Shares slump at floorings group Victoria despite bullish update

The company, which continued its spending spree with nearly £400 million of deals for tiling companies in Italy and Spain over the last 12 months, has lost nearly a third of its stockmarket value since the summer, and lost another 18% in early trading as it fell fell below 500p.

But, in a bullish trading update, the Kidderminster-based business said its first-half revenue had risen "in a challenging market" by more than 3% on a like-for-like basis.

Victoria, which retains its head office in the town but no longer manufactures carpets there, also said it planned to offer 450 euros of senior secured notes due in 2023, to repay its existing senior bank facility.

Victoria now has operations in Spain, Italy, Belgium, the Netherlands and Australia as well as the UK and employs around 3,000 people across more than 20 sites.

The company said it was now "realising the benefits of the growth and diversification of the business over the past few years". It had seen strong revenue growth in the UK and Europe, particularly in soft floorings where it has "aggressively" targeted growth in market share.

"In doing so we have maintained the strategy set out in our last annual report; focusing our product mix on competitive products, lowering average selling prices, and driving sales volume. As a result, sales have grown organically in excess of 5%," the company said in today's trading statement.

Victoria was 'pleased' with the performance of its three tiling acquisitions. However, "the sector has seen an increase in pricing pressure since the start of the financial year which, combined with the planned, but significant, one-off disruption from the installation of a new porcelain line at our Italian factory, has had a marginal impact on overall sales growth and margins."

"Overall, as previously stated, the goard firmly believes that it should capitalise on the strength of the group by driving sales and market share at this time, although this comes with a short-term investment in operating margin. "

This is expected to cut profit margins by 1%-1.5% below what the market had been expecting, but expects to win it back as sales grow over the next year.

"The goard believes that seeking to increase market share is the correct strategy for the group at this time as, even with current market conditions, the group's year-to-date revenues are on track to exceed consensus market forecasts, and the group plans to recover the margin investment in stages over the next 12 months."

The company said it was continuing on the takeover trail, with a "large number of high-quality acquisition targets".