20 May 2025

Topps Tiles Plc

Interim Financial Report

Topps Tiles Plc ("Topps Group", the "Company" or the "Group"), the UK's leading tile specialist, announces its unaudited consolidated interim financial results for the 26 weeks ended 29 March 2025.

Strategic and Operational Highlights

Financial Summary

* The financial impact of CTD has been excluded from adjusted measures in FY 2025.

Current Trading and Outlook

Commenting on the results, Rob Parker, Chief Executive said:

"I am pleased with the progress we have made over the first half, which has included an improving sales trend, offsetting the majority of our inflationary cost pressures, and continuing to deliver our strategy; while also delivering a small increase in underlying profitability.  We have recently announced the conclusion of the CMA investigation into our acquisition of CTD, which will form a major part of the business-to-business element of our growth strategy moving forwards.

As we look forward to the second half, current trading shows a strong improvement in both our market leading omni-channel business, Topps Tiles, and also in the newer parts of the Group; and we have a clear plan to move CTD into profitability by the final quarter of our financial year and into growth beyond that.  As a result, we expect our full year profits to show a meaningful improvement over the prior year."

Notes

Adjusted items are Alternative Performance Measures which are used by Group management to plan for, control and assess the performance of the Group.  These measures are not defined by IFRS and therefore a reconciliation between each APM and the nearest IFRS measure is presented in the most recent Annual Report and Accounts.  Topps Tiles like-for-like revenue is defined as sales from Topps Tiles stores that have been trading for more than 52 weeks and online sales made through the Topps Tiles brand (only).  Adjusted sales and profit metrics exclude the impact of items which are either one-off in nature or fluctuate significantly from year to year, described in the Financial Review section of this document.  In this period, the performance of CTD has been excluded from adjusted metrics due to the ongoing disruption caused by the CMA investigation.  Adjusted net debt is defined as bank loans before unamortised issue costs, less cash and cash equivalents, as at the balance sheet date.  It excludes lease liabilities under IFRS 16.

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INTERIM MANAGEMENT REPORT

Topps Group is the largest specialist distributor of tiles and related products in the UK.  Approximately 75% of sales across the Group are made to trade customers, including tilers, general builders and contractors, with the remaining 25% to domestic homeowners.  The majority of the Group's sales are ultimately related to work in the domestic repair, maintenance and improvement (RMI) sector, with the balance of sales relating to commercial projects, infrastructure and new build housing.

The Group owns a number of brands which target different customer groups within this market.  The largest is Topps Tiles, the market-leading, omni-channel brand, which was founded in 1963 and, with its rich history and 298 stores, has strong brand recognition across the UK, serving both trade and homeowner customers.  Pro Tiler Tools is the tile industry's leading online pure play brand focused on trade customers, offering a wide range of trade-focused essentials items and a deep product specialism, at market-leading pricing.  The Parkside brand operates in the commercial market which includes tiles supplied across sectors such as leisure, retail, hospitality, infrastructure and offices, where product specification is often heavily influenced by the architect and designer community.  Tile Warehouse is an online pure play brand aimed at more budget-conscious homeowner customers.  CTD joined the Group in August 2024 and has over 50 years of experience serving the trade, the commercial market, and the housebuilder sector.  Across the brand portfolio, the Group offers differentiated physical, digital and direct selling offers to all customer types in the tile market.

All of our brands derive benefit from the scale of the Group, the specialist focus of our business model and our passion for tiles.  We enjoy a competitive advantage in sourcing differentiated products from around the world that we often access on an exclusive basis.  Our strategy is underpinned by our people strategy, which delivers world-class customer service across the Group, our operational & digital excellence strategy, including a high-quality, specialist supply chain and ongoing investment in systems, and our environmental leadership strategy, including our goal of being carbon neutral across Scope 1 and 2 emissions by 2030.

STRATEGIC AND OPERATIONAL REVIEW

A year ago, the Group launched its new goal, Mission 365, which was to increase sales to £365m in the medium term, while achieving an adjusted profit before tax margin of 8-10% at a Group level.  Moreover, we stated that every brand within the Group structure has the potential to deliver an 8-10% adjusted profit before tax margin.  This would imply a minimum profit level for the Group of £30 million, an almost five-fold increase when compared to profits in FY 2024.

