TIDMVCP
RNS Number : 5544I
Victoria PLC
27 November 2018
For Immediate Release 27 November 2018
Victoria PLC
('Victoria', the 'Company', or the 'Group')
Interim Results
for the 26 weeks ended 29 September 2018
Continued successful execution of strategy
Victoria PLC (LSE: VCP) the international designers,
manufacturers and distributors of innovative floorcoverings, is
pleased to announce its interim results for the 26 weeks ended 29
September 2018.
Financial and Operational Highlights
H1 FY19 H1 FY18 Growth
======================= ========== ========== ================================
Revenue GBP273.4m GBP189.5m +44%
Underlying EBITDA1 GBP45.4m GBP24.6m +85%
Underlying EBITDA 16.6% 13.0% +360 bps
margin GBP34.0m GBP18.2m +87%
Underlying operating
profit(1)
Operating profit GBP13.6m GBP12.9m +5%
Underlying profit
before tax(1) GBP28.2m GBP15.5m +82%
Earnings per share:
- Basic adjusted(1) 17.91p 13.10p +37%
- Basic 0.58p 6.55p -91%
Cash generated by
operations GBP34.8m GBP17.4m +100%
Net debt GBP342.7m GBP98.6m
Net debt / EBITDA2 3.09x 1.77x
Financial highlights
-- Revenue grew by 44% versus the same period in the prior year, from GBP189.5m to GBP273.4m
-- Like-for-like revenue growth3 (LFL) of more than 5% in UK
& Europe soft flooring, where there have been no acquisitions
in the period, and more than 3% across the Group
[1] Underlying performance is stated before the impact of
exceptional items and amortisation of acquired intangibles within
operating profit. Underlying profit before tax and adjusted EPS are
also stated before non-underlying items within finance costs
(comprising mark-to-market adjustments, BGF redemption premium
charge, earn-out liability fair value adjustments, release of
prepaid finance costs and exchange rate differences on foreign
currency loans).
[2] As measured in line with our bank facility covenants.
[3] LFL revenue growth adjusted to remove the impact of
acquisitions, translational currency differences and other
exceptional items.
Revenue H1 FY19 H1 FY18
--------------------- ---------- ----------
UK & Europe, soft GBP138.6m GBP130.7m
flooring
UK & Europe, ceramic GBP81.7m -
tiles
--------------------- ---------- ----------
Australia (AUD) A$95.3m A$98.8m
--------------------- ---------- ----------
Australia (GBP) GBP53.1m GBP58.8m
--------------------- ---------- ----------
Group GBP273.4m GBP189.5m
--------------------- ---------- ----------
-- Underlying EBITDA margin rose to a record 16.6%, from 13.0%
for the same period last year (and 15.2% at the year-end)
-- 82% increase in underlying profit before tax, from GBP15.5m to GBP28.2m
-- An increase in one-off exceptional costs in the period,
resulting from the acquisition of Ceramica Saloni and other
corporate M&A activity, as well as ongoing operational synergy
projects as previously disclosed
-- Total capital expenditure in the period of GBP20.9m, comprising:
- GBP8.8m of replacement capex, plus
- GBP12.1m of expansionary capex, with key areas of being: a new
backing & finishing line at our carpet factory in South Wales
(c. GBP4m), further investment in the new UK distribution centres
as a continuation of the logistics project that commenced last year
and is expected to complete early next year (c. GBP1.5m), and
expansion of atomising and press capacity in Keraben (c.GBP5m)
-- Continued strong cash generation, with cash generated by
operations of GBP34.8m, being over 100% of underlying operating
profit, and double that of the comparative period last year
-- Following the period end, the Group considered a Bond issue
to refinance its existing bank facilities but the rates available
at that time were not in Shareholders' best interests. The Group
may consider revisiting this in the future if appropriate
-- Net debt as at 29 September 2018 of GBP342.7m, representing
3.09x EBITDA(2) , following the acquisition of Ceramica Saloni in
August, with significant headroom against covenants remaining
The Board expects the full year result to be in line with market
expectations.
Operational highlights
-- Continued progress achieved against strategic priorities, including:
- achieving LFL growth and gains in market share in soft
flooring, driven by new value-orientated products and brands,
and
- adding further scale in branded, mid-high end ceramic tiles
with the acquisition of Ceramica Saloni in August
-- Identified operational synergies between Keraben Grupo and
Ceramica Saloni ahead of original expectations
-- In Italy, the planned investment in production facilities at
Ceramiche Serra completed in May 2018 and now delivering a
significant improvement in performance
Geoff Wilding, Executive Chairman of Victoria PLC commented:
"Victoria continued to make strong operational progress during
the period. We again delivered against our strategy designed to
grow market share, improve cash generation, and increase earnings
per share, via both acquisition and organically, and we continue to
focus on synergies and integration to ensure operational excellence
within the Group.
"Our progress was made against a backdrop of a challenging
market and our strategy of achieving product and market
diversification over the last few years has enabled us to adapt
well to various market conditions and tailor our offering
accordingly. This remains a key strength of the Group relative to
its competitors. In the UK, for example, we have been able to
materially grow market share by introducing new value-orientated
products and brands (alongside existing, predominantly mid-upper
priced, products), safe in the knowledge that, although our margin
growth is a little slower this year - albeit expected to be some
200 basis points higher than FY2018 - growth will be continued next
year driving returns for our shareholders.
"With the Group's focus on generating cash, driving earnings,
and continued operational integration, I look forward to the second
half of the year with confidence and to updating our shareholders
on our progress in due course."
For more information contact:
Victoria PLC
Geoff Wilding, Executive Chairman
Philippe Hamers, Group Chief Executive +44 (0) 15 6274
Michael Scott, Group Finance Director 9610
Cantor Fitzgerald Europe
Rick Thompson, Phil Davies, Will Goode (Corporate
Finance)
Caspar Shand-Kydd (Sales), Andrew Keith +44 (0) 20 7894
(Equity Sales) 7000
Berenberg (joint broker)
Ben Wright, Mark Whitmore, Laura Fine (Corporate +44 (0) 20 3207
Broking) 7800
Buchanan Communications +44 (0) 20 7466
Charles Ryland, Maddie Seacombe, Tilly Abraham 5000
About Victoria
Established in 1895 and listed since 1963 and on AIM since 2013
(VCP.L), Victoria PLC, is an international manufacturer and
distributor of innovative flooring products. The Group, which is
headquartered in Kidderminster, UK, designs, manufactures and
distributes a range of carpet, flooring underlay, ceramic tiles,
LVT (luxury vinyl tile), artificial grass and flooring accessories.
