Topps Tiles (LSE:TPT) — Full Year Results

0:01 Good morning, ladies and gentlemen, and welcome to the TOPPS TILES PLC Full Year Results Investor Presentation. At any time via the q and a tab that's just situated on the right hand corner of your screen. Please just 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 we'll publish those responses where it is appropriate to do so. And before we begin, as usual, we would

0:32 just like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. I would now like to hand you over to the executive management team from TOPPS TILES PLC. Rob, good morning, sir. Hi. Good morning, and good morning, everyone. A very warm welcome to the full 2024 full year results. I'm Rob Parker, chief executive of the group, and with me today is Steven Hobson, who is our CFO. We will dive straight in, and I'm gonna kick off with a summary of the business across the year, and I'll hand on to Steven who's gonna go through some financial highlights, and I'll and take back through strategy and operational highlights as well. So as we announce the interim results, we have launched an exciting and ambitious new goal for the business, which is called Mission three six five. That's about delivering £365,000,000 worth of sales across the group, up from about 250 broadly today.

1:24 We have also refreshed our strategy in order to help us deliver that goal with a specific focus on five key areas of growth across the business. Those five in turn, as detailed on the slide here, are trade is a real area of strength for the business, and it has actually been performing very well. So we're very encouraged by performance of trade. We recognize there's a lot of opportunity to engage trade, particularly digitally, And we started that journey already over the second half of our year with some really strong performance coming through over the final quarter. We've significantly expanded our addressable market by expanding our category focus of the business. So a number of hard surface product categories are either in trial across the group or or are being rolled out. We're already selling online. B to b business to business growth, we've identified as a real opportunity as well, and we believe that we can build on existing growth across the existing strength across the business.

2:14 And in the second half, we completed the acquisition of some of the assets of CTD Tiles. We think that's a really strong fit for our strategy and will play an important part now in the business moving forward. That business is subject to that acquisition is subject to a competition of markets authority, which remains ongoing, and we're assisting the CMA with that investigation. ProTiler continues to ProTiler, which is a business we acquired a couple of years ago now, continues to perform very, very well indeed. So much so in fact that we've actually signed up to a new distribution center in the in the second half of the year. We'll actually come on to that a little bit later. That will be operational by January 2025. And then TOPPS, which is the newest part of our group, we started that just over two years ago. Also continues to make progress, and sales have actually increased about threefold from where we were a year ago.

3:03 So turning to our financial results for the year. As investors in the market are already very much aware, 2024 has been a tough year and a tough year for for performance across the entire sector. Our group sales have declined by around 5% across the year. We are very confident that that is a significant outperformance of the market. We believe the market has declined across the year by somewhere between 1015%.

3:27 And actually, we now believe the market for UK for The UK is around 20% below the level it was in 2019, and our sales over an equivalent period of time were actually growing 15% as a group. Profit for the year was at six point adjusted pretax profit for the year was at £6,300,000. That really reflects the operational gearing in the business. Stephen will cover it in more detail, but actually our margin and costs are rather broadly flat or actually slightly down in terms of costs for the year. So the the decrease in performance in in profitable performance is is really all about the decline in sales. And we've continued to deploy our strategy. We've actually completed two acquisitions in the year so that the remaining element, prototype tools we've acquired and then the CTD tile which is, as I've mentioned. We have the balance sheet to do this, and we've been saying for some time, we have a strong balance sheet and a robust balance sheet, and we've used taken those opportunities as they occurred to deploy that that that capacity that we have, and we believe over time, they'll prove to be very good additions to the business.

4:26 Current trading ends the first eight weeks of the year, so from the start of October to the end of November. We are pleased to be able to report with returns to growth. It seems very modest. We're very conscious of that. It's just over 1% growth, but it is a positive number. And we that that that is a significantly driven on some of the results we saw during the course of 2024. Trading within that, I've already mentioned trading is performing very well indeed. We've seen strong growth in trading year on year, but that in itself does also underline how weak consumer and particularly consumer ROI continues to be across The UK. And we will continue to deploy our strategy. We remain we remain really well positioned for the for the medium term. So that's some of the highlights of the presentation. I'll hand you over to Steven to go through some the financials. Thank you very much, Rob. Yeah. Good morning, everyone.

5:12 I'm I'm Steven Olsen. I'm the CFO of of TOPPS TILES. Thanks for joining us today. And just to frame the results before I get into the numbers, Rob's already mentioned that in the year, the group competes completed two acquisitions, and that was as as we said, it's the remaining 40% of shares that we didn't previously own in a business called ProTOPPS TILES. We bought 60 in 2022 and then 40% in about in the second half of this year and also the CTD TOPPS acquisition. And in terms of financial reporting and the impact on financial reporting, the pro title business was already fully consolidated into group numbers from 2022 because they repelled the controlling stakes. There isn't any change in in in that regard. And and then CTD has been consolidated into group numbers since the date of acquisition, which is about six weeks before the end of the year. And we have taken the CTD trade performance out of our adjusted financial measures, which I'll explain to you very few slides.

6:11 And the reason for that is that CTD was acquired out of administration. And and so in those remaining six weeks, it was sort of the trading being representative of where the business, I think, will get to. Needed quite a lot of support and attention in the first few weeks to get it sort of back up and running. So we've taken that out for the for the six weeks. So I'll explain the impact of of CTD on the numbers as we go through the slides in the in the forthcoming section. So that's that's the sort of context of it. So if we start by looking at revenue, you know, and start starting with revenue. Total group sales for the year on a statutory basis were down 4.1% to £252,000,000, and that follows three consecutive record years of revenue for the group during 2021 to 2023. And as I just mentioned, we have excluded CTD from our adjusted measures.

7:00 So the the the sort of the blue bar two thirds away across the page refers to our adjusted sales of the year, which were £248,500,000, which is down 5.4% year on year. Within that, the group has a a number of businesses now, the main one being the TOPPS TILES brand, which is the largest part of the business at £210,000,000 of sales. Like for like sales in TOPPS TILES were down 9.1% year on year, with q four being slightly better than the previous couple of quarters with like for likes of minus 8.2. And then from the start of the new financial year, as Rob just mentioned, like flux sales and TOPPS TILES were actually only very marginally down, which is which is pleasing pleasing results. As we've said, trade customers were much stronger than homeowner customers over the last year, which has really supported the group's worldwide sales. And as a result of that, our trade mix, so the proportion of sales in TOPPS TILES that were made to trade customers rather than homeowners, moved forward quite materially from 59.6% of sales of the TOPPS TILES to 62.8% of sales in the year. And we do think that the group's focus on trade is a real key strength in terms of supporting the top line. It does have an impact in terms of gross margins, which I'll come to on the next slide.