Five key areas of growth were identified to deliver Mission 365.  The indicative sales uplifts we expect to deliver from the five growth areas, together with a modest level of market recovery and business as usual price growth, are as follows:

As part of this new goal, we redefined the scope of the Group's operations and the market in which we operate.  The Group's core focus has traditionally been tiles and closely associated products, a market valued at c. £1.2 billion in 2023.  However, the Group already sells a variety of floor and wall coverings products other than tiles, and the inclusion of these new product categories, such as luxury vinyl tiles, outdoor tiles, shower panels, splashbacks and more, expands the Group's addressable market to c. £2.1 billion.  In summary, the Group is now focused on the wider market of all hard wall and floor surface coverings, a large and exciting market, and one which presents multiple opportunities for growth.

We expect the Group to deliver the following financial outcomes in the medium term:

The most significant strategic progress towards this goal was made in August 2024 through the acquisition of the brand and certain assets of CTD, on which more detail is given below.  Updates on the other areas of the strategy are given in the subsequent section.

CTD acquisition

On 19 August 2024, the Group acquired the brand and certain assets from CTD Tiles Limited, which had fallen into administration, including all intellectual property, CTD's Architectural & Designer (A&D) and Housebuilder business, selected stock and a licence to occupy 30 CTD stores, for consideration of £9 million.  CTD had previously operated 86 stores, and the majority of the other stores closed soon afterwards.

Following an initial enquiry from the Competition and Markets Authority (CMA), on 3 October 2024 the CMA opened a Phase 1 investigation into the transaction and served an Initial Enforcement Order (IEO) on the Group.  The IEO, which is usual in Phase 1 investigations, restricted the Group's management team from running the CTD business or making further, necessary, integrations of CTD into the wider Group in areas such as IT whilst the investigation was ongoing.  The implementation of these measures would have enabled the CTD business to move back towards profitability and the delay impacted on the performance of CTD in the first half.

In line with the stipulations of the IEO, a 'hold separate manager' was engaged to run the CTD business with a 'monitoring trustee' also appointed to report back to the CMA.  The Group fully complied with the CMA process at all times.  Over the following months, the Group responded to a large number of information requests and provided over 1,300 documents to the CMA.  During this time, the CMA did consent to CTD moving from their old warehouse in Kings Norton, Birmingham, to the Group's new 140,000 sq ft warehousing facility in the Prologis Park Pineham, near Northampton, which is also the home of Pro Tiler Tools.

Following their Phase 1 review, the Group was pleased to note that the CMA did not identify any competition concerns in 26 out of 30 CTD retail store locations or in either the CTD A&D or Housebuilder businesses, which operate on a national level.  On 24 April 2025, the CMA announced that the Group's proposal to dispose of four stores in areas where local competition concerns had been identified had been accepted, resulting in the lifting of the IEO and enabling the management team to regain control of the business, almost seven months after the IEO was imposed.  The Group is currently working with the CMA to approve a proposed buyer of these four stores and, once approval has been granted and subject to the granting of new property leases and other consents, the Group will dispose of the stores and formally end the CMA's involvement in the process.  The cost of the CMA process has been significant and is detailed in the financial review below.

On 24 April 2025, the Group regained control of the CTD business and has been conducting business review, with the following conclusions:

Please see the financial review for a breakdown of the trading and non-trading performance of CTD within H1 2025.

Strategic progress

1)   Modernise the trade digital experience

Trade customers can offer repeat custom and act as brand ambassadors on behalf of Topps Group to other traders and to homeowners.  They may use the Group's brands frequently, perhaps multiple times a week, compared to homeowners who usually only come into the market once every few years, and as a result are rewarded with advantaged pricing and enhanced support.  As such, the Group has had a strategy of increasing its trade mix over time.  Following the acquisition of CTD, approximately 75% of sales in Topps Group by value are to trade customers, and trade mix within the Topps Tiles brand increased very significantly in the first half, up 6.0 percentage points year on year to 67.4% of sales.  This compares to c. 50% of sales ten years ago.

To drive further growth in trade revenues, Topps Group has been actively improving its trade offer, in particular through Topps Tiles' digital channels.  Over the last year, the Topps Tiles team has made strong progress with the initiatives identified twelve months ago, specifically, it has:

Specifically in relation to digital channels, there are early signs of progress, with online trade traffic in Topps Tiles up approximately four-fold, online trade sales up 85% in the first half and total sales to trade customers up 12% year on year, with the number of active traders at the end of the period up 11% year on year to 146,000.

We see a significant further opportunity to grow the number of registered traders and improve share of wallet through further progress in the areas listed above in the coming years, with a total opportunity of £15 - £20 million when compared to 2024 levels.