Victoria has operations in the UK, Spain, Italy, Belgium, the
Netherlands and Australia and employs approximately 3,000 people
across more than 20 sites. Victoria is the UK's largest carpet
manufacturer and the second largest in Australia, as well as the
largest manufacturer of underlay in both regions.
The Group's strategy is designed to create value for its
shareholders and is focused on consistently increasing earnings per
share via acquisitions and sustainable organic growth.
The Group's trading subsidiaries, as set out segmentally,
include:
UK & Europe: A. & A. Carpets Ltd, Abingdon Flooring Ltd, Alliance
Distribution Ltd, Avalon B.V, Ceramica Saloni, S.A.U,
Ceramiche Serra S.p.A., Distinctive Flooring Ltd,
Ezi Floor Ltd, Grass Inc. B.V, Interfloor Ltd, Keraben
Grupo S.A., Millennium Weavers N.V, Sanicova, S.L.U,
Victoria Carpets Ltd, View Logistics Ltd, Westex
(Carpets) Ltd
Australia: Primary Flooring Pty Ltd, Quest Flooring Pty Ltd,
The Victoria Carpet Co. Pty Ltd
Chairman's Statement
H1 trading review
The Board is pleased to report that trading in the first half
year to September 2018 continued to be good - especially given the
market backdrop - with like-for-like ("LFL") organic revenue
growth(3) of more than 3% across the Group, and Victoria winning
market share as planned. Overall, the Group has delivered revenue
of GBP273.4 million, versus GBP189.5 million in the comparative
period last year, and underlying EBITDA margin of 16.6% compared to
13.0% last year.
UK & Europe
Soft flooring
The UK flooring market has seen a mid-high single-digit decline
in volume over the past 12 months. However, Victoria has achieved
more than 5% LFL organic revenue growth(3) in the six months to
September by taking advantage of these conditions to materially
grow market share. This growth is expected to continue for the
balance of the year, albeit at the temporary expense of some
potential margin gains, as previously announced. (It is important
to understand the Group's margin is, however, still growing and
will be some 200 basis points higher than in FY 2018, in line with
guidance provided in October). To clarify, this slower margin gain
is not the result of price cutting; Victoria has no intention of
diluting our high-quality brands. Instead, the Group has introduced
new value-orientated products and brands to increase our share of
wallet at existing retailers and to attract new retailers to our
products.
This strategy has been, and continues to be, successful and
therefore the Board is firmly of the view that it is the right
approach to consolidate the Group's position as the largest, most
successful flooring manufacturer and distributor in the UK.
Furthermore, the Group is implementing several internal, proactive
measures during the second half of the year and next year. These
will resume the margin growth whilst maintaining the market share
gains, such that the medium-term outcome will be a larger, more
profitable and more stable business.
Ceramic tiles
Following the acquisition of Ceramica Saloni in August, the
Group's operational management in Spain are firmly focused on
delivering the identified synergies in raw materials procurement,
utilisation of Keraben's atomisation capacity, and production
efficiencies. These actions are now well advanced and are expected
to be fully delivered by the end of the current financial year. I
am pleased to advise that the outcome of these synergies is likely
to be better than the Board had initially expected, which will make
a material contribution to achieving continued growth in FY
2019.
Our Italian ceramic tile business, Ceramiche Serra, is having a
very strong year. For the last 25 years Serra has operated a unique
production model employing a number of patented technologies to
manufacture a cost-effective product tailored for specific end
markets (100% of the company's production output is exported from
Italy). When Victoria acquired this company in December 2017, Serra
had begun the process of replacing one of its existing production
lines - all of which produced red body tiles - with a new line
designed to manufacture higher margin porcelain tiles. This was a
very substantial project and quite disruptive to the business for a
number of months, but the installation was completed as planned by
the end of May and the new products are selling well, which is
driving significant improvement of the performance of Serra.
The Group is also looking at potential initiatives to broaden
our export markets in ceramic tiles, including to increase sales of
our products into the UK, which is currently a very small market
for our businesses.
Australia
Australia represents around 13% of operational profits.
Following a period of very strong growth, the Australian market has
been a little softer this year following the tightening of mortgage
lending and some decline in consumer confidence. Victoria's
Australian operations recorded LFL revenue of -4% in H1. However,
the Australian economy is still growing and the Group is fortunate
in having very strong management at Victoria Australia, Quest, and
Dunlop Flooring, who have developed plans to ensure improved
performance next year. The Board has a high degree of confidence in
them to deliver these improvements.
Strategy
Victoria has executed a simple strategy to create wealth for
shareholders over the last six years: use carefully selected
acquisitions to build scale, market position, and diversification;
focus on synergies and integration to drive higher margins and
increase cash flow; deploy the cash flow to pay down debt arising
from the acquisitions; and then repeat.
Our pace of growth has been steady and measured and includes 13
businesses acquired over the last six years. All are performing as
anticipated, reflecting the highly selective nature of our
acquisition process. A successful acquisition typically takes nine
to twelve months to complete given the intense nature of our due
diligence and for every acquisition that is announced, there are
many that are not pursued for a wide variety of reasons. Value
isn't created by doing deals, it's by doing good deals.
Accompanying the acquisition activity, we have carefully built
the most effective operational management team in the sector, which
has ensured an intense management focus on further developing the
high-quality businesses that have been acquired.
At this stage of Victoria's development and following the
sizeable acquisition of Ceramica Saloni in August of this year, our
efforts are now firmly on delivering the potential synergies
(progress is very encouraging and all workstreams are expected to
be completed by the end of the current financial year) and
generating cash across the Group to pay down debt as per the
strategy described above.
