TIDMVCP
RNS Number : 2463T
Victoria PLC
23 November 2021
For Immediate Release 23 November 2021
Victoria PLC
('Victoria', the 'Company', or the 'Group')
Interim Results
for the six months ended 2 October 2021
All-time Record Results
Victoria PLC (LSE: VCP) the international designers,
manufacturers and distributors of innovative floorcoverings, is
pleased to announce its interim results for the six months ended 2
October 2021.
FINANCIAL AND OPERATIONAL HIGHLIGHTS
Continuing operations H1 FY22 H1 FY21
Revenue GBP489.0m GBP305.5m
Underlying EBITDA(1) GBP84.5m GBP52.4m
Underlying operating profit(1) GBP58.6m GBP28.2m
Operating profit GBP27.7m GBP10.7m
Underlying profit before tax(1) GBP41.1m GBP13.7m
Profit / (loss) before tax GBP2.9m GBP(4.7)m
Underlying free cash flow(2) GBP18.0m GBP18.3m
Net debt(3) GBP519.3m GBP364.6m
Net debt / EBITDA(4) 3.3x 3.3x
Earnings / (loss) per share:
- Diluted adjusted(1) 24.32p 8.09p
- Diluted (2.68)p (3.11)p
(1) Underlying performance is stated before exceptional and
non-underlying items. In addition, underlying profit before tax and
adjusted EPS are also stated before non-underlying items within
finance costs
(2) Underlying free cash flow represents cash flow after
interest, tax and replacement capital expenditure, but before
investment in growth, financing activities and exceptional
items
(3) Net debt shown before right-of-use lease liabilities,
preferred equity, bond issue premia and the deduction of prepaid
finance costs
(4) Leverage shown consistent with the measure used by our
lending banks
-- Unprecedented 30% like-for-like organic revenue growth led to
all-time record operating results
-- Continued like-for-like expansion of operating margins, with
130bps organic uplift offset by mix-effect of acquisition of lower
margin businesses
-- Inflationary pressures and supply chain constraints
successfully mitigated with proactive management of raw materials
and energy costs
-- Four value-enhancing acquisitions completed in Italy, the
Netherlands and the USA; providing meaningful earnings and cash
flow enhancement along with material operational synergy
opportunities
-- Despite these significant investments, leverage maintained at
a consistent level with the prior year end, in-line with the
Group's financial policy
-- Outlook remains very positive, along with a healthy pipeline of acquisition opportunities
Geoff Wilding, Executive Chairman of Victoria PLC commented:
"Victoria capitalised on its operational competitive advantages
and balance sheet strength during the first half of FY22 to again
deliver all-time record trading results and further value-enhancing
acquisitions in a continuation of its mission to create wealth for
shareholders."
For more information contact:Victoria PLC
Geoff Wilding, Executive Chairman
Philippe Hamers, Group Chief Executive
Michael Scott, Group Finance Director +44 (0) 1562 749 610
Singer Capital Markets (Nominated Adviser
and Joint Broker)
Rick Thompson, Phil Davies, Alex Bond +44 (0) 207 496 3095
Berenberg (Joint Broker)
Ben Wright, Mark Whitmore
Peel Hunt (Joint Broker)
Adrian Trimmings, Andrew Clark
Buchanan Communications (Financial PR) +44 (0) 203 207 7800
Charles Ryland, Chris Lane, Vicky Hayns, +44 (0) 207 418 8900
Tilly Abraham +44 (0) 20 7466 5000
About Victoria
Established in 1895 and listed since 1963
and on AIM since 2013 (VCP.L), Victoria
PLC, is an international manufacturer and
distributor of innovative flooring products.
The Group, which is headquartered in Kidderminster,
UK, designs, manufactures and distributes
a range of carpet, flooring underlay, ceramic
tiles, LVT (luxury vinyl tile), artificial
grass and flooring accessories.
Victoria has operations in the UK, Spain,
Italy, Belgium, the Netherlands, the USA,
and Australia and employs approximately
4,000 people across more than 26 sites.
Victoria is the UK's largest carpet manufacturer
and the second largest in Australia, as
well as the largest manufacturer of underlay
in both regions.
The Group's strategy is designed to create
value for its shareholders and is focused
on consistently increasing earnings and
cash flow per share via acquisitions and
sustainable organic growth. (Further information
about Victoria can be found on its website,
www.victoriaplc.com )
CHAIRMAN & CHIEF EXECUTIVE'S LETTER TO SHAREHOLDERS
One of our US-based shareholders recently shared a letter from
legendary investor, Bill Miller of Miller Value Partners. Although
clearly not directly related to the flooring industry, he shares
some wisdom we think is worth remembering whilst there seems to be
some extraordinary things happening in global economies.
