Victoria Regulatory News (VCP)

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News Release  

29 October 2018

Victoria PLC("Victoria", the "Company", or the "Group")

Pro-forma and Interim Financial Information

Victoria PLC (LSE: VCP) today announces the following financial information that has been prepared in connection with the Company's financing arrangements.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

Unaudited Pro Forma Condensed Consolidated Financial Information

This announcement (the "Announcement") includes unaudited pro forma condensed consolidated financial information of the Group as of and for the 52 weeks ended June 30, 2018. The unaudited pro forma condensed consolidated income statement information for the 52 weeks ended June 30, 2018 gives effect to the transactions described below as if they had occurred on July 2, 2017:

• the acquisition of Keraben Grupo, S.A.U. ("Keraben") and the related financing;

• the acquisition of Cerámica Saloni, S.A.U. and its consolidated subsidiaries ("Saloni") and the related financing; and

• the payment of fees and expenses related to the foregoing.

The unaudited pro forma condensed consolidated balance sheet information as of June 30, 2018 gives effect to the transactions described below as if they had occurred on June 30, 2018:

• the acquisition of Saloni and the related financing; and

• the payment of fees and expenses related to the foregoing.

The unaudited pro forma condensed consolidated financial information consists of:

• an unaudited pro forma condensed consolidated income statement for the 52 weeks ended June 30, 2018, which is based on and derived from (i) the unaudited interim consolidated financial statements of the Group as of and for the 13 weeks ended June 30, 2018, which includes comparative financial information as of and for the 13 weeks ended July 1, 2017, prepared in accordance with IFRS, (ii) the audited consolidated financial statements of the Group as of and for the 52 weeks ended March 31, 2018, prepared in accordance with IFRS, (iii) the unaudited financial information of Keraben for the period from July 2, 2017 to November 15, 2017, prepared in accordance with Spanish GAAP, (iv) the unaudited interim consolidated financial statements of Saloni as of and for the six months ended June 30, 2018, which include comparative financial information as of and for the six months ended June 30, 2017, prepared in accordance with Spanish GAAP, (v) the audited consolidated financial statements of Saloni as of and for the year ended December 31, 2017, prepared in accordance with Spanish GAAP and (vi) certain adjustments for intracompany eliminations, reconciliation between Spanish GAAP and IFRS, translation of euro amounts to pound sterling amounts, presentational adjustments and certain financing arrangements;

• an unaudited pro forma condensed consolidated balance sheet as of June 30, 2018, which is based on and derived from (i) the unaudited interim consolidated financial statements of the Group as of and for the 13 weeks ended June 30, 2018, prepared in accordance with IFRS, (ii) the unaudited interim consolidated financial statements of Saloni as of and for the six months ended June 30, 2018, prepared in accordance with Spanish GAAP, and (iii) certain adjustments for intracompany eliminations, reconciliation between Spanish GAAP and IFRS, translation of euro amounts to pound sterling amounts, presentational adjustments, purchase price allocation and certain financing arrangements; and

• related condensed notes.

The unaudited pro forma condensed consolidated financial information has not been adjusted to give effect to any cost or revenue synergies resulting from the acquisitions of Keraben and Saloni. The unaudited pro forma condensed consolidated financial information has not been prepared in accordance with the requirements of Regulation S‑X of the Securities Act, the Prospectus Directive or any generally accepted accounting standards. The unaudited pro forma adjustments are based upon available information and certain assumptions that we believe to be reasonable. Neither the assumptions underlying the pro forma adjustments nor the resulting unaudited pro forma condensed consolidated financial information have been audited or reviewed in accordance with any generally accepted auditing standards.

The unaudited pro forma condensed consolidated financial information is for informational purposes only and should not be considered indicative of actual results that would have been achieved had the acquisitions of Keraben and Saloni been completed as of the dates indicated and do not purport to indicate our future consolidated results of operations or financial position. The actual results may differ significantly from those reflected in the unaudited pro forma condensed consolidated financial information for a number of reasons, including, but not limited to, differences in assumptions used to prepare the unaudited pro forma condensed consolidated financial information.

Summary Adjusted Pro Forma Financial Data of Group for the 52 weeks ended June 30, 2018

(1) For further information on Pro Forma Revenue, Pro Forma EBITDA, Adjusted Pro Forma Revenue and Adjusted Pro Forma EBITDA, see the information provided in the sections below.

(2) Adjusted Pro Forma EBITDA margin represents Adjusted Pro Forma EBITDA as a percentage of Adjusted Pro Forma Revenue.