2)   Expand into new coverings categories

As described above, the Group has redefined its addressable market to include all hard wall or floor surface coverings, including products such as luxury vinyl tiles, shower panels, outdoor tiles, laminate and engineered wood, splashbacks, XXL porcelain, and acoustic panels.  A 5-10% market share of these categories would amount to over £50 million of incremental sales compared to 2024 levels and we believe there exists at least a £25 - £30 million sales opportunity in these areas as part of Mission 365.

In the first half of this year, good initial progress has been made.  The outdoor tile range has been extended, splashbacks and shower panels have been rolled out to all stores, a wood and laminate trial is underway in 43 stores and both luxury vinyl tiles and acoustic panels are now direct-sourced, significantly improving margin in these categories.  Digital marketing has been improved and colleague training has taken place.  Overall, £4.6 million of sales have been made across these categories in Topps Tiles, up 17% year on year, with gross profit up 30%.

In addition, the Group has agreed a partnership with Wren Kitchens whereby Topps Tiles products will be available in all Wren showrooms around the country, to be ordered by Wren customers and fulfilled by Topps Tiles.  This partnership is modest in value so far but shows signs of having good potential.

3)   Business-to-business sales focus

The acquisition of CTD has significantly enhanced our B2B offering within the Group.  Four brands now cater for trade and professional customers, all of which have complementary, differentiated market positions:

The CTD acquisition has already added c. £30 million of B2B sales to the Group and, following the execution of the plan above, will contribute materially above the £15 million - £25 million originally envisaged for B2B sales growth in the Mission 365 plan.

4)   Pro Tiler Tools

Pro Tiler Tools continues to take market share and deliver strong financial results. In the six-month period, sales of £15.4 million were up 17.6% year on year, with current sales levels three times higher than at the point of acquisition in 2022.  Growth has been delivered by continued operational improvements, including an industry-leading sales cut-off of 9pm for next day delivery, additional specialist recruitment in areas such as digital marketing and new product launches including UK exclusives.  The most significant operational improvement in the first half saw the Pro Tiler business relocate from a 50,000 square foot unit in Earls Barton, Northampton, to a 140,000 square foot unit in the Prologis Pineham business park, close to junction 15a of the M1, which the business now shares with CTD.  This facility will support Pro Tiler as it continues to grow towards its £50 million revenue goal.

5)   Tile Warehouse

Tile Warehouse, our online pure play brand focused on selling coverings products to value-conscious homeowners, was established in summer 2022 and continues to grow well.  Sales in the first half of £1.4 million were more than double the previous year's result, and losses halved to £0.2 million.  With traffic up 31% in the first half and conversion also growing, Tile Warehouse is the UK's fastest growing tile specialist.

The objective for this brand remains the same as when it was launched - to establish a £15 million business within five years in the £100 million UK online pure play homeowner tile market.

Strategic enablers

The Group has begun its two-year programme of core systems upgrades.  Working with our chosen implementation partners, the business will implement Microsoft Dynamics 365 Business Central across central functions, the Topps Tiles and CTD store networks, and Parkside, in 2027.  Pro Tiler Tools and Tile Warehouse run on different systems and we will revisit their systems architecture following the core systems upgrade.

Exceptional customer service remains critical to the delivery of our goal and is fundamental to the success of all of our brands.  Whilst continuing with our internal 'tile talk' customer service metric and retaining world-class scores in Topps Tiles (H1 2025: 91.2% overall satisfaction, H1 2024: 92.5% overall satisfaction), this year we have targeted a significant increase in Google store reviews.  As a result of this focus, we have recorded 27,422 Google reviews in the period, compared to 1,399 reviews in the same period last year.  The average score cumulatively for the business is 4.92 stars, improving local search results and giving potential customers, many of whom would not have been in the market for tiles for a number of years, the confidence to shop with us.

The Group's focus on digital operations extends across pure play brands such as Pro Tiler Tools and Tile Warehouse to omni-channel operations such as Topps Tiles.  Overall, Group online sales increased by 2.5 percentage points from 17.3% in H1 2024 to 19.8% in H1 2025 and we expect this to continue to increase in future years.

Summary

One year after the launch of the Mission 365 goal, the business has made meaningful progress across all five strategic growth areas, and the acquisition of CTD has materially accelerated progress towards the goal.  Underlying profitability is stable and will improve as operational leverage comes through.  There are many growth opportunities across all five strategic growth areas, which are all still at an early stage, and we remain confident on delivering the goal, leading to substantially improved financial outcomes, in the medium term.

