TIDMTPT
RNS Number : 6081U
Topps Tiles PLC
26 November 2019
26 November 2019
Topps Tiles Plc
Annual Financial Report
Topps Tiles Plc ("Topps", "Topps Tiles" or "the Company"), the
UK's largest tile specialist, announces its annual financial
results for the 52 weeks ended 28 September 2019.
Highlights
52 weeks ended 52 weeks ended YoY
28 September 29 September
2019 2018
Statutory Measures
Group revenue GBP219.2 million GBP216.9 million +1.1%
Gross margin 61.6% 61.1% +50bps
Profit before tax GBP12.5 million GBP12.7 million (1.6)%
Basic earnings per share 5.18p 5.00p +3.6%
Final dividend per share 2.30p 2.30p nil
Total dividend per share 3.40p 3.40p nil
Net cash from operating GBP21.9 million GBP21.9 million nil
activities
Adjusted Measures
Adjusted Group revenue(1) GBP214.3 million GBP214.8 million (0.2)%
Like-for-like revenue year-on-year(2) +0.6% 0.0% n/a
Adjusted gross margin(3) 62.0% 61.3% +70bps
Adjusted profit before tax(4) GBP16.0 million GBP16.0 million nil
Adjusted earnings per share(5) 6.61p 6.64p (0.5)%
Net debt(6) GBP11.3 million GBP16.2 million +GBP4.9
million
Adjusting items are detailed in the notes below and in the
adjusted measures section of the financial review. These include
trading losses from the Commercial business while we go through an
initial two year phase of investing in growth, plus other items
which are either one-off in nature, or can fluctuate significantly
from year to year (such as some property related items).
Financial Summary
-- Adjusted revenues broadly flat at GBP214.3 million (2018: GBP214.8 million)
and like-for-like sales growth of 0.6%;
-- Adjusted profit before tax of GBP16.0 million (2018: GBP16.0 million),
with growth in gross margin offsetting inflationary cost pressures;
-- Net debt reduced by GBP4.9 million year-on-year to GBP11.3 million due
to continued cash generation and year end timing related working capital
benefits;
-- Final dividend maintained at 2.3 pence per share (2018: 2.3 pence per
share), making a total for the year of 3.4 pence per share (2018: 3.4
pence per share);
-- Statutory profit before tax of GBP12.5 million (2018: GBP12.7 million),
details of the adjusting items can be found in the table below.
Strategic & Operational Summary
Group
-- The UK's leading tile specialist with a core purpose to inspire customers
through our love of tiles;
-- Leading Product strategy is focused on delivering competitive advantage
through our specialist focus, buying scale and expertise across both
retail and commercial businesses:
-- 86% of tile ranges are own brand or exclusive to Topps;
-- 40 new ranges launched during the year with over one third developed
in-house;
-- 70% of Group purchases now made through our core supplier group.
-- Leading People is about ensuring we have the best people in each of our
respective market places and achieving this through excellent leadership
of our people;
-- Colleague engagement is key to our customer service ethic - development
of colleagues and internal succession are key areas of focus.
Retail
-- Strategy of "Out-specialising the Specialists" remains our key focus;
-- Customer overall satisfaction rating of 86% - we estimate this ranks
us #3 within the UK retail sector (source: Institute of Customer Service
and Topps data);
-- New omni-channel website launched at the start of October - digital experience
and social media presence continues to grow in importance; new 'Virtual
Tiler' tool providing enhanced inspiration for customers and linking
further the in-store and online experience;
-- Almost all of our customers come to store and experience the world class
specialist service provided by colleagues in our 362 retail stores (2018:
368 stores) - continued review of portfolio and existing lease flexibility
is key;
-- Continued rapid growth in our Trade Rewards+ loyalty programme for professional
tile fitters - now over 90,000 active members (2018: 72,000).
Commercial
-- Strategy of disrupting the commercial tile market and constructing a
new market leader over the medium term;
-- Entry into commercial tile market has approximately doubled the size
of the Group's addressable UK market whilst allowing us to leverage our
tile expertise and scale;
-- Sales of GBP4.9 million (+133% YoY or 81% excluding Strata) and a trading
loss of GBP2.0 million (2018: GBP1.0 million), plus a non-trading loss
of GBP0.3 million (2018: GBP0.1 million) for amortisation of intangibles
and redemption payments for non-controlling share, with a target of broadly
breakeven for FY20 (excluding amortisation and redemption payments for
non-controlling share).
Current Trading and Outlook
-- In line with our past experience, consumer demand has weakened further
since the UK General Election was called in late October;
-- In the first eight weeks of the new financial period, retail like-for-like
revenues decreased by 7.2% (2018: decrease of 1.9%);
-- A reduction in political uncertainty will be key to the short term outlook
improving.
Commenting on the results, Matthew Williams, CEO said:
"This has been another year of strategic progress for Topps,
with a resilient sales performance in our retail business and
significant development in our commercial operations. In Retail,
our strategy of 'Out-specialising the Specialists' enabled us to
deliver like-for-like sales growth and further enhance our
market-leading gross margins in tough market conditions. In
Commercial, we saw significant year-on-year sales growth as we
continue to invest in constructing a market-leader over the medium
term.
"At the start of the new financial year, trading conditions have
become more challenging, with consumer demand weakening further
since the General Election was called in late October. Against this
backdrop of heightened political and economic uncertainty,
like-for-like sales in the first eight weeks have declined. Whilst
we expect external events will continue to weigh on consumer
confidence for the immediate future, we remain confident that our
market-leading retail offer and growing commercial operations give
us a strong platform from which to deliver sustainable growth over
the medium and long term."
Notes
(1) Adjusted revenues are defined as total Group revenues
excluding Commercial revenue of GBP4.9 million (2018 GBP2.1
million).
(2) Like-for-like sales revenues are defined as sales from
online and stores that have been trading for more than 52 weeks. In
2019 sales in like for like stores was GBP209.8 million (2018:
GBP208.6 million), with an average of 354 stores included in the
weekly calculation.
(3) Adjusted gross margin is defined as Group gross margin
excluding Commercial gross margin of GBP2.0 million (2018 GBP0.8
million).
(4) Adjusted profit before tax excludes several items which are
either one-off in nature or fluctuate significantly from year to
year (such as some property related items). These are set out as
follows:
2019 GBPm 2018 GBPm
Adjusted Profit before tax 16.0 16.0
Property
- Impairment of property, plant, equipment and
movement in onerous lease provision (1.8) (2.2)
- Vacant property costs (1.1) (0.2)
- Gains on disposal of freehold or long leasehold
properties nil 0.7
(2.9) (1.7)
Commercial
- Costs related to acquisition during the period (0.4) nil
- Commercial trading loss (2.0) (1.0)
- Commercial amortisation of intangibles & redemption
payments for non-controlling share (0.3) (0.1)
(2.7) (1.1)
Other
- Historical adjustment to refunds provision nil (0.5)
- Write off of goodwill relating to historic (0.2) nil
acquisition
- Repayment of historical import duty 2.3 nil
2.1 (0.5)
Statutory Profit before tax 12.5 12.7
(5) Adjusted earnings per share is adjusted for all of the items
highlighted above, including the offsetting tax impacts of these
items of GBP0.7 million (2018 GBP0.3 million), plus the impact of
corporation tax of GBP2.4 million (2018 GBP3.0 million).
(6) Net debt is defined as bank loans, before unamortised issue
costs (note 18) and less cash and cash equivalents.
For further information please contact:
(26/11/19) 020 7638
Topps Tiles Plc 9571
Matthew Williams, CEO (Thereafter) 0116
Rob Parker, CFO 282 8000
Citigate Dewe Rogerson 020 7638 9571
Kevin Smith/Nick Hayns
STRATEGIC REPORT
The content of this Strategic Report meets the content
requirements of the Strategic Report as set out in s414a of the
Companies Act 2006. This Strategic Report [and Chairman's
Statement] contains certain forward-looking statements. These
statements are made by the Directors in good faith based on the
information available to them up to the time of their approval of
this report and such statements should be treated with caution due
to the inherent uncertainties, including both economic and business
risk factors, underlying any such forward-looking information.
MARKETPLACE
The UK Tile Market and Performance of the Business
The UK tile market is valued at GBP372m per annum at
manufacturers selling prices (source: MBD), or approximately GBP700
million at retail selling prices. The market splits into two broad
sectors - domestic, accounting for around 55% of the market and
commercial, accounting for the remaining 45%. The domestic market
includes the renovation, maintenance and improvement of residential
properties and the commercial market includes commercial building
projects in their many and varied forms, as well as new build
residential property.
The annual tile industry report published by MBD covers the
whole of the UK tile market (domestic and commercial) and is based
on manufacturer and supplier data. In 2018 the total market was
flat on a value basis, with 2% growth in volume.
The Board has previously recognised that Brexit could have a
number of implications for the Group - we continue to monitor and
plan for any adverse impacts.
Domestic Tile Market
Due to the discretionary nature of domestic market spending,
consumer confidence remains a key driver of its performance. During
2019, the average level of consumer confidence was -12.5, which
compares to -9.3 in 2018 (source: GFK). The index has been
relatively stable across the year, averaging -12.8 over the first
half and -12.2 over the second. The consumer confidence index has
remained negative since the EU referendum result in June 2016 and
we will continue to monitor this measure closely during the UK's
exit from the EU.
A further key driver of the customer decision to take on a home
improvement project is buying a new home; housing transactions are
therefore a useful indicator of likely future demand. Housing
transactions across the UK have been quite stable since the summer
of 2017 and during 2019 they have remained broadly flat at around
1.2m (Source: HMRC).
We also consider UK house price data to be a useful indicator of
the relative health of our market. House prices are both a good
reflection of the housing market itself and also tend to reflect
consumer confidence, as home owners tend to feel more affluent in a
rising market. During the year house prices have been stable, with
the average price of a house in the UK at GBP215,352 (2018:
GBP214,922) (Source: Nationwide).
Commercial Tile Market
Construction output for the private commercial sector declined
by 2.6% across the period (source: ONS). We believe this to be a
good proxy for the commercial tile market, with evidence of overall
price deflation in construction as a whole and general project
delays as investments and purchasing confidence declined.
The UK commercial tile market is quite fragmented and
regionalised with only a very small number of scale competitors.
The smaller competitors tend to specialise in certain sectors of
the market - examples being transport, restaurants, automotive,
leisure, offices or high end residential. Our success in this
market results both from appealing to designers and architects
through our differentiated offer, and to contractors who may
require more commoditised products, in large quantities, but at
lower prices. Although the focus for our commercial business is on
customers in the former category, where we can leverage our tile
specialism and design credentials, the Groups buying advantage also
enables volume sales.
Strategy
The Group business has an overarching goal to profitably grow
sales and we aim to achieve this by putting our customers at the
heart of what we do. In 2017, we identified an opportunity to
expand into the commercial tile market. As a result, we acquired
the Parkside business and have made good progress investing in and
growing revenues. During 2019, we further expanded our commercial
operations through the acquisition of Strata Tiles. Whilst the
commercial business currently only accounts for approximately 2% of
our turnover, we consider it to be a key aspect of our future
growth plans as it doubles the size of the Group's addressable
market in the UK. Our retail business, Topps Tiles, continues to
successfully operate from a position of strength as the market
leader and we have continued to refine and hone our customer offer.
Both business units are supported by our Group strategies of
"Leading Product" and "Leading People".
Leading Product
The Group's core purpose is to inspire customers through our
love of tiles and this objective is reflected in our "Leading
Product" initiative. Our specialism in tiles is our key source of
competitive advantage. We are experts in the ranging, sourcing and
procurement of tiles on a global basis and we work with carefully
selected partners around the world to develop and produce
differentiated products that are innovative, high quality and
exclusive. We protect the intellectual property and design assets
we create through partner exclusivity and design registration.
Ultimately, it is this Group specialism that we leverage through
our business units into both the retail and commercial markets.
Progress and Outlook
Our pace and iterative cycle of product introduction continues
to set us apart from our competitors. During the year we launched
over 40 new product ranges and we are proud that more than a third
of our new tile ranges were design-led by us in collaboration with
selected key supply partners. 86% of our tile ranges are either own
brand or exclusive to us and this forms an important aspect of our
differential. Importantly, 70% of our purchases are now through our
core supplier group, a key metric of our drive to leverage our
buying scale and advantage and benefit those partners that are
aligned to our strategic ambitions.
Innovation in design and, more recently, in manufacturing
technology, makes it an exciting period for the ceramic industry
and as specialists we are focused on embracing new opportunities to
deliver the best possible products and projects for our customers.
For example, we further extended our outdoor product offer with the
addition of our exclusive 20mm porcelain tile range Everscape(TM) ,
and more recently launched Aquabase(TM) , a range of unique
porcelain shower trays, which are designed to co-ordinate and
contrast with many of our other tile ranges in the latest on-trend
looks. In the year ahead, we will increase the level of in-house
developed products across all categories.
In Commercial, we have focused on supporting our sales teams
with an extended product range in order that they can be highly
competitive in this established sector. Both Parkside and Strata
now have access to over 7,000 tile products from a global supply
base. Within the period we were pleased to strengthen our offer by
securing exclusive partnerships with several Italian tile brands
which are highly recognised within the architectural and design
community.
Technical authority is increasingly important in our market and
we aim to be leaders in this field. We have invested over recent
years to build our own in-house technical team to meet the demands
of our now broader customer base and to set us apart from our
competitors. We are able to offer key technical information through
in-house testing, on-demand support and ensuring high levels of
product quality at all times.
Leading People
The Group's success is underpinned by industry-leading levels of
customer service and this is reflected in our "Leading People"
initiative. This means that we are very focussed on our colleagues
that deliver this service, with their capability and engagement
levels being critical.
Progress and Outlook
This year we launched a new colleague initiative called "Leading
People". This is based around us having the leading people in each
of our respective markets and we believe we will achieve this by
having the very best leadership of our people. Leading People is
about Leading the Thinking, Leading the Pace and Leading the Team.
We are developing a range of materials to help all colleagues
understand our expectations of them and to help them develop and
grow within this framework.
Our online Learning Management System, "theHub", continues to be
our primary vehicle for delivery of Learning & Development
activity; it is very well utilised with the majority of colleagues
logging on at least once every month. During the year we launched a
new personal performance review process which encourages colleagues
and managers to have a regular dialogue specifically tailored to
the needs of both the business and our colleagues.
Colleague engagement in the business is high and we have now
launched a new colleague engagement survey. This allows us to
tailor questions to specific topics and build a long term view of
colleague engagement. The new system also allows a mid-year "pulse"
survey which provides a helpful interim update on progress against
key initiatives.
Internal succession is very important to us. As an example, when
we recruit at a store management level, 58% (2018: 60%) of these
roles are filled internally. This allows for excellent
opportunities for colleague progression and also allows us to
retain the strong technical skill sets that all store colleagues
learn.
We are also investing in improvements in our HR and payroll
technology in order to improve efficiency, ways of working, risk
management and colleague engagement, and we expect this system to
go live in the current financial year.
Retail - Topps Tiles
Our retail strategy for the domestic market of "Out-specialising
the Specialists" continues to be very effective. This strategy is
focused on providing both our retail and trade customers with a
truly inspirational experience - both online and in store.
Progress and Outlook
The majority of home owners will utilise our website as the
first step of their shopping journey with us - often as part of the
research phase. This year we took a significant step forwards with
the launch of our new website, which, has been based around an
enhanced user experience, including omni-channel technology
capability which will unlock further functionality over time.
Whilst we know that our website is very important for customers
when they are starting their journey with us, we also know that our
stores represent a vital part of their journey - with 90% of our
customers visiting a store as part of their purchase. As customers'
needs change so too does the way we invest to attract them.
Our marketing spend is increasingly focused on digital mediums,
and in particular in driving traffic to our website. We are also
collaborating more than ever with social media influencers - people
who have a natural fit with our customer offer and who can help us
reach out to an ever-larger potential customer base. During the
period we have been focused on social media impressions and, in
particular, building our Instagram presence by creating a community
of influencers and traders with an interior design focus; as a
result we now have 37,000 followers on Instagram (FY18: 16,000).
Total social media impressions for the year increased by 96% to
12.7 million (FY18: 6.5 million).
This year we have introduced a new service into stores, 'Virtual
Tiler', which allows colleagues to work with the customer to help
them design a 3D visualisation of their project with their chosen
tiles. Virtual Tiler complements our existing visualiser and the
innovative grout and trim visualiser on the new website, and,
together, they are a major source of inspiration for customers and
a key tool for colleagues to utilise in stores.
Our colleagues offer our customers a world-class experience
within store. Our all-store improvement initiative is now two years
into a three-year programme. This includes a number of new
merchandising initiatives such as implementing design advice areas
in stores. These areas establish a space in store for colleagues to
interact with customers in a more consultative way, allowing them
to really understand their needs and provide bespoke design
solutions. The majority of our customers shop infrequently for
tiles which means that when they do, they need lots of advice and
expertise. Our customer satisfaction scores are very important to
us and during the year we launched our new customer feedback
system, "Tile Talk". We have achieved an overall satisfaction
rating of 86%, which we estimate places us within the top three of
UK retailers (source: Institute of Customer Service and Topps
data).
The size of our store portfolio is also a key source of
competitive advantage as this makes us very convenient for the
majority of the UK population. At the period end we had 362 stores
(2018: 368 stores) and we expect to see continued movement in the
portfolio through active portfolio management based on openings,
closures and relocations. We anticipate that the total number of
retail stores will reduce by approximately 10 in the current year
due to a programme of continued portfolio optimisation. The optimum
size of the portfolio for the UK will continue to be reviewed based
on changing customer needs over time. Critically, the average
unexpired lease term to the next break opportunity is 3.8 years
(2018: 4.1 years) and if we remove stores which are strategically
important (where we have proactively taken longer terms to secure
our tenure) the average unexpired lease term to break falls to 3.1
years (2018: 3.4 years) - the flexibility this provides is a key
strength of the business.
Our trade customer base represents 56% of our total sales (2018:
56%). Trade provides a vital link to those homeowners who prefer to
transact through their fitter rather than with us direct. The UK
consumer remains very dependent on the "Do It For Me" trend and
hence our trade customer base is key to our continued success. We
focus very hard on ensuring we offer our trade customers a
compelling overall offer and our trade loyalty scheme leads our
market place - with 90,000 traders registered and earning points
over the preceding 12 months (2018: 72,000).
Commercial - Parkside & Strata
The commercial tile market represents around 45% of the overall
UK tile market, hence our entry into this market approximately
doubles our addressable market. Historically, the Group had a very
small representation in this part of the market through commercial
sales made in its retail stores, but in 2017 we identified
commercial as an opportunity for expansion and profitable growth
and acquired the Parkside business. Our strategy of "Disrupt and
Construct" means that we plan to disrupt the existing competitive
landscape and, over time, construct a new market leader. Our tile
expertise, size and scale as a Group is central to this plan -
giving us the resources to recruit a talented sales team and invest
in market leading pricing.
Progress and Outlook
2019 was a year of learning, development and growth for
Parkside. We have built a sales team of 19 people with
approximately 400 years of combined tile sales experience,
delivered a sales increase of 81% and developed a very encouraging
pipeline of potential future sales. Feedback from customers has
been very positive with both the quality and friendliness of our
sales teams and our access to exclusive and differentiated ranges
seen as key strengths. We have expanded our network of design
studios with openings in the Clerkenwell district of London and the
Cotswolds, bringing the total to four. These meeting and event
spaces enable designers, architects and contractors to directly
experience the vast range of product possibilities we offer.
During the period we further strengthened our position in the
commercial tile market through the acquisition of Strata Tiles.
Strata Tiles is a commercial tile business with a specialist focus
in transport, retail and living spaces and an experienced team of
nine sales people working across the industry.
Overall Commercial sales performance was strong during the
period with total revenues growing by 133% to GBP4.9 million and an
encouraging future pipeline of prospects which continues to build.
Trading losses for the commercial business have been GBP2.0 million
(excluding GBP0.3 million arising on the amortisation of intangible
assets and provision for redemption of non-controlling interest).
In line with previously announced strategy, these losses have been
treated as a longer term investment and as such have been excluded
from the adjusted financial results of the Group for this year.
With effect from the 53 week period ended 3 October 2020 Commercial
will be no longer be excluded from our adjusted financial results
and our expectation is that we will trade at broadly breakeven in
that period (excluding amortisation of intangibles and redemption
of non-controlling interest). We remain open to further growth
through acquisition and will continue to review such opportunities
as they arise.
Board
As announced on 5 November 2019, Matthew Williams will step down
from his position as CEO with effect from 29 November 2019,
remaining as an advisor to the business until May 2020. He will be
succeeded by Rob Parker, currently CFO.
Key Performance Indicators ("KPIs")
The Board monitors a number of financial and non-financial
metrics and KPIs both for the Group and by individual store. This
information is reviewed and updated as the Directors feel
appropriate. Specific measures include:
52 weeks to 52 weeks to YoY
28 September 29 September
2019 2018
Financial KPIs
Adjusted Group revenue growth year-on-year* (0.2)% +1.5% n/a
Like-for-like sales growth year-on-year* +0.6% 0.0% n/a
Adjusted gross margin* 62.0% 61.3% +70bps
Adjusted profit before tax* GBP16.0m GBP16.0m nil
Adjusted earnings per share* 6.61 pence 6.64 pence (0.5)%
Net debt* GBP11.3m GBP16.2m +GBP4.9m
Inventory days 134 130 (4)
Non-financial KPIs
Customer overall satisfaction score 86.0% n/a n/a
Colleague turnover 36.8% 37.2% +0.4%
Carbon emissions per store (tonnes
per annum) 31.9 31.1 (2.6)%
Number of retail stores at year end 362 368 (6)
* as defined on page 3
Notes
-- Customer overall satisfaction scores are calculated from the responses
we receive through our TileTalk customer feedback programme. Overall
satisfaction (OSAT) is the percentage of customers that score us 5 in
the scale of 1 - 5, where 1 is highly dissatisfied, and 5 is highly satisfied.
We estimate this places us in the top three of UK retailers based on
published data from the Institute of Customer Service and our own results
data. The programme was introduced in October 2018 and hence there is
no prior year comparator for this measure.
-- Energy carbon emissions have been compiled in conjunction with our electricity
and gas suppliers. This is based on the actual energy consumed multiplied
by Environment Agency approved emissions factors. Vehicle emissions have
been calculated by our in-house transport team based on mileage covered
multiplied by manufacturer quoted emission statistics.
FINANCIAL REVIEW
Adjusted Measures
The Group's management uses adjusted performance measures, to
plan for, control and assess the performance of the Group. Adjusted
Group revenue and gross margin differ from statutory by the
exclusion of the commercial business, to allow the Group to
understand Topps Tiles retail performance on a more comparable
basis.
Adjusted profit before tax differs from the statutory profit
before tax as it excludes the effect of one off or fluctuating
items, allowing the Group to understand results across periods in a
more consistent manner.
For the current period the following items have been
excluded:
-- Losses relating to the commercial business of GBP2.3 million (2018: GBP1.1
million) - recognising that 2018 and 2019 will be two years of investment
in longer term growth. The commercial loss is comprised of GBP2.0 million
from trading and a GBP0.3 million impairment of intangible assets and
provision for redemption payments for non-controlling share;
-- One-off deal costs related to the purchase of the Strata business of GBP0.4
million;
-- Losses related to movement in property related provisions (including onerous
lease movements and provision against fixed assets in loss making stores)
of GBP1.8 million (2018: GBP2.2 million);
-- Vacant property costs of GBP1.1 million (2018: GBP0.2 million) for stores
closed as part of a portfolio optimisation programme;
-- Gain relating to repayment of historical import duty from HMRC of GBP2.3
million; and
-- Losses from a write off of goodwill relating to a historical acquisition
(Surface Coatings Ltd) GBP0.2 million.
In the prior year a gain from the disposal of four freehold
properties of GBP0.7 million and a loss of GBP0.5 million relating
to a historical adjustment to the refunds provision, were also
excluded.
PROFIT AND LOSS ACCOUNT
Revenue
Total revenue for the period ended 28 September 2019 increased
by 1.1% to GBP219.2 million (2018: GBP216.9 million).
Adjusted revenue decreased by 0.2% to GBP214.3 million (2018:
GBP214.8 million). Like-for-like store sales were 0.6% higher than
the prior year, which consisted of a 0.2% increase in the first
half of the financial period and a 0.9% increase in the second
half. We believe that the sales performance represents an
outperformance of our market and is an endorsement of our
strategy.
Gross Margin
Total gross margin was 61.6%, an increase from 61.1% in the
prior year.
Adjusted gross margin (for our retail business) increased to
62.0% compared with 61.3% in the previous financial period. Over
the first half of the period adjusted gross margin was 61.4%, and
we delivered a gross margin of 62.7% in the second half of the
period. Gross margin includes a GBP0.5 million gain (20 bps) from
the reclassification of other income from operating costs. In
addition, there has been a benefit from sourcing gains and new
ranges with improved margins. Over the year foreign exchange had a
modest impact (10bps adverse movement) with a minor benefit in the
first half offset in the second half. For the year ahead we
anticipate that gross margin in our retail business will be broadly
flat, but continued growth of the commercial business which
operates at a lower level will dilute total gross margin by around
100 bps.
Operating Expenses
Total operating costs increased from GBP118.7 million to
GBP121.6 million, an increase of 2.4%. Costs as a percentage of
sales were 55.5% compared to 54.7% in the prior period. When
adjusting items (detailed above) are excluded, operating costs were
GBP116.1 million (2018: GBP114.6 million), an increase of 1.3%.
Adjusted costs as a percentage of adjusted sales were 54.2%
compared to 53.4% in the previous period.
The movement in adjusted operating costs is explained by the
following key items:
- The average number of UK stores trading during the financial period was
366 (2018: 372), which generated a reduction in costs of approximately
GBP1.5 million;
- Inflation at an average of approximately 1.4% increased our cost base
by around GBP1.7 million (excluding regulatory impacts);
- Regulatory cost impacts, including the National Living Wage, accounted
for GBP0.5 million of additional costs;
- Depreciation increased by GBP0.2 million due to higher levels of investment
in the store estate over recent years;
- Supply chain costs increased by GBP0.3 million partially due to additional
off site facilities for stock as a result of Brexit contingency planning;
- Reclassification of GBP0.5 million of other income from operating costs
into gross margin;
- Employee profit share costs decreased by GBP0.5 million, with lower level
of financial performance compared to plan; and
- Other cost increases of GBP0.3 million across a number of cost lines.
For the year ahead we expect the adjusted operating costs for
the business to be between GBP122 million and GBP123 million. This
includes between GBP5.5 million and GBP6.0 million of costs
relating to the inclusion of the commercial business due to this no
longer being treated as an adjusting item.
Financing
Net finance costs for the period were GBP0.9 million (2018:
GBP1.0 million). The reduction recognises changes to the principle
debt which continued to fall over the year.
Net interest cover was 28.2 times (2018: 23.0 times) based on
profit before interest and tax of GBP13.3m (2018: GBP13.7m),
adjusted for depreciation and amortisation of GBP7.4 million (2018:
GBP7.1 million) and adjusting items of GBP3.5 million (2018: GBP3.3
million).
Profit Before Tax
Profit before tax (PBT) was GBP12.5 million (2018: GBP12.7
million). The Group PBT margin was 5.7% (2018: 5.9%).
Excluding the adjusting items detailed above, PBT was GBP16.0
million (2018: GBP16.0 million). The Group adjusted PBT margin was
7.5% (2018: 7.4%).
Tax
The effective rate of corporation tax for the period was 19.2%
(2018: 23.9%).
The Group tax rate is higher than the prevailing UK corporation
tax rate due to non-deductible expenditure and depreciation on
assets not qualifying for capital allowances.
Earnings Per Share
Basic earnings per share were 5.18 pence (2018: 5.00 pence).
Diluted earnings per share were 5.14 pence (2018: 4.93
pence).
Excluding the adjusting items detailed on page three adjusted
earnings per share were 6.61 pence (2018: 6.64 pence).
Dividend and Dividend Policy
The Board has previously indicated that it intended to pursue a
dividend cover policy and that it would target approximately two
times as a sustainable level and over the period we are in line
with this at a cover of 1.94x the adjusted earnings per share
(2018: 1.95x).
The Board is recommending to shareholders a final dividend of
2.3 pence per share (2018: 2.3 pence per share). This will cost
GBP4.4 million (2018: GBP4.4 million). The shares will trade
ex-dividend on 19 December 2019 and, subject to approval at the
Annual General Meeting, the dividend will be payable on 31 January
2020.
This will maintain the total dividend for the year at 3.4 pence
per share (2018: 3.4 pence per share).
The policy for the interim dividend is to pay one third of the
prior full year dividend.
BALANCE SHEET
Capital Expenditure
Capital expenditure on tangible/intangible assets and investment
properties in the period amounted to GBP7.8 million (2018: GBP7.9
million), a decrease of 1.3%.
Key investments are as follows:
- New retail stores and store improvements GBP4.5 million - 12 new openings
(including two relocations) (2018: GBP3.3 million)
- Commercial showrooms GBP0.6 million (2018: GBP0.4 million)
- Freehold and investment property purchases GBP0.2 million (2018: GBP3.1
million)
- Central office refurbishment, IT and other expenditure GBP2.5 million
(2018: GBP1.1 million)
The Board expects capital expenditure in the year ahead to be
between GBP6 million and GBP7 million which will cover our core
investment plans. In addition, we are considering investing in a
programme to retrofit LED lighting into all stores at a cost of
between GBP2.5 million and GBP3.0 million which will deliver a
significant saving in energy and carbon emissions. Any strategic
acquisitions that the Group may consider as part of its growth
plans in the commercial tile market would be additional to this
guidance.
At the period end the Group held five freehold or long leasehold
sites, including two warehouse and distribution facilities and an
office building, with a total carrying value of GBP13.8 million
(2018: six freehold or long leasehold sites valued at GBP14.2
million). The carrying value is based on the historic purchase cost
and capital expenditure less accumulated depreciation and in the
case of the investment property a fair value adjustment.
Acquisitions & Disposals
During the year we disposed of one freehold property for a
consideration of GBP0.2 million.
During the prior period we acquired one freehold property for a
consideration of GBP2.9 million and disposed of four freehold
properties for a consideration of GBP3.9 million.
Intangible Assets & Goodwill
During the year Topps acquired 80% of the Strata commercial
tiles business, which has resulted in a goodwill value of GBP1.9
million. The Strata acquisition also resulted in intangible assets
of GBP1.7 million, which have been amortised by GBP0.1m in the
period to a new carrying value of GBP1.6 million.
At the period end Parkside goodwill was GBP1.2 million (2018:
GBP1.2 million). Intangible assets, relating to the Parkside
business, were amortised by GBP0.1 million to a new holding value
of GBP0.3 million (2018: GBP0.3 million).
In the previous year the Topps retail business held goodwill
relating to historic acquisitions of GBP0.2 million, which was
written off during the period.
Inventory
Inventory at the period end was GBP30.9 million (2018: GBP30.2
million) representing 134 days turnover (2018: 130 days turnover).
The September 2019 year end stock balance includes GBP1.1 million
of stock built up in advance of the previously proposed 31 October
2019 Brexit deadline, as a precaution against the risk of potential
delays getting stock through ports during November.
Capital Structure and Treasury
Cash and cash equivalents at the period end were GBP18.7 million
(2018: GBP13.8 million) with borrowings of GBP30.0 million (2018:
GBP30.0 million) before unamortised issue costs.
This gives the Group a net debt position of GBP11.3 million
(2018: GBP16.2 million).
Cash flow
Cash generated from operations was GBP21.9 million, compared to
GBP21.9 million in the prior year period, being flat year on year.
Improvements in working capital of GBP2.0 million were driven by
the financial calendar with year-end falling before payroll
payments were made in FY19, whilst in FY18 payroll payments had
been made. Working capital gains were offset by reduced cash flow
from operating activities (including interest) (GBP1.2 million
lower than prior year), and higher tax payments (GBP0.8 million
higher than the prior year).
Free cash flow was GBP11.5 million (2018: GBP17.9 million), a
reduction of GBP6.4 million year on year. This reduction was driven
by lower proceeds from disposals of properties of GBP3.5 million.
FY19 also includes the GBP2.7 million cash outflow for acquisition
of the Strata business.
IFRS 16 - Leases
IFRS 16 will be adopted by the Group in the period ending 3
October 2020. The standard will have a material impact on the
financials statements of the Group due to the large number of
property leases it holds as well as leases relating to machinery
and vehicles.
Based on the lease portfolio at the transition date of 29
September 2019, the Group will recognise a right-of-use asset in
the region of GBP125m, with a corresponding lease liability in the
region of GBP130m.
For the period ending 3 October 2020, the Group expects a
reduction in Profit before taxation in the region of GBP1m, as a
result of the adoption of IFRS 16.
Current Trading and Market Conditions for the Year Ahead
Consumer demand has weakened further since the UK General
Election was called in late October. In the first eight weeks of
the new financial year, retail like-for-like sales have declined by
7.2%. A reduction in political uncertainty will be key to the short
term outlook but we remain confident that our market-leading retail
offer and rapidly-growing commercial operations gives us a solid
platform from which to deliver sustainable growth over the medium
term.
Long Term Viability
The Board have also considered the Longer Term Viability ("LTV")
of the business in light of updated Corporate Governance
requirements. The fuller LTV statement can be found in our Annual
Report.
Matthew Williams Rob Parker
Chief Executive Officer Chief Financial Officer
26 November 2019
Consolidated Statement of Financial Performance
For the 52 weeks ended 28 September 2019
52 weeks 52 weeks
ended ended
28 September 29 September
2019 2018
Notes GBP'000 GBP'000
-------------------------------------------- ------------------ ---------------------------- -------------
Group revenue - continuing operations 3 219,197 216,887
-------------------------------------------- ------------------ ---------------------------- -------------
Cost of sales (84,245) (84,464)
-------------------------------------------- ------------------ ---------------------------- -------------
Gross profit 134,952 132,423
-------------------------------------------- ------------------ ---------------------------- -------------
Distribution and selling costs (93,138) (88,348)*
-------------------------------------------- ------------------ ---------------------------- -------------
Repayment of historical import duty 5 2,272 -
-------------------------------------------- ------------------ ---------------------------- -------------
Other operating expenses (8,070) (9,480)
-------------------------------------------- ------------------ ---------------------------- -------------
Administrative costs (17,439) (16,067)*
-------------------------------------------- ------------------ ---------------------------- -------------
Sales and marketing costs (5,244) (4,793)
-------------------------------------------- ------------------ ---------------------------- -------------
Group operating profit 13,333 13,735
-------------------------------------------- ------------------ ---------------------------- -------------
Finance income 7 15 25
-------------------------------------------- ------------------ ---------------------------- -------------
Finance costs 7 (873) (1,072)
-------------------------------------------- ------------------ ---------------------------- -------------
Profit before taxation 5 12,475 12,688
-------------------------------------------- ------------------ ---------------------------- -------------
Taxation 8 (2,397) (3,029)
-------------------------------------------- ------------------ ---------------------------- -------------
Profit for the period 27 10,078 9,659
-------------------------------------------- ------------------ ---------------------------- -------------
Profit is attributable to:
-------------------------------------------- ------------------ ---------------------------- -------------
Owners of Topps Tiles Plc 10,119 9,659
-------------------------------------------- ------------------ ---------------------------- -------------
Non-controlling interests 28 (41) -
-------------------------------------------- ------------------ ---------------------------- -------------
10,078 9,659
-------------------------------------------- ------------------ ---------------------------- -------------
Earnings per ordinary share from continuing
operations:
-------------------------------------------- ------------------ ---------------------------- -------------
- Basic 5.18p 5.00p
-------------------------------------------- ------------------ ---------------------------- -------------
- Diluted 5.14p 4.93p
* Distribution and selling costs and administrative costs are
now inclusive of employee profit sharing costs, which were
separately identified in the prior period financial statements. The
prior period has been adjusted to be comparable. The Group have
reviewed its accounting policy and have reclassified employee
profit sharing costs of GBP5,153,000 (2018: GBP5,776,000) to
distribution and selling costs, and GBP617,000 (2018: GBP492,000)
to administrative costs.
Consolidated Statement of Comprehensive Income
For the 52 weeks ended 28 September 2019
52 weeks 52 weeks
ended ended
28 September 29 September
2019 2018
GBP'000 GBP'000
------------------------------------------------------------ ------------- -------------
Profit for the period 10,078 9,659
Total comprehensible income for the period is attributable
to:
Owners of Topps Tiles Plc 10,119 9,659
Non-controlling interests (41) -
------------------------------------------------------------ ------------- -------------
10,078 9,659
Consolidated Statement of Financial Position
as at 28 September 2019
2019 2018
Notes GBP'000 GBP'000
----------------------------------------------------- ----- -------- ---------
Non-current assets
Goodwill 11 3,104 1,461
Intangible assets 12 2,663 339
Property, plant and equipment 13a 46,958 47,953
Investment properties 13b 1,233 1,233
----------------------------------------------------- ----- -------- ---------
53,958 50,986
----------------------------------------------------- ----- -------- ---------
Current assets
Inventories 30,924 30,154
Trade and other receivables 15 8,142 8,712
Cash and cash equivalents 16 18,747 13,842
----------------------------------------------------- ----- -------- ---------
57,813 52,708
----------------------------------------------------- ----- -------- ---------
Total assets 111,771 103,694
Current liabilities
Trade and other payables 17 (43,336) (38,648)
Current tax liabilities (2,025) (2,923)
Provisions 20 (1,235) (1,197)
----------------------------------------------------- ----- -------- ---------
(46,596) (42,768)
----------------------------------------------------- ----- -------- ---------
Net current assets 11,217 9,940
Non-current liabilities
Bank loans 18 (29,884) (29,851)
Deferred tax liabilities 20 (1,197) (1,017)
Provisions 20 (3,862) (3,395)
----------------------------------------------------- ----- -------- ---------
Total liabilities (81,539) (77,031)
----------------------------------------------------- ----- -------- ---------
Net assets 30,232 26,663
----------------------------------------------------- ----- -------- ---------
Equity
Share capital 21 6,548 6,548
Share premium 22 2,490 2,490
Own shares 23 (1,548) (3,750)
Merger reserve 24 (399) (399)
Share-based payment reserve 25 3,962 3,945
Capital redemption reserve 26 20,359 20,359
Accumulated losses 27 (1,178) (2,530)
----------------------------------------------------- ----- -------- ---------
Capital and reserves attributable to owners of Topps
Tiles Plc 30,234 26,663
Non-controlling interests 28 (2) -
----------------------------------------------------- ----- -------- ---------
Total equity 30,232 26,663
----------------------------------------------------- ----- -------- ---------
The accompanying notes are an integral part of these financial
statements.
