Pre-tax profits at Topps Tiles have slumped from £17.6m to £7.5m in the 26 weeks to March 28, although the figure exceeds analysts’ forecasts.

Group like-for-like sales plummeted 18.5 per cent, while group total sales dropped 13.4 per cent to £92.1m.

In the first seven weeks of the second half, group like-for-likes faired better, falling 11.9 per cent. Group total sales dropped 9.6 per cent.

UK gross margin fell from 63.2 per cent to 60.4 per cent due to the weakness of sterling, while operating costs were reduced to £44.4m, compared with £45.9m last year.

Topps Tiles said its business in Holland has become “increasingly challenging”. Like-for-likes have declined 17 per cent, against a decline of 3.7 per cent last year. Its losses have widened from £0.1m to £0.6m. The retailer said that as a result it is “continuing to review the business very closely”. It added there are “no plans currently to expand the business further”. It has closed four stores in the period and it is now trading from 18.

The retailer said that since having its credit insurance removed in February – which it announced to the Stock Exchange – its suppliers have continued to supply to it and there has therefore been “no material impact on the business as a result”.

The retailer will not pay an interim dividend and expects to be able to operate in its current financial covenants for the next 12 months.

Chief executive Matthew Williams said: “The business continues to demonstrate its resilience during a challenging trading period. We are delivering on our key financial and operational objectives and as the market leading brand we are confident that we will benefit as competitors withdraw and conditions improve.”

House broker, KBC Peel Hunt analyst John Stevenson, said Topps Tiles’ pre-tax profit performance came in “well ahead of KBC forecasts”.

He said: “With current trade showing signs of improvement, the board does not expect to breach debt covenants, making a refinancing less likely.”