Key Performance Indicators ("KPIs")

As set out in our most recent Annual Report, the Board monitors a number of financial and non-financial KPIs when reviewing the implementation of the Group's strategy.  Our performance in the 26 weeks to 29 March 2025 is set out in the table below, together with the prior year performance data.  One KPI, total scope 1 and 2 net carbon emissions (tonnes per annum), is only available on an annual basis and so is not disclosed here.  The source of data and calculation methods are consistent with those described in the 2024 Annual Report.

* as defined in the Financial Review

FINANCIAL REVIEW

H1 2025 covers the 26 weeks to 29 March 2025.  The previous period ('H1 2024') covers the 26 weeks to 30 March 2024.  After a challenging year in 2024, the Group returned to sales growth in the period, with performance improving over the first half and adjusted profits slightly higher than the previous year, despite significant cost inflation. Key financial results were as follows:

Acquisition and performance of CTD

On 19 August 2024, the Group acquired the brand and certain assets from CTD Tiles Limited (in administration) including the right to occupy 30 stores, selected stock, intellectual property and branding, for consideration of £9.0 million.  The initial acquisition accounting was explained in the 2024 full year results.  This has not been re-examined in the current accounting period due to the short period of time between the cessation of the IEO and the half year reporting date, however this will be reviewed in advance of the year end, in line with the twelve month measurement period as specified within IFRS 3, and any adjustments will be re-presented in the 2025 full year results.

In the 2024 full year results, CTD's performance was excluded from adjusted profit metrics, including its trading performance, acquisition costs, and the initial costs of the CMA investigation.  CTD's results will be excluded from adjusted profit metrics in FY 2025 as the CMA investigation has had the impact of removing the business from the Group's control for a material part of the year.

In the first half of the year, sales in the CTD business were £15.1 million, annualising at £30 million.  Gross profit in the six-month period was £5.9 million.  Following the acquisition of CTD, the Group acquired £2.2 million of stock for £0.6 million, which was held by CTD and subject to retention of title clauses.  Of the overall £1.6 million gain, £0.6 million was recognised within profit and loss as a credit against cost of goods sold in the last financial year, £0.8 million was recognised in H1 2025 and the remaining £0.2 million will be recognised in future periods.  Excluding this benefit and one-off costs in connection with the warehouse move, the gross margins in CTD were 35% and action is being taken in the second half of the year to improve gross margins.

The total loss before tax of the business was as follows:

One-off items of £1.3 million were incurred, including costs for legacy IT systems which will now be exited, administration fees, and relocation and moving costs for the distribution centre.  The extensive CMA Phase one process, which is described in the section above, resulted in total one-off advisory costs of £1.6 million, primarily consisting of legal and economist fees.

During the first half, the hold separate management team restocked the business following the administration, resulting in an increase in inventories of £2.5 million.  The business also focused on cash collection, including amounts falling due in the previous trading period, and payables increased as a result of reinitiating normal supplier payment terms, resulting in a cash inflow from other working capital movements of £2.8 million.  Capital expenditure of £0.8 million was incurred, largely as a result of the relocation of CTD's main warehouse Kings Norton to the Prologis Park Pineham.  As a result, the cash outflow in the first half, excluding CMA advisory costs, was £2.1 million, broken down as follows:

The cash outflow due to CMA advisory fees in the first half was £1.0 million.

Consolidated Statement of Profit or Loss

Topps Group returned to revenue growth in 2025, with 4.1% adjusted revenue growth across the business, including an improving trend across the first two quarters.  Sales in the Topps Tiles brand were 2.2% higher year on year, driven by strong conversion, leading to transaction growth, with ATV staying relatively flat year-on-year.  Like-for-like sales in Topps Tiles were 3.0% higher year-on-year. 

Sales in Online Pure Play remained very strong, up 21.7% to £16.8 million.  Within Online Pure Play, Pro Tiler Tools continued to deliver excellent growth, up 17.6% year-on-year to £15.4 million and Tile Warehouse doubled sales year-on-year to £1.4 million.  Parkside saw a £0.3 million decrease in sales to £3.9m.  Revenue by business area was as follows:

*Online Pure Play includes Pro Tiler Tools and its associated brands, which were acquired in March 2022, and Tile Warehouse, which was launched in May 2022.

** CTD was acquired on 19 August 2024.  Please see the section above for further information.

Adjusted gross profit was £2.0 million higher year-on-year at £68.2 million (H1 2024: £66.2 million).  The adjusted gross margin was 0.5 percentage points lower year-on-year at 53.4%, caused entirely by the continued change in business mix, specifically the relatively faster growth in the Online Pure Play businesses compared with growth from Topps Tiles.  Gross margins in the Topps Tiles brand were flat year-on-year, with the negative impact from a higher trade and essentials mix entirely offset by tighter controls on store discount, improved margins in new categories, improved stock management, FX gains and other margin management actions.

