annual RepoRt and financial statements 2011 annual RepoRt and financial statements 2011 l P c A n n U A L R E P o R T A n d F i n A n c A L S T A T E m E n T S 2 0 1 1 i Topps Tiles Plc Thorpe Way, Grove Park, Enderby, Leicestershire LE19 1SU T 0116 282 8000 F 0116 282 8115 www.toppstiles.co.uk GREAT CHOICE | GREAT VALUE | GREAT SERVICE GREAT CHOICE. GREAT VALUE. GREAT SERVICE. 14887_TT_AR11_cover.indd 1 07/12/2011 21:47 Plc Annual Report and Financial Statements 2011 inTroducTion Plc Annual Report and Financial Statements 2011 Review of the business Governance Financial Statements other information k “WiTh vERy chALLEnGinG TRAdinG condiTionS PERSiSTinG ThRoUGhoUT ThE SEcond hALF oF oUR FinAnciAL PERiod, oUR FocUS hAS bEEn on sTrengThening our markeT leading PosiTion. WE FURThER UPGRAdEd And ExPAndEd oUR SToRE ESTATE, conTinUEd ThE EvoLUTion oF ThE ToPPS TiLES oFFER And SUPPoRTEd ThiS WiTh new markeTing iniTiaTives in-SToRE, on TELEviSion And onLinE. in AddiTion, WE mAdE SomE signiFicanT inFrasTrucTure invesTmenTs AcRoSS ThE bUSinESS Which WiLL bEnEFiT oUR FUTURE PERFoRmAncE.” maTThew williams chiEF ExEcUTivE oFFicER conTenTs review oF The business Financial sTaTemenTs oTher inFormaTion 75 Five year record 76 notice of Annual General meeting 79 Explanatory notes to the notice of Annual General meeting 81 The team 88 Store locations 1 The year in brief 2 our strategy 3 chairman’s statement 5 chief Executive’s statement 10 business review 22 corporate Social Responsibility governance 26 directors 27 directors and advisors 28 directors’ report 31 corporate governance statement 33 Remuneration report 37 independent auditors’ report – consolidated financial statements 38 consolidated statement of financial performance 39 consolidated statement of financial position 40 consolidated statement of changes in equity 41 consolidated cash flow statement 42 notes to the consolidated financial statements 70 independent auditor’s report – company financial statements 71 company balance sheet 72 notes to the company financial statements 15stores operated by the Group in scotland 51stores operated by the Group in the north 16 stores operated by the Group in wales 63stores operated by the Group in london 57stores operated 118stores operated by the Group in the midlands by the Group in the south scotland north midlands wales london south Topps Tiles – store numbers Tile clearing house – store numbers Stores at the beginning of the period new stores opened Sub-total closures (including brand swaps) Total 275 17 292 –3 289 Stores at the beginning of the period new stores opened Sub-total closures (including brand swaps) Total 37 – 37 –6 31 designed and produced by radley Yeldar www.ry.com 14887_TT_AR11_cover.indd 2 07/12/2011 21:47 Plc Annual Report and Financial Statements 2011 The year in brief Review of the business Governance Financial Statements Other information k 1 £175.5m £18.2m Group revenue (53 weeks ended 2 October 2010: £182.4m) Adjusted operating profit1 (53 weeks ended 2 October 2010: £21.1m) –2.0% £13.9m Like-for-like revenue (53 weeks ended 2 October 2010: +1.7%) Adjusted profit before tax2 (53 weeks ended 2 October 2010: £16.3m) 59.6% 5.50p Gross margin (53 weeks ended 2 October 2010: 58.7%) Adjusted earnings per share3 (53 weeks ended 2 October 2010: 6.18p) £14.0m 0.6p Operating profit (53 weeks ended 2 October 2010: £19.9m) Final dividend (53 weeks ended 2 October 2010: 1.0p) £7.9m 1.1p Profit before tax (53 weeks ended 2 October 2010: £12.4m) Total dividend (53 weeks ended 2 October 2010: 1.0p) 3.04p Basic earnings per share (53 weeks ended 2 October 2010: 5.37p) 1 2011 adjusted operating profit is adjusted for exceptional items being the impairment of plant, property and equipment of £1.1 million (2010: £0.8 million), an inventory charge of £1.3 million (2010: £nil), and an increase in property related provisions of £1.9 million (2010: £0.4 million) 2 2011 adjusted profit before tax is adjusted for the effect of exceptional items above plus: – write off of remaining 2006 loan fees of £0.2 million (2010: £nil) – property disposal gain of £nil (2010: £0.1 million) – £1.6 million (non-cash) charge relating to the interest rate derivatives that the Group has in place (per IAS 39) (2010: £2.8 million) 3 Adjusted for the post tax effect of exceptional items highlighted above Please note this report has been prepared for the 52 weeks ended 1 October 2011 and the comparative period was prepared for the 53 weeks ended 2 October 2010. With the exception of the Group like-for-like revenue measure which is comparable, the reported figures are presented on this basis and are not entirely comparable. The impact of the additional week in 2010 was to increase revenue by £3.6 million and operating profit by £0.4 million. Like-for-like revenues are defined as sales from stores that have been trading for more than 52 weeks. 14887_TT_AR11_p1-25.indd 1 07/12/2011 21:49 Plc Annual Report and Financial Statements 2011 our sTraTegy 2 THE TOPPS’ STRATEGY IS FOCUSED ON DELIVERING OUTSTANDING VALUE TO OUR CUSTOMERS TO ENSURE THEY ALWAYS “RETURN AND RECOMMEND”. THIS HAS ENABLED US TO INCREASE OUR COMPETITIVE ADVANTAGE, BY FURTHER INCREASING MARKET SHARE; BUILT UPON THE STRONG FOUNDATIONS OF CusToMer serViCe, ProduCT offer AND loCaTional ConVenienCe. r V i C e P e r o d u C T M e r s To s u C ouTsTanding Value l o C a T i o n al ConV e n i C e n e o f f e r CusToMer serViCe ProduCT offer Customer service remains our number one priority and it is our policy to be honest, helpful and knowledgeable but never pushy. We invest extensively in training to ensure our staff have the best product knowledge in the industry. We mystery shop the customer experience in all our stores every month and encourage all customers to complete a satisfaction survey. As a specialist we are able to offer a huge range of products with many of them in stock and available to take away. Many of our key lines are imported directly from factories all over the world which ensures that we can offer the very latest tastes and trends to our customers, often on an exclusive basis. loCaTional ConVenienCe We have over 300 locations nationwide in easily accessible, highly visible locations, all with customer parking; thereby ensuring that the majority of the UK population have a store near them. In addition our website allows customers to review our range in advance, either purchasing directly online or visiting a store to discuss their project and benefit from our exceptional customer service. ouTsTanding Value When these three key elements of our business are combined we believe we offer outstanding value. Our existing customers satisfaction surveys are the best possible validation of this and their recommendations are an important source of future growth for the business. Over the past year, 88.1% of our customers have told us that they would recommend us to friends and family, something we are incredibly proud of. 14887_TT_AR11_p1-25.indd 2 07/12/2011 21:49 Plc Annual Report and Financial Statements 2011 ChairMan’s sTaTeMenT Review of the business Governance Financial Statements Other information k 3 “TOPPS HAS MAINTAINED ITS POSITION AS BRITAIN’S NUMBER ONE TILE RETAILER BY GIVING ITS CUSTOMERS INSPIRATION FOR THEIR HOME IMPROVEMENT PROjECTS, OUTSTANDING VALUE FOR MONEY AND ExCEPTIONAL LEVELS OF SERVICE.” Michael Jack – chairman Our Business Our expectation for the year was that it would again be tough for retailers in our sector and that proved to be the case. Nevertheless, we were encouraged by our first half performance, which saw overall revenues grow by 1.8% on a like-for-like basis. However, as we progressed through the second half the combined effects of a deteriorating economic outlook, stagnation in the housing market and falls in domestic purchasing power further undermined consumer confidence. Inevitably this has had a negative impact on our business and like-for-like revenues were down 2.0%. Total revenue for the financial period was £175.5 million with adjusted profit before tax2 of £13.9 million, down from £16.3 million in the prior period. Notwithstanding this difficult trading backdrop our gross margin remained robust at 59.6% (2010: 58.7%). In our previous Annual Report we committed ourselves to prudent cost management, further investment in key infrastructure and a targeted growth in our store estate. Good progress has been made against all of these objectives, enabling the Group to: a Grow the store estate to 320 by the period end, up from 312 a Convert five Tile Clearing House sites to the more profitable Topps format a Complete our new warehouse, enabling a longer term shift towards more direct sourcing, thereby enhancing margins a Commence the implementation of a new IT system a Build greater awareness of the Topps brand through national TV campaigns Our PeOPle and their cOntriButiOn A keen focus on the demands of the customer is at the heart of any successful retail business. Feedback from our rigorous “mystery shop” monitoring has confirmed that Topps is now in the top 10% of retailers in Europe when it comes to levels of customer service. This result validates our policy of continuous “on the job” staff training. Such a result could not have been achieved without the hard work and commitment of everyone who works at Topps, either in store or as part of our support functions. Our staff have also demonstrated their community spirit through their unerring support of the Help for Heroes campaign. On behalf of the Board, I would like to thank them all for their remarkable contribution to the business, and the wider community, across the entire year. cOrPOrate gOvernance This year Barry Bester, our Chairman since 2003, and co-founder of the business, brought his time with Topps to a close. After 26 years of dedicated commitment to the business, he announced in May that he wished to pursue his other business interests. Stuart Williams, co-founder and Company President has also announced his intention to conclude his formal involvement with the Group. Together Stuart and Barry formed a partnership which helped to take Topps from a private business, with just a few stores, to today’s publicly quoted enterprise with 321 outlets nationally. We owe both of them a deep debt of gratitude for all they have done to help develop Topps into Britain’s number one tile retailer. The Board recognises the need to recruit additional independent Non-Executive Directors to bring the Board into line with corporate governance best practice. This process is well advanced and we expect to be in a position to make an announcement early in 2012. 2 As explained on page 1 14887_TT_AR11_p1-25.indd 3 07/12/2011 21:49 Plc Annual Report and Financial Statements 2011 Chairman’s statement Continued 4 Our new sage metro brings this classic brick shaped ceramic up to date with an on-trend colour palette. the satin finish of Chic gives a handmade appearance, a perfect choice for adding character into room design. Metro Chic DiviDenD Our Future Last year we announced the resumption of dividend payments. Although trading has been tough in this financial period, prudent financial management has enabled the Board to recommend to shareholders a final dividend of 0.6p per share. This will cost £1.1 million. Subject to approval at the Annual General Meeting the dividend will be payable on 31 January 2012 to all shareholders on the register as at 30 December 2011. This brings the total dividend for the year to 1.1p per share (2010: 1.0p per share), an increase of 10%. Looking ahead, we recognise that economic conditions will remain difficult in 2012, with consumer budgets again under pressure. However, we will remain focused on maintaining our market leading position safeguarding our margins and looking at further ways in which cost can be taken out of the business. At store level our product presentation will be enhanced to enable us to continue the theme of inspiring customers’ home improvement plans. We will also invest in staff training and development to ensure a continuity of well qualified staff, trained to deliver Topps’ outstanding customer service. Our online presence will be developed so that customers can more easily choose the tile that is just right for them. We will also continue to look for opportunities to open a limited number of new stores in those parts of the country where we are under- represented. All of these initiatives will be supported by sustained marketing spend, with improved targeting, to ensure that our message of great prices, unparalleled product ranges, and superb service is communicated to both our retail and trade customers alike. Michael Jack Chairman 28 November 2011 £13.9m 1.1p Adjusted profit before tax2 (53 weeks ended 2 october 2010: £16.3m) total dividend (53 weeks ended 2 october 2010: 1.0p) 2 As explained on page 1 14887_TT_AR11_p1-25.indd 4 08/12/2011 14:23 Plc Annual Report and Financial Statements 2011 Chief exeCuTiVe’s sTaTeMenT Review of the business Governance Financial Statements Other information k 5 “LOOKING AHEAD, WE ExPECT ECONOMIC CONDITIONS WILL REMAIN DIFFICULT IN 2012, WITH CONSUMER BUDGETS AGAIN UNDER PRESSURE. OUR RESPONSE WILL BE TO TAKE FURTHER COST OUT OF THE BUSINESS, GROW MARGIN AND MAxIMISE SALES OPPORTUNITIES, WHILE MAKING OPERATIONAL IMPROVEMENTS THAT WILL POSITION THE BUSINESS FOR FUTURE GROWTH AS ECONOMIC CONDITIONS IMPROVE.” Matthew Williams – chief executive Officer Our focus during the period has been on strengthening our market leading position by continuing to deliver outstanding service and excellent value, high quality products to our customers. We further upgraded and expanded our store estate, continued the evolution of the Topps Tiles offer and supported this with new marketing initiatives in-store, on television and online. In addition, we made some significant infrastructure investments across the business, which will benefit our future performance. Prudent management of all costs remained a key focus. In addition we also reviewed a number of our retail processes to both further improve our proposition to customers and enhance financial performance. The economic environment has continued to be challenging and, in particular, we saw a slowing in customer numbers during the second half of our financial period. That said, the business remains financially well positioned and the strong operational progress made during the year will enable us to continue to progress our growth plans. the Market Topps has seen its position as the UK’s leading tile retailer strengthen further during the period, with our share of the non-contract tile market growing to 26% (2010: 25%) (source: MBD). Our unwavering focus on offering our customers outstanding service and value enabled the Group to, once again, outperform the market. Tile consumption in the UK continues to be low in comparison to the rest of Europe (roughly one third of the demand experienced in Northern Europe, source: MBD). However long-term growth, based on projections of an increase in housing stock and consumer usage of tiles, remains attractive. Against this background we believe there is potential for up to 400 Topps Tiles stores in the UK. stOre develOPMent and exPansiOn With a continuing backdrop of challenging trading conditions our focus has been on optimising returns from the existing store estate by adding new stores selectively and targeting tactical re-sites of individual stores where this is supported by the local market opportunity. Over recent years our store expansion strategy was realigned to reflect the deterioration in the economic environment. In the 2009/10 financial period we returned to growth in store numbers and this activity accelerated in the period under review. In the last 12 months we opened 15 new stores and closed seven stores (of which three were relocations), resulting in a net increase of eight stores and completing the financial period with 320 stores. New store openings have performed well and we are very satisfied with the return on investment. In the year ahead we have plans in place to increase the size of the business by approximately five new stores. We have continued with our programme of converting Tile Clearing House stores into the more profitable Topps Tiles format and have completed five in the financial period. Trading results from these conversions have been pleasing and a further 15 are planned for the year ahead. This will leave 16 Tile Clearing House stores which will function as clearance units for the Topps stores. Our improved and expanded website was relaunched during the period. The response has been very encouraging, with record numbers of people visiting the site and staying online for longer periods than ever before. Our online presence is now an increasingly important factor in driving store footfall as a growing number of customers undertake the research phase of their project online before visiting our stores. To help them with this process we have introduced more inspirational room set photography, a greater variety of design ideas and a completely new market-leading interactive “visualiser”. This enables customers to choose from our extensive range of wall and floor tiles and model them into a variety of different room settings. 14887_TT_AR11_p1-25.indd 5 07/12/2011 21:49 Plc Annual Report and Financial Statements 2011 Chief exeCuTiVe’s sTaTeMenT CONTINUED 6 latest inkjet technologies enhance our range of stone-effect tiles. representing the latest in our large format tiles, this stylish range uses inkjet technologies to create a distinctive marble effect. Marfil Bardiglio We have also improved the site navigation and checkout procedures as well as updating the visual presentation to mirror the latest in-store experience. While we expect the primary role of the website to remain as a customer research tool, it is also playing a growing role as a direct sales channel, with online revenues now representing around 1.5% of sales (2010: 1%). We expect this to continue to grow and play an ever increasing role in our customer offer. inFrastructure During the period we completed the construction of our second warehousing facility at our Leicestershire headquarters at a cost of c.£3 million. This warehouse is now fully operational and will form a key part of our logistics strategy over the coming years, giving us the operational capacity for up to 400 stores. In particular, the additional capacity will allow us to source more products direct from the manufacturer, decreasing the proportion sourced via third party distributors and delivering a gross margin benefit. During the next financial period we will be implementing a new enterprise-wide information technology system of which the majority of the implementation will occur in the second half. This new system, which will add much greater functionality across a range of disciplines, will be a key enabler for a number of new processes and customer initiatives. The total cost of the system implementation will be approximately £1 million, the majority of which has been spent in this financial period. custOMer service As the UK’s leading tile specialist, the provision of exceptional levels of customer service is a key differentiator of the Topps Tiles brand. Over the course of the last year we have changed the way we measure customer satisfaction and adopted the Net Promoter Scoring system. The score is calculated based on customers’ feedback to the question of how likely they are to recommend Topps Tiles to friends or colleagues. The scores are based on a numerical scale from 0–10 which allows customers to be split into promoters (9–10), passives (7–8) and detractors (0–6). The final score is based on the percentage of promoters less the percentage of detractors, thereby creating a possible range of –100% to +100%. Over the financial period we have scored 88.1% against this measure and consider this a very clear endorsement of our customer service ethic. The measure used for 2010 is not directly comparable. Marketing, advertising and sPOnsOrshiP The evolution of the Topps Tiles brand continued during the period, in line with our greater emphasis on inspiring customers and reaching beyond our traditional customer base. Our product brochures and in-store merchandising have been repositioned to reflect customers’ increased focus on style as the principal driver in their purchase decision. This approach also provides consistency with our improved consumer website. Greater emphasis has also been given to the breadth of our ranges, with a greater focus on being able to attract high end customers, as well as retaining those attracted by our traditional value message. £175.5m £18.2m Group revenue (53 weeks ended 2 October 2010: £182.4m) Adjusted operations profit1 (53 weeks ended 2 October 2010: £21.1m1) 1 As explained on page 1 14887_TT_AR11_p1-25.indd 6 07/12/2011 21:49 Plc Annual Report and Financial Statements 2011 Review of the business Governance Financial Statements Other information k 7 our charming range of crackle glaze tiles introduces Vintage style to our brand, perfect for kitchens and bathrooms. our new and exclusive Matrix brand offers a multitude of colours and tones in classic proportions. chic craquele Matrix Botanic Marketing, advertising and sPOnsOrshiP (cOntinued) Over the course of the last financial period we increased our level of marketing expenditure by approximately £1 million in order to drive footfall and increase our market share. Television advertising and sponsorship has proved to be the most effective way to build consumer awareness of the Topps brand. In the early part of the period we ran a national weather sponsorship campaign with ITV and subsequent TV campaigns across a variety of national terrestrial and digital channels have also been successful in driving store footfall. To complement this we will continue to communicate the inspirational range through home interest magazines and PR. We are planning to sustain a similar level of marketing expenditure in the year ahead. A trade-focused campaign will run in parallel with the consumer campaign, in line with our strategy of securing a greater proportion of trade project spend. staFF develOPMent Our people are fundamental to fulfilling our key objective of delivering excellent customer service and this remains as important as ever. We continue to invest in their professional development through a sophisticated in-store e-learning system, which is developed and administered in-house, providing new courses and regular updates. During the year we rolled-out new programmes to equip all store staff with the product and technical knowledge to support our “customer inspiration” agenda, as well as specialist sales skills training. The initial results from this programme have been encouraging, with a greater consistency of standards already evident across the store estate. All our staff are incentivised with competitive benefit packages and performance based rewards, and we encourage internal promotion. We anticipate that staffing levels will increase in line with the progressive expansion of the store base. cOMMunity Topp’s commitment to its local communities through sponsorship and charitable activity remains strong. We aim to make positive contributions to those communities served by our stores, working closely with them to promote our primary aim of being a “good neighbour”. We currently sponsor over 300 youth football teams nationwide, providing the teams with support, new kits and equipment. Our work for the charity, Help for Heroes, which we have been supporting since 2008, has gone from strength to strength and we have already helped to raise over £160,000 for this very worthy cause. We also work with the British Association of Modern Mosaic (“BAMM”), sponsoring two national competitions and supporting the promotion of mosaic art in schools and community groups countrywide. –2.0% current trading and OutlOOk In the first seven weeks of the new financial period, Group revenues, which are on a like-for-like basis, decreased by 6.9%. Looking ahead, we expect economic conditions will remain difficult in 2012, with domestic budgets again under pressure. Our response will be to take further cost out of the business, grow margin and maximise sales opportunities, while making operational improvements that will position the business for future growth as economic conditions improve. Matthew Williams Chief Executive Officer 28 November 2011 88.1% Like-for-like revenue (53 weeks ended 2 October 2010: +1.7%) Net Promoter Score (53 weeks ended 2 October 2010: n/a) 14887_TT_AR11_p1-25.indd 7 07/12/2011 21:49 Plc Annual Report and Financial Statements 2011 8 Great Ch oice TOPPS TILES FEATURES AN unriValled range OF PRODUCTS WITH THE LATEST DESIGNS SOURCED FROM AROUND THE WORLD. WE CATER FOR EVERY BUDGET, IN ANY STYLE, FOR ANY ROOM AND IN ANY MATERIAL, FROM THE PERIOD BEAUTY OF NATURAL STONE AND REAL WOOD TO THE VERSATILITY OF MOSAICS AND THE CONTEMPORARY FEEL OF GLASS. AT TOPPS TILES WE REALLY DO HAVE Tiles for eVeryone. Meeting our customers’ desires to be inspired, our new style guides help customers identify looks and designs to suit their living space. 14887_TT_AR11_p1-25.indd 8 07/12/2011 21:50 Plc Annual Report and Financial Statements 2011 Review of the business Governance Financial Statements Other information k 9 Ch oice Vibia Monaco Mosaic Henley Warm Complementing our fantastic range of mosaics, this unique glass and marble mix is available in Pearl and graphite. The new henley range, using inject technologies to replicate traditional encaustic design, is one of our most exciting new additions. 14887_TT_AR11_p1-25.indd 9 07/12/2011 21:50 Plc Annual Report and Financial Statements 2011 business reVieW 10 Matthew Williams – chief executive Officer rob Parker – Finance director Cautionary statement This Business Review, Chairman’s statement and Chief Executive’s statement, have been prepared solely to provide additional information to shareholders to assess the Group’s strategies and the potential for those strategies to succeed. These reports should not be relied on by any other party or for any other purpose. The Business Review, Chairman’s statement and Chief Executive’s statement contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information. The Directors, in preparing this Business Review, have complied with section 417 of the Companies Act 2006. This Business Review has been prepared for the Group as a whole and therefore gives greater emphasis to those matters which are significant to Topps Tiles Plc and to its subsidiary undertakings when viewed as a whole. nature, OBjectives and strategies OF the Business Topps Tiles is a specialist tile and wood flooring retailer with 320 outlets across the UK, and is the country’s largest retailer of its kind with a 26% market share. The Group operates two retail brands, Topps Tiles (“Topps”) and Tile Clearing House (“TCH”). Topps is the UK’s leading branded tile retailer with 289 stores offering wall and floor tiles, natural stone, laminate, solid wood flooring and a comprehensive range of associated products such as underfloor heating, adhesives and grouts. TCH is a discount retail format, comprising a further 31 stores with a mini warehouse design and a “when it’s gone it’s gone” style customer offer. The Group strategy is focused on delivering outstanding value and service to our customers. The key elements to the success of this strategy are the friendly professionalism and expertise of our staff, store locations, product choice and availability. Key operational objectives: a Deliver outstanding value for money and service to ensure customers always “return and recommend” a Maintain and extend our market leading position a Manage the store estate prudently, opening new stores where opportunities arise that complement the existing estate and review of the existing store portfolio to ensure we are keeping track with consumer shopping patterns and our cost base is as efficient as possible a Continued evolution of the in-store customer offer to maintain our competitive advantage a Further development of the e-commerce offering to maintain leading edge customer service 14887_TT_AR11_p1-25.indd 10 07/12/2011 21:50 Plc Annual Report and Financial Statements 2011 k Review of the business Governance Financial Statements Other information 11 “OUR PRIMARY OBjECTIVES CONTINUE TO BE FOCUSED ON OPTIMISING RETURNS FROM THE ExISTING ESTATE, CAREFUL MANAGEMENT OF OUR COST BASE AND IMPROVING OUR FINANCIAL FLExIBILITY. OUR MOST RECENT TRADING PERIOD DEMONSTRATED THE FRAGILITY OF UK CONSUMER CONFIDENCE AND PROVIDES FURTHER RE-ENFORCEMENT THAT OUR CURRENT STRATEGY AND OBjECTIVES ARE APPROPRIATE FOR THE BUSINESS AT THE PRESENT TIME.” Key financial objectives: a Primary focus on increasing revenues and cash generation, maintaining tight cost control and optimising gross margins a Maximising earnings per share and shareholder returns, including bi-annual review of our dividend policy a Ongoing supplier tendering and benchmarking of non-stock suppliers a Managing the Group’s exposure to fluctuations in foreign exchange rates a Maintaining a capital structure which enables an appropriate balance of financial flexibility and capital efficiency Progress against these objectives is discussed throughout this report and, where appropriate measures are utilised, these are included in the Key Performance Indicators section. OPeratiOnal review Our primary objectives continue to be focused on optimising returns from the existing estate, careful management of our cost base and improving our financial flexibility. Our most recent trading period demonstrated the fragility of UK consumer confidence and provides further reinforcement that our current strategy and objectives are appropriate for the business at the present time. Over the financial period we have maintained our focus on cost control and have only seen increases in costs resulting from inflationary factors, one-off items or where we have decided that additional investment was appropriate, such as increased marketing expenditure. Further detail of expenditure is provided within the Financial Review. key PerFOrMance indicatOrs (“kPis”) The Directors monitor a number of financial and non-financial metrics and KPIs for the Group and by individual store, including: financial KPis 52 weeks to 1 October 2011 –2.0% Like-for-like sales growth year-on-year (53 weeks to 2 October 2010: +1.7%) –3.8% Total sales growth year-on-year (53 weeks to 2 October 2010: +2.0%) 59.6% Gross margin (53 weeks to 2 October 2010: 58.7%) £13.9m Adjusted PBT2 (53 weeks to 2 October 2010: £16.3m) £50.9m Net debt (53 weeks to 2 October 2010: £49.1m) 123 Stock days (53 weeks to 2 October 2010: 121) 2 Adjusted PBT as defined on page 1 14887_TT_AR11_p1-25.indd 11 07/12/2011 21:50 Plc Annual Report and Financial Statements 2011 business reVieW CONTINUED 12 our new buxton range offers customers a multitude of floor design possibilities and satisfies the growing trend for statement floors. our new Victorian inspired mosaic collection offers affordable period style. Buxton victorian Mosaic non-financial KPis risks and uncertainties 26% Market share (53 weeks to 2 October 2010: 25%) 88.1% Net Promoter Score (53 weeks to 2 October 2010: n/a) n/a Customer satisfaction (53 weeks to 2 October 2010: 97.6%) 320 Number of stores (53 weeks to 2 October 2010: 312) Note – Net Promoter Score is a new measure we have adopted in favour of customer satisfaction ratings. The score is calculated based on customers’ feedback to the question of how likely they are to recommend Topps Tiles to friends or colleagues. The scores are based on a numerical scale from 0–10 which allows customers to be split into promoters (9–10), passives (7–8) and detractors (0–6). The final score is based on the percentage of promoters less the percentage of detractors. The Directors receive regular information on these and other metrics for the Group as a whole. This information is reviewed and updated as the Directors feel appropriate. The Board conducts a continuing review of key risks and uncertainties. The Board’s primary focus when reviewing these risks and uncertainties over the last 12 months has included: a The continuing challenges of the UK economy and the subsequent business impact a Balancing our longer term investment needs against the uncertain economic outlook a Ensuring that the Group’s capital structure remains appropriate and that future funding requirements are accessible uK economy The most recent trading period demonstrated the fragility of UK consumer confidence, which in turn has had a direct impact on our sales performance. Over the first half of our financial period we demonstrated an encouraging trend of steady growth in like-for-like sales. During the second half, and in particular the final quarter, we saw a significant reduction in revenues when compared to the prior period. Over the financial period as a whole we have seen a sales decline of 2.0% on a like-for-like basis. During the current trading period, reflecting the first seven weeks of our new financial period, we have seen like-for-like sales decline by 6.9%, providing clear evidence of the current economic climate and the weakness in consumer confidence. The Board believes the business is well positioned to deal with these challenges, continuing to generate healthy profits and remaining cash generative. Furthermore we believe the business is well positioned to take advantage of the likely retraction in the competitive base across our core markets. 