Capital expenditure
The Board and management of Victoria are committed to building a
long-term successful business. Although we would clearly be willing
to trim capex budgets during difficult economic conditions, the
policy is to ensure that our businesses remain well invested and to
broadly match capex to depreciation over an economic cycle. This
approach should reassure shareholders that the Group will remain
operationally competitive and sustainable into the future.
In addition, the Group selectively invests in organic expansion
projects where the Board determines there is a meaningful benefit
in terms of growth in capacity or ongoing cost reduction. For
example, this month Victoria commissioned a new backing and
finishing line at its carpet manufacturing plant in South Wales.
This is a significant investment and as a result, Victoria now has
the fastest, most productive manufacturing facility, with
operational savings that will deliver a significant improvement in
margins next year and a payback period of only about 2.5 years.
Exceptional and other non-underlying costs
As discussed above, Victoria's strategy is to make carefully
qualified acquisitions and then to integrate them in order to
deliver synergies to drive higher margins and improved cash
generation. Of necessity, this acquisition and integration activity
produces large, one-off costs as well as some accounting
adjustments that are not representative of the underlying business.
While we continue to execute our strategy such costs will continue
to be generated, but this will stop the moment that we stop
pursuing acquisitions or undertaking synergy projects.
The notes to the accounts provide further details, but these
costs fall into the following key categories:
1. Acquisition activity. Pursuing acquisitions comes with
prospecting costs, acquisition advisory costs, legal fees, due
diligence fees (often covering financial, tax compliance, legal and
environmental amongst other areas), as well as costs associated
with intercompany and capital structure advice. Furthermore, as we
are extremely selective with the acquisitions that we undertake,
unfortunately, but inevitably, costs are incurred on deals that we
choose not to complete.
2. Reorganisation costs. Delivering operational integration and
cost synergies requires restructuring activity, producing large,
one-off costs in terms of redundancies, plant and machinery
relocation, reconfiguration and planning, site disruption, etc.
These are unavoidable if the incremental benefits from the
acquisitions are to be achieved, but are also genuinely
non-recurring (a factory can only be closed once, for example).
These costs have increased in the last 12-18 months because, whilst
earlier in the development of the Group the synergies being
delivered were 'softer' (procurement savings, application of best
practice, etc), once the Group reached a certain scale in a number
of product areas, we were able to look at more substantial synergy
projects involving consolidation of physical operations. However,
accepting the one-off costs today, the positive impact on margins
going forward are material - building a stronger, more profitable
Group for the future.
3. Intangible amortisation. The goodwill and other intangible
assets on Victoria's balance sheet are a product of the Group's
strategy to only buy the very best businesses it can find.
Therefore, because acquisition prices reflect profitability and
cash flow, the price paid will often exceed the net asset value of
the target, resulting in intangible assets, some of which are then
amortised over a fixed period in line with accounting standards.
This amortisation cost is entirely non-cash, and of course these
assets do not need to be 'physically' replaced once they are fully
amortised.
4. Adjustments to earn-outs and deferred consideration. Wherever
possible, the Board includes deferred consideration within the
structure of the Group's acquisitions, often contingent on the
ongoing performance of the target over a number of years (an
"earn-out"). Such structures pass risk from the Group back to the
vendor, as well as serving to incentivise management. The fair
value of these liabilities is fully recognised in the Group's
balance sheet, with any variations over time charged to the income
statement. Whilst the final payment of earn-outs is of course made
in cash, these adjustment items are themselves non-cash and not
related to the underlying operating business.
5. Write-down of pre-paid financing costs. As the Group has made
acquisitions over the last few years, its debt has been refinanced
on a few occasions to update its capital structure as the Board
deems appropriate for the enlarged business. Accounting standards
require that up-front financing fees are held on the balance sheet
and amortised over the term of the loan. So, if a loan is replaced
early with a new facility on making an acquisition, the entire
outstanding fee that has not yet been amortised is written-down in
one go. This is, of course, not a normal occurrence and also a
non-cash event.
In summary, acquisitions and operational integration will result
in exceptional costs from time to time. However, by setting these
out in detail in the financial statements we hope to help
shareholders better understand these items and be encouraged by
what is actually happening at an operational level in the
Group.
Borrowings and cash generation
Following the acquisition of Ceramica Saloni in August, the
Group had net debt of GBP342.7 million at 29 September 2018, which
represents 3.09x adjusted EBITDA(2) . The Group has significant
headroom in its covenants at this level, but the Board sees this
level as an internal ceiling and is therefore emphasising paying
down debt at this time.
Victoria has consistently demonstrated over the last five years
that, while there is seasonality in its net debt (our working
capital levels generally peak in September due to building stock
levels to meet increases in demand during the pre-Christmas rush),
overall cash generation is aligned to annual earnings. Flooring
manufacturers structured like Victoria can generate large amounts
of cash, with the Group generating pre-tax operating cash flow of
between 95% and 100% of underlying EBITDA over the last three
years. Management across the entire Victoria Group is very focused
on cash generation with favourable supplier arrangements,
manufacturing matched to demand, customer payment terms, and
longevity of key items of plant all contributing to a very high
percentage of reported earnings turning to net cash, which we have
been able to use to make acquisitions, invest in capex, and reduce
debt.
Operational cash generation across the Group is, and will
continue to be, strong.
Brexit
I am somewhat reluctant to add to the almost limitless verbiage
on Brexit. Nonetheless, given Victoria's next full report to
shareholders will be following Brexit, I thought I should share
some comments on the matter and its likely minimal impact on
Victoria.
Firstly, there is very little trade of product manufactured in
the UK by Victoria into Europe or vice-versa. Therefore, any
tariffs or other trade barriers between Europe and the UK are not
expected to have a negative effect on the Group's general trading.
Indeed, given some 60% of the soft flooring sold in the UK is
imported (and almost entirely from Europe), any trading barriers
which have the practical effect of reducing imports represent a
material opportunity for the Group to further grow its UK market
share.