8:15 PLC and our sort of architecture design focused focused business saw sales decline £1,800,000 to £7,600,000 in the year in what was a very tough market. Online pure play, the yellow bar in the middle of the slide, consists of two different businesses. So ProTiler Tools, which I've I've mentioned, which we completed the definition of in the year, and then a smaller business called Tile Warehouse. And this part of the group continues to perform really, really strongly. So sales in this part of the group were up 36% year on year, which follows growth of 50% in in the previous financial year. And now that part of the business is over 30,000,000 of sales and is a material part of the group. CTV sales in those first six weeks of ownership were £3,300,000, which takes the total revenue as you can see on the slide to 252,000,000.

9:07 Moving on to talk about gross margin secondly. We saw positive growth actually in our gross margins this year. On an adjusted basis, so again excluding CTD, gross margins were up 30 basis points from fifty three point nought percent to 53.3%. And and within this, talking you through the component parts, the TOPPS TILES brand saw positive gains from price, COGS, and volume mix. And what I'm getting at there specifically is reduced cost of sales because in the previous years, people will remember we saw extremely high shipping costs and also we've talked to you in the past about the prices of TOPPS being quite heavily affected by very high gas prices in previous years. Those factors have now primarily normalized and so therefore we saw a year on year benefit on that within FY '24.

9:53 I mentioned on the previous slide that the the group's sales to trade customers were particularly strong in FY '24. Trade customers benefit from lower pricing than home homeowner customers because they shop with us a lot and they spend money with us, and so they have a layer of sort of benefits associated with that, which is common in the in the sector. So the increased mix of sales to trade customers had a negative impact on our gross margin percentage by about half a point. And then there was also a further reduction in gross margin due to the high growth in the online pure play business. And these businesses, particularly Proton Tools, which as I've said, have been great, very, very fast, operates at lower gross margins than the group as a whole. But, actually, on a net margin, so a profit before tax margin basis, they operate in within actually the target range for the group, sort of eight to 10% PBT range. So as the sales in that part of the business grow, it reduces our gross margin, which is the minus 1.2% you can see on the chart, but actually it's positive as a net margin basis.

10:57 And then the other bar primarily represents operational gains, in particular, lower stock losses, is a pleasing pleasing thing. So adjusted gross margins were 53.3%. The impact of CTD on gross margins, which as I mentioned is excluded from adjusted margins, but on a total basis, the impact from CTD was slightly accretive, so 0.1% accretive. And that was largely due to some one off gains as we started to sell through stock that was acquired on the potential of title claims, and that took the reported gross margin to 54.4% in the year.

11:37 If I move on now to our cost base and starting with operating expenses and other income, on an adjusted basis, the I'll come on to statutory basis in a second, but on an adjusted basis, the cost base was actually lower year on year by £1,100,000 at a £121,500,000, and that was despite almost £5,000,000 of inflationary costs this year. Inflation costs were largely in in people costs, reflecting the impacts of national and wage increases primarily from April 2024 flowing to the flowing to the p and l. And so so that was an increasing cost. The other increasing cost was an increase in the online clear play part of the business. As I mentioned, sales were up over 30%, and we invested another £1,200,000 in that part of the business to drive that strong sales growth.

12:27 Part sides costs were actually lower by £1,200,000 year on year, and that was largely due to the reduction in the cost base of parts of that we did in FY twenty three. So this is the annualization of that cost reduction. And therefore, if you add up the cost reduction over the two year period in FY '23 and '24, total costs in the parts of our business are down over £2,000,000, which actually represents about 40% of that business' cost base. As a result of that and despite the sales decline in parts that I spoke to two slides ago, parts have actually moved into a modest level of profit for the first time this year despite the sales decline. The next big bar in terms of cost reduction is is titled profit share. Now everyone in TOPPS Group has an element of variable pay in in their jobs, and that is no matter whether you're a service specialist working on of our TOPPS TILES stores, where you will earn commission on the sales that you make, or whether you work in our warehouse and distribution centers, or whether you're a colleague in our sports office. And given the year on year financial performance of the group, which Rob's already mentioned, was was down about 50%, profit share clearly also dropped substantially as well year on year.

13:41 The other savings bar on the right hand side of the page includes some savings in supply chain and store cost based on those lower volumes. That is a relatively modest saving, and it's true to say that the business' cost base is relatively fixed overall. So as sales drop, our cost base don't particularly drop as fast as the sales. That's also should be other way around as cost rise out sales rise and cost don't rise as much as well. We describe that as high operational gearing, which is inherently. So therefore, in summary, adjusted costs were down at a 121,500,000 despite the 5,000,000 or so inflationary costs in business. Now the difference between adjusted operating costs and statutory operating costs this year is very large, which I've presented on the table on the right hand side. So adjusted costs are 121,500,000.

14:30 But if you just look at the front page of the of the p and l, you'll see that our statutory operating costs and other income were a £145,700,000. And and the most significant item that you can see on on that table by by some stretch is called store impairments and lease gains and losses, which was a cost of £18,800,000 on an aggregate basis. That includes a large impairment or right of use assets and fixtures and fittings, which is a noncash item, and I'll come back to explain that shortly. The other material item on the right hand side of the page is the pro Tyler share purchase expense, £3,200,000, and we've discussed that in previous results presentations. It relates to building up a provision essentially to buy out the remaining shares in ProTiler, which we did in May 2024. That's now complete as the transaction has has been done in in 2024.

15:22 And then the CTD costs of 1,900,000. I've already said a couple of times that we've adjusted out all of of CTD. The net impact of CTD on the business's profit was £200,000. This £1,900,000 obviously just represent the costs associated with CTD, but we explained we also backed up the gross margin as well. So that explains the statutory profit movement statutory cost movement in the end of the year. So combining everything now to look at our our p and l accounts on on an adjusted basis, I have explained a fair chunk of this already, so I can sort of go through it relatively quickly. Sales were down 5.4%. Gross margins were up slightly in 30 basis points as I've mentioned, and OpEx was was down by £1,100,000.