14887_TT_AR11_p1-25.indd 12 07/12/2011 21:50 Plc Annual Report and Financial Statements 2011 k Review of the business Governance Financial Statements Other information 13 easy fit solid wood flooring is incredibly easy to lay and gives the effect of a real wood floor without the hassle of nails and glue. our polished porcelain range gives an air of luxury to even the smallest spaces. easy Fit Polished Porcelain balancing our longer term investment needs against the uncertain economic outlook During the financial period the Board monitored both the Group performance and the macro economy closely and considered that a return to investing in key areas of growth for the business was appropriate. This strategy has resulted in an overall increase in the number of stores and the completion of a new warehousing facility which is key to our future plans. The Board intends to continue with the cautious expansionary approach we outlined to shareholders over the last two years and intends to target approximately five new store openings over the next 12 months. We will also continue to invest in older parts of the store estate through a programme of minor store improvements and plan to convert a further 15 TCH stores to the Topps brand, a strategy which has demonstrated positive results over the last 12 months. appropriate capital structure During the period the Group successfully refinanced its loan facilities and now has in place a £75.0 million committed revolving credit facility, expiring in May 2015. As at the financial period end £60.0 million of this facility was drawn, with a further £15.0 million of undrawn financing available. The loan facility contains financial covenants which are tested on a bi-annual basis. other key risks In addition to the above, the Board considers other key risks including its relationship with key suppliers, the potential threat of new competitors, the risk of failure of key information technology systems, possible impacts on costs of sourcing due to the weakness of Sterling in comparison to the Euro and US dollar currencies, loss of key personnel and the development of substitute products. The Board’s response to these risks is articulated throughout this report and includes: a Continuing improvement in our existing retail operations, including regular review of our product offer and customer service to ensure that we are maximising the opportunity to deliver sales a Careful management of costs across all areas of the business with increases in expenditure only in areas that the Board decides are appropriate in order to either drive short-term gains or generate longer term strategic benefits a Tight management of cash and continued reduction in net debt to improve financial flexibility a Continuing review of the Group’s global sourcing strategy to enable us to deliver greater value for money whilst maintaining returns and minimise the risk of over reliance on any individual supplier The Directors will continue to monitor all of the key risks and uncertainties and the Board will take appropriate actions to mitigate these risks and their potential outcomes. gOing cOncern Based on a detailed review of the above risks and uncertainties and management’s current expectations the Board believes that the Group will continue to meet all of its financial commitments as they fall due and will be able to continue as a going concern. The current economic climate and most recent trading period creates a degree of uncertainty in the outlook and our forecasts are sensitive to relatively small changes in sales and margin assumptions. This uncertainty, combined with the financial covenants included in our loan facilities, has led the Board to conduct a detailed review of a number of different trading scenarios and possible mitigating actions, should they be required. Mitigating actions would include further cost reductions, working capital management, reduced investment, freehold property disposal and possible review of dividend policy. Based on this analysis the Board has concluded that in the event that the level of like-for-like sales highlighted in the current trading section of the CEO’s report were to continue for the whole of the financial period ending 29 September 2012, some form of mitigating action would be required but once taken into account the Group would fully meet all of its future financial commitments. The Board, therefore, considers it appropriate to prepare the financial statements on the going concern basis. 14887_TT_AR11_p1-25.indd 13 07/12/2011 21:50 Plc Annual Report and Financial Statements 2011 14 Unbeatable Topps value We offer a range of quality low cost wall and floor tiles for customers on a tight budget. cava anthracite AT TOPPS TILES WE NOT ONLY OFFER THE BIGGEST CHOICE OF TILES AND WOOD FLOORING, WE ARE COMMITTED TO OFFERING OUR CUSTOMERS The besT Tiles aT The besT PriCes. PLUS OUR CUSTOMERS CAN SHOP WITH CONFIDENCE WITH OUR loWesT PriCe guaranTee. SO WHETHER OUR CUSTOMERS ARE TILING THE SMALLEST OF ROOMS OR THE WHOLE HOUSE WE HAVE qUALITY PRODUCTS TO SUIT EVERY BUDGET. Valu eGreat 07/12/2011 21:51 14887_TT_AR11_p1-25.indd 14 Plc Annual Report and Financial Statements 2011 k Review of the business Governance Financial Statements Other information 15 colorado textured ceramic wall tile Overs and buy back any unused full packs can be returned up to 60 days from the date of purchase for a refund. Bumpy white 5%Lowest price guarantee our price promise reassures our customers that we offer the best prices in the market. if the same product is found cheaper anywhere else, we will beat it by 5%. Valu e 14887_TT_AR11_p1-25.indd 15 07/12/2011 21:51 Plc Annual Report and Financial Statements 2011 Business review Continued 16 A versatile collection of colours, textures and finishes, from glass and ceramic to polished and tumbled natural stone mosaics. Back by popular demand, our natural stone range now includes a handmade terracotta. lemon Marble Handmade Spanish Terracotta 26% Market share (53 weeks ended 2 october 2010: 25%) Financial review Profit and loss account Please note this report has been prepared for the 52 weeks ended 1 October 2011 and the comparative period was prepared for the 53 weeks ended 2 October 2010. With the exception of the Group like-for-like revenue measure, which is comparable, the reported figures are presented on this basis and are not entirely comparable. The impact of the additional week in the prior period was to increase revenue by £3.6 million and operating profit by £0.4 million. revenue Revenue for the period ended 1 October 2011 decreased by 3.8% to £175.5 million (2010: £182.4 million). Like-for-like store sales decreased by 2.0% in the period, which consisted of a 1.8% increase in the first half of the financial period and a 5.8% decrease in the second half. Gross margin Overall gross margin was 59.6% compared with 58.7% in the previous financial period. At the interim stage of this period gross margin was 59.7%, and we have recorded a gross margin of 59.5% in the second half of the period. The second half includes an exceptional charge against inventory of £1.3 million relating to a change in our in-store practices which means we no longer consider display inventory to be suitable for sale. Adjusting for this, the underlying margin in the second half period would be 61.0% and 60.3% for the period as a whole, demonstrating an encouraging level of improvement. The environment we operate in continues to be a highly competitive one and we are able to utilise our scale to ensure that we can offer customers outstanding value and also generate increasing levels of returns. Continued improvement in the efficiency of our supply chain and further vertical integration have been the key drivers of the improvements over the financial period. We will continue to invest margin in a controlled way to drive transaction volume where we consider it appropriate to do so. 14887_TT_AR11_p1-25.indd 16 08/12/2011 14:44 Plc Annual Report and Financial Statements 2011 k Review of the business Governance Financial Statements Other information 17 inspired by hotel chic, Mira hatch Mosaic is the latest addition to our Marble stone range. Mira hatch Mosaic galaxy Black granite Operating expenses Total operating costs have increased from £87.3 million to £90.6 million, an increase of 3.8%. Costs as a percentage of sales were 51.6% compared to 47.8% in the previous period. When adjusted for exceptional items, detailed below, operating costs were £87.7 million (2010: £86.1 million), equivalent to 50.0% of sales (2010: 47.2% of sales). The movement in adjusted operating costs is explained by the following key items: a This financial period was one week shorter than the previous financial period, which is equivalent to a saving of approximately £1.7 million a Inflation at an average of approximately 2% has increased our cost base by around £1.8 million a The average number of UK stores trading during the financial period was 313 (2010: 310), which would imply a 1.0% increase in store costs, generating approximately £0.7 million of additional costs a We have made additional investments in marketing, increasing spend by approximately £1.0 million a Business performance has been below the level of internal targets which has meant a reduced level of rewards for staff. Employee profit share costs have decreased by £0.3 million a The remaining elements of the cost base are broadly flat when compared to the prior year During the period we have incurred several charges which we have categorised as exceptional due to their nature. These charges relate to impairments of plant, property and equipment of £1.1 million (2010: £0.8 million), an inventory charge of £1.3 million (2010: £nil), and an increase in property related provisions of £1.9 million (2010: £0.4 million). Operating profit Operating profit for the period was £14.0 million (2010: £19.9 million). Operating profit as a percentage of sales was 8.0% (2010: 10.9%). When adjusted for the exceptional items detailed on page 1 operating profit was £18.2 million (2010: £21.1 million). Other gains and losses There were no other gains and losses during the period (2010: £0.1 million gain relating to disposal of freehold property). Financing The net cash interest charge for the year was £4.4 million (2010: £4.8 million), excluding the impact of revaluations of derivative instruments. Whilst the interest charge has fallen compared to the prior period we have only seen limited benefit from the very low interest rates that prevail in the market. This is due to a series of interest rate derivatives we have in place which negate the majority of any impact from interest rate movements. The interest rate derivatives give rise to a “marked to market” revaluation as required by IAS 39 “Financial Instruments: Recognition and Measurement”. This revaluation has generated a fair value (non cash) charge of £1.6 million (2010: £2.8 million). Due to the nature of the underlying financial instruments, IAS39 does not allow hedge accounting to be applied to these losses and hence this charge is being applied direct to the income statement rather than offset against balance sheet reserves. Following the financial period end the Board has decided to close out 50% of the interest rate derivatives. This will have the effect of reducing the Group’s annual interest charge moving forwards by approximately £1.25 million (at current LIBOR rates) but will increase net debt by £6.2 million from April 2012. Net interest cover was 4.3 times (2010: 5.1 times) based on earnings before interest, tax, depreciation and the impairment of plant, property and equipment, excluding the impact of IAS 39 in finance charges. 14887_TT_AR11_p1-25.indd 17 07/12/2011 21:52 Plc Annual Report and Financial Statements 2011 business reVieW CONTINUED 18 our new and exclusive Matrix brand offers a multitude of colours and tones in classic proportions. Matrix red chic craquele our charming range of crackle glaze tiles introduces Vintage style to our brand, perfect for kitchens and bathrooms. balance sheet capital expenditure Capital expenditure in the period amounted to £10.8 million (2010: £4.9 million), an increase of 123%, reflecting the increased level of investment in infrastructure that we highlighted in our previous Annual Report. Capital expenditure includes the cost of 12 new openings, five conversions, three relocations and 12 refits at a cost of £5.3 million. In addition to this we purchased the freehold on one existing store at a cost of £1.6 million. Other capital expenditure includes the building of a new warehousing facility at a cost of £3.1 million and £0.8 million on a new IT system, which will go live in 2012. At the period end the Group held eight freehold or long leasehold sites including three warehouse and distribution facilities with a total net book value of £17.8 million (2010: six freehold or long leasehold valued at £13.4 million). Profit before tax Reported profit before tax is £7.9 million (2010: £12.4 million). Group profit before tax margin was 4.5% (2010: 6.8%). When adjusted for the exceptional and non-cash items detailed on page 1 the profit before tax is £13.9 million (2010: £16.3 million). tax The effective rate of Corporation Tax for the period was 27.7% (2010: 31.5% (continuing operations)). The effective rate of Corporation Tax has been increased from the basic rate by non-deductible expenditure and depreciation on assets not qualifying for capital allowances. This has been offset by a prior year credit reflecting the release of certain provisions held against known tax risks as they have been reduced or settled. earnings per share Basic earnings per share were 3.04p (2010: 5.37p – continued and discontinued operations). Diluted earnings per share were 2.97p (2010: 5.26p – continued and discontinued operations). dividend and dividend policy Last year we announced the resumption of dividend payments. Although trading has been tough in this financial period, prudent financial management has enabled the Board to recommend to shareholders a final dividend of 0.6p per share. This will cost £1.1 million. Subject to approval at the Annual General Meeting the dividend will be payable on 31 January 2012 to all shareholders on the register as at 30 December 2011. 320 59.6% Number of stores (53 weeks ended 2 October 2010: 312) Gross margin (53 weeks ended 2 October 2010: 58.7%) 14887_TT_AR11_p1-25.indd 18 07/12/2011 21:52 Plc Annual Report and Financial Statements 2011 k Review of the business Governance Financial Statements Other information 19 Microline’s simple classic shape offers endless design possibilities from kitchen shabby chic to bathroom simplicity. bringing this classic brick-shaped ceramic up to date with a vibrant colour palette and metallic finish. Microline Metro glass inventory Inventory at the period end was £23.8 million (2010: £24.9 million) representing 123 days turnover (2010: 121 days turnover). We have continued our focus on improving working capital efficiencies and have also recognised a one-off charge against display inventories. As a result we have realised a reduction in stockholding over the period. capital structure and treasury Cash and cash equivalents at the period end were £9.1 million (2010: £41.9 million) with repayable borrowings at £60.0 million (2010: £91.0 million). This gives the Group a net debt position of £50.9 million compared to £49.1 million as at 2 October 2010. cash flow Cash generated by operations was £20.7 million, compared to £19.8 million last period. £50.9m Net debt (53 weeks ended 2 October 2010: £49.1m) 123 Stock days (53 weeks ended 2 October 2010: 121) Matthew Williams Chief Executive Officer Rob Parker Finance Director 28 November 2011 14887_TT_AR11_p1-25.indd 19 07/12/2011 21:52 Plc Annual Report and Financial Statements 2011 20 Great Servi ce AT TOPPS TILES WE ARE PROUD OF OUR REPUTATION FOR PROVIDING exCellenT CusToMer serViCe, THIS ETHOS HAS BEEN PRESENT FROM THE START AND RUNS THROUGHOUT THE CORE OF OUR BUSINESS. NOTHING IS TOO MUCH TROUBLE FOR OUR KnoWledgeable Well Trained sTaff, WE HELP OUR CUSTOMERS EVERY STEP OF THE WAY, FROM INSPIRATIONAL IDEAS FOR THEIR HOMES TO SELECTING THE RIGHT PRODUCTS TO PRODUCE AN exCellenT qualiTy finish – WE EVEN ORGANISE THE FITTING. With over 300 stores nationwide visit a store near you today Browse and buy online our online store is open 24 hours a day – 7 days a week, enabling customers to browse, order samples, visualise tiles on a room set visualiser and purchase securely. 14887_TT_AR11_p1-25.indd 20 07/12/2011 21:52 Plc Annual Report and Financial Statements 2011 k Review of the business Governance Financial Statements Other information 21 Servi ce Try at home sample service our sample service allows customers to view different tiles in their homes so that they can check suitability prior to purchase. Our free “How to” guides offer expert advice our free “how to” guide is available as a dVd or can be downloaded online. it offers expert preparation and fixing guides to help those customers who want to “have a go” themselves and complete their tiling or wood flooring project like a professional. 14887_TT_AR11_p1-25.indd 21 07/12/2011 21:52 Plc Annual Report and Financial Statements 2011 CorPoraTe soCial resPonsibiliTy 22 ‘‘WE ARE SO HONOURED THAT TOPPS TILES HAVE CONTINUED TO SUPPORT H4H IN 2011. THEIR SUPPORT SINCE 2008 HAS BEEN INCREDIBLE. THEY ARE ALWAYS ENTHUSIASTIC AND NEVER SEEM TO TIRE OF DOING jUST ABOUT ANYTHING TO RAISE MONEY FOR OUR HEROES! THE MONEY REALLY HAS MADE A HUGE DIFFERENCE AND WE ARE VERY GRATEFUL FOR EVERYTHING THEY HAVE DONE. THEY ARE A PLEASURE TO WORK WITH AND WE ARE LOOKING FORWARD TO SEEING WHAT YOU HAVE PLANNED FOR NExT YEAR!’’ bryn Parry H4H NOVEMBER 2011. Taking responsibility for our impact on society is important to us as a business and we have been developing our Corporate Social Responsibility (“CSR”) agenda since 2004. Over the past eight years we have evolved and enhanced our programme to ensure we are an active member within the communities we work, that we work in an environmentally conscious manner, and we ensure our employees feel supported, developed and engaged. We are proud of our achievements in this area and focus our attention across three primary areas: a Community and Charity a Environment a Our People cOMMunity and charity An important part of being a “good neighbour” for Topps Tiles is ensuring we are active in the communities local to our stores and places where we work. We have a strong CSR ethic at Topps and this is reflected in the work we do within our community and charity programmes. In its eighth year, our CSR programme has grown and enhanced over the years providing the framework and impetus for stores to support local activities that are a “perfect fit” for the values and culture of our Group. Topps in the Community Mosaic art is fast becoming a growing craft across the UK and Topps is proud to lead the way in promoting and supporting mosaic as both a public art and an educational craft skill for children and adults. Our mosaic programme is broken down into two key areas: a supporting the educational needs of adults and children in our local community. We provide Topps Tiles Community Vouchers for mosaic materials to community artists and neighbourhood craft groups and provide expertise and materials to schools, educational workshops and further education centres. Our support assists these individuals and groups to develop their self-esteem, self-ability, educational needs, empowerment, inclusion and communication skills; and a sponsoring two major competitions designed to showcase the work of novice mosaic artists. Mega Mosaic Makers, is a primary school competition organised by The British Association for Modern Mosaic and our own landmark competition for adults learning mosaic in community workshops and further education centres, the Topps Tiles Award for Achievements in Mosaics. youth football Sponsorship of youth football is the cornerstone of our community relations programme and an exciting way for us as a business to get involved in the helping of children in our local communities get outdoors and get active. We are one of the biggest supporters of youth football in the UK and whenever we open a new store we encourage them to look for sponsorship opportunities. Our stores are encouraged to build close relationships with teams and not only support them emotionally but also with the equipment needed to ensure they can get active without worry – kit, footballs and kitbags. We have been so successful in our youth football sponsorship that the kit our stores donate to junior teams is now arguably the most famous strip in the grassroots game! Teams are also encouraged to support our charity partner Help for Heroes. We currently support over 300 youth teams nationwide and are very proud of this association. All the activity culminates in an annual tournament where teams across the country are invited to come together at the King Power Stadium, Leicester City FC. 14887_TT_AR11_p1-25.indd 22 07/12/2011 21:52 Plc Annual Report and Financial Statements 2011 k Review of the business Governance Financial Statements Other information 23 award for achievements in Mosaics 2011 winner, Julie hand. help for heroes charity bike ride. We are one of the biggest supporters of youth football in the uK sponsoring over 300 youth teams nationwide. Charity During 2008 we adopted “Help for Heroes” as our Group charity and have taken their cause to our hearts in a big way. Founded in 2007, the charity funds specialist rehabilitation projects for members of the armed forces wounded in front-line conflicts including Afghanistan. Undoubtedly, one of Britain’s most high-profile charities, Help for Heroes enjoys phenomenal support from the British public, as it does with the workforce at Topps Tiles. The last year has seen a phenomenal fundraising drive by our employees with individuals arranging events in their local communities (fun runs, football tournaments etc) as well as participating in companywide fundraisers such as our “Be a Christmas Hero” day. All the hard work and commitment that our employees put into our partnership was recently recognised at the Help for Heroes Awards ceremony where the Group received an award for “Outstanding Support”. With over £160,000 already raised for Help for Heroes, Topps are looking forward to continuing the successful partnership in 2012. “We are so honoured that Topps Tiles have continued to support H4H in 2011. Their support since 2008 has been incredible. They are always enthusiastic and never seem to tire of doing just about anything to raise money for our heroes! The money really has made a huge difference and we are very grateful for everything they have done. They are a pleasure to work with and we are looking forward to seeing what you have planned for next year!” Bryn Parry H4H November 2011. 300+ Number of football teams we sponsor in the UK 14887_TT_AR11_p1-25.indd 23 07/12/2011 21:52 Plc Annual Report and Financial Statements 2011 CorPoraTe soCial resPonsibiliTy CONTINUED 24 help for heroes charity cake sale. Mega Mosaic Makers competition. envirOnMent energy Energy is a major driver of cost for the business and also forms a significant part of our environmental impact. Energy efficient technology including low energy lighting helps to reduce our environmental impact and we continually review opportunities to adopt new technology on a cost efficient basis wherever possible. In 2010, in liaison with the Carbon Trust, we commenced a pilot scheme for the replacement of old inefficient lighting installations with new efficient systems at 11 of our sites. This scheme proved successful, achieving our objectives of an improved environment for our customers and staff, cost savings from lower electricity consumption and maintenance costs and a reduction in our carbon footprint. As a result of this success we have now completed a further 21 locations and plan to continue the upgrade programme in the year ahead. Waste Waste management remains an important area for our business and recent initiatives, specifically at our main warehouses, have reduced waste going to landfill by up to 40%. All cardboard and plastic generated at the centre is now baled and sold on to recycling companies with all waste wood crushed in to small pieces and similarly sold on. Using our proactive approach to continuously minimise waste, the plan is to further broaden and increase our commitment by reviewing areas such as polystyrene, metal and canteen waste more closely. With the continuing need for us to actively manage our store waste in conjunction with our chosen refuse partner our stores now use Dry Mixed Recycling which means that cardboard, paper, newspapers, plastic films, bottles, steel and aluminium cans can all be put into one bin. As well as controlling our costs, we are also reducing our environmental impact by diverting store waste away from landfill and into established recycling channels. Transport Topps has taken delivery of a further five “Euro 5” low emission vehicles during 2011 and have specified manufacturers’ telematic systems as standard on these vehicles. This brings in line all of Topps’ own fleet to Euro 5 specification. Total CO2 emissions on our own fleet for 2011 was 2,460 tonnes, a reduction of 8% year-on-year, despite additional activity, with new fleet efficiencies expected to reduce this number further during 2012. We are continuing to review our trailer replacement programme with a focus on a lightweight fleet to reduce mileage and subsequent emmisions. We already have one double-deck trailer in daily use and we are considering options including more double-deck urban trailers, drawbar combinations and more aerodynamic designs. We are also committed to collaborating with other retailers where possible to share empty fleet space, maximising efficiencies. supply chain We source our goods for resale from around the world. Labour standards, factory conditions and human rights are issues we take seriously. To address any possible concerns our buyers conduct regular supplier visits and factory tours and also ensure that all contracts for supply of goods include our requirements in relation to each of the above issues. We have a policy on timber products and have adopted the principles and criteria of the Forest Stewardship Council as our benchmark. Our PeOPle Our employees are a central focus for us and we want them to feel engaged and proud of their Company. We want to ensure that not only do we give our customers an inspiring place to shop but we also give our employees an inspiring place to work. employee wellbeing We provide an employee helpline service for all employees to have a channel for expressing concerns and seeking advice. Over the last year we have launched a new employee assistance programme, a store manager health plan, employee private health cover and extended our paternity policy to ensure our employees’ wellbeing is fully supported. 