TIDMTPT
RNS Number : 0214H
Topps Tiles PLC
01 December 2020
1 December 2020
Topps Tiles Plc
Annual Financial Report
A year of challenge and change - emerging stronger and
refreshed
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 26 September 2020.
Strategic and Operational Highlights
-- The Group, which is already the UK's leading tile specialist, has set
a new market share goal, aiming to account for GBP1 in every GBP5 spent
on tiles and associated products in the UK by 2025 - "1 in 5 by 2025";
-- This will be achieved by serving a broader customer base, with a current
focus on enhancing our value credentials in Retail and growing our Commercial
business;
-- In our Retail business, we have launched a new strategy: "Great Experience,
Great Product and Great Value", ensuring the journey for our customers
starts and ends with a great service experience - whether in-store or
online;
-- The world-class customer service delivered by our staff across our 342
stores remains key to our offer and this is bolstered by our recently
relaunched website which, during the first national lockdown, saw online
sales treble;
-- In our Commercial business, we remain committed to our strategy of disrupting
the commercial tile market and constructing a new market leader over the
medium term;
-- Sustainability is becoming a key part of our agenda; we are working with
suppliers on high recycled content tiles and investing into energy efficient
infrastructure.
Financial Highlights
52 weeks ended 52 weeks ended YoY
26 September 28 September
2020 2019
Statutory Measures
Group revenue GBP192.8 million GBP219.2 million (12.0)%
Gross margin 58.5% 61.6% (3.1)ppts
(Loss) / Profit before tax GBP(9.8) million GBP12.5 million n/a
Basic earnings per share (4.11)p 5.18p n/a
Final dividend per share nil 2.30p n/a
Total dividend per share nil 3.40p n/a
Adjusted Measures
Retail like-for-like revenue
year-on-year(1) (12.5)% +0.6% n/a
Adjusted profit before tax(2) GBP3.6 million GBP16.0 million (77.5)%
Adjusted earnings per share(3) 1.57p 6.61p (76.2)%
Adjusted net cash / (debt)(4) GBP26.0 million GBP(11.3) million +GBP37.3 million
Adjusting items are detailed in the notes below - these include
the impact of IFRS 16 in 2020, items which are one-off in nature or
can fluctuate significantly from year to year (such as some
property-related items). In the prior year, adjusting items
included trading losses from the Commercial business whilst the
business went through an initial two-year phase of investing in
growth.
Financial Summary
-- Revenue decline of 12.0% (to GBP192.8 million; 2019: GBP219.2 million),
with retail like-for-like sales decline of 12.5%, predominantly reflecting
the impact of the Covid-19 pandemic, including a period of temporary store
closures in Q3;
-- Strong recovery in retail like-for-like sales in Q4, up 16.5%;
-- Adjusted profit before tax of GBP3.6 million (2019: GBP16.0 million),
with trading losses in Q3 from store closures being partially offset by
Government support and improved trading in the final quarter of the year;
-- Balance sheet transformed over the period, moving from adjusted net debt
of GBP11.3 million at the beginning of the year to an adjusted net cash
position of GBP26.0 million at year end (before the impact of IFRS 16).
The GBP37.3 million improvement includes a one-off GBP17.9 million net
receipt from the sale and leaseback of our head office and central warehouse
buildings as well as a significant focus on cash management as part of
Covid-19 response;
-- Based on a prudent view of the commercial market following Covid-19, recognised
a non-cash impairment of Commercial goodwill, intangible assets and property,
plant and equipment of GBP5.6m under IAS 36;
-- After adjusting items (detailed below), including the impact of IFRS 16
and the Commercial impairment, loss before tax on a statutory basis was
GBP9.8 million (2019: profit of GBP12.5 million);
-- No final dividend proposed in light of the challenges faced this year
(2019: full year dividend of 3.4 pence per share). Cash dividends paid
in this financial period relate to prior year final dividend payment.
The Board is keen to re-instate the dividend policy as soon as is appropriate.
This should be possible in the new financial year, subject to delivering
a positive adjusted EPS.
Navigating Covid-19
-- The safety and well-being of our colleagues and customers has been our
number one priority throughout the pandemic;
-- Retail stores trading in line with Government guidance - over half of
Retail sales are to trade customers;
-- Support from the UK Government's Job Retention Scheme ceased in early
August;
-- Named a Top Five retailer for our handling of the crisis by employee review
site Glassdoor and Retail Week magazine.
Current Trading and Outlook
-- In the first eight weeks of the new financial period, retail like-for-like
revenues increased by 19.6% (2019: decrease of 7.2%);
-- Retail business benefitting from the current increase in home improvement
activity;
-- Commercial market remains subdued but activity levels starting to improve.
Commenting on the results, Rob Parker, Chief Executive said:
"In what has been a very challenging year, I am pleased with our
response as a business, in the resilience we have shown and, in
particular, the strong bounce-back in retail sales delivered since
the initial national lockdown. Underpinning all of this have been
our exceptional colleagues across the Group, and I would like to
thank them all for their hard work and commitment throughout this
testing period.
"During the year we have transformed our balance sheet and have
accelerated our strategic development, building on our credentials
as the UK's leading tile specialist. We are ambitious for the
business and have set ourselves a new goal of taking GBP1 in every
GBP5 spent on tiles and associated products in the UK by 2025.
"It has been a year of challenge and change for Topps but we are
emerging stronger and refreshed. Our new financial year has begun
strongly, with retail like-for-like sales in the first eight weeks
ahead by 19.6%. With our true omni-channel offer, specialist
credentials and strong financial footing, Topps is well-positioned
for growth as the UK economy begins to recover."
Notes
(1) Retail like-for-like sales revenues are defined as sales
from online and stores that have been trading for more than 52
weeks. In 2020 sales in like for like stores was GBP182.3 million
(2019: GBP209.8 million), with an average of 357 stores included in
the weekly calculation.
(2) Adjusted profit before tax excludes the impact of IFRS 16
and 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:
2020 GBPm 2019 GBPm
Adjusted profit before tax 3.6 16.0
---------- ----------
Property
---------- ----------
- Impairment of property, plant, equipment
and movement in onerous lease provision (1.6) (1.8)
---------- ----------
- Vacant property costs (1.5) (1.1)
---------- ----------
- Gains on disposal of freehold properties 3.0 nil
(pre IFRS 16)(5)
---------- ----------
(0.1) (2.9)
---------- ----------
Commercial
---------- ----------
- Costs related to acquisition during the *nil *(0.4)
period
---------- ----------
- Commercial trading loss *n/a *(2.0)
---------- ----------
- Commercial amortisation of intangibles *n/a *(0.3)
& contingent consideration
---------- ----------
- Commercial impairment of goodwill, intangibles *(5.6) *nil
and property, plant and equipment
---------- ----------
(5.6) (2.7)
---------- ----------
Other
---------- ----------
- Costs related to business restructure (0.5) nil
---------- ----------
- Write off of goodwill relating to historic
acquisition nil (0.2)
---------- ----------
- Repayment of historical import duty nil 2.3
---------- ----------
(0.5) 2.1
---------- ----------
IFRS 16
---------- ----------
IFRS 16 adjustments 0.4 nil
---------- ----------
IFRS 16 - one off adjustment relating to sale (2.9) nil
and leaseback(5)
---------- ----------
IFRS 16 - one off changes including impairment (4.7) nil
of closure programme stores
---------- ----------
(7.2) nil
---------- ----------
Statutory (loss) / profit before tax (9.8) 12.5
---------- ----------
* In the prior year, adjusting items included trading losses
from the Commercial business whilst the business went through an
initial two-year phase of investing in growth. In the current year,
Commercial trading losses are included in adjusted profit. In the
current year, we have impaired commercial goodwill, intangibles and
property, plant and equipment, recognising the risk of a slower
growth profile following the impact of Covid-19 on sectors that the
Parkside and Strata businesses serve.
(3) Adjusted earnings per share is adjusted for the items
highlighted above, plus the impact of corporation tax
(4) Adjusted net debt is defined as bank loans, before
unamortised issue costs (note 20), less cash and cash equivalents.
It excludes lease liabilities under IFRS 16.
(5) Gains on disposal of freehold properties include a GBP4.0
million gain on the sale of the Group's head office and central
warehousing buildings calculated on a pre IFRS 16 basis, the sale
and leaseback transaction under IFRS 16 generates a GBP2.9 million
reversal of this gain leaving a net gain of GBP1.1 million - see
note 4 to the accounts.
For further information please contact:
Topps Tiles Plc (1/12/20) 020 7638 9571
Rob Parker, CEO (Thereafter) 0116 282 8000
Stephen Hopson, CFO
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 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
The UK tile market splits into two broad sectors - domestic,
accounting for around 55% of the market, and commercial, accounting
for the remaining 45% (source: Mintel). 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.
An external survey of the tile market is published by Mintel in
September each year. It covers the whole of the UK tile market,
based on manufacturer and supplier data. The September 2020 report
quotes the 2019 total market at GBP375.5 million at MSP
(manufacturers' selling prices) with a projection for 2020 at
GBP285.8 million, a 23.9% fall. The projected decline in the market
this year is largely due to the significant disruption from
Covid-19 and any projection of future performance is particularly
problematic due to the continued uncertainty the pandemic has
caused. Mintel forecasts that the market will rise by around 9% to
GBP310.6 million in 2021 and then recover to GBP375.5 million in
2022 but these estimates are highly likely to be revised based on
the current strong level of demand being seen in the domestic
sector.
Domestic Tile Market
Taking on a home improvement project is generally regarded as
discretionary spend and therefore consumer confidence is seen as a
good indicator of future growth. However, due to the pandemic,
there are other factors influencing levels of demand. Following the
period of lockdown, there has been a wave of domestic home
improvement work, a rediscovery of the love of the home and in some
cases, diversion of discretionary spend from other areas such as
holidays into home improvement. The market is therefore currently
more buoyant than the metrics suggest however the sustainability of
this trend is hard to forecast.
During 2020, the average level of consumer confidence was -22.1,
which compares to -12.5 in 2019 (source: GFK). Over the first half
(excluding March), the index was relatively stable at -11, the
second half has been dominated by the effects of Covid-19 with an
average level of consumer confidence at -29.3.
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. UK housing
transactions across the first half were stable, averaging around 1%
growth (excluding March). The second half has seen significant
disruption as Covid-19 preventative measures specifically impacted
the housing market and transactions fell by 31%. Transactions for
the financial year were 1.0 million, around 16% below the trend
over recent years of approximately 1.2 million (Source: HMRC).
UK housing prices can also be a useful indicator of our market.
In a rising market, home owners tend to feel more affluent and are
more confident in spending money on their homes. During the year
house prices grew slowly, with the average price of a house in the
UK at GBP218,947 (2019: GBP214,394) (Source: Nationwide). It should
be noted, however, that 2020 has been a highly unusual year for
economic indicators and the significant restriction in housing
transactions detailed above may also mean that the house price data
is a less robust indicator for this specific period.
Construction output for private housing repair, maintenance and
improvement declined by 18.6% across the period (source: ONS).
Commercial Tile Market
The UK commercial tile market is fragmented and regionalised
with only a 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 higher end residential. Our success in this market results from
appealing to both designers and architects, with our quality and
differentiated offer, and to contractors, who may require more
commoditised products, in large quantities, in short timescales,
but at lower prices. Although the focus for our commercial business
is on customers in the former category, where we can leverage our
access to differentiated product through our supplier
relationships, the Group's buying advantage and stock holding
position also supports volume sales.
The commercial tile market has seen and continues to see
significant disruption resulting from Covid-19. During the most
intense period of the UK lockdown during the third quarter a number
of our construction and refurbishment projects were postponed or
starts delayed or cancelled. The long-term nature of many
commercial projects means that some of these may now take time to
materialise as investment in certain sectors remains constrained.
Although data indicates an improvement in new project starts, they
remain below FY19 levels and it is likely the commercial market for
tiles will remain somewhat subdued for the next 12-18 months.
Market performance remains highly varied by sub-sector and by
client within each sub-sector and we have seen differing activity
levels across retailers, restaurant brands, hotel, construction and
developer clients.
Construction output for the private commercial sector declined
by 15.4% across the period (source: ONS).
Covid-19
In common with all organisations, the global pandemic has
generated an unprecedented level of disruption to our business. Our
Retail stores closed from 23 March 2020 and the most significant
period of disruption was in our third quarter, from April to June.
Whilst stores were closed, we relied on our website (which was
relaunched in October 2019) and online sales trebled in this
period. We slowly re-opened stores (allowed due to our 'Home and
hardware' categorisation) as we developed safe working practices
for our colleagues and customers, and gained confidence that we
could safely service our customers' needs. One particular highlight
during the lockdown period was our ability to maintain supply
through the strength of our supplier relationships and the hard
work and endeavour of our colleagues working in inventory
management, buying and logistics.
Alongside the safety of our colleagues and customers, the key
focus of the business in this period was on managing cash and
strengthening our financial position. We have emerged stronger as a
result, having removed an annualised GBP4.0 million of operating
costs, further rationalised the store estate, monetised GBP18.1
million of freehold assets through the sale and leaseback of our
head office and warehouse facilities and reduced capital
expenditure (excluding freehold purchases) by GBP3.2 million,
compared with the prior year. These actions, combined with a much
stronger period of trading in our retail business over the final
quarter and the timing of year end, put the business in a strong
position with adjusted net cash of GBP26.0 million and available
headroom against existing facilities of GBP75.0 million at the year
end.
We estimate that the trading disruption from Covid-19 in the
third quarter, including temporary closure of stores, impacted
gross profit by approximately GBP16 million, contributing to our
statutory loss in the year. The business used the support provided
by the UK Government - principally the Job Retention Scheme and the
cessation of retail business rates. During April, when our stores
were closed, around 90% of our colleagues were furloughed. As
stores re-opened, our use of Government support schemes reduced
through to August, when we ceased further claims against the Job
Retention Scheme. The total amount of support received from the
Government in the financial year was GBP10.7 million, comprising
GBP5.3 million from the Job Retention Scheme, GBP4.7 million from
the cessation of business rates and GBP0.7 million of grants.
Liquidity has been supported through an additional GBP10.0 million
loan facility through existing lenders and backed by the UK
Government Coronavirus Large Business Interruption Loan Scheme
("CLBILS") of which GBP5.0 million was drawn at year end, as well
as GBP6.0 million of VAT deferrals which we expect to repay during
the current financial year.
The risks presented by Covid-19 remain and we are very conscious
of the resulting uncertainties that this generates. However, the
business is well positioned to deal with these uncertainties and we
are confident that our market leading position will strengthen as
we continue to respond by making decisions in the best long-term
interests of the business. One key lesson from the first national
lockdown is how much our customers value our stores and the support
of our colleagues, and the Board would like to place on record its
thanks and gratitude to all colleagues across the business for
their support and endeavour during this period. Topps Tiles has a
strong team of talented and capable people and this period has
demonstrated that unequivocally.
Core Purpose, Goal & Strategy
The core purpose of the Group is to inspire customers through
our love of tiles. This gives us a very clear focus on our chosen
specialism of tiles (and closely related products) and encourages
all of our colleagues to be passionate about the products we
sell.
This year we announced a new goal for the business. Based on
total market share (including both the domestic and commercial
markets) and encompassing tiles, adhesives and grouts - which
comprise a material portion of our annual sales - we estimate that
our current combined market share in the UK is around 17%. Our new
goal is to achieve a 20% share - accounting for GBP1 in every GBP5
spent on tiles and associated products in the UK. We believe that
we can achieve this target by 2025, requiring us to outperform the
market by approximately 3.5% each year over the next five
years.
Our strategy to achieve this objective is to broaden our
customer base while retaining our specialism in tiles and
reputation for high-quality and innovative products. Our Retail
business is the clear leader in the UK. This year we have conducted
a robust appraisal of a number of aspects of our retail business
and identified exciting opportunities for future growth. For
example, we will ensure that customers fully appreciate our value
credentials - that with our market-beating product range they will
always be able to find great products at great prices and truly
'get the look for less'. Our entry into the Commercial tile market
in 2017 was a key strategic step, allowing us to approximately
double our addressable market whilst maintaining our specialism in
tiles. Our continued progress against our Commercial ambitions is
explained below.
Our Retail and Commercial businesses are both supported by our
Group strategies of "Leading Product" and "Leading People".
Leading Product
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
This year we relied on the strength of our supply chain more
than ever before. During the period of peak Covid-19 disruption
many of our suppliers were also experiencing disruption and we
worked with them very pro-actively to ensure we would have
continued access to product. This was further compounded by the
period following lockdown when our retail business experienced an
exceptionally robust recovery in demand. We believe the strength of
our supply chain and strategic relationships with manufacturers
have enabled us to stay ahead of our competitors in terms of
product availability through this period. Our strategic supplier
base accounts for 80% of our purchases (2019: 70%).
In response to the disruption caused by Covid-19 we slowed the
flow of new product into our Retail business this year, delivering
32 new product ranges; approximately 35% of these were design-led
by us in collaboration with key supply partners. 87% of our retail
ranges are either own brand or exclusive to us and this forms a key
aspect of our product differential. In addition, we launched a
further 11 ranges under our rebranded 'Get The Look For Less'
initiative.
This year we have also launched the second of our unique
'collections', which bring a group of tiles and associated products
together under one brand that we can present to our customers as a
single project solution. Following the launch of Regal(R) in 2019,
Matrix(R) is a portfolio of small format ceramic wall tiles in 23
colours, two sizes and two finishes, with co-ordinating detailing
including tile trims and grouts. The colours have been developed by
Topps and are built on design trends and customer insights. The
range represents a significant growth opportunity appealing equally
to both domestic and commercial clients. Matrix(R) is advantaged in
the market on design, choice, quality and stock availability
compared to any of its market rivals.
In our Commercial business, we have continued to leverage the
Group's scale to develop strategic supplier relationships; allowing
us to build a portfolio of recognised brands and products appealing
to the architectural and design sector, often on an exclusive
basis. The Commercial business now has access to more than 8,000
products from our global supplier base. Leveraging our scale means
more than two-thirds of commercial purchases are through our
strategic supplier group and provide us advantaged cost of goods.
Leveraging our specialism means we have been very successful at
developing bespoke projects for key clients and won sizeable
developments across the residential, retail and hospitality
sectors.
Technical authority is a further key aspect of differential in
our market and we are leaders in this field, working closely with
our strategic supplier base to set exacting standards on quality
and performance. We have our own in-house technical team to meet
the demands of our broader customer base and offer key technical
information and on-demand support across all channels through our
dedicated in-house testing facilities and quality control.
Leading People
The Group's success is underpinned by nationally-recognised and
industry-leading levels of capability and engagement of our
colleagues. This ensures excellence in both service to our
customers and clients, and to the support provided to store teams
by our Leicester support office and field teams. This starts with
our Leading People initiative, which encourages colleagues to lead
the thinking, lead the pace and for our managers to lead the
team.