Pro forma Condensed Consolidated Income Statement Data of Group for the 52 weeks ended June 30, 2018

(a) Represents exceptional costs that arose in Keraben under previous ownership, primarily in relation to sell‑side transaction costs on the sale of the business to the Group, including advisory fees, the previous management incentive plan and associated taxes.

Pro forma Condensed Consolidated Balance Sheet Data of Group

Notes to the Unaudited Pro Forma Condensed Consolidated Financial Information

Note 1-Condensed Consolidated Income Statement Data of the Group

The pro forma condensed consolidated income statement data of the Group for the 52 weeks ended June 30, 2018 has been calculated by adding (i) the consolidated financial information for the 52 weeks ended March 31, 2017 and (ii) the unaudited consolidated interim financial information for the 13 weeks ended June 30, 2018 and then subtracting (iii) the unaudited consolidated interim financial information for the 13 weeks ended July 1, 2017. This information has been derived from the Group's audited and interim financial statements.

Condensed Consolidated Income Statement Data of Group

Note 2-Condensed Consolidated Financial Information of Saloni

The pro forma condensed consolidated income statement data of Saloni for twelve months ended June 30, 2018 has been calculated by adding (i) the consolidated financial information for the year ended December 31, 2017 and (ii) the unaudited consolidated interim financial information for the six months ended June 30, 2018 and then subtracting (iii) the unaudited consolidated interim financial information for the six months ended June 30, 2017. This information has been derived from Saloni's audited and interim financial statements, realigned in order to match the financial presentation of the Group and translated from euro into pounds sterling at a rate equal to € 1.129 = £1.00, which was the period average for the twelve months ended June 30, 2018.

The pro forma condensed consolidated balance sheet data of Saloni as of June 30, 2018 has been derived from Saloni's interim financial statements, realigned in order to match the financial presentation of the Group and translated into pounds sterling at a rate equal to € 1.128 = £1.00, which was the period‑end rate as of June 30, 2018.

Condensed Consolidated Income Statement Data of Saloni

Condensed Consolidated Balance Sheet Data of Saloni

(a) Reflects the conversion of Saloni's consolidated balance sheet data from Spanish GAAP to IFRS. There are no material differences as between Saloni's balance sheet data as of June 30, 2018 as presented in accordance with Spanish GAAP and as presented in accordance with IFRS. For a discussion of certain of the differences between Spanish GAAP and IFRS, see "Annex A: Summary of Certain Differences between Spanish GAAP and IFRS."

Note 3-Saloni Acquisition Adjustments

On August 7, 2018, the Group acquired Saloni for cash consideration of €96.7 million (£86.2 million). We financed the acquisition of Saloni through (i) an equity placement raising gross proceeds of £60.5 million and (ii) drawings under the €445.0 million (£394.0 million) senior bank facility. We used the remaining proceeds in excess of the cash consideration payable for the Saloni acquisition to (i) to repay certain existing indebtedness of Saloni, (ii) to repay drawings under our existing revolving credit facility, (iii) to repay term loan indebtedness incurred to finance the acquisition of Keraben, (vi) to pay fees and expenses incurred in connection with the acquisition of Saloni and (v) for general corporate purposes.

The unaudited condensed consolidated income statement data of Saloni for the twelve months ended June 30, 2018 has been adjusted to give pro forma effect to (i) the financing costs associated with the acquisition of Saloni as if the acquisition had occurred on July 2, 2017 and (ii) the amortization of acquired intangibles as if the acquisition of Saloni had occurred on July 2, 2017. For purposes of the financing adjustment, we have assumed a rate of interest of 2.75%, which we believe reflects the rate of interest we could have obtained for permanent financing based on our acquisition of Keraben in 2017, and excluded €17.0 million of finance income relating to a write down of debt at Saloni under previous ownership.

Note 4-Acquisition of Keraben

The results of operations of Keraben have been consolidated with those of the Group since November 16, 2017. The acquisition of Keraben was financed through (i) an equity placement of new ordinary shares by the Issuer raising gross proceeds of £180.0 million and (ii) the draw‑down of €178 million under a syndicated term loan facility with a per annum interest rate equal to 2.75% when leverage is at or below 3.0x.

This adjustment represents the unaudited condensed consolidated income statement data of Keraben for the period from July 2, 2017 to November 15, 2017, prepared solely for the purposes of the pro forma condensed consolidated income statement for the 52 weeks ended June 30, 2018. The historical financial information of Keraben for the period from July 2, 2017 to November 15, 2017 has been (i) extracted from the accounting records of Keraben, (ii) presented in accordance with IFRS, (iii) translated from euro into pounds sterling at a rate equal to € 1.122 = £1.00, which was the period average from July 2, 2017 to November 15, 2017, (iv) adjusted to give pro forma effect to the financing costs associated with the acquisition of Keraben as if the acquisition had occurred on July 2, 2017, and (v) the amortization of acquired intangibles as if the acquisition of Keraben had occurred on July 2, 2017. There are no material differences as between Keraben's income statement data for the period from July 2, 2017 to November 15, 2017 as presented in accordance with Spanish GAAP and as presented in accordance with IFRS.

