Victoria mindful of consumer risks after record interim performance

Flooring designer and manufacturer Victoria reported a 58.7% rise in revenue in its first half on Tuesday, to £776.1m, with organic growth coming in at 7.7% to reach a “record” operating performance.

The AIM-traded firm said its underlying EBITDA was 18.5% firmer year-on-year for the six months ended 1 October, at £100.1m, as its underlying operating profit was 4.3% firmer at £61.1m.

Operating profit rocketed 196.2% to £82m, while profit before tax surged 1,731% to £53.1m compared to the same period in the prior year.

Victoria said its net debt-to-EBITDA ratio was 3.4x at the end of the period, compared to 3.3x year-on-year.

Diluted earnings per share totalled 36.69p, swinging from losses of 2.68p per sharee in the first half of the 2022 financial year, while diluted adjusted earnings per share slipped to 17.87p from 24.32p.

Victoria said its reported margins were impacted, as expected, by the mix effect from the acquisition of businesses that currently had lower margins.

It said that effect was expected to reduce as integration synergies were realised, as it achieved with previous acquisitions.

“Proactive management” of raw materials and energy successfully mitigated both inflationary pressures and supply chain constraints, the directors added.

During the period, Victoria completed the acquisition of the rugs and UK carpet divisions of Balta to make it Europe's largest manufacturer of soft flooring.

Integration there was “well underway”, to realise the “material potential synergy benefits” of this acquisition.

Despite the significant investments, the board noted that the firm’s leverage was maintained in line with its financial policy.

Looking ahead, Victoria said that although macroeconomic conditions were “challenging”, it was continuing to be confident that synergy gains and proactive management actions would enable its financial performance for the 2023 financial year to be in line with market consensus expectations.

“Integration of recent acquisitions is proceeding apace and on schedule,” said executive chairman Geoff Wilding.

“Consequently, the board believes cash flow, after exceptional costs relating to the integration projects, will be in excess of £100m in the second half.”

Wilding said that in the near term, it was likely that disposable incomes in some markets would be under further pressure from higher interest rates and inflation, with the resulting weaker consumer demand making additional price increases to offset higher input costs “more difficult” to implement.

“Nevertheless, whilst acknowledging these challenges, I am pleased to say that the board continues to be confident that synergy gains and proactive management actions will enable Victoria's financial performance for 2023 to be in line with market consensus expectations and the outlook for the business remains positive.”

At 1053 GMT, shares in Victoria were down 0.22% at 448p.

Reporting by Josh White for Sharecast.com.