REG - Topps Tiles - AGM Requisition Notices

Topps TilesAnnouncement

07/12/2022 07:00

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RNS Number : 8263I  Topps Tiles PLC  07 December 2022

 7 December 2022

 

 

Topps Tiles Plc

Receipt of Requisition Notices

 

Topps Tiles Plc (LSE: TPT) ("Topps", the "Company" and together with its
subsidiary undertakings, the "Group"), the UK's leading tile specialist,
announces that on 6 December 2022 it received requisition notices (the
"Requisition Notices") pursuant to section 338 of the Companies Act 2006 (the
"Act") requiring that the board of directors of the Company (the "Board" or
the "Directors") include resolutions (the "Requisitioned Resolutions") in the
notice of the Company's annual general meeting proposed to be held on 18
January 2023 (the "AGM") as follows:

·      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 Michael Bartusiak, having consented to act, be appointed as
a non-executive director of the Company with immediate effect.

The Requisition Notices have been served by Lynchwood Nominees Limited on
behalf of MS Galleon GmbH ("MSG") which currently holds approximately 29.9 per
cent. of the Company's voting share capital.

The Requisition Notices include a request that the Company circulate an
explanatory statement in respect of each of the Requisitioned Resolutions in
accordance with section 314 of the Act.

The Board does not consider the Requisitioned Resolutions to be in the best
interests of the Company and its shareholders as a whole and, therefore,
intends to recommend that shareholders vote AGAINST the Requisitioned
Resolutions at the AGM.

 

Background to the Requisition Notices

MSG owns Cersanit, a major European producer of tiles, in addition to having a
range of home improvement and tile retailing interests, primarily in the
Polish market.

Topps first received a notification of shareholding from MSG in May 2020,
stating that MSG had a 4.1 per cent. beneficial interest in the voting share
capital of Topps.  By November 2020, MSG had built its shareholding to 20 per
cent.  During this period, the Company engaged in regular dialogue with MSG,
in line with its stewardship practice with its other major shareholders.  In
this initial phase, Cersanit was a minor supplier to Topps.

During 2021, MSG approached Topps regarding (i) the potential appointment of
an MSG representative to the Board, and (ii) a proposal that Topps should
purchase a greater proportion of its tiles from Cersanit.  MSG has
consistently set out its 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 per cent.

Topps did not consider this to be in the interests of shareholders as a whole
and sought to engage with MSG to explain that the Company's expertise in
ranging, sourcing and procurement of tiles from a wide range of suppliers on a
global basis is a core part of its competitive advantage and its iterative
programme to develop and produce differentiated products that are innovative,
of high quality and exclusive to Topps Group is a key strength of the Group.

In addition, Topps' sourcing policy does not allow for greater than 10 per
cent. of tile purchases to come from any one supplier in order to avoid
concentration risk.  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 per cent. of its cost of goods sold (by value) from Cersanit
on commercial arm's length terms.

In order to consider the merits of appointing a representative of MSG to the
Board, the Board requested that MSG should set out in writing its rationale
for a Board seat, including why an MSG appointed non-executive director would
be additive to the already well-qualified Board, why the appointment would be
in the interests of all Topps shareholders, and how conflicts of interest
would be managed.  No proposal was received.

Subsequently, MSG, through its nominee, voted against the re-appointment of
Darren Shapland as Chairman of Topps, as well as a number of other customary
resolutions, at the 2022 annual general meeting.  Since July 2022, MSG has
increased its beneficial shareholding in Topps to 29.9 per cent. of the
Company's voting share capital.

More recently on 25 November 2022, MSG requested, via Lidia Wolfinger (who is
one of the proposed MSG non-executive directors as set out above), 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.

 

Board's rejection of the proposals

The Board unanimously rejects these proposals, which it believes present a
clear conflict of interest between MSG's objective for Cersanit to be a major
supplier of Topps and the interests of all Topps shareholders.  In
particular, 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.

The Board is currently compliant with the UK Corporate Governance Code's
requirements in relation to board composition, 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 pre-pandemic, as
evidenced by the Topps' recent FY22 results, which announced a second
consecutive record year of revenue and significant market share gains(1).

The Board believes that the proposed appointment of MSG's non-executive
directors has the primary objective of aligning Topps' business and its
strategy to MSG's commercial objectives as owner of Cersanit and is therefore
not in the best interests of the Company and its shareholders as a whole.

In the light of the Requisition Notices, the Board has consulted certain other
major shareholders of Topps representing 39.1 per cent. of the Company's
voting share capital, and has received confirmation of their intention to vote
against the Requisitioned Resolutions.  These confirmations have been
received from the Company's three largest shareholders other than MSG -
Aberforth Partners LLP (acting in its capacity as discretionary fund manager
for clients), Mr Stuart Williams and Invesco Asset Management Limited - as
well as Axa Investment Managers UK Limited and others.

 

Accordingly, the Board does not consider the Requisitioned Resolutions to be
in the best interests of the Company and its shareholders as a whole and,
therefore, intends to recommend that shareholders vote AGAINST the
Requisitioned Resolutions at the AGM.

Darren Shapland, Non-Executive Chairman of Topps, said:

 

"The Board strongly rejects these proposals, which it believes expose a clear
conflict of interest between MSG's objectives for Cersanit and the interests
of all Topps shareholders.  The Board welcomes the support received from our
other largest shareholders, who have confirmed their intention to vote against
the Requisitioned Resolutions at the AGM."

 

Keith Down, Senior Independent Director of Topps, said:

 

"The Board unanimously rejects these resolutions which it does not consider to
be in the best interests of the Company and its shareholders as a whole.  In
proposing a resolution to remove the Chairman, who has led communications with
MSG on behalf of the Board, MSG is seeking simply to strengthen its own
position."

 

A further announcement will be made in due course.

 

The person responsible for arranging the release of this announcement on
behalf of the Company is Helen Evans, Company Secretary.

 

 

(1) The Group announced full year results on 29 November for the 52 week
period ended 1 October 2022.  Revenues of £247.2 million were up 8.4% year
on year, the second consecutive record year of revenue for the Group.
Adjusted pre-tax profit was £15.6 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 £28.0 million higher (a 12.8%
increase) and adjusted profit before tax was up £1.9 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/George Peele                                            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 (http://www.toppstiles.co.uk) ,
www.parkside.co.uk (http://www.parkside.co.uk) , www.protilertools.co.uk
(http://www.protilertools.co.uk) , www.northantstools.co.uk
(http://www.northantstools.co.uk) , www.premiumtiletrim.co.uk
(http://www.premiumtiletrim.co.uk) and www.tilewarehouse.co.uk
(http://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/
(http://www.toppstilesplc.com/)

 

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