Exceptional items for Keraben for the period from July 2, 2017 to November 15, 2017 principally relate to costs incurred in the cancellation of existing financing arrangements and financial expenses in relation to certain management incentive plans triggered by the acquisition of Keraben by the Group.

Note 5-Saloni Financing Adjustments

This adjustment gives pro forma effect to the £60.5 million Equity Placement together with our drawing of €445.0 million under the Bridge Facility (i) to fund a portion of the consideration payable for our acquisition of Saloni; (ii) to repay certain existing indebtedness of Saloni; (iii) to repay our existing revolving credit facility and other existing indebtedness of the Group; and (iv) for general corporate purposes.

Note 6-Saloni Purchase Price Allocation

On August 7, 2018, the Group acquired Saloni. The consideration transferred includes (i) the purchase of the shares valued at €96.7 million and (ii) the repayment of existing net indebtedness of £61.0 million. We have assumed a useful economic life of 15 years for intangible assets. The acquisition of Saloni is being accounted for using the acquisition method as defined by IFRS. This unaudited pro forma condensed consolidated financial information has been prepared on the basis of preliminary estimates of fair values, which have been based on the percentages resulting from the final purchase price allocation calculation of the Keraben acquisition. The actual amounts and the allocation between tangible assets, goodwill and intangible assets other than goodwill ultimately recorded may differ materially from the information presented herein. The preliminary estimates of the fair values of the assets acquired and liabilities assumed reflected herein are subject to change based upon completion of the valuation of the assets acquired and liabilities assumed as of the closing date.

Adjusted Pro Forma Financial Data of Group for the 52 weeks ended June 30, 2018

Adjusted Pro Forma Revenue

The following table presents a reconciliation of our pro forma revenue to our Adjusted Pro Forma Revenue:

(a) This adjustment gives pro forma effect to our acquisition of Sanicova, a sister company of Saloni acquired together with Saloni on August 7, 2018 but not reflected in our Pro Forma Revenue, as if such acquisition had occurred on July 2, 2017. We have estimated the revenue contribution of Sanicova for the 52 weeks ended June 30, 2018 on the basis of the audited annual financial information of Sanicova for the year ended December 31, 2017.

(b) This adjustment gives pro forma effect to our acquisition of Ceramiche Serra S.p.A. as if it had occurred on July 2, 2017. The revenue contribution of Ceramiche Serra for the period from July 2, 2017 to December 1, 2017, the date on which the acquisition was completed, has been extracted from Ceramiche Serra's monthly management accounts over this period.

Adjusted Pro Forma EBITDA

The following table provides a reconciliation of our Pro Forma EBITDA to our Adjusted Pro Forma EBITDA:

(a) This adjustment gives pro forma effect to (i) our acquisition of Sanicova, a sister company of Saloni acquired together with Saloni but not reflected in our Pro Forma EBITDA, as if such acquisition had occurred on July 2, 2017 and (ii) certain normalization adjustments to the EBITDA contributions of Saloni and Sanicova for the 52 weeks ended June 30, 2018. We estimate that the EBITDA contribution of Sanicova for the 52 weeks ended June 30, 2018 would have been €0.7 million. The normalization adjustments include (i) the impact of certain non‑recurring items, (ii) the elimination of certain non‑applicable expenses that existed prior to the acquisition under the previous ownership structure and (iii) the alignment of Saloni's financial information to our accounting policies. Management estimates, based on a quality of earnings assessment prepared by an international accounting firm, that Saloni's normalized EBITDA for the 52 weeks ended June 30, 2018 would have been €17.1 million. This adjustment does not include any cost or revenue synergies expected following the acquisition of Saloni.

(b) This adjustment gives pro forma effect to our acquisition of Ceramiche as if it had occurred on July 2, 2017. The EBITDA contribution of Ceramiche Serra for the period from July 2, 2017 to December 1, 2017, the date on which the acquisition was completed, has been extracted from Ceramiche Serra's monthly management accounts over this period.

(c) This adjustment reflects management's estimate of the incremental EBITDA that would have been generated during the twelve months ended June 30, 2018 had production not been disrupted due to the planned removal of an existing red body tile production line and the installation of a new porcelain production line. This adjustment does not give effect to any assumed uplift in volume or profitability from the sale of porcelain products being manufactured by the new production line.