Secondly, whilst any marked depreciation in the value of
Sterling will have an impact on certain raw material costs for our
UK factories, clearly this will also affect the raw material costs
of our UK competitors and, importantly, this will have a much more
severe impact on our European competitors who supply around 60% of
the UK market, making them less competitive with UK manufacturers.
In addition, the Board is comfortable that Victoria is able to pass
on the impact of increased raw material prices - exactly as we did
following the 20% drop in Sterling after the Brexit referendum in
July 2016 (shareholders will recall our margins improved that year
by 1.1%, despite the drop in Sterling).
Furthermore, most of the raw materials that we import into the
UK come from countries outside of the EU and therefore, to the
extent there are tariff or non-tariff trading barriers between the
UK and the EU, the direct impact on Victoria will be minimal.
However, to be prudent and protect our UK factories' supply chains
from any delays in the delivery of raw materials, we plan to carry
a greater quantity of certain raw materials than usual for a period
of time.
Finally, as I explained in the 2018 Annual Report, general
economic downturn in the UK (or elsewhere) is something we are
always mindful of, Brexit or no-Brexit. To that end I would remind
shareholders of the following:
1. Low operational gearing. 54% of Victoria's cost base is made
up of raw materials, which, of course, are wholly variable with
revenue. A further 31% of costs (labour, marketing, logistics) are
semi-variable. The result is that in the event of a decline in
sales, the overwhelming majority of costs fall as well, reducing
the impact of lower sales on profits.
2. Historical resilience during the 2007-09 recession. Every
year between FY 2006 and FY 2011 Victoria recorded organic growth
(6% CAGR) in sales (no acquisitions were done during this period)
due to its mid-upper market product positioning and strong sales
focus. The Group today is a much larger, more resilient and more
diversified business, but the same characteristics remain.
3. Victoria has a highly effective operational management team.
The importance of this strength is difficult to overstate. Their
decades of experience mean that they have lived through several
economic cycles and they know how to respond to changing conditions
to protect the business.
4. Effective use of outsourcing. The Group has long practised
outsourcing a small percentage (up to 5%) of its product
manufacturing requirements to provide operational flexibility and a
production buffer in the event of a downturn, and therefore more
time for management to respond to changing conditions.
5. Diverse economic exposure. Although the Group has
manufacturing facilities in four countries (Spain, the UK,
Australia, and Italy), it exports a significant amount of product
all over the world. As a result, 40% of earnings come from other
countries, reducing the Group's exposure to any one economy.
Outlook
In conclusion I, the Board and management are confident in the
outlook for the Group, and believe that Victoria is on track to
meet its objectives for the current financial year.
Material market share gains in the UK will secure long-term
earnings growth. The Group's Australian businesses are expected to
return to growth next year as a result of actions being taken
today. In Europe, we are achieving greater than expected
operational synergies in our Spanish businesses, which will add to
earnings in FY 2020, together with strong performance from our
Italian business which is producing record profits.
Victoria's operational management teams are firmly focused on
the delivery of our organic strategy while we will continue to seek
and review high-quality companies to ensure there are suitable
acquisition opportunities when the time is right to execute
them.
Finally, I am acutely aware that Victoria's share price is not
where I believe it should be given our current trading and
prospects. As one of the largest shareholders, you can be assured
that I, and the other directors and management, are focused on
building the confidence of investors and delivering the financial
results expected of Victoria.
It is important to remember, together we own a very robust,
well-managed, and growing business with over 3,000 employees who
manufacture and sell some of the finest flooring in the world. The
events of the last couple of months have not distracted management
from delivering and for that reason I am highly confident of
Victoria's continued long-term success.
Geoffrey Wilding
Executive Chairman
26 November 2018
Condensed Consolidated Income Statement
For the 26 weeks ended 29 September 2018 (unaudited)
26 weeks ended 29 26 weeks ended 30 52 weeks ended 31 March
September 2018 September 2017 2018 (audited)
Under Non- Under Non- Under Non-
lying under lying under lying under
perfor lying Reported perfor lying Reported perfor lying Reported
mance items numbers mance items numbers mance items numbers
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- --------- ------ -------- ------- --------- -------- ------ --------- -------- ------- ---------
Continuing
Operations
Revenue 3 273.4 - 273.4 189.5 - 189.5 424.8 - 424.8
Cost of Sales (177.9) - (177.9) (127.6) - (127.6) (279.4) - (279.4)
Gross profit 95.5 - 95.5 61.9 - 61.9 145.4 - 145.4
Distribution costs (33.3) - (33.3) (28.4) - (28.4) (59.4) - (59.4)
Administrative expenses (29.4) (20.4) (49.8) (15.4) (5.3) (20.7) (38.6) (22.4) (61.0)
Other operating income 1.2 - 1.2 0.1 - 0.1 1.4 - 1.4
Operating profit/(loss) 34.0 (20.4) 13.6 18.2 (5.3) 12.9 48.8 (22.4) 26.4
--------------------------- ------ -------- ------- --------- -------- ------ --------- -------- ------- ---------
Comprising:
Operating profit before
non-underlying and
exceptional
items 34.0 - 34.0 18.2 - 18.2 48.8 - 48.8
Amortisation of acquired
intangibles - (9.8) (9.8) - (3.0) (3.0) - (11.2) (11.2)
Exceptional and other
non-underlying items 4 - (10.6) (10.6) - (2.3) (2.3) - (11.2) (11.2)
--------------------------- ------ -------- ------- --------- -------- ------ --------- -------- ------- ---------
Finance Costs 5 (5.8) (3.2) (9.0) (2.7) (1.4) (4.1) (8.0) (5.0) (13.0)