14887_TT_AR11_p1-25.indd 24 07/12/2011 21:53 k Review of the business Governance Financial Statements Other information 25 supporting The british association for Modern Mosaics by providing materials to schools for the Mega Mosaic Makers competition. employee development As a Group we actively encourage employee development. We have a strong culture and history of growing and developing our people within the organisation and it is important to us that our employees fulfil their potential whilst they are working with us. a 2011 has seen over 300 of our retail employees gain Level Two Qualifications in Retail Skills and 45 employees have begun studying for their Level Three Qualification. a This year has also seen the launch of the Topps Tiles Young Apprenticeships programme. We have 12 young men and women working with us across the UK and it is a programme we hope to develop and grow over the coming year. In April 2011 the Group retained its Investors in People award for a further three years. Topps Tiles is pleased to be a constituent member of the FTSE4Good UK Index. Our full policy can be found on our website at www.toppstiles.co.uk in the investor section under corporate responsibility. Plc Annual Report and Financial Statements 2011 annual youth football tournament at leicester City’s King Power stadium. Our in-house Health and Safety team maintain regular dialogue with staff and carry out periodical inspections and assessments to ensure risks are minimised or removed in our stores, warehouse and offices and to promote effective communication and employee involvement we also operate a Health & Safety Committee, which meets on a regular basis and is chaired by a main Board Director. Communication and engagement Communication with our employees is vital and we have initiatives in place to ensure regular and effective dialogue with staff. We have introduced a three year communication and engagement plan to support the business plan for the future. a We have a number of existing communication channels including a newly designed internal magazine and a weekly stores bulletin. We also have an intranet that is being redesigned and which we expect to play an increasingly important part in our communication plans as we move forward. As part of our communication commitment we have conducted a series of management road shows, taking over 400 of our senior managers through our strategic plans for the next three years and ensuring all employees understand and are part of our vision. a This year saw the launch and rollout of our employee representative forum (“TEAM Talk”) across the entire business and the first full employee engagement survey. These initiatives will help to create a framework for employees to participate in a two way engagement process with those that will drive decision making within the Group. a We are developing our internal employee brand in a drive to attract and retain the talent needed to support our growth plans. We actively encourage our staff to apply for internal vacancies and promotions. a Rewarding our employees for all their hard work is part of the Topps ethos and every employee has the opportunity to enhance their basic pay through additional performance related incentives. This year has also seen us review and enhance our complete reward programme to ensure we are competitive and recognise all our employees for their hard work and loyalty. 14887_TT_AR11_p1-25.indd 25 07/12/2011 21:53 Plc Annual Report and Financial Statements 2011 DiRectORs 26 Rt. Hon. Michael Jack Privy Councillor Non-Executive Chairman (aged 65) Member of Audit Committee Chairman of Nomination Committee Member of Remuneration Committee In business Michael’s management experience came from P&G, Marks & Spencer’s and a part of Northern Foods. His career as an MP concluded in 2010 after 23 years during which he served as a Minister in four Departments including the Treasury, as Financial Secretary. Additionally he chaired the EFRA Select Committee. Now he chairs the recently formed Office of Tax Simplification. He joined Topps Tiles Board in 1999. Matthew Williams Chief Executive Officer (aged 37) Matt joined the Company in 1998 after completing his Chartered Surveyors exams and took up the role of Property Director. In 2004 he was promoted to Chief Operating Officer and on 1 April 2006 joined the Plc Board. In 2007 he was promoted to Chief Executive Officer. Robert Parker Finance Director (aged 39) Company Secretary Secretary of Audit Committee Rob joined Topps Tiles in 2007 as Finance Director. Rob’s previous role before joining the Group was Director of Finance & IT for Savers Health & Beauty Ltd. Prior to that Rob was with the Boots Group Plc for 10 years, including five years with the international side of the business, ultimately as Director of Finance for Boots Retail International. He is responsible for the accounting, financial control, treasury, administration and Group secretarial matters. Nicholas Ounstead Marketing Director (aged 51) Alan White Non-Executive Director (aged 56) Health & Safety Committee Chairman Chairman of Audit Committee Nicholas joined Topps Tiles in April 1997. Prior to this he was Marketing Director at Bellegrove Ceramics Plc which is a major supplier to DIY chains and independent retailers. In September 2001 he was appointed Chief Operating Officer and promoted to Chief Executive Officer from 2002 to 2007. Nicholas is also Chairman of the Health and Safety Committee. Member of Nomination Committee Chairman of the Remuneration Committee Alan is the Chief Executive of N Brown Group plc, a role he was appointed to in 2002. He qualified as a chartered accountant with Arthur Andersen and has been Group Finance Director for Sharp Electronics (UK), N Brown Group plc and Littlewoods plc. He joined the Board of Topps Tiles in April 2008. 14887_TT_AR11_p26-37.indd 26 07/12/2011 21:54 Review of the business Governance Financial Statements Other information k 27 Plc Annual Report and Financial Statements 2011 DiRectoRS AnD ADviSoRS Directors The RT. Hon. J.M. Jack, Privy Counsellor Non-Executive Chairman M.T.M. Williams Chief Executive Officer R. Parker acma Finance Director N.D. Ounstead Marketing Director A. White fca Non-Executive Director Secretary R. Parker acma Registered number 3213782 Registered office Thorpe Way Grove Park Enderby Leicestershire LE19 1SU Auditor Deloitte LLP Manchester United Kingdom Bankers HSBC Bank Plc 56 Queen Street Cardiff CF10 2PX Registrars Capita irg Plc Bourne House 34 Beckenham Road Beckenham Kent BR3 4TU Solicitors Beachcroft LLP St. Ann’s House St. Ann Street Manchester Sinclair Abson Smith Lawyers 19 Market Place Stockport SK1 1HA Brokers Peel Hunt Moor House 120 London Wall London EC2Y 5ET 14887_TT_AR11_p26-37.indd 27 08/12/2011 14:27 Plc Annual Report and Financial Statements 2011 DiRectORs’ RePORt 28 The Directors present their Annual Report on the affairs of the Group, together with the Financial Statements and Auditor’s Report, for the 52 week period ended 1 October 2011. The Corporate Governance Statement set out on pages 31 to 32 forms part of this report. Principal activity The principal activity of the Group comprises the retail and wholesale distribution of ceramic tiles, wood flooring and related products. Business Review The Company, being the listed entity Topps Tiles Plc, is required by the Companies Act to set out in this report a fair review of the business of the Group during the financial period ended 1 October 2011 and of the position of the Group at the end of that financial period. The Company is also required to set out a description of the principal risks and uncertainties facing the Group. The information that fulfils the requirements of the enhanced business review can be found within the Chairman’s statement on page 3, the CEO’s statement on page 5, the strategy summary on page 2, the Business Review on pages 10 to 19 and the Corporate and Social Responsibility statement on pages 22 to 25, which are incorporated in this report by reference. The Directors monitor a number of financial and non-financial key performance indicators (KPIs) for the Group and by store and these are detailed on pages 11 and 12. Results and dividends The audited Financial Statements for the 52 week period ended 1 October 2011 are set out on pages 38 to 75. The Group’s profit for the period from continuing operations, after taxation, was £5,714,000 (2010: £8,472,000). During the interim period a dividend of 0.5p per share was declared and paid (2010: no interim dividend was paid). Following careful consideration, and for the reasons given in the Chairman’s statement of this report, the Board is recommending the payment of a final dividend of 0.6 pence per share, totalling £1,130,195 (2010: 1 pence per share, totalling £1,882,023). Directors The Directors of the Company, who served throughout the year, and thereafter except as noted, were as follows: B.F.J. Bester M.T.M. Williams R. Parker N.D. Ounstead J.M. Jack A. White Non-Executive Chairman (resigned on 17 May 2011) Chief Executive Officer Finance Director Marketing Director Senior Independent Non-Executive Director and, appointed as Non-Executive Chairman on 17 May 2011 Non-Executive Director In line with the updated Code on Corporate Governance all Directors will be subject to annual re-election from the next Annual General Meeting. The Company provides insurance against Directors and Officers liabilities to a maximum value of £7,500,000. The Directors’ interests in the shares of the Company are set out on page 36. Details of Directors’ share options are provided in the Directors’ Remuneration Report on page 35. share capital Details of the Company’s authorised and issued share capital, together with details of the movements in the Company’s issued share capital during the period, are shown in note 23 to the Financial Statements. The Company has one class of ordinary shares in issue, which carry no right to fixed income. Each share carries the right to one vote at general meetings of the Company. There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed by the general provisions of the Articles of Association and prevailing legislation. The Directors are not aware of any agreements between holders of the Company’s shares that may result in restrictions on the transfer of securities or on voting rights. No person has any special rights of control over the Company’s share capital and all issued shares are fully paid with the exception of the 122,000 shares issued to the Topps Employee Benefit Trust. change of control – significant Agreements The Group is party to significant agreements, including commercial contracts, financial and property agreements and employees’ share plans, which contain certain termination and other rights for the counterparties upon a change of control of the Company. Should the counterparties choose to exercise their rights under the agreements on a change of control such arrangements would need to be renegotiated. None of these are considered to be significant in terms of the likely impact on the business of the Group as a whole. There are no agreements between any Group company and any of its employees or any Director of the Company which provides for compensation to be paid to the employee or Director for termination of employment or for loss of office as a consequence of a takeover of the Company, other than provisions that would apply on any termination of employment. 14887_TT_AR11_p26-37.indd 28 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 Review of the business Governance Financial Statements Other information k 29 supplier payment policy The Group’s policy is to negotiate terms of payment with suppliers when agreeing the terms of each transaction, ensuring that suppliers are made aware of the terms of payment and that both parties abide by those terms. The effect of the Group’s negotiated payment policy is that trade payables at the period end represented 38 days purchases (2010: 41 days). Trade creditor days is calculated by dividing the trade and other payables creditor by the aggregate of cost of sales and relevant non-stock expenditure, multiplied by 365. charitable and political contributions During the period the Group made no charitable donations (2010: £10,000 to Help for Heroes). The Group made no political contributions (2010: £nil). The Group will continue its support for Help for Heroes and participation in future fundraising efforts. substantial shareholdings In addition to the Directors’ shareholdings noted on page 36, on 22 November 2011 the Company had been notified, in accordance with Chapter 5 of the Disclosure and Transparency Rules or under section 793 of the Companies Act 2006, of the following interests in 3% or more of its issued share capital. Barry Bester Aberforth Stuart Williams AXA Investment Managers Aviva Ernstrom Allianz River & Mercantile Number 22,929,954 20,822,889 20,593,950 17,155,253 9,097,903 8,986,376 8,950,000 8,344,994 % held 12.2% 11.1% 10.9% 9.1% 4.8% 4.8% 4.8% 4.4% Disabled employees Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicant concerned. In the event of members of staff becoming disabled, every effort is made to ensure that their employment with the Group continues and that appropriate training is arranged. It is the policy of the Group that the training, career development and promotion of disabled persons should, as far as possible, be identical with that of other employees. employee consultation The Group places considerable value on the involvement of its employees and has continued to keep them informed on matters affecting them as employees and on the various factors affecting the performance of the Group. This is achieved through formal and informal meetings and the Company magazine. Employee representatives are consulted regularly on a wide range of matters affecting their current and future interests. Financial risk management, objectives and policies The Group is exposed to certain financial risks, namely interest rate risk, currency risk and credit risk. Information regarding such financial risks is detailed in notes 17, 18, 19, 20 and 21. The Group’s risk management policies and procedures are also discussed in the Business Review on pages 10 to 19. share option schemes The Directors’ recognise the importance of motivating employees and believe that one of the most effective incentives is increased employee participation in the Company through share ownership. This has been achieved through the introduction of a number of employee sharesave, share bonus, approved and unapproved share option schemes, since the flotation in 1997. The total number of options held by employees, including Directors, is 6,229,563 (2010: 5,571,746). As described in note 32, employee share purchase plans are open to almost all employees and provide for a purchase price equal to the daily average market price on the date of grant, less 20%. The shares can be purchased during a two week period, which during the period ended 1 October 2011 fell between 7 January 2011 and 24 January 2011 when the average price was 79p. Details of Directors’ share options are provided in the Directors’ Remuneration Report on page 35. information given to the auditor Each of the Directors at the date of approval of this annual report confirms that: a So far as the Director is aware, there is no relevant audit information of which the Company’s auditor is unaware; and a The Director has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Company’s auditor is aware of that information. This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006. Auditor A resolution to re-appoint Deloitte LLP as the Company’s auditor will be proposed at the forthcoming Annual General Meeting. 14887_TT_AR11_p26-37.indd 29 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 DiRectORs’ RePORt cONtiNued 30 Directors’ Responsibilities statement The Directors are responsible for preparing the Annual Report, Directors’ Remuneration Report and the Financial Statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the Group Financial Statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS Regulation and have elected to prepare the parent Company Financial Statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing the parent Company Financial Statements, the Directors are required to: a select suitable accounting policies and then apply them consistently; a make judgements and accounting estimates that are reasonable and prudent; a state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the Financial Statements; and a prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. In preparing the Group Financial Statements, International Accounting Standard 1 requires that Directors: a properly select and apply accounting policies; a present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; a provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and a make an assessment of the Company’s ability to continue as a going concern. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions. Responsibility statement We confirm that to the best of our knowledge: a the Financial Statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and a the management report, which is incorporated into the Directors’ Report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. By order of the Board R Parker Director and Company Secretary 28 November 2011 14887_TT_AR11_p26-37.indd 30 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 cORPORAte GOveRNANce stAteMeNt Review of the business Governance Financial Statements Other information k 31 Rt. Hon. Michael Jack (Chairman of the Board) Dear shareholder, The Company is committed to the principles of corporate governance contained in the 2010 UK Corporate Governance Code issued by the Financial Reporting Council (“the Code”) for which the Board is accountable to shareholders. statement of compliance with the code The Company has complied throughout the period with the Provisions of the Code except for provision B.6.1, as the Board does not currently undertake formal appraisal of its own performance and that of its committees on the basis that it considers an informal rolling programme of review appropriate. The Company complies with all other provisions of the Code. In addition, the Company recognises the need to increase the number of independent Non-Executive Directors on the Board and a process to identify and appoint two suitable candidates is well advanced. The Company hopes to be in a position to make a further announcement on these appointments early in 2012. The Board of Directors comprises five members, of which two are considered independent including the Company’s Non-Executive Chairman, Rt. Hon. Michael Jack. The Senior Independent Non-Executive Director is Alan White, who also chairs the Audit Committee and Remuneration Committee. Brief biographical details of all Directors are given on page 26. The Board meets at least ten times a year. Certain defined issues are reserved for the Board including approval of Financial Statements and circulars, annual budgets, strategy, Directors’ appointments, internal control and risk management, corporate governance, key external and internal appointments and pensions and employee incentives. In advance of Board Meetings Directors are supplied with up-to-date information about trading performance, the Group’s overall financial position and its achievement against prior period, budgets and forecasts. Where required, a Director may seek independent professional advice at the expense of the Company. All Directors have access to the Company Secretary and they may also address specific issues to the Senior Independent Non-Executive Director. In line with the updated UK Corporate Governance Code all Directors will be subject to annual re-election from the next Annual General Meeting. Directors are elected at the first AGM after appointment. All Non-Executive Directors have written letters of appointment. The Board acknowledges the Code’s position with respect to the potential loss of independence for any Non-Executive Director who has served for nine years or more. Although the Rt. Hon. Michael Jack has exceeded this term the Board regards him to be independent and considers his broad based commercial experience and extensive business specific knowledge to be extremely beneficial. The Board considers that the Rt. Hon. Michael Jack and Alan White are independent for the purposes of the Code. The terms and conditions for the appointment of Non-Executive Directors are available for inspection on request. The Board will review the independence of Non-Executive Directors on an ongoing basis. The Board operates three committees. These are the Nomination Committee, the Remuneration Committee and the Audit Committee. All of these committees meet regularly and have formal written terms of reference which are available for inspection on request. Attendance at Board/committee meetings The following table shows the number of Board and Committee meetings held during the 52 week period ended 1 October 2011 and the attendance record of the individual Directors. Number of meetings B.F.J. Bester (resigned 17 May 2011) M.T.M. Williams N.D. Ounstead R. Parker J.M. Jack A. White Board of directors Audit committee Remuneration committee Nomination committee 13 8 13 13 13 13 13 2 1 2 2 2 2 2 3 1 N/A N/A N/A 3 3 2 1 N/A N/A N/A 2 2 14887_TT_AR11_p26-37.indd 31 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 cORPORAte GOveRNANce stAteMeNt cONtiNued 32 statement about applying the principles of the code The Company has applied the principles of the UK Corporate Governance Code as reported above. Further explanation of how the principles of the Code have been applied in connection with Directors’ remuneration is set out in the Remuneration Report. Audit committee The Audit Committee consists of the Non-Executive Directors. The Chairman is Alan White, the other member is the Rt. Hon. Michael Jack. The qualifications of the Audit Committee members are detailed on page 26. The Audit Committee considers the nature and scope of the audit process (both internal and external) and its effectiveness. The Committee reviews and approves the internal audit programme, meets with the external auditor and considers the Annual and Interim Financial Statements before submission to the Board. The Committee reviews the arrangements by which staff may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters. The Committee also reviews the Group’s system of internal control and reports its findings twice a year to the Board. The Committee meets with the external auditor and the rest of the Board attend at the invitation of the Audit Committee Chairman. Part of the role of the Audit Committee is to review the independence of the Company’s auditor. The Company’s external auditor, Deloitte LLP (“Deloitte”), have provided non-audit services to the Company in the form of tax advice. The Audit Committee is satisfied that Deloitte LLP has adequate policies and safeguards in place to ensure that auditor objectivity and independence is maintained. The Audit Committee is aware that providing audit and non audit advice could lead to a potential conflict of interest. The level of fees paid to Deloitte LLP for non audit services has been considered by the Audit Committee and is not perceived to be in conflict with auditor independence. In order to ensure the continued independence and objectivity of the external auditor, there is an established policy regarding the provision of non audit services. The Audit Committee has concluded that the auditor, Deloitte, is independent. Deloitte has been auditor for the Group since September 2003. The current audit partner’s first period as signing partner is the current period ended 1 October 2011. The Audit Committee considers the work of Deloitte and their independence in deciding whether an audit tender is required and, at this point in time, is satisfied by the work of Deloitte and their independence, and so has proposed their re-appointment. Nomination committee The Nomination Committee is chaired by The Rt. Hon. Michael Jack. The other member is Alan White. The formal terms of reference for this Committee require it to make recommendations to the Board for appointments of Directors and other senior executive staff. Appointments to the Board are made on merit, against objective criteria, taking into account the skills and experience required. Where appropriate, external search consultants are enlisted. Dialogue with institutional shareholders The Directors seek to build on a mutual understanding of objectives between the Company and its institutional shareholders by making annual presentations and communicating regularly throughout the year. The Company also posts financial information on its website www.toppstiles.co.uk. Maintenance of a sound system of internal control The Board has applied Principle C.2 of the Code by establishing a continuous process for identifying, evaluating and managing the significant risks the Group faces. The Board regularly reviews the process, which has been put in place from the start of the period to the date of the approval of this report and which is in accordance with the revised guidance on internal control published in October 2005 (The Turnbull Guidance). The Board is responsible for the Group’s system of internal control and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. In compliance with Provision C.2.1 of the Code, the Board continuously reviews the effectiveness of the Group’s system of internal control. The Board’s monitoring covers all controls, including financial, operational and compliance controls and risk management. It is based principally on reviewing reports from management to consider whether significant risks are identified, evaluated, managed and controlled and whether any significant weaknesses are promptly remedied and indicate a need for more extensive monitoring. The Board has also performed a specific assessment for the purposes of this Annual Report. This assessment considers all significant aspects of internal control arising during the period covered by the report including the work of internal audit. The Audit Committee assists the Board in discharging its review responsibilities. During the course of its review of the system of internal control, the Board has not identified nor been advised of any failings or weaknesses which it has determined to be significant. Therefore a confirmation in respect of necessary actions has not been considered necessary. Rt. Hon. Michael Jack Chairman of the Board 28 November 2011 14887_TT_AR11_p26-37.indd 32 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 ReMuNeRAtiON RePORt Review of the business Governance Financial Statements Other information k 33 introduction This report has been prepared in accordance with Schedule 8 of the Accounting Regulations under the Companies Act 2006. The report also meets the relevant requirements of the Listing Rules of the Financial Services Authority and describes how the Board has applied the principles relating to the Directors’ remuneration in the Code. As required by the Act, a resolution to approve the report will be proposed at the Annual General Meeting of the Company at which the Financial Statements will be approved. The Act requires the auditor to report to the Company’s members on certain parts of the Directors’ Remuneration Report and to state whether in their opinion those parts of the report have been properly prepared in accordance with the Accounting Regulations. The report has therefore been divided into separate sections for the audited and unaudited information. UnAUDiteD informAtion Remuneration committee The Company has a Remuneration Committee (“the Committee”), which is constituted in accordance with the recommendations of the Code. The members of the Committee are the Rt. Hon. Michael Jack and Alan White. The Committee is chaired by Alan White and has met three times during the financial period to discuss the remuneration of the senior management team and the Non-Executive Directors. None of the Committee has any personal financial interest (other than as shareholders), conflicts of interest arising from cross-directorships or day-to-day involvement in running the business. The Committee makes recommendations to the Board on the individual remuneration packages of each Executive Director. No Director plays a part in any discussion about his own remuneration. The terms of reference for the Committee are available on written request from the Company Secretary. During the financial period the main areas reviewed by the Committee have been executive annual pay award, non-executive fees, chairman remuneration, board sub-committee fees and executive salary benchmarking. Remuneration policy Executive remuneration packages are prudently designed to attract, motivate and retain Directors of the high calibre needed to maintain the Group’s position as a market leader and to reward them for enhancing value to shareholders. The performance measurement of the Executive Directors and key members of senior management and the determination of their annual remuneration package are undertaken by the Committee. The remuneration of the Non-Executive Directors is determined by the Board within limits set out in the Articles of Association. There are four main elements of the remuneration package for Executive Directors: a basic annual salary and benefits; a annual cash based bonus payments; a deferred share-based long-term incentives; and a pension arrangements. Basic salary An Executive Director’s basic salary is reviewed and determined by the Committee prior to the beginning of each financial period and when an individual changes position or responsibility. In deciding appropriate levels, the Committee considers the Group as a whole, including levels of increases appropriate to other employees in the Group, and relies on objective research which gives up-to-date information on a comparator Group of companies. In line with the general pay award for all staff, basic salaries were reviewed in June 2011 and were increased by 2.5%, effective from that date, in consideration of general inflation. Executive Directors’ contracts of service, which include details of remuneration, will be available for inspection at the Annual General Meeting. Executive Directors’ pay and the employment conditions of the Group are taken into account when determining the Directors’ remuneration for the financial period. In addition to basic salary, the Executive Directors receive certain benefits-in-kind, principally a car and private medical insurance. Annual bonus payments A discretionary annual cash bonus scheme represents the short-term incentive element of the overall remuneration package for Mr. Williams, Mr. Parker and Mr. Ounstead. The Committee establishes the objectives that must be met in the financial period if a cash bonus is to be paid. The maximum bonus achievable in the period was 125% of basic salary based on Group outperformance against budgeted EBITDA. For the period ending 1 October 2011 the performance criteria were not met and no bonus payment was due. Deferred bonus long-term incentive plan At the AGM in January 2010 a new deferred bonus long-term incentive plan was approved by shareholders. Under this long-term incentive plan 25% of the annual bonus (net of tax) is deferred in the form of shares for a two-year period, with a matching share award (on a gross basis) that vests at the end of two years subject to the achievement of performance conditions relating to continuing employment within the business and EBITDA earnings growth measured over the two-year period. For the period ended 1 October 2011 the performance criteria were not met and no bonus payment was due. The bonus structure will remain the same for the coming financial period. Pension arrangements Mr. Bester, Mr. Ounstead and Mr. Parker received contributions into their own personal pension schemes as disclosed in the table on page 35. 