Topps Tiles (LSE:TPT) — Annual Results

0:00 Good morning and welcome to the TOPPS TILES PLC Results Investor Presentation. Throughout the quarter presentation, investors will be in listen only mode. Questions are encouraged and they can be submitted at any time via the Q and A tab situated in 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 received in the meeting itself. Have the company can review the questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to make the following poll. I'd now like to hand you over to CEO, Rob Parker. Good morning, sir. Hi. Thank you. Thanks very much. Yes. Good morning, everyone. A very warm welcome to the TOPPS Group twenty twenty five results. As you just said, I'm Rob Parker, current chief executive. I'm very pleased to be here today for what will be my last set of results with the company. So, also, joining me today, I'm delighted to say is our new chief executive, Alex Jensen.

0:48 And the plan for the session is I will run through the overview for the group. I'll talk to the f y twenty five financials. I'll also address strategic progress during the course of the year, and then I'll hand on to Alex as our new CEO to share her initial thoughts on the business and also her priority areas for the year ahead. So let's turn on to the highlights for the year. Firstly, we have a really clear strategic goal for the business, which we call Mission three sixty five, and that's about getting to £365,000,000 worth of sales in a single financial year with a very clear profit underpin of a minimum of 8%, a range of 8% to 10% net margin we believe we can deliver across each of those sales. We're making really strong progress towards our goal. And, actually, after about eighteen months since we launched this goal, we're now 40% of the way towards the sales part of the target.

1:38 And goal is underpinned by five very clear areas of growth, and I'll talk to each of those in turn as we go through the presentation. The CTD business we acquired about fifteen months ago has been a major part of our focus in the year just gone. So we've been dealing with the repercussions repercussions of of the the CMA investigation into that acquisition. One of the outcomes from CMA, the primary outcome was we needed to dispose of four of the stores that we acquired. Three of those disposals are now completed. And the final fourth disposal is imminent, and we expect to go really sort of day by day. But it should be gone before the end of this quarter, and that will then bring to a close any sort of CMA involvement in that process. And that will leave us with 22 stores trading under the CTV brand. The operations are now fully integrated. So the IT systems are all now being run off of core TOPPS Group systems, and it operates under our core one of our core logistics facilities as well, a warehouse down in Northampton.

2:35 We've got really clear plans for the business to move it into profit in the year. We've now started FY '26, and the strategic rationale for CTD absolutely remains as clear as it was when we purchased the business fifteen months months ago. And I'll I'll talk to that as we go through the go through the slides a little bit more. Across the group, 75% of our sales are now trade weighted. Trade also forms a vital link back into, particularly, TOPPS TILES for the homeowner for us. Many of our homeowners now prefer to shop through their through their chosen fitter, so a very important link for the business. Digital has been a key area of focus for us, our digital credentials continue to strengthen. Digital penetration across the group is now just over 21% of our sales, sales, so are transacted through through digital platforms of some description, and that is up from 18 and a half percent just a year ago.

3:25 We've also this week, actually, as part of our part of our results week, we've announced the appointment of a new CFO for the group. That person is Caroline Brown, who will join us somewhere around spring of next year following the serving of a notice period. And we also very recently acquired the FireDearth brand intellectual property and stock. Alex will provide more detail on both the CFO appointment and the FireDearth acquisition as part of our update. So turning to the right hand side of the page with the group financials, a very strong year of progress we feel, particularly in the second half where we saw a number of the key financial metrics really step on and we delivered certainly very strong sales growth over the second half of the year and profit growth on that basis. Gross margin has also seen really good progress this year. Again, second half stronger than the first half, but overall gross margin for the group is up by around 50 basis points year on year.

4:16 Adjusted pretax profit on that basis has come in at the top end of the range of analyst expectations. It came in at $9,200,000 which in itself is a 46% increase for the group year on year. Adjusted earnings per share growth was similar, very slightly less because of slightly changed tax rates year on year, but that's allowed us to pay a dividend or recommend the dividend to shareholders, which represents a 21% increase year on year and is equivalent to about 85% of our adjusted earnings per share being remitted back to shareholders. Our balance sheet also remains robust. I'm very pleased to say we've maintained the net cash position year on year, so GBP 7,400,000 of net cash at the year end, very slightly down on where it was a year ago, but remains in a net cash position.

