Victoria Regulatory News (VCP)

29 August 2014

Victoria PLC

('Victoria', the 'Company', or the 'Group')

Final Results

for the year ended 29 March 2014 and Notice of AGM

Victoria PLC (AIM: VCP), a manufacturer, supplier and distributor of design-led carpets and other floorcoverings, is pleased to announce its full year results for the year ended 29 March 2014.

The Annual Report and Accounts are being posted to shareholders today and are also available on the Company's website at www.victoriaplc.com.

Financial Highlights

Operational Highlights:

· Acquisition of Westex seamlessly integrated and significantly earnings enhancing for the Group

· The UK achieved like-for-like sales growth of 1.7% to £28.21m (2013: £27.73m), excluding the impact of Westex

· Australian sales were marginally down by 1.1% on the prior year at A$65.40m, impacted by slower economic growth and the competitive trading environment

· Ongoing focus on generating cash, including the sale and leaseback of certain properties, has significantly reduced the Group's debt levels at the end of the year

· New product ranges successfully launched in the period to address evolving market trends

·

Geoff Wilding, Chairman of Victoria PLC commented:

"2014 marked a significant improvement in Victoria's financial position. Much of the underlying improvement has come from our relentless day-to-day focus on costs, margins and sales growth.

We were very pleased to acquire Westex, arguably the UK's premium tufted carpet manufacturer.

We completed the rationalisation of our spinning mills in Australia, significantly improving our operational efficiencies in this market.

We are encouraged by the outlook for our business, with the UK residential property market showing signs of increased consumer confidence. The Australian market is also showing signs of economic improvement, which will, in time, translate into consumer confidence and increased demand for carpet.

With the reshaping of the business that has already occurred, together with the improving market conditions and other opportunities that we see, I am optimistic about the Group's future.

Our mission is to create wealth for our shareholders, rewarding them for their investment in and support for the Group."

- Ends -

For more information contact:

Chairman's Statement

I am pleased to advise shareholders that the financial year for 2014 marked a significant improvement in Victoria's financial position:

· Group revenues grew by 0.7% (6.8% in constant currency terms) from £70.91m to £71.39m

· Group operating profit before exceptional items from continuing operations increased from a loss of £0.50m to a profit of £2.58m, as a result of continued improvements in like-for-like group profitability and the acquisition of the Globesign group ('Westex')

· Group profit before tax and exceptional items from continuing operations increased from a loss of £0.96m to a profit of £2.05m

· After exceptional items, the Group recorded a profit before tax from continuing operations of £2.28m, compared with a £3.34m loss before tax in the prior year

· Group debt as at year end was £1.48m, compared with £7.51m in 2013, reflecting the successful restructuring of the Group

Review:

There are a number of factors that have contributed to our change in fortunes but I would like to highlight a few specific actions over the period:

· Much of the underlying improvement has come from a relentless day-to-day focus on costs, margins, and sales growth. The success of this is a credit to the Group's employees who have needed to adjust in a relatively short time to a new culture and I would like to thank them for their efforts and focus. I would also like to take this opportunity to sincerely thank our retailers whose loyal support and business has been vital to our plans.

· We were very pleased to acquire Westex during 2014. Westex is arguably the UK's premium tufted carpet manufacturer, and is run by talented and committed individuals who, I am delighted to say, have committed to remain at the business for a minimum of five years. In 2014, Westex generated profits of £4.53m although the contribution to Victoria's profit before tax was £1.17m, reflecting the fact that we owned the business for just three months of the financial year.

· Our ongoing focus on generating cash has significantly reduced the Group's debt levels - from £7.51m at the end of 2013 to £1.48m as at the end of 2014 - even after the payment of £16.00m to the shareholders of Westex.

