VICTORIA PLC-FULL YEAR TRADING UPDATE

VICTORIA PLC-FULL YEAR TRADING UPDATE

Full Year Trading Update

Strong growth in line with market expectations

Confident outlook for further earnings and cash flow growth

Victoria PLC (LSE: VCP), the international designers, manufacturers and distributors of innovative flooring, provides a trading update for the financial year ended 1 April 2023, confirming the Board expects Group revenues and underlying EBITDA to be in line with consensus market expectations[1], successful progress in earnings enhancing integration of acquisitions, and a confident outlook for FY24 following management actions to mitigate near term macro-economic pressures influencing consumer demand and inflation.

Trading update

Despite challenging macro-economic conditions, Victoria PLC, is set to deliver its tenth consecutive year of revenue and underlying operating profit growth. Total volume sold will exceed 200 million square metres (more than 29,500 football fields) for the first time in the Company's history with revenues for the year ended 1 April 2023 of more than £1.45 billion, alongside continued growth in underlying operating cashflow.

Earnings enhancing reorganisation of Balta on track

In April 2022, the Company acquired the rugs and UK carpet divisions of Balta Group, together with the internationally-known brand, "Balta", establishing Victoria as Europe's largest carpet and rug manufacturer.

The integration of Balta is proceeding successfully with the reorganisation programme on schedule and the Board anticipates completion this calendar year, with a materially positive impact on future earnings and cash flow. The Board expects to realise synergy gains of no less than €15 million per annum (+2% margin for the division) upon completion.

This reorganisation consists of three key projects:

(i)            The relocation of Balta's carpet manufacturing from Belgium to the Group's more modern and more productive UK factories in Wales and Yorkshire, with a net reduction of 295 employees. 80% of Balta's carpet is sold in the UK, Europe's largest carpet market, and this move will enable Balta to sell the same historical quantity (c. € 100 million revenue per annum), but with lower production and transport costs alongside improved customer service from shorter delivery times.

(ii)           The consolidation of the Balta rug manufacturing operation onto Victoria's large site at Sint-Baafs Vijve, Belgium, with the closure of the nearby factory at Avelgem, together with the relocation of some production to Usak, Turkey, where the Group has two very modern rug and yarn extrusion factories. These changes will improve efficiency and lower production costs, with the same output (c. €240 million revenue per annum) being achieved with 220 fewer employees.

(iii)          The sale of non-core assets acquired with the Balta transaction where the opportunity for synergies with the Group's existing businesses are minimal, with the proceeds being used alongside the Group's operational cash generation to further reduce Group leverage.

Outlook

The Directors' conviction that Victoria is well-positioned to deliver further earnings and cash flow growth in FY24 and beyond is underpinned by the known synergy gains from completion of the Balta reorganisation. Furthermore, whilst the Group is not immune to the external factors that impact consumer demand or inflationary pressures, the Board is confident that Victoria's inherently low operational gearing, combined with price increases (where essential), cost savings, and tight supply chain management, will mitigate the financial impact of any macro-economic uncertainty in the year ahead.

Consequently, Victoria remains competitively very well placed in its markets to defend its position and capitalise on opportunities where gaps appear, and the Directors are confident in the Company's ability to continue to create wealth for shareholders.

Date of Preliminary Results

The Board expects to announce the Group's preliminary results for the year ended 1 April 2023 in July 2023.

Executive Chairman Geoff Wilding said,

"We are laser-focussed on the reorganisation of Balta and the integration of other recent acquisitions. Completion of these projects is expected to deliver a significant uplift in productivity and cash flow, even during a period of economic uncertainty, which underpins our confidence in outlook for FY24 earnings growth and deleveraging."

No Comments

Sorry, the comment form is closed at this time.