Topps given hope after profits fall

The UK's largest tile and wood flooring retailer has suffered a 22% fall in profits but has been encouraged by a pick-up in recent trading.

Topps Tiles, which operates 320 stores and has a 26% share of the market, saw underlying profits fall to £5.6 million in the 26 weeks to the end of March, driven by a 4.7% drop in like-for-like sales.

Sales at the start of the second half of its year were up by 4.5% after April's dismal weather put the focus back on home improvement projects.

However, the Leicester-based group, which also trades as Tile Clearing House, warned that trading conditions remain challenging and it was too early to say whether this marked the start of an improving trend.

Seymour Pierce stockbrokers said the profits figure was short of the £6.8 million it expected but that recent trading meant it stuck by its full-year forecast for a profit haul of £13 million.

Analyst Freddie George said: "We remain concerned that the DIY sheds, in particular B&Q, which has recently launched a new tile range, and other retailers, which are improving their 'Home' offers, will start to impact Topps' revenues."

He added that the completion of the company's second warehouse at its Leicestershire headquarters should enable a longer term shift to direct sourcing and improved margins. Topps hopes the new facility will enable it to fulfil its ambition of expanding to a chain of around 400 stores in the UK.

It opened five new Topps stores and converted seven Tile Clearing Houses into the more profitable Topps format during the period.

It plans to grow margins through buying more of its products directly from manufacturers. Shares were up 3% after the results.

Bottom-line pre-tax profits dropped by half to £5 million, partly as a result of a series of charges for property and equipment.