Further upheaval at Victoria as carpet markets remain tough

CARPET manufacturer Victoria has issued its first trading update since the completion of a bloody battle for control of the firm’s boardroom.

The Kidderminster company said that since its February update trading conditions in its two main market areas of Australasia and the UK had remained extremely challenging.
 
Revenue in Australia was down in the last quarter of the company’s financial year by 9.6% in local currency and by 2.6% in sterling terms. It said while the softening of trading conditions in Australasia was seen for the first time in recent years in Q3, there was a further rapid and significant softening of market conditions in February and March 2012, as consumers saved more and reduced spending on discretionary items such as floor coverings.
 
Despite the difficult trading conditions, the UK – which includes the Republic of Ireland, finished Q4 of the financial year ended March 31, 2012, strongly. Revenues were up 12% in constant currency terms. The insurance replacement market continued to perform well and there was a good finish to the year in both export and home contract markets, with robust sales to the hospitality sector.
 
The new board said it anticipated that pre-tax profit for the year end would be in line with market forecasts published prior to the sales process in January 2012.
 
Exceptional non-recurring costs of circa £0.7m will be charged in the 2011/12 financial year, relating to the restructuring of the group’s Irish businesses and costs associated with both the recent general meeting and the formal sales process.

Borrowing levels at the year-end were below those originally forecast, but will increase again in the first half of the new financial year with the build up of inventory and marketing spend to support major new range launches in both the UK and Australia.
 
“Trading conditions in the UK and Australia are likely to remain very challenging. The board believes that the changes in consumer taste in the Australasian market over the past year, away from wool carpets towards synthetic pile carpets, may be a permanent structural change,” it said.

“As a consequence, pre-emptive action has been taken to restructure the woollen spinning mills in Australia. The ‘right-sizing’ of the mills will give rise to material non-recurring costs in the first half of the new financial year.
 
“Overall, the board believes that the actions taken will position the company well for the future and the business remains well placed to capitalise on opportunities when economic conditions improve.”
 
Further fallout from the board upheaval continues with the firm announcing that group financial director Ian Davies will leave the business in August to take up the role of FD at Vislink plc.

Katherine Innes Ker, the board’s new chairman, said: “On behalf of the board I would like to thank Ian for his significant contribution to the group since he joined in March 2007. I have thoroughly enjoyed working with Ian.

“I understand why he felt he could not refuse this opportunity to return to the technology sector, in which he had spent the majority of his career prior to joining Victoria, and wish him every success for the future. The succession process is in hand and the board intends to have the appointment in place in good time.”
 
Alan Bullock, Group Managing Director, added: “Ian has been an important part of the group’s development during the past five years and has made a valuable contribution to the company’s success.

“We are most grateful for all Ian has done whilst at Victoria, but understand his decision to further his career in the technology sector. We wish him all the very best for the future.”

Victoria will announce its preliminary results for the year ended March 31, 2012 in June 2012.

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