Topps Tiles interim revenue slips but Q2 shows improvement

Topps Tiles posted a rise in first-half like-for-like sales on Wednesday but a dip in total revenue as it said trading improved over the second quarter.

In the 26 weeks to 30 March 2019, LFL sales at the tile specialist nudged up 0.2%. Topps said trading over the second quarter showed an improvement, with LFL sales up 1.8% versus a 1.4% drop in the first quarter and a 2.2% decline in the second quarter of 2018.

The company estimated that the effect of weather conditions in the prior year and a later Easter this year has benefited LFL sales over the quarter by around 1.6%.

Meanwhile, total revenue during the first half ticked down to £108.8m from £109.4m in the same period a year ago.

Chief executive officer Matthew Williams said: "Developing and reinforcing our specialism in tiles is at the heart of our growth strategy. I am encouraged by our overall performance in the first half and believe the successful execution of this strategy is enabling us to outperform the overall tile market. Our commercial business is growing at pace and we remain open to opportunities to accelerate its expansion."

At 1105 BST, the shares were up 2.9% to 76.16p.

Peel Hunt said that based on the update, which was ahead of its sales forecast, it now expects first-half pre-tax profit of around £7.9m, up 10% year-on-year and stronger than it originally expected anticipated.

"Trading on circa 11x price-to-earnings ratio and offering a yield of 4.5%, underpinned by a strengthening balance sheet, we expect the shares to continue to make progress," it said.

Liberum said the update shows that underlying trading has improved in the second quarter despite continued tough market conditions.

"We leave our forecasts unchanged. This reflects a resilient performance in a tough market and gives us confidence that the group's strategy can capture the longer-term opportunities. This includes its good progress within the UK's commercial tile space, which has doubled the group's total addressable market size to circa £700m.

"The group’s quality metrics and balance sheet remain healthy. The shares currently trade on a CY19E PER of 11.7x and offer a dividend yield of 4.4%."

LIberum, which has Topps as a corporate client, rates the stock at 'buy' with a 95p price target.