The financial statements of Topps Tiles Plc, registered number
3213782, were approved by the Board of Directors and authorised for
issue on 26 November 2019. They were signed on its behalf by:
MATTHEW WILLIAMS
ROB PARKER
Directors
Consolidated Statement of Changes in Equity
For the 52 weeks ended 28 September 2019
Share-based Capital
Share Share Own Merger payment redemption Accumulated Non-controlling Total
capital premium shares reserve reserve reserve losses interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ------- ------- ------- ------- ----------- ---------- ----------- ---------------- --------
Balance at 1
October
2017 6,548 2,487 (4,411) (399) 3,921 20,359 (4,952) - 23,553
---------------- ------- ------- ------- ------- ----------- ---------- ----------- ---------------- --------
Profit and total
comprehensive
income for the
period - - - - - - 9,659 - 9,659
---------------- ------- ------- ------- ------- ----------- ---------- ----------- ---------------- --------
Issue of share
capital - 3 - - - - - - 3
Dividends - - - - - - (6,566) - (6,566)
Own shares
issued
in the period - - 661 - - - (661) - -
Credit to equity
for
equity-settled
share-based
payments - - - - 24 - 11 - 35
Deferred tax on
share-based
payment
transactions - - - - - - (21) - (21)
---------------- ------- ------- ------- ------- ----------- ---------- ----------- ---------------- --------
Balance at 29
September
2018 6,548 2,490 (3,750) (399) 3,945 20,359 (2,530) - 26,663
---------------- ------- ------- ------- ------- ----------- ---------- ----------- ---------------- --------
Profit and total
comprehensive
income for the
period - - - - - - 10,119 (41) 10,078
---------------- ------- ------- ------- ------- ----------- ---------- ----------- ---------------- --------
Dividends - - - - - - (6,623) - (6,623)
Own shares
issued
in the period - - 2,202 - - - (2,202) - -
Credit to equity
for
equity-settled
share-based
payments - - - - 17 - 64 - 81
Deferred tax on
share-based
payment
transactions - - - - - - (6) - (6)
Non-controlling
interest
on business
combination - - - - - - - 39 39
---------------- ------- ------- ------- ------- ----------- ---------- ----------- ---------------- --------
Balance at 28
September
2019 6,548 2,490 (1,548) (399) 3,962 20,359 (1,178) (2) 30,232
---------------- ------- ------- ------- ------- ----------- ---------- ----------- ---------------- --------
Consolidated Cash Flow Statement
For the 52 weeks ended 28 September 2019
52 weeks 52 weeks
ended ended
28 September 29 September
2019 2018
GBP'000 GBP'000
-------------------------------------------------------------- ------------- -------------
Cash flow from operating activities
Profit for the period 10,078 9,659
Taxation 2,397 3,029
Finance costs 873 1,072
Finance income (15) (25)
-------------------------------------------------------------- ------------- -------------
Group operating profit 13,333 13,735
Adjustments for:
Depreciation of property, plant and equipment 7,117 6,983
Amortisation of intangible assets 245 90
Loss /(gain) on disposal of property, plant and equipment 866 (421)
Impairment (reversal)/charge of property, plant and equipment (246) 958
Impairment of goodwill 245 -
Decrease in fair value of investment properties 21 1,651
Share option charge 17 24
Decrease/(increase) in trade and other receivables 820 (2,241)
Increase in inventories (681) (652)
Increase in payables 4,412 5,419
-------------------------------------------------------------- ------------- -------------
Cash generated by operations 26,149 25,546
Interest paid (861) (1,109)
Taxation paid (3,385) (2,543)
-------------------------------------------------------------- ------------- -------------
Net cash from operating activities 21,903 21,894
Investing activities
Interest received 15 25
Purchase of property, plant and equipment (7,242) (5,052)
Addition of intangibles (563) -
Purchase of investment property (21) (2,884)
Proceeds on disposal of property, plant and equipment 185 3,921
Acquisition of subsidiary, net of cash acquired (2,749) -
Net cash used in investment activities (10,375) (3,990)
Financing activities
Dividends paid (6,623) (6,566)
Proceeds from issue of share capital - 3
Drawdown of bank loans 5,000 -
Repayment of bank loans (5,000) (5,000)
-------------------------------------------------------------- ------------- -------------
Net cash used in financing activities (6,623) (11,563)
Net increase in cash and cash equivalents 4,905 6,341
-------------------------------------------------------------- ------------- -------------
Cash and cash equivalents at beginning of period 13,842 7,501
-------------------------------------------------------------- ------------- -------------
Cash and cash equivalents at end of period 18,747 13,842
-------------------------------------------------------------- ------------- -------------
Notes to the Financial Statements
For the 52 weeks ended 28 September 2019
1 GENERAL INFORMATION
Topps Tiles Plc is a public company, limited by shares,
incorporated and domiciled in the United Kingdom under the
Companies Act 2006. The address of the registered office is given
in the Annual Report. The nature of the Group's operations and its
principal activity are set out in the Directors' Report in the
Annual Report.
These audited financial statements are presented in pounds
sterling because that is the currency of the primary economic
environment in which the Group operates.
ADOPTION OF NEW AND REVISED STANDARDS
In the current period, there were no new or revised standards
and interpretations adopted that have a material impact on the
financial statements, apart from IFRS 9 and IFRS 15 (see
below).
STANDARDS ADOPTED IN CURRENT PERIOD
The following new and revised Standards and Interpretations have
been adopted in the current year. Their adoption has not had any
significant impact on the amounts reported in these financial
statements that may impact the accounting for future transactions
and arrangements, apart from IFRS 9 and IFRS 15.
Amendments to IFRS 2 (Jun 2016) - Classification and Measurement
of Share-based Payment Transactions
Annual Improvements to IFRSs: 2014-16 Cycle (Dec 2016) - Annual
Improvements to IFRSs: 2014-16 Cycle - IFRS 1 and IAS 28
Amendments
Amendments to IAS 40 (Dec 2016) - Transfers of Investment
Property
IFRIC 22 - Foreign Currency Transactions and Advance
Consideration
IFRS 9 "Financial Instruments"
The Group has adopted IFRS 9 "Financial Instruments" for the
first time in the current financial year, with a date of initial
application of 30 September 2018. The standard is applicable to
financial assets and financial liabilities, and covers the
classification and measurement of financial assets and financial
liabilities. The standard also revises the requirements for when
hedge accounting can be applied and introduces a new impairment
model for financial assets.
The Group applied IFRS 9 using the modified retrospective
method, without adjusting prior periods. The adoption of IFRS 9 had
no material impact on the Group's retained earnings at 30 September
2018. There were no changes to the carrying amounts of assets and
liabilities on transition to IFRS 9.
(a) Classification and measurement of financial assets
IFRS 9 contains two principal classification categories for
financial assets: measured at amortised cost or measured at fair
value (through profit or loss or through other comprehensive
income). The classification of financial assets under IFRS 9 is
generally based on the business model in which a financial asset is
managed and its contractual cash flow characteristics. Under IFRS
9, investments in equity instruments that do not have a quoted
price in an active market for an identical instrument are now
measured at fair value rather than at cost.
On 30 September 2018 the Group reassessed the classification and
measurement of financial assets of the business and has classified
its financial instruments into the appropriate IFRS 9
categories:
Classification (IAS Classification (IFRS
Financial Assets 39) 9)
---------------------------------------- --------------------- -------------------------
Derivative financial instruments Fair value through Fair value through profit
(not designated as hedging instruments) profit and loss and loss
Trade and other receivables Loans and receivables Amortised cost
Cash and cash equivalents Loans and receivables Amortised cost
---------------------------------------- --------------------- -------------------------
Upon adoption of IFRS 9, gains and losses for assets measured at
fair value will continue to be recorded in profit or loss. All of
the classification changes above only impact disclosure in the
Notes to the Financial Statements. The accounting policies for
financial assets in Note 2 have been updated for changes arising
from IFRS 9.
(b) Classification and measurement of financial liabilities
For financial liabilities, the classification and measurement
requirements under IFRS 9 are similar to those under IAS 39, and no
changes were noted on transition.
(c) Impairment
IFRS 9 also introduced a forward-looking expected credit loss
model for recognising provisions in respect of financial assets and
receivables. This results in greater judgement due to the need to
factor in forward looking information when estimating the
appropriate amount of provisions. The Group considers the
probability of a default occurring over the life of its trade
receivables on initial recognition of those assets. This, in
theory, could result in earlier recognition of credit losses, than
the incurred loss model of IAS 39.
The Group has updated its accounting policy for the
establishment of provisions against trade receivables to reflect
the lifetime expected credit loss, consistent with the simplified
approach under IFRS 9. The impact of using the expected credit loss
model on the consolidated financial statements of the Group is
immaterial at the transition date.
(d) Hedge accounting
The Group does not account for derivatives under hedge
accounting and therefore, the updated IFRS 9 requirements in
relation to hedge accounting do not impact the Group.
IFRS 15 "Revenue from contracts with customers"
The Group has adopted IFRS 15 "Revenue from Contracts with
Customers" for the first time in the current financial year, with a
date of initial application of 30 September 2018. The standard
establishes a principles-based approach for revenue recognition and
is based on the concept of recognising revenue for performance
obligations only when they are satisfied and the control of goods
or services is transferred. In doing so, the standard applies a
five-step approach to the timing of revenue recognition and applies
to all contracts with customers, except those in the scope of other
standards.
Based on the nature of the Group's revenue streams with the
recognition of revenue at the point of sale and the absence of
significant judgement required in determining the timing of
transfer of control, the adoption of IFRS 15 does not have a
material impact on the timing or nature of the Group's revenue
recognition.
The standard has been applied using the modified retrospective
method of adoption, without adjusting prior periods. Under this
approach the cumulative effect of applying the new standard is
recognised at the date of initial application. The Group has
considered the following in assessing the impact of the new
standard:
(a) Sale of goods
The Group's contracts with customers for the sale of goods
generally include one performance obligation. The Group has
concluded that revenue from the sale of goods should be recognised
at the point in time when control of the asset is transferred to
the customer. This does not represent a change to the Group's
accounting policy and therefore, the adoption of IFRS 15 does not
have an impact on the timing of revenue recognition.
(b) Principal versus agent consideration
Management has established that the Group acts as a principal
for all types of products and thus should recognise revenue in the
gross amount of consideration to which it expects to be entitled.
The Group already recognised revenue on a gross basis, therefore
the Group's revenue recognition is unchanged in this regard.
(c) Right of return
The Group currently estimates the expected level of returns, and
as such holds a sales return provision in the Consolidated
Statement of Financial Position to provide for these.
Prior to IFRS 15, provisions for customer returns were presented
on a net basis, as part of Accruals within Trade and other
payables. Following the adoption of IFRS 15, they are now shown on
a gross basis and liabilities for the full amount expected to be
refunded to customers are included in Accruals within Trade and
other payables. Subsequently assets for the value of goods expected
to be returned are included in Inventories. The net adjustment on
adoption is a GBP0.4m increase in the value of Inventories and
Accruals.
None of the adjustments impacted the Group's profit, retained
earnings, net assets or cash flows.
A summary of the impact on the Group Statement of Financial
Position as at 28 September 2019 is shown below:
Balances
pre IFRS 15 IFRS 15
adjustments adjustments As reported
GBP'000 GBP'000 GBP'000
------------------------- ------------ ------------ -----------
Current assets
Inventories 30,526 398 30,924
Current liabilities
Trade and other payables (42,938) (398) (43,336)
------------------------- ------------ ------------ -----------
Net assets 30,232 - 30,232
------------------------- ------------ ------------ -----------
Within trade and other payables, GBP3,165,000 (2018:
GBP3,963,000) relating to customer deposits has been reclassified
from trade payables to contract liabilities as a result of the
adoption of IFRS 15 (see note 17).
(a) Disclosure of disaggregation of revenue
IFRS 15 requires the disaggregation of revenue from contracts
with customers into categories that depict how the nature, amount,
timing and uncertainty of revenue and cash flows are affected by
economic factors. Management has considered how information about
the entity's revenue has been presented for other purposes such as
internal management accounts and investor presentations. Based on
this, revenue has been disaggregated between the Retail and
Commercial businesses (please refer to note 3). However, management
has concluded that since customers access the Group's products
across multiple channels and often their journey involves more than
one channel, any further disaggregation of revenue would not be
appropriate.
STANDARDS NOT ADOPTED IN CURRENT PERIOD
At the date of authorisation of these financial statements, the
following Standards and Interpretations which have not been applied
in these financial statements were in issue but not yet effective
(and in some cases had not yet been adopted by the EU). Apart from
IFRS 16, the Directors anticipate that the adoption of the
remaining standards and interpretations in future periods will have
no material impact on the financial statements of the Group.
Annual Improvements to IFRSs: 2015-17 Cycle (Dec 2017) - Annual
Improvements to IFRSs: 2015-17 Cycle - IFRS 3, IFRS 11, IAS 12 and
IAS 23 Amendments
Amendments to IFRS 10 and IAS 28 (Sept 2014) - Sale or
Contribution of Assets between an Investor and its Associate or
Joint Venture
IFRIC 23 - Uncertainty over Income Tax Treatments
Amendments to IFRS 9 (Oct 2017) - Prepayment Features with
Negative Compensation
Amendments to IAS 28 (Oct 2017) - Long-term Interests in
Associates and Joint Ventures
Amendments to IAS 19 - Plan Amendment, Curtailment or
Settlement
Amendments to IFRS 3 - Clarification of definition of a
business
Amendments to IAS 1 - Amendments regarding the definition of
material
Amendments to IAS 8 - Amendments regarding the definition of
material
IFRS 16 "Leases"
IFRS 16 "Leases" was issued in January 2016 to replace IAS 17
"Leases" and has been endorsed by the EU. The standard is effective
for accounting periods beginning on or after 1 January 2019 and
will be adopted by the Group in the period ending 3 October
2020.
The standard will have a material impact on the financials
statements of the Group due to the large number of property leases
it holds as well as leases relating to machinery and vehicles.
All of the Group's operating leases, apart from those leases
captured under the low value and short term lease exemptions, will
be recognised on the Consolidated Statement of Financial Position,
which will give rise to the recognition of an asset representing
the right to use the leased item and an obligation for future lease
payables. Lease costs will be recognised in the form of
depreciation of the right to use asset and interest on the lease
liability, resulting in a higher interest expense in the earlier
years of the lease term. The total expense recognised in the
Consolidated Statement of Financial Performance over the life of
the lease will be unaffected by the new standard. However, IFRS 16
will result in the timing of lease expense recognition being
accelerated for leases which would be currently accounted for as
operating leases. Rental costs will be replaced by interest and
depreciation charges and therefore, IFRS 16 will impact the Group's
profit each period.
The implementation of IFRS 16 has no impact on cash flows
generated, but will impact the presentation of the Consolidated
Cash Flow Statement, with an increase in net cash from operating
activities being offset by an increase in net cash used in
financing activities.
Material judgements are required in identifying and accounting
for leases. The most significant judgement areas are expected to be
around the determination of the lease term and discount rate. The
lease term includes extension periods where it is reasonably
certain that a lease extension option will be exercised or that a
lease termination option will not be exercised. The discount rate
should best represent the rate implicit in the lease or the
incremental borrowing rate in order to determine the present value
of future lease commitments. The Group intends to apply a single
discount rate to all leases with similar characteristics, which is
an option permitted by the standard. This rate will be calculated
based on the Revolving Credit Facility rate adjusted for a factor
based on the lease term.
The Group has invested in a new property management system to
prepare for the adoption of the new standard and has a project team
working to determine the effect of this new standard on its
existing lease portfolio of 362 property leases and other contracts
and implement the processes and systems necessary to comply with
its requirements. The Group intends to apply the modified
retrospective approach on transition and will not restate the
comparative information. Under this transition route, any
difference between asset and liability is recognised in opening
retained earnings at the transition date. The lease liability is
calculated using a discount rate at the date of transition, rather
than at the lease commencement date.
In order to estimate the impact on the Consolidated Statement of
Financial Position for the year ending 3 October 2020, the lease
portfolio at transition date, of 29 September 2019, has been used.
On transition, the Group will recognise a right-of-use asset in the
region of GBP125m, with a corresponding lease liability in the
region of GBP130m.
For the period ending 3 October 2020, the Group expects a
reduction in Profit before taxation in the region of GBP1.0m, as a
result of the adoption of IFRS 16. In order to illustrate the
likely impact of transitioning to IFRS 16 on the Consolidated
Statement of Financial Performance, we have set out a proforma
unaudited reconciliation using financials from the Consolidated
Statement of Financial Performance for the period ended 28
September 2019.
Pre IFRS 16
for the period
ended 28 September Remove Include estimated Include estimated
Proforma Consolidated 2019 estimated depreciation financing Post IFRS
Statement GBP'm rent GBP'm cost 16 estimated
of Financial Performance GBP'm GBP'm GBP'm
----------------------------- ------------------- ----------- ------------------- ----------------- -------------
Group revenue 219.2 - - - 219.2
Gross profit 135.0 - - - 135.0
Operating costs (121.7) 25.0 (23.4) - (120.1)
----------------------------- ------------------- ----------- ------------------- ----------------- -------------
Group operating profit 13.3 25.0 (23.4) - 14.9
Finance costs / Investment
revenue (0.8) - - (2.6) (3.4)
----------------------------- ------------------- ----------- ------------------- ----------------- -------------
Profit before taxation 12.5 25.0 (23.4) (2.6) 11.5
----------------------------- ------------------- ----------- ------------------- ----------------- -------------
2 ACCOUNTING POLICIES
The principal accounting policies adopted are set out below.
A) BASIS OF ACCOUNTING
The financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRSs") and IFRS
Interpretations Committee ("IFRS IC") interpretations. The
financial statements have also been prepared in accordance with
IFRSs adopted by the European Union and therefore the Group
financial statements comply with Article 4 of the EU IAS
regulation, and as applied in accordance with the provisions of the
Companies Act 2006. The financial statements have been prepared on
the historical cost basis, except for the revaluation of derivative
financial instruments and investment property. Historical cost is
generally based on the fair value of the consideration given in
exchange for goods and services.
The accounting policies set out below have, unless otherwise
stated, been applied consistently to all periods presented in these
Group financial statements.
The Group has applied for the first time IFRS 15 "Revenue from
contracts with customers" and IFRS 9 "Financial Instruments". Refer
to Note 1 for details of the impact on transition to these
standards.
B) GOING CONCERN
When considering the going concern assertion, the Board reviews
several factors including a detailed review of the above risks and
uncertainties, the Group's forecast covenant and cash headroom
against lending facilities, and management's current expectations.
Further details of the assumptions, sensitivities and procedures
performed are given in the Strategic Report. As a result of this
review the Board believes that the Group will continue to meet all
of its financial commitments as they fall due and will be able to
continue as a going concern. Therefore, the Board considers it
appropriate to prepare the financial statements on the going
concern basis.
c) BUSINESS COMBINATIONS
Acquisition of subsidiaries and businesses are accounted for
using the acquisition method. The consideration transferred in a
business combination is measured at fair value, which is calculated
as the sum of the acquisition on date fair values of assets
transferred by the Group, liabilities incurred by the Group to the
former owners of the acquisition and the equity interest issued by
the Group in exchange for control of the acquisition.
