Shares tumble 10% at flooring manufacturer as market continues to suffer
Shares at Kidderminster flooring manufacturer Victoria have fallen by 10%, as it continues to suffer from a 20% drop in market demand.
Victoria embarked on a period of reorganisation 18 months ago and has since cut 1,170 employees (a 16% reduction), relocated its Balta carpet manufacturing operations from Belgium to Victoria’s existing UK factories and its rug production to Turkey, as well as acquiring a new warehouse and distribution facility in the US.
€31m of non-core and surplus real estate has already been sold, with a further €50m expected.
“Subdued but stable” conditions in the UK and Australia contrast with improving demand in the US, but Victoria is feeling the pressure on earnings from labour inflation and additional expenditure from the reorganisation and integration projects.
It now expects that revenue for the year ending 30 March 2024, whilst less than 2023, will be broadly in line with market expectations. Underlying EBITDA will also be below that achieved in 2023 and the Board now expects that to be approximately £160m.
Despite market conditions, Victoria says it will invest up to £25m in the repurchase of shares, as well as continuing with its repurchase of 2026 bonds, buying €11.1m to date. The firm has set a target of buying €25m.
Executive Chairman, Geoff Wilding, said: “There has been a lot of noise around Victoria in the last six months. To their enormous credit, operational management simply put their heads down and forged ahead with the integration projects designed to maximise the available synergies within the Group and optimise cash generation in a challenging macro-environment.
“The pace and rigour of this work has accelerated in the last 90 days, with a larger cost incurred in the current year but a clear impact on future earnings and cash flow. We emphasise that we are not expecting some immediate improvement in flooring demand. However, we are confident of the impact on earnings and cashflow of management’s actions and are certain demand will inevitability revert to the long-term mean.”