Progress and Outlook
The Covid-19 pandemic has been central to our engagement with
our people this year, with around 90% of our colleagues being
furloughed during the period of maximum disruption in the third
quarter of our financial year. From early August all of our
colleagues had returned to work and we stopped using the Government
Job Retention Scheme. Our commitment to our colleagues and their
wellbeing and engagement was reflected in being named a Top Five
retailer for our handling of the crisis by employee review site
Glassdoor and Retail Week magazine. This latest acknowledgment
followed a previous award from Glassdoor where we were also named
in the top ten Best Employers in the UK (and were the
highest-listed retailer).
We have introduced a strong focus on mental health and wellbeing
this year, with 24 colleagues across the country trained as Mental
Health First Aiders, and 50 more volunteering to join the second
phase of training. The business joined the annual 'Time to Talk'
day, a campaign run by Time to Change, a social movement that aims
to change the way people think and act about mental health. This
included encouraging colleagues to reach out to each other through
whatever means they can, providing a support network where they
feel people may be more vulnerable, as well as online materials to
support colleagues and a telephone helpline.
Our consistently high engagement levels were evidenced in our
annual colleague survey, MyVoice, which enables all colleagues
across the business to have their say on their feelings about
leadership, work and wellbeing. In November 2019, 70% of colleagues
completed the survey, with 74% of responses strongly agreeing, or
agreeing, with positive statements about the Group.
Our investment in our people continues with the development
opportunities we provide. A total of 35% of vacancies across the
Group are filled internally, enabling us to offer progression
within the business as well as retaining the technical skills of
store colleagues.
This year we introduced an apprenticeship scheme to enable us to
use our contributions to the Apprenticeship Levy to develop our
people and business capability. We are working with national
specialist partners to provide Level 3 to Level 6 apprenticeship
qualifications which are currently developing colleagues in IT,
Project Management, Finance, Payroll, HR, Business Administration,
Marketing and Customer Service disciplines. Qualifications will
soon be available for store colleagues as well as a 'warehouse to
wheels' provision which will enable warehouse colleagues to acquire
an LGV licence - providing career progression opportunities.
Sustainability
Sustainability is becoming a key part of our agenda. This year
we made progress in reducing our impact on the environment across a
number of areas, specifically in transport and supply chain, waste
and recycling, working with suppliers on innovative products
involving high recycled content, and investing in energy efficient
infrastructure.
We improved transport efficiency by repatriating more than 1,000
product lines within our 'Essentials' category to our distribution
centre in Leicester, removing the need for c.10,000 direct-to-store
deliveries by our suppliers every year. We also changed the
provider of direct customer orders, which were previously managed
from our stores, such that these orders are now fulfilled on shared
resource, on vehicles which are largely full from the point of
collection to delivery. This increases efficiency and reduces the
level of carbon emissions.
In our supply chain, we build long term relationships with
suppliers who share our ethical values. All of our suppliers are
required to comply with the Topps Responsible Sourcing Code. This
code has been designed to be ethical, auditable, and achievable and
is in place to promote good working practices with our suppliers.
As part of our auditing process, all of our suppliers have to
complete a Social and Ethical Self-assessment document to be able
to identify if there are any product or geographical risks. We are
working closely with Intertek, the leading Quality Assurance
experts, who will carry out independent third-party auditing where
due diligence mapping has identified any potential risks. To
mitigate any additional risk there are also on-going surveillance
visits carried out by our buyers, factory agents and members of our
technical team to ensure that our products continue to be ethically
sourced.
We continue to work with suppliers to increase the level of
recycled content used in production and, this year, made a
long-term commitment with one supplier to support production of
tiles with 98% recycled content. This unique technology has the
potential to revolutionise tile production in the future, utilising
waste materials and reducing gas consumption. Our first range,
Sequel Vibe, has already won several awards for our commercial
business Parkside. Our second range Principle(TM) will launch in
early 2021.
We collect waste from across our store network and are working
with Biffa Waste Recycling to reduce the level of waste sent to
landfill. We also collect damaged tiles from our stores and this
year recycled 84% of our tiles, a 32 ppts increase on the previous
year.
Our rolling programme of LED lighting installations across the
store estate continues, with 100 additional stores due to complete
by early 2021. This programme will deliver 1,530 tonnes of annual
CO2 savings as well as provide reduced maintenance across the
estate.
Retail - Topps Tiles
This year we have launched a new strategy in our retail business
- "Great Experience, Great Product and Great Value". We strive to
ensure that the journey for all of our customers starts and ends
with a great customer service experience, whether in-store or
online, and we complement this with a range of market leading
products supported by our Leading Product initiative. Ultimately,
these are combined to deliver great value to our customers.
Progress and Outlook
As part of our new strategic retail focus to deliver great value
for customers and our new Group market share goal we are keen to
ensure we appeal to as broad a range of customers as possible. A
thorough analysis of our offer was completed during the year and
identified an opportunity to increase our participation in the
lower-priced 'value' segment. As part of this strategy we have
rebranded and relaunched the 'Get The Look For Less' part of our
offer as well as adding new ranges. This new branding in stores
makes it easier for our customers to seek out our lower priced
ranges where they wish to do so and ensures that we have a relevant
offer for a wider range of customers.
We have also reviewed our range of tile accessory items such as
adhesives and grouts and ensured that we are offering our retail
customers strong value in these areas. This has resulted in some
price reductions and hence investment of gross margin. Sales have
responded positively and this initiative has been profit
enhancing.
Our digital platform remains a vital part of our overall offer
and for many customers our website is the first step on their
journey with us. We relaunched our website at the start of this
year - this included an all-new design but also a modern platform
with greater flexibility and resilience. This served us
particularly well during the peak of the Covid-19 disruption.
During the period when our Retail stores were closed, our website
sales trebled and this provided a vital inflow of cash to the
business, and allowed us to continue to service some of our
customers' needs. Subsequently, with the re-opening of our stores,
online sales have decreased but remain above the prior year level.
We are very focused on offering our customers a true omni-channel
experience and our new website has now made this possible -
customers can choose which channel they utilise during their
journey - and can change seamlessly between them as they wish.
Almost all of our customers will use our website at some stage but
90% of our customers will also visit one of our stores.
We have continued to progress our social media activities this
year across Instagram, Pinterest and Facebook. We now have 50,000
followers on Instagram, an increase of 44% on the prior year.
Engagement in our Facebook retail page has increased by 82% this
year, and on Pinterest we have an audience of around 850,000, with
impressions double the prior year.
Our colleagues offer our customers a world-class experience
within store. The majority of our customers shop infrequently for
tiles which means that when they do, they need advice and
expertise. Our customer satisfaction scores are very important to
us in delivering our strategy and this year we have achieved an
overall satisfaction rating of 89% (2019: 86%). This means that 89%
of customers who filled in a survey rated us as five out of five,
an outstanding performance.
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. Over recent years we have identified
opportunities to reduce the size of our portfolio without
significantly reducing convenience for our customers. This helps us
to continue to respond to our customers' changing needs, develop a
true omni-channel business and also to drive improvements in return
on capital employed. At the period end we had 342 stores (2019: 362
stores), having closed 24 stores during the period and opened 4. We
anticipate that there will be further opportunities for modest
reductions in the store portfolio and recognise that this approach
requires flexibility in our leased portfolio. The average unexpired
lease term to the next break opportunity is 3.4 years (2019: 3.8
years); removing stores which are strategically important (where we
have proactively taken longer terms to secure our tenure) from that
calculation the average unexpired lease term to break falls to 3.3
years (2019: 3.1 years).
Our customer base splits into two distinct but related groups -
professional fitters (trade) and homeowners (retail). The two
groups are related in that trade provides a vital link to
homeowners who prefer to transact through their fitter rather than
with us direct. This year we have seen increased demand from our
retail customers, especially in the period following the initial
Covid-19 lockdown. We attribute this to homeowners having more time
to invest in DIY and also concerns about tradespeople entering
their homes during the pandemic. It is too early to say to what
extent this shift is temporary or structural but the business is
equally well positioned to provide for either customer group. Our
trade customer base represents 55% of our total sales (2019: 56%)
and includes 97,000 (2019: 90,000) registered traders who also
participate in our market-leading trade loyalty scheme.
Commercial - Parkside & Strata
The commercial tile market represents around 45% of the overall
UK tile market, and with our entry into this market in 2017 we
approximately doubled the size of our addressable market whilst
maintaining our specialism in tiles and related products. Our entry
started with the acquisition of the Parkside business in September
2017 and in April 2019 we purchased the Strata business which was
complimentary to Parkside. Our strategy of "Disrupt and Construct"
means that we plan to 'disrupt' the existing highly fragmented
competitive landscape and put in place the building blocks to
'construct' a new market leader. Our tile expertise, supplier
relationships, size and scale as a Group is central to this plan -
giving us the resources to recruit a talented sales team, invest in
market-leading pricing and access the broadest range of products,
often on an exclusive basis.
Progress and Outlook
The first half of the 2020 financial year was a positive period
for our Commercial business with sales growing above GBP4.5m in the
first six months and increasing by 246% year on year (including the
benefit from acquiring Strata in the prior year) as we successfully
executed our strategy. The disruption generated from Covid-19 has
been significant in the commercial market and we have seen fewer
projects commencing and delays to existing projects. The impact of
this was to reduce sales by 18% year on year across the second
half. Our buying power and technical expertise in tiles gives us
the flexibility to focus on commercial sectors and sub-sectors less
affected by Covid-19. Even within hospitality and leisure, areas
highly impacted, activity remains and our broad client base and
flexibility of supply means we are well placed to service this
demand.
Overall sales for the full year were GBP7.5 million, an increase
of 53% (including the benefit from acquiring Strata in the prior
year). Trading losses across the year improved slightly to GBP1.9
million (2019: GBP2.0 million), excluding GBP0.3 million (2019:
GBP0.3 million) arising on the amortisation of intangible assets
and provision for redemption of non-controlling interest. Our
stated desire to move our Commercial business to breakeven has been
delayed due to the Covid-19 disruption and a further loss is
expected in the year ahead. As covered in the Financial Review, the
Board have conducted an impairment review of the goodwill,
intangible assets and property, plant and equipment held within the
Commercial business. The Board reviewed a range of scenarios but,
taking a prudent view and recognising the risk of a slower growth
profile following the impact of Covid on sectors that the Parkside
and Strata sales teams serve, the Board have decided to impair
these assets to a carrying value of zero. The impact on loss before
tax of this impairment was GBP5.6 million.
Notable projects we delivered this year include supplying the
tiles for over 11 hotel projects including the Hilton, Hyatt,
Marriott and Grosvenor hotel groups. We continue to supply major UK
retailers and 2020 has included some exciting work with Harrods
that will continue into the new year. We have worked closely with
residential building development partners to deliver unique tile
designs including the Silk District Whitechapel development where
we supplied bespoke tiles for 700 apartments.
Digital interaction is critical to success in the commercial
market, with the key customer groups of architects and designers
needing to access services digitally. This year we again
strengthened our digital offer by launching video consultations, a
five-minute sample selector tool, 360 studio tours, and an online
colour design lab. Engagement with our partners and clients has
risen significantly through the Parkside and Strata websites and
social media. We attended over 30 sales events in FY20 and built
project pipelines that have more than doubled year on year. The
commercial sector is a relationship business and our sales team of
25 people is key to this success.
During the year we integrated the Strata sales support operation
into our Parkside business and exited the Strata offices and
warehouse in Guildford. Both businesses now operate on the same new
systems platform and are supported from our central team in
Leicester, as part of the 'construct' side of the strategic plan.
This will ensure that our Commercial operations are more efficient
and future-proof, and also helps to reduce our cost base
significantly.
Our Commercial business remains a key element of our Group
strategy and we remain confident in our ability to build a
market-leading profitable business over the medium term.
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 52 weeks YoY
to to
26 September 28 September
2020 2019
Financial KPIs
Group revenue growth year-on-year (12.0)% +1.1% n/a
Retail like-for-like sales growth
year-on-year* (12.5)% +0.6% n/a
Group gross margin 58.5% 61.6% (3.1)ppts
Adjusted profit before tax* GBP3.6m GBP16.0m (77.5)%
Adjusted earnings per share* 1.57 pence 6.61 pence (76.2)%
Adjusted net cash / (net debt)* GBP26.0m GBP(11.3)m +GBP37.3m
Inventory days 134 134 nil
Non-financial KPIs
Customer overall satisfaction
score 88.5% 86.0% +2.5 ppts
Colleague turnover 28.8% 36.8% (8.0) ppts
Carbon emissions per store (tonnes
per annum) 24.7 32.0 (22.8)%
Number of retail stores at year
end 342 362 (20)
* 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 that 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.
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 profit before tax differs from the statutory profit
before tax as it excludes the effect of one off or fluctuating
items, allowing stakeholders to understand results across years in
a more consistent manner. It also excludes the impact of IFRS 16 to
enable a more meaningful comparison to the prior year.
For the current year the following items have been excluded:
-- Gains from the sale of freehold properties (pre IFRS 16) of GBP3.0 million
(2019: GBPnil);
-- Losses related to movement in property related provisions (including onerous
lease movements and provision against fixed assets in loss making stores)
of GBP1.6 million (2019: losses of GBP1.8 million);
-- Vacant property costs of GBP1.5 million (2019: GBP1.1 million) for stores
closed as part of a portfolio optimisation programme;
-- Impairment of Commercial goodwill, intangibles and property, plant and
equipment under IAS 36, of GBP5.6 million (2019: GBPnil), based on a prudent
view of the commercial market following Covid-19 ;
-- One-off costs relating to business reorganisation (across store operations,
central functions and the integration of Strata back office support) of
GBP0.5 million (2019: GBPnil); and
-- IFRS 16 related adjustments of GBP7.2 million (2019: GBPnil), of which
GBP2.9 million relates to a one-off adjustment connected to the sale and
leaseback of freehold properties (see gains note above), GBP4.7 million
relating to one off changes including impairment of closure programme
stores and GBP0.4 million gain relating to ongoing differences to the
P&L following the adoption of IFRS 16.
In the prior year we adjusted for a gain relating to repayment
of historical import duty from HMRC of GBP2.3 million, losses from
a write off of goodwill relating to a historic acquisition (Surface
Coatings Ltd) GBP0.2 million, losses related to the Commercial
business and the purchase of Strata of GBP2.7 million and, as
described above, losses related to movement in property related
provisions of GBP1.8 million and vacant property costs of GBP1.1
million.
All of the FY20 adjustments other than the costs relating to the
business reorganisation and some of the vacant property costs were
non-cash.
STATEMENT OF FINANCIAL PERFORMANCE
Revenue
Total revenue for the period ended 26 September 2020 decreased
by 12.0% to GBP192.8 million (2019: GBP219.2 million). Revenue was
materially impacted by temporary store closures in the third
quarter as part of our response to the Covid-19 pandemic. In
addition, there was a net closure of 20 stores in the year.
Retail like-for-like store sales were 12.5% lower than the prior
year, which consisted of a 6.1% decrease in the first half of the
financial period and a 18.8% decrease in the second half. Retail
like-for-like sales in the final quarter increased 16.5% on the
prior year.
Gross Margin
Total gross margin was 58.5%, a decrease from 61.6% in the prior
year. 0.3 ppts of the margin decline was due to the changing sales
mix between Retail and Commercial, with the balance due to lower
margins in Retail.
Gross margin in the retail business decreased from 62.0% in the
prior year to 59.2% in the current year, a 2.8 ppt decline. This
was driven by an increased focus on pricing competitiveness and
changes in product mix (1.0 ppt impact), as well as direct delivery
costs, especially web sales delivered direct to our customers
during lockdown (0.4 ppts impact) and a higher expense relating to
inventory write offs and a higher inventory obsolescence provision
(1.4 ppts). The impact of foreign exchange on cost of goods sold
this year was immaterial.
For the year ahead, we anticipate that gross margin will be
between 59% and 60%.
Operating Expenses
Operating expenses were GBP118.8 million compared to GBP121.6
million in FY19 however the year on year change is distorted as a
result of the adoption of IFRS 16 and impairment of Commercial
assets. On an adjusted basis, operating expenses reduced from
GBP116.1 million to GBP108.4 million. Commercial operating expenses
were included within adjusted items for the first time, increasing
adjusted costs by GBP5.0m when compared to FY19. In addition,
within the year the Group benefitted from GBP10.7 million of
government support (see breakdown below). To provide a more
meaningful year on year movement, excluding government support as
well as Commercial operating expenses, adjusted operating costs
would have been GBP114.1 million, a decrease of 1.7% on the prior
year.
The movement in adjusted operating costs is explained by the
following key items:
-- Government support of GBP10.7 million - Job Retention scheme GBP5.3 million,
Rates holiday GBP4.7 million and local authority Covid-19 grants of GBP0.7
million;
-- Commercial operating costs of GBP5.0 million were included in adjusted
operating costs for the first time;
-- The average number of UK stores trading during the financial period was
357 (2019: 366), a 2.5% reduction, which resulted in approximately GBP1.8
million less cost;
-- Inflation at an average of approximately 2.0% increased our cost base
by around GBP2.3 million (excluding regulatory impacts);
-- Regulatory cost increases from the National Living Wage, accounted for
GBP0.6 million of additional costs;
-- Colleagues have been allowed to roll over unused holiday from FY19 into
FY20 due to the Covid-19 pandemic, resulting in an additional holiday
pay accrual at year end of GBP1.9 million;
-- Employee profit share costs decreased by GBP1.5 million, with lower level
of financial performance compared to plan;
-- Other savings of GBP3.5 million across the business including GBP1.7m
of savings specifically relating to the national lockdown (employment
and property costs) and GBP1.8m of other savings across other areas including
supply chain and marketing.
For the year ahead, we expect the adjusted operating costs
excluding IFRS 16 for the business to be between GBP115 million and
GBP116 million, subject to the level of trading performance.
Financing
Interest on bank loans and overdrafts, net of bank interest
receivable, was GBP0.8 million (2019: GBP0.9 million). During the
period of national lockdown, the Group drew down the full GBP39
million available on the revolving credit facility and took
additional facilities of GBP10 million (as part of the CLBILS
government backed scheme). Following the sale of the Grove Park
freehold assets for GBP18.1 million and very strong focus on
liquidity the Group has ended the year in an adjusted net cash
position, excluding lease liabilities under IFRS 16.
Net interest cover (calculated as adjusted EBITDA divided by net
interest on bank loans, overdrafts and deposits) was 15.7 times
(2019: 28.2 times).
IFRS 16 has had the impact of increasing finance costs by GBP3.0
million, resulting in total net finance costs of GBP3.8 million
(2019: GBP0.9 million, as reported under IAS 17).