--------------------------- ------ -------- ------- --------- -------- ------ --------- -------- ------- ---------
Comprising:
Interest payable on
loans 5 (4.9) (4.9) (2.2) - (2.2) (6.6) - (6.6)
Amortisation of prepaid
finance costs 5 (0.7) (2.9) (3.6) (0.3) - (0.3) (1.0) (0.2) (1.2)
Interest accrued on
BGF loan 5 (0.1) (0.1) (0.2) (0.1) (0.1) (0.2) (0.1) (0.3) (0.4)
Net interest expense on
defined
benefit pensions 5 (0.1) - (0.1) (0.1) - (0.1) (0.3) - (0.3)
Other non-underlying
finance costs 5 - (0.2) (0.2) - (1.3) (1.3) - (4.5) (4.5)
--------------------------- ------ -------- ------- --------- -------- ------ --------- -------- ------- ---------
Profit/(loss) before
tax 28.2 (23.6) 4.6 15.5 (6.7) 8.8 40.8 (27.4) 13.4
Taxation 6 (6.7) 2.8 (3.9) (3.6) 0.8 (2.8) (9.2) 4.4 (4.8)
Profit/(loss) for the
period 21.5 (20.8) 0.7 11.9 (5.9) 6.0 31.6 (23.0) 8.6
--------------------------- ------ -------- ------- --------- -------- ------ --------- -------- ------- ---------
Earnings per
share -
pence basic 7 17.91 0.58 13.10 6.55 31.38 8.58
diluted 7 17.88 0.58 12.64 6.44 30.61 8.37
-------------------------- ------ -------- ------- --------- -------- ------ --------- -------- ------- ---------
Condensed Consolidated Statement of Comprehensive
Income
For the 26 weeks ended 29 September 2018 (unaudited)
52 weeks
26 weeks 26 weeks ended
ended ended 31
29 September 30 September March
2018 2017 2018
(audited)
GBPm GBPm GBPm
--------------------------------------------- -------------- -------------- ----------
Profit for the period 0.7 6.0 8.6
---------------------------------------------- -------------- -------------- ----------
Other comprehensive income / (expense):
Items that will not be reclassified to
profit or loss:
Actuarial gains on defined benefit pension
scheme 2.0 1.8 2.0
Increase in deferred tax asset relating
to pension scheme liability (0.4) (0.4) (0.4)
Items that will not be reclassified to
profit or loss 1.6 1.4 1.6
---------------------------------------------- -------------- -------------- ----------
Items that may be reclassified subsequently
to profit or loss:
Retranslation of overseas subsidiaries 0.3 (0.7) (2.1)
Items that may be reclassified subsequently
to profit or loss 0.3 (0.7) (2.1)
---------------------------------------------- -------------- -------------- ----------
Other comprehensive income / (expense) 1.9 0.7 (0.5)
---------------------------------------------- -------------- -------------- ----------
Total comprehensive income for the year
attributable to the owners of the parent 2.6 6.7 8.1
---------------------------------------------- -------------- -------------- ----------
Condensed Consolidated Balance Sheet
As at 29 September 2018 (unaudited)
29 September 30 September 31 March
2018 2017 2018
(audited)
GBPm GBPm GBPm
----------------------------------------- ------------- ------------- ----------
Non-current assets
Goodwill 274.8 58.3 188.1
Intangible assets other than goodwill 203.5 63.1 210.3
Property, plant and equipment 182.8 44.6 142.9
Investment property 0.8 0.2 0.8
Investments in associates 1.0 - 1.0
Deferred tax assets 4.5 4.9 4.6
Total non-current assets 667.4 171.1 547.7
------------------------------------------ ------------- ------------- ----------
Current assets
Inventories 137.2 77.4 100.3
Trade and other receivables 118.0 53.9 88.2
Cash at bank and in hand 74.0 28.7 54.0
Total current assets 329.2 160.0 242.5
Total assets 996.6 331.1 790.2
------------------------------------------ ------------- ------------- ----------
Current liabilities
Trade and other current payables 152.8 75.5 121.5
Current tax liabilities 1.4 3.3 1.0
Other financial liabilities 3.5 0.7 3.0
Total current liabilities 157.7 79.5 125.5
------------------------------------------ ------------- ------------- ----------
Non-current liabilities
Trade and other non-current payables 39.0 16.9 29.2
Other non-current financial liabilities 412.3 125.0 306.1
Deferred tax liabilities 52.1 14.4 54.7
Retirement benefit obligations 7.1 9.2 9.1
Total non-current liabilities 510.5 165.5 399.1
------------------------------------------ ------------- ------------- ----------
Total Liabilities 668.2 245.0 524.6
Net Assets 328.4 86.1 265.6
------------------------------------------ ------------- ------------- ----------
Equity
Share capital 6.3 4.5 5.9
Share premium 288.7 52.5 229.8
Retained earnings 29.3 23.9 26.7
Foreign exchange reserve 3.2 4.3 2.9
Other reserves 0.9 0.9 0.3
Total Equity 328.4 86.1 265.6
------------------------------------------ ------------- ------------- ----------
Condensed Consolidated Statement of Changes in
Equity
For the 26 weeks ended 29 September 2018 (unaudited)
Foreign
Share Share Retained exchange Other Total
capital premium earnings reserve reserves equity
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------------- --------- --------- ---------- ---------- ---------- --------
At 1 April 2017 4.5 52.5 16.5 5.0 0.8 79.3
---------------------------------------------- --------- --------- ---------- ---------- ---------- --------
Profit for the period to 31 March 2018 - - 8.6 - - 8.6
Other comprehensive profit for the period - - 1.6 - - 1.6
Retranslation of overseas subsidiaries - - - (2.1) - (2.1)
Total comprehensive profit / (loss) - - 10.2 (2.1) - 8.1
---------------------------------------------- --------- --------- ---------- ---------- ---------- --------
Issue of Share capital 1.4 176.6 - - - 178.0
BGF equity transfer - 0.7 - - (0.7) -
Share-based payment charge - - - - 0.2 0.2
Transactions with owners 1.4 177.3 - - (0.5) 178.2
---------------------------------------------- --------- --------- ---------- ---------- ---------- --------
At 31 March 2018 5.9 229.8 26.7 2.9 0.3 265.6
---------------------------------------------- --------- --------- ---------- ---------- ---------- --------
Profit for the period to 29 September 2018 - - 0.7 - - 0.7
Other comprehensive profit for the period - - 1.6 - - 1.6
Retranslation of overseas subsidiaries - - - 0.3 - 0.3
Total comprehensive profit - - 2.3 0.3 - 2.6
---------------------------------------------- --------- --------- ---------- ---------- ---------- --------
Issue of Share capital 0.4 58.9 - - - 59.3
Equity transfer on exercise of B growth
shares - - 0.3 - (0.3) -
Share-based payment charge - - - - 0.9 0.9
