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GazTech
From The Times
November 28, 2007
No cracks in Topps Tiles but DIY is best avoided
Nick Hasell: Tempus
Long-term shareholders in Topps Tiles need no reminding of the specialist retailer’s formidable track record.
The sum of £1,000 invested in the shares at flotation ten years ago would have been worth £28,220 on September 30, the close of Topps’s financial year. Over that period, earnings per share have grown more than 800 per cent, while the company has returned more than £200 million – or the equivalent of two thirds of yesterday’s stock market valuation – to shareholders through dividends and share buybacks.
Followers were more inclined to look forward than back on yesterday’s release of full-year numbers, with the disclosure of a slowdown in like-for-like sales growth in the UK to 1.1 per cent over the past seven weeks – against 3.3 per cent last year – sufficient to exacerbate fears over Topps’s susceptibility to a DIY slowdown and sending its shares down nearly 10 per cent. They were also unsettled by the decision of the 300-strong chain to slow the pace of its UK store roll-out programme, which had provided much of the momentum behind profits, as it nears its target of 400. It will open a minimum of 20 outlets a year, against 30 previously, although Topps pins that revision on the availability of sites rather than consumer demand.
Topps has long professed that it is partially protected from a housing slowdown by customers opting to refurbish their homes rather than move, and the low level of the average transaction value in its stores, of £64, would appear to bear that out. Investors should also be mindful of Topps’s low operational gearing. Its business model is pegged on an ability to secure marginal sites at cheap rents, keeping fit-out costs low and paying staff an above-average element of commission, such that fixed charges are covered three times by operating profits. Together with net margins of above 20 per cent, the highest in its sector, those traits have meant that even when, as two years ago, like-for-like sales dropped by 10 per cent, operating profits still rose 30 per cent.
If there are weaknesses, these may be more pronounced overseas, where Topps’s immature 20-store portfolio in the Netherlands enjoys fewer economies of scale than its domestic base. This month’s purchase by Travis Perkins of Tile Giant, a smaller rival, may also prove troublesome, given the deep pockets of its new owner.
Even so, a current-year earnings multiple of 9.6 times and dividend yield of 6.8 per cent appears too cheap. But, with the likes of Kingfisher due to update investors tomorrow and sentiment set to remain against DIY stocks for the short term, the shares, at 164¼p, are best avoided now and revisited in the new year.
Topps Tiles' profits rise
Chris Barry
23/ 5/2007
TOPPS Tiles paid the price for its £100m share buy back scheme as higher interest payments put a £3.3m dint in profits.
The bottom-line fall in profits masked another strong year for the Handforth-based company, the country's biggest tile retailer.
Operating profits in the 26 weeks to March 31 rose 8.8 per cent to £21.3m, which chief operating officer Matt Williams said `give a true picture' of the group's performance.
After the £3.3m interest charge, pre-tax profits fell from from £20.3m to £18.7m.
After the share buyback designed to make the company's balance sheet `work a bit harder', the company now holds net debt f £106m, compared with net cash of £24.9m this time last year.
Turnover in the period rose 14.9 per cent from £88.6m to £101.8m. On alike-for-like basis, stripping out new store openings, sales were up 4.4 per cent.
In line with the strong performance the interim dividend was raised from 3.5p to 3.75p.
Mr Williams said it was clear that shoppers were being more cautious after the recent increase in interest rates.
"The increase in rates is doing what is supposed to - slow down consumer spending. Although the retail market continues to be tough, trading has been robust and we have delivered further revenue growth.."
November 28, 2007
No cracks in Topps Tiles but DIY is best avoided
Nick Hasell: Tempus
Long-term shareholders in Topps Tiles need no reminding of the specialist retailer’s formidable track record.
The sum of £1,000 invested in the shares at flotation ten years ago would have been worth £28,220 on September 30, the close of Topps’s financial year. Over that period, earnings per share have grown more than 800 per cent, while the company has returned more than £200 million – or the equivalent of two thirds of yesterday’s stock market valuation – to shareholders through dividends and share buybacks.
Followers were more inclined to look forward than back on yesterday’s release of full-year numbers, with the disclosure of a slowdown in like-for-like sales growth in the UK to 1.1 per cent over the past seven weeks – against 3.3 per cent last year – sufficient to exacerbate fears over Topps’s susceptibility to a DIY slowdown and sending its shares down nearly 10 per cent. They were also unsettled by the decision of the 300-strong chain to slow the pace of its UK store roll-out programme, which had provided much of the momentum behind profits, as it nears its target of 400. It will open a minimum of 20 outlets a year, against 30 previously, although Topps pins that revision on the availability of sites rather than consumer demand.
Topps has long professed that it is partially protected from a housing slowdown by customers opting to refurbish their homes rather than move, and the low level of the average transaction value in its stores, of £64, would appear to bear that out. Investors should also be mindful of Topps’s low operational gearing. Its business model is pegged on an ability to secure marginal sites at cheap rents, keeping fit-out costs low and paying staff an above-average element of commission, such that fixed charges are covered three times by operating profits. Together with net margins of above 20 per cent, the highest in its sector, those traits have meant that even when, as two years ago, like-for-like sales dropped by 10 per cent, operating profits still rose 30 per cent.
If there are weaknesses, these may be more pronounced overseas, where Topps’s immature 20-store portfolio in the Netherlands enjoys fewer economies of scale than its domestic base. This month’s purchase by Travis Perkins of Tile Giant, a smaller rival, may also prove troublesome, given the deep pockets of its new owner.
Even so, a current-year earnings multiple of 9.6 times and dividend yield of 6.8 per cent appears too cheap. But, with the likes of Kingfisher due to update investors tomorrow and sentiment set to remain against DIY stocks for the short term, the shares, at 164¼p, are best avoided now and revisited in the new year.
Topps Tiles' profits rise
Chris Barry
23/ 5/2007
TOPPS Tiles paid the price for its £100m share buy back scheme as higher interest payments put a £3.3m dint in profits.
The bottom-line fall in profits masked another strong year for the Handforth-based company, the country's biggest tile retailer.
Operating profits in the 26 weeks to March 31 rose 8.8 per cent to £21.3m, which chief operating officer Matt Williams said `give a true picture' of the group's performance.
After the £3.3m interest charge, pre-tax profits fell from from £20.3m to £18.7m.
After the share buyback designed to make the company's balance sheet `work a bit harder', the company now holds net debt f £106m, compared with net cash of £24.9m this time last year.
Turnover in the period rose 14.9 per cent from £88.6m to £101.8m. On alike-for-like basis, stripping out new store openings, sales were up 4.4 per cent.
In line with the strong performance the interim dividend was raised from 3.5p to 3.75p.
Mr Williams said it was clear that shoppers were being more cautious after the recent increase in interest rates.
"The increase in rates is doing what is supposed to - slow down consumer spending. Although the retail market continues to be tough, trading has been robust and we have delivered further revenue growth.."