"Since no one has privileged access to the future, forecasting
the market is a waste of time... In the post-war period the US
stock market has gone up in around 70% of the years because the US
economy grows most of the time. Odds much less favorable than that
have made casino owners very rich, yet most investors try to guess
the 30% of the time stocks decline, or even worse spend time trying
to surf, to no avail, the quarterly up and down waves in the
market. Most of the returns in stocks are concentrated in sharp
bursts beginning in periods of great pessimism or fear, as we saw
most recently in the 2020 pandemic decline. We believe time, not
timing, is key to building wealth in the stock market."
Certainly, when executing our acquisition strategy, Victoria's
Board spends little time trying to predict precisely where we are
in the economic cycle, but rather focuses on ensuring we are buying
high quality, resilient businesses at valuations that provide a
margin of safety for our shareholders. This has stood us in good
stead over the last nine years and we are therefore pleased to
report that the operating results for the six months to 2 October
were an all-time record for Victoria, as can be seen in the below
table.
H1, Financial 2022 2021 2020 2019 2018 2017
Year
Revenue GBP489.0m GBP305.5m GBP312.9m GBP273.4m GBP189.5m GBP153.4m
---------- ---------- ---------- ---------- ---------- ----------
Pre IFRS 16 Underlying GBP75.1m GBP44.9m GBP53.8m GBP45.4m GBP24.6m GBP20.2m
EBITDA
---------- ---------- ---------- ---------- ---------- ----------
Post IFRS 16 GBP84.5m GBP52.4m GBP58.5m
Underlying EBITDA
---------- ---------- ---------- ---------- ---------- ----------
Unsurprisingly, given H1 FY21 was affected by various national
lockdowns in Victoria's primary markets, revenues increased by 60%
in H1 FY22. Additionally, Victoria completed four acquisitions
during the period, which also contributed to the financial
performance of the Group. On a LFL basis, revenues increased by
29.8 % over H1 FY21 and, perhaps more relevantly, 9.2 % over H1
FY20, demonstrating the strong organic growth the operational
strategy is delivering for shareholders.
Although Victoria saw significant inflation in raw material
prices during the period, the impact was largely mitigated by
management actions, with the result that the underlying EBITDA
margin grew by +130bps on a LFL basis(5) . (The reported margin of
17.3% was the result of the optical margin dilutive effects of
acquisitions made during the period - dilution that will, as
achieved with previous acquisitions, be offset by synergy benefits
as the businesses are integrated into Victoria).
(5) LFL margin variance calculated by normalising the impact of
acquisitions
OPERATIONAL REPORT BY DIVISION
UK & Europe Soft Flooring - operating margin +190bps
H1 FY22 H1 FY21
Total
Revenue GBP214.0 million GBP126.0 million
----------------- -----------------
Absolute growth % 69.8%
----------------- -----------------
LFL growth % 48.4%
----------------- -----------------
Underlying EBITDA
margin 18.0% 15.2%
----------------- -----------------
LFL margin variance +190bps
%
----------------- -----------------
The UK & Europe Soft Flooring division again delivered an
extremely strong result.
There were two prime reasons for this very pleasing outcome:
1. Inflationary pressures seen in raw materials and energy costs
were quickly addressed by our operational management with more than
one selling price increase in the year to date. Mitigating actions
will continue whilst input prices remain under pressure, balancing
as always between margin and growth. Victoria's level of service,
which is highly valued by retailers, has ensured a significant
degree of acceptance of these increases and demand for our product
remains strong.
2. The Group's operational management anticipated the
possibility of supply chain disruption and consequently increased
raw material inventory ahead of many of our competitors. These
higher-than-normal holdings of raw materials safe-guarded service
levels and further contributed to Victoria's reputation as a
reliable supplier of product, which leads to increased wallet
share.
Specific initiatives during the period included:
Carpet Manufacturing
-- Broadloom carpet has maintained a remarkably consistent
market share over the last 15 years at c.60% of the UK residential
flooring market. Different types of hard flooring (such as tiles,
laminates, LVT, hardwoods, etc) have been used by consumers in
kitchens, entrances, and bathrooms during this period, but carpet
predominates in the other areas of the house. Accordingly, we
continue to invest in our UK factories to improve both productivity
and output.
-- The relocation of the Westex operations (plant, offices and
showroom) to Dewsbury was completed during the period, which
finalised our major production optimisation plan in the UK.
-- We continued the roll-out of high-speed tufting machines,
increasing productivity as well as creating the option of running
small batch sizes (using beams instead of creels), which enables
increased flexibility and reduces working capital (inventory)
demands.
-- The company completed the construction of a new warehouse for
finished carpet rolls on the Abingdon site in Wales, which will
reduce the cost of volume shipments and reduce the pressure on the
logistics centres.
