Category Expansion
Through expanding our offer into adjacent categories we are able to significantly expand our addressable market and provide hard surface covering solutions across more of the house.
The UK tile market splits into two broad sectors – the residential repairs, maintenance and improvement (‘RMI’) sector, accounting for around 55% of the market, and the commercial and housebuilder sector, accounting for the remaining 45% (source: Mintel). The commercial market includes all types of commercial building projects, including infrastructure, as well as new-build residential property, including housebuilding. Within Topps Group, Topps Tiles is mainly focused on the residential RMI market, although it also sells into the commercial sector through its trade customers, Tile Warehouse is largely focused on the residential RMI market, Parkside is focused on the commercial market, Pro Tiler Tools serves trade customers and contractors who may be working across either or both of these markets and CTD sells into both sectors, including into the housebuilder market, a sector not previously served by Topps Group.
An external survey of the tile market is published by Mintel. It covers the whole of the UK tile market, based on manufacturer and supplier data. The most recent report, dated 2023, estimates the size of the UK tile market in 2023 at £351.7 million, measured at MSP (manufacturers’ selling prices), which is 12.8% down from Mintel’s market estimate for 2022 of £403.4 million and for 2021 of £392.4 million. Both 2021 and 2022 benefitted substantially from the ‘home improvement boom’ following the Covid-19 pandemic but, with increasing pressure on consumers as a result of high inflation, falling real wages, high interest rates and pressure on house prices, 2023 proved a much tougher environment. The 2024 report has not yet been published but the Group’s internal estimates are that the market is down a further 10-15% on 2023 levels and therefore it is expected that Mintel will downgrade their estimates for the current year from last year’s estimate.
At selling prices, the Group estimates the tile market across the domestic and commercial sectors to be in the region of £700 million annually. This year, following the strategic expansion into a wider range of product categories, the Group estimates its addressable market to be around £2.1 billion per annum, including product areas such as luxury vinyl tiles, wood, splashbacks and shower panels.
The domestic tile market is large and offers long term potential – of the 24.4 million dwellings in England, the average age is around 71 years, giving a significant and growing need for repair, maintenance and improvement spend. Of the 24.4 million homes, 15.8 million were owner occupied, 4.6 million were private rented, and 4.0 million were social rented (either from housing associations or local authorities (source: 2022-23 English Housing Survey, DLUHC).
The ‘home improvement boom’ described above followed a very poor period for domestic demand in 2020 which was due to the Covid-19 pandemic. However, from 2021, a number of factors were particularly favourable for the domestic market, resulting in robust demand. These factors included people spending more time in their home whilst at the same time having a restricted choice for their economic activity, a boost to housing prices and transactions through reduced stamp duty and low interest rates, and substantial excess savings built up through the lockdown period. As such, the market was buoyant from the spring of 2021 into 2022.
However, from 2023 onwards, a number of negative market factors have increasingly weighed on sentiment. Consumer confidence has been negative for all of 2023 and 2024, averaging -34 over the FY23 financial year and -19 for the FY24 financial year (source: GFK). Although lower than zero, the trend was more optimistic throughout 2024 until September, when confidence stepped back. The Barclays UK consumer spending report breaks down spending across a number of categories and, throughout 2024, the home improvement and DIY category was one of the weakest performers, with an average monthly year on year decline of 7.2% across the financial year (source: Barclays).
The UK housing market is a useful indicator of the market. In a market of rising prices, homeowners tend to feel more affluent and are more confident in spending money on their homes. House prices, on average were 0.5% higher in FY24 than in the previous year, and by September 2024, were 3.2% higher year on year (source: Nationwide). Mortgage approvals and housing transactions also impact the level of demand on home improvement projects, albeit with a lag. Mortgage approvals rose 23.1% in the FY24 financial year compared to FY23, and approvals in September 2024 were almost 50% higher than in the same month of the previous year (source: Bank of England), although housing transactions were still 12% lower year on year overall in FY24 (source: HMRC). When combined with the start of a cycle of potentially falling interest rates, the upward movements in house prices and mortgage approvals might suggest the start of an improved outlook for the housing market in 2025.
The UK commercial tile market is highly fragmented and regionalised with only a small number of scale competitors. The smaller competitors tend to specialise in certain sectors of the market – examples being transport, restaurants, automotive, leisure, offices or higher-end residential.
The Group’s success in this market results from appealing to both designers and architects, with our quality and differentiated offer, and to contractors, who may require larger quantities of products, in short timescales. The Parkside business is able to service both categories: it can leverage its access to differentiated product through the Group’s supplier relationships, as well as its buying advantage and stock-holding position to support volume sales.
Total construction output for the new build private commercial work across all product types decreased by 0.6% year-on-year on a volume, seasonally adjusted basis (FY23: increased by 7.4%) (source: ONS).
UK House Prices
Source: Nationwide
Consumer Confidence
Source: GfK
Construction Market Size
Source: ONS
Mortgage approvals & housing transactions
Source: Bank of England and HMRC