· Although Victoria has long owned its factories, it is difficult to see any genuine competitive advantage in ownership of the land and buildings. Victoria is a carpet manufacturer, not a property investor, and the Board has formed the view that the capital locked up in real estate is generally better employed in carpet manufacturing and distribution operations. There will be circumstances where it is worthwhile to retain ownership of the real estate, but during 2014 we have sold our operational real estate in Australia and the Company's property at Kidderminster, by way of sale and lease back.

· In last year's report to shareholders I outlined the proposed rationalisation of the Company's spinning mills in Australia to one site at Bendigo and this consolidation has now been completed. Costs associated with this move totalled £0.78m in 2014 but it has significantly improved operating efficiencies in Australia, ensuring we remain competitive.

· As part of our strategy to dispose of non-core and underperforming assets we have successfully sold the Canadian interior decorating retailer, Colin Campbell, realising a small premium to the carrying value. The business had never generated a meaningful return to Victoria and it did not have any strategic value so in 2013 we bought out the other 50% shareholder, which enabled us to deal freely with the business - a move which resulted in us being able to achieve a sale.

Post balance sheet date the Board was delighted to deliver on its commitment to shareholders at the time of its appointment and be able to pay a special dividend of £2.92 per share in July - bringing the total payment to shareholders since they approved the Contract for Differences ("CFD") to £3.00 per share. This act also enabled the CFD to be terminated and remove any uncertainty around this arrangement. 100% of the proceeds of the CFD were reinvested into Victoria demonstrating my commitment to, and confidence in, the future of the business.

Dividend

The very large dividend paid in July 2014 has led to the decision that a final dividend will not be paid this year. However the Board would like to send a clear signal to shareholders of the Company's commitment to paying dividends as part of its plan to create wealth for shareholders and it is intended to recommence dividends next year.

Board Changes

As announced in May 2014, the Board of Victoria was further strengthened with the appointment of Terry Danks, the existing Company Secretary of the Group and Finance Director of Victoria Carpets Limited.

Outlook

We are encouraged by the improving UK residential property market. Although new homes are a useful source of revenue, by far the most important driver of carpet sales is home-owners redecorating/refurbishing their homes. Consumer confidence and home sales are the underlying factors for this activity.

After a very difficult couple of years there are also promising signs of economic improvement in Australia, which will, in time, translate into consumer confidence and increasing demand for carpet.

To help shareholders understand the underlying earnings of Victoria I have set out in the table below a summary of the operating profits of each component of the Group.

Notes:

1. Westex earnings are for the 12 months ending 28 February of each year (their former balance sheet date); all other earnings are for Victoria's financial year

2. All numbers exclude exceptional items

3. Existing UK incorporates Victoria Carpets Limited and Westwood Yarns Limited

Our Mission

I would like to finish this report by highlighting Victoria PLC's commitment to create wealth for shareholders. It is the benchmark against which all management and board decisions are measured. The means by which we do this is by the manufacture and distribution of some of the finest floor coverings in the UK and Australia, but the objective is to reward shareholders for their investment in, and support for, Victoria PLC.

I am pleased to say that over the last 18 months many of the Group's management have bought shares (most of them for the first time) on market with their own cash reflecting their belief in Victoria PLC. Their personal investment ensures they think and act in the best interests of shareholders because they are shareholders.

In summary, with the reshaping of the business that has already occurred, together with the improving market conditions and other opportunities that we see, I am optimistic about the Group's future.

Operating and Financial Review

Operational Review

United Kingdom

Whilst the improving UK economic position has been well documented during this financial period, market conditions remain highly competitive and consumers remain cautious over spend on high value items after a sustained period of below inflationary wage growth.

With the market trend towards less expensive products, Victoria launched a number of product ranges in the financial period to reflect this.

The UK achieved like for like sales growth of 1.7% from £27.73m to £28.21m, which excludes the impact of the acquisition of Westex.

The UK underlying operating performance (excluding Westex) has improved from an operating loss of £1.82m in 2013 to an operating profit of £0.40m in 2014. The turnaround in performance is driven by an improvement in gross margin and a continued focus on reducing the cost base, including the full year benefit of cost saving initiatives undertaken in the second half of 2013.