Underlay
-- Victoria's largest underlay business obtained full ISO
accreditation of the Integrated Management System, giving us ISO
9001 (quality management), ISO 14001 (environmental management) and
ISO 45001 (occupational Health & Safety).
-- We launched the new 'Acoustics' Division with the development
of a technologically sophisticated underlay product under the new
brand 'Sonixx' for attacking the acoustic building materials
market
Artificial grass manufacturing
-- Artificial landscaping grass (which is entirely different to
artificial sports fields) is possibly the fastest growing flooring
category in Europe, with growing consumer acceptance of artificial
grass due to enhanced realism and increasing awareness of its
advantages when compared with natural grass, such as limited
maintenance and no water requirements . European demand for
artificial grass is expected to achieve double-digit growth from
82.4 million m(2) in 2020 to 110.6 million m(2) in 2023 (10.3% p.a.
in volumes) AMI Consulting (2020).
-- Victoria made its first investment in the sector in February 2017, with the acquisitions of Netherlands-based Avalon and Grass Inc. These businesses have been highly successful - organically doubling in size over the last four years.
-- In May we acquired Edel Group, which is based in the
Netherlands and Germany, to create Europe's largest premium
landscaping grass group. For the year ended 31 December 2020, Edel
generated unaudited total revenues of EUR47.6 million (GBP41.4m)
and normalised EBITDA of EUR10 million (GBP8.7m).
-- The integration of Edel with Victoria's existing artificial
grass business is now well underway and will create significant
opportunities for value-creating commercial and operating
synergies:
-- Victoria has been outsourcing the production of c.4 million
m(2) of artificial grass. Capitalising on the manufacturing
capabilities of Edel and insourcing this production will increase
the margin on Victoria's existing artificial grass revenue.
-- There have been sharp price increases in the raw materials
for artificial grass this year but the increased scale of the
integrated businesses will provide an opportunity to both reduce
raw material costs and improve productivity at the factories, with
a consequential improvement in operating margin.
-- Both Edel and Victoria have extensive, but largely
non-overlapping distribution networks across Europe, providing a
real opportunity to grow the combined revenues by collaboration on
sales and distribution.
Alliance Logistics
-- It is difficult to overstate the strategic value of our
investment in our logistics capability. It is a key differentiator,
separating Victoria from the continental carpet suppliers by
meaningfully enhancing our service proposition. Retailers place
great value on fast, on-time delivery as it allows them to reduce
their inventory levels and warehouse overheads.
-- Victoria now has more than 240 delivery vehicles on the road,
with further enhancement to the Microlise fleet management software
during the period enabling live traffic updates and live route
planning. Due to the demand in the UK for drivers, our wages cost
has increased by about GBP1 million per year, but we have avoided
any disruption from the widely reported national driver
shortages.
-- We continued to enhance the service offering with track &
trace functionality now providing our customers with live tracking
of their orders, alongside real-time updates via email and SMS.
-- We signed a commitment for a completely new,
environmentally-friendly distribution centre (185,000 ft(2)) in
Worcester, which will replace the Kidderminster warehouse upon the
completion of construction in December 2022. This building will
lower our operating costs and allow for further sales growth.
-- Significantly, Alliance is now attracting 3(rd) party deliveries at profitable price levels.
UK & Europe Ceramic Tiles - underlying EBITDA +35% to
GBP37.4 million
H1 FY22 H1 FY21
Total
Revenue GBP182.5 million GBP132.5 million
----------------- -----------------
Absolute growth % +37.7%
----------------- -----------------
LFL growth % +17.4%
----------------- -----------------
Underlying EBITDA
margin 20.5% 20.9%
----------------- -----------------
LFL margin variance +180bps
%
----------------- -----------------
Sharply rising energy costs have been a headwind in recent
months. However, unlike some competitors, the Group benefits from
having much of its energy pricing hedged, which dampens the
short-term impact of higher energy prices and provides time to
respond with mitigating actions. We do not expect the current high
energy prices to be indefinite - indeed new hedges can be secured
with forward prices markedly below the current spot price - but we
anticipate some level of impact on margins in H2, although these
are being mitigated with price increases.
Operational highlights during the period include:
Italy
-- We have previously advised that, due to strong customer
demand, Victoria's Italian ceramic tile business has its full
output sold out until Q2 2022, despite the production capacity
added earlier this year by the acquisition of the factory and
assets of Ceramiche Santa Maria. Integration of this business
continues, with a second refurbished atomiser expected to be
operational by the end of November - increasing production capacity
and lowering raw material costs.
-- The acquisition of Santa Maria, along with Colli and
Vallelunga, materially, but temporarily, diluted the operating
margin in the short term in our ceramics division during the
period. This effect is being rapidly alleviated as the businesses
are integrated into our core operations.