Profit Before Tax
The loss before tax was GBP9.8 million (2019: GBP12.5 million
profit).
Excluding the adjusting items detailed above, profit before tax
was GBP3.6 million (2019: GBP16.0 million). The Group adjusted
profit before tax margin was 1.9% (2019: 7.5%).
Tax
The effective rate of corporation tax for the period was 18.4%
(on a post IFRS 16 basis) (2019: 19.2%).
Earnings Per Share
Basic earnings per share were (4.11) pence (post IFRS 16). Basic
earnings per share on a pre IFRS 16 basis were (0.86) pence (2019:
5.18 pence). Diluted earnings per share were (4.11) pence (post
IFRS 16). Diluted earnings per share on a pre IFRS 16 basis were
(0.86) pence (2019: 5.14 pence). Excluding the adjusting items,
adjusted earnings per share were 1.57 pence (2019: 6.61 pence) -
both calculated excluding the impact of IFRS 16.
Dividend and Dividend Policy
No final dividend has been proposed in light of the challenges
faced this year and the importance of conserving cash, as indicated
in the Interim Results (2019: full year dividend 3.4 pence per
share). However, the Board is keen to re-instate the dividend
policy of remitting approximately half of the adjusted earnings per
share back to shareholders as soon as is appropriate. This should
be possible in the new financial year, subject to delivering a
positive adjusted EPS.
STATEMENT OF FINANCIAL POSITION
Capital Expenditure
Excluding freehold and long leasehold acquisition, capital
expenditure in the period amounted to GBP4.4 million (2019: GBP7.6
million), a decrease of 42% year on year.
Key investments are as follows:
-- New retail stores GBP1.3 million - four new openings (including three
relocations) (2019: GBP2.7 million)
-- All-store improvement programme GBP0.2 million (2019: GBP1.8 million)
-- LED store improvement programme GBP0.6 million (2019: nil)
-- Central office refurbishment GBP1.3 million (2019: GBP0.7 million)
-- Group IT developments GBP0.3 million (2019: GBP0.7 million)
-- Commercial showrooms GBPnil (2019: GBP0.6 million)
-- Other expenditure GBP0.7 million (2019: GBP1.1 million)
In addition, we purchased two freehold properties as described
in the Acquisitions & Disposals section below for GBP2.3
million (2019: GBP0.2 million).
The Board expects capital expenditure in the year ahead to be
between GBP5 million and GBP6 million which will cover our core
investment plans, including investment of over GBP1.3 million in a
programme to retrofit LED lighting into a further 100 stores 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.
Acquisitions & Disposals
During the year we entered into a sale and leaseback arrangement
for our head office and central warehouse buildings for a price of
GBP18.1 million before costs (GBP17.9 million net of costs).
Following completion, we entered into leases for a combined annual
rent of GBP1.2m over a 20 year period. As a result of this
transaction, GBP13.7 million of non-current assets were
derecognised and a right of use asset of GBP10.5 million and a
lease liability of GBP12.7 million were booked.
We also disposed of our only investment property, an office
building, for a consideration of GBP0.8 million. During the year we
purchased the freehold interest in two store properties for GBP2.3
million to allow the Group to restructure the lease payments. These
assets were subsequently reclassified as assets held for sale and,
after year end, we entered into sale and leaseback agreements on
both sites.
At the period end the Group held five freehold or long leasehold
sites, with a total carrying value of GBP3.1 million (2019: six
freehold or long leasehold sites valued at GBP13.8 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 held at the last year end, at fair value.
Impairment of Commercial assets
Following a review of indicators of impairment under IAS 36, the
Board reviewed the recoverable amounts of the goodwill, intangible
assets and plant, property and equipment relating to our Commercial
business. Specifically, this is in relation to the acquisition of
Parkside Ceramics Limited in 2017 and Strata Tiles Limited in 2019,
and subsequent capital expenditure relating to these businesses.
The Board reviewed a range of scenarios but, taking a prudent view
and recognising the risk of a slower growth profile following the
impact of Covid on sectors that the Parkside and Strata businesses
serve, the Board have decided to impair these assets to a carrying
value of zero. The impact on loss before tax of this impairment was
GBP5.6 million.
Inventory
Inventory at the period end was GBP29.3 million (2019: GBP30.9
million) representing 134 days turnover (2019: 134 days turnover).
The September 2020 year end stock balance does not include any
additional stock for future potential import delays in advance of
the Brexit deadline (2019: GBP1.1 million was held in advance of
the 31 October 2019 Brexit deadline).
Cash flow
On a statutory basis, net cash from operating activities was
GBP51.0 million, compared to GBP21.9 million in the prior year
period. A significant factor in this change was the adoption of
IFRS 16 which replaces lease payments (recorded within operating
activities) with a payment of interest (recorded within operating
activities) and capital (recorded within financing activities)
relating to the lease liability. See the section on IFRS 16 below
for more details. To support comparability with prior years, an
analysis of free cash flow is presented below which excludes the
impact of IFRS 16.
Free cash flow was GBP41.8 million (2019: GBP11.5 million), an
increase of GBP30.3 million year on year, analysed in the table
below:
2020 2019
GBPm GBPm
Cash generated by operations before WC
movements 10.4 21.6
Changes in working capital 21.5 4.6
Interest (0.9) (0.9)
Tax (1.0 ) (3.4)
30.0 21.9
Capital expenditure excluding investments (4.4) (7.6)
Freehold and leasehold investments (2.3) (0.2)
Disposals and other investments 18.5 (2.6)
Free cash flow 41.8 11.5
Dividends (4.5) (6.6)
Change in adjusted net cash / (debt) 37.3 4.9
Adjusted net cash / (debt) at end of period 26.0 (11.3)
The working capital inflow was driven by a variety of factors,
including the deferral of VAT from the second calendar quarter of
2020 (GBP6.0 million) as part of the Government's Covid-19 support
package which is expected to be repaid from the start of the next
tax year, a lower closing inventory (GBP1.6 million), a holiday pay
accrual at year end (GBP1.9 million) and higher payables at year
end due to strong trading in the last quarter (c. GBP8.0 million)
as well as changes in other debtor and creditor balances.
Cash and cash equivalents at the period end were GBP31.0 million
(2019: GBP18.7 million) with borrowings of GBP5.0 million (2019:
GBP30.0 million).
Banking Facilities
The Group has a GBP39.0 million revolving credit facility in
place which is committed to July 2022 (2019: GBP39.0 million). At
the year end, none of this was drawn (2019: GBP30 million was
drawn). In addition, the Group has GBP10 million of credit
facilities through the Coronavirus Large Business Interruption Loan
Scheme ("CLBILS"). At the year-end, GBP5 million of this was drawn.
At the end of the year, the Group had GBP44 million of undrawn
committed banking facilities.
IFRS 16 'LEASES'
The Group has applied IFRS 16 'Leases' at 29 September 2019
(date of initial application), using the modified retrospective
approach. Under this approach, comparative information is not
restated and the cumulative effect of applying IFRS 16 is
recognised in retained earnings at the date of initial
application.
Accounting under IFRS 16
IFRS 16 applies a single 'on balance sheet' approach to lease
accounting. Under IFRS 16, leases are
accounted for as follows:
-- A right-of-use asset is recognised which represents the lessee's contractual
right to use the lease asset over the lease term. The right-of-use asset
is depreciated on a straight-line basis over the lease term.
-- A lease liability is recognised which reflects the lessee's obligation
to make payments under the lease term. The lease liability is held at
amortised cost, with an associated interest charge. This results in a
higher interest expense in the earlier years of the lease term.
IFRS 16 results in the timing of lease expense recognition being
accelerated for leases which would be currently accounted for as
operating leases. However, the total expense over the life of the
lease will be identical under IFRS 16 and IAS 17. IFRS 16 has no
economic impact and does not impact the cash flows of the
Group.
Statement of Financial Performance impact
The impact of the implementation of IFRS 16 on the Statement of
Financial Performance is as follows:
52 weeks ended 26 September 2020
Statutory
Impact of Results
under IFRS
Pre IFRS 16 IFRS 16 16
GBPm GBPm GBPm
---------------------- ------------ ---------- -----------
Group revenue 192.8 - 192.8
Cost of sales (80.0) - (80.0)
----------------------- ------------ ---------- -----------
Gross profit 112.8 - 112.8
Operating costs (114.6) (4.2) (118.8)
----------------------- ------------ ---------- -----------
Group operating loss (1.8) (4.2) (6.0)
----------------------- ------------ ---------- -----------
Net finance costs (0.8) (3.0) (3.8)
----------------------- ------------ ---------- -----------
Loss before taxation (2.6) (7.2) (9.8)
----------------------- ------------ ---------- -----------
Statement of Financial Position impact
On transition of IFRS 16 on 29 September 2019, the Group
recognised additional right-of-use assets of GBP117.7m, sub-lease
assets of GBP3.5m, lease liabilities of GBP128.2m and deferred tax
assets of GBP0.7m, as well as a reduction in prepayments,
provisions and liabilities. As a result, a transitional adjustment
of GBP3.6m decreased the opening balance of retained earnings.
As at 26 September 2020, adjusted net cash on a pre-IFRS 16
basis was GBP26.0m. This becomes net debt of GBP98.1m under IFRS 16
due to the recognition of the lease liabilities which are now on
balance sheet.
Our banking covenants are based on a frozen-GAAP basis and
therefore the application of IFRS 16
has no impact.
Cash Flow Statement impact
IFRS 16 does not impact the total cash flow during the period.
However, under IAS 17 the rental
payments were included within operating activities, whereas
under IFRS 16 these are treated as
financing activities. The GBPnil impact on the cash flow is
shown in the table below:
52 weeks ended 26 September 2020
Statutory
Impact of Results
under IFRS
Pre IFRS 16 IFRS 16 16
GBPm GBPm GBPm
------------------------------------------ --- ------------ ---------- --------------
Net cash from operating activities 30.0 21.0 51.0
Net cash from investing activities 11.8 0.4 12.2
Net cash used in financing activities (29.5) (21.4) (50.9)
------------------------------------------ --- ------------ ---------- --------------
Cash flow 12.3 - 12.3
------------------------------------------ --- ------------ ---------- --------------
Brexit
Throughout the year, the Board monitored developments and
received regular reports on progress from the Group's Brexit
Working Group as we prepared for the end of the transition period,
following the UK's exit from the European Union. We have
implemented the operational changes needed to manage new employment
practices and further border formalities and customs procedures for
imported products. Robust plans have been put in place to flex
delivery schedules to ensure continuity of supply should there be
an initial period of disruption at ports of entry. In addition, we
have invested in additional short-term stock-holding and
warehousing facilities to mitigate any near-term disruption. In
addition, the end of the transition period may see the imposition
of tariffs on products imported from the EU. With its
geographically diverse supplier base and buying power, the Group is
well-positioned relative to competitors to mitigate the impact on
product costs, prices and margins.
Current Trading and Market Conditions for the Year Ahead
In the first eight weeks of the new financial year, retail
trading conditions have remained encouraging against a backdrop of
customers diverting discretionary spend away from holidays and
other leisure activities into home improvement projects. Against
this backdrop retail like-for-like sales have increased by 19.6%.
Whilst we expect external events to continue to support investment
in the home in the short-term, it is very difficult to predict
medium and longer-term trends; we remain confident that our
market-leading Retail offer and Commercial growth strategy, along
with our supply chain and balance sheet strength, give us a solid
platform from which to deliver sustainable long-term growth.
Going Concern
When considering the going concern assertion, the Board reviews
several factors including the ability of the Group to meet its
banking covenants and operate within its banking facilities based
on current financial plans, along with a series of more pessimistic
trading scenarios that were deemed severe but plausible. The more
pessimistic trading scenarios included a second national lockdown
related to the Covid-19 pandemic during the next 12 months that
would see our Retail stores closed for up to three months.
The Group took a number of actions to strengthen its liquidity
during the Covid-19 pandemic, including accessing a range of
support measures put in place by the UK Government, and the sale
and leaseback of the Group's head office and central warehouse
buildings in Enderby in June 2020. The going concern review also
outlined a range of other mitigating actions that could be taken in
a severe but plausible trading scenario. These included, but were
not limited to, savings on store employee costs, savings on central
support costs, and reduction of capital expenditure.
The Group's forecast covenant and cash headroom was reviewed
against current lending facilities. These were refinanced in July
2018 and expire in July 2022, with an opportunity to extend in June
2021 for a further year, so a potential full term of five years
ending July 2023. In all scenarios, the Board have concluded that
there is sufficient covenant headroom and available liquidity for
the Group to continue in operational existence for the foreseeable
future. The Board therefore continue to adopt the going concern
basis in preparing the financial statements.
Long Term Viability
The Board have also considered the Longer Term Viability ("LTV")
of the business in light of updated Corporate Governance
requirements. Based on this review, the Directors confirm that they
have a reasonable expectation that the Group will continue to
operate and meet its liabilities, as they fall due, for the next 3
years. The full LTV statement can be found in our Annual
Report.
Rob Parker Stephen Hopson
Chief Executive Officer Chief Financial Officer
1 December 2020
Consolidated Statement of Financial Performance
For the 52 weeks ended 26 September 2020
52 weeks 52 weeks
ended ended
26 September 28 September
2020 2019
Notes GBP'000 GBP'000
--------------------------------------------- ----- ------------- -------------
Group revenue 3 192,813 219,197
Cost of sales (80,001) (84,245)
--------------------------------------------- ----- ------------- -------------
Gross profit 112,812 134,952
Distribution and selling costs (80,971) (93,138)
Repayment of historical import duty 2,272
Other operating expenses (10,105) (8,070)
Administrative costs (23,178) (17,439)
Sales and marketing costs (4,587) (5,244)
--------------------------------------------- ----- ------------- -------------
Group operating (loss)/profit (6,029) 13,333
Finance income 6 101 15
Finance costs 6 (3,901) (873)
--------------------------------------------- ----- ------------- -------------
(Loss)/profit before taxation 4 (9,829) 12,475
Taxation 7 1,811 (2,397)
--------------------------------------------- ----- ------------- -------------
(Loss)/profit for the period 29 (8,018) 10,078
--------------------------------------------- ----- ------------- -------------
(Loss)/profit is attributable to:
Owners of Topps Tiles Plc (7,966) 10,119
Non-controlling interests 30 (52) (41)
--------------------------------------------- ----- ------------- -------------
(8,018) 10,078
--------------------------------------------- ----- ------------- -------------
All results relate to continuing operations
of the Group.
Earnings per ordinary share:
- Basic (4.11)p 5.18p
- Diluted (4.11)p 5.14p
Consolidated Statement of Comprehensive Income
For the 52 weeks ended 26 September 2020
52 weeks 52 weeks
ended ended
26 September 28 September
2020 2019
GBP'000 GBP'000
----------------------------------------------------------- ------------- -------------
(Loss)/profit for the period (8,018) 10,078
Total comprehensible income for the period is attributable
to:
Owners of Topps Tiles Plc (7,966) 10,119
Non-controlling interests (52) (41)
----------------------------------------------------------- ------------- -------------
(8,018) 10,078
The Group has initially applied IFRS 16 'Leases' at 29 September
2019, using the modified retrospective approach. Under this
approach, comparative information is not restated and the
cumulative effect of applying IFRS 16 is recognised in retained
earnings at the date of initial application, 29 September 2019 (see
note 34). The comparative period is presented under the previous
accounting standard, IAS 17 'Leases' and has accordingly not been
restated. As such, the results for the 52 week period ended 26
September 2020 are not directly comparable with those reported in
the prior period. See note 34 for a reconciliation of the IFRS 16
impact on the financial statements.
Consolidated Statement of Financial Position
as at 26 September 2020
2020 2019
Notes GBP'000 GBP'000
----------------------------------------------------- ----- --------- --------
Non-current assets
Goodwill 10 - 3,104
Intangible assets 11 916 2,663
Property, plant and equipment 12a 27,170 46,958
Investment properties 12b - 1,233
Other financial assets 14 2,749 -
Deferred tax assets 15 1,406 -
Right-of-use assets 14 106,258 -
----------------------------------------------------- ----- --------- --------
138,499 53,958
----------------------------------------------------- ----- --------- --------
Current assets
Assets classified as held for sale 12c 1,786 -
Inventories 16 29,337 30,924
Other financial assets 14 873 -
Trade and other receivables 17 3,567 8,142
Cash and cash equivalents 18 31,018 18,747
----------------------------------------------------- ----- --------- --------
66,581 57,813
----------------------------------------------------- ----- --------- --------
Total assets 205,080 111,771
Current liabilities
Bank loans 20 (4,981) -
Trade and other payables 19 (58,446) (43,336)
Lease liabilities 14 (25,520) -
Current tax liabilities (1,114) (2,025)
Provisions 22 (462) (1,235)
----------------------------------------------------- ----- --------- --------
(90,523) (46,596)
----------------------------------------------------- ----- --------- --------
Net current (liabilities)/assets (23,942) 11,217
Non-current liabilities
Bank loans 20 - (29,884)
Lease liabilities 14 (98,636) -
Deferred tax liabilities 15 - (1,197)
Provisions 22 (1,867) (3,862)
----------------------------------------------------- ----- --------- --------
Total liabilities (191,026) (81,539)
----------------------------------------------------- ----- --------- --------
Net assets 14,054 30,232
----------------------------------------------------- ----- --------- --------
Equity
Share capital 23 6,548 6,548
Share premium 24 2,492 2,490
Own shares 25 (1,483) (1,548)
Merger reserve 26 (399) (399)
Share-based payment reserve 27 3,965 3,962
Capital redemption reserve 28 20,359 20,359
Accumulated losses 29 (17,400) (1,178)
----------------------------------------------------- ----- --------- --------
Capital and reserves attributable to owners of Topps
Tiles Plc 14,082 30,234
Non-controlling interests 30 (28) (2)
----------------------------------------------------- ----- --------- --------
Total equity 14,054 30,232
----------------------------------------------------- ----- --------- --------
The Group has initially applied IFRS 16 'Leases' at 29 September
2019, using the modified retrospective approach. Under this
approach, comparative information is not restated and the
cumulative effect of applying IFRS 16 is recognised in retained
earnings at the date of initial application, 29 September 2019 (see
note 34).