16:12 Interest was up £600,000 reflecting higher IFRS 16 interest charges. I should make clear to investors that that interest charge does relate to IFRS 16 interest costs on leases that isn't to do with bank interest payments, which basically zero for the rest of the year. And all of that led to profit before tax reducing from £12,500,000 to £6,300,000 in the year. And it hopefully is fairly clear looking at the p and l, but all of that profit movement therefore is down to the sales decline given that margins gross margins were up and and operating costs were were down. The tax rate for the business was slightly lower than The UK headline rate of corporation tax, and therefore earnings per share were down 47%, which is a slightly lower rate profit before tax movement of 50% down.

17:01 And then that led to 2.4p of earnings per share, and we have proposed a full year dividend of 2.4p per share, which is therefore a 100% of EPS and down from 3.6p last year. And again, I'll come back to dividends shortly.

17:17 So if we turn to the budget, the cash flow statement then. So net cash over the course of the year reduced by £14,700,000 from 23,400,000 start of the year to 8,700,000 at the end of the year. And that includes, as Rob mentioned in the in his opening remarks, that includes £19,000,000 of cash relating to the two acquisitions completed on the period, which are the the two bars on the right hand side of the chart. So excluding those two acquisitions, our net cash actually increased slightly over the course of the year. So if I walk through the slide, operational cash flows before leases and that excludes CTD were £34,900,000, which is £6,200,000 lower than last year's equivalent number, which therefore follows exactly the year on year movement in adjusted profit that I spoke about already.

18:11 We saw a working capital inflow again excluding CTD of 6,400,000 in the year, but that did include a £9,000,000 timing benefit, which is simply because our year end this year in in the end of September moved to the September 28, which fell just before the September payroll VAT and supply payments, which went out Monday, September 30. So the first day of the sort of the new financial year. So that gave us a benefit of £9,000,000 from from timing. We will retain that working capital timing benefit until we have fifty three week year, which will be in a few years' time. So it'll it'll remain in the numbers until it reverses out and we have 53 a year. Lease payments were £21,800,000, which are £1,200,000 lower than last year. Again, some payments moved just into the start of 2025, which explains that difference.

19:02 CapEx continues to be relatively low at £4,500,000 in the year. And then there was a dividend to check-in TOPPS TILES PLC of £7,100,000 on a cash basis, and that consists of the final dividend from last year and then the interim dividend of 1.2p that we paid and offered through this year. So before acquisitions, but including those dividend payments, net cash grew from 23,400,000 to 27,600,000. And then I think as we've explained already, CTD for £9,000,000 and the final 40% of shares in pro Tyler, and the two of those in total aggregated to about £19,000,000 leaving the group at the end of the year with £8,700,000 of net cash. The group has a committed banking facility which is committed to October 2027 and that banking facility is the value of £30,000,000 and so if you add the 30 to the 8,700,000 of cash that we had, that gives you headroom to the banking facilities of £38,700,000 of the year.

20:07 Looking at the balance sheet, capital allocation, and dividends then on this slide, I wanted to come back to this specifically. And on the left hand side is a reminder of the group's capital allocation policy, which we we sort of launched in May 2022. It's not changed from there. I just thought it'd be useful to show a recap to investors on the left hand side of the the elements of our capital allocation policy. And then on the the I suppose the context for launch of that capital allocation policy was the improving strength of the group's balance sheet. And on the right hand side of the chart, you can see the year end net debt or net cash position of the group over the last, what, thirteen, fourteen years or so. And it should be clear that that excludes lease liabilities, so that is sort of back debts or or cash sitting in in our bank.

20:56 And you can see that the, you know, the context there is that over over a decade, the group swung from a position of having £51,000,000 of net debt in f y eleven at the end of f y eleven to £28,000,000 of net cash in 2021, excluding leases. This year, that cash balance has reduced to £9,000,000. As I explained, that that includes the two acquisitions that we've made. So we finished the year of £9,000,000. And if you want to include leases, we have £86,000,000 of lease liabilities sitting on the company's balance sheet and therefore our net debt to EBITDA post leases year end is 2.3 times. And if you combine that with our £30,000,000 bank facility, I would still describe it as a very robust balance sheet despite the year on year decline in cash.

21:47 So when it comes to dividend, our policy was also described as part of that dividend and capital allocation policy in 2022. And our core policy on dividend is to pay out two thirds of our adjusted earnings per share as a dividend. But the policy very clearly gives us some flexibility around that. We don't pursue it here to that sort slavishly. In particular, it gives us some flexibility to pay out up to 100% of our adjusted earnings per share in in a year, particularly if we feel there's a sort of relatively short term period of weaker trading. And so this year, we have taken advantage of the flexibility that that policy gives us, and and we've decided to pay out the maximum that the policy allows us to, which is to pay out 100% of our earnings. And therefore, we are proposing a full year dividend of 2.4, which consists of the interim of 1.2p fully paid plus another proposed final dividend of 1.2p, which will obviously be subject to shareholder approval at the AGM in January next year.

22:46 And I mentioned earlier on that within our cost base, our statutory cost base, there was a large noncash impairment of store assets, so I thought it might be helpful to show investors a little bit more detail on that, which I've done in this slide. And you can read for yourselves on the on the right hand side, some of the processes that the company goes through. And then on the left hand side, there's two snips of some of the notes to the accounts. So the the lease note, explains our right of use assets, and then a snip from the property, plots, and equipment, so the fixed asset notes as well. And I've highlighted with the botched hand at the the impairment, which you can see exactly in the back of the accounts, the two things that I'm talking here. And there's a process that companies have to go through under an accounting standard called I a s 36, where we're required to look at assets on the company balance sheet and see if there's any, what they call, trigger for impairment across across business, which I think the poor state of the market and the decline in the company's profit year on year was, in our view, a trigger to to do a full impairment review, which we completed.

