TIDMTPT
RNS Number : 8703L
Topps Tiles PLC
06 January 2023
6 January 2023
Topps Tiles Plc
Update on AGM resolutions
Topps Tiles Plc (LSE: TPT) ("Topps", the "Company" and together
with its subsidiary undertakings, the "Group"), the UK's leading
tile specialist, provides an update in connection with the
requisition notices received by the Company on 6 December 2022 (the
"Requisition Notices"), served on behalf of MS Galleon GmbH ("MSG")
which required the Board to include resolutions (the "Requisitioned
Resolutions") in the notice of the Company's annual general meeting
to be held on 18 January 2023 (the "AGM").
-- The Topps board of directors (the "Board") has now become
aware that MSG has been contacting certain Topps shareholders
individually, with information which contradicts previous
statements made directly to Topps around the link between
sourcing and MSG's equity interest in the Company;
-- In addition to the potential conflict of interest around
sourcing, the Board believes MSG may also be preparing
to launch its Nexterio tile retail brand in the UK, potentially
establishing a direct competitor to Topps, which would
create a further material conflict of interest;
-- The Company has secured further support from key shareholders.
Over 41 per cent. of Topps' shareholders have now committed
to vote against the Requisitioned Resolutions
In advance of the AGM, the Company would like to provide the
following additional key information to its shareholders:
Further information is provided below.
The Requisition Notices
-- that Darren Shapland be removed from office as a director
of the Company, and from the position of Non-Executive Chairman
of the Company, with immediate effect;
-- that Lidia Wolfinger, having consented to act, be appointed
as a non-executive director of the Company with immediate
effect; and
-- that Michal Bartusiak, having consented to act, be appointed
as a non-executive director of the Company with immediate
effect.
As previously announced, the Requisitioned Resolutions served by
MSG are as follows:
MSG currently beneficially owns approximately 29.8 per cent. of
the Company's voting share capital. Lidia Wolfinger and Michal
Bartusiak are both employees of companies owned by MSG.
The Board does not consider the Requisitioned Resolutions to be
in the best interests of the Company and its shareholders as a
whole and has therefore recommended that shareholders vote AGAINST
the Requisitioned Resolutions at the AGM.
Sourcing linked to equity
The Board outlined its position in detail in its announcement of
7 December 2022. In summary, the Board believes that the proposed
appointment of MSG's non-executive directors has the primary
objective of aligning Topps' business and strategy to MSG's
commercial objectives as owner of Cersanit, a manufacturer of
tiles, and is therefore not in the best interests of the Company
and Topps' shareholders as a whole.
Since its announcement of 7 December 2022, the Topps Board
understands that MSG has been contacting certain Topps shareholders
individually in an attempt to garner support for the Requisitioned
Resolutions. Information provided to shareholders by MSG included a
statement that it had recently discussed increasing its share of
Topps' product purchases to 5 per cent.
However, this statement is not an accurate representation of the
entirety of those discussions and directly contradicts statements
made by MSG to Topps. MSG has, on a number of occasions, directly
linked the level of its equity holding in the Company with the
level of supply that it wishes Topps to source from Cersanit. To
this end, one of the proposed directors, Lidia Wolfinger, requested
as recently as 25 November 2022 that Topps should source 29.9 per
cent. of its tile purchases from Cersanit in line with MSG's
shareholding in Topps, with interim stage gates for achieving a 5
per cent. and then 10 per cent. share over the short term(1) .
Moreover, when Topps has reviewed opportunities to source
products from Cersanit, the frequent conclusion has been that as a
supplier it is uncompetitive when compared with other manufacturers
of similar products.
The Board continues to believe that all sourcing should be
conducted on an arms-length commercial basis. In addition, a
diverse global supply chain is a key source of competitive
advantage for Topps and the Board believes strongly that becoming
overly reliant on a single supplier is not in the best interests of
the Company and its shareholders as a whole. Topps' sourcing policy
does not allow for more than 10 per cent. of tile purchases to come
from any one supplier in order to avoid concentration risk.
The Board believes it is incompatible for the proposed
non-executive directors to have the target of increasing tile
purchases from Cersanit to 29.9 per cent., whilst at the same time
acting in the best interests of all shareholders of Topps.
