There's no final dividend from Topps Tiles, as the company suffers badly from the recession.
The results were pretty much in line with expectations, with revenues being down 10.6%, at £186m, and operating profit falling 53% to £16.4m. Bottom line pre-tax profit fell to £4.9m, from £27.7m the year before, but there were a number of exceptional items during the year, including significant restructuring costs. Adjusting for those exceptionals, underlying pre-tax profit would have been around £16.3m -- a fall of 45%.
Unadjusted basic earnings per share came in at just 1p, down from 11.2p last year (though the adjusted figure suggested underlying earnings would have been around 6.6p per share).
Chief executive Matthew Williams put the poor performance down to tough economic conditions and poor consumer confidence, which is not unreasonable -- spiffing up your kitchen floor is not one of life's essentials when the going gets tough. But there do seem to be signs of stability returning, with trading in the first seven weeks of the new year turning back in the right direction.
Debt is the killer
There will be economic cycles and dips in consumer confidence, and companies that allow themselves to get too deeply in debt during the good times will inevitably suffer during the bad times, and Topps' year-end net debt of £71m really didn't help (even though that was reduced from the previous year's £92m).
Next year's focus, as it should be, is on reducing that debt figure, and to that end there will be no final dividend paid. It's ironic though that Topps is only in this situation because it decided to return £112m to shareholders back in 2006 via a special dividend. Prior to this time it had a small amount of net cash on its balance sheet.
The new share placing should help any short-term cash-flow squeeze the company might face in the coming year, but I think we're looking at a critical six months for Topps Tiles now.
The shares fell a little on the news, valuing them at a forward P/E of over 16 (if current forecasts for 2010 remain unchanged). That seems way too high for me, especially as the prospect of any dividend being paid next year is now very uncertain.
More from Alan Oscroft:
