Topps Tiles defends technique amid crucial letter from distinguished investor

Topps Tiles has hit back at a major shareholder who accused the firm of numerous failures and called for an overhaul of its management and strategy.

MS Galleon, which owns a 29.9 per cent stake in Britain’s largest tile retailer, warned the business was in ‘significant danger’ of losing further market share to rivals.

In an open letter written by its managing director, Piotr Lipko, the Vienna-based company blamed Topps’ leadership for multiple ‘strategic missteps and operational failures.’

Lipko claimed the business had displayed a ‘complete failure’ to adapt to the changing retail backdrop and had shown a ‘continued lack of engagement and willingness’ to listen to MS Galleon’s concerns.

He also lambasted Topps Tiles for a ‘disastrous’ takeover of CTD Tiles, whose brands and intellectual property, along with 30 stores, were bought out of administration in August.

It urged the company to perform a ‘comprehensive review’ of its leadership and strategy to help create a more omnichannel and only-focused business.

Boardroom row: Topps Tiles is battling its biggest shareholder MSG, which has called for its chairman to be ousted and for two representatives to take seats on its board

The letter was published two days after the results showed Topps Tiles’ slumped to a £16.2million pre-tax loss in the year ending 28 September following a 9.1 per cent drop in like-for-like revenues.

MS Galleon said the group’s sales had been comparably weaker than those of peers such as Wickes, Victorian Plumbing, and Screwfix owner Kingfisher.

In response, Topps Tiles noted its like-for-like sales had remained flat since 2019 despite the broader UK tile market having contracted by around 20 per cent over the same period.

Paul Forman, its chairman, said: ‘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.’

Under its ‘Mission 365’ strategy announced in May, Topps Tiles is targeting annual revenues of £365million and adjusted pre-tax margins of between 8 and 10 per cent over the medium term.

The Leicestershire-based group hopes to achieve this by branching into new product categories, boosting B2B sales and developing the online Pro-Tiler and Tile Warehouse businesses.

It said the CTD acquisition would ‘significantly accelerate’ its growth among B2B customers and was finalised after the ‘appropriate’ due diligence with advisors.

Dan Coatsworth, investment analyst at AJ Bell, said that while Topps Tiles has robustly defended its strategy, ‘with the share price close to decade lows, there are cracks in the facade of the company’s argument.’

He added: ‘The current management argue they are taking share in a difficult market.

‘However, doing less badly than the competition is not the most compelling argument to make, even if it is a valid one.’

Topps Tiles shares were 0.25 per cent lower at 39.9p by midday on Monday, taking their declines this year to around 18 per cent.