-- Further capacity is expected to become available when the new
and more energy efficient multi-purpose (red body/porcelain)
replacement kiln at Ceramiche Serra currently being installed
becomes operational in mid-January 2022.
-- Additionally, a brand new, large-size production line became
operational in the Ceramiche Ascot factory at the end of September,
which allows for increased output in larger tile sizes.
Spain
-- The performance of the newly integrated brand Ibero/Casa Infinita, which is aimed at a more value-conscious customer, has been very pleasing.
-- Significant improvements were achieved in the overall
production cost in our Spanish factories from OPEX savings and
productivity enhancing initiatives to reduce the cost of goods
sold.
Turkey
-- Following the half-year balance date, Victoria entered into
an agreement to acquire Turkish ceramic tile manufacturer,
Graniser. This is a profitable and growing business, which delivers
a good quality, low-cost manufacturing platform to the Group. Upon
completion of the acquisition, which is anticipated in January, the
business will be quickly integrated into the Group's ceramic tiles
division and is expected to provide us with a meaningful
competitive advantage for certain product lines and end
markets.
Australia - Like-for-like Revenue +14.6%
H1 FY22 H1 FY21
Total
Revenue GBP53.4 million GBP47.0 million
---------------- ----------------
Absolute growth % 13.6%
---------------- ----------------
LFL growth % 14.6%
---------------- ----------------
Underlying EBITDA
margin 13.3% 13.2%
---------------- ----------------
LFL margin variance +10bps
%
---------------- ----------------
Our Australian business has performed exceptionally well,
despite very trying operating conditions.
Melbourne, where all our carpet factories are located, had the
dubious distinction this period of enduring the world's longest
lockdown, and only reopened for business in October. Sydney, where
our underlay factory is based, also experienced an extended
lockdown during H1. And New Zealand, which is an important market
for our Australian-produced flooring, also saw revenues
significantly disrupted with long, rolling lockdowns shutting down
all retail activity.
Supplying the construction industry was, however, still
permitted in Australia during this period and the division
capitalised on this opportunity (albeit at slightly lower margins
than our usual consumer business), together with supplying
retailers in the other Australian states, which were not subject to
restrictions.
As elsewhere, raw material prices have increased, which has led
to the business raising its selling prices across the board to
protect earnings.
Despite all of the above, the Australia division grew both its
revenues and operating margins versus the same period last year (a
comparative period during which Australia experienced a much
shorter and less-impactful lockdown compared to our European
markets).
The Australian lockdowns have as of last month largely come to
an end and we are anticipating a strong contribution to H2 as
economies open and pent-up demand is released.
North America - acquisition of fast-growing brand and
distribution capability
H1 FY22 (14 weeks)
Revenue GBP39.1 million
-------------------
Underlying EBITDA GBP2.6 million
-------------------
EBITDA margin 6.6%
-------------------
On 23 June we announced the expansion of our North American
presence (previously based solely on exports from our European
factories) with the acquisition of Cali Bamboo Holdings Inc.
("Cali"). Victoria's US strategy is to acquire good brands and
distribution (not manufacturing) businesses, which sell the same
categories of product as the Group manufactures or sells in Europe.
Significant demand exists for European flooring in the US and there
are material synergy opportunities to be secured by integrating US
distribution capability into our business.
Highlights in H1 include:
-- Cali is, in itself, a high-growth business that has achieved
an organic CAGR of 17% for the past five years via its omni-channel
distribution model, resulting in revenues for the 12 months ended
30 April 2021 of US$171.6 million (GBP124.3m). Revenues for the 14
weeks under Victoria ownership in H1 were a very satisfying US$54.3
million (GBP39.2m), but more could have been achieved if supply
constraints (primarily shipping) had not limited consumer access to
product. Since the acquisition, Victoria has made some operational
changes, which are expected to flow through to much better supply
of product in H2.
-- The integration of Cali into the Victoria Group is well
underway with the preparation of artificial turf as an enlargement
of the outdoor product offer. Along with outdoor flatwoven rugs,
these 2 new categories will be introduced in Q4.
-- More than 50% of Cali's revenues are in the US's highest
growth (27.7% CAGR 2014-19)(6) flooring product category of LVT/LVP
(Luxury Vinyl Tile/Luxury Vinyl Plank), with the balance consisting
of engineered hardwoods, composite decking, and other items.
-- Cali has incorporated Amazon as an advertising and sales
channel, with revenues expected to start flowing in H2.
(6) US Floor Report 2020
CASHFLOW & LIQUIDITY
Net operating cash flow before interest, tax and exceptional
items was again very good at GBP61.2 million for the half year
ended 2 October.