The Group's adjusted gross margin increased 0.7 percentage points compared with the second half of FY 2024, and the business expects to see further adjusted gross margin expansion in the second half.

As described in the section above, CTD generated gross profit of £5.9 million, including gains of £0.8 million from the sell through of stock acquired under retention of title clauses following acquisition.  Excluding these gains and some one-off costs related to the relocation of the warehouse, gross margins in CTD were 34.6%.  After the inclusion of the CTD business, Group gross margins in the first half were 51.9%.

Adjusted operating costs were £62.0 million, up £1.0 million from £61.0 million last year, explained by the following key items:

Cost inflation of £2.0 million was due to the impact of the 9.8% increase in National Living Wage from April 2024, wage rises for other colleagues from 1 October 2024, and other inflationary increases, partially offset by a £0.5 million saving from utility costs.  Increased performance related pay of £0.6 million relates to higher store commission, store bonuses, and Pro Tiler bonus payments, and is expected to increase further in the second half as profits continue to improve.  The Group has signalled an intent to increase marketing investment as well as embark on a core systems and CEP upgrade programme, with total cost increases of £0.6 million year on year in the period.  The continued sales growth in Pro Tiler Tools has resulted in more cost growth, particularly in digital marketing and in relation to their new distribution centre.  Other net savings includes lower store hours, reduced property cost accruals and provisions, lower depreciation and fewer stores.

The first half contains a seasonal non-cash expense of £0.8 million relating to holiday pay accruals (H1 2024: £0.8 million expense), which will reverse in full over the second half of the financial year (resulting in a £1.6 million increase in half-on-half profits).  Gas usage in the business will also be lower in the second half.  The latest increase in National Living Wage of 6.7%, together with the increase in the rate and reduction in the threshold of employers' NICs will also impact the second half cost base.  The Forward Guidance section below sets out in more detail some of the factors influencing operating costs in H2 compared to H1.

Adjusted operating profit was up 19.2% to £6.2 million (H1 2024: £5.2 million).

Adjusted net finance costs were £3.0 million in H1 2025 (H1 2024: £2.1 million), as a result of lower cash balances throughout the half, utilisation of the revolving credit facility in the period, and higher IFRS16 interest charges due to rising interest rates.  Statutory interest costs were £3.3 million (H1 2024: £2.3 million), broken down as follows:

Adjusted profit before tax for the period was £3.2 million (H1 2024: £3.1 million) and, after including the adjusting items described in the next section, the statutory profit before tax was £1.9 million (H1 2024: loss before tax of £1.5 million).

Adjusting items

The Group's management uses adjusted performance measures, to plan for, control and assess the performance of the Group.  Adjusted profit before tax differs from the statutory profit before tax as it excludes the effect of one-off or fluctuating items, allowing stakeholders to understand results across years in a more consistent manner.

We have excluded property costs in relation to the store closure programme, which ended with stores closed in 2022.  Only one closed store was left in the estate as at the half year end date.

In line with prior years, we treat any impairment charges or impairment reversals of right-of-use assets, derecognition of lease liabilities where we have exited a store, and one-off gains and losses through sub-lets as adjusting items.  From the 2024 full year results, we have also excluded impairment and impairment reversals of plant, property and equipment from adjusted profit, as the impairment of these assets is a result of the same impairment review process applied to right of use assets, implying the same accounting presentation.  In addition, the impact of these impairments is excluded from adjusted profit.  Impairments imply that assets will not incur a depreciation charge moving forward in statutory profit, however, the Group's adjusted profit before tax measure will carry a notional depreciation charge, as if the assets had not been impaired, meaning that adjusted profit before tax will continue to be comparable year on year, and is more reflective of the actual lease payments made by the Group.  None of these items has any cash impact, in 2024 or in future periods.

In the period, the Group relocated the warehouse operations of both Pro Tiler Tools and CTD into a distribution centre at the Prologis Park Pineham.  The costs associated with the warehouse before operational use, costs associated with the warehouse being exited, and the relocation of the Pro Tiler operation to the new facility, were £0.9 million.

