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Margin stability not enough for Topps Tiles

It doesn't look as though stable margins will be enough to protect the bottom line at Topps Tiles this year
May 23, 2017

Although these first-half numbers were largely what analysts expected from retailer Topps Tiles (TPT), they haven't stopped some from lowering their forecasts for the current financial year. A weak trading environment left like-for-like sales growth in negative territory at the half-year stage, and this is expected to deteriorate further as the group comes up against tough comparative figures in the second half. In fact, like-for-like sales growth is already down 5.8 per cent over the seven weeks ended 20 May, prompting Peel Hunt to trim their numbers. Analysts there now expect pre-tax profits of £20.5m for the year ending September 2017, giving EPS of 8.4p, down from £22m and 9p in FY2016.

IC TIP: Hold at 97p

Chief executive Matt Williams said the group had lost out on average transaction values, rather than volumes, which was likely linked to Topps' resistance to introducing inflationary-driven price rises. The gross margin held up reasonably well, falling just 30 basis points to 61.2 per cent as a result of extra one-off costs following the introduction of a new loyalty scheme and the closing of an older one. On an underlying basis, gross margins were flat year on year.

TOPPS TILES (TPT)

ORD PRICE:97pMARKET VALUE:£187m
TOUCH:96-98p12-MONTH HIGH:150pLOW: 80p
DIVIDEND YIELD:3.7%PE RATIO:13
NET ASSET VALUE:10.5pNET DEBT:131%

Half-year to 1 AprilTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201610810.14.21.0
20171079.53.91.1
% change-1-5-7+10

Ex-div: 15 Jun

Payment: 14 Jul