Our operating management team anticipated possible supply chain
issues earlier in the year and therefore invested heavily in raw
materials to minimise the risk of any disruption to our
manufacturing. This investment resulted in working capital
increasing by GBP14.0 million, but it is temporary and will unwind
as raw material levels return to normal levels when supply chains
become more stable over the next few months. We manage working
capital tightly (as we do all our capital) and are confident this
investment was the right thing to do as it has enhanced our
reputation as a reliable supplier of flooring when some of our
competitors have struggled.
Victoria continued to maintain a strong liquidity position and
the Group finished the period with cash and undrawn credit lines in
excess of GBP 280 million. Furthermore, almost all Victoria's debt
financing takes the form of long-dated Senior Notes ("bonds")
which, in themselves, have no financial maintenance covenants, with
the earliest tranche not due for repayment until 2026 .
OUTLOOK
Operations
The strong demand for flooring experienced this year has
primarily come from existing home owners, motivated by spending
more time in their homes, deciding to redecorate . 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.
High savings rates - particularly of consumers that form
Victoria's target market - are underpinning the demand for flooring
and consequently, despite selling price increases, consumers are
continuing to prioritise redecorating their home.
The integration of the acquisitions we have made this year are
still at an early stage but are progressing well, and so the
synergy gains that are expected as the integration work proceeds
will drive further earnings and margin gains, helping to offset
some of the inflationary pressures being experienced.
The Group's extensive Luxury Vinyl Tile ('LVT') product range
continues to grow and now generates nearly 10% of Group revenues.
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, rather than soft flooring and ceramic tiles whose
market share has remained broadly unchanged for the last 15 years,
comprising around 60% of flooring purchased in Victoria's primary
markets.
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 pricing with suppliers and customers,
and re-engineering products to hit price points in the market 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.
We are acutely aware of the impact on inventory values of higher
raw material costs and are closely monitoring inventory turn and
holding levels to ensure we maintain an appropriate return on the
capital employed in the business.
We plan to roll-out further initiatives in logistics to ensure
we remain the leading company in order fulfilment, which makes
retailers a little less sensitive to price increases - being able
to fulfil a consumer's order is more important than the last few
pennies on the cost of the product.
Acquisitions
Victoria has always been a disciplined and selective buyer -
something that is reflected in the quality and pricing of the
acquisitions it has made to date. This characteristic is even more
important now, given the strong market for flooring products over
the last 12 months and the buoyant merger and acquisition activity
widely seen. With some of the multiples we see being paid by other
companies, it will take years, if ever, for investors to see any
sort of return on their capital. However, we value our capital
highly and while we fully expect to conclude further acquisitions,
shareholders can be assured that we will not overpay.
Regarding this policy, we are helped by the fact that Victoria
is acknowledged in the industry as a reliable buyer, who will pay a
fair price, move quickly and confidentially, and treat the business
and its employees respectfully, post-completion. Consequently, we
get to see a large number of opportunities, which means we are
never under pressure to do a particular deal. If the valuation
becomes too expensive, we will, without hesitation, move on to
other opportunities.
CONCLUSION
In the short term, we expect inflation to continue to impact the
cost of goods sold. Notwithstanding this, the fundamental outlook
for the Group remains very positive given its historically proven
capacity to maintain margins, demand for its products, synergies it
expects to realise from the acquisitions it has made, and the
opportunity it has to continue to make very meaningful
acquisitions. Consequently, the Board expects the next 12 months to
be another period of positive wealth creation for Victoria's
shareholders.