14887_TT_AR11_p26-37.indd 33 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 ReMuNeRAtiON RePORt cONtiNued 34 DireCtorS’ ContrACtS executive Directors It is the Company’s policy that Executive Directors are offered permanent contracts of employment with a range of six to twelve months’ notice period. Under an event of contract termination any severance payment would be subject to negotiation but would be with regard to length of service and the prevailing notice period. Non-executive Directors Non-Executive Directors have specific terms of engagement and their remuneration is determined by the Board within the limits set by the Articles of Association and based on independent surveys of fees paid to Non-Executive Directors of similar companies. The basic fee paid to each Non-Executive Director in the period was £34,000 (2010: £34,000). In addition to the basic fee there is an additional allowance paid to the Senior Independent Non-Executive Director of £3,026 (2010: £2,836). With respect to the sub-committees of the Board there is a fee paid for the additional role of sub-committee Chairman of £3,000 (2010: £nil), and £2,000 for being a member of each sub-committee (2010: £nil). It is the Company’s policy that Non-Executive Directors should have contracts with an indefinite term providing for a maximum of six months’ notice. Independent Non-Executive Directors cannot participate in any of the Company’s share option schemes and are not eligible to join the Company’s pension scheme. The role of Chairman is also non-executive, with an indefinite term contract and a maximum six months’ notice. During the period we announced a change in Chairman. The outgoing Chairman, Barry Bester, retired from the Board on 17 May 2011 and his contract entitled him to six months’ notice from that date. The total remuneration received by Mr. Bester for the period was £131,000 (2010: £115,000) including a contribution to the Company pension scheme of £6,000 (2010: £6,000). Mr. Bester also participated in the 2009 Save As You Earn Scheme. Effective from 17 May 2011 The Rt. Hon. Michael Jack was promoted to the role of Chairman and has received total remuneration for the period of £66,000 (2010: £37,000). The details of the Non-Executive Directors’ contracts are summarised in the table below: Name of director J.M. Jack A. White date of contract or letter of appointment unexpired term Notice period 26 January 1999 1 April 2008 N/A N/A 6 months 6 months Performance graph The following graph shows the Company’s performance, measured by total shareholder return (“TSR”), compared with the performance of the FTSE 250 index also measured by TSR. The index chosen for the comparison demonstrates the Group’s TSR in comparison to the average for FTSE 250 companies. The FTSE 250 index is considered a relevant comparator for the business. Total Shareholder Return Charting % 100% 80% 60% 40% 20% 0% –20% –40% –60% –80% –100% Oct-06 Topps Tiles Plc FTSE 250 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 14887_TT_AR11_p26-37.indd 34 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 AUDiteD informAtion Aggregate Directors’ remuneration The total amounts for Directors’ remuneration were as follows: emoluments Money purchase pension contributions Share-based payments Amounts receivable under long-term incentive schemes Review of the business Governance Financial Statements Other information k 35 2011 £’000 1,013 23 – 66 1,102 2010 £’000 1,219 26 92 79 1,416 Directors’ emoluments Name of director M.t.M. Williams N.d. Ounstead R. Parker Non-executive Directors B.F.J. Bester (resigned 17 May 2011) J.M. Jack A. White Fees £’000 Basic salary £’000 vehicle allowance £’000 Benefits in kind £’000 Money purchase pension contributions £’000 Bonus £’000 – – – – – 17 17 359 205 205 123 66 25 983 24 21 21 – – – 66 1 1 1 2 – – 5 – 8 9 6 – – 23 – 8* – – – – 8 2011 £’000 384 243 236 ** 2010 £’000 515 285 338 131 66 42 1,102 115 37 34 1,324 *N. Ounstead received a bonus relating to an outstanding award from the previous financial period. **2010 comparatives have been restated to exclude share payments to aid comparison with 2011 remuneration. Directors’ share options Share options held by the Directors relate to the 2009 and 2011 Save As You Earn schemes, which were eligible to all employees. No options have been exercised in the period. Name of director N.d. Ounstead R. Parker M.t.M. Williams Scheme 2 Oct 2010 Acquired 1 Oct 2011 exercise price date from which exercisable expiry date Save As You earn April 2009 Save As You earn April 2009 Save As You earn April 2011 Save As You earn April 2009 Save As You earn April 2011 26,836 44,727 – 26,836 – – – 5,625 – 5,625 26,836 44,727 5,625 26,836 5,625 £0.165 1 Apr ‘12 1 Oct ‘12 £0.165 1 Apr ‘14 1 Oct ‘14 £0.64 1 Apr ’14 1 Oct ’14 £0.165 1 Apr ‘12 1 Oct ‘12 £0.64 1 Apr ‘14 1 Oct ‘14 Share options held by the Directors that departed during the year are as follows: Name of director B.F.J. Bester Scheme 2 Oct 2010 Acquired 1 Oct 2011 exercise price date from which exercisable expiry date Save As You earn April 2009 26,836 – 26,836 £0.165 1 Apr ‘12 1 Oct ‘12 The market price of the ordinary shares at 30 September 2011 was 34.0p and the range during the period was 26.0p to 85.0p. 14887_TT_AR11_p26-37.indd 35 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 ReMuNeRAtiON RePORt cONtiNued 36 Directors’ interests The Directors had the following interest in the shares of the Company at the period end (all interests relate solely to ordinary shares). M.t.M. Williams N.d. Ounstead R. Parker J.M. Jack A. White Approval This report was approved by the Board of Directors on 28 November 2011 and signed on its behalf by: Alan White Chairman of Remuneration Committee 2011 No. of ordinary shares of 3.33p each 567,000 447,750 72,500 74,250 41,499 2010 No. of ordinary shares of 3.33p each 600,000 477,750 72,500 44,250 41,499 14887_TT_AR11_p26-37.indd 36 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF TOPPS TILES PLC Review of the business Governance Financial Statements Other information k k 37 We have audited the Group financial statements of Topps Tiles Plc for the 52 week period ended 1 October 2011 which comprise the consolidated statement of financial performance, the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of changes in equity, the consolidated cash flow statement and the related notes 1 to 34. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. This report is made solely to the company’s members, as a body, in accordance with chapter 3 of part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditor As explained more fully in the Directors’ Responsibilities statement, the Directors are responsible for the preparation of the Group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the Group financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion the group financial statements: a give a true and fair view of the state of the Group’s affairs as at 1 October 2011 and of its profit for the 52 week period then ended; a have been properly prepared in accordance with IFRSs as adopted by the European Union; and a have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the IAS Regulation. Separate opinion in relation to IFRSs as issued by the IASB As explained in note 2 to the Group financial statements, the Group in addition to complying with its legal obligation to apply IFRSs as adopted by the European Union, has also applied IFRSs as issued by the International Accounting Standards Board (IASB). In our opinion the Group financial statements comply with IFRSs as issued by the IASB. Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the Group financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following: Under the Companies Act 2006 we are required to report to you if, in our opinion: a certain disclosures of directors’ remuneration specified by law are not made; or a we have not received all the information and explanations we require for our audit. Under the Listing Rules we are required to review: a the directors’ statement contained within the Business Review in relation to going concern; a the part of the Corporate Governance Statement relating to the Company’s compliance with the nine provisions of the UK Corporate Governance Code specified for our review; and a certain elements of the report to shareholders by the Board on Directors’ remuneration. Other matter We have reported separately on the parent company financial statements of Topps Tiles Plc for the period ended 1 October 2011 and on the information in the Directors’ Remuneration Report that is described as having been audited. Timothy Edge (Senior Statutory Auditor) for and on behalf of Deloitte LLP Chartered Accountants and Statutory Auditor Manchester, United Kingdom 28 November 2011 14887_TT_AR11_p26-37.indd 37 08/12/2011 14:29 Plc Annual Report and Financial Statements 2011 Consolidated statement of finanCial performanCe For the 52 weeks ended 1 October 2011 38 Group revenue – continuing operations Cost of sales Gross profit Employee profit sharing Distribution costs Other operating expenses Administrative costs Sales and marketing costs Group operating profit before exceptional items Impairment of plant, property and equipment Write off of display inventories Property related provisions Group operating profit Other gains Investment revenue Finance costs Fair value loss on interest rate derivatives profit before taxation Taxation profit for the period from continuing operations discontinued operations Profit for the period from discontinued operations profit for the period attributable to equity holders of the Company earnings per ordinary share from continuing operations – basic – diluted from continuing and discontinued operations – basic – diluted Notes 3,4 5 5 5 4 4,8 4,9 4,9 4,9 4,6 4,10 11 30 13 52 weeks ended 1 october 2011 £’000 175,525 (70,904) 104,621 (6,638) (65,883) (6,393) (6,624) (5,103) 18,174 (1,051) (1,281) (1,862) 13,980 – 356 (4,798) (1,630) 7,908 (2,194) 5,714 53 weeks ended 2 October 2010 £’000 182,406 (75,254) 107,152 (6,902) (64,492) (5,452) (7,044) (3,385) 21,093 (815) – (401) 19,877 100 453 (5,275) (2,780) 12,375 (3,903) 8,472 – 5,714 1,502 9,974 3.04p 2.97p 3.04p 2.97p 4.56p 4.46p 5.37p 5.26p Consolidated statement of Comprehensive inCome For the 52 weeks ended 1 October 2011 Profit for the period Total comprehensive income for the period attributable to equity holders of the parent Company 52 weeks ended 1 october 2011 £’000 5,714 5,714 53 weeks ended 2 October 2010 £’000 9,974 9,974 14887_TT_AR11_p38-88.indd 38 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 Consolidated statement of finanCial position As at 1 October 2011 non-current assets Goodwill Property, plant and equipment Current assets Inventories Trade and other receivables Deferred tax asset Cash and cash equivalents total assets Current liabilities Trade and other payables Derivative financial instruments Bank loans Current tax liabilities Provisions net current (liabilities)/assets non-current liabilities Bank loans Deferred tax liabilities Provisions total liabilities net liabilities equity Share capital Share premium Own shares Merger reserve Share-based payment reserve Capital redemption reserve Retained earnings total deficit attributable to equity holders of the parent The accompanying notes are an integral part of these financial statements. Review of the business Governance Financial Statements Other information k 39 52 weeks ended 1 october 2011 £’000 53 weeks ended 2 October 2010 £’000 245 37,221 37,466 23,800 7,261 595 9,088 40,744 78,210 (24,105) (12,186) – (5,537) (1,075) (42,903) (2,159) (59,289) – (1,480) (103,672) (25,462) 6,279 1,022 (4) (399) 543 20,359 (53,262) (25,462) 245 31,639 31,884 24,874 7,594 – 41,879 74,347 106,231 (25,588) (10,557) (7,250) (6,181) – (49,576) 24,771 (83,466) (422) (1,297) (134,761) (28,530) 6,273 1,001 – (399) 367 20,359 (56,131) (28,530) Notes 14 15 17 22 18 19 21 20 22 20 22 22 23 24 25 26 27 28 30 The financial statements of Topps Tiles Plc, registered number 3213782, on pages 38 to 69 were approved by the Board of Directors and authorised for issue on 28 November 2011. They were signed on its behalf by: M.T.M Williams Director R. Parker Director 14887_TT_AR11_p38-88.indd 39 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 Consolidated statement of ChanGes in equity For the 52 weeks ended 1 October 2011 40 equity attributable to equity holders of the parent share capital £’000 share premium £’000 own shares £’000 merger reserve £’000 share- based payment reserve £’000 Capital redemption reserve £’000 foreign exchange reserve £’000 retained earnings £’000 total equity £’000 5,703 – – – 570 – Balance at 26 September 2009 Profit and total comprehensive income for the period Shares issued in respect of placing and open offer Transfer to retained earnings Credit to equity for equity-settled share-based payments Deferred tax on share-based payment transactions Release of reserve on disposal of subsidiary Balance at 2 October 2010 Profit and total comprehensive income for the period Issue of share capital Dividends Own shares purchased in the period Credit to equity for equity-settled share-based payments Deferred tax on share-based payment transactions – Balance at 1 october 2011 6,279 – 6 – – – – 6,273 1,001 – 14,296 (14,296) – – – 1,001 – 21 – – – – 1,022 – – – – – – – – – – – (4) – – (4) 240 240 20,359 336 (81,161) (53,282) – – – – – – – – 127 – – – – – – – – – – – 9,974 9,974 – 14,296 14,866 – – 121 127 121 (639) (399) – 367 – 20,359 (336) – 639 (56,131) (336) (28,530) – – – – – – (399) – – – – 176 – 543 – – – – – – – – – – 5,714 – (2,817) 5,714 27 (2,817) – – (4) 176 – 20,359 – (28) (28) – (53,262) (25,462) 14887_TT_AR11_p38-88.indd 40 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 Consolidated Cash flow statement For the 52 weeks ended 1 October 2011 Cash flow from operating activities Profit for the period Profit for the period from discontinued operations Taxation Fair value on interest rate derivatives Finance costs Investment revenue Other gains Group operating profit Adjustments for: Depreciation of property, plant and equipment Impairment of property, plant and equipment Property related provisions Write off of display inventories Share option charge Decrease/(increase) in trade and other receivables (Increase)/decrease in inventories Decrease in payables Cash generated by operations Interest paid Taxation paid Net cash from operating activities investing activities Interest received Purchase of property, plant and equipment Proceeds on disposal of property, plant and equipment Net cash used in investment activities financing activities Dividends paid Proceeds from issue of share capital New loans Loan issue costs Repayment of bank loans Net cash (used in)/from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of period Effect of foreign exchange rate changes Cash and cash equivalents at end of period Review of the business Governance Financial Statements Other information k 41 52 weeks ended 1 october 2011 £’000 53 weeks ended 2 October 2010 £’000 5,714 – 2,194 1,630 4,798 (356) – 13,980 4,128 1,051 1,862 1,281 176 337 (207) (1,888) 20,720 (4,795) (3,883) 12,042 616 (10,535) 5 (9,914) (2,817) 23 60,000 (1,125) (91,000) (34,919) (32,791) 41,879 – 9,088 9,974 (1,502) 3,903 2,780 5,275 (453) (100) 19,877 4,040 815 401 – 127 (3,351) 1,853 (3,991) 19,771 (5,308) (4,112) 10,351 107 (4,292) 949 (3,236) – 14,874 – – (7,500) 7,374 14,489 27,270 120 41,879 14887_TT_AR11_p38-88.indd 41 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 notes to the Consolidated finanCial statements For the 52 week period ended 1 October 2011 42 1 General information Topps Tiles Plc is a company incorporated in the United Kingdom under the Companies Act 2006. The address of the registered office is given on page 27. The nature of the Group’s operations and its principal activity are set out in the Directors’ Report on page 28. These financial statements are presented in Sterling because that is the currency of the primary economic environment in which the Group operates. Foreign operations are included in accordance with the policies set out in note 21. adoption of new and revised standards In the current period, the following new and revised standards and interpretations have been adopted and have affected or may affect in the future the amounts reported in the financial statements. IFRS 3 (revised 2008) “Business Combinations”. Following an amendment to IFRS 3 all acquisition costs are charged to the statement of financial performance for all business combinations acquired after 1 July 2009. IFRIC 17 “Distributions of Non-cash Assets to Users”. The interpretation provides guidance on when an entity should recognise a non-cash dividend payable, how to measure the dividend payable and how to account for any difference between the carrying amount of the assets distributed and the carrying amount of the dividend payable when the payable is settled. The following amendments were made as part of Improvements to IFRSs (2009): Amendments to IFRS 2 “Share-based Payments”. IFRS 2 has been amended following the issue of IFRS 3 (2008). This has clarified the accounting for share-based payment transactions between group entities. Amendments to IAS 17 “Leases”. IAS 17 has been amended such that it may be possible to clarify a lease of land as a finance lease if it meets the criteria for that classification under IAS 17. Amendments to IAS 39 “Financial Instruments Recognition and Measurement”. IAS 39 has been amended to state that option contracts between an acquirer and a selling shareholder to buy or sell an acquiree that will result in a business combination at a future acquisition date are not excluded from the scope of this standard. At the date of authorisation of these financial statements, the following standards and interpretations, which have not been applied in these financial statements, were in issue but not yet effective: IAS 24 (revised 2009) Related Party Disclosures IFRS 7 (revised 2010) Disclosures – Transfers of Financial Assets Improvements to IFRSs (2010) The Directors anticipate that the adoption of these standards and interpretations in future periods will have no material impact on the financial statements of the Group. 2 accountinG policies a) Basis of accounting The financial statements have been prepared in accordance with International Financial Reporting Standards “IFRSs”. The financial statements have also been prepared in accordance with IFRSs adopted by the European Union and therefore the Group financial statements comply with Article 4 of the EU IAS regulation. The financial statements have been prepared on the historical cost basis, except for the revaluation of derivative financial instruments. Historical cost is generally based on the fair value of the consideration given in exchange for the assets. b) Going concern Based on a detailed review of the risks and uncertainties discussed within the Business Review, and management’s current expectations, the Board has a reasonable expectation that the Group will continue to meet all of its financial commitments as they fall due and will be able to continue as a going concern. The current economic climate and most recent trading period creates a degree of uncertainty in the outlook and our forecasts are sensitive to relatively small changes in sales and margin assumptions. This uncertainty, combined with the financial covenants included in our loan facilities, has led the Board to conduct a detailed review of a number of different trading scenarios and possible mitigating actions, should they be required. Mitigating actions would include further cost reductions, working capital management, reduced investment, freehold property disposal and possible review of dividend policy. Based on this analysis the Board have concluded that in the event that the level of like-for-like sales highlighted in the current trading section of the CEO’s Report were to continue for the whole of the financial period ending 29 September 2012, some form of mitigating actions would be required but once taken into account the Group would fully meet all of its future financial commitments. The Board, therefore, considers it appropriate to prepare the financial statements on the going concern basis. 14887_TT_AR11_p38-88.indd 42 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 Review of the business Governance Financial Statements Other information k 43 2 accountinG policies (continued) The principal accounting policies adopted are set out below. c) Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the period are included in the consolidated statement of financial performance from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation. d) financial period The accounting period ends on the Saturday which falls closest to 30 September, resulting in financial periods of either 52 or 53 weeks. Throughout the financial statements, Directors’ Report and Business Review, references to 2011 mean at 1 October 2011 or the 52 weeks then ended; references to 2010 mean at 2 October 2010 or the 53 weeks then ended. e) Goodwill Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (the acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer’s previously held equity interest (if any) in the entity over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the Group’s interest in the fair value of the acquiree’s identifiable net assets exceeds the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer’s previously held equity interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain. Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. Goodwill arising on acquisitions before the date of transition to IFRSs has been retained at the previous UK GAAP amounts subject to being tested for impairment at that date. Goodwill of £15,080,000 written off to reserves under UK GAAP prior to 1998 has not been reinstated and is not included in determining any subsequent profit or loss on disposal. f) revenue recognition Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales-related taxes. Revenue from the sale of goods is recognised when all the following conditions are satisfied: a the Group has transferred to the buyer the significant risks and rewards of ownership of the goods; a the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; a the amount of revenue can be measured reliably; a it is probable that the economic benefits associated with the transaction will flow to the entity; and a the costs incurred or to be incurred in respect of the transaction can be measured reliably. Revenue for the Tesco Clubcard scheme is recognised on a gross profit basis as services are provided on an agency basis. Sales returns are provided for based on past experience and deducted from income. Interest income is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition. Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established (provided that it is probable that the economic benefit will flow to the Group and the amount of income can be measured reliably). 14887_TT_AR11_p38-88.indd 43 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 notes to the Consolidated finanCial statements CONTINuED 44 2 accountinG policies (continued) g) exceptional items The Group has identified certain items as exceptional where they relate to one-off costs incurred in the period that they do not expect to be repeated on an annual basis, or where Directors consider the separate disclosure to be necessary to understand the Group’s performance. The principles applied in identifying exceptional costs are consistent between periods. h) property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is charged so as to write off the cost of assets, less estimated residual value, over their estimated useful lives, on the following bases: Freehold buildings 2% per annum on cost on a straight-line basis Short leasehold land and buildings over the period of the lease, up to 25 years on a straight-line basis Fixtures and fittings Motor vehicles Freehold land is not depreciated. over 10 years or at 25% per annum on a reducing balance basis as appropriate 25% per annum on a reducing balance basis Residual value is calculated on prices prevailing at the date of acquisition. Assets held in the course of construction for production, supply or administrative purposes, or for purposes not yet determined, are carried at cost, less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group’s accounting policy. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use. The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the statement of financial performance. i) impairment of tangible and intangible assets excluding goodwill At each period end, the Group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment at least annually and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a re-valued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a re-valued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. j) inventories Inventories are stated at the lower of cost and net realisable value and relate solely to finished goods for resale. Cost comprises purchase price of materials and an attributable proportion of distribution overheads based on normal levels of activity and is valued at standard cost. Net realisable value represents the estimated selling price, less costs to be incurred in marketing, selling and distribution. Provision is made for those items of inventory where the net realisable value is estimated to be lower than cost. The net replacement value of inventories is not considered materially different from that stated in the consolidated statement of financial position. Inventories written down and expensed in the year amounted to £2,292,000 (2010: £2,493,000). Additionally £1,281,000 has been written off in relation to display inventories. 14887_TT_AR11_p38-88.indd 44 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 Review of the business Governance Financial Statements Other information k 45 2 accountinG policies (continued) k) taxation The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the period. Taxable profit differs from net profit as reported in the statement of financial performance because it excludes items of income or expense that are taxable or deductible in other periods and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, and interests in jointly controlled entities, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on tax laws and rates that have been enacted at the balance sheet date. Deferred tax is charged or credited in the statement of financial performance, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. l) foreign currency The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group company are expressed in Sterling, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements. Transactions in currencies other than the entity’s functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of transactions. At each period end, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the statement of financial performance for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in statement of financial performance for the period. Exchange differences are recognised in profit or loss in the period in which they arise except for: a exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings; a exchange differences on transactions entered into to hedge certain foreign currency risks (see below under financial instruments/hedge accounting); and a exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on disposal or partial disposal of the net investment. For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operation are translated at exchange rates prevailing at period end dates. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during the period, in which case the exchange rates at the dates of transactions are used. Exchange differences arising are recognised in other comprehensive income and accumulated in equity, in the Group’s foreign exchange reserve. Such differences are recognised as income or expense in the period in which the operation is disposed of. On the disposal of a foreign operation (i.e. a disposal of the Group’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, loss of joint control over a jointly controlled entity that includes a foreign operation, or loss of significant influence over an associate that includes a foreign operation), all of the accumulated exchange differences in respect of that operation attributable to the Group are reclassified to profit or loss. 14887_TT_AR11_p38-88.indd 45 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 notes to the Consolidated finanCial statements CONTINuED 46 2 accountinG policies (continued) m) leases Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. n) investments Fixed asset investments are shown at cost less provision for impairment. o) retirement benefit costs For defined contribution schemes, the amount charged to the statement of financial performance in respect of pension costs is the contributions payable in the period. Differences between contributions payable in the period and contributions actually paid are shown as either accruals or prepayments in the balance sheet. p) finance costs Finance costs which are directly attributable to the construction of tangible fixed assets are capitalised as part of the cost of those assets. The commencement of capitalisation begins when both finance costs and expenditures for the asset are being incurred and activities that are necessary to get the asset ready for use are in progress. Capitalisation ceases when substantially all the activities that are necessary to get the asset ready for use are complete. All other finance costs of debt are recognised in the statement of financial performance over the term of the debt at a constant rate on the carrying amount. q) financial instruments Financial assets and financial liabilities are recognised in the Group’s balance sheet when the Group becomes a party to the contractual provisions of the instrument. All financial assets are recognised and derecognised on a trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value. Financial assets are classified into the following specified categories: financial assets “at fair value through profit or loss” (FVTPL), “held-to-maturity” investments, “available-for-sale” (AFS) financial assets and “loans and receivables”. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. financial assets at fVtpl Financial assets are classified as at FVTPL where the financial asset is either held for trading or it is designated as at FVTPL. The Group has no designated FVTPL financial assets. A financial asset is classified as held for trading if: a it has been acquired principally for the purpose of selling in the near future; or a it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or a it is a derivative that is not designated and effective as a hedging instrument. Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. Fair value is determined in the manner described in note 2v. loans and receivables Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. effective interest method The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Income is recognised on an effective interest basis for debt instruments other than those financial assets and liabilities classified as at FVTPL. 14887_TT_AR11_p38-88.indd 46 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 Review of the business Governance Financial Statements Other information k 47 2 accountinG policies (continued) q) financial instruments (continued) impairment of financial assets Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 39 days, as well as observable changes in national or local economic conditions that correlate with default on receivables. For financial assets carried at amortised cost, the amount of the impairment is the differences between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash within three months and are subject to an insignificant risk of changes in value. derecognition of financial assets The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. financial liabilities and equity Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs. Financial liabilities are classified as at FVTPL where the financial liability is either held for trading or it is designated as at FVTPL. The Group does not have any designated FVTPL liabilities. A financial liability is classified as held for trading if: a it has been incurred principally for the purpose of disposal in the near future; or a it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit taking; or a it is a derivative that is not designated and effective as a hedging instrument. Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. Fair value is determined in the manner described in note 2v. 14887_TT_AR11_p38-88.indd 47 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 notes to the Consolidated finanCial statements CONTINuED 48 2 accountinG policies (continued) q) financial instruments (continued) other financial liabilities Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. derecognition of financial liabilities The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire. derivative financial instruments The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. The Group uses foreign exchange forward contracts and interest rate swap contracts to manage these exposures. The Group does not hold or issue derivative financial instruments for speculative purposes. The use of financial derivatives is governed by the Group’s policies approved by the Board of Directors, on the use of financial derivatives. Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently re-measured to their fair value at each period end date. The resulting gain or loss is recognised in profit or loss immediately. A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled within 12 months. Other derivatives are presented as current assets or current liabilities. Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at fair value with changes in fair value recognised in profit or loss. An embedded derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the hybrid instrument to which the embedded derivative relates is more than 12 months and is not expected to be realised or settled within 12 months. Other derivatives are presented as current assets or current liabilities. r) share-based payments The Group has applied the requirements of IFRS 2 Share-based Payments. In accordance with the transitional provisions, IFRS 2 has been applied to all grants of equity instruments after 7 November 2002 that were unvested as of 1 October 2005. The Group issues equity settled share-based payments to certain employees. Equity settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the share-based payment is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest. Fair value is measured by use of the Black Scholes model. The Group provides employees with the ability to purchase the Group’s ordinary shares at 80% of the current market value through the operation of its share save scheme. The Group records an expense, based on its estimate of the 20% discount related to shares expected to vest on a straight-line basis over the vesting period. s) trade payables Trade payables are initially measured at fair value and are subsequently measured at amortised cost, using the effective interest rate method. t) operating profit Operating profit is stated after charging restructuring costs but before property disposals, investment income and finance costs. u) provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, and it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of that obligation. Provisions are measured at the Directors’ best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material. 14887_TT_AR11_p38-88.indd 48 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 Review of the business Governance Financial Statements Other information k 49 2 accountinG policies (continued) v) Critical accounting judgements and key sources of estimation uncertainty In the application of the Group’s accounting policies, which are described above, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The critical judgement, apart from those involving estimations (which are dealt with separately below), that the Directors have made in the process of applying the Group’s accounting policies and that has the most significant effect on the amounts recognised in financial statements is the detailed criteria for the recognition of revenue from the sale of goods set out in IAS 18 Revenue and, in particular, whether the Group has transferred to the buyer the significant risks and rewards of ownership of the goods. The Group only recognises revenue where this is the case. Key sources of estimation uncertainty The key assumptions concerning the future, and other key sources of estimation uncertainty at the period end date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period, are discussed below: impairment of property, plant and equipment During the period, the Group has closed four stores in the UK, including some before their lease end dates. As the fixtures and fittings within these stores cannot be re-used in other locations within the Group, the carrying value of these assets has been fully provided for in the period. Additional impairments have been made for stores which are identified for conversion during the next financial period and for loss-making stores. onerous lease provisions During the period the Group has continued to review the performance of its store portfolio, which has resulted in no further stores being exited before their lease term has expired (2010: eight stores). In respect of the leases in relation to stores exited before lease end dates in prior periods that are still vacant, the Group has provided for what it considers to be the unavoidable costs prior to lease termination or sublease. The Group has further reviewed any trading loss making stores and provided for those leases considered to be onerous. These estimates are based upon available information and knowledge of the property market. The ultimate costs to be incurred in this regard may vary from the estimates. dilapidations provision The Group has estimated its likely dilapidation charges for its store portfolio and provided accordingly. This estimate involves an assessment of average costs per store and the expected exit period for the current portfolio, and is based on management’s best estimate, taking into account knowledge of the property market and historical trends. The ultimate costs to be incurred may vary from the estimates. fair value of derivatives and other financial instruments As described above, the Directors use their judgement in selecting an appropriate valuation technique for financial instruments not quoted in an active market. Valuation techniques commonly used by market practitioners are applied, such as discounted cash flows and assumptions regarding market volatility. tax The Directors are aware of the material impact that corporation tax has on the Group accounts and therefore they ensure that the Group continues to provide at a sufficient level for both current and deferred tax liabilities. 3 reVenue An analysis of Group revenue is as follows: Topps Tiles Tile Clearing House Revenue from the sale of goods Interest receivable Fair value gain on forward currency contracts Total revenue 52 weeks ended 1 october 2011 £’000 162,932 12,593 175,525 316 40 175,881 53 weeks ended 2 October 2010 £’000 165,068 17,338 182,406 457 – 182,863 Interest receivable represents gains on loans and receivables. There are no other gains recognised in respect of loans and receivables. 14887_TT_AR11_p38-88.indd 49 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 notes to the Consolidated finanCial statements CONTINuED 50 4 Business seGments IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Executive to allocate resources to the segments and to assess their performance. These segments comprise (a) Topps Tiles retail operations in the UK; (b) TCH retail operations in the UK; and (c) the Topps Floorstore operation in Holland, which was disposed of on 22 December 2009. Segment result represents the profit/(loss) earned by each segment without allocation of the central administration costs including Directors’ salaries, other gains and losses, investment income, finance costs, fair value loss on interest rate derivatives and income tax expense. revenues from major products and services and information about major customers The Group’s principal activity, being a “specialist tile and woodflooring retailer”, is reported in the segments shown below and due to its wide product offering the disclosure of revenues from major products is not appropriate. As the Group’s revenue is derived from sales to the general public, it has no reliance on any individual major customer. Geographical segments The Group’s reporting format is by business segment. Although the Group operated in two geographic segments, the UK and Holland, during the previous period, neither the revenue from sales to external customers nor the value of net assets within Holland represented more than 10% of Group totals. The following is an analysis of the Group’s revenue and results by reportable segment: 52 weeks ended 1 october 2011 Revenue Segment result Central administration costs Operating profit Investment revenues Finance costs Fair value loss on interest rate derivatives Profit before tax Tax Profit after tax other information Capital additions Depreciation Impairment losses recognised Balance sheet Segment assets unallocated corporate assets Consolidated total assets Segment liabilities unallocated corporate liabilities Consolidated total liabilities topps £’000 tCh £’000 Consolidated £’000 162,932 15,218 12,593 30 175,525 15,248 (1,268) 13,980 356 (4,798) (1,630) 7,908 (2,194) 5,714 topps £’000 6,031 2,811 275 125,086 – 125,086 (19,676) – (19,676) head office/ distribution centre £’000 4,727 418 81 tCh £’000 66 899 695 Consolidated £’000 10,824 4,128 1,051 5,077 – 5,077 (5,357) – (5,357) – (51,953) (51,953) – (78,639) (78,639) 130,163 (51,953) 78,210 (25,033) (78,639) (103,672) Unallocated corporate assets include the Group’s overdraft, which in the statement of financial position is presented net within cash and cash equivalents due to a legal right of off-set between Group entities. 14887_TT_AR11_p38-88.indd 50 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 Review of the business Governance Financial Statements Other information k 51 4 Business seGments (continued) Unallocated corporate liabilities comprise bank loans, derivatives, corporation and deferred tax liabilities and sundry head office creditors. 53 weeks ended 2 October 2010 Revenue Segment result Central administration costs Operating profit Other gains and losses Investment revenues Finance costs Fair value loss on interest rate derivatives Profit before tax Tax Profit for the period from discontinued operations Profit after tax and discontinued operations other information Capital additions Depreciation Impairment losses recognised Balance sheet Segment assets unallocated corporate assets Consolidated total assets Segment liabilities unallocated corporate liabilities Consolidated total liabilities 5 exceptional items Topps £’000 165,068 20,276 TCH £’000 17,338 964 Topps Floorstore £’000 1,014 1,022 Discontinued operations £’000 (1,014) (1,022) Consolidated £’000 182,406 21,240 (1,363) 19,877 100 453 (5,275) (2,780) 12,375 (3,903) 8,472 1,502 9,974 Topps £’000 2,986 2,704 374 113,223 – 113,223 (20,824) – (20,824) TCH £’000 836 952 441 8,268 – 8,268 (5,707) – (5,707) Topps Floorstore £’000 Head office/ distribution centre £’000 Discontinued operations £’000 Consolidated £’000 – 3 48 – – – – – – 1,031 384 – – (15,260) (15,260) – (108,230) (108,230) – (3) (48) 4,853 4,040 815 – – – – – – 121,491 (15,260) 106,231 (26,531) (108,230) (134,761) During 2011, nine stores (2010: nine) were closed or converted and the Group conducted an impairment review of the fixed assets held by its loss-making stores resulting in an impairment of property, plant and equipment totalling £1,051,000. The Group also reviewed its potential exposure to future lease commitments pertaining to closed stores and the provision held for future dilapidation costs resulting in a charge of £1,862,000 (2010: £401,000). Additionally an assessment of the carrying value of display inventories has been performed leading to a write off of £1,281,000. Included in cost of sales: Write off of display inventories Included in administrative expenses: Property related provisions Impairment of property, plant and equipment 52 weeks ended 1 october 2011 £’000 53 weeks ended 2 October 2010 £’000 1,281 1,862 1,051 4,194 – 401 815 1,216 14887_TT_AR11_p38-88.indd 51 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 notes to the Consolidated finanCial statements CONTINuED 52 6 profit Before taxation Profit before taxation for the period has been arrived at after charging/(crediting): Depreciation of property, plant and equipment Impairment of property, plant and equipment Disposal of property, plant and equipment Property related provisions Staff costs (see note 7) Operating lease rentals Write down of inventories recognised as an expense Write off of display inventories Cost of inventories recognised as expense Net foreign exchange (gain)/loss Analysis of auditor’s remuneration is provided below: Fees payable to the Company’s auditor with respect to the Company’s annual accounts Fees payable to the Company’s auditor and their associates for other audit services to the Group: Audit of the Company’s subsidiaries pursuant to legislation Total audit fees Tax services: compliance services advisory services Total non-audit fees 52 weeks ended 1 october 2011 £’000 4,128 1,051 58 1,862 42,216 20,881 2,292 1,281 67,331 (84) 53 weeks ended 2 October 2010 £’000 4,040 815 – 401 40,152 20,861 2,493 – 72,761 17 52 weeks ended 1 october 2011 £’000 53 weeks ended 2 October 2010 £’000 40 104 144 34 75 109 253 40 105 145 47 21 68 213 A description of the work of the Audit Committee is set out on page 32 and includes an explanation of how auditor objectivity and independence is safeguarded when non-audit services are provided by the auditor. 14887_TT_AR11_p38-88.indd 52 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 Review of the business Governance Financial Statements Other information k 53 7 staff costs The average monthly number of persons and their full time equivalents employed by the Group and Company in the UK during the accounting period (including Executive Directors) was: Selling Administration Their aggregate remuneration comprised: Wages and salaries (including LTIP, see note 32) Social security costs Other pension costs (see note 31b) 52 weeks ended 1 october 2011 number employed 1,467 194 1,661 53 weeks ended 2 October 2010 Number employed 1,441 174 1,615 2011 £’000 2010 £’000 38,410 3,657 149 42,216 36,541 3,430 181 40,152 Details of Directors’ emoluments are disclosed on page 35. Employee profit sharing of £6.6 million (2010: £6.9 million) is included in the above and comprises sales commission and bonuses. 8 other Gains Other gains in the previous period relate to the sale of one freehold property. 9 inVestment reVenue, finance costs and fair Value loss on interest rate deriVatiVes investment revenue Bank interest receivable and similar income Fair value gain/(loss) on forward currency contracts finance costs Interest on bank loans and overdrafts 52 weeks ended 1 october 2011 £’000 53 weeks ended 2 October 2010 £’000 316 40 356 457 (4) 453 (4,798) (5,275) No finance costs are appropriate to be capitalised in the period, or the prior period. Interest on bank loans and overdrafts represents gains and losses on financial liabilities measured at amortised cost, including interest charges levied, together with interest paid on the interest rate derivatives of £2,075,000 (2010: £2,678,000). There are no other gains or losses recognised in respect of financial liabilities measured at amortised cost. Net losses from the movement in fair value on held for trading assets and liabilities (derivative instruments) were £1,590,000 (2010: £2,784,000), which include fair value losses on interest rate swaps of £1,630,000 (2010: £2,780,000) and fair value gains on forward currency contracts of £40,000 (2010: £4,000 loss). 14887_TT_AR11_p38-88.indd 53 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 notes to the Consolidated finanCial statements CONTINuED 54 10 taxation Continuing operations Current tax – charge for the year Current tax – adjustment in respect of previous periods Deferred tax – effect of reduction in uK corporation tax rate Deferred tax – credit for year (note 22) Deferred tax – adjustment in respect of previous periods (note 22) Corporation tax in the UK is calculated at 27% (2010: 28%) of the estimated assessable profit for the period. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. The charge for the period can be reconciled to the profit per the statement of financial performance as follows: Continuing operations Profit before taxation Tax at the uK corporation tax rate of 27% (2010: 28%) Tax effect of expenses that are not deductible in determining taxable profit Tax effect of chargeable gain lower than profit on sale of freehold property Tax effect of tangible fixed assets which do not qualify for capital allowances Tax effect of adjustment in respect of prior periods Tax expense for the period discontinued operations Current tax – adjustment in respect of previous periods 52 weeks ended 1 october 2011 £’000 3,620 (381) 168 (1,097) (116) 2,194 52 weeks ended 1 october 2011 £’000 7,908 2,135 262 – 294 (497) 2,194 2011 £’000 – – 53 weeks ended 2 October 2010 £’000 5,276 (39) (31) (1,246) (57) 3,903 53 weeks ended 2 October 2010 £’000 12,375 3,465 173 (28) 389 (96) 3,903 2010 £’000 (480) (480) 11 discontinued operations On 18 December 2009, the Group announced that it was withdrawing funding to the Dutch operation, which resulted in Topps Retail BV being placed into administration on 22 December 2009. The transaction was completed on 22 December 2009, on which date control of Topps Retail BV passed to the administrator and was therefore accounted as a disposal in the consolidated financial statements. The results of the discontinued operations, which have been included in the consolidated statement of financial performance, were as follows: Revenue Expenses Loss before tax Attributable tax expense Profit on disposal of discontinued operations Attributable tax expense Net profit attributable to discontinued operations (attributable to owners of the Company) 52 weeks ended 1 october 2011 £’000 53 weeks ended 2 October 2010 £’000 – – – – – – – – – 1,014 (1,329) (315) – (315) 1,337 1,022 480 1,502 During the year Topps Retail BV received £nil (2010: received £204,000) from the Group’s net operating cash flows, paid £nil (2010: £nil) in respect of investing activities and paid £nil (2010: £nil) in respect of financing activities. 14887_TT_AR11_p38-88.indd 54 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 Review of the business Governance Financial Statements Other information k 55 11 discontinued operations (continued) In the previous period a profit of £1,337,000 arose on the disposal of Topps Retail BV, being the proceeds of disposal (£nil) net of the carrying amount of the subsidiary’s assets and liabilities. Further detail is provided in the table below. The effect of discontinued operations on segment results is disclosed in note 4. The net liabilities of Topps Retail BV at the date of disposal are detailed below: Property, plant and equipment Inventories Trade receivables Current tax receivables Trade payables Sundry payables Bank overdraft Onerous lease provision Foreign exchange reserve Total consideration Gain on disposal 12 diVidends 22 December 2009 £’000 44 596 26 7 (773) (293) (316) (340) (288) (1,337) – 1,337 Interim dividend for the 26 week period ended 26 April 2011 of £0.005 (2010: £nil) per share Proposed final dividend for the 52 week period ended 1 October 2011 of £0.006 (2010: £0.01) per share 2011 £’000 942 2010 £’000 – 1,129 1,882 The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. 13 earninGs per share The calculation of earnings per share is based on the earnings for the financial period attributable to equity shareholders and the weighted average number of ordinary shares. Weighted average number of shares For basic earnings per share Weighted average number of shares under option For diluted earnings per share 2011 number of shares 188,271,731 3,873,411 192,145,142 2010 Number of Shares 185,643,741 4,123,000 189,766,741 14887_TT_AR11_p38-88.indd 55 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 notes to the Consolidated finanCial statements CONTINuED 56 13 earninGs per share (continued) The calculation of the basic and diluted earnings per share used the denominators as shown above for both basic and diluted earnings per share. The adjusted earnings figure is based on the following data: from continuing and discontinued operations Profit after tax for the period Post tax effect of: Impairment of property, plant and equipment Interest rate derivative charge Fair value gain on foreign currency forward contracts Property disposal gain Loan issue cost write off Property related provisions Display inventory write off Adjusted profit after tax for the period from continuing operations Profit after tax for the period Post tax effect of: Impairment of property, plant and equipment Interest rate derivative charge Fair value gain on foreign currency forward contracts Property disposal gain Loan issue cost write off Property related provisions Display inventory write off Adjusted profit after tax for the period from discontinued operations Basic Diluted 14 Goodwill Cost and carrying amount at 26 September 2009 and 2 October 2010 and 1 October 2011 The balance of goodwill remaining is the carrying value that arose on the acquisition of Surface Coatings Ltd in 1998. 52 weeks ended 1 october 2011 £’000 5,714 53 weeks ended 2 October 2010 £’000 9,974 1,051 1,190 (29) – 133 1,360 935 10,354 2011 £’000 5,714 1,051 1,190 (29) – 133 1,360 935 10,354 52 weeks ended 1 october 2011 – – 863 2,001 – (100) – (977) – 11,761 2010 £’000 8,472 815 2,001 – (100) – 289 – 11,477 53 weeks ended 2 October 2010 0.81p 0.79p £’000 245 The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. Goodwill acquired in a business combination is allocated, at acquisition, to the cash-generating units that are expecting to benefit from that business combination. Before recognition of any impairment losses, the carrying amount of goodwill has been allocated to the TCH segment. The recoverable amounts are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to, selling prices and direct costs during the period. Management estimates discount rates based on the Group’s weighted average cost of capital. The growth rates are based on industry growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market. Discounted cash flows are calculated using a pre-tax rate of 7.0% (2010: 7.2%). 14887_TT_AR11_p38-88.indd 56 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 Review of the business Governance Financial Statements Other information k 57 14 Goodwill (continued) The Group prepares cash flow forecasts derived from the most recent financial budgets approved by management for the next five years and extrapolates cash flows for the following five years. The growth rate applied does not exceed the average long-term growth rate for the relevant markets. The Group has conducted a sensitivity analysis on the impairment tests of TCH’s carrying value. There are no reasonable changes that would result in the carrying value of goodwill being reduced to its recoverable amount. The accounting judgements and sources of estimation uncertainty involved in assessing any impairment loss are referred to in note 2 to the financial statements. As a result of the annual test of impairment of goodwill, no impairment has been identified for the current period. 15 property, plant and equipment Cost At 26 September 2009 Additions Disposals At 2 October 2010 Additions Disposals at 1 october 2011 accumulated depreciation and impairment At 26 September 2009 Charge for the period Provision for impairment Eliminated on disposals At 2 October 2010 Charge for the period Provision for impairment Eliminated on disposals at 1 october 2011 Carrying amount at 1 october 2011 At 2 October 2010 land and buildings freehold £’000 14,854 1,002 (850) 15,006 4,699 – 19,705 1,378 213 – – 1,591 243 81 – 1,915 short leasehold £’000 1,842 – – 1,842 – – 1,842 1,270 113 66 – 1,449 88 – – 1,537 fixtures and fittings £’000 43,719 3,832 – 47,551 6,058 (3,343) 50,266 25,285 3,702 749 – 29,736 3,780 970 (3,280) 31,206 17,790 13,415 305 393 19,060 17,815 motor vehicles £’000 206 19 (202) 23 67 – 90 104 15 – (112) 7 17 – – 24 66 16 total £’000 60,621 4,853 (1,052) 64,422 10,824 (3,343) 71,903 28,037 4,043 815 (112) 32,783 4,128 1,051 (3,280) 34,682 37,221 31,639 Freehold land and buildings include £4,104,000 of freehold land (2010: £4,104,000) on which no depreciation has been charged in the current period. There is no material difference between the carrying and market values. Cumulative finance costs capitalised in the cost of tangible fixed assets amount to £nil (2010: £nil). Contractual commitments for the acquisition of property, plant and equipment are detailed in note 31. During the period, the Group has closed nine stores in the UK. As the fixtures and fittings within these stores cannot be re-used in other locations within the Group, the carrying value of these assets has been fully provided for in the period, with the associated impairment charge included within other operating expenses. 16 suBsidiaries A list of the significant subsidiaries, including the name, country of incorporation and proportion of ownership interest is given in note 3 to the Company’s separate financial statements. 14887_TT_AR11_p38-88.indd 57 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 notes to the Consolidated finanCial statements CONTINuED 58 17 trade and other receiVaBles Amounts falling due within one year: Amounts receivable for the sale of goods Allowance for doubtful debts Other debtors and prepayments – Rent and rates – Other 2011 £’000 661 (104) 5,053 1,651 7,261 2010 £’000 523 (103) 5,503 1,671 7,594 The Directors consider that the carrying amount of trade and other receivables at 1 October 2011 and 2 October 2010 approximates to their fair value on the basis of discounted cash flow analysis. Credit risk The Group’s principal financial assets are bank balances and cash and trade receivables. The Group considers that it has no significant concentration of credit risk. The majority of sales in the business are cash based sales in the stores. Total trade receivables (net of allowances) held by the Group at 1 October 2011 amounted to £0.6 million (2010: £0.4 million). These amounts mainly relate to insurance generated sales, sundry trade accounts and Tesco Clubcard Scheme generated sales. In relation to these sales, the average credit period taken is 41 days (2010: 39 days) and no interest is charged on the receivables. Trade receivables between 60 days and 120 days are provided for based on estimated irrecoverable amounts from the sale of goods, determined by reference to past default experience. Before accepting any new customer, the Group uses an external credit scoring system to assess the potential customer’s credit quality and defines credit limits by customer. Limits and scoring attributed to customers are reviewed periodically. Of the trade receivables balance at the end of the year, £105,000 (2010: £100,000) is due from Independent Inspections and £105,000 (2010: £104,000) is due from Tesco PLC, the Group’s two largest customers. Included in the Group’s trade receivable balance are debtors with a carrying amount of £131,000 (2010: £110,000) which are past due at the reporting date for which the Group has not provided as there has not been a significant change in credit quality and the amounts are still considered recoverable. The Group does not hold any collateral over these balances. The average age of these receivables is 168 days (2010: 124 days), however this ageing is distorted by four accounts totalling £11,000 (2010: £19,000) which are overdue by 299 days (2010: 202 days). Ageing of past due but not impaired receivables: 60 – 120 days 121 – 202 days 2011 £’000 63 68 2010 £’000 91 19 The allowance for doubtful debts was £104,000 by the end of the period (2010: £103,000). Given the minimal receivable balance, the Directors believe that there is no further credit provision required in excess of the allowance for doubtful debts. The allowance for doubtful debts includes £104,000 relating to individually impaired trade receivables (2010: £103,000) which are due from companies that have been placed into liquidation. The Directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value. 