5:01 And we've also got behind that a £30,000,000 revolving credit facility with primary lenders. So turning then on to the highlights of the adjusted measures of the income statement in a little bit more detail. So sales on an adjusted basis, so that's excluding the CTV business, actually grew by 6.8% year on year to GBP $265,000,000. And then when combined with the gross margin improvement I mentioned, which on an adjusted basis grew to GBP 53,800,000, that actually generates an additional 10,200,000 worth of gross profit. Operating costs remain does remain absolutely a key area of focus. The regulatory environment particularly remains very challenging here. I'll talk to that in a little bit more detail on the next slide. But operating costs in total grew GBP 5,700,000 or 4.7% year on year.

5:52 And the interest charge for the business includes IFRS 16 charges. Actual bank interest paid was about GBP 900,000 for the year, 900,000, which in itself was up GBP 900,000 year on year and does reflect the fact that we did carry a level of net debt across the year. And all of that then combined into the number I mentioned on the previous page, the adjusted pretax profit of £9,200,000, a 46% increase year on year for the group. So turning then to some performance bridge charts, and we've set out here the changes year on year across revenue, gross margin and adjusted operating costs in sort of key three areas of the income statement. So sales by brand on the top left hand corner of the page. Every single part of our business grew their sales year on year, which is something we were very, very, very pleased with. So TOPPS TILES in aggregate grew by 3.9% to £218,600,000.

6:46 Parkside grew by almost 12% to £8,500,000 of the sales. And what we call online pure play, which is our tile warehouse business and also ProTiler tools grew by 25.6% to just over £38,000,000. They're the sales on the adjusted basis. And then when we add in the CTD business, that delivered sales of £30,400,000, which brings us to that number I mentioned a couple of slides ago, $296,000,000 million in aggregate for the group. Turning to gross margin on the top right hand side of the page. The first three blocks effectively lay out the changes in the margin structure for TOPPS TILES this year. So TOPPS TILES has seen a good year of progress. We have seen improved buying in TOPPS TILES, which has helped to drive increased margins. We've seen reduced levels of discounting in the stores, and we've also seen some price increase coming through the network.

7:38 All of those things have helped to increase gross margin. We've We've also seen reduced levels of damage across the business, particularly in our supply chain and also some gains in terms of foreign exchange rates year on year as well, where the regime was slightly more favorable to us. That's also generated gains. They have in part been offset by increasing trade mix in TOPPS TILES. Typical trade customer operates on a slightly lower gross margin because of sort of bulk volume discounts, etcetera, that we offer when compared to a retail customer. And the TOPPS TILES trade mix in the year was 68% when compared to 62.8% year on year. So trade continuing to grow very rapidly, and we'll talk to that in more detail. So gross margin showed a material increase. We actually, in aggregate, we were up 130 basis points 58.9% in TOPPS TILES. But then following that, all parts of the business actually grew gross margin year on year as well. That brings us to the adjusted gross margin when we add in the gross profit sales and gross profit relating to the CTD business. CTD operates on approximately a 40% gross margin, and that would have the effect of diluting overall group gross margin by about 160 basis points to bring us to the statutory gross margin we see on the page.

8:49 The operating cost environment, as I've mentioned, remains challenging. We've had continued increases in national heavy wage. We've had national insurance, employer national insurance increases as well. When you add in other underlying inflation, that generates about GBP 4,600,000 of extra costs to the group. Improved performance across the business as well has driven higher levels of performance related pay that added about £2,500,000 to the group's cost base. We've seen some additional investment in marketing and systems. When combined, that's about £800,000 Our online pure play business, as I mentioned, continues to grow very, very rapidly, and we continue to invest in that business. So that has added additional cost into our into our cost base as well. And then those costs have been offset in part by slightly fewer stores trading in TOPPS TILES, about four fewer stores trading across the year has saved us about GBP 1,000,000 of store related costs and about GBP 3,300,000 from other areas of savings, some of which is property related, some of which is lower depreciation.

9:47 We've also seen lower utility charges this year. Those sorts of areas are all helping to keep the business' cost base as efficient as possible. And CTD, I've mentioned a couple of times, has been treated below the line in FY 'twenty five as it comes back into our core financials this year in FY 'twenty six. That will add approximately £11,000,000 of cost to the group's cost base. Turning next to adjusted net cash. The operating cash flows for the business have increased this year. We've seen £15,000,000 of cash generation, and that in itself has been supported by higher levels of of profits. Working capital is actually a very modest outflow. That in itself was driven by slightly higher levels of receivables in the form of trade credit, where I'll I'll talk to you in a bit more detail. We are having a bigger push terms of trade credit across the group. The CTD business represented £5,400,000 of cash outflow this year, lots of that is one off in nature. And I'll actually come on to the p and l impacts of CTD in a couple of slides' time.