Geoff Wilding
Executive Chairman
Philippe Hamers
Group Chief Executive
Condensed Consolidated Income Statement
For the 26 weeks ended 2 October 2021 (unaudited)
26 weeks ended 2 October 2021 27 weeks ended 3 October 2020 53 weeks ended 3 April 2021
(restated) (audited)
Non- Non- Non-
Underlying underlying Reported Underlying underlying Reported Underlying underlying Reported
performance items numbers performance items numbers performance items numbers
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- --------- ------ ------------ ----------- --------- --------------------------- --------------------------- --------------------------- ------------ ----------- -----------
Continuing
Operations
Revenue 3 489.0 - 489.0 305.5 - 305.5 662.3 - 662.3
Cost of Sales (315.6) (4.7) (320.3) (203.2) - (203.2) (427.4) - (427.4)
Gross profit 173.4 (4.7) 168.7 102.3 - 102.3 234.9 - 234.9
Distribution costs (50.6) - (50.6) (36.0) - (36.0) (74.8) - (74.8)
Administrative expenses (66.3) (26.2) (92.5) (39.6) (17.5) (57.1) (84.2) (33.9) (118.1)
Other operating income 2.1 - 2.1 1.5 - 1.5 3.9 - 3.9
Operating profit 58.6 (30.9) 27.7 28.2 (17.5) 10.7 79.8 (33.9) 45.9
--------------------------- ------ ------------ ----------- --------- --------------------------- --------------------------- --------------------------- ------------ ----------- ---------
Comprising:
Operating profit before
credit losses,
non-underlying and
exceptional items 59.4 - 59.4 29.8 - 29.8 81.3 - 81.3
Increase in credit loss
provision (0.8) - (0.8) (1.6) - (1.6) (1.5) - (1.5)
Amortisation of acquired
intangibles 4 - (16.0) (16.0) - (13.5) (13.5) - (26.8) (26.8)
Other non-underlying items 4 - (7.4) (7.4) - (0.6) (0.6) - 0.7 0.7
Other exceptional items 4 - (7.5) (7.5) - (3.4) (3.4) - (7.8) (7.8)
--------------------------- ------ ------------ ----------- --------- --------------------------- --------------------------- --------------------------- ------------ ----------- ---------
Finance costs 5 (17.5) (7.3) (24.8) (14.5) (0.9) (15.4) (29.7) (23.7) (53.4)
--------------------------- ------ ------------ ----------- --------- --------------------------- --------------------------- --------------------------- ------------ ----------- ---------
Comprising:
Interest on loans and
notes 5 (14.2) - (14.2) (11.6) (1.4) (13.0) (23.9) (1.4) (25.3)
Amortisation of prepaid
finance costs and accrued
interest 5 (1.1) - (1.1) (1.3) - (1.3) (2.6) (7.3) (9.9)
Unwinding of discount on
right-of-use lease
liabilities 5 (2.2) - (2.2) (1.5) - (1.5) (3.0) - (3.0)
Preferred equity items 5 - (10.4) (10.4) - - - - (13.1) (13.1)
Other finance items 5 - 3.1 3.1 (0.1) 0.5 0.4 (0.2) (1.9) (2.1)
--------------------------- ------ ------------ ----------- --------- --------------------------- --------------------------- --------------------------- ------------ ----------- ---------
Profit / (loss) before tax 41.1 (38.2) 2.9 13.7 (18.4) (4.7) 50.1 (57.6) (7.5)
Taxation (charge) / credit 6 (10.3) 4.3 (6.0) (3.5) 4.3 0.8 (13.0) 23.3 10.3
--------------------------- ------ ------------ ----------- --------- --------------------------- --------------------------- --------------------------- ------------ ----------- ---------
Profit / (loss) for the
period from continuing
operations 30.8 (33.9) (3.1) 10.2 (14.1) (3.9) 37.1 (34.3) 2.8
--------------------------- ------ ------------ ----------- --------- --------------------------- --------------------------- --------------------------- ------------ ----------- ---------
(Loss) /
earnings per
share - pence basic 7 (2.68) (3.11) 2.30
diluted 7 (2.68) (3.11) 2.29
-------------------------- ------ ------------ ----------- --------- --------------------------- --------------------------- --------------------------- ------------ ----------- ---------
Condensed Consolidated Statement of Comprehensive
Income
For the 26 weeks ended 2 October 2021 (unaudited)
26 weeks ended 27 weeks ended 53 weeks ended
2 October 2021 3 October 2020 3 April 2021
(restated) (audited)
GBPm GBPm GBPm
-------------------------------------------------------- ---------------- ---------------- ---------------
(Loss) / profit for the period (3.1) (3.9) 2.8
--------------------------------------------------------- ---------------- ---------------- ---------------
Other comprehensive income / (expense)
Items that will not be reclassified to profit or loss:
Actuarial gain / (loss) on defined benefit pension
scheme 0.2 (1.2) (0.1)
Increase in deferred tax asset relating to pension
scheme liability - 0.2 -
Items that will not be reclassified to profit or loss 0.2 (1.0) (0.1)
--------------------------------------------------------- ---------------- ---------------- ---------------
Items that may be reclassified subsequently to profit
or loss:
Retranslation of overseas subsidiaries 1.3 3.7 (6.1)
Items that may be reclassified subsequently to profit or
loss 1.3 3.7 (6.1)
--------------------------------------------------------- ---------------- ---------------- ---------------
Other comprehensive income / (expense) 1.5 2.7 (6.2)