Control linked to equity
The Board has tried to engage constructively with MSG but in its
interactions with Topps, MSG has made it clear on a number of
occasions that it believes that the size of its shareholding
entitles it to expect the Company's management and the Board to
comply with its requests. Previous requests have extended to
sourcing, the composition of the Board, and also supporting MSG's
strategic plans for UK growth. The Board sees no linkage between a
minority equity stake and control of the Company and believes lack
of compliance with MSG's requests led to MSG voting against Darren
Shapland's re-election at the 2022 annual general meeting and that
this is also driving the proposal to remove Darren from the Board
as well as the proposed appointment of two new directors
representing MSG in 2023.
The Board is currently compliant with the UK Corporate
Governance Code's requirements in relation to board composition. It
is well qualified and experienced and has helped the executive team
steer the business through the COVID-19 pandemic to a position
which is stronger than before the pandemic. This is evidenced by
Topps' recent FY22 results, which announced a second consecutive
record year of revenue and significant market share gains(2) .
Potential competitor
MSG owns Nexterio, a retailer of tiles and associated products
with over 40 outlets in Poland, which the Board understands is
being prepared for a launch into the UK. A new company, Nexterio.UK
Limited was incorporated on 22 November 2022, the website
www.nexterio.co.uk has been registered and the Board understands a
search for suitable trading locations around the UK is underway.
Nexterio would be a direct competitor to Topps, and the Board
believes that the appointment of non-executive directors onto the
Board who represent a direct competitor would be a further conflict
of interest and would not be in the interests of all shareholders
of Topps.
Update on shareholder engagement
Following its announcement on 7 December 2022, the Board has
been contacted by a number of other large institutions to confirm
their support for the Board's position. Together with the major
shareholders listed in the original announcement, shareholders
representing 41.3 per cent. of the Company's voting share capital
have now confirmed their intention to vote against the
Requisitioned Resolutions.
Darren Shapland, Non-Executive Chairman of Topps, said:
"The Board continues to believe that these proposals would
expose shareholders to a number of serious conflicts of interest
and are not therefore in the interests of all shareholders of the
Company. The Board welcomes the strong support received from other
large shareholders who support the Board's position in voting
against the Requisitioned Resolutions at the AGM."
Keith Down, Senior Independent Director of Topps, said:
"The Board has unanimously rejected these resolutions which it
does not believe are in the best interests of the Company and its
shareholders as a whole. MSG is attempting to remove the Chairman,
who has been leading communications with MSG on behalf of the
Board, to allow it to increase its control over the business."
(1) In the financial year ended 1 October 2022, Topps sourced
1.1 per cent. of its cost of goods sold (by value) from Cersanit on
commercial arm's length terms.
(2) The Group announced full year results on 29 November for the
52 week period ended 1 October 2022. Revenues of GBP247.2 million
were up 8.4% year on year, the second consecutive record year of
revenue for the Group. Adjusted pre-tax profit was GBP15.6 million,
up 4.0% year on year. Estimated market share increased 1.4
percentage points to 19.0%. The full year dividend of 3.6 pence per
share (including a proposed final dividend of 2.6 pence per share)
was up 16.1% year on year. Relative to 2019, the last full year
before Covid-19, Group sales in 2022 were GBP28.0 million higher (a
12.8% increase) and adjusted profit before tax was up GBP1.9
million (a 14.1% increase). Note that adjusted profit before tax in
2019 has been restated in line with the IFRIC agenda decision on
cloud computing and includes the trading loss from the Parkside
brand which was excluded from adjusted profit at the time.
Enquiries:
Topps Tiles Plc +44 (0) 116 282 8000
Helen Evans, Company Secretary
Citigate Dewe Rogerson +44 (0) 20 7638 9571
Kevin Smith/Ellen Wilton toppstiles@citigatedewerogerson.com
Notes to editors
Topps Tiles Plc is the UK's leading specialist supplier of tiles
and associated products, targeting the UK domestic refurbishment
and commercial markets and serving homeowners, trade customers,
architects, designers and contractors from 304 nationwide Topps
Tiles stores, four commercial showrooms and six websites:
www.toppstiles.co.uk , www.parkside.co.uk , www.protilertools.co.uk
, www.northantstools.co.uk , www.premiumtiletrim.co.uk and
www.tilewarehouse.co.uk .
Since opening its first store in 1963, Topps has maintained a
simple operating philosophy -- inspiring customers with unrivalled
product choice and providing exceptional levels of customer
service. For further information on the Group, please visit
http://www.toppstilesplc.com/
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END
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