In August 2024, the CTD brand and certain assets were acquired from administration and the financial impact of this business, including its trading performance, acquisition costs and one-off items, integration costs (including the warehouse relocation), and the costs of advisory fees relating to the CMA investigation have been excluded from adjusted profit.  The IEO enforced by the CMA had the effect of keeping CTD at arm's length of the company's management and prohibiting further integration which would have improved the business's financial performance.

In the period between H2 2022 and H1 2024 we excluded the cost relating to the 40% purchase of shares of Pro Tiler Limited, which, under IFRS 3, is treated as a remuneration expense rather than a cost relating to the acquisition of the relevant shares.  Restructuring costs and other one-off costs have also been excluded.

An analysis of movements from adjusted profit before tax to statutory profit/(loss) before tax is given below:

Tax and earnings per share

The tax expense was £0.7 million (H1 2024: £0.5 million).  On an adjusted basis, the tax expense was £1.0 million (H1 2024: £0.9 million) and the effective tax rate for the period was 30.3% (H1 2024: 28.9%), higher than the headline rate of corporation tax in the UK of 25% as a result of certain disallowable expenses such as share based payment expenses and the net impact of depreciation compared to capital allowances.

Adjusted earnings per share were 1.12 pence, up 8.7% when compared to 1.03 pence in H1 2024.  The growth was greater than the growth in adjusted profit before tax due to the full ownership of Pro Tiler Limited - in the prior period there was a non-controlling interest which was acquired in the second half of FY 2024.

Basic earnings per share were 0.61 pence (H1 2024: loss per share of 1.12 pence).

Dividend

Under the Group's capital allocation policy, interim dividends are set at one third of the full year dividend from the previous year.  The full year dividend relating to FY 2024 was 2.4 pence and, as such, an interim dividend of 0.8 pence has been declared by the Board (H1 2024: 1.2 pence).  The shares will trade ex-dividend on 5 June 2025 and the dividend will be paid on 11 July 2025.  The Board expects to continue to apply its dividend policy at the full year and therefore maintain full year dividend payments at a level which is at least consistent with FY 2024.

Consolidated Statement of Financial Position and Consolidated Cash Flow Statement

Capital Expenditure and Store Estate

Capital expenditure in the first half was £4.0 million (H1 2024: £1.9 million).  £2.5 million relates to the establishment of the Group's new distribution centre at the Prologis Park Pineham, supporting the Pro Tiler Tools and CTD operations.  In the period, the Group opened one new Topps Tiles store at Balham, with the balance of capital expenditure being spent on store improvements and IT projects.

In the period, one new Topps Tiles store opened and four Topps Tiles stores closed.  At the period end there were 298 trading stores (H1 2024: 304 stores).  We retain significant flexibility within our store estate, with an average unexpired lease term of 2.8 years (H1 2024: 3.0 years), or 2.7 years excluding strategically important stores (H1 2024: 2.9 years).  At the period end, there was one closed store (H1 2024: three closed stores) which is expected to be exited in the second half of the year, with five closed stores exited in the first half.

The Board expects capital expenditure in the full year to be between £6 million and £8 million.

Inventory

Inventory at the period end was £40.3 million (H1 2024: £35.1 million), representing 114 stock days (H1 2024: 108 stock days).  This includes £4.1m million of stock held in Pro Tiler (H1 2024: £3.1 million), representing 66 stock days (H1 2024: 62 stock days) and £5.4 million of stock held at CTD, following restocking over the period as the business rebuilds its offer, up from £2.9 million at the last year end.  At the last year end, inventory was £37.9 million, equivalent to 118 stock days.

Consolidated Cash Flow Statement

The Group's adjusted net cash/(debt) position decreased in the period by £9.9 million from £8.7 million of adjusted net cash at year end to £1.2 million of adjusted net debt at the half year end.  Adjusted net cash/(debt) is defined as cash and cash equivalents, less bank loans, before unamortised issue costs.  The table below analyses the Group's adjusted net cash flow:

Cash generated by operations, after leases but before working capital movements and excluding CTD was £4.2 million, £1.7 million lower than the previous year, including the cash impact of the non-operational warehouse costs and lower provisions.  A working capital outflow excluding CTD of £4.5 million in the first half (HY 2024: outflow of £1.7 million) was due to a moderate increase in trade credit, and lower payables, due to lower accruals and the timing of a rent payment which fell into the first half.  Stock, excluding CTD, was flat year-on-year.  CTD cash flows and capital expenditure are detailed in the sections above.  Net interest paid was a £0.4 million cash outflow when compared to a £0.3 million inflow last year due to lower cash balances throughout the half.  However, cash tax payments were lower as a result of the statutory loss made last year and dividends were lower, being the cash cost of the FY 2024 final dividend of 1.2 pence per share (HY 2024: final dividend of 2.4 pence per share).