Acquisition-related costs are recognised in the profit or loss as
incurred.
At the acquisition date, the identifiable assets acquired and
the liabilities assumed are recognised at their fair value, except
that:
-- deferred tax assets or liabilities and assets or liabilities related
to employee benefit arrangements are recognised and measured in accordance
with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively; and
-- assets that are classified as held for sale in accordance with IFRS 5
Non-current Assets Held for Sale and Discontinued Operations are measured
in accordance with that Standard.
Contingent consideration is recognised at fair value at the date
of acquisition. Subsequent changes in contingent consideration
which has been classified as an asset or liability which does not
result from a measurement period adjustment is accounted for in
accordance with IFRS 9 where the asset or liability is a financial
instrument, and in accordance with IAS 37 in all other cases.
d) BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries). Control is achieved where the Company has the
power to govern the financial and operating policies of an investee
entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the
period are included in the consolidated statement of financial
performance from the effective date of acquisition or up to the
effective date of disposal, as appropriate. Where necessary,
adjustments are made to the financial statements of subsidiaries to
bring the accounting policies used into line with those used by the
Group. All intra-group transactions, balances, income and expenses
are eliminated on consolidation.
e) FINANCIAL PERIOD
The accounting period ends on the Saturday which falls closest
to 30 September, resulting in financial periods of either 52 or 53
weeks.
Throughout the financial statements, Directors' Report and
Strategic Report, references to 2019 mean "at 28 September 2019" or
the 52 weeks then ended; references to 2018 mean "at 29 September
2018" or the 52 weeks then ended.
F) GOODWILL
Goodwill arising in a business combination is recognised as an
asset at the date that control is acquired (the acquisition date).
Goodwill is measured as the excess of the sum of the consideration
transferred, the amount of any non-controlling interest in the
acquiree and the fair value of the acquirer's previously held
equity interest (if any) in the entity over the net of the
acquisition-date amounts of the identifiable assets acquired and
the liabilities assumed.
If, after reassessment, the Group's interest in the fair value
of the acquiree's identifiable net assets exceeds the sum of the
consideration transferred, the amount of any non-controlling
interest in the acquiree and the fair value of the acquirer's
previously held equity interest in the acquiree (if any), the
excess is recognised immediately in profit or loss as a bargain
purchase gain.
Goodwill is not amortised but is reviewed for impairment at
least annually. For the purpose of impairment testing, goodwill is
allocated to each of the Group's cash-generating units expected to
benefit from the synergies of the combination. Cash-generating
units to which goodwill has been allocated are tested for
impairment annually, or more frequently when there is an indication
that the unit may be impaired. If the recoverable amount of the
cash-generating unit is less than the carrying amount of the unit,
the impairment loss is allocated first to reduce the carrying
amount of any goodwill allocated to the unit and then to the other
assets of the unit pro rata on the basis of the carrying amount of
each asset in the unit. An impairment loss recognised for goodwill
is not reversed in a subsequent period.
On disposal of a subsidiary, the attributable amount of goodwill
is included in the determination of the profit or loss on
disposal.
Goodwill arising on acquisitions before the date of transition
to IFRSs has been retained at the previous UK GAAP amounts subject
to being tested for impairment at that date. Goodwill of
GBP15,080,000 written off to reserves under UK GAAP prior to 1998
has not been reinstated and will not be included in determining any
subsequent profit or loss on disposal.
G) REVENUE RECOGNITION
Revenue is measured at the transaction price received or
receivable and represents amounts receivable for goods in the
normal course of business, net of discounts, VAT and other
sales-related taxes.
Revenue from the sale of goods is recognised on the collection
or delivery of goods, when all the following conditions are
satisfied:
-- the Group has satisfied its performance obligations to external customers,
being the date goods are collected from store or received by the customers;
and
-- the customer has obtained controls of the goods being transferred.
These conditions are met, predominantly, at the point of sale.
The exceptions to this are for: goods ordered in advance of
collection, where revenue is recognised at the point that the goods
are collected; sales of goods that result in award credits for
customers (see below); and web sales, where revenue is recognised
at the point of delivery.
Sales of goods that result in award credits for customers, under
the Company's Trader Loyalty Scheme, are accounted for as multiple
element revenue transactions and the fair value of the
consideration received or receivable is allocated between the goods
supplied and the award credits granted. The consideration allocated
to the award credits is measured by reference to their fair value
being the amount for which the award credits should be sold
separately. Such consideration is not recognised as revenue at the
time of the initial sale transaction, but is deferred and
recognised as revenue when the award credits are redeemed and the
Company's performance obligations have been satisfied.
The level of sales returns is closely monitored by management,
and as such, the Group holds a sales return provision in the
Consolidated Statement of Financial Position to provide for the
expected level of returns. The sales value of the expected returns
is recognised within Accruals, with the cost value of the goods
expected to be returned recognised as a current asset within
Inventories.
Interest income is recognised when it is probable that the
economic benefits will flow to the Group and the amount of income
can be measured reliably. Interest income is accrued on a time
basis, by reference to the principal outstanding and at the
effective interest rate applicable, which is the rate that exactly
discounts estimated future cash receipts through the expected life
of the financial asset to that asset's net carrying amount on
initial recognition.
H) INTANGIBLE ASSETS
Intangible assets acquired in a business combination and
recognised separately from goodwill are initially recognised at the
fair value at the acquisition date (which is regarded as their
cost). Subsequent to initial recognition, intangible assets
acquired in a business combination are reported at costs less
accumulated amortisation.
Costs that are directly associated with identifiable software
products controlled by the Group, and that will generate economic
benefits beyond one year are recognised as intangible assets. These
intangible assets are stated at cost less accumulated amortisation
and impairment losses, and are amortised over four years.
I) PROPERTY, PLANT & EQUIPMENT
Property, plant and equipment is stated at cost less accumulated
depreciation and any recognised impairment loss.
Depreciation is charged so as to write off the cost of assets,
less estimated residual value, over their estimated useful lives,
on the following bases:
Freehold buildings 2% per annum on cost on a straight-line basis
Short leasehold land over the period of the lease, up to 50 years on
and buildings a straight-line basis
Fixtures and fittings over 10 years, except for the following: four years
for computer equipment or five years for display
stands, as appropriate
Motor vehicles 25% per annum on a reducing balance basis
Freehold land is not depreciated.
The assets' residual values and useful lives are reviewed, and
adjusted if appropriate, at the end of each reporting period.
The gain or loss arising on the disposal or retirement of an
asset is determined as the difference between the sales proceeds
and the carrying amount of the asset and is recognised in the
Consolidated Statement of Financial Performance.
J) IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS
At each period end, the Group reviews the carrying amounts of
its tangible and intangible assets to determine whether there is
any indication that those assets have suffered an impairment loss.
If any such indication exists, the recoverable amount of the asset
is estimated in order to determine the extent of the impairment
loss (if any). Where the asset does not generate cash flows that
are independent from other assets, the Group estimates the
recoverable amount of the cash-generating unit to which the asset
belongs.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future post-tax cash flows are discounted to their present value
using a post-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to
the asset for which the estimates of future cash flows have not
been adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised as an expense
immediately, unless the relevant asset is carried at a revalued
amount, in which case the impairment loss is treated as a
revaluation decrease.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset (cash-generating unit) in prior years. A reversal of
an impairment loss is recognised as income immediately, unless the
relevant asset is carried at a revalued amount, in which case the
reversal of the impairment loss is treated as a revaluation
increase.
K) INVENTORIES
Inventories are stated at the lower of cost and net realisable
value and relate solely to finished goods for resale, net of
supplier rebates. Cost comprises the average purchase price of
materials and an attributable proportion of distribution overheads
based on normal levels of activity and is valued at standard cost.
Net realisable value represents the estimated selling price, less
costs to be incurred in marketing, selling and distribution.
Provision is made for those items of inventory where the net
realisable value is estimated to be lower than cost. The net
replacement value of inventories is not considered materially
different from that stated in the consolidated statement of
financial position.
L) TAXATION
The tax expense represents the sum of the tax currently payable
and deferred tax.
The tax currently payable is based on taxable profit for the
period. Taxable profit differs from net profit as reported in the
statement of financial performance because it excludes items of
income or expense that are taxable or deductible in other periods
and it further excludes items that are never taxable or deductible.
The Group's liability for current tax is calculated using tax rates
that have been enacted or substantively enacted by the balance
sheet date.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and
liabilities are not recognised if the temporary difference arises
from the initial recognition of goodwill or from the initial
recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the tax
profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries, except where
the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will
not reverse in the foreseeable future.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised based on tax laws and rates that have been enacted at the
balance sheet date. Deferred tax is charged or credited in the
statement of financial performance, except when it relates to items
charged or credited directly to equity, in which case the deferred
tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
m) FOREIGN CURRENCY
The individual financial statements of each Group company are
presented in pounds sterling (its functional currency). For the
purpose of the consolidated financial statements, the results and
financial position of each Group company are expressed in pounds
sterling, which is the functional currency of the Company, and the
presentational currency for the consolidated financial
statements.
Transactions in currencies other than the entity's functional
currency (foreign currencies) are recorded at the rates of exchange
prevailing on the dates of transactions. At each period end,
monetary assets and liabilities that are denominated in foreign
currencies are retranslated at the rates prevailing on that date.
Non-monetary items carried at fair value that are denominated in
foreign currencies are retranslated at the rates prevailing at the
date when the fair value was determined. Non-monetary items that
are measured in terms of historical cost in a foreign currency are
not retranslated.
Exchange differences arising on the settlement of monetary
items, and on the retranslation of monetary items, are included in
the statement of financial performance for the period.
Exchange differences arising on the retranslation of
non-monetary items carried at fair value are included in the
statement of financial performance for the period.
n) LEASES
Rentals payable under operating leases are charged to income on
a straight-line basis over the term of the relevant lease even
where payments are not made on such a basis, except where another
more systematic basis is more representative of the time pattern in
which economic benefits from the lease asset are consumed or a
provision has been made for an onerous lease. Contingent rentals
arising under operating leases are recognised as an expense in the
period in which they are incurred.
In the event that lease incentives are received to enter into
operating leases, such incentives are recognised as a liability.
The aggregate benefit of incentives is recognised as a reduction of
rental expense on a straight-line basis, except where another
systematic basis is more representative of the time pattern in
which economic benefits from the leased asset are consumed.
The Group provides for the unavoidable costs prior to lease
termination or sub-lease relating to onerous leases. Dilapidation
costs are provided for against all leasehold properties across the
entire estate. See note 2U and 2X for details on how these
provisions are calculated.
O) RETIREMENT BENEFIT COSTS
For defined contribution schemes, the amount charged to the
statement of financial performance in respect of pension costs is
the contributions payable in the period. Differences between
contributions payable in the period and contributions actually paid
are shown as either accruals or prepayments in the statement of
financial position.
P) FINANCE COSTS
Finance costs of debt are recognised in the statement of
financial performance over the term of the debt at a constant rate
on the carrying amount.
Q) FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are recognised in the
Group's statement of financial position when the Group becomes a
party to the contractual provisions of the instrument.
All financial assets are recognised and derecognised on a trade
date where the purchase or sale of a financial asset is under a
contract whose terms require delivery of the financial asset within
the timeframe established by the market concerned, and are
initially measured at fair value plus transaction costs, except for
those financial assets classified as at fair value through profit
or loss, which are initially measured at fair value.
Financial assets are classified into the following specified
categories: financial assets "at fair value through profit or loss"
(FVTPL), financial assets "at fair value through other
comprehensive income" (FVOCI), and financial assets carried at
"amortised cost". The classification of financial assets under IFRS
9 is generally based on the business model in which a financial
asset is managed and its contractual cash flow characteristics.
FINANCIAL ASSETS AT FVTPL
Financial assets at FVTPL are stated at fair value, with any
resultant gain or loss recognised in profit or loss. Transactional
costs of financial assets carried at FVTPL are expensed in the
Consolidated Statement of Financial Performance. The Directors use
their judgement in selecting an appropriate valuation technique for
financial instruments not quoted in an active market. Valuation
techniques commonly used by market practitioners are applied, such
as discounted cash flows and assumptions regarding market
volatility. Financial assets at FVTPL are subsequently measured at
fair value, with net gains and losses, including any interest or
dividend income being recognised in profit of loss.
Trade and other receivables
Trade and other receivables that have fixed or determinable
payments that are not quoted in an active market are initially
recognised at fair value and then carried at amortised cost, using
the effective interest method, less any impairment. Interest income
is recognised by applying the effective interest rate, except for
short-term receivables when the recognition of interest would be
immaterial.
EFFECTIVE INTEREST METHOD
The effective interest method is a method of calculating the
amortised cost of a debt instrument and of allocating interest
income over the relevant period. The effective interest rate is the
rate that exactly discounts estimated future cash receipts
(including all fees on points paid or received that form an
integral part of the effective interest rate, transaction costs and
other premiums or discounts) through the expected life of the debt
instrument, or, where appropriate, a shorter period, to the net
carrying amount on initial recognition.
Income is recognised on an effective interest basis for debt
instruments other than those financial assets and liabilities
classified as at FVTPL.
IMPAIRMENT OF FINANCIAL ASSETS
Financial assets, other than those at FVTPL, are assessed for
indicators of impairment at each statement of financial position
date. Financial assets are impaired where there is objective
evidence that, as a result of one or more events that occurred
after the initial recognition of the financial asset, the estimated
future cash flows of the investment have been impacted. The Group
assesses on a forward-looking basis the expected credit losses
associated with its financial assets carried at amortised cost.
For certain categories of financial asset, such as trade
receivables, assets that are assessed not to be impaired
individually are subsequently assessed for impairment on a
collective basis. Objective evidence of impairment for a portfolio
of receivables could include the Group's past experience of
collecting payments, an increase in the number of delayed payments
in the portfolio past the average credit period, as well as
observable changes in national or local economic conditions that
correlate with default on receivables. The Group applies the IFRS 9
simplified approach to measuring expected credit losses which uses
a lifetime expected loss allowance for financial assets.
For all other financial assets carried at amortised cost, the
amount of the impairment is the difference between the asset's
carrying amount and the present value of estimated future cash
flows, discounted at the financial asset's original effective
interest rate.
The carrying amount of the financial asset is reduced by the
impairment loss directly for all financial assets. The Group will
write off, either partially or in full, the gross carrying amount
of a financial asset when there is no realistic prospect of
recovery. This is usually the case when it is determined that the
debtor does not have the assets or sources of income that could
generate sufficient cash flows to repay the amounts subject to the
write-off.
If, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event
occurring after the impairment was recognised, the previously
recognised impairment loss is reversed through profit or loss to
the extent that the carrying amount of the investment at the date
the impairment is reversed does not exceed what the amortised cost
would have been had the impairment not been recognised.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise of cash balances including
credit card receipts and deposits, less bank overdrafts which are
repayable on demand where there is a right of offset. All cash
equivalents have an original maturity of three months or less.
DERECOGNITION OF FINANCIAL ASSETS
The Group derecognises a financial asset only when the
contractual rights to the cash flows from the asset expire; or it
transfers the financial asset and substantially all the risks and
rewards of ownership of the asset to another entity. If the Group
neither transfers nor retains substantially all the risks and
rewards of ownership and continues to control the transferred
asset, the Group recognises its retained interest in the asset and
an associated liability for amounts it may have to pay. If the
Group retains substantially all the risks and rewards of ownership
of a transferred financial asset, the Group continues to recognise
the financial asset and also recognises a collateralised borrowing
for the proceeds received.
FINANCIAL LIABILITIES AND EQUITY instruments
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that evidences a
residual interest in the assets of the Group after deducting all of
its liabilities. Equity instruments issued by the Group are
recorded at the proceeds received, net of direct issue costs.
Financial liabilities that are classified as FVTPL relate to
derivatives that are not designated and effective as a hedging
instrument. Financial liabilities at FVTPL are stated at fair
value, with any resultant gain or loss recognised in profit or
loss.
OTHER FINANCIAL LIABILITIES
Other financial liabilities, including borrowings, are initially
measured at fair value, net of transaction costs. Other financial
liabilities are subsequently measured at amortised cost using the
effective interest method, with interest expense recognised on an
effective yield basis. The effective interest method is a method of
calculating the amortised cost of a financial liability and of
allocating interest expense over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future
cash payments through the expected life of the financial liability,
or, where appropriate, a shorter period, to the net carrying amount
on initial recognition.
DERECOGNITION OF FINANCIAL LIABILITIES
The Group derecognises financial liabilities when, and only
when, the Group's obligations are discharged, cancelled or they
expire.
DERIVATIVE FINANCIAL INSTRUMENTS
The Group's activities expose it to the financial risks of
changes in foreign currency exchange rates.
The Group uses foreign exchange forward contracts to manage its
foreign currency risk. The Group does not hold or issue derivative
financial instruments for speculative purposes.
The use of financial derivatives is governed by the Group's
policies, approved by the Board of Directors, on the use of
financial derivatives.
Derivatives are initially recognised at fair value at the date a
derivative contract is entered into and are subsequently remeasured
to their fair value at each period end date. The resulting gain or
loss is recognised in profit or loss immediately. The fair values
are determined by reference to the market prices available from the
market on which the instruments involved are traded.
A derivative is presented as a non-current asset or a
non-current liability if the remaining maturity of the instrument
is more than 12 months and it is not expected to be realised or
settled within 12 months. Other derivatives are presented as
current assets or current liabilities.
R) SHARE-BASED PAYMENTS
The Group has applied the requirements of IFRS 2 Share-based
Payments.
The Group issues equity-settled share-based payments to certain
employees. Equity-settled share-based payments are measured at fair
value (excluding the effect of non-market-based vesting conditions)
at the date of grant. The fair value determined at the grant date
of the share-based payment is expensed on a straight-line basis
over the vesting period, based on the Group's estimate of shares
that will eventually vest. Fair value is measured by use of the
Black-Scholes model.
The Group provides employees with the ability to purchase the
Group's ordinary shares at 80% of the current market value through
the operation of its Sharesave scheme. The Group records an
expense, based on its estimate of the 20% discount related to
shares expected to vest on a straight-line basis over the vesting
period.
S) TRADE PAYABLES
Trade payables are initially measured at fair value and are
subsequently measured at amortised cost, using the effective
interest rate method.
T) OPERATING COSTS
Restructuring costs relate to board approved decisions such as
business closures or major organisational changes. Operating profit
is stated after charging/(crediting) restructuring costs but before
investment income and finance costs.
The accounting policy for employee profit sharing costs has been
revised, with costs now reclassified to distribution and selling
costs and administrative costs. There is no impact on earnings per
share.
U) PROVISIONS
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, and
it is probable that the Group will be required to settle that
obligation and a reliable estimate can be made of the amount of
that obligation. Provisions are measured at the Directors' best
estimate of the expenditure required to settle the obligation at
the balance sheet date, and are discounted to present value where
the effect is material.
V) SUPPLIER INCOME
Amounts receivable from suppliers are initially held on the
balance sheet within the cost of inventory and recognised within
the income statement once the contractual terms of the supplier
agreements are met and the corresponding inventory has been
sold.
Volume rebates and price discounts are recognised in the income
statement as a reduction in cost of sales, in line with the
recognition of the sale of a product.