10:45 Tax paid in the year is actually relatively modest due to some statutory losses that we saw in FY 'twenty four, which in themselves were IFRS 16 related. CapEx for the year for the group was GBP 5,500,000, 2,800,000 of that was on a new warehouse that we've opened, and I'll talk to you in more detail. Around £2,000,000 was accrued in terms of store investments, and then the remainder was on IT projects and other sort of similar kind of initiatives. Dividend outflow for the year of £3,900,000 That's the final from FY 'twenty four and the interim dividend from FY 'twenty five, all of which brings us to a net cash position of GBP 7,400,000, down GBP 1,300,000 year on year, but still in a net cash position and still representing a robust balance sheet. So turning next then to strategy and the updates on the on the key areas. We have a very clear strategy for the business supporting our delivery of our goal of mission 365.

11:39 And the way this schematic should be interpreted is the first four blocks the page are really all about growing sales. The first two on the left hand side are all about our customer offer and the products that we choose to focus on, our product specialism. And then on the right hand side, the key customers we serve. Consumer, in essence, is homeowner and trade. The key point here to note is trade is a very, very broad church and we'll talk about some of those different kind of trade customers as we go through the presentation. All of which is underpinned by three supporting pillars, environmental leadership, very important to us. TOPPS is all about our world class customer service credentials, and then operational and digital excellence, which reflects some of the investments that we plan to make in key enablers of the strategy. On then to what we call the road to 365. So this is our landing and our flight path to get to our goal of £365,000,000 worth of sales. We've very clearly identified five key areas of opportunity for us, which we believe will take us successfully to our goals. CTD, since we acquired it, has been added into the b to b element of the of the of the chart here, and we actually expanded our ambition in that space off the back of back of the CTG acquisition. We're eighteen months on now for when we first shared this with shareholders.

12:52 And as I mentioned at the start, we did over £296,000,000 worth of sales this year. That's a new record year for the group. We've successfully successfully celebrated four years out of five record years across the group in the last five years, and we're now 40% of our way to Mission three sixty five. So I'll talk to each of those five specifically on the next few slides. So in terms of category expansions, we think we've made we feel we've made good progress in the year in terms of category expansion, but we do also recognize that there is still more to do in the space and certainly a lot more opportunity to come across the group and particularly in TOPPS TILES where we're very focused here. We now feel outdoor and LVT luxury vinyl tiles actually are really part of the core operations of the group and both are actually performing quite well across the business. They both deliver sort of material levels of volume. Other categories are now launched and they're launching all of our TOPPS TILES stores. Sales though do remain quite modest today and it's an area where we intend to push much harder, particularly in areas like marketing to make sure customers really understand that we sell these categories and also colleague training to make sure we can do a great job of servicing our customers' needs. Sales for the year have grown by around 12% and we do consider all of that to be incremental to the business.

14:03 And as a result of our sourcing gains, actually, we've actually managed to generate a 20 increase in gross profit for the year. Turning next to TOPPS TILES trader digital experience. Trade has been a very key area of success for the group as a whole in the ticking in TOPPS TILES. And within that, our digital strategy for trade has been working very, very well, we feel. We've relaunched the trade website this year. We've significantly improved the experience for traders, so much simpler registration, much clearer pricing as soon as you come on the website. And as part of the new website functionality, we've now also got things like single basket checkout, checkout, which really helps drive convenience even further. We launched in the year a new customer engagement platform. We launched that in the second half of the year. This represents a really significant step forward in our ability to communicate with our trade customer base, and we're we're starting to really push on with some of the opportunity that presents.

14:55 Trade credit, I mentioned on the cash flow page. Trade credit has been an area of growth and will continue to be. We've actually seen a 40% increase in trade credit the TOPPS TILES part of the business this year. It still remains relatively modest overall and is really only as we see it for our sort of largest multi operative trade customers. But where it's required, it is an important hygiene factor for those trade customers. And, yeah, we've seen a 40% increase in those sales this year, but remaining relatively modest overall. Our trade club has been completely rebranded and relaunched this year, which in turn in turn supports our non digital activities such as trade nights in stores as well still remain very, very important. Some of these sort of non digital activities for our trade customers. We've got a trade app development well underway now. We plan for that to launch in the second half of of the year. We're now in FY '26.