23:50 And in particular, we look at the largest asset on the company's budget, which are the price of use assets, which starts the year at £81,000,000. Those assets represent the company's rights to use leased assets. So almost all our stores are held on leases, but under the accounting standards, those are viewed as as assets because we have the right to use those. They have a value associated with them normally on the balance sheet, and these are the assets that we're talking about. And all you can do is you look at the future cash flows generated by stores on a on a on a sort of fully absorption costing basis, and then where the future cash flows can't support the assets on store by store basis, we're required to impair it. And the outcome was that we posted a noncash impairment of £17,100,000 against the right of use assets and £2,300,000 against the fixtures and fittings within those within those assets. And the FNF process follows exactly the same process as the rights of these assets.

24:44 That impairment gets posted against our statutory profits this year, but as I mentioned, it's a it's a noncash accounting item, and so we removed it from our adjusted profits. In future years, it will also have no impact on our adjusted profits moving forward, which hopefully makes you comparisons of profit much more easy to understand for for investors as we move forward. So the the adjusted profit won't change as a result of this.

25:13 And then my final slide before I hand back to Rob, just looking forward slightly. So, again, there's there's a fair bit on the slide. I'll just count just a few points of the presentation. Looking at macroeconomic indicators, I think we've characterized them as being mixed at the moment. There are some positives. So in particular, things like mortgage approvals are up quite substantially year on year, which is which is a good sign. And that hasn't yet led to increased levels of housing transactions. I mean, logic says it should, but there's a lag factor until that happens, so that that hasn't happened yet. And then, you know, we would hope that after housing transactions start to pick up, then maybe people will start to spend a bit more on, you know, on their homes again. And but that that has yet to come through yet. Consumer confidence is something we look at quite a lot. It was on a on a positive trend, but then it it took a bit of a hit in recent months in in sort of September and October.

26:03 We didn't know that consumer confidence improved slightly last week, but it is still it is still relatively low. And then inflation is, you know, is trending down, but I think it's fair to say there are upward pressures on inflation as well, which we think might come through in in future months. So a big set of macroeconomics, I think. Although our although our own trading is back into slight growth in the first eight weeks here, which we are pleased with, I think we've been very clear not to call that a recovery in the market. We don't think that there's been a recovery in consumer spending yet, which I think Rob will touch on his presentation shortly. And then we as a business also face our own set of inflationary challenges. So in total, we're guiding investors to think about £5,000,000 of inflationary costs hitting the business in FY '25, which includes the impact from national and wage increases in April and also the changes that the chancellor announced to national insurance, both the rates of national insurance, but also importantly the threshold at which that insurance payments kicks in. So it's been reduced from £9,100 to £5,000, which will which will impact the business for sure.

27:07 So in total, we think we have about £5,000,000 inflationary costs coming to FY '24. There's a few other slides. A few other points which you won't necessarily pick out on the slides. Just two more quick ones. H one to H two phasing, you should continue to expect H one to be impacted by holiday pay accruals, which reverse that in the second half. And obviously, we have high heating costs in the first half as well. And and then also one final thing, we've mentioned already the fact that we've acquired a new distribution center or or signed a lease from a new distribution center to support ProTiler. We will be paying the CapEx cost to fit that out, and so we're guiding CapEx to step up the tier £289,000,000 including the cost of fitting that. So, hopefully, environment does remain quite tough. The good news is is that we do have a large list of self help measures that we're in the process of implementing, which we think will really drive the business forward, which is what I'll hand back to Rob to talk to you about now.

27:59 Thanks, Steven. Very good. Thank you. So, yeah, Greg. Thank you. Moving on to strategy then and operational run through. So the goal in the addressable market. So I've already covered it as we announced at the interims. Our new exciting goal, we think, is all about mission three six five is about getting the business to £365,000,000 of annualized sales, and that's also combined with a really clear target for profitability. So we believe every part of our business of every operational element can generate at least 8% net margins. At the prototype, the business is already generating that level of profitability today. And historically, prior to pandemic period and various points of disruption, the TOPPS TILES business consistently achieved that level of profitability. Operational gearing will be key, as Steven highlighted, to get TOPPS TILES back there, but we believe every part of the business can generate at least 8% of their margins. And the addressable market for the business has been really materially expanded as well from about 1,200,000,000 previously, which was just focused on tiles and closely associated products to 2,100,000,000 now, and we've achieved that by broadening our reach into more of the half floor and wall surface covering sector and and related products.

29:09 So whilst tiles remain our core, and it's really important, it's the name above the door. It's it's what we do. We've also started to extend our reach in in risk years, actually, into adjacent categories, and we feel there's much more we can achieve in that space. Things like wooden laminate shower panels, double XL tiles, the the super large tiles that are now coming out of factories, and also splashbacks, and I'll I'll talk to some of those in terms of, you know, these huge slides. So the strategy for the business has therefore been enhanced and refreshed to reflect that increased scope for our ambition and also the fact that we wanna ensure we're we really are market leaders or as we've got here first four in each of our chosen areas of focus. The only exception for that actually is hard surfaces where we recognize that we need to build and grow. Our immediate focus is ensuring the customers know that we actually sell them by some categories, hence, we're gonna be famous for hard surfaces, first for everything else.

30:01 So the way this schematic works is the four boxes across the top are all about our focus on growing. So it's really, really important. Well, the first two, therefore, very much about our customer offer and our product, and then therefore, product focus, and then our consumer our our consumer and then consumer and trade are the customers that we serve on the right hand side. So noting, actually, the trade is also a very, very broad definition. I'll I'll talk to that a little bit in in a couple of slides' time. And those four boxes focused on growing sales and then underpinned by three what we call supporting pillars. So those three are environmental leadership. We wanna make sure we really are leading our market in terms of environmental credentials. It's a recently important area for our customers. Our people focus agenda is all about top people, top service, and that applies to all areas of our operations.

30:48 And then operational excellence actually reflects some of the investments that we wanna make, which would be improved to be key enablers of the strategy over time. The other thing I would say on this slide then is we've got five trading brands across the bottom of the page, and investors may or may not be familiar with these to to varying extents, but but very quickly, TOPPS TILES is I think will be familiar to most certain UK based investors. That remains bulk of our sales. Sometimes 85% of our sales go to TOPPS TILES. That's very much our consumer focus and trading, but our sort of our sort of store based omnichannel retail business. Park side is in our our business that focuses on the architect and design community. It's very much about direct selling into larger commercial type projects, corporate clients, those kind of areas, very much b to b. The pro tiling business is an online only essentials business. So, you know, they sell everything you need to do a tiling job with the exception of the tiles themselves.