Return on Capital Employed

Lease adjusted returns on capital employed in the first half were 12.9% (H1 2024: 16.4%), based on a reduction in the rolling 12-month adjusted operating profit compared to the previous year, in particularly the second half of FY 2023. 

Banking Facilities

The Group maintains a robust balance sheet, providing resilience and allowing investment in growth opportunities.  A £30.0 million revolving credit facility is in place which is committed to October 2027 (H1 2024: £30.0 million facility, committed to October 2026).  At the half year, £14 million of this facility was drawn (H1 2024: £nil drawn) following £18.9 million of acquisitions in the second half of FY 2024.  Based on net debt excluding lease liabilities of £1.2 million at the period end, the Group had £28.8 million of headroom to its banking facilities at the period end (H1 2024: £49.3 million).

Forward Guidance

Certain factors will impact the second half, as described below:

Current Trading and Outlook

Current trading is strong, with the trading momentum from the second quarter continuing into the second half.  Group sales in the first seven weeks of the second half were up 9.5%, with like-for-like sales in Topps Tiles up 6.2% and other brands within the Group also seeing an acceleration of previous sales trends.

Macroeconomic indicators are looking more favourable, including lower interest rates, relatively high levels of personal savings and rising disposable incomes, although consumer sentiment remains volatile.  The combination of strong strategic execution and a differentiated brand portfolio gives the Group confidence that it will deliver meaningful year on year growth in both sales and profit this year as it progresses towards delivery of Mission 365.

Risks and Uncertainties

The Board continues to monitor the key risks and uncertainties of the Group.  Since the 2024 Annual Report, the Board has removed a principal risk on the limited logistics capacity of the Group.  In FY25 the Pro Tiler and CTD warehouse operations were moved to a new warehouse and the increased logistics capacity of the Group is now sufficient to support the Group's medium term growth forecasts.  A principal risk on Global Supply Chain that focused on geopolitical tensions in the red sea has been broadened to include consideration of the potential impact of tariffs being applied to global trade.  The Board believes that the other principal risks remain largely as documented in the 2024 Annual Report, by nature and scale.  These key risks and uncertainties include: growth through mergers and acquisitions; aging systems; cyber security; development and delivery of group strategy; inflationary cost increases of goods not for resale; macroeconomic changes and consumer confidence; critical asset failure; sustainability and climate change; health and safety.

Going concern

When considering the going concern assertion, the Board reviews several factors including a review of risks and uncertainties, the ability of the Group to meet its banking covenants and operate within its banking facilities based on current financial plans, along with a detailed review of more pessimistic trading scenarios that are deemed severe but plausible. The two downside scenarios modelled include a moderate decline in sales and a more severe decline in sales, which result in much lower sales and gross profit than the base scenario, resulting in worse profit and cash outcomes. The more severe downside scenario modelled this year was based on a prolonged period of macroeconomic stress in the UK, lasting for more than one year, with sales falling nearly 10% year-on-year across the remainder of FY25 and then no growth year-on-year in FY26, in both our Topps Tiles brand and Pro Tiler Tools brands.  The scenario also assumes declines in gross margins across the remainder of FY25 equating to a year-on-year decrease of approximately one percentage point, with recovery over a two-year period. The more severe downside scenario represents a reverse stress-test scenario to assess the amount of sales reduction required before the Group begins to approach covenant breach. Even in this scenario the group has a significant amount of cash headroom. This scenario also assumes that variable costs would reduce in line with sales and direct mitigating cost reduction actions, which would be taken if such a downturn occurred.

The going concern analysis, prepared for the Board, also outlined a range of additional mitigating actions that could be taken in a severe but plausible trading scenario. These included, but were not limited to, further savings on store colleague costs and central support costs, reduced marketing activity, a reduction of capital expenditure, management of working capital and suspension of the dividend. The Group's cash headroom and covenant compliance was reviewed against current lending facilities in both the base case and the severe but plausible downside scenarios. In no scenario modelled does the Group breach covenant compliance. The current lending facility, of £30.0 million, was refinanced in October 2022 and expires in October 2027. The Group will begin discussions with lenders on refinancing in 2026.

In all scenarios, the Board has concluded that there is sufficient available liquidity, with sufficient covenant headroom for the Group to continue to meet all of its financial commitments as they fall due for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, the Board continues to adopt the going concern basis in preparing the Interim Accounts.

