Discount retailer The Works is bracing for a boardroom showdown after activist investor Kelso demanded the appointment of a retired private equity partner as a director, a move the company warns could destabilize its growth strategy.

Kelso, a London-listed activist investor, has called on The Works to install Graeme Coulthard, a retired private equity specialist, as a director at the company's annual general meeting scheduled for early next month. The proposal will now be put to a shareholder vote.

Company Urges Shareholders to Reject the Proposal

The retailer, which operates roughly 500 stores across the UK and specialises in toys and arts and crafts, disclosed on Thursday that it had urged Kelso to withdraw the request, but the activist investor indicated it "remained intent on proceeding."

The Works said it informed Kelso that the appointment "would not be in the best interests of the company or its stakeholders and would be more likely to undermine, rather than enhance, long-term value creation." The company is now calling on its investors to vote down the proposal.

The retailer cautioned that Coulthard's appointment would "create an imbalance in governance and potentially result in particular shareholder interests being prioritised over those of the broader shareholder base, with a consequent risk of value destruction."

Questions Over Candidate's Expertise

The Works questioned Coulthard's qualifications, telling investors he "has limited experience as a director of a listed company and no executive experience in multi-site value retail operations."

Coulthard, who holds an eight per cent stake in The Works, served as a partner at London-based private equity firm Charterhouse for 19 years before retiring in 2017. He previously sat on the board of Card Factory for nearly a year, losing his seat in February 2015 when Charterhouse sold its position in the retailer (City AM).

"While Mr Coulthard has a background in accountancy, the board already has significant expertise in this area and notes that his experience is primarily as a private equity investor rather than as an operator of businesses," The Works stated.

The retailer also asserted that Coulthard has not completed the due diligence checks required to qualify as a director of an AIM-listed company. AIM, the London Stock Exchange's junior market for smaller growth companies, imposes lighter regulatory requirements than the main market but still mandates standard director vetting procedures.

Following the company's public rebuttal, The Works' shares dropped by more than four per cent to 89p.

Kelso's Track Record at The Works

This is not Kelso's first attempt to reshape The Works' board. In 2024, the retailer's share price rose after the activist secured two board seats (City AM). In February of this year, shares spiked again when Kelso increased its stake, describing the company as "one of the most undervalued companies on the UK stock market" (City AM).

Strategic Pivot and Financial Performance

The Works has been working to reposition itself beyond its "pile 'em high, sell 'em cheap" reputation, focusing on "screen-free" children's entertainment to attract British parents.

Chief executive Gavin Peck told City AM last month that these efforts received a boost from the Labour government's crackdown on children's social media use. "Anything that the government brings in heightens that awareness as well, and we certainly hear and see more people talking about that," he said.

The company reported 3.3 per cent sales growth and £260m in revenue for the year ended May, with adjusted profit rising 44 per cent to £7.2m.