Transactions with owners 0.4 58.9 0.3 - 0.6 60.2
---------------------------------------------- --------- --------- ---------- ---------- ---------- --------
At 29 September 2018 6.3 288.7 29.3 3.2 0.9 328.4
---------------------------------------------- --------- --------- ---------- ---------- ---------- --------
At 1 April 2017 4.5 52.5 16.5 5.0 0.8 79.3
---------------------------------------------- --------- --------- ---------- ---------- ---------- --------
Profit for the period to 1 July 2017 - - 6.0 - - 6.0
Other comprehensive profit for the period - - 1.4 - - 1.4
Retranslation of overseas subsidiaries - - - (0.7) - (0.7)
Total comprehensive profit / (loss) - - 7.4 (0.7) - 6.7
---------------------------------------------- --------- --------- ---------- ---------- ---------- --------
Issue of Share capital - - - - - -
Share-based payment charge - - - - 0.1 0.1
Transactions with owners - - - - 0.1 0.1
---------------------------------------------- --------- --------- ---------- ---------- ---------- --------
At 30 September 2017 4.5 52.5 23.9 4.3 0.9 86.1
---------------------------------------------- --------- --------- ---------- ---------- ---------- --------
Condensed Consolidated Statements of Cash Flows
For the 26 weeks ended 29 September 2018 (unaudited)
26 26 52
weeks weeks weeks
ended ended ended
31
29 September 30 September March
2018 2017 2018
(audited)
GBPm GBPm GBPm
---------------------------------------------------------------------- ------------- ------------- ----------
Cash flows from operating activities
Operating profit 13.6 12.9 26.4
Adjustments For:
Depreciation charges 11.4 6.4 15.8
Amortisation of intangible assets 9.8 3.0 11.3
Amortisation of government grants (0.2) (0.1) (0.3)
Loss on disposal of property, plant and equipment - - 0.1
Share-based employee remuneration 0.9 0.1 0.2
Defined benefit pension (0.2) (0.2) (0.2)
------------- ------------- ----------
Net cash flow from operating activities before movements in working
capital 35.3 22.1 53.3
Change in inventories (4.9) (2.5) (8.0)
Change in trade and other receivables 1.7 2.5 2.6
Change in trade and other payables 2.7 (4.7) 6.4
------------- ------------- ----------
Cash generated by operations 34.8 17.4 54.3
Interest paid (4.9) (2.2) (6.7)
Income taxes paid (7.3) (5.0) (10.6)
Net cash inflow from operating activities 22.6 10.2 37.0
------------------------------------------------------------------------ ------------- ------------- ----------
Investing activities
Purchases of property, plant and equipment (20.6) (6.9) (25.9)
Purchases of intangible assets - - (0.7)
Proceeds on disposal of property, plant and equipment 0.4 0.1 2.1
Deferred and contingent consideration payments (3.9) (9.4) (15.3)
Acquisition of subsidiaries net of cash acquired (82.8) (3.1) (276.5)
Net cash used in investing activities (106.9) (19.3) (316.3)
------------------------------------------------------------------------ ------------- ------------- ----------
Financing activities
Increase in long-terms loans 42.9 10.1 128.8
Issue of share capital 59.3 - 178.1
Repayment of obligations under finance leases / hire purchase (0.4) (0.4) (0.3)
Net cash generated in financing activities 101.8 9.7 306.6
------------------------------------------------------------------------ ------------- ------------- ----------
Net increase in cash and cash equivalents 17.5 0.6 27.3
Cash and cash equivalents at beginning of period 53.1 28.0 28.0
Effect of foreign exchange rate changes 1.6 0.1 (2.2)
Cash and cash equivalents at end of period 72.2 28.7 53.1
------------------------------------------------------------------------ ------------- ------------- ----------
Comprising:
Cash at bank and in hand 74.0 28.7 54.0
Bank overdrafts (1.8) - (0.9)
72.2 28.7 53.1
---------------------------------------------------------------------- ------------- ------------- ----------
Notes
1. General information
These condensed consolidated financial statements for the 26
weeks ended 29 September 2018 have not been audited by the
Auditor.
The information for the 52 weeks ended 31 March 2018 does not
constitute statutory accounts as defined in Section 434 of the
Companies Act 2006. A copy of the statutory accounts for that year
has been delivered to the Registrar of Companies. The Auditor's
report on those accounts was unqualified and did not include a
reference to any matter to which the Auditor drew attention by way
of emphasis without qualifying the report and did not contain
statements under Section 498(2) or 498(3) of the Companies Act
2006.
2. Basis of preparation and accounting policies
These condensed consolidated financial statements should be read
in conjunction with the Group's financial statements for the 52
weeks ended 31 March 2018, which were prepared in accordance with
IFRSs as adopted by the European Union.
With the exception of the adoption of IFRS 15 on 1 April 2018,
these interim financial statements have been prepared on a
consistent basis and in accordance with the accounting policies set
out in the group's Annual Report and Financial Statements for the
year ended 31 March 2018. There was no material impact on the
group's results as a consequence of the transition to IFRS 15 as
the group's activities are primarily the sale of flooring products,
the revenue for which was previously recognised at a point in time
when the transfer of risks and rewards occurs which is consistent
with IFRS 15. The comparative figures in these interim financial
statements have not been restated as a consequence of adopting IFRS
15 for the first time this period.
Having reviewed the Group's projections and taking account of
reasonably possible changes in trading performance, the Directors
believe they have reasonable grounds for stating that the Group has
adequate resources to continue in operational existence for the
foreseeable future.
Accordingly, the Directors continue to adopt the going concern
basis in preparing the financial statements of the Group.
3. Segmental information
The Group is organised into two operating divisions, the sale of
floorcovering products in the UK & Europe and Australia.
Geographical segment information for revenue, operating profit
and a reconciliation to entity net profit is presented below.
