Topps Tiles swings to a loss, remains confident for current year
Topps Tiles has tumbled into the red, after the Covid-19 pandemic temporarily closed the tile specialist's retail stores.
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Group revenue in the year to 26 September fell 12.0% to £192.8m, while pre-tax losses came in at £9.8m against profits a year earlier of £12.5m.
The adjusted pre-tax profit was £3.6m, compared to £16.0m in 2019, after trading losses in the third quarter were partially offset by government support and strong sales once lockdown measures were relaxed.
Retail like-for-like sales fell 12.5% during the year, but rose 16.5% in the fourth-quarter.
Rob Parker, chief executive, said: "In what has been a very challenging year, I am pleased with our response as a business, in the resilience we have shown and the strong bounce back in retail sales delivered since the initial lockdown,
"During the year, we have transformed our balance sheet and have accelerated our strategic development.
"It has been a year of challenge and change for Topps but we are emerging stronger and refreshed."
During the year, Topps moved from adjusted net debt of £11.3m to an adjusted net cash position of £26.0m prior to the impact of IFRS 16.
The improved cash position was achieved by a "significant" focus on cash management in response to Covid-19, and a one-off £17.9m net receipt from the sale and leaseback of Topps' head office and central warehouse.
In terms of current trading, Topps said retail like-for-like revenues in the first eight weeks of the new financial period had increased by 19.6% compared to a 7.2% decline in the same period a year earlier, boosted by a surge in home improvement post-lockdown.
However, it added that the commercial market remained "subdued", although activity levels were starting to improve. As well as its retail outlets, Topps also supplies professionals across the construction sector.
Peel Hunt, which has a ‘buy’ recommendation on the stock, upgraded its 2021 pre-tax profit forecasts on the back of the results, to £10m from £6.9m.
Analyst John Stevenson called current trading "impressive", adding: "Management has set a goal of ‘one in five by 2025’, essentially a combined retail and commercial market share of 20% by the 2025 full year, which points to a compound annual revenue growth of around 5% over the next five years, but a profit compound annual growth rate of more than 25%.
"Given the strength of strength of current trading, we still see upside risk to revenue forecasts."