Express & Star

Profits higher for carpets group Victoria

Carpets and floor coverings group Victoria says it expects its underlying pre-tax profits to be up to 39 per cent higher for its current financial year.

Published
The headquarters of Victoria in Kidderminster

The Kidderminster-based group says earnings before tax will be £95 million to £97m for the year to the end of March.

In its interim results in November, Victoria said it was taking advantage of difficult market conditions to actively pursue market share.

Its board said that this approach, which hit earnings this year, had unsettled some shareholders but it believes it to be in the best long-term interests of the group and its shareholders.

The group has continued with this strategy and, across markets that the board believes are down six to eight per cent in the UK and Australia and flat in Europe,it has continued to grow overall like-for-like revenue and gain meaningful market share by winning new retailers as customers from competitors and securing a greater share of spending from existing customers of Victoria.

The growth has come at a short-term cost with the introduction of lower margin, volume products and the Group has also temporarily absorbed, rather than passed on, substantial increases in underlay raw material prices in recent months and some large one-off costs associated with the consolidation of the Group's UK logistics operations to improve service levels to customers.

It says that action to ensure margins continue to increase.have almost all now been successfully completed and it expects them to materially enhance earnings in the 2020 financial year.

It has consolidated the group's carpet manufacturing facilities at its factory in South Wales enabling considerable production efficiencies to be achieved and higher volumes to be produced.

Victoria will reduce debt levels over the next 12 months, but with the approach of Brexit management are being prudent and carrying a higher quantity of raw materials than normal for the next quarter or so.

The share price of Victoria, which has been pursuing an acquisition strategy, fell by more than half between August and October last year.

In the autumn its shares fell 35 per cent in two days, wiping more than £260m off its market value, after it announced plans for a bond issue alongside a warning that its margins were up to 1.5 per cent below consensus market forecasts.