18 cash and cash equiValents Cash and cash equivalents comprise cash held by the Group and short-term bank deposits (with associated right of set off) net of bank overdrafts, with an original maturity of three months or less. The carrying amount of these assets approximates their fair value. A breakdown of significant bank and cash balances by currency is as follows: Sterling uS dollar Euro Total cash and cash equivalents 2011 £’000 7,607 715 766 9,088 2010 £’000 41,109 331 439 41,879 14887_TT_AR11_p38-88.indd 58 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 19 other financial liaBilities Trade and other payables amounts falling due within one year Trade payables Other payables Accruals and deferred income Review of the business Governance Financial Statements Other information k 59 2011 £’000 2010 £’000 11,316 3,419 9,370 24,105 12,489 3,406 9,693 25,588 Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 38 days (2010: 41 days). No interest is charged on these payables. The Directors consider that the carrying amount of trade payables at 1 October 2011 and 2 October 2010 approximates to their fair value on the basis of discounted cash flow analysis. 20 BanK loans Bank loans (all Sterling) The borrowings are repayable as follows: On demand or within one year In the second year In the third to fifth year Less: Total unamortised issue costs Less: amount due for settlement within 12 months (shown under current liabilities) Issue costs to be amortised within 12 months Amount due for settlement after 12 months 2011 £’000 2010 £’000 59,024 90,716 – – 60,000 60,000 (976) 59,024 – 265 59,289 7,500 7,500 76,000 91,000 (284) 90,716 (7,500) 250 83,466 The Directors consider that the carrying amount of the bank loan at 1 October 2011 and 2 October 2010 approximates to its fair value since the amounts relate to floating rate debt. The average weighted interest rates paid on the loan were as follows: Loans 2011 % 3.11 2010 % 2.67 The Group borrowings are arranged at floating rates, thus exposing the Group to cash flow interest rate risk. Whilst the interest charge on the loan has fallen compared to the prior period, the Group has seen limited benefit due to the interest rate derivatives which negate the majority of any impact on the interest rate movement. During the period the Group successfully re-financed its loan facilities and now has in place a £75.0 million committed revolving credit facility, expiring in May 2015. As at the financial period end £60.0 million of this facility was drawn, with a further £15.0 million of undrawn financing available. The loan facility contains financial covenants which are tested on a bi-annual basis. At 1 October 2011, the Group had available £15 million (2010: £5 million) of undrawn committed banking facilities. 14887_TT_AR11_p38-88.indd 59 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 notes to the Consolidated finanCial statements CONTINuED 60 21 financial instruments Capital risk management The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged from 2010. The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 20, cash and cash equivalents disclosed in note 18 and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in notes 23 to 30. The Group is not subject to any externally imposed capital requirements. significant accounting policies Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 2q to the financial statements. Categories of financial instruments financial assets Loans and receivables (including cash and cash equivalents) financial liabilities Held for trading Amortised cost Carrying value and fair value 2011 £’000 2010 £’000 16,349 49,473 12,186 83,394 10,557 116,304 The Group considers itself to be exposed to risks on financial instruments, including market risk (including currency risk), credit risk, liquidity risk and cash flow interest rate risk. The Group seeks to mitigate the effects of these risks by using derivative financial instruments to hedge these risk exposures economically. The use of financial derivatives is governed by the Group’s policies approved by the Board of Directors, which provide written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and the investment of excess liquidity. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. market risks The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign currency risk, including: a forward foreign exchange contracts to hedge the exchange rate risk arising on the import of goods from South America and China; and a interest rate swaps and collars to mitigate the risk of movements in interest rates. foreign currency risk management The Group undertakes certain transactions denominated in foreign currencies. Hence, exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters utilising forward foreign exchange contracts. The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows: euro us dollar assets liabilities 2011 £’000 766 715 2010 £’000 439 331 2011 £’000 1,027 128 2010 £’000 1,129 329 14887_TT_AR11_p38-88.indd 60 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 Review of the business Governance Financial Statements Other information k 61 21 financial instruments (continued) foreign currency sensitivity analysis The Group is mainly exposed to the currency of China and Brazil (US dollar currency) and from various European countries (Euro) as a result of inventory purchases. The following table details the Group’s sensitivity to a 10% increase and decrease in Sterling against the relevant foreign currencies. 10% represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. The sensitivity analysis includes external loans as well as loans to foreign operations within the Group where the denomination of the loan is in a currency other than the currency of the lender or the borrower. A positive number below indicates an increase in profit and other equity where Sterling strengthens 10% against the relevant currency. Profit or Loss movement on a 10% strengthening in Sterling against the Euro Profit or Loss movement on a 10% strengthening in Sterling against the uS Dollar Profit or Loss movement on a 10% weakening in Sterling against the Euro Profit or Loss movement on a 10% weakening in Sterling against the uS Dollar 2011 £’000 24 (53) (29) 65 2010 £’000 63 – (77) – Currency derivatives The Group utilises currency derivatives to hedge significant future transactions and cash flows. The Group uses foreign currency forward contracts in the management of its exchange rate exposures. The contracts are denominated in US dollars and Euros. At the balance sheet date, the total notional amounts of outstanding forward foreign exchange contracts that the Group has committed to are as below: Forward foreign exchange contracts 2011 £’000 4,778 2010 £’000 4,356 These arrangements are designed to address significant exchange exposures for the first half of 2012 and are renewed on a revolving basis as required. At 1 October 2011 the fair value of the Group’s currency derivatives is a £70,000 asset within other debtors and prepayments (note 17) (2010: an asset of £22,000). These amounts are based on market value of equivalent instruments at the balance sheet date. Gains of £40,000 are included in investment revenues (note 9) (2010: losses of £4,000). interest rate risk management The Group is exposed to interest rate risk as entities in the Group borrow funds at floating interest rates. The risk is managed by the Group by maintaining an appropriate mix between fixed and floating rate borrowings, by the use of interest rate swap contracts and collars. The Group’s exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management section of this note. interest rate sensitivity analysis The sensitivity analyses below have been determined based on the exposure to interest rates for both derivatives and non-derivative instruments at the balance sheet date. For floating rate liabilities, the analysis is prepared assuming the amount of liability outstanding at the balance sheet date was outstanding for the whole year. A 50 basis points increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the possible change in interest rates. If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Group’s profit would be impacted as follows: Profit or (loss) The Group’s sensitivity to interest rates mainly relates to the interest rate derivatives. 50 basis points increase in interest rates 50 basis points decrease in interest rates 2011 £’000 1,553 2010 £’000 1,443 2011 £’000 (1,280) 2010 £’000 (1,385) 14887_TT_AR11_p38-88.indd 61 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 notes to the Consolidated finanCial statements CONTINuED 62 21 financial instruments (continued) interest rate derivatives The Group uses interest rate derivatives to manage its exposure to interest rate movements on its bank borrowings. The Group’s interest rate derivatives comprise: a 5 year interest rate cap with a notional value of £20 million (2010: £20 million) with interest capped at 6% a 5 year interest rate swap with a notional value of £20 million (2010: £20 million) paying interest at a fixed rate of 5.63% a 10 year cancellable collar with a notional value of £20 million (2010: £60 million) with a cap of 5.6% and a floor of 4.49%, the interest rate within this range is LIBOR less 0.4%. Where LIBOR falls below the floor the interest rate resets to a fixed level of 5.55% The fair value liability of the swaps entered into at 1 October 2011 is estimated at £12,186,000 (2010: £10,557,000). Amounts of £1,630,000 have been charged to the statement of financial performance in the period (2010: £2,780,000). On 27 October 2011 the Group settled the 5 year interest rate swap for a consideration of £476,000, additionally on 1 November 2011 the Group entered into a legally binding agreement committing it to a partial trade termination amounting to 50% of the 10 year cancellable collar, which will be settled on 2 April 2011 for a consideration of £6,240,000. Credit risk management Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. Management has considered the counterparty risk associated with the cash and derivative balances and do not consider there to be a material risk. The Group has a policy of only dealing with creditworthy counterparties. The Group’s exposure to its counterparties is reviewed periodically. Trade receivables are minimal consisting of a number of insurance companies and sundry trade accounts, further information is provided in note 17. The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the Group’s maximum exposure to credit risk without taking account of the value of any collateral obtained. liquidity risk management Ultimate responsibility for liquidity risk management rests with the Board of Directors. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Included in note 20 is a description of additional undrawn facilities that the Group has at its disposal to reduce liquidity risk further. liquidity and interest risk tables The following tables detail the Group’s remaining contractual maturity for its non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows (and on the assumption that the variable interest rate remains constant at the latest fixing level of 3.42009% (2010: 2.74665%)) of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows. 2011 Non-interest bearing Variable interest rate instruments 2010 Non-interest bearing Variable interest rate instruments less than 1 month £’000 24,105 – 1–3 months £’000 3 months to 1 year £’000 – 555 – 1,107 1–5 years £’000 – 66,595 total £’000 24,105 68,257 Less than 1 month £’000 25,588 630 1–3 months £’000 – 418 3 months to 1 year £’000 – 9,290 1–5 years £’000 – 84,266 Total £’000 25,588 94,604 The Group is now financed through a £75 million (£60 million utilised) revolving credit facility. In the previous period the total unused amount of financing facilities was £5 million at the balance sheet date. The Group expects to meet its other obligations from operating cash flows and proceeds of maturing financial assets. 14887_TT_AR11_p38-88.indd 62 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 Review of the business Governance Financial Statements Other information k 63 21 financial instruments (continued) The following table details the Group’s liquidity analysis for its derivative financial instruments. The table has been drawn up based on the undiscounted net cash inflows/(outflows) on the derivative instruments that settle on a net basis and the undiscounted gross inflows and (outflows) on those derivatives that require gross settlement. When the amount payable or receivable is not fixed, the amount disclosed has been determined by reference to the projected interest and foreign currency rates as illustrated by the yield curves existing at the reporting date. 2011 Interest rate swaps payments Foreign exchange forward contracts payments Foreign exchange forward contracts receipts 2010 Interest rate swaps payments Foreign exchange forward contracts payments Foreign exchange forward contracts receipts less than 1 month £’000 (476) 1–3 months £’000 (119) 3 months to 1 year £’000 1–5 years £’000 5+ years £’000 total £’000 (795) (11,704) (688) (13,782) – – Less than 1 month £’000 – – – (2,356) (2,422) 2,399 2,449 – – – – (4,778) 4,848 1–3 months £’000 (603) 3 months to 1 year £’000 (1,572) 1–5 years £’000 (6,606) 5+ years £’000 (2,331) (1,933) (2,423) 1,928 2,450 – – – – Total £’000 (11,112) (4,356) 4,378 fair value of financial instruments The fair values of financial assets and financial liabilities are determined as follows: a Foreign currency forward contracts are measured using quoted forward exchange rates and yield curves derived from quoted interest rates matching maturities of the contracts. a Interest rate swaps are measured at the present value of future cash flows estimated and discounted based on the applicable yield curves derived from quoted interest rates. a Interest rate collars are measured using applicable yield curves derived from quoted interest rates and market volatilities. The fair values are therefore categorised as Level 2, based on the degree to which the fair value is observable. Level 2 fair value measurements are those derived from inputs other than unadjusted quoted prices in active markets (level 1 categorisation) that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). 22 proVisions Onerous lease provision Dilapidations provision Current Non-current At 2 October 2010 Additional provision in the year utilisation of provision Release of provision in the year at 1 october 2011 2011 £’000 1,097 1,458 2,555 1,075 1,480 2,555 onerous lease provision dilapidations provision £’000 823 748 (474) – 1,097 £’000 474 1,114 (121) (9) 1,458 2010 £’000 823 474 1,297 – 1,297 1,297 total £’000 1,297 1,862 (595) (9) 2,555 14887_TT_AR11_p38-88.indd 63 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 notes to the Consolidated finanCial statements CONTINuED 64 22 proVisions (continued) The onerous lease provision relates to estimated future unavoidable lease costs in respect of closed, non-trading and loss making stores. The provision is expected to be utilised over the following four financial periods. The dilapidations provision represents management’s best estimate of the Group’s liability under its property lease arrangements based on past experience and is expected to be utilised over the following seven financial periods. The following are the deferred tax liabilities/(assets) recognised by the Group and movements thereon during the current and prior reporting period: As at 26 September 2009 Credit to income Impact of rate change Credit to equity As at 2 October 2010 (Credit)/charge to income Impact of rate change Charge to equity as at 1 october 2011 accelerated tax depreciation £’000 other short-term timing differences £’000 2,421 (86) (138) – 2,197 (204) (146) – 1,847 – (53) 2 – (51) 7 2 – (42) share-based payments £’000 (213) (11) – (121) (345) 9 – 28 (308) exchange rate differences £’000 9 (1) – – 8 10 (1) – 17 interest rate hedging £’000 (263) (1,174) 106 – (1,331) (909) 166 – (2,074) rent free £’000 (77) 22 (1) – (56) 19 2 – (35) total £’000 1,877 (1,303) (31) (121) 422 (1,068) 23 28 (595) The Government announced in March 2011 that it intended to reduce the rate of corporation tax from 28% to 23% by 1 April 2014, and the Finance Act 2011, which was substantively enacted in July 2011, included provisions to reduce the rate of corporation tax to 25% with effect from 1 April 2012. Accordingly, deferred tax balances have been revalued to the lower rate of 25% in these accounts, which has resulted in a debit to the income statement of £23,000. 23 called-up share capital Authorised 240,000,000 (2010: 240,000,000) ordinary shares of 3.33p each (2010: 3.33p) Authorised 37,000,000 (2010: 37,000,000) redeemable B shares of £0.54 each Authorised 124,890,948 (2010: 124,890,948) irredeemable C shares of £0.001 each Issued and fully-paid 188,365,802* (2010: 188,202,323) ordinary shares of 3.33p each (2010: 3.33p) Total 2011 £’000 8,000 19,980 125 28,105 6,279 6,279 2010 £’000 8,000 19,980 125 28,105 6,273 6,273 In the previous period the Group issued 17,109,302 shares as part of a placing and open offer on 27 November 2009. The issue increased the number of shares from 171,093,021 to 188,202,323. Under the arrangements of the placing, the Company issued shares in exchange for shares in Tail Finance Jersey Limited. No share premium was ultimately recorded in the Company’s financial statements through the operation of the merger relief provisions of the Companies Act 2006. The subsequent redemption of these shares gave rise to distributable profits of £14.3 million which were transferred to retained earnings. During the period the Group issued 163,479 (2010: none) ordinary shares with a nominal value of £5,449 (2010: £nil) under share option schemes for an aggregate cash consideration of £26,694 (2010: £nil). *During the period 122,000 (£4,000) shares were purchased by Topps Tiles Employee Benefit Trust on behalf of the Directors and Senior Management Team. These have not been paid for at the balance sheet date. 14887_TT_AR11_p38-88.indd 64 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 24 share premium At start of period Premium on issue of new shares Shares issued in respect of placing and open offer Transfer to retained earnings At end of period 25 own shares At start of period Issued in the period At end of period Review of the business Governance Financial Statements Other information k 65 2011 £’000 1,001 21 – – 1,022 2010 £’000 1,001 – 14,296 (14,296) 1,001 2011 £’000 2010 £’000 – (4) (4) – – – During the period, a subsidiary of the Group purchased 122,000 with a nominal value of £4,000, which have been classified as own shares. 26 merGer reserVe At start of period Release of reserve on disposal of subsidiary At end of period 27 share-Based payment reserVe At start of period Credit to equity for equity-settled share-based payments At end of period 28 capital redemption reserVe At start and end of period 2011 £’000 (399) – (399) 2011 £’000 367 176 543 2010 £’000 240 (639) (399) 2010 £’000 240 127 367 2011 £’000 2010 £’000 20,359 20,359 The capital redemption reserve arose on the cancellation of treasury shares and as a result of a share reorganisation in 2006. 29 foreiGn exchanGe reserVe At start of period Release of reserve on disposal of subsidiary At end of period 2011 £’000 – – – 2010 £’000 336 (336) – 14887_TT_AR11_p38-88.indd 65 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 notes to the Consolidated finanCial statements CONTINuED 66 30 retained earninGs At 27 September 2009 Release from Merger reserve on disposal of subsidiary Transfer from the share premium account Deferred tax on sharesave scheme taken directly to equity Net profit for the period At 2 October 2010 Dividends (note 12) Deferred tax on sharesave scheme taken directly to equity Net profit for the period at 1 october 2011 £’000 (81,161) 639 14,296 121 9,974 (56,131) (2,817) (28) 5,714 (53,262) The transfer from the share premium account in the previous period arose from the firm placing and open offer in November 2009. Within these arrangements, the Company issued shares in exchange for ordinary shares and redeemable preference shares in Tail Finance Jersey Limited. No share premium was ultimately recorded in the Company financial statements through the operation of the merger relief provisions of the Companies Act 2006. The realised gain was taken after the deduction of transaction costs of £0.5 million, principally as a result of commissions and professional charges. The subsequent redemption of these shares gave rise to distributable profits of £14.3 million which were transferred to retained earnings. 31 financial commitments a) Capital commitments At the end of the period there were capital commitments contracted of £300,000 (2010: £nil). b) pension arrangements The Group operates separate defined contribution pension schemes for employees. The assets of the schemes are held separately from those of the Group in independently administered funds. The pension cost charge represents contributions payable by the Group to the funds and amounted to £149,000 (2010: £181,000). c) lease commitments The Group has entered into non-cancellable operating leases in respect of motor vehicles, equipment and land and buildings. Minimum lease payments under operating leases recognised as an expense for the period were £20,881,000 which includes property service charges of £699,000 (2010: £20,861,000 including property service charges of £649,000). At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases which fall due as follows: – within 1 year – within 2–5 years – after 5 years 2011 2010 land and buildings £’000 18,401 61,188 66,485 146,074 other £’000 1,156 1,738 39 2,933 Land and buildings £’000 17,908 58,796 63,027 139,731 Other £’000 1,014 1,922 80 3,016 Operating lease payments primarily represent rentals payable by the Group for certain of its office and store properties. Leases are negotiated for an average term of 15 years and rentals are fixed for an average of five years (2010: same). 14887_TT_AR11_p38-88.indd 66 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 Review of the business Governance Financial Statements Other information k 67 32 share-Based payments The Group operates three share option schemes in relation to Group employees. equity-settled share option scheme Options are exercisable at the middle market closing price for the working day prior to the date of grant and are exercisable three years from the date of grant if the employee is still employed by the Group at that date. Details of the share options outstanding during the period are as follows: date of grant 26 January 2001 12 February 2002 Movements in share options are summarised as follows: Outstanding at beginning of period Exercised during the period Expired during the period Outstanding at end of period Exercisable at end of period option price exercisable period 54p 54p 7 years 7 years no. of options outstanding 2011 – 40,779 40,779 2010 78,020 40,779 118,799 2011 number of share options 118,799 (41,520) (36,500) 40,779 40,779 2011 weighted average exercise price £ 0.54 0.54 0.54 0.54 0.54 2010 Number of share options 122,299 – (3,500) 118,799 118,799 2010 Weighted average exercise price £ 0.54 – 0.54 0.54 0.54 The options outstanding at 1 October 2011 had a weighted averaged exercise price of 54p (2010: 54p) and a weighted average remaining contractual life of one year (2010: one year). other share-based payment plans Employee share purchase plans are open to almost all employees and provide for a purchase price equal to the daily average market price on the date of grant, less 20%. The shares can be purchased during a two-week period each financial period. The shares so purchased are generally placed in the employee share savings plan for a three or five year period. Movements in share-based payment plan options are summarised as follows: Outstanding at beginning of period Issued during the period Expired during the period Exercised during the period Outstanding at end of period Exercisable at end of period 2011 number of share options 2011 weighted average exercise price 5,452,947 1,259,204 (482,588) – 6,229,563 6,229,563 19p 64p 46p – 25p 25p 2010 Number of share options 5,974,783 – – (521,836) 5,452,947 5,452,947 2010 Weighted average exercise price 19p – – 19p 19p 19p 14887_TT_AR11_p38-88.indd 67 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 notes to the Consolidated finanCial statements CONTINuED 68 32 share-Based payments (continued) The inputs to the Black-Scholes Model for the above two schemes are as follows: – pence Weighted average share price Weighted average exercise price – pence Expected volatility Expected life Risk – free rate of interest Dividend Yield – % – years – % – % 2011 31.5 25.2 74.1 and 67.9 3 or 5 0.7 5.37 2010 22.6 18.1 32.4 3 or 5 0.8 5.04 Expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous three or five years (2010: same). The expected risk used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural forces. deferred bonus long-term incentive plan At the AGM in January 2010 a new deferred bonus long-term incentive plan (LTIP) was approved by shareholders. Under this long-term incentive plan a proportion of the annual bonus is deferred in the form of shares for a two year period with a matching share award that vests at the end of two years subject to the achievement of performance conditions. 25% of the annual bonus has been deferred into shares, on a net basis, for a two year period, with a further match on a gross basis which vests two years later subject to the achievement of performance conditions relating to continued employment in the business and EBITDA earnings growth measured over the two year period. For the period ended 2 October 2010 it was determined that a bonus be paid equivalent to 50% of basic salary for Executive Directors and the members of the Senior Management Team. 25% of the annual bonus was deferred under the deferred bonus long-term incentive plan. The total number of shares due to be awarded was 121,959, and the fair value of these deferred shares as at 1 October 2011 was £73,000 (2010: £79,000). The total number of matching shares that are expected to be awarded, subject to fulfilment of the performance conditions is 229,378, and the fair value of these matching shares as at 1 October 2011 was £131,000. No options were granted or exercised during the period (2010: 351,337). The options outstanding at 1 October 2011 had a weighted average exercise price of £0.69 and a weighted average remaining contractual life of one year. During the period, matching shares concerning the 2010 bonus award were recognised as an expense. This amounted to £66,000 (2010: £nil). The inputs to the Black-Scholes Model are as follows: Weighted average share price – pence Weighted average exercise price – pence Expected volatility Expected life Risk – free rate of interest Dividend Yield – % – years – % – % 2011 65.8 – 45.3 2 0.6 – 2010 60.0 – 81.6 2 0.8 – Expected volatility was determined by calculating the historical volatility of the Group’s share price over the 2009/10 and 2010/11 financial periods (2010: 2008/09 and 2009/10 financial periods). The expected risk used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural forces. In total, the Group recognised a total expense of £176,000 (2010: £127,000 expense) relating to share-based payments. 14887_TT_AR11_p38-88.indd 68 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 Review of the business Governance Financial Statements Other information k 69 33 related party transactions S.K.M. Williams has the non-statutory role of President, advising on property matters and is a related party by virtue of his 10.6% shareholding (19,903,950 ordinary shares) in the Group’s issued share capital (2010: 10.6% shareholding of 19,903,950 ordinary shares). At 1 October 2011 S.K.M. Williams was the landlord of three properties leased to Multi Tile Limited, a trading subsidiary of Topps Tiles Plc, for £136,000 (2010: £134,000) per annum. No amounts were outstanding with S.K.M. Williams at 1 October 2011 (2010: £nil). The lease agreements on all properties are operated on commercial arm’s length terms. His salary for the year in his role as President was £41,000 (2010: £41,000). Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note, in accordance with exemption available under IAS 24. The remuneration of the Board of Directors, who are considered key management personnel of the Group was £1.1million (2010: £1.3 million) as well as share-based payments of £nil (2010: £0.1 million). Further information about the remuneration of the individual Directors is provided in the Remuneration Report on pages 33 to 36. 34 eVents after the Balance sheet date On 27 October 2011 the Group settled the five-year interest rate swap for a consideration of £476,000. Additionally on 1 November 2011 the Group entered into a legally binding agreement committing it to a partial trade termination amounting to 50% of the 10-year cancellable collar, which will be settled on 2 April 2012 for a consideration of £6,240,000. This will have the effect of reducing the Group’s annual interest charge moving forwards by approximately £1.25 million (at current LIBOR rates). 14887_TT_AR11_p38-88.indd 69 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 independent auditor’s report to the memBers of topps tiles plC 70 We have audited the parent company financial statements of Topps Tiles Plc for the period ended 1 October 2011, which comprise the Company balance sheet and the related notes 1 to 7. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body for our audit work, for this report, or for the opinions we have formed. respective responsibilities of directors and auditor As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of the parent company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the parent company financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the parent company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. opinion on financial statements In our opinion the parent company financial statements: a give a true and fair view of the state of the parent company’s affairs as at 1 October 2011; a have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and a have been prepared in accordance with the requirements of the Companies Act 2006. opinion on other matters prescribed by the Companies act 2006 In our opinion: a the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and a the information given in the Directors’ Report for the financial period for which the financial statements are prepared is consistent with the parent company financial statements. matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: a adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or a the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or a certain disclosures of directors’ remuneration specified by law are not made; or a we have not received all the information and explanations we require for our audit. other matter We have reported separately on the group financial statements of Topps Tiles Plc for the period ended 1 October 2011. Timothy Edge (Senior Statutory Auditor) for and on behalf of Deloitte LLP Chartered Accountants and Statutory Auditor Manchester, United Kingdom 28 November 2011 14887_TT_AR11_p38-88.indd 70 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 Company BalanCe sheet As at 1 October 2011 fixed assets Investments Current assets Debtors due within one year Debtors due after one year Cash at bank and in hand Creditors: Amounts falling due within one year net current assets net assets Capital and reserves Called-up share capital Share premium Share-based payment reserve Capital redemption reserve Other reserve Profit and loss account equity shareholders’ funds Review of the business Governance Financial Statements Other information k 71 Notes 2011 £’000 2010 £’000 3 4 4 5 6,7 7 7 7 7 7 2,928 2,801 38 221,200 24,157 245,395 (615) 244,780 247,708 6,279 1,022 482 20,359 6,200 213,366 247,708 630 221,200 29,139 250,969 (1,390) 249,579 252,380 6,273 1,001 323 20,359 6,200 218,224 252,380 The financial statements of Topps Tiles Plc, Companies House number 3213782, were approved by the Board of Directors on 28 November 2011 and signed on its behalf by: M.T.M. Williams Director R. Parker Director 14887_TT_AR11_p38-88.indd 71 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 notes to the Company finanCial statements For the 52 week period ended 1 October 2011 72 1 Basis of accountinG The separate financial statements of the Company are presented as required by the Companies Act 2006. They have been prepared under the historical cost convention and in accordance with United Kingdom Accounting Standards and law. Based on a detailed review of the risks and uncertainties discussed within the Business Review, and management’s current expectations, the Board has a reasonable expectation that the Group will continue to meet all of its financial commitments as they fall due and will be able to continue as a going concern. The current economic climate and most recent trading period creates a degree of uncertainty in the outlook and our forecasts are sensitive to relatively small changes in sales and margin assumptions. This uncertainty, combined with the financial covenants included in our loan facilities, has led the Board to conduct a detailed review of a number of different trading scenarios and possible mitigating actions, should they be required. Mitigating actions would include further cost reductions, working capital management, reduced investment, freehold property disposal and possible review of dividend policy. Based on this analysis the Board have concluded that in the event that the level of like-for-like sales highlighted in the current trading section of the CEO’s Report were to continue for the whole of the financial period ending 29 September 2012, some form of mitigating actions would be required but once taken into account the Group would fully meet all of its future financial commitments. The Board, therefore, considers it appropriate to prepare the financial statements on the going concern basis. The principal accounting policies are summarised below. They have all been applied consistently throughout the period and the preceding period. The Company issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value at the date of grant. The credit added to the cost of investment in those subsidiaries whose employees receive the benefit of the share options is £127,000 (2010: £38,000). In respect of the deferred long-term bonus incentive plan, the share-based payment charge within the Company is £32,000 in respect of the matching share award (2010: £79,000 in respect of the deferred share award). Fixed asset investments are shown at cost less provision for impairment. The Company has taken advantage of the exemption in FRS 8 from disclosing transactions with other members of the Group and the exemption in FRS 29 for making disclosures relating to financial instruments. 2 profit for the year As permitted by section 408 of the Companies Act 2006 the Company has elected not to present its own profit and loss account for the period. Topps Tiles Plc reported a retained loss for the financial period ended 1 October 2011 of £4,858,000 (2010: £264,000 profit). The auditor’s remuneration for services to the Company was £40,000 for audit related work (2010: £40,000 for audit related work). Fees relating to non-audit work totalled £nil (2010: £33,000), see note 6 to the Group financial statements for further details. The Company had no other employees other than the Directors (2010: same), whose remuneration is detailed on page 35. 3 fixed asset inVestments At 27 September 2010 Movement in share options granted to employees at 1 october 2011 shares £’000 2,801 127 2,928 14887_TT_AR11_p38-88.indd 72 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 Review of the business Governance Financial Statements Other information k 73 3 fixed asset inVestments (continued) The Company has investments in the following subsidiaries which principally affected the profits or net assets of the Group. To avoid a statement of excessive length, details of investments which are not significant have been omitted. Subsidiary undertaking Topalpha Limited* Multi Tile Limited Topps Tiles Holdings Topps Tiles (uK) Limited Topps Tiles Distribution Ltd Topps Tiles Holdings BV* % of issued shares held Principal activity 100% 100% 100% 100% 100% 100% Property management and investment Retail and wholesale of ceramic tiles, wood flooring and related products Intermediate holding company Retail and wholesale of ceramic tiles, wood flooring and related products Wholesale and distribution of ceramic tiles, wood flooring and related products Retail and wholesale of ceramic tiles, wood flooring and related products *Held directly by Topps Tiles Plc The investments are represented by ordinary shares. All undertakings are incorporated in Great Britain and are registered and operate in England and Wales except for Topps Tiles Holdings BV, which is registered and incorporated in the Netherlands. A subsidiary of Topps Tiles Holdings BV, Topps Tiles Retail BV was placed into administration during the prior period. 4 deBtors Amounts falling due within one year: Amounts owed by subsidiary undertakings Other debtors Prepayments and accrued income Amounts falling due after one year: Amounts owed by subsidiary undertaking 2011 £’000 2010 £’000 4 28 6 38 – 12 618 630 221,200 221,200 In respect of the deferred bonus share award, a deferred tax asset has not been recognised as it is probable that there will be insufficient suitable profits arising when the shares are awarded against which to relieve the deduction. 5 creditors: amounts fallinG due within one year Trade and other creditors Amounts owed to subsidiary undertakings Accruals and deferred income 2011 £’000 49 292 274 615 2010 £’000 12 253 1,125 1,390 14887_TT_AR11_p38-88.indd 73 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 notes to the Company finanCial statements CONTINuED 74 6 called-up share capital Authorised 240,000,000 (2010: 240,00,000) ordinary shares of 3.33p each (2010: 3.33p) Authorised 37,000,000 (2010: 37,000,000) redeemable B shares of £0.54 each Authorised 124,890,948 (2010: 124,890,948) irredeemable C shares of £0.001 each Issued and fully-paid 188,365,802* (2010: 188,202,323) ordinary shares of 3.33p each (2010: 3.33p) 2011 £’000 8,000 19,980 125 28,105 2010 £’000 8,000 19,980 125 28,105 6,279 6,273 * During the period 122,000 (£4,000) shares were purchased by Topps Tiles Employee Benefit Trust on behalf of the Directors and Senior Management Team. These have not been paid for at the balance sheet date. During the period the Group allotted 163,479 (2010: none) ordinary shares with a nominal value of £5,449 (2010: £nil) under share option schemes for an aggregate cash consideration of £26,694 (2010: £nil). In the previous period the Group issued 17,109,302 shares as part of a placing and open offer which increased the number of shares from 171,093,021 to 188,202,323. 7 reserVes Company At 2 October 2010 Loss for the period Issue of new shares Credit to equity for equity-settled share-based payments at 1 october 2011 share capital £’000 6,273 – 6 share premium £’000 share-based payment reserve £’000 Capital redemption reserve £’000 1,001 – 21 323 – – 20,359 – – other reserves £’000 6,200 – – profit and loss account £’000 218,224 (4,858) – total £’000 252,380 (4,858) 27 – 6,279 – 1,022 159 482 – 20,359 – 6,200 – 213,366 159 247,708 At 1 October 2011, the Directors consider the other reserve of £6,200,000 to remain non-distributable. The Directors consider £203,106,000 of profit and loss account reserves not to be distributable at 1 October 2011. This arose on an unrealised gain on the intragroup disposal of subsidiary companies. 14887_TT_AR11_p38-88.indd 74 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 five year reCord Unaudited Review of the business Governance Financial Statements Other information k 75 Group revenue Group operating profit Profit before taxation Shareholders’ deficit Basic earnings per share Dividend per share Dividend cover Average number of employees Share price (period end) 52 weeks ended 29 September 2007 £’000 52 weeks ended 27 September 2008 £’000 52 weeks ended 26 September 2009 £’000 207,898 44,342 37,833 (54,824) 15.09p 10.70p 1.41 1,722 196.8p 208,084 34,620 27,723 (55,113) 9.56p 3.00p 3.19 1,743 58.25p 186,061 16,425 4,904 (53,282) 1.00p – – 1,625 94.41p 53 weeks ended 2 October 2010 £’000 183,420 20,899 13,397 (28,530) 5.37p – – 1,615 60.0p 52 weeks ended 1 october 2011 £’000 175,525 13,980 7,908 (25,462) 3.04p 1.50p 1.92 1,661 34.0p All figures quoted are inclusive of continued and discontinued operations. 14887_TT_AR11_p38-88.indd 75 07/12/2011 21:54 Plc Annual Report and Financial Statements 2011 notiCe of annual General meetinG 76 NOTICE IS HEREBY GIVEN that the Annual General Meeting of Topps Tiles Plc (the “Company”) will be held at Topps Tiles Plc, Thorpe Way, Grove Park, Enderby, Leicestershire LE19 1SU on 10 January 2012 at 10.00am for the following purposes: ordinary Business 1. To receive and adopt the Company’s Annual Report and Financial Statements for the financial period ended 1 October 2011 together with the last Directors’ Report, the last Directors’ Remuneration Report and the Auditors’ Report on those accounts and the auditable part of the Directors’ Remuneration Report. 2. To declare a final dividend of 0.6p per Ordinary Share on the Ordinary Shares for the period. 3. To re-elect Matthew Williams as a Director of the Company. 4. To re-elect Robert Parker as a Director of the Company. 5. To re-elect Nicholas Ounstead as a Director of the Company. 6. To re-elect The Rt. Hon. Michael Jack as a Director of the Company. 7. To re-elect Alan White as a Director of the Company. 8. To re-elect Claire Tiney, who has been appointed since the last Annual General Meeting, as a Director of the Company. 9. To re-appoint Deloitte LLP as Auditors to hold office from the conclusion of the meeting to the conclusion of the next meeting at which the Annual Report and Financial Statements are laid before the Company at a remuneration to be determined by the Directors. 10. To approve the Directors’ Remuneration Report for the financial period ended 1 October 2011 as set out in the Annual Report and Financial Statements for that period. special Business To consider and, if thought fit, to pass the resolutions set out below which, in the case of Resolution 11 will be proposed as an Ordinary Resolution and, in the case of Resolutions 12 to 14 (inclusive) will be proposed as Special Resolutions. 11. THAT, the Directors of the Company be generally and unconditionally authorised for the purposes of and pursuant to section 551 of the Companies Act 2006 (the “2006 Act”) to allot Relevant Securities (as defined in the explanatory notes to this resolution) up to an aggregate nominal amount of £2,090,651 provided that this authority shall, unless renewed, varied or revoked by the Company, expire 15 months from the passing of this resolution or, if earlier, on the date of the next Annual General Meeting of the Company save that the Company may, before such expiry, make offers or agreements which would or might require Relevant Securities to be allotted and the Directors may allot Relevant Securities in pursuance of such offer or agreement notwithstanding that the authority conferred by this resolution has expired. 12. THAT, subject to the passing of Resolution 11 above, the Directors of the Company be given the general power to allot equity securities (as defined by section 560 of the 2006 Act) for cash, either pursuant to the authority conferred by Resolution 11 or by way of a sale of treasury shares, as if section 561(1) of the 2006 Act did not apply to any such allotment, provided that this power shall be limited to: (a) the allotment of equity securities pursuant to a rights issue or similar offer to Ordinary Shareholders where the equity securities respectively attributable to the interests of all Ordinary Shareholders are proportionate or as nearly as practical (and taking into account any prohibitions against or difficulties concerning the making of an offer of allotment to shareholders whose registered address or place of residence is overseas and subject to such exclusions as the Directors of the Company may deem necessary or expedient to deal with fractional entitlement or record dates) to the respective numbers of Ordinary Shares held by them; and (b) the allotment (otherwise than pursuant to paragraph (a) above) of equity securities up to an aggregate nominal amount of the greater of £313,629 or 5% of the issued share capital of the Company. The power granted by this resolution will expire 15 months from the passing of this resolution or, if earlier, the conclusion of the Company’s next annual general meeting (unless renewed, varied or revoked by the Company prior to or on such date) save that the Company may, before such expiry make offers or agreements which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of any such offer or agreement notwithstanding that the power conferred by this resolution has expired. 14887_TT_AR11_p38-88.indd 76 07/12/2011 21:55 Plc Annual Report and Financial Statements 2011 Review of the business Governance Financial Statements Other information k 77 13. THAT, the Company be generally and unconditionally authorised for the purposes of section 701 of the 2006 Act to make market purchases (within the meaning of section 693(4) of the 2006 Act) of Ordinary Shares of 31⁄3p each in the capital of the Company (“Ordinary Shares”) provided that: (a) the maximum number of Ordinary Shares hereby authorised to be purchased is 28,066,504 (representing 14.9% of the Company’s issued Ordinary Share capital); (b) the minimum price, exclusive of any expenses, which may be paid for an Ordinary Share is 31⁄3p; (c) the maximum price, exclusive of any expenses, which may be paid for an Ordinary Share is an amount equal to 105% of the average of the middle market quotations for an Ordinary Share derived from the London Stock Exchange Daily Official List for the five business days immediately preceding the date on which such Ordinary Share is Contracted to be purchased; (d) unless previously renewed, varied or revoked, the authority conferred shall expire at the close of the next Annual General Meeting of the Company or 12 months from the date of this resolution, if earlier; and (e) the Company may make a contract for the purchase of Ordinary Shares under this authority before the expiry of this authority which would or might require to be executed wholly or partly after the expiry of such authority, and may make purchases of Ordinary Shares in pursuance of such a contract as if such authority had not expired. 14. THAT, a general meeting other than an annual general meeting may be called on not less than 14 clear days’ notice. notes 1. The right to vote at the meeting is determined by reference to the register of members. Only those members registered in the register of members of the Company as at 10.00am on 8 January 2012 (being 48 hours before the time for holding the meeting) or, in the event that the meeting is adjourned, in the register of members 48 hours before the time of any adjourned meeting, shall be entitled to attend or vote at the meeting in respect of the number of shares registered in their name at that time. Changes to entries in the register of members after 10.00am on 8 January 2012 or, in the event that the meeting is adjourned, after 48 hours before the time of any adjourned meeting, shall be disregarded in determining the rights of any person to attend or vote at the meeting. 2. A member is entitled to appoint one or more persons as proxies to exercise all or any of his rights to attend, speak and vote at the meeting. A proxy need not be a member of the Company. A form of proxy is enclosed and notes for completion can be found on the form and should be read carefully before it is completed. To be valid, the form of proxy must be completed, signed and sent to the offices of the Company’s registrars, Capita Registrars, PXS, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU together with the power of attorney or other authority (if any) under which it is signed or a notarially certified or office copy of the same, so as to arrive no later than 10.00am on 8 January 2012 (or, in the event that the meeting is adjourned, no later than 48 hours before the time of any adjourned meeting). 3. A member may appoint more than one proxy in relation to the meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held by him. To appoint more than one proxy, you will need to complete a separate proxy form in relation to each appointment. You may photocopy the enclosed proxy form, indicating clearly on each proxy form the name of the proxy you wish to appoint and the number of shares in relation to which the proxy is appointed. All forms must be signed and should be returned together in the same envelope. You can only appoint a proxy using the procedures set out in these notes and the notes to the proxy form. The right of a member under section 324 of the Companies Act 2006 (“2006 Act”) to appoint a proxy does not apply to a person nominated to enjoy information rights under section 146 of the 2006 Act. 4. The appointment of a proxy will not preclude a member from attending and voting in person at the meeting if he or she so wishes. 5. As at the close of business on the date of this notice, the Company’s issued share capital comprised 188,365,802 Ordinary Shares of 31⁄3p each. Each Ordinary Share carries the right to one vote at a general meeting of the Company. 6. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the resolution. If no voting indication is given, your proxy will vote or abstain from voting at his or her discretion. Your proxy will vote (or abstain from voting) as he or she thinks fit in relation to any other matter which is put before the meeting. The notes to the proxy form explain how to direct your proxy to vote on each resolution or withhold their vote. 7. In the case of joint holders, where more than one joint holders purports to appoint a proxy, only the appointment submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Company’s register of members in respect of the joint holding (the first named being the most senior). 8. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so by using the procedures described in the CREST Manual. CREST personal members or other CREST sponsored members and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s) who will be able to take the appropriate action on their behalf. 14887_TT_AR11_p38-88.indd 77 07/12/2011 21:55 Plc Annual Report and Financial Statements 2011 notiCe of annual General meetinG CONTINuED 78 9. In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a “CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland Limited (formerly CRESTCo’s) specifications and must contain the information required for such instructions, as described in the CREST Manual. The message, regardless of whether it constitutes the appointment of a proxy or an amendment to the instruction given to a previously appointed proxy, must, in order to be valid, be transmitted so as to be received by the issuers’ agent (ID RA10) by the latest time for receipt of proxy appointments specified in this notice. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which the registrars are able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time, any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means. CREST members and, where applicable, their CREST sponsors or voting service provider(s) should note that Euroclear UK & Ireland Limited does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. 10. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001. 11. Where a copy of this notice is being received by a person who has been nominated to enjoy information rights under section 146 of the 2006 Act (“nominee”): (a) the nominee may have a right under an agreement between the nominee and the member by whom he was appointed, to be appointed, or to have someone else appointed, as a proxy for the meeting; or (b) if the nominee does not have any such right or does not wish to exercise such right, the nominee may have a right under any such agreement to give instructions to the member as to the exercise of voting rights. 12. Capita Registrars maintain the Company’s share register. They also provide a telephone helpline service on 0871 664 0300 (calls cost 10p a minute plus network extras. Lines are open from 8.30am to 5.30pm, Monday to Friday). If you have any queries about voting or about your shareholding, please contact Capita Registrars. 13. Members have the right to ask questions at the meeting in accordance with section 319A of the 2006 Act. 14. The following documents are available for inspection by members at the registered office of the Company (except Bank Holidays) during the normal business hours and at the place of the meeting not less than 15 minutes prior to and during the meeting: (a) the register of Directors’ interests required to be kept under section 809 of the 2006 Act; and (b) copies of the Directors’ service contracts. 15. Information regarding the AGM, including the information required by section 311A of the 2006 Act, is available from the Company’s website – www.toppstiles.co.uk. r. parker Company Secretary 28 November 2011 registered office: Thorpe Way Grove Park Enderby Leicestershire LE19 1SU registered no: 3213782 14887_TT_AR11_p38-88.indd 78 07/12/2011 21:55 Plc Annual Report and Financial Statements 2011 explanatory notes to the notiCe of annual General meetinG Review of the business Governance Financial Statements Other information k 79 THE ANNUAL GENERAL MEETING of the Company will be held at the Company’s premises at Thorpe Way, Grove Park, Enderby, Leicestershire LE19 1SU on 10 January 2012 at 10.00am. Four of the resolutions are to be taken at this year’s Annual General Meeting as special business. By way of explanation of these and certain other resolutions: ordinary Business resolution 2 declaration of final dividend A final dividend of 0.6p per Ordinary Share is recommended by the Directors for payment to shareholders on the register of members of the Company at the close of business on 30 December 2011. Subject to approval by the Ordinary Shareholders at the Annual General Meeting, the dividend will be paid on 31 January 2012. An interim dividend of 0.5p was declared on 8 July 2011 which means the total dividend level will be 1.1p per Ordinary Share for the 52 weeks prior to 1 October 2011. resolutions 3 to 8 re-election of directors The Company’s Articles of Association require that all members of the Board of Directors submit themselves for re-election at least every three years with the exception of the Rt. Hon. J.M. Jack who has served for at least nine years and therefore retires and offers himself for re-election annually. Although not required by the Company’s articles, each of the remaining Directors will, in the interests of good corporate governance, retire voluntarily and offer himself for re-election. Brief biographical details about all the Directors appear on page 26 of the Annual Report and Financial Statements, with the exception of Claire Tiney, whose details can be found on our website at www.toppstiles.co.uk. special Business resolution 11 appointment of authority to issue shares The right of the Directors to allot further shares in the capital of the Company requires in most cases the prior authorisation of the shareholders in general meeting under section 551 of the Companies Act 2006 (“the 2006 Act”). Resolution 11 will be put to members as special business to authorise the Directors to allot Ordinary Shares with a nominal value of £2,090,651 out of the Company’s unissued share capital representing approximately 33.3% of the Company’s current issued share capital (excluding shares held in treasury). The Company currently holds nil Ordinary Shares in treasury. The Directors have no current intention of exercising the authority contained in Resolution 11 to allot further shares. The authority shall expire immediately following the Annual General Meeting next following the resolution or, if earlier, 15 months following the resolution being passed. Relevant Securities means: a Shares in the Company other than shares allotted pursuant to an employee share scheme (as defined by section 1166 of the 2006 Act); a right to subscribe for shares in the Company where the grant of the right itself constituted a Relevant Security; or a right to convert securities into shares in the Company where the grant of the right itself constituted a Relevant Security. a Any right to subscribe for or to convert any security into shares in the Company other than rights to subscribe for or convert any security into shares allotted pursuant to an employee share scheme (as defined by section 1166 of the 2006 Act). References to the allotment of Relevant Securities in the resolution include the grant of such rights. resolution 12 disapplication of statutory rights of pre-emption This proposed resolution seeks to obtain power under section 571 of the 2006 Act to enable the Directors to allot, for cash, shares with an aggregate nominal value of £313,629 equal to approximately 5% of the Company’s current issued share capital without being required first to offer such securities to existing shareholders. The Company will thereby be given greater flexibility when considering future opportunities but the interests of existing shareholders will be protected as, except in the case of a rights issue or the allotment of shares under the Company’s share option schemes, the Directors have no present intention to exercise its authority under this resolution to allot any part of the unissued share capital of the Company or, without the prior approval of the Company in general meeting, to make any issue which would effectively alter the control of the Company or the nature of its business. This authority will expire immediately following the Annual General Meeting next following the resolution or, if earlier, 15 months following the resolution being passed. 14887_TT_AR11_p38-88.indd 79 07/12/2011 21:55 Plc Annual Report and Financial Statements 2011 explanatory notes to the notiCe of annual General meetinG CONTINuED 80 resolution 13 authority to purchase ordinary shares At the Annual General Meeting, Ordinary Shareholders are being invited under Resolution 13 to grant authority to the Company to make market purchases of its Ordinary Shares. It is proposed such authority shall expire on the conclusion of the Annual General Meeting to be held in 2013 or 12 months from the date of this resolution, if earlier. This authority will be limited to the purchase of not more than 14.9% of the Ordinary Shares currently in issue. This represents the maximum amount of Ordinary Share capital in issue which is permitted before tender or partial offer to all shareholders is required to be made to perform any share buy-back. The maximum price payable under this authority will be 105% of the average of the middle market quotations of an Ordinary Share for the five business days before the relevant purchase and the minimum price will be 31⁄3p per Ordinary Share. In considering whether or not to purchase Ordinary Shares under the market purchase authority, the Directors will take into account cash resources, the effect on gearing and other investment opportunities before exercising the authority. In addition, the Company will only exercise the authority to make such a purchase in the market when the Directors consider it is in the best interests of the shareholders generally to do so and it should result in an increase in Earnings per Ordinary Share. As at 30 November 2011, there were options to subscribe for 6,080,346 equity shares outstanding under various schemes representing approximately 3.2% of the current issued share capital of the Company. If the authority sought by Resolution 13 was exercised in full, the number of outstanding options would represent approximately 3.8% of the issued share capital following the repurchase of shares. resolution 14 notice period for general meetings This resolution is required to reflect the implementation in August 2009 of the Shareholder Rights Directive. The regulation implementing this Directive increased the notice period for general meetings of the Company to 21 days. Previously the Company was able to call general meetings (other than an AGM) on 14 clear days’ notice and would like to preserve this ability going forward. In order to be able to do so shareholders must approve the calling of meetings on 14 days’ notice. Resolution 14 seeks such approval. The approval will be effective until the Company’s next Annual General Meeting, when it is intended that a similar resolution will be proposed. The Company will also need to meet the requirements for electronic voting under the Directive before it can call a general meeting on 14 days’ notice. 