15:47 That again will offer significant further steps forward in terms of trade experience and our marketing capability, particularly in terms of our ability to deliver things by push notifications to our trade base. In terms of financial performance this year or financial statistics, traffic trade traffic actually increased 66, we're very, very pleased with. Trade digital sales increased by 70%, admittedly from a low base, but nevertheless very good growth. But overall trade in TOPPS TILES grew by 13.3%, which was a very significant outperformance across the whole business. And we now have 152,000 active customers, that's trade customers that have shopped with us in the last twelve months. And trade, as I mentioned, is now 69% of overall sales in TOPPS TILES. So next to the business business the b to b business to business part of the group. We identified this part this is part of Mission three sixty five as a significant area of opportunity.

16:43 Each of our trade brands listed on the bottom of the slide here has a role to play. We see lots of opportunities in selling to larger contractors and particularly multi operative customers. Prior to the CTD acquisition, our sales in this space were probably somewhere between 10,000,000 and £15,000,000. That would have been the Parkside business. And also, we had a TOPPS TILES contract sort of direct selling based team. Post the acquisition of CTV, this is now a 40,000,000 to £45,000,000 part of our operations. Parkside has actually performed very well in the year, have grown sales. They've moved into profit for the first time. They've actually delivered in the region of a 5% net margin as well, which has been great to see. And formed a partnership with Ren Kitchens as well. We've been working on that for probably a little over a year. We now supply a TOPPS TILES branded curated offer to Ren Kitchens.

17:36 It's available in all of their showrooms. We fulfill that through our branches, so Ren don't get involved in the physical side of the product at all. Remains relatively modest today, but we do see that as a key opportunity moving forward as well and another opportunity to grow our our b to b credentials. Turning to the right hand side of the page then with the CTD business. As I mentioned, we acquired about fifteen months ago. We feel we've made some really good progress in the second half of the year. But by the same token, we're also accepting we're not where we wanted to be right now, and we are still working very hard and and very very rapidly to bring this business to to where we do want it to be. So the direct selling teams, which is really across the architect and design architectural and designer sector and also national house builder, the direct selling teams are now integrated into our core commercial operations. That part part of the business is actually working very well.

18:24 As I mentioned, our warehouse and IT migrations have been completed. So the top the business now operates on TOPPS TILES core systems, which has really helped helped us move forward. The CMA disposal process has been hard and it's been quite complicated because of the number of parties that needed to be involved. But the final of the four stores is imminently due to be disposed of and that will then completely end the CMA involvement in the business. And post the completion of those disposals, we will retain we will have retained 22 stores. Those stores are delivering like for like growth. They have been consistently for the last six to eight months. The financials for the year is quite a tough picture. Actually, there's been quite a lot of disruption here. So So the the CMA process in terms of advisory costs will have cost us somewhere in the region of £2,000,000 across the year.

19:10 We've had about £3,200,000 of one offs. About £1,000,000 of that probably is noncash, but this has been dealing with a lot of legacy type contracts and agreements that were in place and one off activities we needed to get completed. And that leaves about GBP 1,700,000 from trading operations, much reduced over the course of the second half of the year. But as we start the year FY 'twenty six, the CTD business is still generating a modest level of trading loss and we have a very, very clear plan supported by that like for like growth to get the business into profit in 2026. And the strategic vision for the business absolutely remains. So CTD gives us an offer for a large contractor customer base and also present participation in the national housebuilder sector, which we were not involved in at all prior to this acquisition.

19:58 Next to Protiler. Protiler has been a huge success story for the group since our acquisition of the business just around, well, about three and a half years ago now, actually. During the course of the year, we relocated them into a complete new facility. They've become very constrained in their existing We moved them into a new 140,000 square feet facility just off the M 1, which is actually shared with the CTD side of the business now. So both co located under one roof. But in doing so, we effectively trebled the amount of cube available to the pro tiler business. And we've really seen the benefit of that going through in the second half as sales have again stepped on to to new levels and level rates of growth have actually accelerated over the second half as well. So we're very, very pleased with that decision and that activity in the year. The new site, without question, has the capacity for us for allow us to allow us to deliver our mission three sixty five target of £50,000,000 of sales for ProTile, and we're rapidly moving to that level.