W) INVESTMENT PROPERTIES
Investment properties are measured initially at cost, including
transaction costs. Subsequent to initial recognition, investment
properties are stated at fair value, which reflects market
conditions at the reporting date. Gains or losses arising from
changes in the fair values of investment properties are included in
profit or loss in the period in which they arise, including the
corresponding tax effect. Investment properties are not
depreciated.
The Group obtains independent valuations for its investment
properties, and at the end of the reporting period, the fair value
of each property is updated, taking into account the most recent
independent valuation. The best evidence of fair value is current
prices in an active market for similar properties. Where such
information is not available the directors consider information for
properties of different nature or recent prices of similar
properties in less active markets, adjusted to reflect those
differences.
Investment properties are derecognised either when they have
been disposed of or when they are permanently withdrawn from use
and no future economic benefit is expected from their disposal. The
difference between the net disposal proceeds and the carrying
amount of the asset is recognised in profit or loss in the period
of de-recognition.
The Group has no restrictions on the realisability of its
investment properties and no contractual obligations to purchase,
construct or develop investment properties or for repairs,
maintenance and enhancements.
X) CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION
UNCERTAINTY
In the application of the Group's accounting policies, which are
described above, the Directors are required to make judgements,
estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
The Directors have concluded that there are no critical areas of
accounting judgement in the application of the Group's accounting
policies in the current period.
KEY SOURCES OF ESTIMATION UNCERTAINTY
The key assumptions concerning the future, and other key sources
of estimation uncertainty at the period end date, that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial period,
are discussed below:
ONEROUS LEASE PROVISION AND LOSS MAKING STORES / STORE
IMPAIRMENT
During the period the Group has continued to review the
performance of its store portfolio, which has resulted in five
further stores being exited before its lease terms had expired
(2018: six stores). In respect of the leases in relation to stores
exited before lease end dates in prior periods that are still
vacant, the Group has provided for what it considers to be the
unavoidable costs prior to lease termination or sub-lease. The
Group has further reviewed any trading loss-making stores and
provided for those leases considered to be onerous, and have
considered whether the net book value of the assets in relation to
those stores are impaired. The key estimates involved relate to the
forecast future cash flows of the stores identified as potentially
loss making. These estimates are based upon available information
and knowledge of the property market and retail market. A 10%
change in the forecast future cash flows of the stores identified
as potentially loss making would lead to a change in the provision
of GBP27,000.
DILAPIDATIONS PROVISION
The Group has estimated its likely dilapidation charges for its
store portfolio and provided accordingly. The key estimate involves
an assessment of the percentage of store leases expected to renew
or exit at the end of the current lease contract, and is based on
management's best estimate, taking into account knowledge of the
property market and historical trends. A 10% change in the
percentage of properties expected to exit at the end of the current
lease contract would lead to a change in the provision of
GBP62,000.
INVENTORY PROVISION
The Group provides against the carrying value of the inventories
held where it is anticipated that net realisable value (NRV) will
be below cost. The key estimate involves an assessment of clearance
and discontinued lines, with an anticipated 100% mark down. A 10%
change in the volume of lines identified as clearance and
discontinued would lead to a change in the provision of
GBP77,000.
3 REVENUE
An analysis of Group revenue is as follows:
52 weeks 52 weeks
ended ended
28 September 29 September
2019 2018
GBP'000 GBP'000
------------------------------- ------------- -------------
Revenue from the sale of goods 219,197 216,887
------------------------------- ------------- -------------
Total revenue 219,197 216,887
------------------------------- ------------- -------------
The Group has one reportable segment in accordance with IFRS 8 -
Operating Segments, which is the Topps Tiles stores and online
business segment. The Group's Board is considered the chief
operating decision maker. The Board receives monthly financial
information at this level and uses this information to monitor the
performance of the Topps Tiles stores and online business segment,
allocate resources and make operational decisions. Internal
reporting focuses on the Group as a whole and does not identify any
further individual segments. All revenue is derived from sales in
the UK and is from one class of business.
IFRS 15 requires the disaggregation of revenue from contracts
with customers into categories that depict how the nature, amount,
timing and uncertainty of revenue and cash flows are affected by
economic factors. The total Group revenue for the period includes
GBP214,346,000 revenue from the Retail business and GBP4,851,000
revenue from the Commercial business, being the recent acquisitions
of Parkside Ceramics Limited and Strata Tiles Limited. As noted
above, the business is not regarded as having more than one
operating segment.
The Group's revenue is driven by the consolidation of individual
small value transactions and as a result, Group revenue is not
reliant on a major customer or group of customers.
4 ACQUISITION OF SUBSIDIARIES
Topps Tiles Plc acquired 80% of the issued share capital of
Strata Tiles Limited ("Strata") on 18 April 2019, a company
supplying tiles for commercial design projects. The acquisition
also involves the grant of a put and call option relating to the
purchase by the Group of the remaining 20% of the issued shares in
Strata, which is exercisable in 2021.
The acquisition of Strata will add additional scale to the
Group's fast-growing commercial business as it seeks to build a
leading position in the commercial tile market. Strata is expected
to benefit from the Group's competitive advantage as the UK's
leading tile specialist, particularly its product range and buying
scale.
The Group performed a purchase price allocation exercise on
Strata Tiles Limited to restate assets and liabilities at their
provisional fair value. Separately identifiable intangible assets
were recognised in relation to the Strata Tiles brand and customer
relationships.
The Group incurred GBP432,863 of costs in relation to
acquisition activity during the year of acquisition, which were
recognised in the Consolidated Statement of Financial
Performance.
The fair value of the net assets acquired and liabilities
assumed at the acquisition date, under acquisition method of
accounting, were:
Provisional
Fair value
of net
assets
required
GBP'000
------------------------------ -------------
Property, plant and equipment 14
Inventories 90
Trade and other receivables 247
Trade and other payables (758)
Corporation tax (49)
Deferred tax (278)
Cash and cash equivalents 968
Brand 835
Customer relationships 842
Provisions (43)
Non-controlling interest (39)
------------------------------ -------------
Fair value of assets acquired 1,829
------------------------------ -------------
Cash consideration 3,717
Total consideration 3,717
------------------------------ -------------
Goodwill 1,888
------------------------------ -------------
The net cash outflow in the cash flow statement in the year of
acquisition was as follows:
GBP'000
-------------------------------------------- -------
Cash consideration 3,717
Cash acquired (968)
-------------------------------------------- -------
Net cash outflow in the cash flow statement 2,749
-------------------------------------------- -------
Since the date of control, the following amounts have been
included within the Group's financial statements for the
period:
GBP'000
---------------- -------
Revenue 1,075
Loss before tax (203)
---------------- -------
Had the acquisition been included from the start of the period,
GBP3,379,000 of revenue and GBP142,000 of loss before tax would
have been included in the Group's financial statements in the
period.
There were no contingent liabilities acquired as a result of the
above transaction.
5 PROFIT BEFORE TAXATION
Profit before taxation for the period has been arrived at after
charging/(crediting):
52 weeks 52 weeks
ended ended
28 September 29 September
2019 2018
GBP'000 GBP'000
-------------------------------------------------------------- ------------- -------------
Depreciation of property, plant and equipment 7,117 6,983
Impairment (reversal)/charge of property, plant and equipment (246) 958
Loss/(gain) on disposal of property, plant and equipment 866 (421)
Amortisation of intangibles 245 90
Impairment of goodwill 245 -
Decrease in fair value of investment properties recognised
as an expense 21 1,651
Property related provisions charged/(credited) 406 (723)
Staff costs (see note 6) 55,440 54,909
Operating lease rentals 26,333 25,489
Repayment of historical import duty (2,272) -
Exchange losses/(gains) recognised in profit or loss 80 (262)
Write-down of inventories recognised as an expense 2,633 3,031
Cost of inventories recognised as an expense 81,612 81,433
-------------------------------------------------------------- ------------- -------------
During the year the business disposed of one freehold property
(2018: four freehold properties).
The gain of GBP2,272,000 relates to repayment of import duty
paid to HMRC, specifically relating to additional duty on products
arriving into the EU from China relating to the period 2015 to
2017. We originally recorded duty paid on a cautious basis,
reflecting the uncertainty of recovering the overpayment. As this
settlement has been agreed and confirmed during this financial
year, this has been accounted for as a change in accounting
estimate in the current period.
Analysis of the auditors' remuneration is provided below:
52 weeks 52 weeks
ended ended
28 September 29 September
2019 2018
GBP'000 GBP'000
------------------------------------------------------------ ------------- --------------
Fees payable to the Company's auditors with respect to the
Company's annual accounts 49 40
Fees payable to the Company's auditors and their associates
for other audit services to the Group:
Audit of the Company's subsidiaries pursuant to legislation 110 90
------------------------------------------------------------ ------------- --------------
Total audit fees 159 130
------------------------------------------------------------ ------------- --------------
Audit related assurance services 20 30
------------------------------------------------------------ ------------- --------------
Total non-audit fees 20 30
------------------------------------------------------------ ------------- --------------
Total fees payable to the Company's auditors 179 160
------------------------------------------------------------ ------------- --------------
Audit related assurance services relate to the fee payable for
the interim review performed. The 2018 fees relate to the Group's
former auditors.
A description of the work of the Audit Committee is set out in
the Annual Report and includes an explanation of how auditors'
objectivity and independence is safeguarded when non-audit services
are provided by the auditors.
6 STAFF COSTS
The average monthly number of persons employed by the Group in
the UK during the accounting period (including Executive Directors)
was:
52 weeks
ended 52 weeks
28 September ended
2019 29 September
Number 2018
employed Number employed
--------------- ------------- -----------------
Selling 1,852 1,900
Administration 237 214
--------------- ------------- -----------------
2,089 2,114
--------------- ------------- -----------------
The average monthly number of persons (full-time equivalents)
employed by the Group in the UK during the accounting period
(including Executive Directors) was:
52 weeks
ended 52 weeks
29 September ended
2019 29 September
Number 2018
employed Number employed
--------------- ------------- ----------------
Selling 1,754 1,792
Administration 231 208
--------------- ------------- ----------------
1,985 2,000
--------------- ------------- ----------------
2019 2018
GBP'000 GBP'000
------------------------------------------------- -------- --------
Their aggregate remuneration comprised:
Wages and salaries (including LTIP, see note 30) 50,153 49,782
Social security costs 4,224 4,209
Other pension costs (see note 29b) 1,063 918
------------------------------------------------- -------- --------
55,440 54,909
------------------------------------------------- -------- --------
Details of Directors' emoluments are disclosed in the Annual
Report. The Group considers key management to be the Directors
only. Employee profit sharing of GBP5.8 million (2018: GBP6.3
million) is included in the above and comprises sales commission
and bonuses.
7 FINANCE INVESTMENT AND FINANCE COSTS
52 weeks 52 weeks
ended ended
28 September 29 September
2019 2018
GBP'000 GBP'000
-------------------------------------- ------------- -------------
Finance Income
Bank interest receivable 15 25
-------------------------------------- ------------- -------------
15 25
-------------------------------------- ------------- -------------
Finance costs
Interest on bank loans and overdrafts (871) (1,028)
Other interest (2) (44)
(873) (1,072)
-------------------------------------- ------------- -------------
No finance costs have been capitalised in the period, or the
prior period.
Interest on bank loans and overdrafts represents gains and
losses on financial liabilities measured at amortised cost. There
are no other gains or losses recognised in respect of financial
liabilities measured at amortised cost.
8 TAXATION
52 weeks 52 weeks
ended ended
28 September 29 September
2019 2018
GBP'000 GBP'000
--------------------------------------------------------- ------------- -------------
Current tax - charge for the period 2,602 3,115
Current tax - adjustment in respect of previous periods (101) (11)
Deferred tax - credit for the period (note 20) (65) (94)
Deferred tax - adjustment in respect of previous periods
(note 20) (39) 19
--------------------------------------------------------- ------------- -------------
2,397 3,029
--------------------------------------------------------- ------------- -------------
The charge for the period can be reconciled to the profit per
the statement of financial performance as follows:
52 weeks 52 weeks
ended ended
28 September 29 September
2019 2018
GBP'000 GBP'000
------------------------------------------------------------------ ------------- -------------
Continuing operations:
Profit before taxation 12,475 12,688
Tax at the UK corporation tax rate of 19.0% (2018: 19.0%) 2,370 2,411
Expenses that are not deductible in determining taxable
profit 74 55
Chargeable gains 1 77
Difference between IFRS 2 and corporation tax relief 14 48
Reduction in UK corporation tax rate (27) 21
Non-taxable income relating to goodwill revaluation - (22)
Tangible fixed assets which do not qualify for capital allowances 105 431
Tax effect of adjustment in respect of prior periods (140) 8
------------------------------------------------------------------ ------------- -------------
Tax expense for the period 2,397 3,029
------------------------------------------------------------------ ------------- -------------
In the period, the Group has recognised a corporation tax credit
directly to equity of GBP64,064 (2018: GBP11,899) and a deferred
tax debit to equity of GBP5,961 (2018: GBP21,184) in relation to
the Group's share option schemes.
9 DIVIDS
Amounts recognised as distributions to equity holders in the
period:
52 weeks 52 weeks
ended ended
28 September 29 September
2019 2018
GBP'000 GBP'000
---------------------------------------------------------- ------------- -------------
Final dividend for the period ended 29 September 2018 of
GBP0.023 (2017: GBP0.023) per share 4,483 4,439
Interim dividend for the period ended 29 September 2019
of GBP0.011 (2018: GBP0.011) per share 2,140 2,127
---------------------------------------------------------- ------------- -------------
6,623 6,566
---------------------------------------------------------- ------------- -------------
Proposed final dividend for the period ended 28 September
2019 of GBP0.023 (2018: GBP0.023) per share 4,483 4,447
---------------------------------------------------------- ------------- -------------
The proposed final dividend for the period ended 28 September
2019 is subject to approval by shareholders at the Annual General
Meeting and has not been included as a liability in these financial
statements.
10 EARNINGS PER SHARE
The calculation of earnings per share is based on the earnings
for the financial period attributable to equity shareholders and
the weighted average number of ordinary shares.
52 weeks 52 weeks
ended ended
28 September 29 September
2019 2018
-------------------------------------------------------------- ------------- -------------
Weighted average number of issued shares for basic earnings
per share 196,441,003 196,439,403
Weighted average impact of treasury shares for basic earnings
per share (1,762,806) (3,292,316)
-------------------------------------------------------------- ------------- -------------
Total weighted average number of shares for basic earnings
per share 194,678,197 193,147,087
-------------------------------------------------------------- ------------- -------------
Weighted average number of shares under option 1,545,658 2,746,297
-------------------------------------------------------------- ------------- -------------
For diluted earnings per share 196,223,855 195,893,384
-------------------------------------------------------------- ------------- -------------
The calculation of the basic and diluted earnings per share used
the denominators as shown above for both basic and diluted earnings
per share.
11 GOODWILL
GBP'000
--------------------------------------------- -------
Cost
At 1 October 2017 1,461
--------------------------------------------- -------
At 29 September 2018 1,461
Acquisition of Strata Tiles Limited (note 4) 1,888
At 28 September 2019 3,349
--------------------------------------------- -------
Accumulated impairment losses
At 1 October 2017 -
At 29 September 2018 -
--------------------------------------------- -------
Impairment losses in the period 245
--------------------------------------------- -------
At 28 September 2019 245
--------------------------------------------- -------
Carrying amount
At 28 September 2019 3,104
--------------------------------------------- -------
At 29 September 2018 1,461
--------------------------------------------- -------
The balance of goodwill remaining is the carrying value that
arose on the acquisition of Parkside Ceramics Limited in 2017 and
Strata Tiles Limited in 2019. The balance relates to two (2018:
two) Cash Generating Units (CGUs). Goodwill of GBP1,216,000
(Parkside Ceramics Limited) relates to one CGU, with the balance of
GBP1,888,000 (Strata Tiles Limited) relating to another CGU.
The Group tests goodwill annually for impairment or more
frequently if there are indications that goodwill might be
impaired.
The recoverable amounts are determined from value in use
calculations. The key assumptions for the value in use calculations
are those regarding the discount rates, growth rates and expected
changes to selling prices and direct costs during the period.
Management estimates discount rates based on the Group's weighted
average cost of capital. The growth rates of 1.3% are based on
industry growth forecasts. Changes in selling prices and direct
costs are based on past practices and expectations of future
changes in the market. Discounted cash flows are calculated using a
pre-tax rate of 14.8% (2018: 14.3%).
The Group prepares cash flow forecasts derived from the most
recent financial budgets approved by management for the next five
years and extrapolates cash flows for the following years. The
growth rate applied does not exceed the average long-term growth
rate for the relevant markets. There are no reasonable changes that
would result in the carrying value of goodwill being reduced to its
recoverable amount.
An impairment of GBP245,000 in relation to Surface Coatings
Limited has been identified in the current period as a result of
the annual test for impairment. This reduces the carrying amount to
nil.
12 INTANGIBLE ASSETS
Customer
Brand relationships Software Total
GBP'000 GBP'000 GBP000 GBP'000
----------------------------------------------- -------- -------------- ---------- --------
Cost
At 1 October 2017 229 200 - 429
Additions - - - -
-------- -------------- ---------- --------
At 29 September 2018 229 200 - 429
----------------------------------------------- -------- -------------- ---------- --------
Additions - - 563 563
Acquired on business combination 835 842 - 1,677
Transferred from property, plant and equipment - - 457 457
----------------------------------------------- -------- -------------- ---------- --------
At 28 September 2019 1,064 1,042 1,020 3,126
----------------------------------------------- -------- -------------- ---------- --------
Accumulated amortisation and impairment
At 1 October 2017 - - - -
Amortisation charge for the period 23 67 - 90
-------- -------------- ---------- --------
At 29 September 2018 23 67 - 90
----------------------------------------------- -------- -------------- ---------- --------
Amortisation charge for the period 64 117 64 245
Transferred from property, plant and equipment - - 128 128
----------------------------------------------- -------- -------------- ---------- --------
At 28 September 2019 87 184 192 463
----------------------------------------------- -------- -------------- ---------- --------
Carrying amount
At 28 September 2019 977 858 828 2,663
----------------------------------------------- -------- -------------- ---------- --------
At 29 September 2018 206 133 - 339
----------------------------------------------- -------- -------------- ---------- --------
The brand and customer relationships additions occurred on the
acquisition of Parkside Ceramics Limited on 31 August 2017 and the
acquisition of Strata Tiles Limited on 18 April 2019.
The brands are amortised over their estimated useful life of 10
years. Customer relationships are amortised over their estimated
useful lives of 3, 5 and 10 years. Amortisation is included within
administrative costs within the Consolidated Statement of Financial
Performance.
Of the additions to software, GBP457,000 was transferred from
property, plant and equipment additions and GBP128,000 of
accumulated depreciation has been transferred to amortisation (Note
13a).