The UK completed a sale and leaseback of the manufacturing facility in Kidderminster in March 2014, receiving cash of £5.80m.

The acquisition of Westex in December 2013 has contributed sales of £4.83m and an operating profit of £1.17m in the period post acquisition. The annual operating profit of Westex over the past three years is shown within the Chairman's Statement.

As a result of the above, the UK recorded a profit before tax and exceptional items of £1.57m compared to a loss before tax and exceptional items of £2.03m in 2013.

Australia

The Australian economy continues to be impacted by the slowdown in the resources sector and a softening in prices as a result of slowing growth in key markets of China and India. The retail and building & construction sectors are showing progress whilst manufacturing and service sectors continue to struggle.

The direction of the Australian Dollar is critical to the health of the manufacturing sector and to competitiveness in the resources sector and overall unemployment rates. There has been considerable volatility in both the Australian Dollar and New Zealand Dollar during the year and experts are divided over their future direction.

The continued low interest rate environment has fostered significant increases in house prices in both Australia and New Zealand with many major cities showing double digit growth over the past 12 months. This activity has boosted approval and commencements in new building construction in 2014, and driven the turnover and clearance rates of existing properties. Most recent data indicates that building and property activity levels are now moderating heading into 2015.

Sales in the period of A$65.40m were below prior year by 1.1% (A$66.14m), impacted by tough economic conditions and the competitive trading environment.

Whilst reported operating profit has reduced by A$0.23m to A$2.88m on lower sales, the like for like operating profit, after adjusting for property leasing costs during the period was in line with prior year. Cost saving initiatives across the business also delivered and contributed to the underlying operating profit, offsetting additional costs in third party logistics following the failure of a long term partner.

The exit from and closure of the Castlemaine Mill freed up key assets to be transferred to the Bendigo Mill, increasing that plant's capacity and reducing operating costs by year end.

The company completed sale and leasebacks of the manufacturing facility in Dandenong and spinning mill at Bendigo realising cash of A$10.50m in the financial year. The sale of the Castlemaine Mill was completed post year end in May 2014 for A$1.0m.

The company has achieved a significant reduction in working capital, with inventory reduced by A$4.29m (20.9%).

Canada

As noted in the Chairman's Statement, the Group disposed of its Canadian operation Colin Campbell at the end of the financial period. The Canadian operation contributed operating profit of £5k in the period and £77k in prior year. The sale of the business in March 2014 realised a £111k profit.

Financial Review

The Group's financial performance for the year end 29 March 2014 is summarised as follows:

Exceptional Items

The exceptional items for the year end 29 March 2014 are summarised below:

The Group sold its carpet manufacturing facilities in both Australia and the UK during the year and the spinning mill in Bendigo, Australia. These properties are now under operating leases varying from 10 to 20 year terms. The property sales realised a profit of £3.30m, which is recorded in other operating income.

The Contract for Differences charge of £1.63m represents the fair value assessment of the contract at the year-end date and associated professional fees in the period. The fair value calculation was based on the principles of the contract and the market capitalisation as at the year end. Also taken into account were a number of conditions still to be met before the contract could be exercised. The conditions were eventually satisfied in July 2014 resulting in the issue of 7,087,730 ordinary shares for the benefit of Geoffrey Wilding (through Camden Holdings Limited).

The smaller of the two spinning mills in Australia was closed in the first half period to meet reduced volume requirements for woollen yarns as a result of the continuing consumer trend away from wool to synthetic carpets.

Acquisition costs in the period relate to professional fees associated with the acquisition of Westex in December 2013.

Taxation

The tax charge in the year was £0.67m (2013: tax credit of £0.74m), equivalent to an effective tax rate of 28.0%. The Group's tax rate is above the prevailing UK standard rate of 23% impacted by a number of factors including a higher standard rate of 30% in Australia and expenses that are not deductible in determining taxable profit.

