Topps Tiles has fought back against claims made by its biggest shareholder that the decision to buy CTD Tiles earlier this year was “irrational” and “detrimental” to the business.
On Sunday, The Times reported that Austrian-based investor MS Galleon – which has an almost 30% stake in the business – had called for an overhaul of the company’s senior management and strategy. In the article, MS Galleon said it believes Topps is guilty of a “complete failure to adapt to the changing retail landscape”.
According to The Times, Piotr Lipko, managing director of MS Galleon, sent a letter to Topps Tiles chairman Paul Forman last week, in which he highlighted so-called “costly blunders” made by the company.
He also described Topps’ acquisition of CTD Tiles in August as “unequivocally irrational” and “highly detrimental” to the interests of the Topps Tiles business. Lipko also said he had “grown frustrated” with Forman’s lack of engagement.
His letter follows the release of Topps Tiles’ latest financial results, in which the retailer admitted it had experienced a worrying drop of almost 50% in its pre-tax profits, which it attributed to a lack of interest in home renovation in the current market.
However, Topps Tiles has today responded to Lipko’s criticism, and has defended its acquisition of CTD Tiles as “strategically compelling”.
The retailer says that because CTD is a trade-focused brand, it believes the acquisition will “significantly accelerate the Group’s growth in the commercial market”. It also emphasised that the deal was completed after appropriate due diligence from its advisors.
Topps Tiles also offered a justification of its lacklustre recent trading results. The business said that although its adjusted revenue declined by over 5% year-on-year, it estimates the overall market is down by around 10-15%, so it considers this a positive result.
Additionally, it says the UK tile market is estimated to be down by around 20%, yet its own like-for-like revenue has remained flat instead.
As well as the company’s response to recent shareholder comments, Topps Tiles chairman Paul Foreman commented: “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.”
The comments made by MS Galleon are not the first time that the shareholder has butted heads with the Topps Tiles board. In 2022, it challenged the company’s board of directors, and tried to have its chairman at the time, Darren Shapland, removed from office. It then proposed to have two of its own members, Lidia Wolfinger and Michael Bartusiak, also appointed to the board.
After the challenge, the Topps Tiles board said it didn’t consider the resolutions proposed by MS Galleon to be in the company’s best interests, and recommended that shareholders voted against the resolution at the company’s January 2023 meeting.
Following Topps Tiles decision to acquire the CTD Tiles brand earlier in the year, the UK’s Competitions and Markets Authority (CMA) said it had launched an investigation into the deal in October. As of this month, the investigation is still ongoing. However, Topps Tiles is forbidden from integrating CTD Tiles stores into its own business until the CMA case has been cleared.
