Victoria drops plans for bond issue

It has resolved to continue with the company's existing bank facilities, rather than re-finance them with a senior secured note as proposed last week.

Geoff Wilding, chairman of Victoria,said: "We embarked on the bond process in good faith and with the intention of delivering benefits for all shareholders in the form of long-term funding at an attractive, fixed interest rate.

"It is very disappointing that despite the positive, stable credit ratings, the indicative pricing for the bond moved unfavourably over the course of last week, particularly when there have been no fundamental changes to the group or its business.

"I want to reassure shareholders that, as with our strategy of only paying the right price for acquisitions, the board applies a high degree of rigour to our long-term financing arrangements. Therefore, as we continue to have a close and positive relationships with our lending banks and operate with significant headroom with respect to covenants under our existing two-year facilities put in place in August 2018, we will continue with these facilities. The banks have been, and continue to be, very supportive of our strategy and performance. Any suggestion to the contrary is untrue."

Mr Wilding added that the last week had not been the board's finest hour in terms of the clarity of its communication.

"For the last six years, the board has endeavoured to maintain an open dialogue, fully appreciating that it is the shareholders who own the company. Unfortunately, we placed too much emphasis on technical guidance and market convention and not enough common sense was applied in terms of communication with shareholders. By failing to communicate clearly last week and in the run-up to the bond launch, the company needlessly left shareholders feeling uncertain about the future.

"Critically, this also left an open goal for those with less than pure motives to spread outrageous untruths. This has damaged the value of the shares, although, of course, there has been no impact on the underlying business, which is high quality and continues to successfully design, manufacture, and distribute flooring products around the world as it always has done.

"Victoria's operational management are firmly focused on delivery of our organic strategy. Separately, the board continues to identify and very selectively pursue attractive acquisition opportunities. We have adapted our usual acquisition structure in such a way that remains attractive to potential vendors but ensures that future acquisitions remain value-enhancing for shareholders by reducing requirements for new equity whilst staying within our internal debt limits. As such we continue to see opportunity to pursue our acquisition strategy to meaningfully enhance the group alongside organic growth.

"The board continues to believe that Victoria is well placed to deliver growth in shareholder value," he said.

The share slump last week after it announced the plans for the bond issue had wiped around £260 million off the carpets and tiling group's stock market value. It had also warned its profit margins would be up to 1.5 pef cent below expectations as it lowered prices to win market share.

The company has been carrying out a takeover campaign over the last six years that has seen it expand to 20 sites across the UK, Australia, Spain, Italy, Belgium and the Netherlands. In the last year it has spent around £400m buying tiling companies in Spain and Italy.

At the same time it has re-organised its manufacturing in the UK, shutting down carpet production in Kidderminster after more than a century although the town remains its company headquarters.