Topps Tiles profits fell sharply this year as sluggish demand in the home repair and maintenance sector and broader economic woes weighed on consumer spending.
The UK housing repair, maintenance and improvement industry has faced a tough trading environment in recent years, and a recent pullback on Bank of England base rate cut expectations has dented recovery hopes.
Rival buildings materials supplier Travis Perkins last moth lowered its annual profit outlook for the second time in three months amid weakness in its merchanting business.
Topps Tiles on Tuesday reported an adjusted pre-tax profit of £6.3million for the year ending 28 September, against £12.5million a year earlier.
Revenues for the period came in at £248.5million, down from £262.7million the previous year.
Statutory losses before tax reached £16.2 million ‘as a result of £19.4million non-cash impairment, primarily of right-of-use assets, and £3.1million expense relating to purchase of remaining Pro Tiler shares’.
The retailer declared total dividend per share for the year of 2.4p, down 33.3 per cent from 3.3p the previous year.
It came as the group warned that changes to the National Living Wage and employer national insurance contributions will add £4million a year to its costs.
Topps Tiles profits slump as economic weakness continues to weigh on consumer spending
By the end of the period, the group’s net cash stash was £8.7million, down from £23.4million at the same point a year ago.
Topps Tiles said: ‘Following three consecutive record years for revenue, weaker market demand led to challenging financial performance over the most recent period, although the Group did outperform the market overall and saw strong performance in some of the newer business areas.’
In the first eight weeks of the group’s new fiscal period, like-for-like sales slipped 0.4 per cent.
Forward macro indicators for the company’s market remain mixed, particularly amid weaker consumer confidence, the group said.
Rob Parker, chief executive of Topps Tiles, added: ‘2024 has been a challenging year for RMI and especially bigger ticket spend.
‘In the tile market, volumes remain well below pre-pandemic levels.
‘Whilst Topps Group is not immune to these pressures, our growth strategy has served us well and we have continued to outperform the wider tile market.
‘The start of the new financial year has seen a return to modest sales growth for the Group, helped by weaker prior year comparatives and the continued strength of our trade offer.
‘Whilst pleasing, the forward macro indicators for our market remain mixed, in particular weaker consumer confidence, and we need to see a sustained improvement in these metrics before we can be confident of a consumer recovery.’
Analysts at Peel Hunt said: ‘It has been a tough year for most big-ticket retailers, reflecting pressures on both consumer and business sectors across the RMI space.
‘However, Topps has clearly outperformed.
‘While the consumer market has yet to show clear recovery signs, we are encouraged by the group’s return to growth in [the first quarter of its new financial year].’
The broker maintained its buy rating with a target share price of 70p.
Topps Tiles shares rose 3.8 per cent or 1.5p to 41.00p on Tuesday, having fallen around 10 per cent in the last year.
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