20:54 Aon, the business, as I mentioned, continues to expand very, very rapidly. The team is developing to feed the growth of that business, and overall operations are in are in excellent shape. This year, we've also delivered a 9PM cutoff for customers of ProTyla. Most of our competitors, in all honesty, struggled to get past to the midday really. So as a as a professional tally or a professional builder, you can go home and order up to 9PM at night for next day on-site delivery, which is pretty much unrivaled amongst the competitor set. Financials, as I mentioned, very strong growth in the year. And actually, you can see the acceleration coming through. So in the first half, the business grew by 17%. In the second half, year grew by 27% once we have that additional operational capacity. The business is now three times the scale when we purchased it, delivering 35,000,000 a year.

21:40 When we purchased it, they were doing £12,000,000 worth of sales. Profit is actually broadly flat year on year in ProTile, which in itself, I actually think is a very good success because we've taken on the additional overhead of the increased warehouse capacity. What you might normally expect is for the performance to step back a little before it steps forward. We've actually managed to manage to stabilize numbers across the year, which has been great. And the exit rate for the business is now very close to our target of an 8% net margin. So an excellent year for Protylar as a p as an acquisition, which has created lots of value for shareholders over the last three years. Tile Warehouse, we've also seen very good continued progress with the tile warehouse business. It's now recognized actually as the fastest growing digital tile specialist in The UK market, which has been excellent. The key KPIs are already coming through and delivering. So traffic is up 20% across the year, conversion rates are up 33% across the year and ATV also delivering growth across the business. Sales for the year now at 3,000,000, so it's the smallest part of our operations but grew by 82% year on year. So we're still very optimistic about where our warehouse can get to over time.

22:43 The business did recognize a modest level of trading loss in the year, but our projection is for the year. We've now started FY '26. This business will come into breakeven and possibly a modest profit in the second half of the year. It remains a key aspect of Mission '3 65. We said we think we can deliver 10 to 15,000,000 of the sales here, we're growing very rapidly. Final slide for me then, just in summary, Mission 365, we still very much feel this is an exciting goal for the business. And when combined with our ambition of 8% to 10% net margins, this should be capable of driving meaningful shifts in our profit in our profits over time. So I'm gonna pass you on to Alex now as our new chief exec. A very warm welcome to her in these sessions, and she will share with us her first impressions of the business and their key areas of focus. Thank you. Thanks, Rob. Well, it's great to meet you all today. I put a few slides together, an introduction, my first impressions, and priorities for the coming year.

23:35 So starting with my experience, I have an international background in multisite retail and b to b. In my last role in, BP, I was divisional CEO of convenience and mobility for Europe and Southern Africa across 15 markets with 9,000 service stations, three and a half thousand shops, and a material b to b business. So I've got experience in developing and executing sustainable growth strategies, including in this retail service station business. And the three value drivers that drove this growth are very relevant to TOPPS in my view. So firstly, driving footfall by becoming a destination of choice by expanding into new categories. Secondly, driving revenue through customer loyalty and increasing personalization.

24:23 And thirdly, creating stickiness through b to b contract wins and key account management. Data was central to revenue growth and to cost efficiency, both of which then increased the bottom line. So another aspect of my experience I wanted to pick out is in digital and data built over more than fifteen years, including when I was chief marketing officer for BP's global retail business. So one of the things my team did was to launch BP's first offer and play payment platform, which enabled payment at pump, click and collect, in app personalization, GPS, and later EV charging. We launched several new loyalty programs across the world, which drove both membership numbers and lifetime value with customers on the app spending 10 times as much. I've led relaunches of b to b and consumer websites, most recently in National Express, to improve conversion rates and ATV.

25:18 So I see a number of opportunities in TOPPS to accelerate digital and leverage customer and operational data to drive profitable growth. So just a bit about my background. And I and I joined TOPPS for three reasons. Firstly, it's got a great purpose that really resonates with me. Secondly, there's the growth potential supported by a strong balance sheet, and I could see how my experience was relevant to this next phase of growth. And then thirdly, the culture of the organization, which I'd describe as collegial, warm, customer focused, and entrepreneurial. So that culture also attracted me. So what have I been doing since I joined ten weeks ago? Well, I've spent a lot of time in the business as you'd expect, meeting all stakeholder groups. I met a large number of our colleagues in nine cross country conference roadshows, which was an absolutely wonderful opportunity to meet many people really quickly.