--------------------------------------------------------- ---------------- ---------------- ---------------
Total comprehensive expense for the period attributable
to the owners of the parent (1.6) (1.2) (3.4)
--------------------------------------------------------- ---------------- ---------------- ---------------
Condensed Consolidated Balance Sheet
As at 2 October 2021 (unaudited)
Group
2 October 2021 3 October 2020 3 April 2021
(restated) (audited)
GBPm GBPm GBPm
----------------------------------------------------- --------------- --------------- -------------
Non-current assets
Goodwill 236.5 176.0 164.8
Intangible assets other than goodwill 263.5 233.8 224.2
Property, plant and equipment 234.0 208.6 202.1
Right-of-use lease assets 99.6 73.4 82.6
Investment property 0.2 0.2 0.2
Deferred tax assets 18.5 5.3 17.2
Total non-current assets 852.3 697.3 691.1
------------------------------------------------------ --------------- --------------- -------------
Current assets
Inventories 241.4 141.6 164.4
Trade and other receivables 194.4 140.9 150.1
Cash and cash equivalents 178.3 134.0 348.8
Total current assets 614.1 416.5 663.3
--------------- --------------- -------------
Total assets 1,466.4 1,113.8 1,354.4
------------------------------------------------------ --------------- --------------- -------------
Current liabilities
Trade and other current payables 285.3 200.4 213.8
Current tax liabilities 8.4 0.6 5.1
Obligations under right-of-use leases - current 14.4 7.3 13.0
Other financial liabilities 34.5 7.0 30.2
Total current liabilities 342.6 215.3 262.1
------------------------------------------------------ --------------- --------------- -------------
Non-current liabilities
Trade and other non-current payables 12.8 15.2 17.0
Obligations under right-of-use leases - non-current 94.8 71.6 74.0
Other non-current financial liabilities 647.3 495.7 647.5
Preferred equity 77.8 - 70.1
Preferred equity - contractually-linked warrants 5.8 - 6.1
Deferred tax liabilities 71.6 68.7 62.9
Retirement benefit obligations 6.1 7.5 6.5
Total non-current liabilities 916.2 658.7 884.1
------------------------------------------------------ --------------- --------------- -------------
Total liabilities 1,258.8 874.0 1,146.2
--------------- --------------- -------------
Net Assets 207.6 239.8 208.2
------------------------------------------------------ --------------- --------------- -------------
Equity
Share capital 6.3 6.3 6.3
Share premium - 288.7 -
Retained earnings 195.8 (67.6) 198.7
Foreign exchange reserve 0.9 9.4 (0.4)
Other reserves 4.6 3.0 3.6
Total equity 207.6 239.8 208.2
------------------------------------------------------ --------------- --------------- -------------
Condensed Consolidated Statement of Changes in
Equity
For the 26 weeks ended 2 October
2021 (unaudited)
Share Share Retained Foreign exchange Other Total
capital premium earnings reserve reserves equity
GBPm GBPm GBPm GBPm GBPm GBPm
At 28 March 2020
(restated) 6.3 288.7 (62.7) 5.7 2.6 240.6
--------------------- ------------- --------- ---------- ------------------- ---------- --------
Profit for the
period to 3 April
2021 - - 2.8 - - 2.8
Other comprehensive
loss for the period - - (0.1) - - (0.1)
Retranslation of
overseas
subsidiaries - - - (6.1) - (6.1)
Total comprehensive
loss - - 2.7 (6.1) - (3.4)
--------------------- ------------- --------- ---------- ------------------- ---------- --------
Cancellation of
share premium
account - (288.7) 288.7 - - -
Buy back of ordinary
shares - - (30.0) - - (30.0)
Share-based payment
charge - - - - 1.0 1.0
Transactions with
owners - (288.7) 258.7 - 1.0 (29.0)
At 3 April 2021 6.3 - 198.7 (0.4) 3.6 208.2
--------------------- ------------- --------- ---------- ------------------- ---------- --------
Loss for the period
to 2 October 2021 - - (3.1) - - (3.1)
Other comprehensive
income for the
period - - 0.2 - - 0.2
Retranslation of
overseas
subsidiaries - - - 1.3 - 1.3
Total comprehensive
loss - - (2.9) 1.3 - (1.6)
--------------------- ------------- --------- ---------- ------------------- ---------- --------
Share-based payment
charge - - - - 1.0 1.0
Transactions with
owners - - - - 1.0 0.9
--------------------- ------------- --------- ---------- ------------------- ---------- --------
At 2 October 2021 6.3 - 195.8 0.9 4.6 207.6
--------------------- ------------- --------- ---------- ------------------- ---------- --------
At 28 March 2020
(restated) 6.3 288.7 (62.7) 5.7 2.6 240.6
--------------------- ------------- --------- ---------- ------------------- ---------- --------
Loss for the period
to 3 October 2020 - - (3.9) - - (3.9)
Other comprehensive
loss for the period - - (1.0) - - (1.0)
Retranslation of
overseas
subsidiaries - - - 3.7 - 3.7
Total comprehensive
loss - - (4.9) 3.7 - (1.2)
--------------------- ------------- --------- ---------- ------------------- ---------- --------
Share-based payment
charge - - - - 0.4 0.4
Transactions with
owners - - - - 0.4 0.4
--------------------- ------------- --------- ---------- ------------------- ---------- --------
At 3 October 2020
