Topps Tiles Responds To Media Comment

Over the weekend, The Times reported that Topps Tiles' largest shareholder - Austrian investor MS Galleon - had called for a management and strategy overhaul of the business.

The Times said Piotr Lipko, MD of MS Galleon, had written to Paul Forman, Topps Tiles’ chairman, claiming there had been a “complete failure” to adapt to the changing retail landscape. Lipko also described the August acquisition of CTD Tiles, which is currently being investigated by the CMA, as “unequivocally irrational” and “highly detrimental” to the interests of the Topps Tiles business.

MS Galleon is invested in and owns companies in a range of sectors, including a number of Polish bathroom, flooring and tile businesses. It challenged the Topps Tiles board in December 2022, attempting to oust then chairman Darren Shapland and installing two of its own team as non-executive directors. 

In 2021, MS Galleon approached Topps regarding the potential appointment of a representative to the Board, and a proposal that Topps should purchase a greater proportion of its tiles from Cersanit - a major European producer of tiles, owned by MS Galleon. The company was of the belief that the proportion of Topps’ tile supply purchased from Cersanit and its representation on the Topps Board should directly reflect its shareholding in Topps, which at that point was approximately 20%. Topps Tiles said at the time that its sourcing policy does not allow for greater than 10% of tile purchases to come from any one supplier in order to avoid concentration risk, adding that any purchases from Cersanit would also need to comply with Chapter 11 of the UK Financial Conduct Authority’s Listing Rules on related party transactions.  In the financial year ending 2 October 2021, Topps sourced 0.5% of its cost of goods sold (by value) from Cersanit on commercial arm’s length terms.  

MS Galleon currently holds 29.9% of the shares of the business. 

Topps Tiles responded with the following statement: 

Topps Tiles Plc (“Topps Group”, or the “Group”), the UK's leading tile specialist, notes recent media comment.

As announced in its 2024 full year results on 26 November 2024, the Group would note the following:

• Topps Group is continuing to take market share in a difficult trading environment for RMI and especially bigger ticket spend:
  
  o In FY24, while the substantially weaker consumer environment saw Topps Group adjusted revenue decline 5.4% year on year, this was a substantial out-performance of an overall market which was estimated to be down 10-15%
  
  o Since 2019, the UK tile market is estimated to be down c.20%, whereas Group LFL revenue has remained flat, and total revenue has increased by 14.9% through successful inorganic growth such as the Pro-Tiler acquisition o In the first eight weeks of FY25, Group sales are up 1.2% (excluding CTD) 
  
  
•  The Group announced strong initial progress against the five growth initiatives underpinning ‘Mission 365’, its strategic plan over the medium term to grow Group sales to £365 million, with an adjusted PBT margin of 8-10%
  
  
• Specifically, the Group noted the development of its trade digital offer; the significant expansion of its addressable market into hard surface coverings; increased trade B2B opportunities with the acquisition of CTD Tiles; and further strong growth in online pureplay, with Pro Tiler revenue up over 30% 
  
  
• Topps Group has invested significantly in expanding its digital operations over the last five years and the business is truly omni-channel with 18% of group revenues coming from online, and investment in the Group’s digital offer for trade customers driving further growth
  
  
• The CTD acquisition is strategically compelling as it is a trade-focused brand which will significantly accelerate the Group’s growth in the commercial market. The acquisition was completed after appropriate due diligence with advisors
  
  
• A clear strategy and robust balance sheet with £38.7 million cash headroom leaves the Group well placed to deliver significant medium term growth 

Paul Forman, Chairman, said: “We engage with all our larger shareholders on a regular basis and listen closely to their views. Our strategy was reviewed in April and presented to shareholders in May, with further updates given last week. Further expansion of our digital capabilities is at the heart of many of these growth initiatives. Our latest results show that we continue to take market share, consistently outperforming the wider tile market despite very challenging trading conditions. We believe this demonstrates the effectiveness of our strategy, which has the full support of the Board.”

Source : Topps Tiles

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