Concern raised about the strength of its balance sheet
Topps Tiles has seen its share price drop amid 'concern' over its balance sheet.

Its share price fell 15.3 per cent to 40p after a research note from the investment house Panmure Gordon.

According to the note, Topps borrowed £116m in 2006 to fund share buy-backs and the 'debt has to remain below 2.25 times underlying earnings at the company's fiscal year ending September, and below 2 times for the 2009 year-end'.

Panmure Gordon recognised Topps' efforts to remain resilient in a challenging market, but said the 2009 covenant 'could yet strangle the company'.

Analyst Philip Dorgan – who cut his target price from 80p to 50p – said this reflected an 'increased concern that a refinancing might be required'.

In recent months Topps' share price has fallen against the backdrop of a slowdown in the housing market and its knock-on effect on out-of-town stores.