Topps Tiles : Annual Report and Accounts

TOPPS TILES PLC

Annual Report and Accounts

for the 52-week period

ended 30 September 2023

Contents

Business Overview

Highlights	02
Celebrating 60 Years of Inspiring Customers	04
Through Our Love of Tiles
Introducing Topps Group	08
Group at a Glance	10
Investment Case	12
Chair's Statement	16

Strategic Report

Marketplace	22
Business Model	24
Our Strategy	26
Leading Product	30
Leading People	32
Environmental Leadership	34
Our Channels
Omni-channel	36
Commercial	38
Online Pure Play	40
Happy 60th Birthday Topps Tiles	42
Key Performance Indicators	46
Financial Review	48
Our Engagement with Stakeholders	54
Our Sustainability Strategy	60
Task Force on Climate-related	76
Financial Disclosures
Risks and Uncertainties	82
Going Concern and Viability Statement	90

Our Governance

Board of Directors	94
Governance at a Glance	96
Executive Committee	97
Corporate Governance Report	98
Audit Committee Report	108
Nomination and Governance Committee Report	114
Directors' Report	119
Directors' Responsibilities Statement	123
Directors' Remuneration Report	124

Our Financials

Independent Auditor's Report	150
Consolidated Statement of Profit or Loss	158
Consolidated Statement of	158
Comprehensive Income
Consolidated Statement of Financial Position	159
Consolidated Statement of Changes in Equity	160
Consolidated Cash Flow Statement	161
Notes to the Financial Statements	162
Company Balance Sheet	201
Company Statement of Changes in Equity	202
Notes to the Company Financial Statements	203

Additional Information

Five-Year Record	214
The Team	215
Store Locations	224

Celebrating

60 years of

Topps Tiles

Inspiring customers through our love of tiles.

This year, Topps Group marks the 60th anniversary of its first tile store opening in Manchester in 1963.

Our relentless focus on inspiring customers through our love of tiles, combined with our world-class levels of customer service, has characterised the last 60 years. Today, Topps Group is the largest tile specialist in the UK.

Read more about our history

on pages 04 to 07

2023 has been a successful year for the Group. We have delivered a third consecutive year of record sales, as well as exceeding our market-share goal of "One-In-Five by 2025", two years ahead of its target.

Read more about our Purpose, Goal and Strategy on page 16

Purpose

The core purpose of the Group is to inspire customers through our love of tiles. This purpose gives our business strategic clarity in that opportunities we pursue leverage our core specialism in tiles and closely associated products.

Goal

The Group's goal is to reach 20% market share by 2025.

Saplewood™ Grey

BUSINESS

OVERVIEW

Group Growth Strategy

Omni-channel

Online Pure Play

Commercial

Leading Product

Leading People

Environmental Leadership

Culture

We are a community of small teams with big ambitions who trust each other, celebrate success, and put the customer at the heart of everything we do, that's the Topps Group way.

TOPPS TILES PLCANNUAL REPORT AND ACCOUNTS 2023

01

Highlights

Topps Tiles Plc ("Topps Group", the "Company" or the "Group"), the UK's leading tile specialist, announces its consolidated annual financial results for the 52 weeks ended 30 September 2023.

Adjusted Measures

Topps Tiles like-for-like Adjusted profit revenue year-on-year1 (%) before tax2 (£m)

Adjusted earnings per share3 (p)

Adjusted net cash at period-end4 (£m)

YoY: n/a
	19.6	9.4
			3.1
20	21	22	23
(12.5)

YoY: (19.9)%

	15.0	15.6	12.5
3.5
20	21	22	23

YoY: (26.9)%

	6.02	6.14
1.52			4.49
20	21	22	23

YoY: +£7.2 million
26.0	27.8		23.4
		16.2
20	21	22	23

Statutory Measures

Group revenue (£m)	Gross profit (£m)
YoY: +6.3%	YoY: +2.8%

Gross margin (%)

YoY: (1.8) ppts

Profit before tax (£m)

