Victoria PLC on Wednesday said it seeing signs of flooring demand perking up and explained that it plans to buyback £25 million in shares.
In addition, it said that liquidity in the market for its bonds ‘has dried up’, hampering plans to repurchase some of its senior secured notes due in 2026.
In addition, the company said it expects to report an annual earnings fall and explained it has cut around 15% of its workforce.
The Kidderminster, England-based firm said the economic outlook is generally improving, including some leading flooring demand, such as mortgage rates, consumer confidence and housing transactions.
That said, the flooring manufacturer said demand continues to be ‘soft in Europe’ and ‘subdued but stable’ in the UK and Australia.
Victoria expects revenue for the year ending March 30 to be lower than the prior year’s level, but in line with market expectations. Statutory revenue in financial 2023 totalled £1.48 billion, or £1.46 billion on an underlying basis.
Underlying earnings before interest, tax, depreciation and amortisation will be below financial 2023’s £196.0 million, coming in at around £160 million.
Executive Chair Geoff Wilding said: ‘We emphasise that we are not expecting some immediate improvement in flooring demand. However, we are confident of the impact on earnings and cashflow of management’s actions and are certain demand will inevitability revert to the long-term mean.’
Victoria said it plans to fork out £25 million to buy back its own shares.
The firm added: ‘Although these share purchases are not the start of a formal and regular programme to return capital to shareholders, the board believes the current share price is materially below the intrinsic value of the group and, whilst liquidity for bond repurchases is constrained, deploying some of the group’s non-operating cash flow, from the sale of non-core and surplus properties, towards these opportunistic purchases (alongside accumulating cash on the balance sheet) serves Victoria’s mission to create wealth for shareholders.’
The company said it has been ‘steadily repurchasing’ its senior secured notes due 2026, buying €11.1 million so far, and at an average discount of 21% against the par value. This reduces further interest payments as well as the amount due when the bond matures in 2026. It has a target of buying €25 million.
Victoria added that it is willing to continue buying the bonds, but said ‘liquidity has dried up, with few holders prepared to sell at current levels’.
It added that cutting its debt level remains a ‘key target’.
Wilding added: ‘There has been a lot of noise around Victoria in the last six months. To their enormous credit, operational management simply put their heads down and forged ahead with the integration projects designed to maximise the available synergies within the group and optimise cash generation in a challenging macro-environment.’
Chief Executive Philippe Hamers, meanwhile, said Victoria has been busy with ‘various synergy projects’ over the past 18 months.
Hamers added: ‘These include the relocation of Balta’s carpet manufacturing and logistics to the group’s existing UK facilities, relocating much of Balta’s rug production to a newly expanded factory in lower-cost Turkey, and introducing new IT systems to improve operational decision-making and financial reporting. We have also initiated a project for the full integration of ceramics production to optimise productivity, and acquired new warehouse and distribution facilities in the US to improve customer service, improving inventory management, and consolidation of raw material procurement.
‘These actions, some of which have been extended and remain ongoing, have allowed production capacity to be maintained with 1,170 fewer employees [a roughly 16% workforce reduction].’
In September, Victoria said there was ‘no wrong-doing whatsoever’ at its Hanover Flooring unit after comments from its auditor marred the firm’s annual results that month.
Grant Thornton UK LLP identified ‘risk factors of fraud’ as it handed its qualified opinion. A qualified opinion essentially means that, save for some exceptions, a company’s financial numbers are an accurate representation.
Grant Thornton’s statement, included in the annual report, noted that ‘potential irregularities’ were found at Hanover, adding that ‘inadequate accounting records were retained’. It added that it had spotted ‘instances of non-compliance with high value dealer regulations’, essentially a money laundering supervision.
Wilding in September responded saying there was ‘no wrong-doing whatsoever’ at Hanover that impacts the firm’s financial statements, explaining that Hanover represents less than 1.3% of the group’s revenue.
He also said that Hanover’s issue was ‘predominantly one of having heightened financial risk due to inadequate accounting records associated with no more than £400,000 of customer receipts’.
Shares in Victoria were down 9.4% to 221.00 pence each in London on Wednesday afternoon.
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