13a PROPERTY, PLANT AND EQUIPMENT
Land and buildings
Freehold
and long Short Fixtures Motor
leasehold leasehold and fittings vehicles Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- ---------- ----------- ------------- --------- --------
Cost
At 1 October 2017 18,988 1,449 91,651 126 112,214
Additions - 160 4,892 - 5,052
Disposals (3,481) (5) (1,416) (51) (4,953)
At 29 September 2018 15,507 1,604 95,127 75 112,313
--------------------------------------- ---------- ----------- ------------- --------- --------
Additions - 313 6,929 - 7,242
Disposals (155) (94) (9,616) (1) (9,866)
Transferred to intangibles - - (457) - (457)
Acquisition of subsidiary undertakings - - 14 - 14
At 28 September 2019 15,352 1,823 91,997 74 109,246
--------------------------------------- ---------- ----------- ------------- --------- --------
Accumulated depreciation
At 1 October 2017 2,536 1,070 54,182 84 57,872
Charge for the period 267 62 6,644 10 6,983
Provision for impairment - - 958 - 958
Eliminated on disposals (251) (2) (1,165) (35) (1,453)
At 29 September 2018 2,552 1,130 60,619 59 64,360
--------------------------------------- ---------- ----------- ------------- --------- --------
Charge for the period 230 89 6,792 6 7,117
Reversal of impairment - - (246) - (246)
Eliminated on disposals (21) (91) (8,702) (1) (8,815)
Transferred to intangibles - - (128) - (128)
At 28 September 2019 2,761 1,128 58,335 64 62,288
--------------------------------------- ---------- ----------- ------------- --------- --------
Carrying amount
At 28 September 2019 12,591 695 33,662 10 46,958
--------------------------------------- ---------- ----------- ------------- --------- --------
At 29 September 2018 12,955 474 34,508 16 47,953
--------------------------------------- ---------- ----------- ------------- --------- --------
Freehold land and buildings includes GBP4,104,000 of freehold
land (2018: GBP4,104,000) on which no depreciation has been charged
in the current period. There is no material difference between the
carrying and market values.
Cumulative finance costs capitalised in the cost of tangible
fixed assets amount to GBPnil (2018: GBPnil). Contractual
commitments for the acquisition of property, plant and equipment
are detailed in note 29.
During the period, the Group has continued to review the
performance of its store portfolio and as the fixtures and fittings
within these stores cannot be reused in other locations, the Group
have provided for the net book value of the assets in relation to
the seven stores (2018: eleven) that are impaired. The carrying
value of these assets has been fully provided for in the period,
with a reduction in the provision of GBP246,000 in the period
(2018: GBP958,000 increase in provision) included within other
operating expenses.
All assets classified as property, plant and equipment are UK
based.
13b INVESTMENT PROPERTIES
At fair value GBP'000
---------------------- -------
At 1 October 2017 -
Additions 2,884
Fair value adjustment (1,651)
---------------------- -------
At 29 September 2018 1,233
---------------------- -------
Additions 21
Fair value adjustment (21)
---------------------- -------
At 28 September 2019 1,233
---------------------- -------
Investment properties relate to one freehold office building
that is not occupied by the Group, and is UK based. The property
was purchased to allow the Group to exit an onerous lease. The
investment property is carried at fair value, and a fair value
adjustment of GBP21,000 (2018: GBP1,651,000 loss) was recognised in
the Consolidated Statement of Financial Performance in the
period.
Since acquisition, the investment property has remained vacant,
and as such there are no other amounts recognised in the
Consolidated Statement of Financial Performance in relation to
rental income or other direct operating expenses.
The Group has no restrictions on the realisability of its
investment properties and no contractual obligations to purchase,
construct or develop investment properties or for repairs,
maintenance and enhancements.
The Group obtains independent valuations for its investment
properties, and at the end of the reporting period, the fair value
of each property is updated, taking into account the most recent
independent valuation. The best evidence of fair value is current
prices in an active market for similar properties. Where such
information is not available the directors consider information for
properties of different nature or recent prices of similar
properties in less active markets, adjusted to reflect those
differences.
14 SUBSIDIARIES
A list of all subsidiaries, including the name, country of
incorporation and proportion of ownership interest is given in note
4 to the Company only financial statements.
15 TRADE AND OTHER RECEIVABLES
2019 2018
GBP'000 GBP'000
------------------------------------------------------------ -------- --------
Amounts falling due within one year:
Amounts receivable for the sale of goods 1,310 899
Allowance for expected credit losses (calculated under IFRS
9) (26) -
Allowance for doubtful debts (calculated under IAS 39) - (24)
Other debtors and prepayments
- Rent and rates 4,435 4,530
- Other 2,423 3,307
------------------------------------------------------------ -------- --------
8,142 8,712
------------------------------------------------------------ -------- --------
The Directors consider that the carrying amount of trade and
other receivables at 28 September 2019 and 29 September 2018
approximates to their fair value on the basis of discounted cash
flow analysis.
CREDIT RISK
The Group's principal financial assets are bank balances and
cash and trade receivables.
The Group considers that it has no significant concentration of
credit risk. The majority of sales in the business are cash-based
sales in the stores.
Total trade receivables (net of expected credit losses /
doubtful debts) held by the Group at 28 September 2019 amounted to
GBP1.3 million (2018: GBP0.9 million). These amounts mainly relate
to sundry trade account generated sales. In relation to these
sales, the average credit period taken is 58 days (2018: 48 days)
and no interest is charged on the receivables.
The Group will write off, either partially or in full, the gross
carrying amount of a financial asset when there is no realistic
prospect of recovery. This is usually the case when it is
determined that the debtor does not have the assets or sources of
income that could generate sufficient cash flows to repay the
amounts subject to the write-off.
Before accepting any new customer, the Group uses an external
credit scoring system to assess the potential customer's credit
quality and defines credit limits by customer. Limits and scoring
attributed to customers are reviewed periodically.
Included in the Group's trade receivable balance are debtors
with a carrying amount of GBPnil (2018: GBPnil) which are past due
at the reporting date for which the Group has not provided as there
has not been a significant change in credit quality and the amounts
are still considered recoverable. The Group does not hold any
collateral over these balances.
Ageing of past due but not impaired receivables:
2019 2018
GBP'000 GBP'000
-------------------- -------- --------
Greater than 60 days - -
-------------------- -------- --------
The allowance for expected credit losses / allowance for
doubtful debts was GBP26,000 by the end of the period (2018:
GBP24,000). Given the minimal receivable balance, the Directors
believe that there is no further credit provision required in
excess of the allowance for expected credit losses / allowance for
doubtful debts.
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses which uses a lifetime expected loss
allowance for all trade and other receivables and accrued
income.
The allowance for expected credit losses / allowance for
doubtful debts includes GBP12,000 relating to individually impaired
trade receivables (2018: GBP10,000) which are due from companies
that have been placed into liquidation.
The Directors consider that the carrying amount of trade and
other receivables is approximately equal to their fair value.
16 CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash held by the Group and
short-term bank deposits net of bank overdrafts, where there is a
right of offset, with an original maturity of three months or less.
The carrying amount of these assets approximates their fair value.
A breakdown of significant bank and cash balances by currency is as
follows:
2019 2018
GBP'000 GBP'000
-------------------------------- -------- --------
Sterling 18,049 11,349
US dollar 183 1,819
Euro 515 674
-------------------------------- -------- --------
Total cash and cash equivalents 18,747 13,842
-------------------------------- -------- --------
Cash and cash equivalents are in the scope of the expected
credit loss model under IFRS 9, however balances are held with
recognised financial institutions and therefore the expected
impairment loss is considered to be minimal.
17 TRADE AND OTHER PAYABLES
Restated
2019 2018
GBP'000 GBP'000
------------------------------------ -------- --------
Amounts falling due within one year
Trade payables 17,394 16,828
Other payables 7,142 4,172
Accruals 14,622 12,449
Deferred income 1,013 1,236
Contract liabilities 3,165 3,963
------------------------------------ -------- --------
43,336 38,648
------------------------------------ -------- --------
Trade payables and accruals principally comprise amounts
outstanding for trade purchases and ongoing costs. The 2018 amounts
have been restated to reclassify customer deposits from trade
payables to contract liabilities as a result of the adoption of
IFRS 15. The average credit period taken for trade purchases is 58
days (2018: 59 days). No interest is charged on these payables.
The Directors consider that the carrying amount of trade
payables at 28 September 2019 and 29 September 2018 approximates to
their fair value on the basis of discounted cash flow analysis.
Accruals includes provisions for customer returns of
GBP1,078,000 (2018: GBP679,000). Prior to IFRS 15, provisions for
customer returns were presented on a net basis, including assets
for the value of goods expected to be returned. Following the
adoption of IFRS 15, they are now shown on a gross basis, with the
asset element included in Inventories. See Note 1 for full impact
of the transition to IFRS 15.
18 BANK LOANS
2019 2018
GBP'000 GBP'000
-------------------------- -------- --------
Bank loans (all sterling) 29,762 29,766
-------------------------- -------- --------
2019 2018
GBP'000 GBP'000
--------------------------------------------- -------- --------
The borrowings are repayable as follows:
On demand or within one year - -
In the second year - -
In the third to fifth year 30,000 30,000
--------------------------------------------- -------- --------
30,000 30,000
Less: total unamortised issue costs (238) (234)
--------------------------------------------- -------- --------
29,762 29,766
Issue costs to be amortised within 12 months 122 85
--------------------------------------------- -------- --------
Amount due for settlement after 12 months 29,884 29,851
--------------------------------------------- -------- --------
The Directors consider that the carrying amount of the bank loan
at 28 September 2019 and 29 September 2018 approximates to its fair
value since the amounts relate to floating rate debt.
The average interest rates paid on the loan were as follows:
2019 2018
% %
------ ---- ----
Loans 2.36 2.27
------ ---- ----
The Group borrowings are arranged at floating rates, thus
exposing the Group to cash flow interest rate risk.
The following is a reconciliation of changes in financial
liabilities to movement in cash from financing activities:
Long term Unamortised
borrowings issue costs
GBP'000 GBP'000
--------------------------------- ----------- ------------
As at 1 October 2017 35,000 (193)
Repayment of bank loan (5,000) -
Issue costs incurred in the year - (255)
Amortisation of issue costs - 214
--------------------------------- ----------- ------------
As at 29 September 2018 30,000 (234)
--------------------------------- ----------- ------------
Repayment of bank loan (5,000) -
Drawdown of bank loan 5,000 -
Issue costs incurred in the year - (102)
Amortisation of issue costs - 98
--------------------------------- ----------- ------------
As at 28 September 2019 30,000 (238)
--------------------------------- ----------- ------------
During the year the Group extended its revolving credit facility
from 29 June 2021 to 29 June 2022 and increased the facility from
GBP35.0 million to GBP39.0 million. As at the financial period end,
GBP30.0million of this was drawn (2018: GBP30.0 million). The loan
facility contains financial covenants which are tested on a
bi-annual basis. The Group did not breach any covenants in the
period.
At 28 September 2019, the Group had available GBP9.0 million
(2018: GBP5.0 million) of undrawn committed banking facilities.
19 FINANCIAL INSTRUMENTS
CAPITAL RISK MANAGEMENT
The Group manages its capital to ensure that entities in the
Group will be able to continue as a going concern while maximising
the return to stakeholders through the optimisation of the debt and
equity balance. The Group's overall strategy remains unchanged from
2018. The capital structure of the Group consists of debt, which
includes the borrowings disclosed in note 18, cash and cash
equivalents disclosed in note 16 and equity attributable to equity
holders of the parent, comprising issued capital, reserves and
accumulated losses as disclosed in notes 21 to 27.
The Group is not subject to any externally imposed capital
requirements.
SIGNIFICANT ACCOUNTING POLICIES
Details of the significant accounting policies and methods
adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are
recognised, in respect of each class of financial asset, financial
liability and equity instrument, are disclosed in note 2Q to the
financial statements.
Categories of financial instruments
Carrying value and
fair value
2019
GBP'000
----------------------------------------------------- ------------------
Financial assets
Amortised cost (including cash and cash equivalents) 20,031
Fair value through profit and loss 89
Financial liabilities
Amortised cost 69,042
------------------------------------------------------ ------------------
Carrying value and
fair value
2018
GBP'000
------------------------------------------------------------ ------------------
Financial assets
Loans and receivables (including cash and cash equivalents) 14,717
Fair value through profit and loss 168
Financial liabilities
Amortised cost 63,300
------------------------------------------------------------- ------------------
The Group considers itself to be exposed to risks on financial
instruments, including market risk (including currency risk),
credit risk, liquidity risk and cash flow interest rate risk.
The Group seeks to mitigate the effects of these risks by using
derivative financial instruments to hedge these risk exposures
economically. The use of financial derivatives is governed by the
Group's policies approved by the Board of Directors, which provide
written principles on foreign exchange risk, interest rate risk,
credit risk, the use of financial derivatives and non-derivative
financial instruments, and the investment of excess liquidity. The
Group does not enter into or trade financial instruments, including
derivative financial instruments, for speculative purposes.
MARKET RISK
The Group's activities expose it primarily to the financial
risks of changes in foreign currency exchange rates and interest
rates. The Group enters into forward foreign exchange contracts to
hedge the exchange rate risk arising on the import of goods.
FOREIGN CURRENCY RISK MANAGEMENT
The Group undertakes certain transactions denominated in foreign
currencies. Hence, exposures to exchange rate fluctuations arise.
Exchange rate exposures are managed within approved policy
parameters utilising forward foreign exchange contracts.
The carrying amounts of the Group's foreign currency denominated
monetary assets and monetary liabilities at the reporting date are
as follows:
Assets Liabilities
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
---------- -------- -------- -------- --------
Euro 636 686 3,157 3,891
US dollar 421 1,822 360 1,453
---------- -------- -------- -------- --------
FOREIGN CURRENCY SENSITIVITY ANALYSIS
The Group is mainly exposed to the currency of China, India and
Brazil (US dollar currency) and to various European countries
(euro) as a result of inventory purchases. The following table
details the Group's sensitivity to a 10% increase and decrease in
sterling against the relevant foreign currencies. Ten per cent
represents management's assessment of the reasonably possible
change in foreign exchange rates, based on historic volatility. The
sensitivity analysis includes only outstanding foreign currency
denominated monetary items and adjusts their translation at the
period end for a 10% change in foreign currency rates. A positive
number below indicates an increase in profit and other equity where
sterling strengthens 10% against the relevant currency.
2019 2018
GBP'000 GBP'000
------------------------------------------------------- -------- --------
Profit or loss movement on a 10% strengthening in
sterling against the euro 229 291
Profit or loss movement on a 10% strengthening in
sterling against the US dollar 6 34
Profit or loss movement on a 10% weakening in sterling
against the euro (280) (356)
Profit or loss movement on a 10% weakening in sterling
against the US dollar (7) (41)
-------------------------------------------------------- -------- --------
CURRENCY DERIVATIVES
The Group utilises currency derivatives to hedge significant
future transactions and cash flows. The Group uses foreign currency
forward contracts in the management of its exchange rate exposures.
The contracts are denominated in US dollars and euros.
At the balance sheet date, the total notional amounts of
outstanding forward foreign exchange contracts that the Group has
committed to are as below:
2019 2018
GBP'000 GBP'000
----------------------------------- -------- --------
Forward foreign exchange contracts 10,600 10,582
----------------------------------- -------- --------
These arrangements are designed to address significant exchange
exposures for the first half of 2019 and are renewed on a revolving
basis as required.
At 29 September 2019 the fair value of the Group's currency
derivatives is a gain of GBP88,514 within other debtors and
prepayments (note 15) (2018: gain of GBP167,699 within other
debtors and prepayments (note 15)).
Gains of GBP99,957 have been included in cost of sales during
the period (2018: GBP291,845 gain).
INTEREST RATE RISK MANAGEMENT
The Group is exposed to interest rate risk as entities in the
Group borrow funds at floating interest rates. Due to the reduced
level of floating rate borrowings and the current low level of
interest rates, management have not deemed it necessary to
implement measures that would mitigate this risk. The Group's
exposures to interest rates on financial assets and financial
liabilities are detailed in the liquidity risk management section
of this note.
INTEREST RATE SENSITIVITY ANALYSIS
The sensitivity analysis below has been determined based on the
exposure to interest rates for both derivatives and non-derivative
instruments at the balance sheet date. For floating rate
liabilities, the analysis is prepared assuming the amount of
liability outstanding at the balance sheet date was outstanding for
the whole year. A 50 basis points increase or decrease is used when
reporting interest rate risk internally to key management personnel
and represents management's assessment of the possible change in
interest rates.
If interest rates had been 50 basis points higher/lower and all
other variables were held constant, the Group's profit would be
impacted as follows:
50 basis points increase 50 basis points decrease
in interest rates in interest rates
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
----------------- ----------------- -------- ---------------- --------
(Loss) or profit (143) (164) 143 164
----------------- ----------------- -------- ---------------- --------
The Group's sensitivity to interest rates mainly relates to the
revolving credit facility.
CREDIT RISK MANAGEMENT
Credit risk refers to the risk that a counterparty will default
on its contractual obligations, resulting in financial loss to the
Group. Management have considered the counterparty risk associated
with the cash and derivative balances and do not consider there to
be a material risk. The Group has a policy of only dealing with
creditworthy counterparties. Before accepting any new customer, the
Group uses an external credit scoring system to assess the
potential customer's credit quality and defines credit limits by
customer. Limits and scoring attributed to customers are reviewed
periodically. Trade receivables are minimal, consisting of a number
of sundry trade accounts; further information is provided in note
15.
The carrying amount of financial assets recorded in the
financial statements, which is net of expected credit losses,
represents the Group's maximum exposure to credit risk without
taking account of the value of any collateral obtained.
LIQUIDITY RISK MANAGEMENT
Ultimate responsibility for liquidity risk management rests with
the Board of Directors. The Group manages liquidity risk by
maintaining adequate reserves, banking facilities and borrowing
facilities by continuously monitoring forecast and actual cash
flows and matching the maturity profiles of financial assets and
liabilities.
LIQUIDITY AND INTEREST RISK TABLES
The following tables detail the Group's remaining contractual
maturity for its non-derivative financial liabilities. The tables
have been drawn up based on the undiscounted cash flows (and on the
assumption that the variable interest rate remains constant at the
latest fixing level of 2.36% (2018: 2.27%) of financial liabilities
based on the earliest date on which the Group can be required to
pay. The table includes both interest and principal cash flows.
Less than 1-3 3 months 1-5
1 month months to 1 year years Total
2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- --------- -------- ---------- -------- --------
Non-interest bearing 39,158 - - - 39,158
Variable interest rate instruments 59 119 539 31,251 31,968
----------------------------------- --------- -------- ---------- -------- --------
Less than 1-3 3 months 1-5
1 month months to 1 year years Total
2018 Restated GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- --------- -------- ---------- -------- --------
Non-interest bearing 33,449 - - - 33,449
Variable interest rate instruments 74 151 30,377 - 30,602
----------------------------------- --------- -------- ---------- -------- --------
The Group is financed through a GBP39 million (2018: GBP35
million) revolving credit facility, of which GBP30 million (2018:
GBP30 million) was utilised. At the balance sheet date the total
unused amount of financing facilities was GBP9 million (2018: GBP5
million). The Group expects to meet its other obligations from
operating cash flows and proceeds of maturing financial assets. The
2018 amounts have been restated to reclass customer deposits from
trade payables to contract liabilities as a result of the adoption
of IFRS 15 (see note 17).
The following table details the Group's liquidity analysis for
its derivative financial instruments. The table has been drawn up
based on the undiscounted net cash inflows/(outflows) on the
derivative instruments that settle on a net basis and the
undiscounted gross inflows and (outflows) on those derivatives that
require gross settlement. When the amount payable or receivable is
not fixed, the amount disclosed has been determined by reference to
the projected interest and foreign currency rates as illustrated by
the yield curves existing at the reporting date.
