Topps sees sales decline slow

Topps Tiles saw half-year pre-tax profits slump to £7.5m

Embattled tile and flooring chain Topps Tiles has reported plunging half-year profits, but offered cheer as recent sales showed signs of improvement.

The group saw shares surge more than 14% as investors took heart from a slowdown in the pace of sales falls since the half-year, while Topps also reassured it was unlikely to breach financial covenants.

The news overshadowed a slump in underlying pre-tax profits to £7.5 million in the six months to March 28, down from £17.6 million a year ago.

Topps said seven-week sales in the second half had fallen by 11.9%, which marked a significant improvement on the 18.5% decline suffered the previous six months.

But the group revealed the impact of its trading woes, confirming that it had reduced its store workforce by 8.5% to 1,478 and central support functions by 10% over the year to the end of March.

It has also axed seven under-performing stores and reined in its expansion programme, while marketing and advertising spend has been slashed by around £2 million.

The firm has been hit hard by the slump in the property market and a more general consumer spending decline amid the recession. Its woes were compounded earlier this year after an insurer refused to cover suppliers against the risk of Topps going bust.

But the Leicester-based group said it had continued trading with all affected suppliers regardless, with the decision having "no material impact" on the business.

"We recognise that there are key uncertainties in the economic outlook with ongoing pressure on consumer spending levels," said Topps.

"We have continued to deliver our financial objective of reducing costs and maximising cash generation and the business model has demonstrated its resilience during a very challenging trading period."