Topps Tiles profits nearly halve as consumer demand remains sluggish

Topps Tiles’ profits fell sharply this year as weak demand in the home repair and maintenance sector and broader economic problems weighed on consumer spending.

The UK home repair, maintenance and improvement industry has faced a difficult trading environment in recent years, and a recent pullback in expectations for a Bank of England base rate cut has dented hopes for recovery.

Rival building materials supplier Travis Perkins last month cut its annual profit outlook for the second time in three months amid weakness in its trading business.

Topps Tiles on Tuesday reported an adjusted pre-tax profit of £6.3 million for the year ended September 28, up from £12.5 million a year earlier.

Revenue for the period amounted to £248.5m, up from £262.7m a year earlier.

Statutory pre-tax losses reached £16.2 million “as a result of a non-cash impairment of £19.4 million, mainly of right-of-use assets, and expenses of £3.1 million related to the purchase of the shares remaining Pro Tiler”.

The retailer declared a total dividend per share for the year of 2.4p, down 33.3 per cent from 3.3p a year earlier.

It came as the group warned that changes to the national living wage and employers’ national insurance contributions will add £4m a year to its costs.

At the end of the period, the group’s net cash reserve was £8.7m, up from £23.4m at the same time a year ago.

Topps Tiles said: “Following three consecutive record years for revenue, lower market demand has led to challenging financial performance over the most recent period, although the Group outperformed the broader market and delivered strong performance in some of the areas of newer businesses.

In the first eight weeks of the group’s new fiscal period, comparable sales fell 0.4 percent.

Future macroeconomic indicators for the company’s market remain mixed, particularly amid weaker consumer confidence, the group said.

Rob Parker, CEO of Topps Tiles, added: “2024 has been a challenging year for RMI and especially for increased ticket spend.

‘In the tile market, volumes remain well below pre-pandemic levels.

‘While Topps Group is not immune to these pressures, our growth strategy has served us well and we have continued to outperform the broader tile market.

‘The start of the new financial year has seen a return to modest sales growth for the Group, helped by weaker comparables from the previous year and the continued strength of our commercial offering.

“While satisfactory, future macroeconomic indicators for our market remain mixed, particularly weaker consumer confidence, and we need to see sustained improvement in these metrics before we can be confident of a consumer recovery.”

Peel Hunt analysts said: ‘It has been a difficult year for most major retailers, reflecting pressures on both the consumer and business sectors across the RMI space.

‘However, Topps has clearly performed better.

“Although the consumer market has not yet shown clear signs of recovery, we are encouraged by the group’s return to growth (in the first quarter of its new financial year).”

The brokerage maintained its buy rating with a 70p share price target.

Topps Tiles Stock rose 3.8 per cent or 1.5 pence to 41.00 pence on Tuesday, after falling around 10 per cent in the last year.