Less than 1-3 3 months 1-5 5+
1 month months to 1 year years years Total
2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- --------- -------- ---------- -------- -------- --------
Foreign exchange forward contracts
payments (1,397) (3,161) (6,042) - - (10,600)
Foreign exchange forward contracts
receipts 1,458 3,226 6,005 - - 10,689
----------------------------------- --------- -------- ---------- -------- -------- --------
Less than 1-3 3 months 1-5 5+
1 month months to 1 year years years Total
2018 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- --------- -------- ---------- -------- -------- --------
Foreign exchange forward contracts
payments (1,885) (3,945) (4,752) - - (10,582)
Foreign exchange forward contracts
receipts 1,969 4,016 4,764 - - 10,749
----------------------------------- --------- -------- ---------- -------- -------- --------
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values of financial assets and financial liabilities
are determined as follows:
Foreign currency forward contracts are measured using quoted
forward exchange rates and yield curves derived from quoted
interest rates matching maturities of the contracts.
The fair values are therefore categorised as Level 2 (2018:
Level 2), based on the degree to which the fair value is
observable. Level 2 fair value measurements are those derived from
inputs other than unadjusted quoted prices in active markets (Level
1 categorisation) that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from
prices).
20 PROVISIONS
2019 2018
GBP'000 GBP'000
---------------------------------- -------- ---------
Onerous lease provision 2,990 1,777
Business simplification provision - 128
Dilapidations provision 2,008 2,687
Redemption liability 99 -
---------------------------------- -------- ---------
5,097 4,592
---------------------------------- -------- ---------
Current 1,235 1,197
Non-current 3,862 3,395
---------------------------------- -------- ---------
5,097 4,592
---------------------------------- -------- ---------
Business simplification Onerous Dilapidations Redemption
provision lease provision provision liability Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ----------------------- ---------------- ------------- ---------- --------
At 30 September 2018 128 1,777 2,687 - 4,592
Created in the year - 2,270 - 99 2,369
Utilisation of provision (128) (812) (309) - (1,249)
Release of provision in the
period - (245) (370) - (615)
---------------------------- ----------------------- ---------------- ------------- ---------- --------
At 28 September 2019 - 2,990 2,008 99 5,097
---------------------------- ----------------------- ---------------- ------------- ---------- --------
The onerous lease provision relates to estimated future
unavoidable lease costs in respect of closed, non-trading and
loss-making stores. The provision is expected to be utilised over
the lease term of the various properties (with the majority being
less than 4 years). The dilapidations provision represents
management's best estimate of the Group's liability under its
property lease arrangements based on past experience and is
expected to be utilised over the lease term of the various
properties (average of 12 years which includes an estimation of
renewals). The business simplification provision related to the
decision to exit the Topps Clearance format and relocation of the
finance function to Leicester, resulting in redundancies and the
subsequent closure of nine store locations and one support office.
The discount rate used to calculate the present value of property
provisions is 5% (2018: 5%). A 10% reduction in discount rate would
lead to an increase in property provisions of GBP80,000 (2018:
GBP60,000).
The movements in the onerous lease provision are shown within
"Impairment of property, plant and equipment and movement in
onerous lease provision" in the Highlights section of the Annual
Report.
Provisions include GBP99,000 redemption liability in relation to
the purchase of Strata Tiles Limited, payable in 2021, and
therefore have been classed as non-current. The liability is valued
at fair value based on forecast attainment of performance
conditions associated with the payment of the liability.
The following are the deferred tax liabilities/(assets)
recognised by the Group and movements thereon during the current
and prior reporting period:
Accelerated Share-based Intangible
tax depreciation payments Stock provisions assets Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- ----------------- ----------- ---------------- ---------- ---------
As at 1 October 2017 1,481 (445) (38) 73 1,071
(Credit)/charge to income (242) 155 - (7) (94)
Charge in respect of previous periods 19 - - - 19
Charge to equity - 21 - - 21
As at 29 September 2018 1,258 (269) (38) 66 1,017
Recognised on acquisition of subsidiary - - (7) 285 278
(Credit)/charge to income (182) 139 11 (33) (65)
(Credit)/charge in respect of previous
periods (58) - 27 (8) (39)
Charge to equity - 6 - - 6
As at 28 September 2019 1,018 (124) (7) 310 1,197
---------------------------------------- ----------------- ----------- ---------------- ---------- ---------
Changes to the UK corporation tax rates were substantively
enacted as part of Finance Bill 2017 (on 6 September 2016). These
include reductions to the main rate to reduce the rate to 17% from
1 April 2020. Deferred taxes at the balance sheet date have been
measured using these enacted tax rates and reflected in these
financial statements.
21 SHARE CAPITAL
2019 2018 2019 2018
Shares Shares GBP'000 GBP'000
--------------------------------------------------- ----------- ----------- -------- --------
Allotted, issued and fully paid ordinary shares of
3.33p (2018: 3.33p)
At the start of the period 196,440,971 196,437,298 6,548 6,548
Issued in the period - 3,673 - -
--------------------------------------------------- ----------- ----------- -------- --------
At the end of the period 196,440,971 196,440,971 6,548 6,548
--------------------------------------------------- ----------- ----------- -------- --------
During the period the Group issued nil (2018: 3,673) ordinary
shares with a nominal value of GBPnil (2018: GBP122) under share
option schemes for an aggregate cash consideration of GBPnil (2018:
GBP3,560).
The authorised share capital of the Group is GBP8,000,000 (2018:
GBP8,000,000), which consists of 240,000,000 ordinary shares (2018:
240,000,000).
The holders of ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at meetings of the Company. All shares rank equally with
regard to the Company's residual assets.
22 SHARE PREMIUM
2019 2018
GBP'000 GBP'000
------------------------------- -------- --------
At start of the period 2,490 2,487
Premium on issue of new shares - 3
------------------------------- -------- --------
At end of the period 2,490 2,490
------------------------------- -------- --------
23 OWN SHARES
2019 2018
GBP'000 GBP'000
----------------------------------- -------- --------
At start of the period (3,750) (4,411)
Disposed of on issue in the period 2,202 661
----------------------------------- -------- --------
At end of the period (1,548) (3,750)
----------------------------------- -------- --------
A subsidiary of the Group holds 1,518,694 (2018: 3,090,030)
shares with a nominal value of GBP1,547,603 acquired for an average
price of GBP1.02 per share (2018: GBP3,749,570 acquired for an
average price of GBP1.21 per share) and therefore these have been
classed as own shares.
24 MERGER RESERVE
2019 2018
GBP'000 GBP'000
------------------------------- -------- --------
At start and end of the period (399) (399)
------------------------------- -------- --------
The merger reserve arose on pre-2006 acquisitions. The Directors
do not consider this to be distributable as at 28 September 2019
(2018: same).
25 SHARE-BASED PAYMENT RESERVE
2019 2018
GBP'000 GBP'000
--------------------------------------------------------- -------- --------
At start of the period 3,945 3,921
Credit to equity for equity-settled share-based payments 17 24
--------------------------------------------------------- -------- --------
At end of the period 3,962 3,945
--------------------------------------------------------- -------- --------
The share-based payment reserve has arisen on the fair valuation
of save-as-you-earn schemes and long-term incentive plans. The
Directors consider this to be distributable as at 28 September 2019
(2018: same).
26 CAPITAL REDEMPTION RESERVE
2019 2018
GBP'000 GBP'000
------------------------------- -------- --------
At start and end of the period 20,359 20,359
------------------------------- -------- --------
The capital redemption reserve arose on the cancellation of
treasury shares and as a result of a share reorganisation in 2006.
The Directors do not consider this to be distributable as at 28
September 2019 (2018: same).
27 ACCUMULATED LOSSES
GBP'000
---------------------------------------------------------------- -------
At 1 October 2017 (4,952)
Dividends (6,566)
Deferred and current tax on Sharesave scheme taken directly to
equity (10)
Own shares issued in the period (661)
Net profit for the period 9,659
---------------------------------------------------------------- -------
At 29 September 2018 (2,530)
Dividends (6,623)
Deferred and current tax on Sharesave scheme taken directly to
equity 58
Own shares issued in the period (2,202)
Net profit for the period attributable to owners of Topps Tiles
Plc 10,119
---------------------------------------------------------------- -------
At 28 September 2019 (1,178)
---------------------------------------------------------------- -------
28 NON-CONTROLLING INTEREST
2019 2018
GBP'000 GBP'000
--------------------------------------------------------- -------- -----------------------
At start of the period - -
Non-controlling interest on business combination 39 -
Net loss for the period distributable to non-controlling
interests (41) -
--------------------------------------------------------- -------- -----------------------
At end of the period (2) -
--------------------------------------------------------- -------- -----------------------
29 FINANCIAL COMMITMENTS
a) CAPITAL COMMITMENTS
At the end of the period there were capital commitments
contracted of GBPnil (2018: GBPnil).
b) PENSION ARRANGEMENTS
The Group operates a defined contribution pension scheme for
employees. The assets of the schemes are held separately from those
of the Group in independently administered funds. The pension cost
charge represents contributions payable by the Group to the funds
and amounted to GBP1,063,000 (2018: GBP918,000). At the period end,
the Group holds outstanding contributions of GBP221,115 (2018:
GBP143,485).
c) LEASE COMMITMENTS
The Group has entered into non-cancellable operating leases in
respect of motor vehicles, equipment and land and buildings.
Minimum lease payments under operating leases recognised as an
expense for the period were GBP26,333,430 (2018: GBP25,489,488)
which includes property service charges of GBP954,713 (2018:
GBP911,000).
At the balance sheet date, the Group had outstanding commitments
for future minimum lease payments under non-cancellable operating
leases which fall due as follows:
2019 2018
Land and Land and
buildings Other buildings Other
GBP'000 GBP'000 GBP'000 GBP'000
------------------- ---------- -------- ---------- --------
- Within 1 year 23,037 1,745 23,116 1,572
- Within 2-5 years 72,606 2,563 75,500 2,775
- After 5 years 38,311 - 44,756 15
------------------- ---------- -------- ---------- --------
133,954 4,308 143,372 4,362
------------------- ---------- -------- ---------- --------
Operating lease payments primarily represent rentals payable by
the Group for certain of its office and store properties. Leases
are negotiated for an average term of ten years (2018: ten) and
rentals are fixed for an average of five years (2018: five).
Minimum future sub 2019 2018
lease payments
------------------- ----- -----
- Within 1 year 577 452
- Within 2-5 years 1,919 1,306
- After 5 years 1,652 428
-------------------- ----- -----
4,148 2,186
------------------- ----- -----
30 SHARE-BASED PAYMENTS
The Group operates three (2018: three) share option schemes in
relation to Group employees, being the SAYE scheme, the 2013 Long
Term Incentive Plan and the 2020 Long Term Incentive Plan.
EMPLOYEE SHARE PURCHASE PLANS
Employee share purchase plans are open to almost all employees
and there no specific vesting conditions other than the requirement
for continued employee service. The share plans provide for a
purchase price equal to the average market price over the three
days prior to the date of grant, less 20%. The shares can be
purchased during a two-week period each financial period. The
shares purchased are generally placed in the employee share savings
plan for a three or five year period.
Movements in share-based payment plan options are summarised as
follows:
2019 2018
Weighted Restated
average Weighted
exercise average exercise
Number of price Number of price
share options GBP share options GBP
--------------------------------------- -------------- ------------------ -------------- ------------------
Outstanding at beginning of the period 3,868,716 0.78 3,533,394 0.91
Issued during the period 3,195,674 0.51 2,130,588 0.64
Expired during the period (356,341) 0.92 (375,174) 0.98
Forfeited during the period (1,953,543) 0.73 (1,416,419) 0.83
Exercised during the period (2,352) 0.51 (3,673) 0.98
Outstanding at end of the period 4,752,154 0.61 3,868,716 0.78
Exercisable at end of the period 169,344 1.27 353,507 0.92
--------------------------------------- -------------- ------------------ -------------- ------------------
The number of share options outstanding as at the beginning of
the period has been restated from 3,876,308 to 3,868,716 to adjust
for 7,592 share options which were forfeited in 2018 but were
reported as shares under option as at the period ending 29
September 2018.
The 2018 movement in the number of options have been restated so
that the number of options which were disclosed as expired during
the previous reporting period have been restated so that the number
forfeited during the period is separately disclosed. This more
accurately meets the requirements of IFRS 2.45(b) based on the
conditions related to those movements. This has also caused a
restatement to the average weighted price of the expired
options.
During the financial period, the Group granted 3,195,674 share
options under the existing share option scheme due to vest in April
2022 with a fair value of GBP446,052.
The inputs to the Black-Scholes Model for the employee
three-year Employee Share Purchase Plans issued in the year are as
follows:
Three-year plan
--------------------------- -------- -----
Weighted average share
price - pence 64.70
Weighted average exercise
price - pence 51.00
Expected volatility - % 30.69
Expected life - years 3.20
Risk-free rate of interest - % 0.82
Dividend yield - % 5.26
--------------------------- -------- -----
Expected volatility was determined by calculating the historical
volatility of the Group's share price over the previous three years
(2018: three years).
The weighted average remaining contractual life of the share
options outstanding at the end of the period is 2.38 years (2018:
2.30 years).
The exercise price for share options under the share save scheme
range from 47 pence to 127 pence.
The weighted average share price at the date of exercise of
options exercised during the year ended 28 September 2019 is 69
pence (2018: 88.5 pence).
LONG TERM INCENTIVE PLAN
Long Term Incentive Plans have been granted to senior management
and have a vesting period of three years. Vesting is subject to
achievement of certain performance conditions which are detailed in
the Remuneration Report.
Movements in the 2013 Long Term Incentive Plan options are
summarised as follows:
2019 2018
Weighted Weighted
average exercise average exercise
Number of price Number of price
share options GBP share options GBP
--------------------------------------- -------------- ----------------- --------------- -----------------
Outstanding at beginning of the period 7,973,849 - 6,433,257 -
Issued during the period 2,885,557 - 3,099,142 -
Forfeited during the period (1,496,684) - (610,085) -
Exercised during the period (1,571,336) - (948,465) -
Outstanding at end of the period 7,791,386 - 7,973,849 -
Exercisable at end of the period 951,365 - 2,526,034 -
--------------------------------------- -------------- ----------------- --------------- -----------------
During the financial period, the Group granted 14,497 share
options under the existing share option scheme due to vest in
December 2018 with a fair value of GBP8,819.
The inputs to the Black-Scholes model are as follows:
Weighted average share
price - pence 64.00
Weighted average exercise - pence nil
price
Expected volatility - % 28.35
Expected life - years 1.00
Risk-free rate of interest - % 0.72
Dividend yield - % 5.31
--------------------------- -------- -----
During the financial period, the Group granted 53,000 share
options under the existing share option scheme due to vest in
December 2020. 40,599 of these shares were granted in December 2018
with a fair value of GBP23,415.
The inputs to the Black-Scholes model are as follows:
Weighted average share
price - pence 64.0
Weighted average exercise - pence nil
price
Expected volatility - % 31.20
Expected life - years 2.00
Risk-free rate of interest - % 0.74
Dividend yield - % 5.31
--------------------------- -------- -----
The Group granted 12,401 in June 2019 with a fair value of
GBP7,618.
The inputs to the Black-Scholes model are as follows:
Weighted average share
price - pence 66.20
Weighted average exercise - pence nil
price
Expected volatility - % 28.48
Expected life - years 1.50
Risk-free rate of interest - % 0.62
Dividend yield - % 5.14
--------------------------- -------- -----
During the financial period, the Group granted 2,818,060 share
options under the existing share option scheme due to vest in
December 2021.
The Group granted 2,811,140 of these shares in December 2018
with a fair value of GBP1,537,441.
The inputs to the Black-Scholes model are as follows:
Weighted average share
price - pence 64.00
Weighted average exercise - pence nil
price
Expected volatility - % 30.91
Expected life - years 3.00
Risk-free rate of interest - % 0.78
Dividend yield - % 5.31
--------------------------- -------- -----
The Group granted 6,920 share options in June 2019 with a fair
value of GBP4,038.
The inputs to the Black-Scholes model are as follows:
Weighted average share
price - pence 66.20
Weighted average exercise - pence nil
price
Expected volatility - % 30.64
Expected life - years 2.5
Risk-free rate of interest - % 0.59
Dividend yield - % 5.14
--------------------------- -------- -----
Expected volatility for the additional share options was
determined by calculating the historical volatility of the Group's
share price over the previous one, two and three years (2017: three
and five years).
The weighted average remaining contractual life of share options
outstanding at the end of the period is 7.96 years (2018: 7.52
years).
The weighted average share price at the date of exercise of
options exercised during the year ended 28 September 2019 is 64.78
pence (2018: 76.73 pence).
2020 LONG TERM INCENTIVE PLAN
Under the plan a number of share options were granted to
management level employees across the Group. These options will
vest in December 2020 subject to the achievement of certain
performance criteria which are detailed in the Remuneration
Report.
Movements in 2020 Long Term Incentive Plan options are
summarised as follows:
2019 2018
Weighted
average Weighted
exercise average exercise
Number of price Number of price
share options GBP share options GBP
--------------------------------------- --------------- --------- --------------- -----------------
Outstanding at beginning of the period 2,656,830 - 3,061,262 -
Forfeited during the period (254,182) - (404,432) -
Outstanding at end of the period 2,402,648 - 2,656,830 -
--------------------------------------- --------------- --------- --------------- -----------------
The weighted average remaining contractual life of share options
outstanding at the end of the period is 6.68 years (2018: 7.64
years)
In total, the Group recognised a total expense of GBP17,069
(2018: GBP23,531 expense) relating to share-based payments.
31 CONTINGENT LIABILITIES
The group have an open tax enquiry with HMRC, dating back to
2009 relating to EU loss relief in relation to the closed Dutch
retail business. Historically the Group, supported by external
professional advice, had been of the opinion that the prospect of
needing to settle on this matter was remote. HMRC have recently
hardened their stance, and given updated professional advice
received, the Directors believe that it is possible, and not
probable, that the claim will be settled and therefore has been
disclosed as a contingent liability. The potential undiscounted
amount of the total payments that the Group could be required to
make if there was an adverse decision related to this matter is
approximately GBP0.9m.
32 RELATED PARTY TRANSACTIONS
S.K.M. Williams is a related party by virtue of his close family
relationship with key management, with a 10.5% shareholding
(20,593,950 ordinary shares) in the Group's issued share capital
(2018: 10.5% shareholding of 20,593,950 ordinary shares).
At 28 September 2019, S.K.M. Williams was the landlord of two
properties leased to Multi Tile Limited, a trading subsidiary of
Topps Tiles Plc, for GBP122,000 (2018: two properties for
GBP119,000) per annum.
No amounts were outstanding with S.K.M. Williams at 28 September
2019 (2018: GBPnil). The lease agreements on all properties are
operated on commercial arm's length terms.
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note, in accordance with the exemption available
under IAS 24.
The remuneration of the Board of Directors, who are considered
key management personnel of the Group, was GBP1.2 million (2018:
GBP1.1 million) including share-based payments of GBPnil (2018:
GBPnil million). Further information about the remuneration of the
individual Directors is provided in the Remuneration Report in the
Annual Report.
The Group's defined contribution pension scheme is administered
by Legal and General. During the year the Group made contributions
of GBP1,063,000 (2018: GBP918,000) and at year end the Group has
outstanding contributions of GBP221,115 (2018: GBP143,485).
