Victoria Regulatory News (VCP)

The information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Victoria PLC

('Victoria' or the 'Group')

Trading Update

Victoria PLC (LSE: VCP) the international designers, manufacturers and distributors of innovative flooring, is pleased to provide an update on recent trading following the restart of operations in all the countries in which the Group has manufacturing and/or distribution operations.

Current Trading

The Board is pleased to advise that in every geography trading has exceeded management expectations following the re-start of operations.

Following a dramatic decline in revenues in March and April due to government-mandated closure of all of our manufacturing operations (with the exception of Australia, which is about 14% of our normal revenues) and many of our customers' shops across Europe, sales began to recover in mid-May with the easing of restrictions in some countries. The benefit of our geographic diversification in both manufacturing and customer locations was readily apparent, as different countries ended their lockdowns at varying times.

The Group has methodically re-opened its manufacturing and distribution operations in all geographies, to meet the current high acceleration in demand whilst ensuring that costs are not incurred unnecessarily. 

Group revenues have, as a result, steadily increased and over the last three weeks were approximately 85% of management's pre-Covid-19 budget. Further recovery is expected as orders begin to flow to Victoria from UK retailers, who were the last to start trading as they were only allowed to re-open last week. Revenue performance by division was as follows:

· UK & Europe Soft Flooring c. 70%

· UK & Europe Ceramic Tiles c. 90%

· Australia c. 105%

It is important to remember that much of our product is exported outside of its country of manufacture. It is very encouraging that consumers within countries which did not lock down have shown consistent demand throughout the period, and those that exited lock down first (Germany and Austria, for example, who re-opened retail two months ago) have maintained very good demand following the initial rapid increase after we restarted operations. That said, our operations across all divisions remain prepared to react quickly to any future changes in demand.

Finally, the Board would like to remind shareholders that Victoria's supply chain is highly diversified and invariably localised to the key manufacturing plants. Our access to raw materials has remained secure throughout the period and we will be able to meet demand as it arises.

Net Debt and Liquidity

Careful stewardship of Victoria's cash by the Group's finance and treasury team, together with our inherent low operational gearing, has ensured the Group has maintained a financially robust position. The Group's net debt position is currently c. £370 million and has remained relatively stable since the recent March year-end, with current cash and undrawn credit lines in excess of £200 million.

The Board is satisfied with the strength of Victoria's financial position and shareholders will recall that in July 2019 and again in January 2020 Victoria issued a total of €500 million of Senior Secured Notes ("bonds"). These bonds are not due before July 2024 and, in themselves, carry no maintenance financial covenants.

Victoria has not accessed any government credit-line schemes and does not foresee any current need to raise capital for normal operating activities.

Earnings Outlook for 2020/21

It remains premature to provide meaningful earnings guidance for FY2021, although the Board is considerably more optimistic in respect of the current financial year than at the time of the last trading update in March 2020 at the outbreak of the Covid-19 induced disruption. It is important to remember that 93% of Victoria's revenues are derived from consumers redecorating their homes, not construction or commercial projects, and consumer demand for home decorating products appears to be strong across the world.

This is not altogether surprising, given the extended period consumers have spent in their home over the last four months, which is likely to have encouraged the impulse to redecorate.

The Board looks forward to updating shareholders further in due course

Summary

Whilst trading over the last quarter has, obviously, been affected, the long-term outlook for the Group remains positive.

Victoria is fortunate to have a highly experienced and motivated operational management team - many of whom have been successful in the industry for 30 years or more and the value of this experience is enormous. Our managers acted decisively and promptly to protect their business at the start of the lockdown period and were just as quick to restart operations as customer demand returned at the end of the lockdown. As a result, Victoria is weathering the storm in very good shape.

As we look ahead to the short to medium term, the effort we have made over recent years to build relationships with the owners of other flooring companies will give rise to some materially value-creating opportunities. The events of the last few months have given rise to new or increased imperatives with some business owners. Our financial position and reputation for straightforward dealings mean that the owners of other flooring businesses view Victoria as a reliable transaction partner and we expect to see some very interesting and attractive opportunities in the months ahead.

We have a resilient balance sheet, motivated and talented operational management, fully-developed contingency plans covering possible future scenarios, and geographic diversity of end markets and manufacturing facilities. We are, therefore, confident Victoria will continue to prosper and create wealth for shareholders.

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