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 1 December 2020. They were signed on its behalf by:
ROB PARKER
STEPHEN HOPSON
Directors
Consolidated Statement of Changes in Equity
For the 52 weeks ended 26 September 2020
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 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
---------------- ------- ------- ------- ------- ----------- ---------- ----------- ---------------- --------
Impact of change
in
accounting
policy
(IFRS 16) - - - - - - (3,605) - (3,605)
Adjusted balance
at
29 September
2019* 6,548 2,490 (1,548) (399) 3,962 20,359 (4,783) (2) 26,627
---------------- ------- ------- ------- ------- ----------- ---------- ----------- ---------------- --------
Loss and total
comprehensive
expense for the
period - - - - - - (7,966) (52) (8,018)
---------------- ------- ------- ------- ------- ----------- ---------- ----------- ---------------- --------
Dividends - - - - - - (4,484) - (4,484)
Issue of share
capital - 2 - - - - - - 2
Own shares
issued
in the period - - 65 - - - (65) - -
Credit to equity
for
equity-settled
share-based
payments - - - - 3 - - - 3
Deferred tax on
share-based
payment
transactions - - - - - - (2) - (2)
Acquisition of
non-controlling
interest on
business
combination - - - - - - (100) 26 (74)
---------------- ------- ------- ------- ------- ----------- ---------- ----------- ---------------- --------
Balance at 26
September
2020 6,548 2,492 (1,483) (399) 3,965 20,359 (17,400) (28) 14,054
---------------- ------- ------- ------- ------- ----------- ---------- ----------- ---------------- --------
* The Group has initially applied IFRS 16 'Leases' at 29
September 2019, using the modified retrospective approach. Under
this approach, comparative information is not restated and the
cumulative effect of applying IFRS 16 is recognised in retained
earnings at the date of initial application, 29 September 2019.
Consolidated Cash Flow Statement
For the 52 weeks ended 26 September 2020
52 weeks 52 weeks
ended ended
26 September 28 September
2020 2019
GBP'000 GBP'000
-------------------------------------------------------------- ------------- -------------
Cash flow from operating activities
(Loss)/profit for the period (8,018) 10,078
Taxation (1,811) 2,397
Finance costs 3,901 873
Finance income (101) (15)
-------------------------------------------------------------- ------------- -------------
Group operating (loss)/profit (6,029) 13,333
Adjustments for:
Depreciation of property, plant and equipment 7,145 7,117
Depreciation of right-of-use assets 21,080 -
Amortisation of intangible assets 477 245
Loss on disposal of property, plant and equipment 338 866
Gain on sublease (150) -
Impairment charge/(reversal) of property, plant and equipment 1,155 (246)
Fair value adjustment for asset held for sale 558 -
Impairment of right-of-use assets 5,411 -
Impairment of goodwill 3,104 245
Impairment of intangible assets 1,687 -
Gain on lease disposal (388) -
Receipt of lease incentives 173 -
Decrease in fair value of investment properties - 21
Loss on disposal of investment properties 483 -
Share option charge 3 17
Decrease in trade and other receivables 252 820
Decrease/(increase) in inventories 1,589 (681)
Increase in payables 18,990 4,412
-------------------------------------------------------------- ------------- -------------
Cash generated by operations 55,878 26,149
Interest paid (856) (861)
Interest element of lease liabilities paid (3,033) -
Taxation paid (999) (3,385)
-------------------------------------------------------------- ------------- -------------
Net cash from operating activities 50,990 21,903
Investing activities
Interest received 20 15
Interest received on sublease assets 81 -
Receipt of capital element of sublease assets 343 -
Purchase of property, plant and equipment (6,290) (7,242)
Purchase of intangibles (417) (563)
Purchase of investment property - (21)
Proceeds on disposal of property, plant and equipment 18,552 185
Acquisition of subsidiary, net of cash acquired (74) (2,749)
Net cash from / (used in) investment activities 12,215 (10,375)
Financing activities
Payment of capital element of lease liabilities (21,452) -
Dividends paid (4,484) (6,623)
Proceeds from issue of share capital 2 -
Drawdown of bank loans 20,000 5,000
Repayment of bank loans (45,000) (5,000)
-------------------------------------------------------------- ------------- -------------
Net cash used in financing activities (50,934) (6,623)
Net increase in cash and cash equivalents 12,271 4,905
-------------------------------------------------------------- ------------- -------------
Cash and cash equivalents at beginning of period 18,747 13,842
-------------------------------------------------------------- ------------- -------------
Cash and cash equivalents at end of period 31,018 18,747
-------------------------------------------------------------- ------------- -------------
The Group has initially applied IFRS 16 'Leases' at 29 September
2019, using the modified retrospective approach. Under this
approach, comparative information is not restated.
Notes to the Financial Statements
For the 52 weeks ended 26 September 2020
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 16 (see below). The Group has
not early adopted any other standard, interpretation or amendment
that has been issued but is not yet effective.
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 16.
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'
The new lease accounting standard is now effective for the Group
for the first time and it has had a material impact on the Group's
financials statements. Further details of IFRS 16 'Leases',
including the impact of adoption are included in note 34.
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 16 'Leases'. Refer
to Note 34 for details of the impact on transition to this
standard.
B) GOING CONCERN
When considering the going concern assertion, the Board reviews
several factors including the ability of the Group to meet its
banking covenants and operate within its banking facilities based
on current financial plans, along with a series of more pessimistic
trading scenarios that were deemed severe but plausible. The more
pessimistic trading scenarios included a second lock down during
the next 12 months that would see our retail stores closed for up
to three months.
The Group took a number of actions to strengthen its liquidity
during the Covid-19 pandemic. The UK Government put in place a
range of support measures for businesses and we accessed all of
those available to us. This included utilising the Coronavirus Job
Retention Scheme to furlough the c.90% of our colleagues who were
unable to work from home, business rates relief for the 2020/21 tax
year, VAT deferral and utilising the Coronavirus Large Business
Interruption Loan Scheme ("CLBILS"), which facilitates access to
finance for medium-sized and larger businesses affected by the
coronavirus outbreak. The sale and leaseback of the Group's head
office and central warehouse buildings at Enderby was completed in
June 2020. The going concern review also outlined a range of other
mitigating actions that could be taken in a severe but plausible
trading scenario. This included, but was not limited to, savings on
store employee costs, savings on central support costs, and
reduction of capital expenditure.
The Group's forecast covenant and cash headroom was reviewed
against current lending facilities. These were refinanced in July
2018 and expire in July 2022, with an opportunity to extend in June
2021 for a further year, so a potential full term of five years
ending July 2023.
In all scenarios, the Board have concluded that there is
sufficient covenant headroom and available liquidity for the Group
to continue in operational existence for the foreseeable future.
The Board therefore continue to adopt the going concern basis in
preparing the financial statements.
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 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 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
There has been a change in accounting policy during the year,
from the accounting period ends on the Saturday which falls closest
to 30 September resulting in financial periods of either 52 or 53
weeks, to the accounting period is drawn up to a Saturday within 7
days of 30 September resulting in financial periods of either 52 or
53 weeks. There has been no impact on prior period financial
statements as a result of this change.
Throughout the financial statements, Directors' Report and
Strategic Report, references to 2020 mean "at 26 September 2020" or
the 52 weeks then ended; references to 2019 mean "at 28 September
2019" 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.
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.
Non-current assets are classified as held for sale if the assets
are available for immediate sale in their present condition and the
sale is highly probable. After reclassified as held for sale, the
assets are measured at the lower of their carrying value and fair
value less costs to sell.
J) IMPAIRMENT OF TANGIBLE, INTANGIBLE AND RIGHT-OF-USE
ASSETS
At each period end, the Group reviews the carrying amounts of
its tangible, intangible, and right-of-use 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 pre-tax cash flows are discounted to their present value
using a pre-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 is derived using the average cost method and
includes an attributable proportion of distribution overheads based
on normal levels of activity. 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
The Group has changed its accounting policy for leases as a
result of IFRS 16 "Leases". The new policy is detailed below and
the impact of the change is described in note 34.
IAS 17
Until 28 September 2019, as a lessee, the Group previously
classified leases as operating or finance leases based on its
assessment of whether the lease transferred substantially all the
risks and rewards of ownership. Rentals payable under operating
leases were charged to the Consolidated Statement of Financial
Performance 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 were recognised
as an expense in the period in which they are incurred.
In the event that lease incentives were received to enter into
operating leases, such incentives were recognised as a liability.
The aggregate benefit of incentives was recognised as a reduction
of rental expense on a straight-line basis, except where another
systematic basis was more representative of the time pattern in
which economic benefits from the leased asset were consumed.
The Group leases properties from which it no longer trades.
These properties are often sublet to third parties. Rents
receivable were recognised by offsetting the income against rental
costs accounted for within the Consolidated Statement of Financial
Performance.
The Group provided for the unavoidable costs prior to lease
termination or sub-lease relating to onerous leases. Dilapidation
costs were provided for against all leasehold properties across the
entire estate. See note 2U and 2Y for details on how these
provisions are calculated.
IFRS 16
The following policies apply subsequent to the date of initial
application of IFRS 16, 29 September 2019.
Leases in which the Group is a lessee
The Group leases assets which consist of properties, vehicles
and equipment. Rental contracts are typically made for fixed
periods but may have extension options or break options to maximise
operational flexibility. Lease terms are negotiated on an
individual basis and contain a wide range of different terms and
conditions.
The Group now assesses whether a contract is or contains a lease
based on the new definition of a lease. Under IFRS 16, a contract
is, or contains, a lease if the contract conveys a right to control
the use of an identified asset for a period of time in exchange for
consideration.
At the commencement date of property leases the Group determines
the lease term to be the full term of the lease, assuming that any
option to break or extend the lease is unlikely to be exercised.
The Group considers the lease term to be the non-cancellable period
and in assessing this applies the definition of a contract and
determines the period for which the contract is enforceable.
Under IFRS 16, the Group recognises right-of-use assets and
lease liabilities for most leases.
The Group has elected to take advantage of the following
recognition exemptions and account for lease payments as an expense
on a straight-line basis over the lease term or another systematic
basis for the following two types of leases:
-- leases with a lease term of 12 months or less and containing no purchase
options - this election is made by class of underlying asset;
-- leases where the underlying asset has a low value when new - this election
can be made on a lease-by-lease basis.
For leases where the Group has taken short-term lease
recognition exemption and there are any changes to the lease term
or the lease is modified, the Group accounts for the lease as a new
lease.
From 29 September 2019 leases are recognised as a right-of-use
asset with a corresponding liability at the date at which the
leased asset is available for use by the group. Each lease payment
comprises an element of capital and finance cost. The finance cost
is charged to profit or loss over the lease period so as to produce
a constant periodic rate of interest on the remaining balance of
the liability for each period. The right-of-use asset is
depreciated over the shorter of the asset's useful life and the
lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include the
net present value of the following lease payments:
-- fixed payments (including in-substance fixed payments), less any lease
incentives receivable;
-- variable lease payments that are based on an index or a rate;
-- amounts expected to be payable by the lessee under residual value guarantees;
-- the exercise price of a purchase option if the lessee is reasonably certain
to exercise that option;
-- payments of penalties for terminating the lease if the lease term reflects
the lessee exercising that option.
The lease payments are discounted using the interest rate
implicit in the lease. If that rate cannot be determined, the
lessee's incremental borrowing rate is used, being the rate that
the lessee would have to pay to borrow the funds necessary to
obtain an asset of similar value in a similar economic environment
with similar terms and conditions.
Right-of-use assets are measured at cost comprising the
following:
-- the amount of the initial measurement of lease liability;
-- any lease payments made at or before the commencement date less any lease
incentives received;
-- any initial direct costs;
-- restoration costs.
After lease commencement, the Group measures right-of-use assets
using a cost model. Under the cost model a right-of-use asset is
measured at cost less accumulated depreciation and accumulated
impairment.
Subsequent to initial measurement, lease liabilities increase as
a result of interest charged at a constant rate on the balance
outstanding and are reduced for lease payments made. The lease
liability is also remeasured to reflect changes in:
-- the lease term (using a revised discount rate);
-- the assessment of a purchase option (using a revised discount rate);
-- the amounts expected to be payable under residual value guarantees (using
an unchanged discount rate);
-- future lease payments resulting from a change in an index or a rate used
to determine those payments (using an unchanged discount rate).
The remeasurements are matched by adjustments to the
right-of-use asset.
Lease modifications may also prompt remeasurement of the lease
liability unless they are determined to be separate leases.
The right-of-use asset is subsequently depreciated using the
straight-line method from the commencement date to the earlier of
the end of the useful life of the right-of-use asset or the end of
lease term. The estimated useful lives of right-of-use assets are
determined on the same basis as those of property, plant and
equipment. In addition, the right-of-use asset is reduced by
impairment losses, if any, and adjusted for certain remeasurements
of the lease liability.
The capital element of payments related to leases are presented
under cash flow from financing activities in the Consolidated Cash
Flow Statement, and the interest element of payments presented
under cash flow from operating activities.
Leases in which the Group is a lessor
Lessor accounting remains similar to current accounting under
IAS 17. At lease inception, lessors will determine whether each
lease is a finance lease or an operating lease. To classify each
lease, the Group makes an overall assessment of whether the lease
transfers substantially all of the risks and rewards incidental to
ownership of the underlying asset. If this is considered to be the
case, then the lease is recognised as a finance lease, if not then
it is recognised as an operating lease. As part of this assessment,
the Group considers certain factors such as whether the lease is
for the major part of the economic life of the asset.
When the Group is an intermediate lessor, it accounts for its
interests in the head lease and the sub-lease separately. It
assesses the lease classification of a sub-lease with reference to
the right-of-use asset arising from the head lease, not with
reference to the underlying asset. If a head lease is a short-term
lease to which the Group applies the recognition exemption, then it
classifies the sub-lease as an operating lease.
The Group has reassessed the classification of sub-leases in
which the Group is a lessor. Under IAS 17, the subleases were
classified with reference to the underlying asset which resulted in
all subleases being classified as operating leases.
On transition to IFRS 16 on 29 September 2019, the Group has
reclassified a small number of sub-leases as finance leases,
resulting in recognition of a finance lease receivable, being equal
to the net investment in the lease. The Group recognises finance
income over the lease term of a finance lease, based on a pattern
reflecting a constant periodic rate of return on the net
investment.
There will be no change to the accounting for the remaining
subleases which continue to be accounted for as operating leases,
and income from these leases will continue to be recognised on a
straight-line basis over the term of the lease.
Sale and leaseback
A sale and leaseback transaction is where the Group sells an
asset and immediately reacquires the use of the asset by entering
into a lease with the buyer. On entering into a sale and leaseback
transaction the Group determines whether the transfer of the assets
qualifies as a sale (satisfying a performance obligation in IFRS 15
"Revenue from Contracts with Customers"). Where the transfer is a
sale and providing the transaction is on market terms than the
previous carrying amount of the underlying asset is split
between:
-- a right-of-use asset arising from the leaseback (being the proportion
of the previous carrying amount of the asset that relates to the
rights retained), and
-- the rights in the underlying asset retained by the buyer-lessor at
the end of the leaseback.
The Group recognises a portion of the total gain or loss on the
sale. The amount recognised is calculated by splitting the total
gain or loss into:
-- an unrecognised amount relating to the rights retained by the seller-lessee,
and
-- a recognised amount relating to the buyer-lessor's rights in the
underlying asset at the end of the leaseback.
The leaseback itself is then accounted for under IFRS 16.
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.
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.
Employee profit sharing costs are classified as distribution and
selling costs and administrative costs.
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) GOVERNMENT GRANTS
The Group applies IAS 20 'Accounting for Government Grants and
Disclosures of Government Assistance' when accounting for
government grants. A government grant is not recognised until there
is reasonable assurance that the Group will comply with the
conditions attaching to it, and that the grant will be received.
Government grants are recognised in the Consolidated Statement of
Financial Performance on a systematic basis over the periods in
which the Group recognises as expenses the related costs for which
the grants are intended to compensate. The Group has chosen to
present government grants netted off against the related
expense.
Y) 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.
CRITICAL ACCOUNTING JUDGEMENTS
The key accounting judgements used in the financial statements
are as follows:
LEASE TERMS
IFRS 16 defines the lease term as the non-cancellable period of
a lease together with the options to extend or terminate a lease,
if the lessee were reasonably certain to exercise that option. The
Group has applied judgement to determine the lease term for some
lease contracts in which it is a lessee that includes renewal
options and break clauses, which can significantly affect the
amount of lease liabilities and right-of-use assets recognised.
At the commencement date of a property lease the Group normally
determines the lease term to be the full term of the lease,
assuming that any option to break or extend the lease is unlikely
to be exercised and it is not reasonably certain that the Group
will continue in occupation for any period beyond the lease
term.
For property leases the key factors that are normally the most
relevant are the profitability of the leased store, the future
plans of the business, and whether there are any penalties
associated with exercising an option.
Leases are regularly reviewed on a lease-by-lease basis and will
be revalued if it becomes likely that a break clause or option to
extend the lease is exercised.
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:
INCREMENTAL BORROWING RATE
Under IFRS 16, the Group recognises a right-of-use asset
representing its right to use the underlying asset and a lease
liability representing its obligation to make lease payments. The
discount rate used to calculate the lease liability is the rate
implicit in the lease, if it can be readily determined, or the
lessee's incremental borrowing rate if not. The lease liability is
initially measured at the present value of the remaining lease
payments, discounted using the Group's incremental borrowing rate,
adjusted to take into account the risk associated with the length
of the lease which ranges between 1 and 20 years. The Group uses
the lessee's incremental borrowing rate for all property and
equipment leases.
As a result of the significant impact the transition to IFRS 16
has had on the Group's opening balance sheet, the discount rate is
considered to be a significant judgement with estimation. The
weighted average incremental borrowing rate applied to the lease
liabilities on transition was 2.30%, ranging between 2.17% and
3.09% dependent on the length of the lease term.
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 thirteen
further stores being exited before their lease terms had expired
(2019: five stores). In the prior period, in respect of the leases
in relation to stores exited before lease end dates in prior
periods that are still vacant, the Group provided for what it
considered to be the unavoidable costs prior to lease termination
or sub-lease. The Group also reviewed any trading loss-making
stores and provided for those leases considered to be onerous, and
considered whether the net book value of the assets in relation to
those stores were impaired. In the current period, as a result of
the adoption of IFRS 16, the onerous lease provision and
loss-making stores provision have been released, and instead each
store is tested for impairment in line with IAS 36. For the prior
period, the key estimates involved related to the forecast future
cash flows of the stores identified as potentially loss making.
These estimates were based upon available information and knowledge
of the property market and retail market. For the current period,
the key estimates involved relate to the pre-tax discount rate,
long-term growth rate, and cashflow forecasts - see note 14 for
further details.
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
GBP226,000.
3 REVENUE
An analysis of Group revenue is as follows:
52 weeks 52 weeks
ended ended
26 September 28 September
2020 2019
GBP'000 GBP'000
------------------------------- ------------- -------------
Revenue from the sale of goods 192,813 219,197
------------------------------- ------------- -------------
Total revenue 192,813 219,197
------------------------------- ------------- -------------
The Group has one reportable segment in accordance with IFRS 8 -
Operating Segments, which encompasses the Topps Tiles Group revenue
generated instore and online from retail and commercial customers.
