less
exceptional operating expenses.
Consolidated Group Balance Sheet
As at 2 April 2005
2 April 2005 3 April 2004 2 October 2004
Unaudited Unaudited Audited
£'000 £'000 £'000
Fixed assets
Goodwill 534 568 551
Tangible assets 30,914 27,024 29,236
Joint venture undertaking
- share of assets 1,148 990 1,059
- share of liabilities (940) (809) (866)
------------ ------------ ------------
208 181 193
------------ ------------ ------------
31,656 27,773 29,980
Current assets
Stocks 27,606 21,447 24,373
Debtors 4,113 5,371 3,919
Cash at bank and in hand 22,734 22,650 29,624
------------ ------------ ------------
54,453 49,468 57,916
Creditors: amounts falling due
within one year (36,460) (33,281) (45,452)
------------ ------------ ------------
Net current assets 17,993 16,187 12,464
------------ ------------ ------------
Total assets less current liabilities 49,649 43,960 42,444
Creditors: amounts falling due after
more than one year (8,582) (6,000) (7,571)
Provisions for liabilities and charges (2,181) (1,504) (1,864)
------------ ------------ ------------
Net assets 38,886 36,456 33,009
============ ============ ============
Capital and reserves
Called-up share capital 5,698 5,732 5,673
Share premium 5,384 3,231 4,889
Merger reserve (399) (399) (399)
Treasury shares (4,183) (2,781) (733)
Capital redemption reserve 137 - 137
Profit and loss account 32,249 30,673 23,442
------------ ------------ ------------
Equity shareholders' funds 38,886 36,456 33,009
============ ============ ============
Consolidated Group Cash Flow Statement
As at 2 April 2005
26 weeks to 27 weeks to 53 weeks to
2 April 2005 3 April 2004 2 October 2004
Unaudited Unaudited Audited
£'000 £'000 £'000
Net cash inflow from Group
operating activities 15,470 15,150 37,770
Returns on investment and
servicing of finance 357 397 530
Taxation (4,362) (1,974) (5,236)
Capital expenditure and financial
investment (1,624) (4,410) (8,266)
Equity dividends (13,285) (6,989) (11,534)
----------- ------------ ------------
Cash (outflow)/inflow before
financing (3,444) 2,174 13,264
Financing (3,446) 1,896 (2,220)
----------- ------------ ------------
(Decrease)/increase in cash (6,890) 4,070 11,044
=========== ============ ============
Reconciliation of Group operating
profit to net cash flow from Group
operating activities
Group operating profit 19,629 14,564 32,509
Depreciation charges 1,682 1,329 2,729
(Profit)/loss on disposal of
fixed assets - 72 269
Goodwill amortisation 17 18 35
Increase in stocks (3,233) (1,734) (4,660)
(Increase)/decrease in debtors (189) (659) 793
Increase/decrease in creditors (2,436) 1,560 6,095
----------- ------------ ------------
15,470 15,150 37,770
=========== ============ ============
Return on investments and
servicing of finance
Interest received 522 456 930
Interest paid (165) (59) (400)
----------- ------------ ------------
357 397 530
=========== ============ ============
Capital expenditure
Payments to acquire tangible
fixed assets (5,781) (7,441) (11,491)
Receipts from sales of tangible
fixed assets 4,157 3,031 3,225
----------- ------------ ------------
(1,624) (4,410) (8,266)
=========== ============ ============
Financing
Proceeds from issue of ordinary
share capital 521 1,589 3,325
New loans 16 3,088 3,095
Treasury shares (3,450) (2,781) (8,640)
Repayment of loans (533) - -
----------- ------------ ------------
(3,446) 1,896 (2,220)
=========== ============ ============
Summary
Opening cash position 29,624 18,580 18,580
(Decrease)/increase in cash (6,890) 4,070 11,044
----------- ------------ ------------
Closing cash position 22,734 22,650 29,624
=========== ============ ============
Notes to the Interim Financial Information
For the 26 weeks ended 2 April 2005
1 Basis of preparation
(a) The interim report was approved by the Board on 23 May 2005. The financial
information for the 26 weeks ended 2 April 2005 and similarly the financial
information for the 27 weeks ended 3 April 2004 have neither been audited or
reviewed. The financial information for the 53 week period ended 2 October 2004
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 53 week period ended 2 October 2004
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 53 week period ended 2 October 2004.
2 Taxation
Although the Corporate tax rate for the 26 weeks ended 2 April 2005 is 30% and
deferred tax has been provided for in full, provision has been made at the
estimated underlying rate of 23.3% (2004: 26.7%) reflecting savings from share
symmetry on options exercised and intra-Group restructuring benefits.
3 Interim dividend
An interim net dividend of 3.50p per ordinary share has been declared payable on
30 June 2005 to shareholders on the register on 3 June 2005.
4 Earnings per share
Basic earnings per share for the 26 weeks ended 2 April 2005 have been
calculated on earnings (after the deduction of taxation) of £16,677,000 (2004:
£11,383,000 ) and on ordinary shares of 226,615,590 (2004: 227,741,821), being
the weighted average of ordinary shares in issue during the period.
Diluted earnings per share for the 26 weeks ended 2 April 2005 have been
calculated on earnings (after the deduction of taxation) of £16,677,000 (2004:
£11,383,000) and on ordinary shares of 228,732,706 (2004: 229,785,930) 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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