31:43 Very much focused at a professional installment covering both a wide range of customers and applications. TOPPS is the newest part of the business, which we started a couple of years ago. It's very much home owner focused and designed to cater for a slightly more valuable value orientated customer online only. And then CTD Tiles is the newest partner group we acquired as we mentioned earlier in August. And we'll talk to that a little bit more as we go through the slides. In terms of those sources of incremental growth, we I've talked about touched on these at the start. We covered them at the at the interim Five key areas we've highlighted where we think that we can really see meaningful change and meaningful as we work towards our delivery mission three six five. We haven't changed any of these at all since the update we gave to investors six months ago, but I thought it was quite helpful just to reorient reorient investors around how these fit into that refresh strategy I I shared on the previous slide. So category expansion, I think, really, is all about on our surfaces or as as we're starting to call internally more of the house. Tile warehouse is then part of our first consumer focus on TOPPS TILES, obviously.

32:51 And then the other areas of focus are actually all about trade in different forms. So we've been really, really clear. We wanna be first for trade in all of our markets across The UK, and each of those things, ProTile, the trading digital experience, and leads to being very, really key areas of focus to help against that. So on this slide, then we talked about the road to three six five. Again, this is almost almost the same chart that we shared with investors at the half year. And of those five key areas of growth, we've we've tried to lay out as best we can with a range against each of the numbers, what we think that journey to mission three six five will look like. I suppose a couple of points to to underpin here. One is we've included a a a block of growth for the market. Our assumptions around market growth are very modest. So this is not a market recovery goal. This is a self help goal, as Steven mentioned earlier. Any growth we issue in the market will probably go on a normalized basis, some 3% of the year. If there's any acceleration of that, that will be helpful in getting us to our goal faster.

33:49 The addition of CTD then, we've added into the left hand side here, which, again, are the things we covered earlier, we believe is a 30 to £40,000,000 sales opportunity. The way we're seeing that currently is that should be a significant accelerator of our journey to mission three six five. I do think that will have some interrelationship

34:04 into our b to b area of focus. A lot of CTV businesses is around b to b, and that's an area we need to consider more fully. And at the moment, our focus on CTV is supporting, as I said, the CMO, the competition and markets authority with their with their review. And in the meantime, we'll continue with our our focus in terms of strategic areas of growth. So in terms of the blocks on the page, you just sort of quickly give people a bit more orientation. TOPPS TILES, therefore, will be a major part of us developing our gold mission 365. This actually remains one of the areas of

34:35 the business I'm I'm most excited about, inspire our existing scale in this space. And I think the trader digital experience and road through new categories of almost all of that will come through the TOPPS TILES business. Very important to us. We've got really strong ambitions, as I mentioned, in the commercial trade space at B2B. That will be across TOPPS TILES, PLC, and ProTile, and and now also CTD as we move forward. And then the ProTile business, we've already touched on at the start, we are very confident that could be at least a £50,000,000 turnover business. We've already grown very, very rapidly. We bought the business two and a half years ago. It was doing about 12,000,000 sales at the time. It's now annualizing very close to 30,000,000. We're really confident that's 50,000,000 business. That would give us another, therefore, at least £20,000,000 of the branch from where we are. And then the TOPPS business, again, we're relatively small, but probably now doing something in the region of £2,500,000 a year run rate. We think that's within that 10 to £15,000,000 opportunity from where we're building it as well.

35:33 So to then first for tiles and what that really means and where we're focused on here. So tiles, of course, are our hard band. It's a really, really important to the group. Model doesn't change. It absolutely is our is our area of strength and competitive advantage. We are the leading specialist resource from all over the world. Vast majority of sellers are either exclusive or own brand, exclusive in some way or own brand. That's the group. We work very hard to ensure that we that we we continue to have the the best and newest and most innovative TOPPS for the market.

36:04 Much of our focus here in investment is also about actually ensuring that we continue to strengthen that competitive advantage in in in order by markets, and that because that does support the majority of our sales today. So we're focusing harder on in the year ahead, we're focusing on our range hierarchy, particularly in making it easier for both customers and colleagues actually to navigate the range. You know, we often find we have a number of products that might look quite similar, but actually look at different price points, and we don't necessarily feel we always do a good enough job of explaining the range to our customers.

36:34 So I think in reality, it's sort of a simple kind of good best hierarchy that already exists in the business, but actually making much more we might wanna focus on sort of features and benefits, particularly in how we explain those customers. We think it'd be a really good step on for the business. But we also know that central brands can be really important, our brands, particularly more for our trade customer

36:54 base. And as a group, actually, in the best position we've been in for a long, long time, and we'll continue to focus really to to develop really clear range hierarchies in our essentials range of products as well. So then on next to famous for hard surfaces. So as I mentioned, we introduced a greater focus on hard surfaces in the interims. It's an important step for the group that allows us to materially expand our addressable market, as we explained. But, ultimately, it's about us getting a greater share of the hard surf of hard surface coverings across the home.

37:26 We've made really good progress over the second half of the year. We feel I'll I'll actually cover that on the next slide. And we've updated all of our website content ready. We have a number of changes planned to improve the user experience. They're all coming in in 2025 for people that shop digitally. And we plan to market websites much harder as well. Have done particularly allocate specific spend to some of these new areas of some of these new areas of priorities, new categories, and we'll invest somewhere in the region of additional £500,000 on digital category expansion marketing for the year end. Talk to the expanded addressable market, and you can see here illustrated large areas of home now increasingly utilizing hard surface coverings. We see that as a really key opportunity for the business. So the progress we've made, outdoor and LVT luxury vinyl tile has actually been in the business for a little while now.

38:16 Mainnet represents some of the movement, £10,000,000 of sales already to date, so, like, around the basis, obviously. So double XL, the sort of super large tiles, these are tiles that can be, you know, 4.2 meter square, 2.4 meter long in some cases. Shower panels. They're actually already in stores. They are being and have been rolled out as we talk. Woodland Lambda, we now have an offer which has been trialed in 42 stores across The UK. It's subject to performance. We plan to roll Lambda offer out in 2025 as well. And And we do it more in terms of the online offer as well. So it's a really effective low risk way for us to in all the new categories, things like acoustic panels, which are a new trend in the market, and splashbacks are now available online, and we plan to bring displays and ranges of those into stores as we get you across the year as well.