Responsibility Statement

We confirm that to the best of our knowledge:

(a) the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as contained in UK-adopted IFRS;

(b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

(c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

There are no other recognised gains and losses for the current and preceding financial periods other than the results shown above. Accordingly, a separate Condensed Consolidated Statement of Comprehensive Income has not been prepared.

1. General information

The interim report was approved by the Board on 20 May 2025. The financial information for the 52 week period ended 28 September 2024 has been based on information in the audited financial statements for that period.

The comparative figures for the 52 week period ended 28 September 2024 are an abridged version of the Group's full financial statements and, together with other financial information contained in these interim results, do not constitute statutory financial statements of the Group as defined in section 434 of the Companies Act 2006.  A copy of the statutory accounts for that 52 week period has been delivered to the Registrar of Companies.  The auditor has reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under s498 (2) or (3) of the Companies Act 2006.

This condensed set of consolidated financial statements has been prepared for the 26 weeks ended 29 March 2025 and the comparative period has been prepared for the 26 weeks ended 30 March 2024.

The interim financial statements have not been audited or reviewed by auditors pursuant to the Auditing Practices Board guidance on "Review of interim financial information" and do not include all of the information required for full annual financial statements.

Basis of preparation and accounting policies

The financial statements of Topps Tiles Plc have been prepared in accordance with UK-adopted International Accounting Standards in conformity with the requirements of the Companies Act 2006 and the disclosure guidance and transparency rules sourcebook of the United Kingdom's Financial Conduct Authority. The unaudited condensed consolidated set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting', as adopted by the European Union and in conformity with the requirements of the Companies Act 2006. The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements. 

New and amended standards adopted by the Group

The Group continues to monitor the potential impact of other new standards and interpretations which have been or may be endorsed and require adoption by the Group in future reporting periods.

Going concern

When considering the going concern assertion, the Board reviews several factors including a review of risks and uncertainties, the ability of the Group to meet its banking covenants and operate within its banking facilities based on current financial plans, along with a detailed review of more pessimistic trading scenarios that are deemed severe but plausible. The two downside scenarios modelled include a moderate decline in sales and a more severe decline in sales, which result in much lower sales and gross profit than the base scenario, resulting in worse profit and cash outcomes. The more severe downside scenario modelled this year was based on a prolonged period of macroeconomic stress in the UK, lasting for more than one year, with sales falling nearly 10% year-on-year across the remainder of FY25 and then no growth year-on-year in FY26, in both our Topps Tiles brand and Pro Tiler Tools brands.  The scenario also assumes declines in gross margins across the remainder of FY25 equating to a year-on-year decrease of approximately one percentage point, with recovery over a two-year period. The more severe downside scenario represents a reverse stress-test scenario to assess the amount of sales reduction required before the Group begins to approach covenant breach. Even in this scenario the group has a significant amount of cash headroom. This scenario also assumes that variable costs would reduce in line with sales and direct mitigating cost reduction actions, which would be taken if such a downturn occurred.

The going concern analysis, prepared for the Board, also outlined a range of additional mitigating actions that could be taken in a severe but plausible trading scenario. These included, but were not

limited to, further savings on store colleague costs and central support costs, reduced marketing activity, a reduction of capital expenditure, management of working capital and suspension of the dividend. The Group's cash headroom and covenant compliance was reviewed against current lending facilities in both the base case and the severe but plausible downside scenarios. In no scenario modelled does the Group breach covenant compliance.

The current lending facility, of £30.0 million, was refinanced in October 2022 and expires in October 2027.

In all scenarios, the Board has concluded that there is sufficient available liquidity, with sufficient covenant headroom for the Group to continue to meet all of its financial commitments as they fall due for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, the Board continues to adopt the going concern basis in preparing the Interim Accounts.

2. Business segments

The Group trades in four related sectors, which are Topps Tiles, Parkside, CTD and Online Pure Play. The Board receives monthly financial information at this level and uses this information to monitor performance, allocate resources and make operational decisions. The Group sells tiles and tile-associated products in each of these sectors, predominantly to UK-based retail, trade and commercial customers, and offers a range of delivery and collection options for orders.

Revenue can be split by the following geographical regions:

3. Taxation

4. Interim dividend

An interim dividend of 0.80p (2024: 1.20p) per ordinary share has been declared. A final dividend of 1.20p per ordinary share was approved and paid in the period, in relation to the 52-week period ended 28 September 2024.

5. Earnings per share

The calculation of earnings per share is based on the earnings for the financial period attributable to equity shareholders and the weighted average number of ordinary shares.