 Cash Flow and Debt

The Group generated significant operating cash flows in the period (before exceptional items) relative to EBITDA (before exceptional items), driven by a continued focus on reducing working capital levels. In particular, underlying inventories levels have decreased year on year by £4.86m after excluding the impact of the additional inventory on the Group balance sheet following the acquisition of Westex in the period.

Capital expenditure was relatively modest at £0.53m (2013: £0.85m) and significantly below depreciation levels. The Group is well invested with modern plant and equipment and capital expenditure requirements are expected to remain below depreciation levels in the new financial period.

The net cash inflow of £11.70m in the period on disposal of property, plant and equipment principally relates to the sale and leaseback of the properties noted earlier in this review.

The net cash outflow arising in respect to the acquisition of Westex was £12.84m, comprising an initial cash consideration of £16.00m and £0.66m of associated professional fees, partly offset by £3.82m opening cash in Westex.

Net debt levels reduced by £6.03m during the financial year to £1.48m (2013: £7.51m).

Future funding

The Group's annual renewal of its Australia facilities took place in November 2013 and there are no problems anticipated in renewing these facilities on similar terms in November 2014.

The Group's UK facilities comprise a committed 3 year revolving credit facility expiring in July 2015, a new term loan facility to finance the Westex acquisition expiring in December 2016 and an overdraft facility. The facilities are subject to financial covenants measured against Group results and all lending covenants were satisfied at all quarterly test dates throughout the year. There are no problems anticipated in renewing the 3 year revolving credit facility which expires in less than 12 months from the date of this report.

The current facilities across the Group provide sufficient capacity in Australian Dollars, Sterling and Euros to cover all anticipated capital expenditure and working capital requirements in the year ahead.

Key performance indicators (KPI's)

The KPI's monitored by the Group Board are set out in the table below for the year ended 29 March 2014.

* Earnings before interest, tax, depreciation, amortisation and exceptional items.

Principal risks and uncertainties

The principal risks facing the business are set out as follows:

Competition

The Group companies operate in mature and highly competitive markets, resulting in pressure on pricing and margins. Management regularly review competitor activity to devise strategies to protect the Group's position as far as possible.

Global Economic conditions

The operating and financial performance of the Group is influenced by economic conditions in the geographic areas it operates, particularly the UK, Eurozone, Australia and the USA. The Group remains focussed on driving operational efficiency improvements, cost reductions and ongoing product development to adapt to the current market and economic conditions.

Key input prices

Material adverse changes in certain raw material prices, in particular wool prices, could affect the Group's profitability. These prices are closely monitored and forward contracts placed to help manage shorter term volatility.

Geoffrey Wilding

Executive Chairman

Consolidated Income Statement

For the 52 weeks ended 29 March 2014

The prior year Consolidated Income Statement was re-stated due to the sale of Colin Campbell & Sons Limited, which is now shown separately under discontinued operations.

Consolidated and Company Balance Sheets

As at 29 March 2014

Consolidated Statement of Changes in Equity

For the 52 weeks ended 29 March 2014

Company Statement of Changes in Equity

For the 52 weeks ended 29 March 2014

Consolidated and Company Statements of Cash Flows

For the 52 weeks ended 29 March 2014

Notes to the Accounts

1 Segmental information

The Group is organised into two operating divisions, the sale of floorcovering products in the UK and Australia.

Geographical segment information for revenue, operating profit/(loss) and a reconciliation to entity net profit/(loss) is presented below.

* Profit/(loss) from discontinued operations relates to the Canadian operation Colin Campbell & Sons Limited, which was sold on 28 March 2014. The result is shown net of tax.

Intersegment sales between the UK and Australia were immaterial in the current and comparative periods.

Management information is reviewed on a segmental basis to profit/(loss) before tax.

Assets held for sale relates to the Castlemaine spinning mill in Australia which was sold in May 2014. The prior year figure relates to the Canadian operation Colin Campbell & Sons Limited which was sold on 28 March 2014.