26:18 And I followed this with working in store, visits to over a dozen TOPPS and CTD stores, visits to our new Parkside Architect and design collaboration space in London, and meeting the teams at ProTiler. I also met with several key suppliers at Europe's largest tile exhibition in Bologna, which was absolutely fascinating and I have to say quite a lot of fun as well. And I've had time with shareholders understanding where the opportunities are and listening to their thoughts and views. Further to that, I've been busy with CFO recruitment. A few weeks ago, we recruited an excellent interim CFO, Rob Swales, who will help deliver the momentum we need over the next six months. Until recently, Rob has been group commercial finance director at TEPCO.

27:09 I've also been busy recruiting a new permanent CFO, and the group was pleased to announce this week that Caroline Brown will be joining us in spring next year. Caroline is currently the group finance and investor relations director at Watches of Switzerland. Previously, she was group finance controller at Next and held senior finance positions at Boots. So there'll be an orderly transition from Rob to Caroline next calendar year. So what about my initial observations? Well, my first impressions are positive. So let me start with the strengths I see. TOPPS TILES has clear market leadership, and its product authority and quality is second to none.

27:57 In my view, our store colleagues are experts who know our tiles and essential ranges inside out, and they offer guidance our competitors simply can't match. I've been in store and I've seen it for myself. But it's not just in TOPPS TILES. In Parkside, we're the partner of choice for world famous brands like Nando's, Hilton's, Starbucks, Harrods, most UK airports. I mean, it's just something that when you're outside the organization, you're not an investor, you know, you probably just don't know. And I was astounded by that when I was doing my research into the company. This is real authority. ProTiler is the de facto online specialist for the professional tilers community. I mean, it's a clear destination for professional tilers. And in CTD, we're already serving national house builders like Bellway, Miller and Bloor Homes.

28:51 So this expertise that we have is clearly recognized by customers. For example, this year, TOPPS TILES has scored 4.97 stars across almost 50,000 Google reviews, which is really impressive. And this kind of customer feedback is replicated across the group in all our brands. And I see that as a really important cornerstone for any growth strategy. So the growth potential that drew me to TOPPS, on the outside is confirmed on the inside by the number of opportunities the teams are getting after. And this has led to real progress in 2025 building in the second half. So moving then to the opportunities I see, and these are then folded into the priorities I have for 2026.

29:41 Our first priority is to ensure CTD and tile warehouse are sustainably profitable in 2026. On CTD, I've spent time with the team and in stores as I mentioned, and it's a good strategic opportunity for us. It gives us access to a a a customer group that we couldn't access otherwise. And I'm impressed by the energy, the knowledge, and the commitment of the team, not least their resilience through the CMA process. And my focus now is on realizing the opportunities to grow and continuing the momentum demonstrated in the last few months. Our second priority is to accelerate digital and unlock more value from our customer data. I'm especially excited to see the impact of our trading app to use CRM more extensively to encourage customer behavior and to continue to improve the productivity of our websites.

30:38 In 2026, we'll also move our legacy systems onto a new cloud based ERP, and this will give us better workflows, much stronger performance, and the ability to scale. It also lays the foundation for a new end to end data and analytics platform. So there is much more to come in this space. Our third priority is to cement TOPPS TILES as the destination of choice for any hard surface project, which is now an addressable market of 2,100,000,000. The team is hyper focused on sales excellence, driving traffic online and footfall in store, improving conversion rates, and also driving stronger basket value by selling more essentials alongside the coverings and clearly highlighting the benefits and features across our pricing ladder, and the new product categories, so encouraging the trade ups.

31:35 The experience of our store teams, our trade approach, and our digital plans are all critical in underpinning this third priority. So fourthly, we'll focus on delivering against our group trade strategy using our portfolio of brands in a really targeted way to win in every customer segment, commercial, house building, contractor, and sole trader. So our go to market strategy is twofold. It's about inspiring property decision makers, whether they're commercial architects, homeowners, house builders, landlords. So inspiring them with our ranges and then helping the trades and DIY customers to get the job done. And the scale and breadth of the group underpin this dual approach.

32:24 And finally, all of this is directed at driving sustainable profitable growth. We've made substantial progress in delivering 40% of our three six five revenue target. And with 9,200,000 profit in 2025, we're 12.5% of the way to our net profit goal. So as part of our annual strategy refresh in two q, we'll be looking to ensure each business has a clear flight path to the eight to 10% net margin target. And building on the theme of creating a destination and the power of differentiated brands and product. This week, we announced the acquisition of the Fired Earth brand out of administration.

