Victoria sells more than 200m square metres of flooring in 2023

The AIM-traded company said the milestone resulted in record revenues of £1.46bn, with organic revenue growth at 2.8%, despite challenging macroeconomic conditions.

Its underlying EBITDA jumped 20.4% year-on-year, reaching £196m.

At the same time, the company reported a year-end net leverage of 3.44x, backed by its senior debt entirely composed of fixed-rate covenant-lite bonds due in August 2026 and March 2028.

With a resilient balance sheet, Victoria said it ended the fiscal year boasting more than £250m in cash and undrawn credit lines.

The company, throughout 2023, emphasised the integration of acquisitions, which were completed this month.

It said the results of those integrations were set to yield a conservative increase of more than £20m annually in EBITDA.

The board highlighted the final phase of its three-year integration expenditure, leading to an expected considerable surge in free cash flow.

Historically, from 2015 to 2019, the firm maintained an average cash conversion ratio of EBITDA to net free cash flow of 55%.

The board said it remained optimistic about sustaining that long-term ratio and planned on achieving it shortly.

While the financial outlook 2024 remained steady and underpinned ongoing integration projects, the company projected that every 5% increase in overall revenue would potentially result in an earnings and cash flow spike of over £25m annually.

“We expect 2024 to be a year of two halves, with stronger second-half earnings as the productivity gains from completion of the major integration projects are experienced,” said executive chairman Geoff Wilding.

“Completion of the projects is also expected to result in Victoria's free cash flow increasing sharply from the second half, with management focussed on returning to our long-run average cash conversion of EBITDA to net free cash flow of 55%.

“Further ahead, 2025 will see the full integration benefits with an expected uplift in margins driving an additional increase in earnings and free cash flow.”

Wilding said Victoria greatly benefitted from being in a long-duration, steady-growth industry that would drive compounding organic growth for decades.

“After making and integrating two-dozen acquisitions over the last 10 years, we have now achieved a scale that we anticipate will result in higher productivity, more efficient logistics, wider distribution, and lower input costs than almost all our competitors.

“Coupling this scale advantage with the underlying sectoral tailwinds will, the board believes, deliver outsized returns for our shareholders for a very long time.”

At 1209 BST, shares in Victoria were up 9.45% at 637p.

Reporting by Josh White for Sharecast.com.