Income statement
26 weeks ended 29 September 2018 26 weeks ended 30 September 2017
Unallocated Unallocated
UK & central UK & central
Europe Australia expenses Total Europe Australia expenses Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- -------- ---------- ------------- ------- -------- ---------- ------------- ------
Revenue 220.3 53.1 - 273.4 130.7 58.8 - 189.5
Underlying operating
profit 30.6 4.1 (0.7) 34.0 12.5 6.4 (0.7) 18.2
Non-underlying operating
items (8.9) (0.9) - (9.8) (2.7) (0.3) - (3.0)
Exceptional operating
items (9.6) (0.1) (0.9) (10.6) (1.5) (0.1) (0.7) (2.3)
Operating profit 12.1 3.1 (1.6) 13.6 8.3 6.0 (1.4) 12.9
Underlying finance charge (5.8) (2.7)
Non-underlying finance
charge (3.2) (1.4)
Profit before tax 4.6 8.8
Tax (3.9) (2.8)
--------------------------- -------- ---------- ------------- ------- -------- ---------- ------------- ------
Profit for the period 0.7 6.0
--------------------------- -------- ---------- ------------- ------- -------- ---------- ------------- ------
Management information is reviewed on a segmental basis to operating
profit.
Other segmental
information
26 weeks ended 29 September 2018 26 weeks ended 30 September 2017
Unallocated Unallocated
UK & central UK & central
Europe Australia expenditure Total Europe Australia expenditure Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- -------- ---------- ------------- ------- -------- ---------- ------------- ------
Depreciation 10.1 1.3 - 11.4 4.9 1.5 - 6.4
Amortisation of
acquisition intangibles 8.9 0.9 - 9.8 2.7 0.3 - 3.0
--------------------------- -------- ---------- ------------- ------- -------- ---------- ------------- ------
19.0 2.2 - 21.2 7.6 1.8 - 9.4
--------------------------- -------- ---------- ------------- ------- -------- ---------- ------------- ------
26 weeks ended 29 September 2018 26 weeks ended 30 September 2017
Unallocated Unallocated
UK & central UK & central
Europe Australia expenditure Total Europe Australia expenditure Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- -------- ---------- ------------- ------- -------- ---------- ------------- ------
Capital expenditure 20.2 1.7 - 21.9 6.0 0.9 - 6.9
--------------------------- -------- ---------- ------------- ------- -------- ---------- ------------- ------
4. Exceptional and non-underlying items
26 weeks ended 26 weeks ended
29 September 30 September
2018 2017
GBPm GBPm
----------------------------------------- --------------- ---------------
Exceptional items
(a) Acquisition and structuring related
costs (6.1) (0.5)
(b) Reorganisation costs (2.7) (1.8)
Non-underlying items
(c) Acquisition-related performance
plan charge (0.9) -
(d) Share incentive plan charge (0.9) -
----------------------------------------- --------------- ---------------
(10.6) (2.3)
----------------------------------------- --------------- ---------------
All of the items in the table above are classified within
administrative expenses.
(a) Professional fees in connection with prospecting,
structuring and completing acquisitions during the period, as well
as review of the Group's capital structure.
(b) Reorganisation costs comprise various fees incurred to date
in relation to reviewing the Group's manufacturing and logistics
operations, as well as other corporate restructuring. This
primarily relates to further restructuring and improvements and
operational synergies at the Group's Abingdon carpet factory
following consolidation of our UK manufacturing operations last
year, plus further set up costs in relation to our new UK logistics
network. Both of these projects are expected to be completed by the
year end.
(c) Charge relating to the accrual of expected liability under
the acquisition-linked performance plan with the Keraben senior
management team. As part of the Keraben acquisition terms, the
senior management team were required to invest EUR8.3 million into
a performance plan linked to the financial results of the target
business over a five year period. The value of this plan can go up
or down from the original EUR8.3 million subscription, depending on
performance. Customary good and bad leaver provisions apply during
the five year period. This investment by management was rolled over
from their exit value under a scheme with the previous private
equity owners.
(d) Non cash share-based payment charge in relation to the
long-term management incentive plan that was put into place in
April 2018.
5. Finance costs
26 weeks ended 26 weeks ended
29 September 30 September
2018 2017
GBPm GBPm
--------------------------------------------------- --------------- ---------------
Interest payable on bank loans and overdrafts 4.6 1.7
Cash interest payable on BGF loan 0.3 0.5
---------------------------------------------------- --------------- ---------------
Total interest payable on loans 4.9 2.2
Amortisation of prepaid finance costs 0.7 0.3
Interest rolled up into BGF loan 0.1 0.1
Net interest expense on defined benefit pensions 0.1 0.1
---------------------------------------------------- --------------- ---------------
Underlying interest costs 5.8 2.7
(a) BGF loan and option, redemption premium
charge 0.1 0.1
(b) Unwinding of present value of contingent
earn-out liabilities 1.6 1.1
(b) Unwinding of present value of deferred
consideration liabilities 0.1 0.2
(c) Mark to market adjustment on foreign exchange
forward contracts (0.5) -
(d) Retranslation of foreign currency loans (1.0) -
(e) Release of prepaid finance costs 2.9 -
--------------------------------------------------- --------------- ---------------
9.0 4.1
--------------------------------------------------- --------------- ---------------
The non-underlying items classified within finance costs are as
follows:
(a) Non-cash annual cost of the redemption premium in relation
to the BGF loan and option.
(b) Non-cash costs relating to the revaluation of deferred
consideration and contingent earn-outs. Deferred consideration is
measured at amortised cost, while contingent consideration is
measured under IFRS 3 at fair value. Both are discounted for the
time value of money. The present value is then remeasured at each
half-year and year-end in relation to the appropriateness of the
discount factor and the unwind of this discount. In addition, any
changes to contingent earn-outs arising from actual and forecast
business performance are reflected as other adjustments to present
value of contingent earn-out liabilities.
(c) Non-cash fair value adjustment on foreign exchange forward
contracts.
(d) Net impact of exchange rate movements on third party and
intercompany loans.
(e) Non-cash charge in the period relating to the release of the
prepaid costs on previous bank facilities which were refinanced in
August 2018.
