Topps Tiles shares lead the way on the small cap today

 
Oliver Gill
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Topps Tiles said demand had fallen in the second of half of the year (Source: Topps Tiles )

Topps Tiles' shares were the best performers on the FTSE Small Cap today, jumping four per cent in trading after revealing its full-year financial performance.

The figures

Annual revenues nosed up just 1.3 per cent to £215m but profit before tax jumped 7.8 per cent to £22m.

Gross margins – the incremental additional profit made on each unit sold – crept up from 61.2 per cent to 61.9 per cent.

Shareholders will rejoice at the news of a final dividend hike of 11.1 per cent, up to 2.5p, taking the total dividend paid during the year to 13.5p per share.

Read more: Topps Tiles' share price slides after company warns on consumer confidence

Why it's interesting

On the face of it, Topps is in the unenviable position of being squeezed both in terms of costs and revenues as a result of the Brexit vote.

Most of the products it sells it must buy in foreign currency. These have got more expensive following the slump in sterling – a by-product of Britain's decision to exit the EU.

The good news, however, is Topps have locked in euros at 1.28 to the pound and US dollars at 1.44 until the end of the year using currency hedges.

On the sales side, the Brexit vote has hit demand for its goods. Topps said consumer confidence was at -4.2 in the second six months of the year compared with a +1.5 in the first.

The challenges facing Topps have led to the company's share price falling during 2016.

However, analysts at Cantor Fitzgerald were satisfied with today's results. They said profits were in line with expectations and, critically, Topps was well placed despite its long-term exposure to currency fluctuations: "The company is flagging it now expects gross margins to be stable despite these currency headwinds."

Read more: Topps Tiles stacks up sales growth as buyers opt for home improvements

What the company said

Chief exec Matthew Williams said:

I am pleased to report that Topps has delivered a strong performance for the year, with our unrivalled combination of range, inspiration and convenience resonating with more customers and driving sales to a new record.

Williams also went on to highlight the positives of the first eight weeks of the firm's new year.

"Like for like sales in the first eight weeks of the new financial year were ahead by 0.8 per cent. Our proven strategy, well-invested business and market-leading position, leave Topps well-placed for further progress in the year ahead."

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