39:18 Sales have roughly trend run rate sales have roughly trend. We're gonna see regularly about £50,000 a week of sales go through to our warehouse, and we remain really confident that can be a scale part of our operation over time on our mission of the slots £15,000,000

39:32 in sales, of our Mission three sixty five Gold. TOPPS TILES remains the leading specialist brand in The UK. Market research very much supports that. So I'm prompted awareness for TOPPS TILES if you ask, you know, the anti person on the street, where might you think about going to buy your tiles? TOPPS TILES actually achieves 33% of unwanted awareness. As a place to go to buy tiles, the only the only the only other business that customers will prompt more than that is actually BQ themselves. BQ obviously, you know, market leader for all things DIY and home improvement in The UK. So we think it's a very, credible score for the TOPPS TILES business. We actually represent around 25% of all tile related search traffic online, and pretty amazing now, I think, works. TOPPS TILES are actually more searched for than customers than Word tiles itself or the tile itself. So, yeah, very strong brand on the TOPPS TILES, and we wanna make sure we continue to to nurture and grow that brand. So we see lots of exciting opportunities here. We wanna make sure we continue to ensure we have world class levels of customer service. We achieved 92% overall satisfaction in the year just gone. That's brilliant. We wanna make sure we keep keep delivering for our customers.

40:38 We've launched a new service brochure actually in stores, which provides a template really for customers and colleagues both to enjoy sort of really high quality engagement when the customer's in the store. It crucially gives them something to take away as well and talk about the the kind of project they're involved in and the times they've looked at in store, the colleague that helped them on the day, and it gives them an opportunity to follow-up with with lots of clear detail. We're also working on bringing technology into the sale. We plan to start bringing tablets into stores, which will allow colleagues to to do more, particularly things like features and benefits I mentioned earlier. It will make that process much simpler for colleagues as well and provide customers with a richer experience. And then range of hierarchy I touched on earlier, again, features and benefits of products when we're selling is an important part of where we're focused moving forward. And we also plan to invest further digital marketing in the year ahead. We still think it's an opportunity to market the business hard particularly for customers doing initial periods of research online, which is inevitably where most of our customers start their journey.

41:36 So in terms of first trade, trade for our solution splits down to two areas. We can talk about domestic trade and then commercial trade. Domestic trade is really about jobs going on in people's homes. They tend to be smaller, maybe a little bit less complex. Commercial trade can be more more complex projects. They tend to be larger. They may involve contractors. They may also be linked to the a and d architect and design sector or or or customers such as national house builders, those kind of areas. TOPPS TILES is a brand that's mainly more focused on domestic trade. We do have some crossover into commercial as well, particularly smaller localized commercial projects will often end up in local Topstar store. I'll cover that on the next slide, but we've seen some pretty strong results coming through the Topstar trade channel this year. PRO TAR, as I said, a couple of slides ago, very much trade focused. They will cover domestic and commercial sectors in in PRO TAR very regularly, and and the business has delivered exceptional growth as we've gone through. I'll I'll touch on the new warehouse in a couple of slides of time. And then commercial trade, we see absolutely remains as a key opportunity. Park side is now a profitable partner operation. We restructured that business in 2023.

42:41 So that business is now now running at a small, but importantly, a positive contribution to the group. Then the acquisition of CTD Tiles may well change our approach, but as I've said, that is that remains subject to us supporting the CMA with their inquiries. So in terms of the TOPPS TILES trade and digital experience, trades have been pretty clear in the process for the business, particularly in TOPPS TILES, and we've indicated there was more to do in the digital space. I'm pleased to say we've made some really good progress, particularly over the last time, quarter of the year, we've actually relaunched the trade website. And at the half year, the interims, we've talked about sort of various points of friction in the journey for the trade customer. But we can do a better job of them. I'm pleased to say we really have stepped on here. So things like trade pricing are now available instantly. You come on to the trade website and need to be registered as you need forward to see those prices.

43:31 And you, as a trader, you can now register and set up an account online in a matter of minutes previously how to start registration online and come into store to sort of be validated by the local teams. You can now do all of that in a sort of self serve fashion online. And we've seen some really, really impressive results coming through, actually. Some from quite a low base, but registration online are are only a double what they were. That's really encouraging. Traffic is actually up about fourfold online, and trade spend is up about 60% now from a low base, as we said, but the group the the TOPPS TILES business as a whole, right, trade sales are up quite significantly in the current trading period, which is very encouraging. In 2025 and the year ahead, we managed to launch our new customer engagement platform, modern day version of a a, you know, direct marketing system.

44:19 So that will really take us forward and really really enhance our direct marketing capabilities, allow us to really engage with those particular trade customers who will obviously repeat purchasing from us all the time. We plan to relaunch our trade loyalty scheme as well. We will increase our marketing spend. So, historically, trade marketing has been very, very modest. That will a mix of things. It will be more digital spend, but it will be more traditional. We can't explain our campaigns, these kind of things. And we plan to launch an app which will actually bring the whole of our trade offer together. That will be later on in 2025, but that's the point where effectively we we we hope to put top stars on on on every trader's mobile device, which will give us opportunities to engage with them wherever and whenever we need to do so, updates on loyalty points, latest promotion offers, those sorts of things, provides a real sort of immediate voice for customers.

45:06 CTD tiles, we've already touched on a couple of times, so I think probably just useful for investors to understand what we've acquired and why. So CCG TOPPS was brought back in August 2024. We've bought this out of administration. The in essence, we've acquired three things here, actually. We we see them as fairly distinctively. There's a there were around 30 stores, seating details, 86 stores in total. A number of stores went to a couple of other players in the market. Some stores remain closed. We took 30 best stores, 30 best performing stores that we considered we could have the best chance of making some some some profit from. They accounted for in the year to June 2024, they accounted for about £20,000,000 of sales.

45:53 We also then acquired the CTV Architectural business, which is an an AMD architect and designer focused operation quite similar to Parkside in its nature, actually, we should think of it in in those terms. And then CTV House Builder business, which at the time accounts for about £16,000,000 in sales, actually is is is is serving national house builders, and that's part of the market that TOPPS group weren't weren't involved in at all. So that's all new to us. So quite an exciting opportunity for the business. We do see the brand positioning as as complementary to our operations. CTDs is slightly more direct focused on TOPPS, and in particular, those commercial elements both A and B and Household, they are they are we are on a very small role in those markets at all. So that's genuinely incremental growth for us. We do see this as a 30 to £40,000,000 opportunity. Nothing has changed our minds on that so far, but as I mentioned a couple of times, our immediate focus is on supporting CMA, and then we will start to focus on how we build that business back and and and make sure we have that business back in the profitability.

46:51 So moving next on to now, I've talked about once we go past the sort of four areas of the strategy, which are really about growing growth. We've then got three supporting pillars. The first of those three supporting pillars then is operational excellence. Two key areas we're really focusing on and keen to update investors on today. So we have now we've signed the lease and are currently fitting out our new distribution center at Wilfampton, a 140,000 square feet. That will be our single biggest facility, you know, across the group, which is very exciting. Currently, about half that space will be allocated to the protiler business who have literally outgrown their existing facilities in in Northampton. So that's a really exciting step on. Protiler that the protiler section that will be operational by January the next stage of both ProTile's growth and also the growth of the group for the use of some some additional capacity.

47:48 Think we're very focused on our systems as well, our our internal systems. So we indicated that half year that we were planning for investment in the systems upgrade has now been approved. We're starting that program soon. Business will migrate to it's currently on a Microsoft Dynamics platform. It will migrate to, in essence, the newest version of that, which now is in the central three sixty five. Projects are set for start January. We expect to complete this project somewhere around quarter three f y twenty six. So it's a it's a big thing to do, Take a chunk of time. And that will cost us, we estimate, somewhere in between £1,200,000. And then our people focus, obviously, remains absolutely key to the business. I've already talked about world class levels of customer service. We absolutely have to have great people. We have done the best people in the market to deliver our customers that that world class service, and we we're very focused on this and have been for for a long period of time.

48:41 I'm delighted to say, again, we achieved that in 2024 with overall satisfaction ratings of 92% for our customers, And we're also getting much more focused on Google views as well. So I'm pretty pleased to say we've we've now achieved 13,005 star Google views during the course of 2024, and that will be a big area of focus for us as we go into into 2025. It's absolutely key for customers that can get that reassurance. Most people will go to Google now for initial search and and recommendation. That that provides a really useful confidence build to customers. They know they'll get a great experience when they come to us. Quality turnover has fallen again. I'm really pleased to say. So down to 26.3% in the year, and particularly manager turnover significantly lower than that as well. That's also a really fair focus for us that we have small teams in stores. The manager provides a key sort of pivot to the world in terms of onboarding, recruiting, onboarding, training new starters.

49:32 So we need we need to to be very stable and achieve that this year. And we've launched our most tier it's an inclusion program this year. So called one TOPPS, we're starting as most people, I think, have done most employ for the listening groups. We've really trying to work and listen very carefully to our colleagues from the telescopic business and and how we make TOPPS an even greater play an even greater place to work and and a very inclusive employer as well. And then charities are really important part of what we do. Colleagues and customers both love our charity campaigns. We're currently partnering with the Outsider Society, a great charity, really good cause. We have a target to raise £1,000,000 for outsiders across five years, and I'm really pleased to say we've reached that halfway marker this year. So we're actually on track for a million pounds, £500,000 already delivered. Environmental leadership is really focused on two things. It's focused on carbon reductions and it's focused on circularity.

50:22 So in terms of carbon reduction, we've had a pretty clear goal here for a couple of years now actually, which is across scope one and scope two, we wanna be carbon neutral by 2013, but it's earlier than most other companies are committed to. We've got really clear targets. We've got really clear programs in place. Our focus, we know over 5,000. So we currently need about 5,000 tonnes of carbon as a business. We know where what that's as a result of, and it's pretty easily split between two things. So it's fuel for our commercial delivery vehicles, alloys, and then it's also energy used to heat our stores. But everything else is is really very, very small and being the two big areas of focus. And we're well on our way to to achieving that by 2030. Scope three, we've actually measured. So, hopefully, viewers will will understand. Scope three is in essence everything happens sort of upstream, downstream of our supply chain. So these are directly accounted for, but we do need to be very, very mindful of these and focused on them. So it's going through and measured for the first time. We expected it to be significantly higher than starting on to our own sort of direct emissions.

51:24 It's actually in the region of a 177,000 tons, about 35 times. So we're starting to focus on how we reduce those over time, working with our partners, manufacturers, etcetera, what that would look like. And circularity is a big part of our agenda as well. So we've had a couple of areas of focus this year. We've been reducing waste both across pallets and tiles, made really progress there. And we've also had some really good innovation initiatives as well, so tile with high levels of recycled content and some of our adhesive product where we've taken sand down and basically alternative sand equivalents which are environmentally sustainable. And then Mission three sixty five indicative financial outcomes. We have this slide in the half year presentation. We thought it was useful to have a back even for investors. Just to remind ourselves what Mission three sixty five can look like. So £365,000,000 of sales. Obviously, we believe we can generate sustainable gross margins 51% to 52% across the business, and we are very confident we can deliver at least 8% net margins in, as I said, every part of our business, that will take us to £13,000,000 of adjusted pretax profit, and we also expect that will fall through to substantial improvements in internal capital over time.

52:32 And then the final slide, just to summarize, bring it all together. So Mission three sixty five, we think it's a really exciting new goal for the business. We've got really clear ambitions about how we wanna get there. We've laid out our journey for investors as best we can. We have significantly expanded our addressable market to allow us to do that, and we see the business now being very much focused on hard and room for surface coverings. And we've refreshed refreshed our strategy to help us achieve that as well as we go on this page. We've got five very specific areas of focus where we're confident we can deliver meaningful progress to help us achieve the next goal. So that concludes the formal part of the presentation. Thank you. Back to Jake for a second. Perfect. Rob, Steven, if I may just jump back in there. Thank you very much indeed for your presentation this morning. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab that's situated on the right hand corner of your screen.

