Innovative flooring firm Victoria (VCP:AIM) is reorganising its UK manufacturing and logistics operations in order to boost production capacity and improve service levels.
The move is in direct response to Victoria’s rapid growth and ‘continued significant demand’ for its products. Investors are growing increasingly excited about Victoria’s growth prospects and the news sends the shares 8.5p higher to 501.5p.
Victoria’s new CEO Philippe Hamers, an industry heavyweight who most recently ran Balta, Europe's largest multi-site, multi-national carpet manufacturer, is getting straight down to business.
Appointed in March, Hamers has swiftly reviewed the AIM-listed carpet and underlay distributor’s UK manufacturing footprint with the aim of increasing capacity and improving efficiency.
MARGIN BOOST
Manufacturing operations at Victoria’s Kidderminster site are to be transferred to its two other UK carpet manufacturing facilities.
Hamers and Victoria’s charismatic executive chairman Geoff Wilding (pictured below) believe this reorganisation will boost margins, optimise asset utilisation and improve production efficiency.
Victoria, a business with significant opportunities for organic and acquisitive growth, also says the move will provide significant additional capacity without the need for material additional capital expenditure.
Following the relocation of the manufacturing facilities from Kidderminster, the current subscale Midlands distribution centre will be relocated to the Kidderminster site.
This move will provide significantly increased capacity. In addition, ambitious Victoria plans to open a Southern distribution centre to the North West of London by late 2018, followed by a further new distribution centre in the North of England.
Wilding says 'by reorganising our manufacturing and logistics operations, we will continue to grow Victoria's earnings per share and free cash flow.’
BUSINESS REMAINS BRISK
Consolidating a fragmented flooring industry, Victoria also issues a positive trading update. Having successfully integrated the recent Ezi Floor and Dunlop and Dutch artificial grass acquisitions, underlying pre-tax profits for the year ending 1 April will be ‘well ahead of last year’.
‘We believe Victoria is well placed for further growth given its growing international operations (now over a third of the business), the scope to achieve meaningful cost and margin synergies and the prospect of further domestic and international earnings enhancing acquisitions despite the uncertain UK macro environment,’ writes Cantor Fitzgerald Europe’s Mark Photiades.
He argues ‘Victoria should increasingly be viewed as an international business. It has traded strongly over the past 18 months driven by a combination of robust organic growth and earnings enhancing acquisitions.'