14887_TT_AR11_p38-88.indd 80 07/12/2011 21:55 Plc Annual Report and Financial Statements 2011 the team a Aamir Jamil Aaron Foster Aaron Smith Aaron Turner Abul Khashad Adam Boshir Adam Campion Adam Clarke Adam Close Adam Cook Adam Crowe Adam Davidson Adam Edwards Adam Ford Adam Gale Adam Green Adam Ireland Adam King Adam Laidlaw Adam Nuttall Adam Palmer Adam Riley Adam Rodriguez Adam Simkins Adam Voyce Adam Ward Adam Whittaker Adam Wolniewicz Adil Rajah Adrian Kimber Adrian Rimmington Aileen Crossley Ajay Arya Ajay Bhakri Akiyemi Orekoya Aklakud Duha Akommil Ali Alan Collins Alan Flynn Alan Hughes Alan Jones Alan Law Alan Monk Alan Parker Alan Rutherford Alan Saunders Alan Sinclair Alan Smalley Alan Sproston Alan White Alan Wrighting Alex Howe Alex Whitmore Alex Wilson Alexander Onions Alexander Penn Alexandria Murphy Alfred Kamara Ali Faheem Ali Rizvi Ali Siddique Alison Hunt Alison Walkinshaw Alistair Payne Allan Chigariro Allan Coomber Allan Harper Alvin Chinyanga Alvin Lapao Amanda Green Amanda Hullett Amandeep Singh Amit Bhargava Andrea Moon Andrea Reeves Andrew Baillie Andrew Belson Andrew Blackborow Andrew Bowden Andrew Brookfield Andrew Canham Andrew Chapman Andrew Clay Andrew Clayton Andrew Collins Andrew Cox Andrew Curr Andrew Curtis Andrew Davis Andrew Dawson Andrew Green Andrew Groucutt Andrew Hamilton Andrew Hanson Andrew Harrison Andrew Hastings Andrew Hill Andrew Hodgson Andrew Keattch Andrew Middleton Andrew Page Andrew Phillips Andrew Riley Andrew Salkeld Andrew Scorgie Andrew Scott Andrew Taylor Andrew Warne Andrew Waterfield Andrew Wathan Andrew Winterburn Andrew Wood Andrew Woodhouse Andrew Woods Andrew Young Andy Playfoot Andy Shaw Angela Capp Angela Morais Angela Tremelling Angelique Da Silva Ann Mathias Anna Kucharska Anna Timney Anna Wedrzyk Annabelle Price Annmarie Malone Ansar Ahmed Anthea Routley Anthony Aldred Anthony Alveranga Anthony Ashton Anthony Bradford Anthony Christopher Anthony Cox Anthony Daly Anthony Davies Anthony Docherty Anthony Eatock Anthony Gibby Anthony Gilbert Anthony Heskett Anthony James Anthony Linsell Anthony Marshall Anthony Molyneux Anthony Townsend Anthony Wood Antonia Rogers Antonio Perkins Antony Belham Anub Varghese Anuraag Parashar Anwar Marshall Arnold Harrison Aron Hoff Ashish Gouniyal Ashleigh Mackinnon Ashley Cutler Ashley Kent Ashley Siddons Asim Ali Astone Davids Ayden Young B Barbara Connor Barclay Pope Barrie Palmer Barry Bester Barry Edwards Barry Hodges Barry Jones Barry Taylor Barry Theobald Barry Veasey Barry Webber Ben Armitage Ben Baker Ben Bright Ben Brooker Ben Davis Ben Holloway Ben Sawyer Ben Stockton Ben Woollins Benjamin Hardie Benjamin Morais Benjamin Rich Benjamin Rowe Benjamin Willis Bernadette Peasland Bernard Fallon Bertil Boyles Beth Boulton Beth Pauls Bill Wylie Billy Decaille Billy Hutchins Bjorn Bjergfelt Bob Barlow Bolaji Adeyanju Bradley Ball Brandon Abels Brant Wells Review of the business Governance Financial Statements Other information k 81 Brendan Flynn Brett Goulden Brian Burke Brian Cariello Brian Cox Brian Crews Brian Dicks Brian Fisher Brian Flatters Brian King Bridget Rees Brigette Hale Bruce Fielding Bruce Garrod Bruce Jeffery Bruno Alves Bruno Bernasconi C Cade Somerville Calbert Hall Campbell Marr Carl Cook Carl Courtney Carl Cumberbatch Carl Dyke Carl Edlundh-Rose Carl Foster Carl Fraser Carl Hermitt Carl Paternoster Carl Roberts Carl Whatley Carlos Chowdhury Carlos Morais Carol Livingstone Caroline Bailey Caroline Bennett Caroline Chewter Caroline May Catherine Platt Chantelle Morgan Charlene Walpole Charles Ross Charles Taylor Charlotte Armstrong Charlotte Driscoll Charlotte Glynn Chelsea Gordon Cheryl Vearncombe Chetna Shah 14887_TT_AR11_p38-88.indd 81 07/12/2011 21:55 Plc Annual Report and Financial Statements 2011 the team CONTINuED 82 Chirag Patel Chloe Zeller Choudre Grobler Chris Bland Chris Butler Chris Cartey Chris Curtis Chris Foster Chris Heyes Chris Howe Chris Jensen Chris Nicholls Chris Sansby Chris Walker Chris White Christer Leth Christian Banham Christina Langridge Christine Hendry Christine Juggins Christine Thistlethwaite Christopher Beeson Christopher Bloy Christopher Bowles Christopher Burgess Christopher Collins Christopher Cooper Christopher Harbutt Christopher Holland Christopher Holt Christopher Hudson Christopher Lamb Christopher Mcwhinnie Christopher Moorhouse Christopher Nottle Christopher Santos Christopher Searle Christopher Stobbs Christopher Turley Christopher Walley Christopher Warren Christopher Williamson Chudry Ghani Cindy Cox Claire Chaffe Claire Rayton Clare Barden Claudia Weaver Clive Marriott Colin Gadd Colin Griffiths Colin Harvey Colin Hoban Colin Joy Colin Markham Colin Rymer Colin Skinner Colin Taylor Conrad Harrup Cora Morrison Corrina Bowers Craig Connor Craig Conway Craig Deveson Craig Dickson Craig Dolling Craig Hill Craig Lewis Craig Murphy Craig Nammontri Craig Nicholson Craig Ollard Craig Reed Craig Tetlow Curtis Hatton d Dale Stone Damian Sheppard Dan Clancy Daniel Bath Daniel Brain Daniel Branson Daniel Burdett Daniel Chant Daniel Childs Daniel Clayton Daniel Collins Daniel Cox Daniel Crotty Daniel Fallows Daniel Findlay Daniel Fulcher Daniel Hall Daniel Hill Daniel Hull Daniel Ingham Daniel Jones Daniel Keeble Daniel Lee Daniel Little Daniel Loft Daniel Mclean Daniel Merrett Daniel Musguin Daniel Robinson Daniel Saltmarsh Daniel Sheppard-brown Daniel Shimmen Daniel Spencer Daniel Thompson Daniel Thornley Daniel Van Aswegen Daniel Woodford Daniel Wren Daniel Zanettacci Danielle Whittaker Dannielle Fry Danny Burgess Darone Dubois-Gayere Darran Wood Darren Bebbington Darren Bradley Darren Connor Darren Doughty Darren Fletcher Darren Harper Darren Hyman Darren Mitchell Darren Morgan Darren Rawlings Darren Read Darren Rutledge Darren Square Darren Wagg Darron Kerr Daryl John Sims Dave Brooks Dave Jobling Dave Marsh David Atherton David Augustus David Binns David Blades David Bolingbroke David Brown David Burnikell David Butler David Carpenter David Critchlow David Dorney David Fisher David Godbold David Harper David Hatton David Hayers David Henderson David Hill David Hirst David Hope David Kershaw David Kettlewell David Knight David Lane David Linwood David Locke David Macartney David Martin David Matthews David Meers David Miller David Morris David Murray David Nichol David Oliver David Parr David Prime David Roper David Rowlands David Sassoon David Savage David Sheehy David Shewan David Smith David Steel David Stott David Sutcliffe David Thomasson David Townsley David Webb David Whitelaw David Wilson David Yallop Dawn Allan Dawn Gale Curtis Dawn Stares Dean Bull Dean Johnson Dean Kelly Dean Macmillan Dean Marshall Dean Miller Dean Newell Dean Stokes Dean Titchen Dean Woolley Debbie Demes Decland Speede Denis O Brien Denise Fishwick Dennis Cragen Dennis Jepson Dennis Jovellanos Dennis Lammas Denzil Johns Derek Amoo Derek Lambourn Derek Sim Derek Smith Derek Wooller Desmond Agyei Devindren Govender Dewi Williams Diane Shatford – Butcher Dilawar Ali Dilip Parmar Dinesh Amin Dipal Parikh Dishon Meade Divyesh Javiya Domantas Jankauskas Dominic Coates Dominic Hall Dominic Reilly Donald Magullian Donna Boulton Douglas Hartness Duane Glover Duncan Foy Duncan Fraser Dylan Roberts e Eamonn Clancy Edward Derbyshire Edward Murphy Elizabeth Morrissey Elizabeth Selfridge Emily Lenton Emily Williams Emma Fortes Emma Hatton Emma Leavis Emma Whatson Emmanuel Liwao Emran Mannan Ermiyas Girma 14887_TT_AR11_p38-88.indd 82 07/12/2011 21:55 Plc Annual Report and Financial Statements 2011 Review of the business Governance Financial Statements Other information k 83 George Wilson Georgina Catling Geraint Thorne Gerard Mallon Gethin Jordan Gianfranco Zanolini Giles Wheatley Gillian Grace Glen Holloway Glendale Canoville Glenn Claridge Glenn Elgy Glyn Jones Glyn Rogers Gordon Davies Goutam Saha Graham Beaney Graham Brophy Graham Cameron Graham Davidson Graham Ford Graham Jones Graham Vance Grant Harris Grant Woolway Gregory Barwick Gulraise Mirza Gurdeep Panesar Gursharan Bains Gursharn Ladhar Guy Ferguson h Hamid Deen Hammed Hussain Harjit Dhaliwal Haroon Cockar Harpreet Hansra Harriet Manning Harry Biggs Hassan Rajah Hazel Millington Helen Gosling Helen March Henry Oakley Henry Rowe Hitesh Nathu Hitesh Patel Hugh Selley f Faisal Ashraf Farid Haddad Farooq Younis Felipe Da Rocha West Finbarr Mcquaid Fiona Finnigan Fiona Grant Fitz Martin Frances Aylward Francesca Wright Francois Van Aswegen Frank Hibbert G G Style Gail Purves Gareth Carnegie Gareth Davies Gareth Hammond Gareth Roberts Gareth Ward Garry Case Garry Hardy Gary Ashdown Gary Asher Gary Bloomfield Gary Curtis Gary Gear Gary Marsden Gary Marshall Gary Parris-Munn Gary Purves Gary Shapcott Gary Thatcher Gary Wilcox Gary Woolmore Gavin Bennett Gavin Collins Gavin Jepson Gavin Magwood Gavin Mitchell Gavin Richardson Gediminas Merkys Gemma Mcbirnie Gemma Stephens George Latham George Martinesz George Peck George Skinner George Tuplin i Iain Arnott Ian Aikman Ian Bird Ian Bloomfield Ian Gould Ian Jones Ian Marshall Ian Mcalinden Ian Mcloughlin Ian Mcneish Ian Noon Ian Paterson Ian Shepherd Ian Sykes Ian Tivendale Ian Winterburn Ibrahim Cisse Imran Ashraf Imran Isat Iqbal Hussain Irene Dickinson Isaac Halstead Iwan Jones Izabela Krzyszkowska J Jabbar Shah Jack Cairns Jack Campany Jack Cassidy Jack Cleary Jack Coker Jack Maddison Jack O Neill Jack Thornley Jack Whitehead Jacob Gonzales Jacqueline Byrne Jailuene Peake Jair Sharp Jajwinder Harar Jake Haudiquet Jake Missen Jake Shopland Jake Woods James Bayley James Biesty James Bone James Butler James Cameron James Clifford James Curthoys James Eastham James Fox James Heard James Hollingshead James Judkins James Mcardle James Metcalf James Morgan James Murphy James Patston James Pearson James Pilfold James Rathbone James Robertson James Rolfe James Saunders James Stark James Stevens James Taylor James Thorning James Vander Plank Jamie Axten Jamie Durnan Jamie Evans Jamie Sia Jamie Thain Jamie Wenborn Jan Reddi Janet Riley Janice Millett Jared Rapsey Jarreth Hawkins Jason Buckley Jason Clare Jason Coupland Jason Darcy Jason Ealden Jason Field Jason Harper Jason Huges Jason Knox Jason Meadows Jason Morley Jason Nettleford Jason Perry Jason Pratt Jason Rose Jason Thomas Jayandrie Chetty Jayaprakash Paragjee Jayde Bailey Jaymal Arjan Jeannette Hastie Jeffrey Adubofour Jeffrey Armstrong Jemma Wyatt Jennifer Donlan Jennifer Wall Jenny Inkson Jenny Seabrook Jeremy Harris Jessica Mackenzie Jessica Thiari Jill Cox Jim Tuvey Joan Hicks Joanne Cox Joanne Elton Jodie Baigrie Joe Cox Joe Gregorace Joe Riddell Joe Smith John Bourke John Chinn John Cook John Duffy John Ellis John Fawkes John Forden John Foster John Gardner John Harris John Hartley John Hesp John Hickey John Hughes John Keouski John Lewis John Marris John Mclaren John Moat John Nelson John Page John Paine John Pilling John Shaw John Smith John Taylor John Thompson John Williams John Wright 14887_TT_AR11_p38-88.indd 83 07/12/2011 21:55 Plc Annual Report and Financial Statements 2011 the team CONTINuED 84 John-Paul Jones Jon Pringle Jon Thatcher Jonathan Adjekum Jonathan Bainbridge- Coombs Jonathan Benn Jonathan Bryant-williams Jonathan Evans Jonathan Francois Jonathan Hargreaves Jonathan Hicks Jonathan Morgan Jonathan Smith Jonathan Wade Jonathan Wallace Jonathan Williams Jonathan Woodroff Jonathon Hall Jonathon Ludlow Jonathon Sheerin Jon-Paul Hughes Jon-Paul Russell Jordan Farenden Josef Kinski Joseph Dolan Joseph Lawton Josephine Hilldrup Josh Dempster Josh Holmes Joshua Groener Joshua Rapley Jubair Ahmed Juginder Gill Julie Brachtvogel Julie Cox Julie Fewings Julie Jordan Juliet Wilford Justin Bradley K Kalpik Singh Kalpit Patel Kamlesh Shah Karen Brook Karen Sutcliffe Karl Atkins Karl Batterham Karl Johansson Karl Stephens Karl Verry Kashan Riley Kashif Munir Kate Cook Katherine Davis Katherine Rudkin Kathryn Baird Kathryn Robinson Katie Brindley Katie Slater Kawaljit Gulati Kayleigh Hanson Keilam Gilbert Keir Beeson Keith Ambrose Keith Earl Keith Fitzpatrick Keith Hughes Keith Johnson Keith Rudkin Keith Storrier Kelly Bell Kelly Savile Kelly-Anne O Connor Kenneth Owen Kenneth Pettengale Kenneth Williams Kerri Atkinson Kerry Hume Kerry Saunders Kevan Richardson Kevin Baker Kevin Bowtle Kevin Burchell Kevin Fox Kevin Hailes Kevin Hartley Kevin Hastings Kevin Hodson Kevin Jeans Kevin Jones Kevin Nicol Kevin Rowe Kevin Sherwood Kevin Thorne Kevin Tully Kieran Barnes-Warden Kieron Clarke Kim Liddle Kirsten Mortlock Kirsti Altass Kirstie Leonard Kris Bailey Krishan Ladwa Kristian Catterall Kristina Kane Kuldeep Singh Kunal Pandya l Lance Cale Laura Brice Laura Edwards Laura James Laura Johnson Laura Sweeney Laurence Jones Lauretta Clarke Leah Norris Leanne Palmer Lee Arrowsmith Lee Baxter Lee Clarke Lee Culley Lee Davis Lee Dering Lee Dover Lee Durrant Lee Etheridge Lee Fisher Lee Galloway Lee Gardner Lee Gornall Lee Henry Lee Hutchinson Lee Jacovou Lee James Lee Johnstone Lee Mayfield Lee Mcconnell Lee Phillips Lee Read Lee Shillibeer Lee Stephenson Lee Taylor Lee West Lee Wilkinson Leena Ramsaha Leigh Hyam Leighton Davies Leo Odoherty Leon Oneill Leon Strange Leonard Finch Lesley Watson Lesley Willcox Lesley Wilson Leslie Shemmeld Lester Marshall Lewis Axford Lewis Edwards Lewis Franklin Lewis Green Lewis Saunders Lewis Smith Lewis Walter Lewis Wenman Liam Allen Liam Fields Liam Fortin Liam Godfrey Liam Gulliver Liam Hodgkins Liam Hunt Liam Mulhall Liam Piper Lianne Harrison-Allcock Lilian Pilling Linda Scott Lindsey Thorburn Lisa Algar Lisa Bannister Lisa Hawkey Lisa Holmes Lloyd Jackson Lorna Hislop Loucas Louca Louis Johnson Louise Sprigg Louise Wilson Luke Gibbons Luke Gynnette Luke Kennedy Luke Kerr Luke Livermore Luke Mcnally Luke Potiphar Luke Saunders Lynette Grimes Lynn Pearson m Malcolm Ferguson Malcolm Temple Malik Ahmad Malik Khaliq Mandy Aidney Mansoor Ali Marc Breeze Marc Smith Marc Stevens Marcel Moore Marcin Sakowicz Marcus Scott Margaret Lawrie Margaret Potter Mark Allman Mark Atkinson Mark Bianchi Mark Bradbury Mark Brown Mark Burgess Mark Coe Mark Discombe Mark Dutton Mark Frisby Mark Fuller Mark Gasson Mark Geary Mark Hunter Mark Johnson Mark Johnston Mark Lever Mark Maciver Mark Palmer Mark Pancott Mark Stephens Mark Stone Mark Sweet Mark Tennant Mark Thompson Mark Vaughan Mark Waldock Mark Walters Mark Winder Mark Wright Marlon Barnes Martin Braddick Martin Byers Martin Derricott Martin Evans Martin Foster Martin Leon Martin Morris Martin Osborne Martin Siggers 14887_TT_AR11_p38-88.indd 84 07/12/2011 21:55 Plc Annual Report and Financial Statements 2011 Martin Smyth Martin Watt Martin Williams Martin Winterburn Martin Wys Martyn Spring Mary Smith Mary Syme Mathew Clucas Mathew Tapp Matt Hammersley Matt Hay Matthew Antell Matthew Attwood Matthew Britton Matthew Charleston Matthew Clamp Matthew Clayton Matthew Coward Matthew Dunne Matthew Fisher Matthew Foster Matthew Foulger Matthew Hawley Matthew Hill Matthew Hook Matthew King Matthew Knight Matthew Mcphee Matthew Moore Matthew Robinson Matthew Sigley Matthew Singleton Matthew Stuckey Matthew Welburn Matthew Wesson Matthew Whitlock Matthew Williams Matthew Woodhouse Matthew Wright Megan Beattie Mehmet Asdoyuran Melanie Gray Melanie Toole Melissa Wadman Melton Thompson Melvyn Chamberlain Metimiku Yohannes Michael Asumadu Michael Blinkhorne Michael Booth Michael Boughton Michael Bowden Michael Braithwaite Michael Buckley Michael Cable Michael Campbell Michael Coldwell Michael Cosgrove Michael Darroch Michael Earls Michael Fannon Michael Finn Michael Foley Michael Haggett Michael Hall Michael Harvey Michael Hopper Michael Huskisson Michael Jack Michael Jenks Michael Lay Michael Litster Michael Lovelock Michael Queen Michael Simcoe Michael Slater Michael Stewart Michael Van Sittert Michael Weeks Michele Poxon Michelle Furber Michelle Hill Michelle Kempson Mick Wells Mike Butler Mike Ingham Mike King Mike Potter Miles Burden Mitchell Williams Mitul Patel Mohamed Akhtar Mohamed Patel Mohammad Mukhtar Mohammed Amin Mohammed Jamil Mohammed Jimale Mohammed Nawaz Mohammed Parvaz Monique Lawrence Mr. Topps (retired) Mubashir Uddin Muhammad Anaib Mehmood Muhammad Kawsar Muhammad Mirza Murdo Martin n Narinder Chatha Narinder Rai Nathan Austin Nathan Bentley-Hicks Nathan Coulthard Nathan Edwards Nathan Hands Nathan Harry Nathan Heape Nathan Shaw Nathan Sobers Nathan Winterton Nathan Wolowicz Navesh Naidoo Neil Ammon Neil Brownley Neil Donkin Neil Hendy Neil Homan Neil Hughes Neil Jones Neil Ketnor Neil Southgate Neil Topping Neil Wardlaw Neil Williams Neill Wiltshire Nicholas Billyeald Nicholas Gadd Nicholas Kershaw Nicholas Lawrence Nicholas Ounstead Nicholas Payne Nicholas Walch Nicholas Withers Nicholaus Buchanan Nick Gussow Nick Lodge Nick Wardman Nicky Glenister Nicola Mcwatt Nicole Andrews Nigel Fleming Nigel Hickman Nigel Parry Niki Savva Nikki Jury Nikola Sutton Nilesh Kerai Noah Lawrie Norberto Estrada Numan Razaq Numan Usman o Oliver Clancy Olivia Pilson-wood Omid Ibrahimi Osemar Masaya p Paige Makepeace Pamela Cuffin Patrick Chambers Patrick Green Paul Aird Paul Baxter Paul Burkett Paul Burrow Paul Carter Paul Cartledge Paul Cavell Paul Chapman Paul Clark Paul Collett Paul Cowen Paul Cull Paul Dalby Paul Davey Paul Davies Paul Fitzsimmons Paul Fluester Paul Galvin Paul Goodhall Paul Holmes Paul Irving Paul Kelly Paul Lathrope Paul Laverty Paul McCabe Paul Mckenna Paul Miller Paul Mills Paul Nicholls Review of the business Governance Financial Statements Other information k 85 Paul Noyes Paul Ruddle Paul Silvester Paul Smith Paul Smitheringale Paul Starkey Paul Symonds Paul Tennant Paul Tregaskis Paul Vandendyck Paul Whittington Paul Wiltshaw Paula Budsworth Pauline Harrison Pawel Warych Penny Vanderplank Pete Bauer Peter Anderson Peter Brooks Peter Charters Peter Davey Peter Higgins Peter Hogg Peter Hughes Peter Jones Peter Lea Peter Mcintyre Peter Meredith Peter Nicholson Peter Simmonds Peter Steel Peter Turtle Peter Walmsley Peter Woods Peter Young Petr Stepan Phil Kelly Philip Cranston Philip Devine Philip Dunn Philip English Philip Gallop Philip Hawkes Philip Hibbert Philip Lewis Philip Mccarney Philip Trevis Phillip Ell Phillip Goodeve Phillip Hunt Phillip Walters Phillipa Hewitt 14887_TT_AR11_p38-88.indd 85 07/12/2011 21:55 Plc Annual Report and Financial Statements 2011 the team CONTINuED 86 Prakash Mistry Prakash Patel Premyslaw Swisloki q Quadeer Ahmed r Rachel Willcock Rachit Vadgama Rahul Rao Raj Surani Rajan Mehta Rajiv Vadgama Rakeem Zammruad Ranbia Kasbia Ravendra Bishun Ravikumar Patel Ray Jeakins Raymond Johnson Raymond Thompson Rea Tarran Rebecca Julier-goodwin Rebecca Oblein Rebecca Smith Reece Morgan Reg Anderton Rhea Kelly Rhys Hedges Rhys Kelland Rhys Sheridan Ricardo Malcolm Richard Banton Richard Bickers Richard Brookfield Richard Carter Richard Clark Richard Cooke Richard Davies Richard Edwards Richard Farrington Richard Fellows Richard Harris Richard Homan Richard Hopkin Richard Oates Richard Oldale Richard Slack Richard Small Richard Sumner Rickey Singleton Ricky Bishop Rob Owen Robel Ghebrewold Robert Adams Robert Adkins Robert Bellamy Robert Bindon Robert Brewin Robert Cairns Robert Chawner Robert Clarke Robert Collins Robert Exley Robert Fernandes Robert Frickey Robert George Robert Gilbert Robert Howes Robert Howker Robert Jay Robert Keohone Robert Kindred Robert King Robert Kreamer Robert Kweli Robert Lynch Robert Moss Robert Myers Robert Parker Robert Philpott Robert Prince Robert Swift Robin Moore Robin Perrin Robin Stagg Robin Thomson Rodney Meyer Roger Bailey Roger Gridley Roger Mark Lazenby Romaldo Rodrigues Ron Woolgar Rory Milne Roseanna Renshaw Ross Ashbrook Ross Copley Ross Hunt Ross Langford Ross Mcnair Roxanne Evans Roxanne Martin Roy Peasland Roy Redgate Rudy Sellar Russ Davis Russell Adgey Russell Shafer Russell Thornton Ryan Apark Ryan Curd Ryan Gomersall Ryan Jones Ryan Mason Ryan Randall Ryan Sinclair s Sabina Ali Sachin Radia Sagren Naidoo Salman Bawani Sam Francis Sam Harvey Sam Nortey Sam Orton Sam Ripley Samantha Barrett Samantha Herron Samantha Hunter Samantha Mussett Samantha Sayer Samantha Sumbler Sameer Jamdar Sampson Coomber Samson Okolosi Samuel Carey Samuel Fisher Samuel Lenny Samuel Major Samuel Prewer Sandip Sahota Sandra Ramsay Sanjeepan Balasubramaiam Saqib Ishfaq Sara Lowery Sarah Bacon Sarah Cassam Sarah Dobson Sarah Drake Sarah Kite Sarah Newcomb Sarah Ramm Sarah Rogerson Sarah Shirley Scott Ahmad Scott Birdseye Scott Bond Scott Campbell Scott Currie Scott Hatton Scott Meadows Scott Williams Scott Winchester Sean Cahill Sean Dare Sean Gee Sean Green Sean Mclean Sean Weatherby Serder Yusuf Shahid Mahmood Shana Doherty Shane Bryan Shane Daley Shane England Shane Malone Shane O’leary Shane Till Shannon Woods Sharon Beckett Sharon Buckley Shaun Barrett Shaun Bryan Shaun Douglas Shaun Harwood Shaun Mayes Shaun Pawsey Shaun Scott Shawdon Smith Sheila Myrie Shelley Carey Shelley Rutter Shirley Moore Shohale Ali Sian Austen Sian Griffiths Silvonne Mclean Simon Beare Simon Brookfield Simon Chappell Simon Crossland Simon Frew Simon Green Simon Grimmett Simon Jones Simon Lasham Simon Leslie Simon Lewis Simon Loach Simon Morgan Simon Neal Simon Palmer Simon Partridge Simon Pitt Simon Roberts Simon Witham Simone Turner Sinitta Maan Siobhan Ashman Stacy Sturdy Steffan Burns Stephanie Ailwood Stephanie Nevett Stephen Adams Stephen Benson Stephen Bloomfield Stephen Brown Stephen Collins Stephen Corkett Stephen Creasey Stephen Foote Stephen France Stephen Freeman Stephen Getty Stephen Green Stephen Hall Stephen Kelly Stephen Lewis Stephen Lopes Stephen Machin Stephen Marshall Stephen Morris Stephen Seymour Stephen Spurgeon Stephen Starkie Stephen Welsby Stephen West Steve Bristow Steve Gaylor Steve Smith Steve Wood Steven Buxton Steven Christie Steven Darbyshire Steven Dooley Steven Godwin 14887_TT_AR11_p38-88.indd 86 07/12/2011 21:55 Review of the business Governance Financial Statements Other information k 87 Plc Annual Report and Financial Statements 2011 Steven Howells Steven Jenkins Steven Kernot Steven Macarthur Steven Mackie Steven Ohara Steven Pressley Steven Richards Steven Shooter Steven Walker Steven Whitehead Stuart Baigent Stuart Barrett Stuart Bartlett Stuart Clarke Stuart Comer Stuart Corlett Stuart Davey Stuart Dixon Stuart Gorry Stuart Hall Stuart Munton Stuart Pemberton Stuart Rees Stuart Roscoe Stuart Ross Stuart Whitby Stuart Williams Sue Bill Suresh Mistry Surmukh Jandu Susan Attwell Susan Black Susan Henshall Susan Hulme Susanne Owen t Taimur Malik Tami Robinson Tanya Paterson Tanya Sharpe Terence Dooley Terence Downing Terry Salisbury Thomas Boulton Thomas Clutterbuck Thomas Crawford Thomas Cunningham Thomas Fry Thomas Hudspith Thomas Love Thomas Mackey Thomas Marriott Thomas Murray Thomas Newman Thomas Otley Thomas Parkes Thomas Ryan Thomas Swain Thomas Treadwell Thomas Wade Tim Bird Tim Ives Tim Tatlock Timothy Bentley Timothy Boardman Timothy Stanhope Timothy Tuff Tirup Patel Toby Collins Toby Hutton Todd Routledge Tom Evans Tom Lewis Tom Wood Toni Christine Frederick Tony Benson Tony Dedman Tony Havvas Tony Nunn Tony Watson Tracey Forrest Tracey Hansard Tracy Ryan Tracy Wickenden Trevor Thomas Tristan Hodge Tyrell Beckham Tyrone Godson-Charles u Umair Qureshi Upendra Dudhaiya Urmila Bhudia Uthayakumar Kulasegarampillai v Veronica Evett Victor Mensa Vikki Bachell Vilius Meilus Vince Barber Vinesh Goswami Vinod Joshi Vinsen Velvindron Vishal Acharya Vishal Maratha w Walkey Hilaire Warren Bester Wayne Farini Wayne Randall Wayne Wheeler Wendy Bruce Wesley Harrop Wesley Neukermans Will Bailey William Barreda William Brownsell William Gunshon William Lewinton William Mason William Mcphee William Ralls William Ryves y Yvonne Archer Yvonne Burgess Z Zaccai Newman Zachary Mcdowell Zack Shine Zahid Hossain Zainab Idris Zlatko Milovanovic Zoe Atkinson Zoe Derry Zoe Gough Zoe Langridge Zoe Mills 14887_TT_AR11_p38-88.indd 87 07/12/2011 21:55 Plc Annual Report and Financial Statements 2011 Store locationS 88 toppS tileS MidlandS Lincoln Newark Boston Mansfield Grantham Worksop Hull Grimsby Spalding Lincoln – Outer Circle Chesterfield Rotherham Meadow Hall Barnsley Doncaster Telford Shrewsbury Stoke-on-Trent Newcastle under Lyme Congleton Leek Nantwich Crewe Northwich Coventry Leicester Leicester – Grove Park Coventry – Binley Stratford upon Avon Rugby Birmingham – Solihull Nuneaton Topps Redditch Nottingham Long Eaton Cannock Wolverhampton Kidderminster Kings Heath Birmingham – Erdington Birmingham – Sheldon West Bromwich Tamworth Burton on Trent Derby – Osmaston Derby london Dagenham Romford Ilford Beckton Chingford Mile End Topps Edmonton Stamford Hill Enfield Waltham Cross Shoreditch Wapping Barking Topps Raynes Park Cheam Mitcham Charlton Penge Forest Hill West Wickham Beckenham Topps Orpington Catford – Bromley Road Old Kent Road Eltham Acton Southall Feltham Staples Corner St Albans Hemel Hempstead New Southgate Chesham Colindale Wembley Uxbridge Golders Green North Finchley Ruislip Borehamwood Westfields Harrow Croydon Croydon Purley Way Gunnersbury Brentford Highgate Camden Vauxhall Twickenham Fulham Wandsworth East Sheen Streatham Battersea Brixton Wimbledon SoutH Brentwood Southend Basildon Chelmsford Rayleigh Colchester Sudbury Braintree Clacton on Sea Grays Chelmsford – Springfield Harlow Bishop’s Stortford Bristol Swindon Hengrove Bridgewater Weston Super Mare Frome Bristol – Clevedon Chippenham Gloucester Cheltenham Worcester Evesham Ipswich – Martlesham Ipswich Norwich King’s Lynn Cambridge Great Yarmouth Bury St Edmunds Wisbech Thetford Huntingdon Cromer Lowestoft Guildford Farnborough Farnham Camberley Byfleet Brighton Gatwick Portsmouth Horsham Uckfield Newhaven East Molesey Chichester Lewes Bognor Regis Salisbury Fareham Topps Isle of Wight Basingstoke Winchester Reading Christchurch Newbury Poole Southampton – Millbrook Southampton – Hedgend Oxford Abingdon Oxford – Watlington Peterborough Stamford Kettering Wellingborough Windsor Slough Northampton Milton Keynes Banbury Luton St Neots Bedford Elms Buckingham Letchworth Aylesbury Welwyn Garden City Stevenage Watford Bristol – Cribbs Causeway Hereford Eastbourne Crayford Erith Sevenoaks Bexhill Maidstone Sittingbourne Tunbridge Wells Strood Broadstairs Tonbridge Canterbury Folkestone Ashford Yeovil Exeter Torquay Barnstaple Plymouth Taunton Launceston Exmouth Bodmin Tiverton Topps Truro WaleS Wrexham Cardiff – Hadfield Road Swansea – Llansamlet Bridgend Merthyr Tydfil Cross Hands Neath Cardiff – Newport Road Carmarthen Barry Haverfordwest Topps Swansea – Fforest Fach Flint Rhyl Holyhead Bangor nortH Manchester – Salford Manchester – Audenshaw Cheadle Manchester – Green Quarter Manchester – Sale Manchester – Stockport Manchester – Failsworth Manchester – Hyde Oldham Manchester – Openshaw Huddersfield Macclesfield Bolton Blackburn Carlisle Penrith Morecambe Barrow Blackpool Preston Cleveleys Chorley Workington Ormskirk Sunderland Stockton Newcastle on Tyne Durham Darlington York Harrogate Scarborough Wakefield Leeds Birstall Pontefract Bradford Chester Warrington Birkenhead Wigan Anfield Aintree St Helens Scotland Glasgow – Hillington Wishaw Glasgow – Greenock Falkirk Glasgow Glasgow – Shawfield Edinburgh – Leith Aberdeen Inverness Dundee Edinburgh – Sighthill Aberdeen – Bridge of Don Edinburgh – Kinnaird Glasgow – Govan Dumfries tile clearing HouSe MidlandS Norwich Northampton Cheltenham Nottingham Stoke-on-Trent Wolverhampton Stoke-on-Trent – Fenton Peterborough Kettering Birmingham – Great Barr Kidderminster london Hayes Charlton Orpington New Southgate Park Royal Dartford SoutH Ilford Harlow Swindon Eastbourne Bournemouth Exeter Plymouth nortH Hull Stockport Cheadle Doncaster Wigan Liverpool – Maghull Blackpool 14887_TT_AR11_p38-88.indd 88 08/12/2011 14:31 Plc Annual Report and Financial Statements 2011 inTroducTion Plc Annual Report and Financial Statements 2011 Review of the business Governance Financial Statements other information k “WiTh vERy chALLEnGinG TRAdinG condiTionS PERSiSTinG ThRoUGhoUT ThE SEcond hALF oF oUR FinAnciAL PERiod, oUR FocUS hAS bEEn on sTrengThening our markeT leading PosiTion. WE FURThER UPGRAdEd And ExPAndEd oUR SToRE ESTATE, conTinUEd ThE EvoLUTion oF ThE ToPPS TiLES oFFER And SUPPoRTEd ThiS WiTh new markeTing iniTiaTives in-SToRE, on TELEviSion And onLinE. in AddiTion, WE mAdE SomE signiFicanT inFrasTrucTure invesTmenTs AcRoSS ThE bUSinESS Which WiLL bEnEFiT oUR FUTURE PERFoRmAncE.” maTThew williams chiEF ExEcUTivE oFFicER conTenTs review oF The business Financial sTaTemenTs oTher inFormaTion 75 Five year record 76 notice of Annual General meeting 79 Explanatory notes to the notice of Annual General meeting 81 The team 88 Store locations 1 The year in brief 2 our strategy 3 chairman’s statement 5 chief Executive’s statement 10 business review 22 corporate Social Responsibility governance 26 directors 27 directors and advisors 28 directors’ report 31 corporate governance statement 33 Remuneration report 37 independent auditors’ report – consolidated financial statements 38 consolidated statement of financial performance 39 consolidated statement of financial position 40 consolidated statement of changes in equity 41 consolidated cash flow statement 42 notes to the consolidated financial statements 70 independent auditor’s report – company financial statements 71 company balance sheet 72 notes to the company financial statements 15stores operated by the Group in scotland 51stores operated by the Group in the north 16 stores operated by the Group in wales 63stores operated by the Group in london 57stores operated 118stores operated by the Group in the midlands by the Group in the south scotland north midlands wales london south Topps Tiles – store numbers Tile clearing house – store numbers Stores at the beginning of the period new stores opened Sub-total closures (including brand swaps) Total 275 17 292 –3 289 Stores at the beginning of the period new stores opened Sub-total closures (including brand swaps) Total 37 – 37 –6 31 designed and produced by radley Yeldar www.ry.com 14887_TT_AR11_cover.indd 2 07/12/2011 21:47 annual RepoRt and financial statements 2011 annual RepoRt and financial statements 2011 l P c A n n U A L R E P o R T A n d F i n A n c A L S T A T E m E n T S 2 0 1 1 i Topps Tiles Plc Thorpe Way, Grove Park, Enderby, Leicestershire LE19 1SU T 0116 282 8000 F 0116 282 8115 www.toppstiles.co.uk GREAT CHOICE | GREAT VALUE | GREAT SERVICE GREAT CHOICE. GREAT VALUE. GREAT SERVICE. 14887_TT_AR11_cover.indd 1 07/12/2011 21:47