Company Balance Sheet
AS AT 28 SEPTEMBER 2019
Restated
(see notes
5 and 6)
2019 2018
Notes GBP'000 GBP'000
----------------------------------------------- ----- --------- -----------
Fixed assets
Investments 4 7,154 3,420
----------------------------------------------- ----- --------- -----------
Current assets
Debtors 5 133,332 112,782
Cash at bank and in hand 5,929 -
----------------------------------------------- ----- --------- -----------
Creditors: amounts falling due within one year 6 (79,343) (52,632)
----------------------------------------------- ----- --------- -----------
Net current assets 59,918 60,150
Non-current liabilities
Provisions (99) -
----------------------------------------------- ----- --------- -----------
Total liabilities (79,442) (52,632)
----------------------------------------------- ----- --------- -----------
Net assets 66,973 63,570
----------------------------------------------- ----- --------- -----------
Capital and reserves
Called-up share capital 7 6,548 6,548
Share premium account 2,490 2,490
Share-based payment reserve 4,496 4,479
Capital redemption reserve 20,359 20,359
Other reserve 8 6,200 6,200
Profit and loss account 26,880 23,494
----------------------------------------------- ----- --------- -----------
Equity shareholders' funds 66,973 63,570
----------------------------------------------- ----- --------- -----------
The Company made a profit after tax for the financial period
ended 28 September 2019 of GBP10,009,000 (2018: GBP15,792,000).
The financial statements of Topps Tiles Plc, Companies House
number 3213782, were approved by the Board of Directors on 26
November 2019 and signed on its behalf by:
MATTHEW WILLIAMS
ROB PARKER
Directors
Company Statement of Changes in Equity
For the 52 weeks ended 28 September 2019
Share-based Capital Profit
Share Share payment redemption Other and loss
capital premium reserve reserve reserves account Total
Company GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------- -------- ----------- ----------- --------- --------- --------
Balance at 1 October
2017 6,548 2,487 4,455 20,359 6,200 14,268 54,317
Profit for the period - - - - - 15,792 15,792
---------------------------- -------- -------- ----------- ----------- --------- --------- --------
Dividend paid to equity
shareholders - - - - - (6,566) (6,566)
Issue of new shares - 3 - - - - 3
Credit to equity for
equity-settled share-based
payments - - 24 - - - 24
---------------------------- -------- -------- ----------- ----------- --------- --------- --------
Balance at 29 September
2018 6,548 2,490 4,479 20,359 6,200 23,494 63,570
---------------------------- -------- -------- ----------- ----------- --------- --------- --------
Profit for the period - - - - - 10,009 10,009
Dividend paid to equity
shareholders - - - - - (6,623) (6,623)
Credit to equity for
equity-settled share-based
payments - - 17 - - - 17
---------------------------- -------- -------- ----------- ----------- --------- --------- --------
Balance at 28 September
2019 6,548 2,490 4,496 20,359 6,200 26,880 66,973
---------------------------- -------- -------- ----------- ----------- --------- --------- --------
The other reserves comprise an unrealised gain arising on the
disposal of certain trademarks to a subsidiary company. At 28
September 2019, the Directors consider the other reserve of
GBP6,200,000 to remain non-distributable.
The Directors consider GBPnil (2018: GBPnil) of profit and loss
account reserves to be not distributable at 28 September 2019.
Notes to the Company Financial Statements
For the 52 weeks ended 28 September 2019
1 GENERAL INFORMATION AND BASIS OF ACCOUNTING
Topps Tiles Plc is a private limited company, limited by shares,
incorporated and domiciled in the United Kingdom under the
Companies Act 2006. The address of the registered office is given
in the Annual Report.
The financial statements of Topps Tiles Plc have been prepared
in accordance with Financial Reporting Standard 101 Reduced
Disclosure Framework (FRS 101) issued by the Financial Reporting
Council (FRC).
During the year IFRS 9 and IFRS 15 were adopted in line with the
requirements of accounting standards. Both standards did not have a
material impact on the financial statements of the Company.
As permitted by FRS 101, the Company has taken advantage of the
following disclosure exemptions available under that Standard:
i) The requirements of IFRS 7 Financial Instruments: Disclosures
ii) The requirement in paragraph 38 of IAS 1 Presentation of Financial Statements
to present comparative information in respect of:
a) Paragraph 79(a)(iv) of IAS 1
b) Paragraph 73(e) of IAS 16 Property, Plant and Equipment
iii) The requirements of IAS 7 Statement of Cash Flows
iv) The requirements of IAS 24 Related Party Disclosures to disclose related
party transactions entered into between two or more members of a group,
provided that any subsidiary which is a party to the transaction is wholly
owned by such a member
v) The requirements of paragraphs 10(d), 10(f), and 134 to 136 of IAS 1
Presentation of Financial Statements
vi) The requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies,
Changes in Accounting Estimates and Errors
Where relevant, equivalent disclosures have been given in the
Group financial statements of which the Company's results are
included.
The financial statements have been prepared under the historical
cost convention. Comparative data is for the period ended 29
September 2018.
2 ACCOUNTING POLICIES
The principal accounting policies adopted are set out below.
A) GOING CONCERN
When considering the going concern assertion, the Board reviews
several factors including a detailed review of the above risks and
uncertainties, and management's current expectations. Further
details of the assumptions, sensitivities and procedures performed
are given in the Strategic Report. As a result of this review the
Board believes that the Company will continue to meet all of its
financial commitments as they fall due and will be able to continue
as a going concern for the foreseeable future. Therefore, the Board
considers it appropriate to prepare the financial statements on the
going concern basis.
B) FINANCIAL PERIOD
The accounting period ends on the Saturday which falls closest
to 30 September, resulting in financial periods of either 52 or 53
weeks.
Throughout the financial statements, Directors' Report and
Strategic Report, references to 2019 mean "at 28 September 2019" or
the 52 weeks then ended; references to 2018 mean "at 29 September
2018" or the 52 weeks then ended.
C) TAXATION
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Company intends to settle
its current tax assets and liabilities on a net basis.
D) INVESTMENTS
Fixed asset investments are shown at cost less provision for
impairment.
E) FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are recognised in the
Company's statement of financial position when the Company becomes
a party to the contractual provisions of the instrument.
All financial assets are recognised and derecognised on a trade
date where the purchase or sale of a financial asset is under a
contract whose terms require delivery of the financial asset within
the timeframe established by the market concerned, and are
initially measured at fair value plus transaction costs, except for
those financial assets classified as at fair value through profit
or loss, which are initially measured at fair value.
Financial assets are classified into the following specified
categories: financial assets "at fair value through profit or loss"
(FVTPL), financial assets "at fair value through other
comprehensive income" (FVOCI), and financial assets carried at
"amortised cost". The classification of financial assets under IFRS
9 is generally based on the business model in which a financial
asset is managed and its contractual cash flow characteristics.
Trade and other receivables
Trade and other receivables that have fixed or determinable
payments that are not quoted in an active market are initially
recognised at fair value and then carried at amortised cost, using
the effective interest method, less any impairment. Interest income
is recognised by applying the effective interest rate, except for
short-term receivables when the recognition of interest would be
immaterial.
EFFECTIVE INTEREST METHOD
The effective interest method is a method of calculating the
amortised cost of a debt instrument and of allocating interest
income over the relevant period. The effective interest rate is the
rate that exactly discounts estimated future cash receipts
(including all fees on points paid or received that form an
integral part of the effective interest rate, transaction costs and
other premiums or discounts) through the expected life of the debt
instrument, or, where appropriate, a shorter period, to the net
carrying amount on initial recognition.
Income is recognised on an effective interest basis for debt
instruments other than those financial assets and liabilities
classified as at FVTPL.
IMPAIRMENT OF FINANCIAL ASSETS
Financial assets, other than those at FVTPL, are assessed for
indicators of impairment at each statement of financial position
date. Financial assets are impaired where there is objective
evidence that, as a result of one or more events that occurred
after the initial recognition of the financial asset, the estimated
future cash flows of the investment have been impacted. The Company
assesses on a forward-looking basis the expected credit losses
associated with its financial assets carried at amortised cost.
For certain categories of financial asset, such as trade
receivables, assets that are assessed not to be impaired
individually are subsequently assessed for impairment on a
collective basis. Objective evidence of impairment for a portfolio
of receivables could include the Company's past experience of
collecting payments, an increase in the number of delayed payments
in the portfolio past the average credit period, as well as
observable changes in national or local economic conditions that
correlate with default on receivables. The Company applies the IFRS
9 simplified approach to measuring expected credit losses which
uses a lifetime expected loss allowance for financial assets.
For financial assets carried at amortised cost, the amount of
the impairment is the difference between the asset's carrying
amount and the present value of estimated future cash flows,
discounted at the financial asset's original effective interest
rate.
The carrying amount of the financial asset is reduced by the
impairment loss directly for all financial assets. The Company will
write off, either partially or in full, the gross carrying amount
of a financial asset when there is no realistic prospect of
recovery. This is usually the case when it is determined that the
debtor does not have the assets or sources of income that could
generate sufficient cash flows to repay the amounts subject to the
write-off.
If, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event
occurring after the impairment was recognised, the previously
recognised impairment loss is reversed through profit or loss to
the extent that the carrying amount of the investment at the date
the impairment is reversed does not exceed what the amortised cost
would have been had the impairment not been recognised.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash on hand and demand
deposits and other short-term highly liquid investments that are
readily convertible to a known amount of cash within three months
and are subject to an insignificant risk of changes in value.
DERECOGNITION OF FINANCIAL ASSETS
The Company derecognises a financial asset only when the
contractual rights to the cash flows from the asset expire; or it
transfers the financial asset and substantially all the risks and
rewards of ownership of the asset to another entity. If the Company
neither transfers nor retains substantially all the risks and
rewards of ownership and continues to control the transferred
asset, the Company recognises its retained interest in the asset
and an associated liability for amounts it may have to pay. If the
Company retains substantially all the risks and rewards of
ownership of a transferred financial asset, the Company continues
to recognise the financial asset and also recognises a
collateralised borrowing for the proceeds received.
FINANCIAL LIABILITIES AND EQUITY instruments
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that evidences a
residual interest in the assets of the Company after deducting all
of its liabilities. Equity instruments issued by the Company are
recorded at the proceeds received, net of direct issue costs.
Financial liabilities that are classified as FVTPL relate to
derivatives that is not designated and effective as a hedging
instrument. Financial liabilities at FVTPL are stated at fair
value, with any resultant gain or loss recognised in profit or
loss.
OTHER FINANCIAL LIABILITIES
Other financial liabilities, including borrowings, are initially
measured at fair value, net of transaction costs. Other financial
liabilities are subsequently measured at amortised cost using the
effective interest method, with interest expense recognised on an
effective yield basis. The effective interest method is a method of
calculating the amortised cost of a financial liability and of
allocating interest expense over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future
cash payments through the expected life of the financial liability,
or, where appropriate, a shorter period, to the net carrying amount
on initial recognition.
DERECOGNITION OF FINANCIAL LIABILITIES
The Company derecognises financial liabilities when, and only
when, the Company's obligations are discharged, cancelled or they
expire.
F) DIVIDS
Dividends payable and receivable are only included in the
financial statements in the year that they have been formally and
irrevocable agreed, this is usually by reference to the board
resolution agreeing the payment on the dividend.
G) FINANCE INCOME AND FINANCE COSTS
Interest receivable or payable is recognised on accrual
basis.
H) SHARE-BASED PAYMENTS
The Group has applied the requirements of IFRS 2 Share-based
Payments.
The Company issues equity-settled share-based payments to
certain employees. Equity-settled share-based payments are measured
at fair value (excluding the effect of non-market-based vesting
conditions) at the date of grant. The fair value determined at the
grant date of the share-based payment is expensed on a
straight-line basis over the vesting period, based on the Company's
estimate of shares that will eventually vest. Fair value is
measured by use of the Black-Scholes model.
The Company provides employees with the ability to purchase the
Company's ordinary shares at 80% of the current market value
through the operation of its Sharesave scheme. The Company records
an expense, based on its estimate of the 20% discount related to
shares expected to vest on a straight-line basis over the vesting
period.
I) CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION
UNCERTAINTY
In the application of the Company's accounting policies, which
are described above, the Directors are required to make judgements,
estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
The Company considers the judgement as to whether investments or
balances owed by subsidiary undertakings are impaired. Where an
indication of impairment is identified the estimation of
recoverable value requires estimation of the recoverable value of
the cash generating units (CGUs)
The Directors have concluded that there are no other critical
areas of accounting judgement or any key sources of estimation
uncertainty in the application of the Company's accounting policies
in the current period.
3 PROFIT FOR THE PERIOD
As permitted by section 408 of the Companies Act 2006 the
Company has elected not to present its own profit and loss account
for the period. Topps Tiles Plc reported a profit for the financial
period ended 28 September 2019 of GBP10,009,000 (2018:
GBP15,792,000).
The auditors' remuneration for services to the Company was
GBP49,000 for audit-related work (2018: GBP40,000 for audit-related
work). Fees relating to non-audit work totalled GBPnil (2018:
GBPnil); see note 5 to the Group financial statements for further
details.
The Company had no employees other than the Directors (2018:
same), whose remuneration is detailed in the Annual Report.
4 INVESTMENTS
Restated
GBP'000
--------------------------------------------------------------- --------------------
Cost at 1 October 2017* 6,113
Movement in share options granted to employees 24
--------------------------------------------------------------- --------------------
Cost at 29 September 2018 6,137
--------------------------------------------------------------- --------------------
Acquisition of subsidiary 3,717
Movement in share options granted to employees 17
--------------------------------------------------------------- --------------------
Cost at 28 September 2019 9,871
--------------------------------------------------------------- --------------------
Impairment at 1 October 2017*, at 29 September 2018* and at 28
September 2019 (2,717)
Net book value at 28 September 2019 7,154
--------------------------------------------------------------- --------------------
Net book value at 29 September 2018 3,420
--------------------------------------------------------------- --------------------
*The opening figures have been restated to present the gross
cost of investment in subsidiaries and provisions for impairment
separately. There was no impact on the net investment value.
The following were subsidiaries that the Company has investments
in, both as at 28 September 2019 and 29 September 2018, with the
exception of Strata Tiles Limited as the company was acquired on 18
April 2019:
% of issued
shares
Subsidiary undertaking held Principal activity
-------------------------- ----------- ------------------------------------------------
Topalpha Limited* 100% Property management and investment
Topalpha (Warehouse) 100% Property management and investment and provision
Limited of warehousing services
Topalpha (Stoke) Limited 100% Property management and investment
Tiles4less Limited* 100% Intermediate holding company
Topps Tiles (UK) Limited 100% Retail and wholesale of ceramic tiles, wood
flooring and related products
Topps Tiles Holdings 100% Intermediate holding company
Limited*
Topps Tile Kingdom Limited 100% Intermediate holding company
Multi Tile Limited 100% Retail and wholesale of ceramic tiles, wood
flooring and related products
Topps Tiles Distribution 100% Wholesale and distribution of ceramic tiles,
Ltd wood flooring and related products
Multi-Tile Distribution 100% Intermediate holding company
Limited
Topps Tiles I.P Company 100% Ownership and management of Group intellectual
Limited property
Topps Tiles Employee 100% Employee benefit trust
Benefit Trust*
Strata Tiles Limited* 80% Architectural ceramic sales and distribution
Parkside Ceramics Limited* 100% Commercial distribution of ceramic and porcelain
tiles, natural stone and related products
* Held directly by Topps Tiles Plc
The investments are represented by ordinary shares.
All undertakings are incorporated in Great Britain and are
registered and operate in England and Wales.
The registered address of all of the above entities (excluding
Parkside Ceramics Limited) is Thorpe Way, Grove Park, Enderby,
Leicestershire, LE19 1SU, United Kingdom.
The registered address of Parkside Ceramics Limited is Parkside
Barnsdale Way, Enderby, Leicester, England, LE19 1SN.
5 Debtors: Amounts falling due within one year
Restated
2019 2018
GBP'000 GBP'000
---------------------------------------- -------- ----------
Amounts owed by subsidiary undertakings 133,267 112,505
Prepayments 27 277
Other debtors 38 -
---------------------------------------- -------- ----------
133,332 112,782
---------------------------------------- -------- ----------
The 2018 amounts have been restated by GBP36,828,000 to reflect
gross rather than net intercompany balances by counterparty. There
is no overall change in net assets as a result of this
restatement.
Amounts owed by subsidiary undertakings are interest free,
repayable on demand and not subject to any security.
6 Creditors: Amounts falling due within one year
Restated
2019 2018
GBP'000 GBP'000
---------------------------------------- -------- --------
Bank loans and overdrafts - 14,706
Trade and other creditors 157 -
Amounts owed to subsidiary undertakings 78,218 36,892
Accruals 968 1,034
---------------------------------------- -------- --------
79,343 52,632
---------------------------------------- -------- --------
The 2018 amounts have been restated by GBP36,828,000 to reflect
gross rather than net intercompany balances by counterparty. There
is no overall change in net assets as a result of this
restatement.
Amounts owed to subsidiary undertakings are interest free,
repayable on demand and not subject to any security.
7 Called-up share capital
2019 2018
GBP'000 GBP'000
---------------------------------------------------------------- -------- --------
Allotted, issued and fully paid 196,440,971 (2018: 196,440,971)
ordinary shares of 3.33p each (2018: 3.33p) 6,548 6,548
---------------------------------------------------------------- -------- --------
During the period nil shares were purchased by Topps Tiles
Employee Benefit Trust on behalf of the Group (2018: nil).
During the period the Group issued and allotted nil (2018:
3,673) ordinary shares with a nominal value of GBPnil (2018:
GBP122) under share option schemes for an aggregate cash
consideration of GBPnil (2018: GBP3,560).
8 Other Reserves
The other reserves comprise an unrealised gain arising on the
disposal of certain trademarks to a subsidiary company.
Five Year Record
UNAUDITED
53 weeks 52 weeks 52 weeks 52 weeks 52 weeks
ended ended ended ended ended
3 October 1 October 30 September 29 September 28 September
2015 2016 2017 2018 2019
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ---------- ---------- ------------- ------------- -------------
Group revenue 212,221 214,994 211,848 216,887 219,197
Group operating profit 18,883 21,073 17,889 13,735 13,333
Profit before taxation 17,019 19,982 16,999 12,688 12,475
Shareholders' funds 10,798 17,545 23,553 26,663 30,232
Basic earnings per share 6.75p 8.05p 6.98p 5.00p 5.18p
Dividend per share 2.34p 3.50p 3.40p 3.40p 3.40p
Dividend cover 2.88x 2.30x 2.05x 1.47x 1.52x
Average number of employees 1,915 1,977 2,030 2,114 2,089
Share price (period end) 148.75p 112.25p 75.50p 62.90p 66.60p
---------------------------- ---------- ---------- ------------- ------------- -------------
All figures quoted are inclusive of continued and discontinued
operations.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR KELFLKFFFFBZ
(END) Dow Jones Newswires
November 26, 2019 02:00 ET (07:00 GMT)
Topps Tiles (LSE:TPT)
Gráfica de Acción Histórica
De Mar 2024 a Abr 2024
Topps Tiles (LSE:TPT)
Gráfica de Acción Histórica
De Abr 2023 a Abr 2024