GCITopps Tiles sales dip in H1, but M&A and market cycle indicate recovery in H2
() , a UK-based tile specialist, issued a trading update for the half year ended March 30, 2024. The group reported total sales down 5.9% year-on-year compared to record revenue performance in FY23.
Lower sales were attributed to subdued demand in the domestic repair, maintenance and improvement (RMI) sector, especially for bigger ticket projects, persisting into FY24. Trade customers were more resilient than homeowners, although year-on-year sales were also marginally lower for the former. Total Q2 LFL sales were 11.3% lower, driven by lower volumes.
On the positive side, conversion rates grew year-on-year and the brand made notable improvements to its customer service scores. Gross margin was also up year-on-year as cost of goods pressures continued to ease, helped by robust cost control measures. Trading in online pure play businesses also remained strong, with good growth seen in Pro Tiler and positive sales in Tile Warehouse, resulting in year-on-year sales growth of 38.3% over H1.
Additionally, the Parkside brand is seeing continued year-on-year improvement in financial performance following Topps' overhaul last year. As a result, Parkside expects to be at breakeven over H1 despite difficulties in the market.
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Lower revenues and profits expected by Topps Tiles in H1 compared to last year's record performance, as the RMI market encountered a number headwinds, particularly in the consumer segment. Profitability was also impacted by the timing of the holiday pay accrual and seasonally higher energy usage during the period. However, these are not unexpected cyclical effects, especially given last FY's record performance. Therefore, we would not overinterpret H1's numbers, as annual profits are expected to be weighted toward H2.
Overall, Topps remains in a strong market position, with leading brands and a robust balance sheet. The group is well-positioned to benefit from a cyclical recovery in the RMI market, helped by easing interest rates and lower cost inflation in H2. Topps also expects to complete the acquisition of the remaining 40% shareholding in Pro Tiler following the end of the earn-out period, helping medium-term group profits as the brand nears breakeven. Further growth plans are expected in next month's interim results.
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