(d) This adjustment reflects management's estimate of the incremental EBITDA that would have been generated during the twelve months ended June 30, 2018 had production at our South Wales factory not been temporarily disrupted due to the collapse of its roof under heavy snow in March 2018.

VICTORIA PLC

Interim Financial Statements as of and

for the 13 weeks ended June 30, 2018

Condensed Consolidated Income Statement

For the 13 weeks ended June 30, 2018 (unaudited)

Condensed Consolidated Statement of Comprehensive Income

For the 13 weeks ended June 30, 2018 (unaudited)

Condensed Consolidated Balance Sheets

As at June 30, 2018 (unaudited)

Condensed Consolidated Statement of Changes in Equity

For the 13 weeks ended June 30, 2018 (unaudited)

Condensed Consolidated Statements of Cash Flows

For the 13 weeks ended June 30, 2018 (unaudited)

1. General Information

These condensed consolidated financial statements for the 13 weeks ended June 30, 2018 have not been audited by the Auditor.

The information for the 52 weeks ended March 31, 2018 does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The Auditor's report on those accounts was unqualified and did not include a reference to any matter to which the Auditor drew attention by way of emphasis without qualifying the report and did not contain statements under Section 498(2) or 498(3) of the Companies Act 2006.

2. Basis of preparation and accounting policies

These condensed consolidated financial statements should be read in conjunction with the Group's financial statements for the 52 weeks ended March 31, 2018, which were prepared in accordance with IFRSs as adopted by the European Union.

With the exception of the adoption of IFRS 15 on April 1, 2018, these interim financial statements have been prepared on a consistent basis and in accordance with the accounting policies set out in the group's Annual Report and Financial Statements for the year ended March 31, 2018. There was no material impact on the group's results as a consequence of the transition to IFRS 15 as the group's activities are primarily the sale of flooring products, the revenue for which was previously recognised at a point in time when the transfer of risks and rewards occurs which is consistent with IFRS 15. The comparative figures in these interim financial statements have not been restated as a consequence of adopting IFRS 15 for the first time this period.

Having reviewed the Group's projections, and taking account of reasonably possible changes in trading performance, the Directors believe they have reasonable grounds for stating that the Group has adequate resources to continue in operational existence for the foreseeable future.

Accordingly, the Directors continue to adopt the going concern basis in preparing the financial statements of the Group.

3. Segmental information

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

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

Income statement

Management information is reviewed on a segmental basis to operating profit.

During the period, no single customer accounted for 10% or more of the Group's revenue. Inter‑segment sales between the UK & Europe and Australia were immaterial in the respective current and prior year periods under review.

Balance sheet

Other segmental information

4. Exceptional and non‑underlying items from continuing operations

All of the items in the table above are classified within administrative expenses.

(a) Professional fees in connection with prospecting and completing acquisitions during the period.

(b) Reorganisation costs comprise various fees incurred to date in relation to reviewing the Group's manufacturing and logistics operations, as well as other corporate restructuring.

(c) Charge relating to the accrual of expected liability under the acquisition‑linked performance plan with the Keraben senior management team. As part of the Keraben acquisition terms, the senior management team were required to invest €8.3 million into a performance plan linked to the financial results of the target business over a five year period. The value of this plan can go up or down from the original €8.3 million subscription, depending on performance. Customary good and bad leaver provisions apply during the five year period. This investment by management was rolled over from their exit value under a scheme with the previous private equity owners.

5. Finance costs

(a) Non‑cash annual cost of the redemption premium in relation to the BGF loan and option.

(b) Non‑cash costs relating to the revaluation of deferred consideration and contingent earn‑outs. Deferred consideration is measured at amortised cost, while contingent consideration is measured under IFRS 3 at fair value. Both are discounted for the time value of money. The present value is then remeasured at each half‑year and year‑end in relation to the appropriateness of the discount factor and the unwind of this discount. In addition, any changes to contingent earn‑outs arising from actual and forecast business performance are reflected as other adjustments to present value of contingent earn‑out liabilities.

(c) Non‑cash fair value adjustment on foreign exchange forward contracts.

(d) Net impact of exchange rate movements on third party and intercompany loans.

6. Tax from continuing operations

Corporation tax is calculated at the applicable percentage of the estimated assessable profit for the year in each respective geography. This is 19% in the UK; 25% in the Netherlands and Spain; 27.9% in Italy; 30% in Australia; and 34% in Belgium.

7. Earnings per share

The calculation of the basic, adjusted and diluted earnings per share is based on the following data: