Topps Tiles Plc

Good morning and welcome to the TopTiles PLC investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged and will be submitted at any time via the Q&A tab situated on the right-hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand over to Alex Jensen, CEO. Good morning.

Thank you, Lily, and welcome everyone to the TOPS interim update. I'm joined, of course, today by interim CFO, Rob Swales. So to put these first half results into context, Mission 365 lays out an ambition to grow revenue 50% higher than the 2024 baseline and to deliver PBT margin of 8%. In 2025, we achieved 40% of this revenue ambition and 12% of our profit growth ambition. In December, I laid out six priorities for the year, crucial to realizing this ambition. And I'm pleased to say that we've made significant progress against each. And to remind you, they were to increase focus on bottom line, to deliver trade growth, to accelerate digital, to increase sales excellence in tops, and to tackle the non-profitable parts of the business. And I'm going to talk to you about these in detail later in the presentation. But to summarize at high level, we have increased our focus on profit. We continue to expand gross margin and have implemented three major self-help cost initiatives aimed at accelerating progress to 8% PVT margin. On the top line, we have outperformed a softer RMI market. This has been underpinned by growth in trade, in digital and delivering in sales excellence and new categories. We have also had a laser-like focus on improving the profit of our acquisitions with the loss on CTD more than halving and Fired Earth already profitable after four months. Moving now to financial highlights. I've used the pro forma numbers here where quite simply we've added CTD trading back into 2025 numbers so we can see a comparison on a similar basis. We delivered flat year-on-year pro forma revenue against a market that declined by 2.5%. Thanks to strong gross margin management, this flowed through to a 2.9% gross profit increase. We managed costs tightly, partially offsetting the cumulative impact of government-led inflation through self-help. This therefore led to a 17.3% increase in pro forma operating profit and flat year-on-year PBT profit due to the increase in interest paid. Looking ahead, and as we mentioned in the R&S, we're expecting modest PBT growth in full year, supported by structural self-help cost-saving initiatives executed and weighted to the second half. So I'd now like to pass over to Rob, who will take us through the financials in more detail. Rob, over to you.

