REG - Topps Tiles - Update on AGM resolutions

Topps TilesAnnouncement

06/01/2023 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230106:nRSF8703La&default-theme=true

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 (http://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 £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/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 (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/)

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  NOADDGDBBXGDGXU