YoY: (37.6)%

192.8	228.0	247.2	262.7
20	21	22	23

112.8	130.7	135.4	139.2
20	21	22	23

58.5	57.3	54.8	53.0
20	21	22	23

	14.0	10.9	6.8
20	21	22	23
(9.9)

Basic earnings per share	Total dividend per share
YoY: (64.6)%	YoY: Flat

	5.47	4.6	1.63
20	21	22	23
(4.16)

	3.1	3.6	3.6
20 Nil	21	22	23

1. Topps Tiles like-for-like revenue is defined as sales from Topps Tiles stores that have been trading for more than 52 weeks and www.toppstiles.co.uk
2. Adjusted profit before tax excludes the impact of items that are either one-off in nature or fluctuate significantly from year to year. See the financial review section of this document for a reconciliation of adjusted profit before tax to statutory profit before tax
3. Adjusted earnings per share is adjusted for the items highlighted above, plus the impact of corporation tax. In 2022, adjusted earnings per share also excluded a £1.2 million deferred tax credit in respect of previous periods, which is not expected to repeat
4. Adjusted net cash is defined as cash and cash equivalents, less bank loans, before unamortised issue costs as at the balance sheet date. It excludes lease liabilities under IFRS 16

02 TOPPS TILES PLCANNUAL REPORT AND ACCOUNTS 2023

Strategic and Operational Highlights

• "One-in-fiveby 2025" market share goal achieved two years early, with market share increasing to 22.1% from 19.8% in 2022 (restated)
• Third consecutive year of record revenue for the Group
• New Topps Group branding, underscoring the significant development and diversification of the Group over recent years
• Record sales in Topps Tiles, with sales per store up 30% compared to pre-pandemic levels, further improvements to world-class customer service scores, and successful expansion into new product categories
• Good progress in Topps Tiles' gross margin, with quarter-on-quarter growth throughout the year (before rebates and other adjustments)
• Excellent progress in Pro Tiler online pure play businesses, with sales up c. 50% year on year and 8-9% profit margins delivered
• Parkside restructure complete and now profitable in the final quarter
• New Chair appointed and new Senior Independent Director Designate announced.

BUSINESS

OVERVIEW

Principle™ White

Financial Summary

• Group revenue up 6.3% to £262.7 million

• Group gross profit up 2.8% to £139.2 million

• Group gross margin at 53.0%, with growth through the year driven by increasing margin in Topps Tiles

• Adjusted profit before tax of £12.5 million, decreased due to the impact of cost inflation

• Cash on hand increased by £7.2 million, due to strong operational cash flows and disciplined working capital management

• Strong balance sheet with £23.4 million net cash and £53.4 million headroom within committed borrowing facilities

• Final dividend of 2.4 pence per share, the full year dividend at 3.6 pence, reflecting confidence in the medium-term prospects of the business.

Current Trading and Outlook

• Trading in the early weeks of the new financial year has reflected the well-documented challenges to discretionary consumer spending, especially RMI, including higher interest rates

and prolonged high inflation, falling house prices and lower housing transactions

• Softer build into seasonal peak trading period, with Group sales

	down (3.0%) year on year in first eight weeks of the new financial
	year, with like-for-like sales in Topps Tiles down (6.1%) and strong
	growth continuing in Pro Tiler Tools
	• Well-positioned to continue to take market share due to
	competitive advantage, including market-leading brands,
	world-class customer service, specialist expertise, strong balance
Torrano™ Blue	sheet, growing cash position and ambitious growth strategy.

TOPPS TILES PLCANNUAL REPORT AND ACCOUNTS 2023

03

1963	1983
The first Topps	Stuart Williams and
Tiles opens in	Barry Bester rapidly
Manchester,	expand the Tile
owned by Ted	Kingdom empire in
Derbyshire	the South

1990	1997
Tile Kingdom buys and		Topps Tiles
becomes Topps Tiles,		becomes a Plc
creating 40 stores
across the UK

2005	2007
The Topps Tiles	Topps Tiles sponsors
estate reaches	Leicester City
250 stores	Football Club and
	we launch our
	Youth Sponsorship
	programme

04 TOPPS TILES PLCANNUAL REPORT AND ACCOUNTS 2023

BUSINESS

OVERVIEW

Celebrating 60 Years

of Inspiring Customers

Through Our Love of Tiles

1999 2003 2004

The Topps Tiles estate	We win Plc of the
reaches 100 stores	year award

We win Plc of the year award - again!