33:11 The deal includes the brand, website, and stock worth an estimated 2,500,000. FireDearth was established in 1983 and is a highly respected brand. It's renowned for its premium design credentials. It's a strong strategic fit for TOPPS adding a premium brand to our offer. And it expands our addressable customer base, strengthening our proposition to homeowners, house builders, and trades, and it also accelerates our digital penetration. So this acquisition also provides strategic opportunity both in shaping FireDearth's future direction and and in locking ways for FireDearth to enhance value across the TOPPS group. And I'm looking forward to sharing more details of our plans later in the year.

33:59 But in terms of immediate next steps, the website has remained open for browsing during administration, and we expect it to be fully transactional very soon. So moving now to current trading and outlook. Group revenue excluding CTD remains in growth over the first nine weeks with sales of 3.3% year on year and with TOPPS TILES at 2% like for like. Sales were moderated slightly due to weaker consumer confidence perhaps due to people waiting to see what the budget brought, but we've got tight control of costs and delivery. The government budget measures were in line with our expectations. CTD stores are delivering consistent like for like growth, and we're confident of delivering a profit in CTD in full year '26.

34:51 The balance sheet remains strong as Rob mentioned. We have our 30,000,000 banking facility committed until October 2027, and we're confident of a further year of progress both financially and strategically. And the business remains well positioned and on track to deliver mission three six five over the medium term. So that concludes the formal part of the presentation, and I'd now like to open it up to any questions you've got for either Rob and I can see we've already got some coming through. So that's great. One second. Okay. So, yeah, thanks, Alex. That was great. We've had three questions come through.

35:37 Let me sort of deal with those, I think, because the first two are both about sales, really. So the first question is about the revenue uplift potential from combining trade digital capabilities with b to b platforms. I mean I mean, I think the answer to this question I'll refer you back to mission three six five. We've got a really clear goal for the business we've laid out where we think the opportunity is as clearly as we possibly can. Mean, Protar is obviously all digital. Tile warehouse is all digital. We talk specifically about targets for TOPPS TILES trade digital growth. So I think there is no other answer other than the one that's sort of on the page around around Mission three sixty five. And, obviously, Alex will update more on that on that journey as we go forward from here. And then the second the second question is is similar in a way. It's also about sales. He's asking about what rate can we scale covering from sort of the the category extensions, really, to which, again, I think the answer has to be we've we've laid out a really clear target for that as part of mission three six five. We've said we think category extensions can be between 25 and £30,000,000.

36:40 And that was achieved by us gaining a sort of broadly a 5% target of our estimations of each of the size of those sort of sub markets, if you like. And again, we've said this year, we're probably at about £12,000,000 of sales. I think it's a good start was the wording I used, but, actually, we also recognize there is more to do. So we'll we'll be be keen keen to to push on in those areas. But 25 to £30,000,000 is the target as part of Mission three six five. Yeah. And and I just add to that, Rob. You know, that is one of our key focus areas. So, you know, one of our priorities is about, you know, sales excellence, and that includes making sure we are really expanding into that 2,100,000,000 of addressable market, which is basically double what it was when it was just tiles, now that it's all hard coverings.

37:29 This is a top priority for us. Yeah. Great. Thanks, Alex. There's then a a question, sort of three three pointed question, really. One was about sort of things that Alex is looking at. Well, I I think Alex has covered that very clearly in her slides. There's a question about the average level of net debt. I assume this is referring to the year we've we've just started. I would refer you back to the notes we've we've just covered on the year just gone, actually. So we started here with net cash. We did run a level of net debt during the year and ended the year with net cash. The big difference this year will be, firstly, I think we've obviously just acquired the FireDearth business. That's a £3,000,000 cash outflow. But we'd also expect to see a significantly reduced level of cash outflow in terms of CTD, which is quite a big drag on our cash this year that we are confident that business will move back into profit. So that should disappear completely from the cash flow. Beyond that, it will be down to down to the sort of underlying performance of the business, really. So I'm not sure there's much else to add in terms of the net debt sort of and and we we wouldn't wouldn't give forecast on any of the sort of key financial numbers for the year ahead.

