Topps Tiles (LON:TPT) reported broadly flat first-half revenue on a pro forma basis but said stronger gross margins and cost-saving initiatives supported a rise in operating profit, as the tile retailer works toward its “Mission 365” growth plan.
Chief Executive Alex Jensen said the company had made “significant progress” against six priorities outlined in December, including increasing focus on the bottom line, growing trade sales, accelerating digital initiatives, improving sales execution in Topps Tiles stores and addressing unprofitable parts of the business.
“We have increased our focus on profit,” Jensen said during the investor presentation. “We continue to expand gross margin and have implemented three major self-help cost initiatives aimed at accelerating progress to 8% PBT margin.”
Pro forma revenue flat as gross margin improves
Interim CFO Rob Swales said Topps presented pro forma figures to allow a like-for-like comparison after the CTD business was adjusted out of fiscal 2025 adjusted measures but included in fiscal 2026 adjusted results following the conclusion of the CMA process and Topps gaining full control.
On that pro forma basis, first-half revenue was broadly flat year over year at £142.6 million, down 0.2%. Topps Tiles like-for-like sales were marginally positive at 0.1%, while online pure-play revenue grew strongly. CTD revenue declined by £2.8 million, largely because the business traded from 22 stores in the first half compared with about 30 in the prior-year period, although CTD store like-for-like sales were positive at 1%.
Swales said pro forma gross margin rose 160 basis points to 53%, driven mainly by margin growth in Topps Tiles. He said close management of cost of goods sold and pricing more than offset mix effects from growth in trade and essentials, which naturally dilute the Topps margin. Margin also benefited from actions at CTD around product range, pricing, discounts and delivery, as well as the addition of the higher-margin Fired Earth brand.
Pro forma gross profit increased 2.9%, while pro forma operating costs rose 1.8%, or about £1.2 million. Swales said more than £2 million of cost increases came from government-driven inflation, including National Living Wage and National Insurance contributions, but these were fully offset by cost control and self-help measures. Investments of £1.4 million in digital infrastructure, the ERP upgrade, the trade app and growth at Pro Tiler and Fired Earth partially offset savings.
As a result, pro forma adjusted operating profit rose 17%. Adjusted profit before tax was flat year over year on a pro forma basis at £2.2 million after higher interest costs. Earnings per share were 0.83 pence, and the company announced an interim dividend of 1 pence per share, in line with its policy of paying one-third of the prior year’s dividend.
Cost initiatives expected to support second half
Jensen said Topps’ store estate accounts for around 60% of the group’s cost base and has been affected by a relatively inflexible labor model and government-led wage inflation. National Living Wage rates have risen 29% over the past three years, she said.
To improve profitability, the company has launched three business-specific transformation plans. In January, Topps announced the closure of 23 loss-making stores over nine months in 2026. Jensen said many of those stores are close to other locations, allowing some sales to transfer, and prior programs have observed 20% to 40% sales transfer.
The company is also rolling out a new store productivity model to better match staffing with customer demand and has consolidated roles in head office and central functions, while reinvesting some savings into areas with the strongest growth momentum.
Jensen said the programs are weighted toward the second half, with full benefits expected in 2027. Across all three initiatives, Topps forecasts £6 million of sustainable annual benefits, designed to offset future inflation and other headwinds. Management expects £3 million of benefit in the second half of fiscal 2026.
Trade, digital and sales execution remain priorities
Jensen said trade customers remain central to the group’s growth strategy because they buy more frequently than homeowners and act as brand ambassadors. Excluding CTD, trade sales grew 4.1% in the first half.
In Topps, the company has emphasized convenience and value for trade customers. It launched live stock availability on essentials in February, which Jensen said was important ahead of the May launch of its new trade app. Adoption of Trade Pay, the company’s 30-day interest-free credit facility for traders, rose 55%, with 11% of trade customers now using it. Jensen said Trade Pay customers spend five times as much as regular trade customers.
Pro Tiler sales increased 20% year over year, with revenue now about three times the level at the time of acquisition in 2022. Jensen said the brand’s growth reflects its positioning as a marketplace for professionals, supported by competitive pricing, rapid fulfillment and digital marketing capability.
Digital sales also increased as a share of the group. Online revenue, including CTD, rose to 21% of the mix, up 3.3 percentage points from the first half of the prior year and 2 percentage points from full-year 2025. Jensen said Topps has launched new websites for CTD, Topps Retail and Fired Earth, and that the Topps website saw a 16% increase in conversion, a 20% decrease in checkout abandonment and a 30% improvement in speed.
The company’s ERP upgrade remains on track to be completed by year-end across central functions and the Topps Tiles and CTD store networks, with Parkside scheduled to follow in 2027. Jensen said a point-of-sale infrastructure upgrade is 40% complete and expected to finish by the end of June.
CTD losses narrow; Fired Earth profitable early
Topps said it has focused on improving profitability at acquired businesses. Jensen said CTD more than halved losses to a £400,000 loss in the first half, improving by £600,000 year over year, and is on track to be profitable in the second half. The company is also opening two housebuilder hubs in the second half, including Minworth, which opened on May 12, and CTD Newcastle, planned for the fourth quarter.
Jensen said Fired Earth, acquired in November, is already profitable after its first four months of trading and sales are exceeding expectations. She said Topps has leveraged group sourcing, logistics and digital capability while preserving the Fired Earth brand. The brand has secured long-term design partnerships with Nina Campbell and Neisha Crosland, launched a 120-color paint collection through a dropship partner and expanded its reach through international stockists in four countries.
Outlook calls for modest profit growth
Topps ended the half with net debt of £3.1 million, compared with net cash of £7 million at the September 2025 year-end. Swales said cash from operations improved by about £5 million, but working capital movements offset that, including an unwind of payables, a higher fiscal 2025 short-term incentive plan and increased Pro Tiler stock as the business expands. The company retains a £30 million revolving credit facility.
Management expects a modest cash build in the second half and a small net cash position at year-end. Jensen said current trading showed Topps Tiles like-for-like sales up 0.6% in the first seven weeks, CTD stores up 3% like-for-like and continued strong performance from online businesses, including some record weeks at Pro Tiler.
Jensen said the macroeconomic and geopolitical environment remains challenging, but the group benefits from a regionally diversified supply chain and purchasing scale. Management expects full-year trading to be weighted toward the second half, with gross margins broadly in line with the first half and modest year-over-year profit growth in line with market expectations, assuming macro conditions and consumer confidence do not deteriorate further.
About Topps Tiles (LON:TPT)
Topps Tiles Plc engages in the retail and wholesale distribution of ceramic and porcelain tiles, natural stone, and related products for residential and commercial markets in the United Kingdom. The company engages in the property management and investment activities; retail and wholesale of wood flooring products; provision of warehousing services; and sale and distribution of architectural ceramic. It also sells its products online. The company was founded in 1963 and is headquartered in Leicester, the United Kingdom.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
The article "Topps Tiles H1 Earnings Call Highlights" first appeared on MarketBeat.
