Sparks - Topps Tiles

Having previously reported FY24 revenue in a trading update, the focus of Topps Tiles’ (TPT’s) results is that the company’s FY24 adjusted PBT, which has halved, is marginally ahead of our prior low-end expectations. Management believes the overall revenue decline of 5% means TPT has once again outperformed the market, which is estimated to have declined by 10–15%. The company is making good progress on the key growth areas under its recently announced Mission 365 strategy, which is expected to drive the bulk of the growth in the medium term (ie before any cyclical recovery).

With respect to the outlook for FY25, TPT has returned to marginal positive revenue growth in the first eight weeks of the year, albeit against a weak comparative, and management continues to highlight more favourable housing-related indicators. From a cost perspective, there are inflationary pressures, including the first-time quantification of the changes to employers’ national insurance contributions and the National Living Wage at £4m in a full financial year, which management is working to mitigate. The drop in FY24 profit demonstrates Topps Tiles’ high operational gearing, which should work to its favour in the event of a recovery.