38:33 And then there's a couple of questions actually from different people, which if combined are about sort of the future of tiles, really, in essence. There's a question about sort of structural decline in favor of paneling, and there's a question about are are people still buying tiles? Well, you know, very clearly, I think people are buying tiles. The market is quite poorly researched in The UK. The probably the best number we would look to as a sort of really quite robust measure, I think, is Barclaycard produce a monthly analysis of of spend across The UK. And Barclaycard can probably account for about 50% of all spend across The UK between both Barclay's Barclays merchant services card acquiring and and Barclays card itself. And the number for the year, they they then subdivide the market, and and one of the key categories is home improvement and DIY spend.

39:21 They their their analysis would show that the market declined by 2% overall or across our financial year, which is why we are confident this is a market beating level of performance. Beyond that, of course, we can see changes in the tile market, and tiles are getting larger. We're clearly increasing the scale of our large tile offering. We're now talking about sort of XL, double XL, and slab format. They're all markets we're very keen to pursue and make sure we're really offering the right choice for our customers over time. But, clearly, tiles will remain a very big part, I think, of home improvement projects in UK. The There's a question about paneling. Well, again, we're in paneling. So paneling can mean large format tiles, 2.4 meter tile, you know, porcelain panels. It can also mean shower panels or plastic and acrylics. We have those as part of our offer now. So is to make sure we stay very, very relevant cost for customers, and we've been we've been doing that for a long time.

40:19 What else have we got here? Alex, there's a question about branches. I mean, obviously, we've done some work historically in terms of the store network to make sure we sort of felt we were broadly right sized. Do you wanna just talk to sort of your sort of thoughts in terms of branch network? Yeah. I mean, as part of any retail business, looking at the portfolio that we have is a constant piece of work that we do, you know, with with rising inflation. It's especially important. So last year's budget inflation costs are now full full year in 2026 plus the 4.1% minimum wage increase in this budget. And so, you know, it's clearly something we need to look at is, you know, those stores that are at the bottom end of a tail as there always is in retail, a tail of sight.

41:09 You know, are they are they still chilling the bar and contributing to the progress towards the net the net profit margin that we're aiming for, which is 8% plus in TOPPS TILES, you know, as it is across each of our businesses. You know, added to which, you know, we're looking at digital penetration and how that changes the need for, you know, the physical store, you know, that changes the economics as well. So, yes, it's something we're constantly reviewing, you know. And meanwhile on CTD, we're looking at, you know, adding more because part of the CTD model is selling into house builders and then making sure the execution on the ground is supported for their contractors and subcontractors that they can actually get access to the products. So, constant assessment. And in two q, when we do our strategy refresh, it's certainly something we'll be looking at.

42:08 Great. Thanks, Alex. And then there's a question on Fire Earth as well. So has the purchase of Fire Earth changed the strategic direction of the business or at least back to a store portfolio model given the clear plan and success of trade sales? Probably one for you, I think, Alex? Yeah. Our our strategy in you know, as I talked about it, it's this dual pronged pronged strategy of inspiring the property decision maker, the homeowners, you know, and sometimes the decision is made by the trade, but quite often, you know, it's the person occupying the space that's making the decisions about the tiles. So, you know, it's a dual pronged strategy of both making sure we're inspiring property decision makers and then supporting anyone who's doing the actual job, whether that's DIY or trade in all of the essentials, trims, grout, everything they need to actually get the job done.

43:01 And so the Fired Earth acquisition is absolutely in line with that because it's about a fantastic brand that really caters into the premium end of the market. And, you know, a single brand like TOPPS can cover so much, but I think at the very, you know, premium end of the market, it enables us to really sort of access a new customer group. And so it's absolutely in line with strategy, and I'm looking forward to sharing more later in the year. Thank you, Alex. I think that, really, we've addressed, I think, all of the questions that have been asked this morning. So, yeah, hopefully, everyone has found that useful session today. As I said, this will be my last session. So, you know, I am signing off. It's been a wonderful business to be part of for the last eighteen years. Alex has now really got up to speed actually over the last eight, ten weeks, and I wish her every success taking the business forward. So, Alex, over to you. Good luck with everything, and thank you very much.

43:59 Thank you, Rob. I think we all very much appreciate your leadership over the years and wish you all the best. Thank you. Thank you. Thank you, everyone. Goodbye. Goodbye. That's That's great. Great. Well, Well, Rob, Alex, thank you very much for updating investors today. Can I please ask investors not to close the session? As you know, we automatically redirected to provide your feedback and all the management team can better understand your views and expectations. Half the management team of TOPPS TILES PLC, we'd like to thank you for attending today's presentation, and good morning to you all.