The Board receives monthly financial information at this level and
uses this information to monitor performance, allocate resources
and make operational decisions. All revenue is derived from sales
in the UK.
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 (LOSS)/PROFIT BEFORE TAXATION
Profit before taxation for the period has been arrived at after
charging/(crediting):
52 weeks 52 weeks
ended ended
26 September 28 September
2020 2019
GBP'000 GBP'0000
-------------------------------------------------------------- ------------- -------------
Depreciation of property, plant and equipment 7,145 7,117
Depreciation of right-of-use assets 21,080 -
Impairment charge/(reversal) of property, plant and equipment 1,155 (246)
Fair value adjustment for asset held for sale 558 -
Impairment of right-of-use assets 5,411 -
Loss on disposal of property, plant and equipment 338 866
Gain on sublease (150) -
Gain on lease disposal (388) -
Amortisation of intangibles 477 245
Impairment of intangibles 1,687 -
Impairment of goodwill 3,104 245
Decrease in fair value of investment properties recognised
as an expense - 21
Loss on disposal of investment properties 483 -
Property related provisions charged 12 406
Staff costs (see note 5) 49,638 55,440
Operating lease rentals - 26,333
Furlough income received (5,228) -
Government grants received (700) -
Repayment of historical import duty - (2,272)
Exchange losses recognised in profit or loss 94 80
Write-down of inventories recognised as an expense 4,331 2,633
Cost of inventories recognised as an expense 75,573 81,612
-------------------------------------------------------------- ------------- -------------
During the year the business disposed of three freehold
properties (2019: one freehold property). The loss on disposal of
property, plant and equipment includes a gain of GBP1.1m in
relation to the sale and leaseback of the Group's head office and
central warehouse buildings in June 2020 for cash consideration of
GBP17.9m, net of fees. In connection with the sale, the Group has
entered into leases for the properties for a 20-year period
following completion. If the profit on the sale of the properties
had been accounted for under IAS 17, a profit of GBP4.0m would have
been recognised.
Analysis of the auditors' remuneration is provided below:
52 weeks 52 weeks
ended ended
26 September 28 September
2020 2019
GBP'000 GBP'000
------------------------------------------------------------ ------------- --------------
Fees payable to the Company's auditors with respect to the
Company's annual accounts 49 49
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 184 110
------------------------------------------------------------ ------------- --------------
Total audit fees 233 159
------------------------------------------------------------ ------------- --------------
Audit related assurance services 0 20
------------------------------------------------------------ ------------- --------------
Total non-audit fees 0 20
------------------------------------------------------------ ------------- --------------
Total fees payable to the Company's auditors 233 179
------------------------------------------------------------ ------------- --------------
Audit related assurance services relate to the fee payable for
the interim review performed.
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.
5 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
26 September ended
2020 28 September
Number 2019
employed Number employed
--------------- ------------- ----------------
Selling 1,661 1,852
Administration 340 237
--------------- ------------- ----------------
2,001 2,089
--------------- ------------- ----------------
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
26 September ended
2020 28 September
Number 2019
employed Number employed
--------------- ------------- ----------------
Selling 1,573 1,754
Administration 332 231
--------------- ------------- ----------------
1,905 1,985
--------------- ------------- ----------------
2020 2019
GBP'000 GBP'000
------------------------------------------------- -------- --------
Their aggregate remuneration comprised:
Wages and salaries (including LTIP, see note 32) 44,865 50,153
Social security costs 3,779 4,224
Other pension costs (see note 31b) 994 1,063
------------------------------------------------- -------- --------
49,638 55,440
------------------------------------------------- -------- --------
Details of Directors' emoluments are disclosed in the Annual
Report. The Group considers key management to be the Directors
only. Employee profit sharing of GBP4.3 million (2019: GBP5.8
million) is included in the above and comprises sales commission
and bonuses.
6 FINANCE INVESTMENT AND FINANCE COSTS
52 weeks 52 weeks
ended ended
26 September 28 September
2020 2019
GBP'000 GBP'000
----------------------------------------------- ------------- -------------
Finance Income
Bank interest receivable 20 15
Interest income from finance lease receivables 81 -
----------------------------------------------- ------------- -------------
101 15
----------------------------------------------- ------------- -------------
Finance costs
Interest on bank loans and overdrafts (868) (871)
Interest payable on lease liabilities (3,033) -
Other interest - (2)
(3,901) (873)
----------------------------------------------- ------------- -------------
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.
7 TAXATION
52 weeks 52 weeks
ended ended
26 September 28 September
2020 2019
GBP'000 GBP'000
--------------------------------------------------------- ------------- -------------
Current tax - credit for the period (48) 2,602
Current tax - adjustment in respect of previous periods 134 (101)
Deferred tax - credit for the period (note 15) (2,028) (65)
Deferred tax - adjustment in respect of previous periods
(note 15) 42 (39)
Effect of tax rate change on opening balance 89 -
--------------------------------------------------------- ------------- -------------
(1,811) 2,397
--------------------------------------------------------- ------------- -------------
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
26 September 28 September
2020 2019
GBP'000 GBP'000
---------------------------------------------------------- ------------- -------------
Continuing operations:
Loss before taxation (9,829) 12,475
Tax at the UK corporation tax rate of 19.0% (2019: 19.0%) (1,868) 2,370
Expenses that are not deductible in determining taxable
profit 966 74
Other movements (49) 1
Fixed asset timing differences (1,104) 105
Difference between IFRS 2 and corporation tax relief (7) 14
Increase/(Reduction) in UK corporation tax rate 91 (27)
Non-taxable income (17) -
Tax effect of adjustment in respect of prior periods 177 (140)
---------------------------------------------------------- ------------- -------------
Tax expense for the period (1,811) 2,397
---------------------------------------------------------- ------------- -------------
In the period, the Group has recognised a corporation tax credit
directly to equity of GBPnil (2019: GBP64,064) and a deferred tax
charge to equity of GBP1,622 (2019: GBP5,961) in relation to the
Group's share option schemes.
In the prior year we disclosed a contingent liability in
recognition of a historic tax claim relating to EU loss relief in
relation to the closed Dutch business. The Group now recognises
that this contingent liability was disclosed in error and the tax
liability was fully provided for in the prior year accounts.
8 DIVIDS
Amounts recognised as distributions to equity holders in the
period:
52 weeks 52 weeks
ended ended
26 September 28 September
2020 2019
GBP'000 GBP'000
---------------------------------------------------------- ------------- -------------
Final dividend for the period ended 28 September 2019 of
GBP0.023 (2018: GBP0.023) per share 4,484 4,483
Interim dividend for the period ended 26 September 2020
of GBP0.000 (2019: GBP0.011) per share - 2,140
---------------------------------------------------------- ------------- -------------
4,484 6,623
---------------------------------------------------------- ------------- -------------
Proposed final dividend for the period ended 26 September
2020 of GBP0.000 (2019: GBP0.023) per share - 4,483
---------------------------------------------------------- ------------- -------------
Due to the ongoing uncertainty in the wider environment, the
Directors have not proposed a final dividend for the period ended
26 September 2020.
9 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
26 September 28 September
2020 2019
-------------------------------------------------------------- ------------- -------------
Weighted average number of issued shares for basic earnings
per share 196,443,323 196,441,003
Weighted average impact of treasury shares for basic earnings
per share (1,472,264) (1,762,806)
-------------------------------------------------------------- ------------- -------------
Total weighted average number of shares for basic earnings
per share 194,971,059 194,678,197
-------------------------------------------------------------- ------------- -------------
Weighted average number of shares under option - 1,545,658
-------------------------------------------------------------- ------------- -------------
For diluted earnings per share 194,971,059 196,223,855
-------------------------------------------------------------- ------------- -------------
The calculation of the basic and diluted earnings per share used
the denominators as shown above for both basic and diluted earnings
per share. The number of potentially exercisable shares were
1,758,101 but not included as they were anti-dilutive.
10 GOODWILL
GBP'000
------------------------------------ -------
Cost
At 30 September 2018 1,461
Acquisition of Strata Tiles Limited 1,888
At 28 September 2019 3,349
At 26 September 2020 3,349
------------------------------------ -------
Accumulated impairment losses
At 30 September 2018 -
Impairment losses in the period 245
------------------------------------ -------
At 28 September 2019 245
------------------------------------ -------
Impairment losses in the period 3,104
------------------------------------ -------
At 26 September 2020 3,349
------------------------------------ -------
Carrying amount
At 26 September 2020 -
------------------------------------ -------
At 28 September 2019 3,104
------------------------------------ -------
The balance of goodwill remaining has been written down to
GBPnil in the period. The carrying value held in the prior period
arose on the acquisition of Parkside Ceramics Limited in 2017 and
Strata Tiles Limited in 2019. The prior period balance related to
two Cash Generating Units (CGUs). Goodwill of GBP1,216,000
(Parkside Ceramics Limited) related 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 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.
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 1.5% 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 16.5% (2019: 14.8%).
11 INTANGIBLE ASSETS
Customer
Brand relationships Software Total
GBP'000 GBP'000 GBP000 GBP'000
----------------------------------------------- -------- -------------- ---------- --------
Cost
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
----------------------------------------------- -------- -------------- ---------- --------
Additions - - 417 417
At 26 September 2020 1,064 1,042 1,437 3,543
----------------------------------------------- -------- -------------- ---------- --------
Accumulated amortisation and impairment
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
----------------------------------------------- -------- -------------- ---------- --------
Amortisation charge for the period 106 167 204 477
Impairment charge in the period 871 691 125 1,687
At 26 September 2020 1,064 1,042 521 2,627
----------------------------------------------- -------- -------------- ---------- --------
Carrying amount
At 26 September 2020 - - 916 916
----------------------------------------------- -------- -------------- ---------- --------
At 28 September 2019 977 858 828 2,663
----------------------------------------------- -------- -------------- ---------- --------
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. These
balances have been written down to GBPnil in the period.
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. Software is amortised over its
estimated useful life of 4 years. Amortisation is included within
administrative costs within the Consolidated Statement of Financial
Performance.
12a 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 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
--------------------------------------- ---------- ----------- ------------- --------- --------
Additions 2,651 57 3,433 - 6,141
Disposals (14,047) (314) (8,627) (2) (22,990)
Reclassified to assets held for sale
(note 12c) (2,344) - - - (2,344)
At 26 September 2020 1,612 1,566 86,803 72 90,053
--------------------------------------- ---------- ----------- ------------- --------- --------
Accumulated depreciation
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
--------------------------------------- ---------- ----------- ------------- --------- --------
Impact of change in accounting policy
(IFRS 16) - - 93 - 93
At 29 September 2019 2,761 1,128 58,428 64 62,381
--------------------------------------- ---------- ----------- ------------- --------- --------
Charge for the period 164 113 6,865 3 7,145
Provision of impairment - 109 1,046 - 1,155
Eliminated on disposals (2,657) (263) (4,876) (2) (7,798)
At 26 September 2020 268 1,087 61,463 65 62,883
--------------------------------------- ---------- ----------- ------------- --------- --------
Carrying amount
At 26 September 2020 1,344 479 25,340 7 27,170
--------------------------------------- ---------- ----------- ------------- --------- --------
At 28 September 2019 12,591 695 33,662 10 46,958
--------------------------------------- ---------- ----------- ------------- --------- --------
Land with a net book value of GBP4,104,000 included within land
and buildings was disposed in the period.
Cumulative finance costs capitalised in the cost of tangible
fixed assets amount to GBPnil (2019: GBPnil). Contractual
commitments for the acquisition of property, plant and equipment
are detailed in note 31.
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 sixteen stores (2019: seven) that are impaired. The carrying
value of these assets has been fully provided for in the period,
with an increase in the provision of GBP1,155,000 in the period
(2019: GBP246,000 decrease in the provision) included within other
operating expenses.
All assets classified as property, plant and equipment are UK
based.
12b INVESTMENT PROPERTIES
At fair value GBP'000
---------------------- -------
At 29 September 2018 1,233
---------------------- -------
Additions 21
Fair value adjustment (21)
---------------------- -------
At 28 September 2019 1,233
---------------------- -------
Disposal (1,233)
---------------------- -------
At 26 September 2020 -
---------------------- -------
On 11 May 2020, the Group completed the sale of its only
investment property for a cash consideration of GBP750,000, to
support the ongoing liquidity of the Group as the Covid-19 pandemic
unfolded. The investment property was carried at fair value, and a
fair value adjustment of GBPnil (2019: GBP21,000 loss) was
recognised in the Consolidated Statement of Financial Performance
in the period.
12c ASSETS CLASSIFIED AS HELD FOR SALE
52 weeks 52 weeks
ended ended
26 September 28 September
2020 2019
GBP'000 GBP'000
---------------------------------------------------------- ------------- -------------
Freehold properties reclassified from property, plant and
equipment 2,344 -
Fair value adjustment for asset held for sale (558) -
---------------------------------------------------------- ------------- -------------
Assets classified as held for sale 1,786 -
---------------------------------------------------------- ------------- -------------
Two freehold properties were purchased in the year and
subsequently reclassified as held for sale on 1 August 2020 in
accordance with IFRS 5 - Non-current Assets Held For Sale and
Discontinued Operations. The sale of both properties has been
completed shortly after the reporting period. Both properties are
measured at the lower of their carrying amounts and fair value less
costs to sell, resulting in a write down of GBP558,000 in the
Statement of Financial Performance.
13 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.
14 LEASES
As a lessee
Right-of-use assets included in the Consolidated Statement of
Financial Position at 26 September 2020 were as follows:
Land and buildings Equipment Total
GBP'000 GBP'000 GBP'000
---------------------------- ------------------ ----------- --------
At transition: 29 September
2019 113,878 3,818 117,696
Additions 17,779 541 18,320
Disposals (3,267) - (3,267)
Depreciation (19,591) (1,489) (21,080)
Impairment (5,411) - (5,411)
------------------------------ ------------------ ----------- --------
At 26 September 2020 103,388 2,870 106,258
------------------------------ ------------------ ----------- --------
Lease liabilities included in the Consolidated Statement of
Financial Position at 26 September 2020 were as follows:
Land and buildings Equipment Total
GBP'000 GBP'000 GBP'000
------------------------------- ------------------ ----------- ---------
At transition: 29 September
2019 (124,414) (3,831) (128,245)
Additions (20,803) (528) (21,331)
Disposals 3,934 35 3,969
Interest (2,960) (73) (3,033)
Repayment of lease liabilities 22,958 1,526 24,484
--------------------------------- ------------------ ----------- ---------
At 26 September 2020 (121,285) (2,871) (124,156)
--------------------------------- ------------------ ----------- ---------
The maturity analysis of the lease liabilities is as
follows:
52 weeks 52 weeks
ended ended
26 September 28 September
2020 2019
GBP'000 GBP'000
------------ ------------- -------------
Current (25,520) -
Non-current (98,636) -
------------ ------------- -------------
(124,156) -
------------ ------------- -------------
The remaining contractual maturities of the lease liabilities,
which are gross and undiscounted, are as follows:
52 weeks 52 weeks
ended ended
26 September 28 September
2020 2019
GBP'000 GBP'000
----------------------------------- ------------- -------------
Less than one year 26,810 -
One to five years 68,449 -
More than five years 52,274 -
----------------------------------- ------------- -------------
Total undiscounted lease liability 147,533 -
----------------------------------- ------------- -------------
The following amounts have been recognised in the Consolidated
Statement of Financial Performance:
Land and buildings Equipment Total
GBP'000 GBP'000 GBP'000
-------------------------------- ------------------ ----------- --------
Depreciation of right-of-use
assets 19,591 1,489 21,080
Impairment of right-of-use
assets 5,411 - 5,411
Interest expense 2,960 73 3,033
Expenses relating to short-term
leases 93 98 191
Holdover lease expense 928 - 928
Gain from sale and leaseback (1,134) - (1,134)
---------------------------------- ------------------ ----------- --------
The total cash outflow for leases during the financial period
was GBP24.5m.
As a lessor
Lease income from lease contracts in which the Group acts as a
lessor is as below:
Total
GBP'000
----------------------------- --------
Lease income (from operating
leases) 193
Finance income (from finance
leases) 81
--------------------------------- --------
The Group leases out a small number of properties, some of which
are classified as operating leases, as they do not transfer
substantially all of the risks and rewards incidental to the
ownership of the assets.
The following table sets out a maturity analysis of lease
payments, showing the undiscounted lease payments to be received
after the reporting date:
52 weeks 52 weeks
ended ended
26 September 28 September
2020 2019
GBP'000 GBP'000
--------------------------------------------- ------------- -------------
Less than one year 111 577
One to five years 82 1,919
More than five years - 1,652
--------------------------------------------- ------------- -------------
Total undiscounted lease payments receivable 193 4,148
--------------------------------------------- ------------- -------------
Some of the properties that the Group leases out have been
reclassified as a finance lease on transition to IFRS 16. These are
shown as Other financial assets on the Consolidated Statement of
Financial Position.
The following table sets out a maturity analysis of lease
receivables, showing the undiscounted lease payments to be received
after the reporting date:
52 weeks 52 weeks
ended ended
26 September 28 September
2020 2019
GBP'000 GBP'000
--------------------------------------------------- ------------- -------------
Less than one year 948 -
One to five years 1,686 -
More than five years 1,350 -
--------------------------------------------------- ------------- -------------
Total undiscounted lease payments receivable 3,984 -
--------------------------------------------------- ------------- -------------
Less: unearned finance income (362) -
--------------------------------------------------- ------------- -------------
Present value of minimum lease payments receivable 3,622 -
--------------------------------------------------- ------------- -------------
Current 873 -
Non-current 2,749 -
--------------------------------------------------- ------------- -------------
3,622 -
--------------------------------------------------- ------------- -------------
Impairment
At the end of the financial year the carrying value of assets,
including right-of-use lease assets, was assessed against their
recoverable amount determined by reference to their value-in-use.
Assets and expected cashflows were assessed at the lowest
identifiable level of Cash Generating Unit ("CGU") where the
expected cash inflows and outflows of each CGU were expected to be
independent of those incurred by other CGUs. Individual retail
stores are considered to be separate CGUs.
The value-in-use calculations require the application of a
number of assumptions.
The key assumptions used in the estimation of recoverable
amounts are set out below:
Assumption Value Sensitivity
Pre-tax discount This is calculated by reference An increase in pre-tax
rate to the weighted average cost of discount rate of 500bps
capital of the Group. At the year-end, at year-end would result
the pre-tax discount rate applied in an increase in value
to forecast cashflows was 13.4%. of impairments of GBP0.2m.