Thank you, Alex, and hello all. I think a good starting point, just before we jump into the financial results, is just to explain the presentation of the numbers that Alex has just mentioned. Given the impact of the CTD business year on year, So you may recall that in FY25 CTD was completely adjusted out of the adjusted financial measures, largely due to the impact of the ongoing CMA process. However, in FY26 CTD is included in the adjusted measures, given we now have full control of this business. So in order to present the adjusted financials on a comparative basis, we've also shown a pro forma view, which brings CTD trading into the FY25 base. And this is what you see in the green box on the right hand side. So let's now walk through the key financial results. Firstly, from a revenue perspective, we're broadly flat year on year on a pro forma basis, which is the minus 0.2 in the top right. Within this, tops tiles like for like was marginally positive in the half at plus 0.1. and our online pure play revenue grew strongly, although total CTD revenue was down due to fewer stores year on year. Proforma gross margin percentage performance was strong. It was up 1.6 basis points, 1.6 percentage points, driven largely by TopsTiles margin growth, consequently driving a 2.9% increase in Proforma gross profit. Operating costs, however, grew by 1.8% with the impact of inflation and the additional cost to support the growth of the pro-tyler and fired earth businesses, largely then offset by cost savings. As a result of the gross margin growth and the partial offset in costs, pro forma adjusted operating profit was up 17%. And then after accounting for higher interest, PBT of 2.2 million was flat year on year on a pro forma basis when the CTD tradings included in the FY25 base. EPS was at 0.83p and we've also announced the interim dividend at one pence per share, which is a third of FY25 as per our policy. So just looking at revenue in a little bit more detail. So starting with half year 25, we've added 15 million of CTD revenue into rebase FY25. And against this pro forma base, revenue, as I've said, is a broadly flat year on year, 142.6 million. Now, if you look at TopsTiles specifically in the little box, we've got a small upside from the marginally positive like-for-like, noting that like-for-like performance was ahead of the market. And we've also got a decline of 1.9 million non-like-for-like, which is largely driven by our store rationalization program starting in H1, which, while sales dilutive, will be profit accretive as we look to rebalance the profitability of the business. Online has been very strong, particularly in Pro Tyler, which was circa 20% up year on year. And the addition of the Fired Earth business has also driven strong revenue contribution of about a million as part of the first half. You'll see as well that CTD revenue has reduced by 2.8 million, and as I've said already, that's largely due to the impact of fewer stores year on year. We traded from 22 stores in H1 this year versus about 30 in the prior year. Although it is worth noting that CTD store like for like in the first half was positive at plus 1%. Moving on to gross margin, you can see firstly that adding CTD into the base, which has a structurally lower margin, has a two percentage points drag on last year's gross profit margin. then on a pro forma basis we've increased gross margin by 160 basis points year on year this is predominantly driven by tops tiles where close management of cogs and price management has more than offset the mix impact we're seeing where growth in trade and essentials naturally dilutes the tops margin An additional margin rate upside in the half has been the focus on improving CTD's margin post the CMA investigation and post getting full control of this business. This is where we focused on product range, pricing, discounts and delivery. In addition, we've also benefited from the build of the Fired Earth brand, which operates at a structurally advantage gross margin. Another mix impact is also evident, the 0.6%. Another mix impact is evident through the strong growth in our online brand, Pro Tyler. This operates on a structurally lower margin. So this growth, however, does deliver strong additional gross profit on a cash basis, but will continue to dilute the overall margin percentage of the group as it grows. And that brings us to our 53% adjusted gross margin in the first half, 26. Finally, on margin, it's also worth noting that in the first half, on a brand basis, on a brand level, gross margin growth was strong. I've already talked about TOPS, but Pro Tyler and CTD margins grew strongly in the year relative to the prior year. If we now look at movements in operating costs, we see firstly that bringing CTD into the FY25 base adds about 6 million of cost. Then on a pro forma basis, costs have grown 1.8% year on year, which equates to about 1.2 million and broadly offset some of the gross margin benefit, partially offset some of the gross margin benefit explained in the previous slide. So within the costs, we've seen about just over two million have increased due to government driven inflationary costs, including the impact of national living wage and NIC increases. However, our strong cost management through cost control and self-help initiatives have fully offset the impact of inflation. Within the self-help cost savings, it's predominantly driven by savings in TOPS tiles where we talked about having fewer stores as part of the rationalisation programme and other cost initiatives in TOPS, plus savings have been delivered through CTD as we continue to focus on returning this business to profit. Further savings are expected in H2 as a consequence of the self-help actions we've taken and we'll explain this in more detail later in the presentation. Partially offsetting the cost savings are 1.4 million of investments we've made in the half. Now, this includes investments in our digital infrastructure, including the ERP upgrade, and our customer-facing digital investments, including the trade app, all of which we anticipate to improve the core infrastructure of the group and deliver a solid ROI. Strong growth of our Pro Tyler and Fired Earth businesses also have associated cost increases, but these have grown at a lower rate than the sales growth in these businesses. So to summarise the P&L performance on a pro forma basis, we've seen revenue broadly flat but ahead of a declining market, strong growth on margin with 160 basis points increased pro forma, partially offset by just over a million of cost growth, which consequently results in a 17% increase in pro forma operating profit. And then after interest costs, adjusted PBT of 2.2 million is flat on a pro forma basis year on year. However, the performance does highlight the necessity of the self-help measures we've put in place and which Alex will build on shortly. So just moving on to cash. From a cash position, the half ended in a small net debt position of 3.1 million. relative to a net cash position of seven million at the year end september 25. whilst cash from operations has increased about five million working capital offsets this in the first half due to an unwind of payables as part of the from year end as part of the buying cycle working capital is also impacted by a higher fy 25 s tip and a stock increase in pro tyler as the business expands CTD shows a small cash benefit across H1 of just over a million, where we focused on tight stock management. Capital investment in H1 of 2.3 million has been focused on investment in digital, including the trade app, which is currently being launched, and our investment in infrastructure as we upgrade the ERP systems and our tilling infrastructure. Note that capex is lower than last year in H1, given the prior year investment in DC2, our distribution centre in Northampton, that now supports Protyla, CTD and Fired Earth. Dividend outflows in H1 reflect the FY25 declared dividend, whilst the other notable cash outflow in the half relates to the acquisition of the Fired Earth brand. We still have in place a 30 million RCF facility that provides significant headroom. And as per previous years, we expect a modest cash build in H2 as we benefit from our H2 weighted profit delivery and an improvement in unwinding working capital. And we expect to deliver a small net cash position at year end. So I'm now going to hand you back to Alex, who's going to give you an update on the strategy.