Profits drop as sales weaken at Topps Tiles

TOPPS Tiles reported a 36% drop in pre-tax profits to £7.9m for the year to October 1 as its sales fell by almost 4% to £175.5m.

The Handforth-based company also said that like-for-like sales had dropped by 2%. Since its year end, sales in the first seven weeks of its new financial year have weakened further, with like-for-likes down by almost 7%.

As a result of its lower profits, the company is cutting its final dividend payment to 0.6p, compared with 1p in 2010. However, its total dividend payment for the year of 1.1p is still 10% higher than last year.

The pre-tax profit figure was weakened by a number of exceptional items, including an inventory charge of £1.3m and an increase in provisions relating to property leases of £1.9m (2010: £400,000).

Chief executive Matthew Williams said: “With very challenging trading conditions persisting throughout the second half of our financial period, our focus has been on strengthening our market leading position.”

The company said that it now had a 26% share of the tile retail market, up from 25% last year.

“We further upgraded and expanded our store estate, continued the evolution of the Topps Tiles offer and supported this with new marketing initiatives in-store, on television and online.

“In addition, we made some significant infrastructure investments across the business which will benefit our future performance.”

He said that he expected conditions to remain tough in 2012, with consumer’s budgets remaining under pressure.

“Our response will be to take further cost out of the business, grow margin and maximise sales opportunities, whilst making operational improvements that will position the business for future growth as economic conditions improve.”  

It added a net new 14 stores to its estate during the year, 12 of which were in areas where it didn’t already have a presence. It also converted five of its Tile Clearing House outlets into its more profitable mainstream Topps Tiles brand, and focussed more of its efforts on higher-end customers and trade accounts.

The company’s year-end net debt was slightly higher at £50.9m, although it said that it has unused headroom of £15m within its current borrowing facilities of £75m.