Topps Tiles, the UK’s largest tiling specialist, has endured a steep deterioration in recent trade as homeowners delayed renovation projects.
Shares in Topps fell 2½p, or 12 per cent, to 18½p after the retailer reported an 18 per cent like-for-like sales decline in the seven weeks to November 15.
The fall in trading was much worse than the 5.4 per cent like-for-like sales decline for the year to September 27, announced on Tuesday in the company’s full-year results.
However, Topps did offer further assurances on the issue of its stretched balance sheet, which has seen shares slide as investors reassess the risk of indebted companies.
Nick Coulter, analyst at Numis Securities, said: “The primary issue remains a debt-laden capital structure and the likelihood that Topps will again have to renegotiate covenants.”
The company, which had £92m of net debt at the year end, is highly leveraged but succeeded in renegotiating terms in September with HSBC, Barclays and Royal Bank of Scotland.
“We haven’t asked for more money. We don’t need any,” said Rob Parker, finance director. “They [the banks] have said that there is further room for manoeuvre if that is required.”
In the full year, pre-tax profit fell from £37.8m to £27.7m on sales that edged up from £207.9m to £208.1m. The company took a hit to its gross margin, which fell from 62.8 per cent to 61.8 per cent, partly as a result of discounting. “People are operating on tighter budgets,” explained Matt Williams, chief executive.
The company’s small Dutch business fell to an operating loss of £800,000 from a profit of £300,000 last year.
In spite of the sharp deterioration in recent sales, Mr Williams said the UK business should profit from its position as market leader and pick up business from failing independent competitors. “I think we have taken market share as the market has contracted,” he said.
Basic earnings per share fell from 15.09p to 9.56p. As expected, Topps chose to preserve cash and not pay a final dividend. Last year the company paid a final distribution of 6.95p.
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