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Topps Tiles offered investors the first glimmer of hope in more than a year when it reported an uptick in trading in April and early May, following a difficult six months of declining revenues and profits.
Operating profits dropped by a quarter in the half-year to March 31, as the tile retailer struggled to cope with reduced footfall from recession-hit customers. Matthew Williams, chief executive, said the main challenge had been maintaining revenues, with sales at stores open more than a year down 4.7 per cent, and total revenues from the 320-store estate 3 per cent lower, at £86.6m.
But like-for-like sales in late spring rose 4.5 per cent – helped, Mr Williams said, by the company’s moves to broaden its appeal, as it aimed to attract higher-end customers trading down from boutiques, without losing the brand’s traditional mid-market audience.
While Topps warned it is “too early to determine whether this marks the beginning of a broader trend”, Mr Williams called the improved trading an endorsement of the group’s strategy.
Topps’s market capitalisation has tumbled from more than £500m to about £60m since 2007, as Britons reduced spending on home improvement. It has benefited more recently, however, from rivals going to the wall, as it picked up both market share and liquidation stock.
Still, Rob Parker, chief financial officer, told the Financial Times that full-year margins would be lower than previous guidance suggested, at about 60 per cent compared with 61.5 per cent.
David Jeary, an analyst at Investec, said the trading figures were encouraging news, albeit against the company’s weak performance in the same period last year.
He said the poor weather over Easter had probably encouraged people to embark on indoor projects such as tiling rather than gardening, to Topps’ benefit. But the recent hot weather would have reversed that trend, and Mr Jeary expected more people to devote the Jubilee weekend to celebration than indoor DIY.
Pre-tax profits for the six months fell to £5m from £10m in 2011, and basic earnings per share fell to 1.94p from 3.85p. The interim dividend was flat at 0.50p.
Net debt fell £4m in the quarter to £46.3m, but remains high at more than three times last year’s earnings before interest, tax, depreciation and amortisation. Still, the company has continued to invest and aims to open five new stores a year, with a focus on the south-east of England.
Analysts at Panmure Gordon said on Tuesday: “Given that the tile sector remains highly fragmented and unlikely to disintermediate online, we think that Topps has a good long-term growth opportunity.”
Shares rose 4 per cent in early trading, to 33½p.