6. Tax
26 weeks ended 26 weeks ended
29 September 2018 30 September 2017
GBPm GBPm
----------------------------------------- ------------------ ------------------
Current tax
- Current year UK 1.5 1.6
- Current year overseas 3.5 2.1
------------------------------------------ ------------------ ------------------
5.0 3.7
Deferred Tax
- Credit recognised in the current year (1.1) (0.9)
------------------------------------------ ------------------ ------------------
Total tax 3.9 2.8
------------------------------------------ ------------------ ------------------
Corporation tax is calculated at the applicable percentage of
the estimated assessable profit for the year in each respective
geography. This is 19% in the UK; 25% in the Netherlands and Spain;
27.9% in Italy; 30% in Australia; and 34% in Belgium.
The overall effective corporation tax rate on underlying profit
is 24.0% (2017: 22.9%), representing the best estimate of the
weighted average annual corporation tax rate expected for the full
financial year.
7. Earnings per share
The calculation of the basic, adjusted and diluted
earnings per share is based on the following
data:
Basic Adjusted Basic Adjusted
26 weeks ended 26 weeks ended 26 weeks ended 26 weeks ended
29 September 2018 29 September 2018 30 September 2017 30 September 2017
GBPm GBPm GBPm GBPm
----------------------------------- ------------------ ------------------ ------------------ ------------------
Profit attributable to ordinary
equity holders of the parent
entity from continuing operations 0.7 0.7 6.0 6.0
Exceptional and non-underlying
items:
Amortisation of acquired
intangibles - 9.8 - 3.0
Acquisition and structuring related
cost - 6.1 - 0.5
Acquisition-related performance
plan charge - 0.9 - -
Share incentive plan charge - 0.9 - -
Reorganisation costs - 2.7 - 1.8
Release of prepaid finance costs - 2.9 - -
BGF loan and option, redemption
premium charge - 0.1 - 0.1
Unwinding of present value of
deferred and contingent
consideration - 1.7 - 1.3
Mark to market adjustment on
foreign exchange forward contracts - (0.5) - -
Retranslation of foreign currency
loans - (1.0) - -
Tax effect on adjusted items where
applicable - (2.8) - (0.8)
------------------------------------ ------------------ ------------------ ------------------ ------------------
Earnings for the purpose of basic
and adjusted earnings per share 0.7 21.5 6.0 11.9
------------------------------------ ------------------ ------------------ ------------------ ------------------
Weighted average number of shares
26 weeks ended 26 weeks ended
29 September 2018 30 September 2017
Number Number
of shares of shares
(000's) (000's)
---------------------------------------------------------------------
Weighted average number of shares for the purpose of basic and adjusted
earnings per share 120,066 90,969
Effect of dilutive potential ordinary shares:
BGF share options and growth shares 189 3,266
------------------------------------------------------------------------ ------------------ ------------------
Weighted average number of ordinary shares for the purposes of diluted
earnings per share 120,255 94,235
------------------------------------------------------------------------ ------------------ ------------------
The potential dilutive effect of the share options has been calculated in accordance with
IAS 33 using the average share price in the period.
The Group's earnings per share are as follows: 26 weeks ended 26 weeks ended
29 September 2018 30 September 2017
Pence Pence
--------------------------------------------------------------------- ------------------ ------------------
Earnings per share
Basic adjusted 17.91 13.10
Diluted adjusted 17.88 12.64
Basic 0.58 6.55
Diluted 0.58 6.44
------------------------------------------------------------------------ ------------------ ------------------
8. Acquisition of subsidiaries
Ceramica Saloni
On 7 August 2018 the Group acquired 100% of the equity of
Ceramica Saloni, SAU and Sanicova, S.L.U (together "Saloni").
Saloni operates from near Castellon and the Group's Keraben
business, in the heart of the Spanish ceramics industry,
manufacturing mid to high-end ceramic and porcelain tiles, which
are sold domestically and exported internationally. Its main
markets are Spain and France, where it sells its products
predominantly to direct markets.
Cash consideration of EUR96.7m (GBP86.2m(1) ) was paid on
completion. This was satisfied in part through a placing of
7,314,626 new Ordinary Shares at a price of 827 pence per Ordinary
Share, raising gross proceeds of approximately GBP60.5 million, and
new bank facilities with Barclays and HSBC. There is no deferred or
contingent consideration.
The valuation exercise to identify intangible assets acquired,
as required under IFRS 3, has not been finalised as at the half
year. The valuation will be reflected in the Annual Report and
Accounts for the Group for the year ending 30 March 2019 together
with the IFRS 3 disclosures. Accordingly, an element of the
Goodwill recorded on the balance sheet as at 29 September 2018 will
be reclassified to Intangible assets once the IFRS 3 valuation has
been completed. The provisional goodwill recognised on the
acquisition is EUR95.1m (GBP84.7m(1) ).
(1) Applying the GBP to EUR exchange rate at the date of
acquisition of 1.1220.
(2) Applying the average GBP to EUR exchange rate over the half
year period of 1.1293.
9. Rates of exchange
26 weeks ended 26 weeks ended 52 weeks ended
29 September 30 September
2018 2017 31 March 2018
-------------------------------
Australia (A$) - average rate 1.7952 1.6805 1.7206
Australia (A$) - period end 1.8038 1.7104 1.8246
Euro (EUR) - average rate 1.1293 1.1417 1.1373
Euro (EUR) - period end 1.1222 1.1341 1.1370
-------------------------------- --------------- --------------- ---------------
10. Risks and uncertainties
The Board continuously assesses and monitors the key risks of
the business. The key risks that could affect the Group's medium
term performance and the factors which mitigate these risks have
not changed from those set out on page 12 of the Group's 2018
Annual Report, a copy of which is available on the Group's website
- www.victoriaplc.com. The Chairman's Statement includes
consideration of uncertainties affecting the Group in the remaining
six months of the year.
On behalf of the Board
Geoffrey Wilding
26 November 2018
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR DMMZMFVDGRZZ
(END) Dow Jones Newswires
November 27, 2018 02:01 ET (07:01 GMT)
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