---------------------------------------- ---------------------------------
Long-term growth This is the average growth rate The impairment calculations
rate used to extrapolate cashflows beyond are not materially sensitive
the budget period. At the year-end, to movements in long-term
a long-term growth rate of 1.5% growth rate.
was applied.
---------------------------------------- ---------------------------------
Cashflow forecasts Cashflows are derived from extrapolation CGU cashflows are expected
of trading performance of identified to grow in each year up
CGUs. Key assumptions include: to perpetuity. A reduction
- expected year-on-year growth of 200bps to the forecast
in cash contributions for stores; cashflow growth rates would
and lead to an increase in
- expected cashflows associated impairment for the year
with the replacement of leased of GBP0.1m.
assets expected to be incurred A 20% increase in expected
on the maturity of lease terms cashflows associated with
for existing leases. the replacement of leased
assets at the end of lease
terms would increase impairments
for the period by GBP0.2m.
---------------------------------------- ---------------------------------
15 DEFERRED TAX LIABILITIES/(ASSETS)
The following are the deferred tax liabilities/(assets)
recognised by the Group and movements thereon during the current
and prior reporting period:
Property Accelerated Share-based Stock Intangible
related items tax depreciation payments provisions assets Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------------- ----------------- ----------- ----------- ---------- ---------
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
Impact of change in accounting
policy
(IFRS 16) (706) - - - - (706)
---------------------------------- -------------- ----------------- ----------- ----------- ---------- ---------
Adjusted balance at 29 September
2019 (706) 1,018 (124) (7) 310 491
(Credit)/charge to income (70) (1,646) 34 - (348) (2,030)
(Credit)/charge in respect of
previous
periods 42 - - - 42
Effect of tax rate change on
opening
balance 107 (56) - - 38 89
Charge to equity - - 2 - - 2
---------------------------------- -------------- ----------------- ----------- ----------- ---------- ---------
As at 26 September 2020 (669) (642) (88) (7) - (1,406)
---------------------------------- -------------- ----------------- ----------- ----------- ---------- ---------
A UK corporation rate of 19% (effective 1 April 2020) was
substantively enacted on 17 March 2020, reversing the previously
enacted reduction in the rate from 19% to 17%. This will increase
the company's future current tax charge accordingly. The deferred
tax asset/liability at 30 September 2020 has been calculated at 19%
(2019: 17%).
16 INVENTORIES
52 weeks 52 weeks
ended ended
26 September 28 September
2020 2019
GBP'000 GBP'000
----------------- ------------- -------------
Goods for resale 29,337 30,924
----------------- ------------- -------------
Goods for resale includes a net realisable value provision of
GBP2,261,000 (2019: GBP767,000). Write-downs of inventories to net
realisable value amounted to GBP4,332,000 (2019: GBP2,633,000) and
were recognised as an expense during the period, included within
cost of sales in the Consolidated Statement of Financial
Performance.
17 TRADE AND OTHER RECEIVABLES
2020 2019
GBP'000 GBP'000
----------------------------------------- -------- --------
Amounts falling due within one year:
Amounts receivable for the sale of goods 2,139 1,310
Allowance for expected credit losses (155) (26)
Other debtors and prepayments
- Rent and rates 124 4,435
- Other 1,459 2,423
----------------------------------------- -------- --------
3,567 8,142
----------------------------------------- -------- --------
The Directors consider that the carrying amount of trade and
other receivables at 26 September 2020 and 28 September 2019
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 26 September 2020 amounted to
GBP2.1 million (2019: GBP1.3 million). These amounts mainly relate
to sundry trade account generated sales. In relation to these
sales, the average credit period taken is 58 days (2019: 58 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 (2019: 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:
2020 2019
GBP'000 GBP'000
-------------------- -------- --------
Greater than 60 days - -
-------------------- -------- --------
The allowance for expected credit losses / allowance for
doubtful debts was GBP155,000 by the end of the period (2019:
GBP26,000). 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 GBPnil relating to individually impaired
trade receivables (2019: GBP12,000) which are due from companies
that have been placed into liquidation.
18 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:
2020 2019
GBP'000 GBP'000
-------------------------------- -------- --------
Sterling 28,862 18,049
US dollar 1,701 183
Euro 456 515
-------------------------------- -------- --------
Total cash and cash equivalents 31,018 18,747
-------------------------------- -------- --------
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.
19 TRADE AND OTHER PAYABLES
2020 2019
GBP'000 GBP'000
------------------------------------ -------- --------
Amounts falling due within one year
Trade payables 22,450 17,394
Other payables 14,761 7,142
Accruals 15,543 14,622
Deferred income 1,039 1,013
Contract liabilities 4,653 3,165
------------------------------------ -------- --------
58,446 43,336
------------------------------------ -------- --------
Trade payables and accruals principally comprise amounts
outstanding for trade purchases and ongoing costs. The average
credit period taken for trade purchases is 63 days (2019: 58 days).
No interest is charged on these payables.
The Directors consider that the carrying amount of trade
payables at 26 September 2020 and 28 September 2019 approximates to
their fair value on the basis of discounted cash flow analysis.
Accruals includes provisions for customer returns of
GBP1,129,000 (2019: GBP1,078,000).
Deferred income relates to consideration for trader loyalty
points earned but not yet redeemed. The value of deferred income as
at 28 September 2019 that was recognised as revenue for the 52
weeks ended 26 September 2020 was GBP755,000.
Contract liabilities relate to deposits received from customers
for orders not yet fulfilled. The value of contract liabilities as
at 28 September 2019 that was recognised as revenue for the 52
weeks ended 26 September 2020 was GBP3,052,000.
20 BANK LOANS
2020 2019
GBP'000 GBP'000
-------------------------- -------- --------
Bank loans (all sterling) 4,866 29,762
-------------------------- -------- --------
2020 2019
GBP'000 GBP'000
--------------------------------------------- -------- --------
The borrowings are repayable as follows:
On demand or within one year 5,000 -
In the second year - -
In the third to fifth year - 30,000
--------------------------------------------- -------- --------
5,000 30,000
Less: total unamortised issue costs (134) (238)
--------------------------------------------- -------- --------
4,866 29,762
Issue costs to be amortised within 12 months 115 122
--------------------------------------------- -------- --------
Amount due for settlement after 12 months - 29,884
--------------------------------------------- -------- --------
Amount due for settlement within 12 months 4,981 -
--------------------------------------------- -------- --------
The Directors consider that the carrying amount of the bank loan
at 26 September 2020 and 28 September 2019 approximates to its fair
value since the amounts relate to floating rate debt.
The average interest rates paid on the loan were as follows:
2020 2019
% %
------ ---- ----
Loans 2.11 2.36
------ ---- ----
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:
Lease Non-current Unamortised
liabilities Current borrowings borrowings issue costs
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------- ------------ ------------------ ----------- ------------
As at 30 September 2018 - - 30,000 -
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)
----------------------------------------- ------------ ------------------ ----------- ------------
Impact of adoption of IFRS 16 128,245 - - -
As at 29 September 2019 128,245 - 30,000 (238)
----------------------------------------- ------------ ------------------ ----------- ------------
Repayment of bank loan - (1,000) (44,000) -
Drawdown of bank loan - 6,000 14,000 -
Repayment of lease liabilities (24,484) - - -
Additions/disposals of lease liabilities 17,362 - - -
Interest accrued on lease liabilities 3,033 - - -
Issue costs incurred in the year - - - (22)
Amortisation of issue costs - - - 126
----------------------------------------- ------------ ------------------ ----------- ------------
As at 26 September 2020 124,156 5,000 - (134)
----------------------------------------- ------------ ------------------ ----------- ------------
The Group has a revolving credit facility to 29 June 2022 of
GBP39.0 million. As at the financial period end, GBPnil of this was
drawn (2019: GBP30.0 million). The loan facility contains financial
covenants which are tested on a bi-annual basis. In light of
Covid-19 the September 2020 covenants have been removed and the
March 2021 covenants relaxed. The Group did not breach any
covenants in the period.
During the year the Group utilised the Coronavirus Large
Business Interruption Loan Scheme ("CLBILS"), which facilitates
access to finance for medium-sized and larger businesses affected
by the coronavirus outbreak. The Group has a credit facility to 21
June 2021 of GBP10.0 million. As at the financial period end,
GBP5.0 million of this was drawn.
At 26 September 2020, the Group had available GBP44.0 million
(2019: GBP9.0 million) of undrawn committed banking facilities.
21 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
2019. The capital structure of the Group consists of debt, which
includes the borrowings disclosed in note 20, cash and cash
equivalents disclosed in note 18 and equity attributable to equity
holders of the parent, comprising issued capital, reserves and
accumulated losses as disclosed in notes 23 to 29.
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
2020
GBP'000
----------------------------------------------------- ------------------
Financial assets
Amortised cost (including cash and cash equivalents) 36,624
Fair value through profit and loss 23
Financial liabilities
Amortised cost 182,011
------------------------------------------------------ ------------------
Carrying value and
fair value
2019
GBP'000
------------------------------------------------------------ ------------------
Financial assets
Loans and receivables (including cash and cash equivalents) 20,031
Fair value through profit and loss 89
Financial liabilities
Amortised cost 69,042
------------------------------------------------------------- ------------------
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
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
---------- -------- -------- -------- --------
Euro 456 636 5,891 3,157
US dollar 1,701 421 608 360
---------- -------- -------- -------- --------
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.
2020 2019
GBP'000 GBP'000
------------------------------------------------------- -------- --------
Profit or loss movement on a 10% strengthening in
sterling against the euro 494 229
Profit or loss movement on a 10% strengthening in
sterling against the US dollar 99 6
Profit or loss movement on a 10% weakening in sterling
against the euro (604) (280)
Profit or loss movement on a 10% weakening in sterling
against the US dollar (121) (7)
-------------------------------------------------------- -------- --------
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:
2020 2019
GBP'000 GBP'000
----------------------------------- -------- --------
Forward foreign exchange contracts 3,575 10,600
----------------------------------- -------- --------
These arrangements are designed to address significant exchange
exposures for the first half of 2021 and are renewed on a revolving
basis as required.
At 26 September 2020 the fair value of the Group's currency
derivatives is a gain of GBP23,417 within other debtors and
prepayments (note 17) (2019: gain of GBP88,514 within other debtors
and prepayments (note 17)).
Gains of GBP65,097 have been included in cost of sales during
the period (2019: GBP99,957 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
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
----------------- ----------------- -------- ---------------- --------
(Loss) or profit (146) (143) 146 143
----------------- ----------------- -------- ---------------- --------
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
17.
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 2.11% (2019: 2.36%) 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 5+
1 month months to 1 year years years Total
2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- --------- -------- ---------- -------- -------- --------
Non-interest bearing 52,754 - - - - 52,754
Lease liabilities 2,134 6,541 18,134 68,449 52,274 147,532
Variable interest rate instruments 22 44 5,182 149 - 5,397
----------------------------------- --------- -------- ---------- -------- -------- --------
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
----------------------------------- --------- -------- ---------- -------- -------- --------
Non-interest bearing 39,158 - - - - 39,158
Lease liabilities - - - - - -
Variable interest rate instruments 59 119 539 31,251 - 31,968
----------------------------------- --------- -------- ---------- -------- -------- --------
The Group is financed through a GBP39.0 million (2019: GBP39.0
million) revolving credit facility, of which GBPnil (2019: GBP30.0
million) was utilised. At the balance sheet date, the total unused
amount of financing facilities was GBP39.0 million (2019: GBP9.0
million).
The Group received a Coronavirus Large Business Interruption
Loan Scheme of GBP10.0 million, of which only GBP5.0 million was
utilised, the amount unused was GBP5.0 million at the balance sheet
date.
The Group expects to meet its other obligations from operating
cash flows and proceeds of maturing financial assets.
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
2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- -------- -------- ---------- -------- -------- --------
Foreign exchange forward contracts
payments (1,091) (1,436) (1,048) - - (3,575)
Foreign exchange forward contracts
receipts 1,098 1,441 1,059 - - 3,598
----------------------------------- -------- -------- ---------- -------- -------- --------
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
----------------------------------- -------- -------- ---------- -------- -------- --------
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 (2019:
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).
22 PROVISIONS
2020 2019
GBP'000 GBP'000
------------------------ -------- ---------
Onerous lease provision - 2,990
Dilapidations provision 2,209 2,008
Redemption liability 120 99
------------------------ -------- ---------
2,329 5,097
------------------------ -------- ---------
Current 462 1,235
Non-current 1,867 3,862
------------------------ -------- ---------
2,329 5,097
------------------------ -------- ---------
Onerous Dilapidations Redemption
lease provision provision liability Total
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ---------------- ------------- ---------- --------
At 28 September 2019 2,990 2,008 99 5,097
Impact of change in accounting
policy (IFRS 16) (2,589) - - (2,589)
---------------------------------- ---------------- ------------- ---------- --------
Adjusted balance at 29 September
2019 401 2,008 99 2,508
---------------------------------- ---------------- ------------- ---------- --------
Created in the year - 413 96 509
Utilisation of provision - (212) - (212)
Release of provision in the
period (401) - (75) (476)
---------------------------------- ---------------- ------------- ---------- --------
At 26 September 2020 - 2,209 120 2,329
---------------------------------- ---------------- ------------- ---------- --------
In 2019, prior to the adoption of IFRS 16, the onerous lease
provision related to the estimated future unavoidable costs in
respect of closed, non-trading and loss-making stores. This
provision was expected to be utilised over the lease term of the
various properties (with the majority being less than 4 years).
Under IFRS 16, right-of-use assets are recognised on balance sheet
and are depreciated and subject to impairment which replaces the
need for an onerous lease provision. On the adoption of IFRS 16 on
29 September 2019, GBP2,589,000 of onerous lease obligations for
rental costs were released and impairments have been recognised
against the related right-of-use assets (refer to note 34 which
shows the impact of IFRS 16 being adopted).
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
10 years which includes an estimation of future renewals after the
current leases end).
The discount rate used to calculate the present value of
property provisions is 6% (2019: 5%). A 10% reduction in discount
rate would lead to an increase in property provisions of GBP53,000
(2019: GBP80,000).
Provisions include GBP120,000 redemption liability in relation
to the purchase of Strata Tiles Limited, payable in 2021, and
therefore have been classed as current. The liability is valued at
amortised cost based on forecast attainment of performance
conditions associated with the payment of the liability.
23 SHARE CAPITAL
2020 2019 2020 2019
Shares Shares GBP'000 GBP'000
--------------------------------------------------- ----------- ----------- -------- --------
Allotted, issued and fully paid ordinary shares of
3.33p (2019: 3.33p)
At the start of the period 196,440,971 196,440,971 6,548 6,548
Issued in the period 2,352 - - -
--------------------------------------------------- ----------- ----------- -------- --------
At the end of the period 196,443,323 196,440,971 6,548 6,548
--------------------------------------------------- ----------- ----------- -------- --------
During the period the Group issued 2,352 (2019: nil) ordinary
shares with a nominal value of GBP78 (2019: GBPnil) under share
option schemes for an aggregate cash consideration of GBP2,100
(2019: GBPnil).
The authorised share capital of the Group is GBP8,000,000 (2019:
GBP8,000,000), which consists of 240,000,000 ordinary shares (2019:
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.
24 SHARE PREMIUM
2020 2019
GBP'000 GBP'000
------------------------------- -------- --------
At start of the period 2,490 2,490
Premium on issue of new shares 2 -
------------------------------- -------- --------
At end of the period 2,492 2,490
------------------------------- -------- --------
25 OWN SHARES
2020 2019
GBP'000 GBP'000
----------------------------------- -------- --------
At start of the period (1,548) (3,750)
Disposed of on issue in the period 65 2,202
----------------------------------- -------- --------
At end of the period (1,483) (1,548)
----------------------------------- -------- --------
A subsidiary of the Group holds 1,470,517 (2019: 1,518,694)
shares with a nominal value of GBP1,482,487 acquired for an average
price of GBP1.01 per share (2019: GBP1,547,603 acquired for an
average price of GBP1.02 per share) and therefore these have been
classed as own shares. These shares are held in an employee benefit
trust.
26 MERGER RESERVE
2020 2019
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 26 September 2020
(2019: same).
27 SHARE-BASED PAYMENT RESERVE
2020 2019
GBP'000 GBP'000
--------------------------------------------------------- -------- --------
At start of the period 3,962 3,945
Credit to equity for equity-settled share-based payments 3 17
--------------------------------------------------------- -------- --------
At end of the period 3,965 3,962
--------------------------------------------------------- -------- --------
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 26 September 2020
(2019: same).
28 CAPITAL REDEMPTION RESERVE
2020 2019
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 26
September 2020 (2019: same).
29 ACCUMULATED LOSSES
GBP'000
------------------------------------------------------------------ --------
At 30 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)
Impact of change in accounting policy (IFRS 16) (3,605)
Adjusted balance at 29 September 2019* (4,783)
Dividends (4,484)
Deferred and current tax on Sharesave scheme taken directly to
equity (2)
Own shares issued in the period (65)
Acquisition of non-controlling interest on business combination (100)
Net loss for the period attributable to owners of Topps Tiles Plc (7,966)
------------------------------------------------------------------ --------
At 26 September 2020 (17,400)
------------------------------------------------------------------ --------
* The Group has initially applied IFRS 16 'Leases' at 29
September 2019, using the modified retrospective approach. Under
this approach, comparative information is not restated and the
cumulative effect of applying IFRS 16 is recognised in retained
earnings at the date of initial application, 29 September 2019.
30 NON-CONTROLLING INTEREST
2020 2019
GBP'000 GBP'000
--------------------------------------------------------- -------- --------
At start of the period (2) -
Non-controlling interest on business combination - 39
Net loss for the period distributable to non-controlling
interests (52) (41)
Acquisition of non-controlling interests during the year 26
--------------------------------------------------------- -------- --------
At end of the period (28) (2)
--------------------------------------------------------- -------- --------
31 FINANCIAL COMMITMENTS
a) CAPITAL COMMITMENTS
At the end of the period there were capital commitments
contracted of GBPnil (2019: 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 GBP994,000 (2019: GBP1,063,000). At the period end,
the Group holds outstanding contributions of GBP216,673 (2019:
GBP221,115).
c) LEASE COMMITMENTS
Prior to the adoption of IFRS 16, the Group had entered into
non-cancellable operating leases in respect of motor vehicles,
equipment and land and buildings. The operating lease payments
primarily represented rentals payable by the Group for certain of
its office and store properties. Those leases were negotiated for
an average term of ten years and rentals were fixed for an average
of five years.
On adoption of IFRS 16, the Group recognised liabilities in
relation to these leases which had previously been classified as
operating leases under the principles of IAS 17.
A reconciliation of differences between the operating lease
commitments disclosed under the prior standard and the lease
liabilities recognised in the Consolidated Statement of Financial
Position at 29 September 2019 is found in note 34.