53:20 But just while the team take a few moments to review those questions that were submitted already, I'd just like to remind you that a recording of this presentation along with a copy of the slides and the published q and a can all be accessed via your investor dashboard. Rob, Steven, as you can see there, we have received a number of questions throughout your presentation this morning. And thank you to all of those on the call for taking the time to submit their questions. But, guys, at this point, if I may just hand back to you just to read out those questions and give your responses where it's appropriate to do so. And if I pick up from you at the end, that'd be great. Thank you. Yeah. Thank you very much, Jake. That's great. And and thanks for the questions from our viewers. One of those, I'll read them out, and I'll I think in most cases, they're probably focused on Rob's answers. I'll pass it to to pick him up in in response. So, Rob, the first question is from Alan. So thank you, Alan, for the question. And and question is that he understands that we have around about 22% of the tire market in The UK. So that's our that's our market share.

54:16 And and I'm gonna ask who are the other main players. Yeah. That's nice. Yeah. Thank you. Yeah. Thanks, Adam. Good question. So we look at market for competition in The UK pretty wide and diverse. If we think about the sort of domestic market, firstly, you know, all all of the sort of DIY shares, the usual rise and rise, being key, which etcetera would have a a good range of products for customers and all the accessory products as well. Merchants, we've got Celco will do a good job of selling tiles, you know, a good good range of tiles as well. Then you've got, I guess, the specialist chains after that. So a number of still specialist chains across The UK. People like Almarade, people like Tile Giants, and some regional players in there. And you've got online only specialists as well, so a number of people now, you know, sort of decent sized businesses actually.

55:02 We've got halls and floors. We've got lot of time out in. We've got awesome superstore. You've got some other higher end chains, so people like Mandarin Stone, a number of centers around The UK and some strong web presence. And the actual bathroom retailers as well. So most most bathroom retailers will also sell a range of tiles, easy bathrooms, and ours is a big player in The UK, over a 130 stores. I think Victorian, plumbing online only, also now getting into the TOP market. So, yeah, there's a really healthy healthy market for TOP competition. That's the sort of domestic market. And then in the commercial market, that tends to be competing for one on a national basis. There's a lot of direct selling teams in and out of architects and designers and some contractors offices, but there are a few sort of larger scale players in that market as well, people like Domus, people like solo stars, etcetera. So, yeah, lots of competition across The UK.

55:55 Thank you, Rob. Next question is about CTD, and and it says that a large number of CTD stores have closed, those which you didn't take on. Have we seen any evidence of us picking up sales in the markets where we traded against CTD previously, but they're now closed? Yeah. Yeah. Okay. Thank you. So, yes, there's some evidence of that, but I guess I'd also refer back to our previous question, which is lots of competition across The UK. Mean, I firstly, just to recap, 86 CTB time stores trading, we we took 30. We took the 30 that had the best chance of profitability, and therefore, the 30 that like, which have been nice, turnover of stores. Other competitors have taken somewhere, I think 23 were taken by other players. So that sort of gets shot to about fifty fifty three, something like that.

56:43 Leaves in the end, therefore, about 30 probably that are generally closed. You know, we we will have seen some benefit as others would have done in each of those localities as well. Thank you. And next one is about trade and digital. Actually, we should, of course, we covered on that slide in the presentation. But you referenced the relaunch of the trade website and enhancement to the digital experience as key growth drivers. And what measurable impact have the are those initiatives had so far? And then what additional features are planned to further enhance customer engagement? I know you covered a bit on that specific slide on trading unit. Yeah. I think we probably have covered quite a lot of that. I mean, ultimately, trade remains an omnichannel part of the offer as well as what I would say. So having more traders come online is great. But, ultimately, we see a lot of those people coming to stores as well. So it's very difficult to say exactly how much has been delivered in any part of business because it's an omnichannel model. In terms of other things we're focused on, I'm referring back to slide 24 in the presentation, I think, where we we sort of went through the areas of areas of focus.

57:45 Thank you, Rob. I think the next one is for me. So this is from someone called Rob. Thanks for the question. And the question is, despite weaker trading, the dividend policy remains intact. Can you clarify the rationale for maintaining dividends at this level given the cash outflow and investment requirements? So few things within that statement and question to unpack. So first of all, clearly, the dividend did actually did actually drop seven point three point six p in FY '24 three, excuse me, and reduced it to 2.4 p. Suppose I how do we think about that? Well, first of all, in the cash flow slide, I was quite keen to point out that the cash generation business does actually remain strong. And, actually, we grew our net cash over the course of the year apart from the fact we did these two acquisitions. So the business remains very cash generative. So it's, I think, the strength of the the group, actually.

58:33 And and I think from our perspective, we regard 2024 as a very tough year where profits have come down a lot, but we're very confident about the future ability of the of the business to grow both profits and cash actually, which is hence the whole sort of focus of the mission three six five goals. So we would need to signal to investors our confidence by pushing our dividends to the to the top of the policy. We think it's affordable. We think the company's balance sheet can sustain it. As a reminder, we do still have cash on the balance sheet. Most companies have have have debt. We have cash on the balance sheet of about 9.4 and and 900p at the at the end of the year. So that's the sort of rationale, a really clear signal of the of the business confidence, but, you know, also recognition that trading has been a bit weaker, which is why the absolute value came down this year. Sorry about your question, Rob. And that actually is it for questions at the moment. So, Jake, how about you for a sec? Absolutely. Rob, Steven, that's great. Thank you very much indeed for addressing all of those questions that came in from investors this morning. And, of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended just for you to review to then add any additional responses, of course, where it's appropriate to do so. But, Rob, perhaps before really just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company, if I could please just ask you for a few closing comments to wrap up with, that'd be great.

59:53 Yeah. Great. Yeah. Thanks, Jake, and thank you to Steven for supporting supporting the presentation today. Thank you for joining us. Thank you to all of our viewers, hopefully, investors. Hope you found the update useful. And I hope investors are excited about Mission three sixty five as we are. Thank you. Perfect, Rob. That's great. And thank you once again for updating investors this morning. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order the management team can really better understand your views and expectations. This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of management team of TOPPS TILES PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good morning to you all.