13 October 2021
Victoria PLC
('Victoria,' the 'Company,' or the 'Group')
Trading Ahead of Market Expectations
Half-Year Trading Update
Victoria PLC, (LSE: VCP) the international designers, manufacturers and distributors of innovative flooring, provides the following trading update.
The Board is pleased to announce that the Group's underlying profit before tax will be ahead of consensus market expectations for the financial year ending 2 April 2022.
Trading
- Group revenue continues to increase, driven by strong consumer demand for flooring products:
- Victoria's Italian ceramic business has its full production output now sold out until Q2 2022 – an unprecedented situation – and management are actively working on plans to further increase capacity.
- The UK logistics operation, which is going from strength to strength, continues to provide a compelling service proposition to Victoria's customers, flooring retailers, driving market outperformance in Victoria's UK soft-flooring business.
- Australian lockdowns, the longest in the world, will come to an end in October, and we are anticipating a strong contribution to H2, following a limited, but profitable, contribution in H1.
- The Group's extensive Luxury Vinyl Tile ('LVT') product range continues to grow. After more than two decades in the European market, where it was invented, LVT continues to replace laminates and sheet vinyl as a floor-covering, with the market share of soft flooring and ceramic tiles broadly unchanged for the last 15 years, comprising around 60% of flooring purchased in Victoria's primary markets.
- Victoria's artificial grass business goes from strength to strength. Although there has been sharp price increases in the raw materials for artificial grass, since the pandemic European consumers' preference for locally produced product rather than Far East imports has been noticeable.
The demand for flooring experienced this year has primarily come from existing home owners redecorating. However, the Board expects demand to continue next year and beyond, due to the high level of housing transactions that has been experienced in many of the Group's key markets this year. Housing sales are a good 12-18 month leading indicator of remodelling-led demand for flooring, which is Victoria's core market.
Operating Margins and Inflation
As previously reported, operating margins were broadly maintained during H1. Although the significant inflationary pressures experienced earlier in the year on many raw materials have eased somewhat, energy and other costs continue to rise. Therefore, the Group will continue to actively manage input and output pricing with suppliers and customers to protect margins on a LFL basis. There is always a time lag in passing on costs, but the Group has demonstrated its pricing resilience over the last nine years with steadily increasing operating margins, despite a wide range of trading conditions.
Supply Chain security
There has been considerable commentary in recent months about supply chain issues being experienced across a variety of industries. Whilst long lead times are seen for LVT products, the Board is pleased to advise that with generally short and diversified supply lines, along with the Group entering this period with a greater-than-normal level of raw materials having anticipated possible supply issues, the company is not experiencing problems with production and delivery of its flooring.
Chief Executive, Philippe Hamers, said:
- “Managing our way successfully and profitably through the extraordinary conditions of the last 18 months, with pandemic lockdowns followed by inflation and supply challenges, has highlighted the value of having the industry's best management team at Victoria. The Group has achieved record operating earnings in the first half of the year and all the credit lies with the skill and dedication of the operational managers.
- The conditions we have faced in the first half will, almost certainly, continue for the rest of the year, but I am confident the Group will continue to deliver for its shareholders.”