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:
2020 2019
Land and Land and
buildings Other buildings Other
GBP'000 GBP'000 GBP'000 GBP'000
------------------- ---------- -------- ---------- --------
- Within 1 year 23 - 23,037 1,745
- Within 2-5 years - - 72,606 2,563
- After 5 years - - 38,311 -
------------------- ---------- -------- ---------- --------
23 - 133,954 4,308
------------------- ---------- -------- ---------- --------
32 SHARE-BASED PAYMENTS
The Group operates three (2019: three) share option schemes in
relation to Group employees; these are the employee share purchase
plans, 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:
2020 2019
Weighted
average Weighted
exercise average exercise
Number of price Number of price
share options GBP share options GBP
--------------------------------------- -------------- --------- -------------- -----------------
Outstanding at beginning of the period 4,752,154 0.61 3,868,716 0.78
Issued during the period 1,634,712 0.60 3,195,674 0.51
Expired during the period (169,344) 1.27 (356,341) 0.92
Forfeited during the period (1,878,431) 0.59 (1,953,543) 0.73
Exercised during the period - - (2,352) 0.51
Outstanding at end of the period 4,339,091 0.59 4,752,154 0.61
Exercisable at end of the period 440,975 0.70 169,344 1.27
--------------------------------------- -------------- --------- -------------- -----------------
During the financial period, the Group granted 1,634,712 share
options under the existing share option scheme due to vest in April
2023 with a fair value of GBP357,773.
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 76.00
Weighted average exercise
price - pence 60.35
Expected volatility - % 31.24
Expected life - years 3.20
Risk-free rate of interest - % 0.39
Dividend yield - % 1.45
--------------------------- -------- -----
Expected volatility was determined by calculating the historical
volatility of the Group's share price over the previous three years
(2019: three years).
The weighted average remaining contractual life of the share
options outstanding at the end of the period is 1.93 years (2019:
2.38 years).
The exercise price for share options under the share save scheme
range from 43 pence to 127 pence.
The weighted average share price at the date of exercise of
options exercised during the year ended 26 September 2020 is nil
pence (2019: 69 pence).
2013 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:
2020 2019
Weighted Weighted
average exercise average exercise
Number of price Number of price
share options GBP share options GBP
--------------------------------------- -------------- ----------------- -------------- -----------------
Outstanding at beginning of the period 7,791,387 - 7,973,849 -
Issued during the period 2,110,791 - 2,885,557 -
Forfeited during the period (3,236,692) - (1,496,684) -
Exercised during the period (48,177) - (1,571,336) -
Outstanding at end of the period 6,617,309 - 7,791,387 -
Exercisable at end of the period 903,188 - 951,365 -
--------------------------------------- -------------- ----------------- -------------- -----------------
During the financial period, the Group granted 2,110,791 share
options under the existing share option scheme due to vest in
December 2022 with a fair value of GBP1,517,173.
The inputs to the Black-Scholes model are as follows:
Weighted average share
price - pence 75.00
Weighted average exercise - pence Nil
price
Expected volatility - % 31.08
Expected life - years 2.92
Risk-free rate of interest - % 0.55
Dividend yield - % 1.47
--------------------------- --------- -----
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 (2019: one,
two and three years).
The weighted average remaining contractual life of share options
outstanding at the end of the period is 7.64 years (2019: 7.96
years).
The weighted average share price at the date of exercise of
options exercised during the year ended 26 September 2020 is 67.09
pence (2019: 64.78 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 were due
to vest in December 2020 subject to the achievement of certain
performance criteria, however these have not been met.
Movements in 2020 Long Term Incentive Plan options are
summarised as follows:
2020 2019
Weighted
average Weighted
exercise average exercise
Number of price Number of price
share options GBP share options GBP
--------------------------------------- -------------- --------- -------------- -----------------
Outstanding at beginning of the period 2,402,648 - 2,656,830 -
Forfeited during the period (513,205) - (254,182) -
Outstanding at end of the period 1,889,443 - 2,402,648 -
--------------------------------------- -------------- --------- -------------- -----------------
The weighted average remaining contractual life of share options
outstanding at the end of the period is 5.62 years (2019: 6.68
years)
In total, the Group recognised a total expense of GBP3,290
(2019: GBP17,069 income) relating to share-based payments.
33 RELATED PARTY TRANSACTIONS
S.K.M. Williams is a related party by virtue of his close family
relationship with key management, with a 10.1% shareholding
(19,660,278 ordinary shares) in the Group's issued share capital
(2019: 10.5% shareholding of 20,593,950 ordinary shares).
At 26 September 2020, S.K.M. Williams was the landlord of one
property leased to Multi Tile Limited, a trading subsidiary of
Topps Tiles Plc, for GBP59,000 (2019: two properties for
GBP122,000) per annum.
No amounts were outstanding with S.K.M. Williams at 26 September
2020 (2019: 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 GBP1.0 million (2019:
GBP1.2 million) including share-based payments of GBPnil (2019:
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 GBP994,000 (2019: GBP1,063,000) and at year end the Group has
outstanding contributions of GBP216,673 (2019: GBP221,115).
34 ADOPTION OF IFRS 16 'LEASES'
This note explains the impact of the adoption of IFRS 16
'Leases' on the Group's financial statements. IFRS 16 was issued in
January 2016 and has been endorsed by the EU. The standard
specifies how to recognise, measure, present and disclose leases
and replaces IAS 17 'Leases' and IFRIC 4 'Determining whether an
arrangement contains a lease'.
The Group adopted IFRS 16 from 29 September 2019 using a
modified retrospective transition approach, as described in
paragraph C5(b) of the standard, under which the cumulative effect
of initial application is recognised as an adjustment to the
opening balance of retained earnings at 29 September 2019. The
comparative information presented for the 52 weeks ended 28
September 2019 has not been restated and therefore continues to be
shown under IAS 17. For all periods prior to 29 September 2019, the
Group classified all of its leases as operating leases under IAS
17. Operating lease rental payments were recognised as an expense
in the Consolidated Statement of Financial Performance on a
straight-line basis over the lease term.
Lease liabilities
On adoption of IFRS 16, the Group recognised liabilities in
relation to leases which had previously been classified as
operating leases under the principles of IAS 17 'Leases'. These
liabilities were measured at the present value of the remaining
lease payments, discounted using the lessee's incremental borrowing
rate as of 29 September 2019. The weighted average incremental
borrowing rate applied to the lease liabilities on 29 September
2019 was 2.30%. The lease liabilities recognised on 29 September
2019 were as follows:
29 September 2019
GBP'000
-------------------------------- --- ------------------
Current lease liabilities 23,637
Non-current lease liabilities 104,608
------------------------------------- ------------------
128,245
------------------------------------ ------------------
Right-of-use assets
The associated right-of-use assets for the Group's property and
equipment leases were measured at either:
-- The carrying amount as if IFRS 16 had been applied since the commencement
date, but discounted using the incremental borrowing rate at the date
of initial application. The Group has applied this to a small number of
property leases where it was possible to obtain sufficient historical
data.
-- An amount equal to the lease liability, adjusted by the amount of any
prepaid or accrued lease payments relating to that lease recognised in
the Consolidated Statement of Financial Position immediately before the
date of initial application. The Group has applied this methodology to
the majority of its property leases and equipment leases.
On transition the Group have performed an impairment review
under IAS 36, recognising an impairment totalling GBP4.6m to the
right-of-use assets through retained earnings. The recognised
right-of-use assets on transition relate to the following types of
assets:
29 September 2019
GBP'000
-------------------------------- --- ------------------
Property 113,878
Vehicles, plant and equipment 3,818
------------------------------------- ------------------
117,696
------------------------------------ ------------------
Adjustments to Statement of Financial Position items
The opening balance sheet position as at 29 September 2019 has
been restated on transition to IFRS 16. The Group recognised
additional right-of-use assets, sub-lease assets, lease liabilities
and deferred tax assets, as well as a reduction in prepayments,
provisions and liabilities, recognising the difference as an
adjustment to the opening balance of retained earnings. The impact
on transition is summarised below. Comparative periods have not
been restated.
28 September IFRS 16 29 September
2019 (reported) transition 2019
IAS 17 adjustments IFRS 16
GBP'000 GBP'000 GBP'000
--------------------------------------------- ---- ---------------- ------------- -------------
Non-current assets
Goodwill 3,104 - 3,104
Intangible assets 2,663 - 2,663
Property, plant and equipment 46,958 (93) 46,865
Investment properties 1,233 - 1,233
Other financial assets - 3,108 3,108
Deferred tax assets - 706 706
Right-of-use assets - 117,696 117,696
--------------------------------------------------- ---------------- ------------- -------------
53,958 121,417 175,375
-------------------------------------------------- ---------------- ------------- -------------
Current assets
Inventories 30,924 - 30,924
Other financial assets - 342 342
Trade and other receivables 8,142 (4,264) 3,878
Cash and cash equivalents 18,747 - 18,747
--------------------------------------------------- ---------------- ------------- -------------
57,813 (3,922) 53,891
-------------------------------------------------- ---------------- ------------- -------------
Total assets 111,771 117,495 229,266
Current liabilities
Trade and other payables (43,336) 4,556 (38,780)
Lease liabilities - (23,637) (23,637)
Current tax liabilities (2,025) - (2,025)
Provisions (1,235) 806 (429)
Total current liabilities (46,596) (18,275) (64,871)
--------------------------------------------------- ---------------- ------------- -------------
Net current assets/(liabilities) 11,217 (22,197) (10,980)
--------------------------------------------------- ---------------- ------------- -------------
Non-current liabilities
Bank loans (29,884) - (29,884)
Lease liabilities - (104,608) (104,608)
Deferred tax liabilities (1,197) - (1,197)
Provisions (3,862) 1,783 (2,079)
---------------------------------------------------
Total liabilities (81,539) (121,100) (202,639)
--------------------------------------------------- ---------------- ------------- -------------
Net assets 30,232 (3,605) 26,627
--------------------------------------------------- ---------------- ------------- -------------
Equity
Share capital 6,548 - 6,548
Share premium 2,490 - 2,490
Own shares (1,548) - (1,548)
Merger reserve (399) - (399)
Share-based payment reserve 3,962 - 3,962
Capital redemption reserve 20,359 - 20,359
Accumulated losses (1,178) (3,605) (4,783)
--------------------------------------------------- ---------------- ------------- -------------
Capital and reserves attributable to owners
of Topps Tiles Plc 30,234 (3,605) 26,629
Non-controlling interests (2) - (2)
Total equity 30,232 (3,605) 26,627
--------------------------------------------------- ---------------- ------------- -------------
IFRS 16 requires derecognition of the onerous lease provision.
The Group's property provisions have been adjusted to reflect this,
with an associated adjustment to retained earnings on
transition.
Under IFRS 16, balances such as rent prepayments/accruals, rent
free incentives and landlord contributions are reflected in either
the right-of-use asset or the lease liability, and therefore have
been derecognised on transition.
The table below shows a reconciliation from the total operating
lease commitment as disclosed at 28 September 2019 to the total
lease liabilities recognised in the accounts immediately after
transition:
29 September 2019
GBP'000
----------------------------------------------------------- -----------------
Operating lease commitment at 28 September 2019 138,262
Recognition exemption for short-term leases (107)
Adjustments as a result of a different treatment of leases
as a result of IFRS 16 2,336
Impact of discounting (12,246)
----------------------------------------------------------- -----------------
At 26 September 2020 128,245
----------------------------------------------------------- -----------------
Statement of Financial Performance impact for the period
The impact on the Statement of Financial Performance was as
follows:
52 weeks ended 26 September 2020
Presented Presented
under IAS Impact of under IFRS
17 IFRS 16 16
GBP'000 GBP'000 GBP'000
---------------------- ----------- ---------- ------------
Group revenue 192,813 - 192,813
Cost of sales (80,001) - (80,001)
----------------------- ----------- ---------- ------------
Gross profit 112,812 - 112,812
Operating costs (114,546) (4,295) (118,841)
----------------------- ----------- ---------- ------------
Group operating loss (1,734) (4,295) (6,029)
----------------------- ----------- ---------- ------------
Net finance costs (848) (2,952) (3,800)
----------------------- ----------- ---------- ------------
Loss before taxation (2,582) (7,247) (9,829)
----------------------- ----------- ---------- ------------
There is no cash flow impact as a result of adoption of IFRS 16,
except for a recategorisation between cash flow from operating
activities, investing activities and financing activities. Lease
payments/receipts and interest payments/receipts are shown
separately on the Statement of Cash Flows.
Practical expedients applied
In applying IFRS 16 for the first time, the Group has used the
following practical expedients permitted by the standard:
-- the use of a single discount rate for portfolios of leases with reasonably
similar characteristics;
-- accounting for low value operating leases and operating leases with a
remaining lease term of less than 12 months as at 29 September 2019 on
a straight line basis as an expense without recognising a right-of-use
asset or a lease liability;
-- the use of hindsight in determining the lease term where the contract
contains options to extend or terminate the lease;
-- on transition, no recognition of initial direct costs incurred in entering
the lease within the value of the right-of-use asset.
The Group has also elected not to reassess whether a contract
is, or contains, a lease at the date of initial application.
Instead, for contracts entered into before the transition date the
Group relied on its assessment made applying IAS 17 'Leases' and
IFRIC 4 'Determining whether an arrangement contains a lease'.
Significant areas of judgement and estimation
The application of IFRS 16 requires significant judgement and
estimation, particularly around the calculation of the incremental
borrowing rate and determining the lease term when there are
options to extend or terminate early - see note 2Y.
Company Balance Sheet
AS AT 26 SEPTEMBER 2020
Restated
2020 2019
Notes GBP'000 GBP'000
----------------------------------------------- ----- --------- ----------
Non-current assets
Investments 4 2,005 7,154
Right-of-use assets 8 647 -
----------------------------------------------- ----- --------- ----------
Current assets
Debtors 5 142,814 134,622*
Cash at bank and in hand 11,618 5,929
----------------------------------------------- ----- --------- ----------
Creditors: amounts falling due within one year 6 (89,013) (80,633)*
Provisions 7 (120) -
----------------------------------------------- ----- --------- ----------
Net current assets 65,299 59,918
Non-current liabilities
Lease liabilities 8 (169) -
Provisions 7 - (99)
----------------------------------------------- ----- --------- ----------
Total liabilities (89,302) (80,732)
----------------------------------------------- ----- --------- ----------
Net assets 67,782 66,973
----------------------------------------------- ----- --------- ----------
Capital and reserves
Called-up share capital 9 6,548 6,548
Share premium account 2,492 2,490
Share-based payment reserve 4,499 4,496
Capital redemption reserve 20,359 20,359
Other reserve 10 6,200 6,200
Profit and loss account 27,684 26,880
----------------------------------------------- ----- --------- ----------
Equity shareholders' funds 67,782 66,973
----------------------------------------------- ----- --------- ----------
*Refer to notes 5 and 6 for further details of the restatement
of balances as at 28 September 2019.
The Company made a profit after tax for the financial period
ended 26 September 2020 of GBP5,287,000 (2019: GBP10,009,000).
The Company has initially applied IFRS 16 'Leases' at 29
September 2019, using the modified retrospective approach. Under
this approach, comparative information is not restated and the
cumulative effect of applying IFRS 16 is recognised in retained
earnings at the date of initial application, 29 September 2019 (see
note 11).
The financial statements of Topps Tiles Plc, Companies House
number 3213782, were approved by the Board of Directors on 1
December 2020 and signed on its behalf by:
ROB PARKER
STEPHEN HOPSON
Directors
Company Statement of Changes in Equity
For the 52 weeks ended 26 September 2020
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 30 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
---------------------------- -------- -------- ----------- ----------- --------- --------- --------
Impact of change in
accounting policy
(IFRS 16) - - - - - 1 1
Adjusted balance at
29 September 2019* 6,548 2,490 4,496 20,359 6,200 26,881 66,974
---------------------------- -------- -------- ----------- ----------- --------- --------- --------
Profit for the period - - - - - 5,287 5,287
Dividend paid to equity
shareholders - - - - - (4,484) (4,484)
Issue of new shares - 2 - - - - 2
Credit to equity for
equity-settled share-based
payments - - 3 - - - 3
---------------------------- -------- -------- ----------- ----------- --------- --------- --------
Balance at 26 September
2020 6,548 2,492 4,499 20,359 6,200 27,684 67,782
---------------------------- -------- -------- ----------- ----------- --------- --------- --------
The other reserves comprise an unrealised gain arising on the
disposal of certain trademarks to a subsidiary company. At 26
September 2020, the Directors consider the other reserve of
GBP6,200,000 to remain non-distributable.
The Directors consider GBPnil (2019: GBPnil) of profit and loss
account reserves to be not distributable at 26 September 2020.
* The Company has initially applied IFRS 16 'Leases' at 29
September 2019, using the modified retrospective approach. Under
this approach, comparative information is not restated and the
cumulative effect of applying IFRS 16 is recognised in retained
earnings at the date of initial application, 29 September 2019.
Notes to the Company Financial Statements
For the 52 weeks ended 26 September 2020
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 16 was adopted in line with the
requirements of accounting standards. Further detailed of IFRS 16
'Leases', including the impact of adoption are included in note
11.
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 28
September 2019.
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 the ability of the Group to meet its
banking covenants and operate within its banking facilities based
on current financial plans, along with a series of more pessimistic
trading scenarios that were deemed severe but plausible. The more
pessimistic trading scenarios included a second lock down during
the next 12 months that would see our retail stores closed for up
to three months.
The Group took a number of actions to strengthen its liquidity
during the Covid-19 pandemic. The UK Government put in place a
range of support measures for businesses and we accessed all of
those available to us. This included utilising the Coronavirus Job
Retention Scheme to furlough the c.90% of our colleagues who were
unable to work from home, business rates relief for the 2020/21 tax
year, VAT deferral and utilising the Coronavirus Large Business
Interruption Loan Scheme ("CLBILS"), which facilitates access to
finance for medium-sized and larger businesses affected by the
coronavirus outbreak. The sale and leaseback of the Group's head
office and central warehouse buildings at Enderby was completed in
June 2020. The going concern review also outlined a range of other
mitigating actions that could be taken in a severe but plausible
trading scenario. This included, but was not limited to, savings on
store employee costs, savings on central support costs, and
reduction of capital expenditure.
The Group's forecast covenant and cash headroom was reviewed
against current lending facilities. These were refinanced in July
2018 and expire in July 2022, with an opportunity to extend at the
end of the first and second years for a further year, so a
potential full term of five years ending July 2023.
In all scenarios, the Board have concluded that there is
sufficient covenant headroom and available liquidity for the
Company to continue in operational existence for the foreseeable
future. The Board therefore continue to adopt the going concern
basis in preparing the financial statements.
B) FINANCIAL PERIOD
There has been a change in accounting policy during the year,
from the accounting period ends on the Saturday which falls closest
to 30 September resulting in financial periods of either 52 or 53
weeks, to the accounting period is drawn up to a Saturday within 7
days of 30 September resulting in financial periods of either 52 or
53 weeks. There has been no impact on prior period financial
statements as a result of this change.
Throughout the financial statements, Directors' Report and
Strategic Report, references to 2020 mean "at 26 September 2020" or
the 52 weeks then ended; references to 2019 mean "at 28 September
2019" 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 are recorded in the financial statements in
the year in which they are approved by the Company's
shareholders.
G) FINANCE INCOME AND FINANCE COSTS
Interest receivable or payable is recognised on accrual
basis.
H) SHARE-BASED PAYMENTS
The Company 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) LEASES
The Company has changed its accounting policy for leases as a
result of IFRS 16 "Leases". The new policy is detailed below and
the impact of the change is described in note 11.
Until 28 September 2019, as a lessee, the Company previously
classified leases as operating or finance leases based on its
assessment of whether the lease transferred substantially all the
risks and rewards of ownership. Rentals payable under operating
leases were charged to the profit and loss account 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 were recognised as an expense in the
period in which they are incurred.
In the event that lease incentives were received to enter into
operating leases, such incentives were recognised as a liability.
The aggregate benefit of incentives was 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 following policies apply subsequent to the date of initial
application of IFRS 16, 29 September 2019.
Leases in which the Company is a lessee
The Company leases assets which consist of vehicles and
equipment. Rental contracts are typically made for fixed periods
but may have extension options or break options to maximise
operational flexibility. Lease terms are negotiated on an
individual basis and contain a wide range of different terms and
conditions.
The Company now assesses whether a contract is or contains a
lease based on the new definition of a lease. Under IFRS 16, a
contract is, or contains, a lease if the contract conveys a right
to control the use of an identified asset for a period of time in
exchange for consideration.
At the commencement date of property leases the Company
determines the lease term to be the full term of the lease,
assuming that any option to break or extend the lease is unlikely
to be exercised. The Company considers the lease term to be the
non-cancellable period and in assessing this applies the definition
of a contract and determines the period for which the contract is
enforceable.
Under IFRS 16, the Company recognises right-of-use assets and
lease liabilities for most leases.
The Company has elected to take advantage of the following
recognition exemptions and account for lease payments as an expense
on a straight-line basis over the lease term or another systematic
basis for the following two types of leases:
-- leases with a lease term of 12 months or less and containing no purchase
options - this election is made by class of underlying asset;
-- leases where the underlying asset has a low value when new - this election
can be made on a lease-by-lease basis.
For leases where the Company has taken short-term lease
recognition exemption and there are any changes to the lease term
or the lease is modified, the Company accounts for the lease as a
new lease.
From 29 September 2019 leases are recognised as a right-of-use
asset with a corresponding liability at the date at which the
leased asset is available for use by the Company. Each lease
payment comprises an element of capital and finance cost. The
finance cost is charged to profit or loss over the lease period so
as to produce a constant periodic rate of interest on the remaining
balance of the liability for each period. The right-of-use asset is
depreciated over the shorter of the asset's useful life and the
lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include the
net present value of the following lease payments:
-- fixed payments (including in-substance fixed payments), less any lease
incentives receivable;
-- variable lease payments that are based on an index or a rate;
-- amounts expected to be payable by the lessee under residual value guarantees;
-- the exercise price of a purchase option if the lessee is reasonably certain
to exercise that option;
-- payments of penalties for terminating the lease if the lease term reflects
the lessee exercising that option.
The lease payments are discounted using the interest rate
implicit in the lease. If that rate cannot be determined, the
lessee's incremental borrowing rate is used, being the rate that
the lessee would have to pay to borrow the funds necessary to
obtain an asset of similar value in a similar economic environment
with similar terms and conditions.
Right-of-use assets are measured at cost comprising the
following:
-- the amount of the initial measurement of lease liability;
-- any lease payments made at or before the commencement date less any lease
incentives received;
-- any initial direct costs;
-- restoration costs.
After lease commencement, the Company measures right-of-use
assets using a cost model. Under the cost model a right-of-use
asset is measured at cost less accumulated depreciation and
accumulated impairment.
Subsequent to initial measurement, lease liabilities increase as
a result of interest charged at a constant rate on the balance
outstanding and are reduced for lease payments made. The lease
liability is also remeasured to reflect changes in:
-- the lease term (using a revised discount rate);
-- the assessment of a purchase option (using a revised discount rate);
-- the amounts expected to be payable under residual value guarantees (using
an unchanged discount rate);
-- future lease payments resulting from a change in an index or a rate used
to determine those payments (using an unchanged discount rate).
The remeasurements are matched by adjustments to the
right-of-use asset.
Lease modifications may also prompt remeasurement of the lease
liability unless they are determined to be separate leases.
The right-of-use asset is subsequently depreciated using the
straight-line method from the commencement date to the earlier of
the end of the useful life of the right-of-use asset or the end of
lease term. The estimated useful lives of right-of-use assets are
determined on the same basis as those of property, plant and
equipment. In addition, the right-of-use asset is reduced by
impairment losses, if any, and adjusted for certain remeasurements
of the lease liability.
J) 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.
CRITICAL JUDGEMENTS IN APPLYING THE COMPANY'S ACCOUNTING
POLICIES
The Directors have concluded that there are no critical areas of
accounting judgement in the application of the Company'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:
INCREMENTAL BORROWING RATE
Under IFRS 16, the Company recognises a right-of-use asset
representing its right to use the underlying asset and a lease
liability representing its obligation to make lease payments. The
lease liability is initially measured at the present value of the
remaining lease payments, discounted using the Company's
incremental borrowing rate, adjusted to take into account the risk
associated with the length of the lease. The Company has therefore
made a judgement to determine the incremental borrowing rate used.
As a result of the significant impact the transition to IFRS 16 has
had on the Company's opening balance sheet, the discount rate is
considered to be a significant judgement.
RECOVERABILITY OF INTERCOMPANY BALANCES
The Directors consider that the recoverability of intercompany
balances is a key source of estimation uncertainty. The company
makes an estimate of the recoverable amount of amounts receivable
to group undertakings by performing an annual review of net assets
and cashflows for those group companies, and have concluded all
intercompany receivables remain recoverable at the period end.
The Company considers whether investments in 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).
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 26 September 2020 of GBP5,287,000 (2019:
GBP10,009,000).
The auditors' remuneration for services to the Company was
GBP49,000 for audit-related work (2019: GBP49,000 for audit-related
work). Fees relating to non-audit work totalled GBPnil (2019:
GBPnil); see note 4 to the Group financial statements for further
details.
The Company had no employees other than the Directors (2019:
same), whose remuneration is detailed in the Annual Report.
4 INVESTMENTS
GBP'000
----------------------------------------------- -------
Cost at 30 September 2018 3,420
Acquisition of subsidiary 3,717
Movement in share options granted to employees 17
Cost at 28 September 2019 7,154
----------------------------------------------- -------
Acquisition of subsidiary 75
Movement in share options granted to employees 3
Impairment of investments in subsidiaries (5,227)
----------------------------------------------- -------
Cost at 26 September 2020 2,005
----------------------------------------------- -------
During the year investments in Parkside Ceramics Limited of
GBP1,435,000 and in Strata Tiles Limited of GBP3,792,000 have been
written down to GBPnil.
The following were subsidiaries that the Company has investments
in, both as at 26 September 2020 and 28 September 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* 90% 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
Strata Tiles Limited and Parkside Ceramics Limited) is Thorpe Way,
Grove Park, Enderby, Leicestershire, LE19 1SU, United Kingdom.
The registered address of Strata Tiles Limited and Parkside
Ceramics Limited is Barnsdale Way, Enderby, Leicestershire,
England, LE19 1SN.
5 Debtors: Amounts falling due within one year
Restated
2020 2019
GBP'000 GBP'000
---------------------------------------- -------- ----------
Amounts owed by subsidiary undertakings 140,418 133,275
Prepayments 48 27
Other debtors 2,348 1,320
---------------------------------------- -------- ----------
142,814 134,622
---------------------------------------- -------- ----------
The 2019 amounts owed by subsidiary undertakings have been
restated by GBP8,000 and other debtors by GBP1,282,000, a net
change of GBP1,290,000, to correct a previous misallocation of
balances owed across the Group entities. 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
2020 2019
GBP'000 GBP'000
---------------------------------------- -------- --------
Trade and other creditors 9,393 5,722
Amounts owed to subsidiary undertakings 76,188 70,308
Accruals 2,952 4,603
Lease liabilities 480 -
---------------------------------------- -------- --------
89,013 80,633
---------------------------------------- -------- --------
The 2019 trade creditors and other creditors have been restated
by GBP5,565,000, amounts owed to subsidiary undertakings have been
restated by GBP7,910,000 and accruals have been restated by
GBP3,635,000, a net change of GBP1,290,000, to correct a previous
misallocation of balances due across the Group entities. 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 PROVISIONS
Provisions include GBP120,000 redemption liability in relation
to the purchase of Strata Tiles Limited, payable in 2021, and
therefore have been classed as current. The liability is valued at
fair value based on forecast attainment of performance conditions
associated with the payment of the liability. The movement in year
includes a net provision increase of GBP21,000 (2019:
GBP99,000).
8 LEASES
As a lessee
Right-of-use assets included in the Balance Sheet at 26
September 2020 were as follows:
Equipment
GBP'000
---------------------------- ---------
At transition: 29 September
2019 1,114
Additions 86
Depreciation (553)
At 26 September 2020 647
------------------------------ ---------
Lease liabilities included in the Balance Sheet at 26 September
2020 were as follows:
Equipment
GBP'000
------------------------------- -----------
At transition: 29 September
2019 (1,106)
Additions (87)
Interest (19)
Repayment of lease liabilities 563
--------------------------------- -----------
At 26 September 2020 (649)
--------------------------------- -----------
The maturity analysis of the lease liabilities is as
follows:
2020 2019
GBP'000 GBP'000
------------ -------- --------
Current (480) -
Non-current (169) -
------------ -------- --------
(649) -
------------ -------- --------
The remaining contractual maturities of the lease liabilities,
which are gross and undiscounted, are as follows:
2020 2019
GBP'000 GBP'000
----------------------------------- -------- --------
Less than one year 482 -
One to five years 174 -
More than five years - -
----------------------------------- -------- --------
Total undiscounted lease liability 656 -
----------------------------------- -------- --------
The following amounts have been recognised in the profit and
loss account:
Equipment
GBP'000
----------------------------- -----------
Depreciation of right-of-use
assets 553
Interest expense 19
------------------------------- -----------
The total cash outflow for leases during the financial period
was GBP563,000.
9 Called-up share capital
2020 2019
GBP'000 GBP'000
---------------------------------------------------------------- -------- --------
Allotted, issued and fully paid 196,443,323 (2019: 196,440,971)
ordinary shares of 3.33p each (2019: 3.33p) 6,548 6,548
---------------------------------------------------------------- -------- --------
During the period nil shares were purchased by Topps Tiles
Employee Benefit Trust on behalf of the Group (2019: nil).
During the period the Group issued and allotted 2,352 (2019:
nil) ordinary shares with a nominal value of GBP78 (2019: GBPnil)
under share option schemes for an aggregate cash consideration of
GBP2,100 (2019: GBPnil).
10 Other Reserves
The other reserves comprise an unrealised gain arising on the
disposal of certain trademarks to a subsidiary company.
11 ADOPTION OF IFRS 16 'LEASES'
This note explains the impact of the adoption of IFRS 16
'Leases' on the Company's financial statements. IFRS 16 was issued
in January 2016 and has been endorsed by the EU. The standard
specifies how to recognise, measure, present and disclose leases
and replaces IAS 17 'Leases' and IFRIC 4 'Determining whether an
arrangement contains a lease'.
The Company adopted IFRS 16 from 29 September 2019 using a
modified retrospective transition approach, as described in
paragraph C5(b) of the standard, under which the cumulative effect
of initial application is recognised as an adjustment to the
opening balance of retained earnings at 29 September 2019. The
comparative information presented for the 52 weeks ended 28
September 2019 has not been restated and therefore continues to be
shown under IAS 17. For all periods prior to 29 September 2019, the
Company classified all of its leases as operating leases under IAS
17. Operating lease rental payments were recognised as an expense
in the profit and loss account on a straight-line basis over the
lease term.
Lease liabilities
On adoption of IFRS 16, the Company recognised liabilities in
relation to leases which had previously been classified as
operating leases under the principles of IAS 17 'Leases'. These
liabilities were measured at the present value of the remaining
lease payments, discounted using the lessee's incremental borrowing
rate as of 29 September 2019. The weighted average incremental
borrowing rate applied to the lease liabilities on 29 September
2019 was 2.23%. The lease liabilities recognised on 29 September
2019 were as follows:
29 September 2019
GBP'000
-------------------------------- --- ------------------
Current lease liabilities 480
Non-current lease liabilities 626
------------------------------------- ------------------
1,106
------------------------------------ ------------------
Right-of-use assets
The associated right-of-use assets for the Company's equipment
leases were measured at either:
-- The carrying amount as if IFRS 16 had been applied since the commencement
date, but discounted using the incremental borrowing rate at the date
of initial application. The Company has applied this to a small number
of leases where it was possible to obtain sufficient historical data.
-- An amount equal to the lease liability, adjusted by the amount of any
prepaid or accrued lease payments relating to that lease recognised in
the Balance Sheet immediately before the date of initial application.
The Company has applied this methodology to the majority of its leases.
The recognised right-of-use assets on transition relate to the
following types of assets:
29 September 2019
GBP'000
------------------------------- ------------------
Vehicles, plant and equipment 1,114
-------------------------------- ------------------
1,114
------------------------------- ------------------
Adjustments to Balance Sheet items
The opening balance sheet position as at 29 September 2019 has
been restated on transition to IFRS 16. The Company recognised
additional right-of-use assets, and lease liabilities, recognising
the difference as an adjustment to the opening balance of retained
earnings. The impact on transition is summarised below. Comparative
periods have not been restated.
28 September IFRS 16 29 September
2019 (reported) transition 2019
IAS 17 adjustments IFRS 16
GBP'000 GBP'000 GBP'000
------------------------------- ----------------- ------------- --------------
Non-current assets
Investments 7,154 - 7,154
Right-of-use assets - 1,114 1,114
------------------------------- ----------------- ------------- --------------
Current assets
Debtors 335,132 - 335,132
Cash at bank and in hand 5,929 - 5,929
------------------------------- ----------------- ------------- --------------
Creditors: amounts falling due
within one year (281,143) (487) (281,630)
------------------------------- ----------------- ------------- --------------
Net current assets 59,918 (487) 59,431
Non-current liabilities
Lease liabilities - (626) (626)
Provisions (99) - (99)
------------------------------- ----------------- ------------- --------------
Total liabilities (281,242) (1,113) (282,355)
------------------------------- ----------------- ------------- --------------
Net assets 66,973 1 66,974
------------------------------- ----------------- ------------- --------------
Capital and reserves
Called-up share capital 6,548 - 6,548
Share premium account 2,490 - 2,490
Share-based payment reserve 4,496 - 4,496
Capital redemption reserve 20,359 - 20,359
Other reserve 6,200 - 6,200
Profit and loss account 26,880 1 26,881
------------------------------- ----------------- ------------- --------------
Equity shareholders' funds 66,973 1 66,974
------------------------------- ----------------- ------------- --------------
Under IFRS 16, balances such as rent prepayments/accruals are
reflected in either the right-of-use asset or the lease liability,
and therefore have been derecognised on transition.
The table below shows a reconciliation from the total operating
lease commitment as disclosed at 28 September 2019 to the total
lease liabilities recognised in the accounts immediately after
transition:
29 September 2019
GBP'000
----------------------------------------------------------- -----------------
Operating lease commitment at 28 September 2019 -
Adjustments as a result of a different treatment of leases
as a result of IFRS 16 1,138
Impact of discounting (32)
----------------------------------------------------------- -----------------
At 26 September 2020 1,106
----------------------------------------------------------- -----------------
Practical expedients applied
In applying IFRS 16 for the first time, the Company has used the
following practical expedients permitted by the standard:
-- the use of a single discount rate for portfolios of leases with reasonably
similar characteristics;
-- accounting for low value operating leases and operating leases with a
remaining lease term of less than 12 months as at 29 September 2019 on
straight line basis as an expense without recognising a right-of-use asset
or a lease liability;
-- the use of hindsight in determining the lease term where the contract
contains options to extend or terminate the lease;
-- on transition, no recognition of initial direct costs incurred in entering
the lease within the value of the right-of-use asset.
The Company has also elected not to reassess whether a contract
is, or contains, a lease at the date of initial application.
Instead, for contracts entered into before the transition date the
Company relied on its assessment made applying IAS 17 'Leases' and
IFRIC 4 'Determining whether an arrangement contains a lease'.
Significant areas of judgement
The application of IFRS 16 requires significant judgement and
estimation, particularly around the calculation of the incremental
borrowing rate - see note 2J.
Discount rate
The discount rate used to calculate the lease liability is the
rate implicit in the lease, if it can be readily determined, or the
lessee's incremental borrowing rate if not. The Company uses the
lessee's incremental borrowing rate for all equipment leases. The
Company applies judgement in determining the appropriate discount
rate used to calculate the lease liability. As mentioned above, the
Company applies a single discount rate to all leases with similar
characteristics, which is an option permitted by the standard. This
rate is calculated based on the Revolving Credit Facility rate
adjusted for a factor based on the lease term.
Five Year Record
UNAUDITED
52 weeks 52 weeks 52 weeks 52 weeks 52 weeks
ended ended ended ended ended
1 October 30 September 29 September 28 September 26 September
2016 2017 2018 2019 2020
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ---------- ------------- ------------- ------------- -------------
Group revenue 214,994 211,848 216,887 219,197 192,813
Group operating profit 21,073 17,889 13,735 13,333 (6,029)
Profit before taxation 19,982 16,999 12,688 12,475 (9,829)
Shareholders' funds 17,545 23,553 26,663 30,232 14,054
Basic earnings per share 8.05p 6.98p 5.00p 5.18p (4.11)p
Dividend per share 3.50p 3.40p 3.40p 3.40p Nil
Dividend cover 2.30x 2.05x 1.47x 1.52x Nil
Average number of employees 1,977 2,030 2,114 2,089 2,001
Share price (period end) 112.25p 75.50p 62.90p 66.60p 51.40p
---------------------------- ---------- ------------- ------------- ------------- -------------
All figures quoted are inclusive of continued and discontinued
operations.
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December 01, 2020 02:00 ET (07:00 GMT)
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