2008

The Topps Tiles transactional website launches. Help for Heroes becomes our chosen charity

Read more about our 60 years on the next page

TOPPS TILES PLCANNUAL REPORT AND ACCOUNTS 2023

05

Celebrating 60 Years of Inspiring Customers Through Our Love of Tiles continued

2010		2011
We become	Topps Tiles
national sponsor	opens a brand
of the ITV weather	new 50,000 sq ft
		warehouse to fulfil
		online orders

2017			2018
We enter the			Winner of
commercial			The Tile
market with the			Association's
acquisition of			Excellence in
Parkside			Retail Award

2020

We become the main shirt sponsors of the Leicester Tigers rugby club

06 TOPPS TILES PLCANNUAL REPORT AND ACCOUNTS 2023

BUSINESS OVERVIEW

2022

After raising £1.2 million for Macmillan, colleagues vote to start a new partnership Alzheimer's Society; Topps Tiles Plc grows further with purchase of Pro Tiler Tools in March, and launches Tile Warehouse in May

2015

Topps Tiles announces charity partnership with Macmillan Cancer Support and goes on to raise over £1 million over seven years

2019

Matt Williams steps down after 12 years as Chief Executive and Rob Parker succeeds him; acquisition of Strata Tiles

2023

Topps Tiles turns 60, and starts the year by opening its first eco-mindful store in Guildford

TOPPS TILES PLCANNUAL REPORT AND ACCOUNTS 2023

07

Introducing Topps Group

ROB PARKER

Chief Executive

2023 has been a key year for Topps Group. We have celebrated our 60th anniversary, delivered our third consecutive year of record levels of sales and achieved our 20% market share goal ("one-in-five by 2025") two years ahead of schedule. We are now trading

in three related sectors - our omni-channel, market leading Topps Tiles business, our online pure play tile and consumable operations (Pro Tiler Tools and Tile Warehouse), and our commercial market-focused offer (Parkside). The purpose of our new Group identity is to encourage our stakeholders to recognise the business that we now are and also the strategic journey we are on. These stakeholders principally fall into three groups - our colleagues, our suppliers and our Shareholders.

When colleagues join us we would like them to be excited about joining our Group rather than just one part of our operations, and to recognise that the Group can offer them many and varied career opportunities over the time they spend with us. Being a bigger business means we can now provide opportunities to our colleagues that weren't possible just a few years ago.

For our suppliers - supplying the Group now offers more possibilities than were previously available to them.

Our commercial terms will be negotiated on a Group-wide basis wherever possible. The growth we have delivered in the scale of our operations is exciting to our suppliers, facilitates their growth, and provides more opportunities for us to work with them in an even more efficient manner.

Welcome to our 2023 Annual Report and our new Group branding. As our business has continued to develop and diversify over recent years, we now think of ourselves as a much broader organisation and have decided that now is the time to fully embrace our Group structure and develop a brand that reflects this.

For our existing and prospective Shareholders, Topps Group encapsulates our ambition and our strategy for our business - to become a diverse ranges of businesses, each of which have our core specialism of tiles (and closely associated accessories) at the heart of everything we do, all delivered through world-class levels of customer service.

In making this change, we haven't forgotten our rich heritage. Topps Tiles has been proudly serving UK consumers since 1963, is the clear UK market-leading business in the domestic tile market, and remains the mainstay of our operations. We celebrate this heritage by retaining the key part of our name in the new branding - Topps Group.

With my very best wishes,

ROB PARKER

Chief Executive, Topps Group

08 TOPPS TILES PLCANNUAL REPORT AND ACCOUNTS 2023