(restated) 6.3 288.7 (67.6) 9.4 3.0 239.8
--------------------- ------------- --------- ---------- ------------------- ---------- --------
Condensed Consolidated Statement of Cash Flows
For the 26 weeks ended 2 October 2021 (unaudited)
26 weeks 27 weeks 53 weeks
ended ended ended
2 October 3 October 3 April
2021 2020 2021
(restated) (audited)
GBPm GBPm GBPm
------------------------------------------------------------------ -------------- ----------- ----------
Cash flows from operating activities
Operating profit 27.7 10.7 45.9
Adjustments For:
Depreciation and amortisation of IT software 25.9 24.2 47.7
Amortisation of acquired intangibles 16.0 13.5 26.8
Negative goodwill arising on acquisition - - (6.5)
Amortisation of government grants (0.2) (0.3) (0.5)
Profit on disposal of property, plant and equipment (0.1) (0.1) (0.1)
Share incentive plan charge 1.0 0.5 1.0
Defined benefit pension (0.1) (0.1) (0.1)
Net cash flow from operating activities before movements in
working capital, tax and interest
payments 70.2 48.4 114.2
Change in inventories (26.1) 26.7 7.6
Change in trade and other receivables (14.0) 1.3 (0.3)
Change in trade and other payables 26.1 (29.0) (25.6)
Cash generated by continuing operations before tax and interest
payments 56.2 47.4 95.9
Interest paid on loans and notes (16.1) (16.1) (30.4)
Interest relating to right-of-use lease assets (2.2) (1.5) (3.0)
Income taxes paid (6.6) (0.6) (5.0)
Net cash inflow from operating activities 31.3 29.2 57.5
------------------------------------------------------------------- -------------- ----------- ----------
Investing activities
Purchases of property, plant and equipment (29.9) (11.5) (27.6)
Purchases of intangible assets (0.7) (0.3) (0.9)
Proceeds on disposal of property, plant and equipment 2.0 0.5 1.2
Deferred consideration and acquisition-related performance plan
payments (12.0) (10.0) (15.6)
Acquisition of subsidiaries net of cash acquired (140.3) - (2.8)
Net cash used in investing activities (180.9) (21.3) (45.7)
------------------------------------------------------------------- -------------- ----------- ----------
Financing activities
Increase in new borrowings, net of refinancing costs - - 303.7
Repayment of borrowings (23.4) (48.2) (164.7)
Issue of preferred equity, net of refinancing costs - - 65.3
Buy back of ordinary shares - - (30.0)
Payments under right-of-use lease obligations (6.7) (5.1) (11.3)
Net cash (used) / generated in financing activities (30.1) (53.3) 163.0
------------------------------------------------------------------- -------------- ----------- ----------
Net (decrease) / increase in cash and cash equivalents (179.7) (45.4) 174.8
Cash and cash equivalents at beginning of period 344.8 174.7 174.7
Effect of foreign exchange rate changes 2.9 0.3 (4.7)
Cash and cash equivalents at end of period 167.9 129.6 344.8
------------------------------------------------------------------- -------------- ----------- ----------
Comprising:
Cash and cash equivalents 178.3 134.0 348.8
Bank overdrafts (10.4) (4.4) (4.0)
167.9 129.6 344.8
------------------------------------------------------------------ -------------- ----------- ----------
1. General information
These condensed consolidated interim financial statements for the 26 weeks ended 2 October 2021
have not been audited or reviewed by the Auditor. They were approved by the Board of Directors
on 22 November 2021.
The information for the 53 weeks ended 3 April 2021 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 interim financial statements should be read in conjunction with the
Group's financial statements for the 53 weeks ended 3 April 2021, which were prepared in accordance
with IFRSs as adopted by the European Union.
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 53 weeks ended 3 April 2021.
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 interim
financial statements of the Group.
3. Segmental information
The Group is organised into four operating segments: soft flooring products in UK & Europe;
ceramic tiles in UK & Europe; flooring products in Australia; and flooring products in North
America. The Executive Board (which is collectively the Chief Operating Decision Maker) regularly
reviews financial information for each of these operating segments in order to assess their
performance and make decisions around strategy and resource allocation at this level.
The UK & Europe Soft Flooring segment comprises legal entities in the UK, Republic of Ireland,
the Netherlands and Belgium, whose operations involve the manufacture and distribution of
carpets, flooring underlay, artificial grass, LVT, and associated accessories. The UK & Europe
Ceramic Tiles segment comprises legal entities primarily in Spain and Italy, whose operations
involve the manufacture and distribution of wall and floor ceramic tiles. The Australia segment
comprises legal entities in Australia, whose operations involve the manufacture and distribution
of carpets, flooring underlay and LVT. The North America segment comprises legal entities
in the USA, whose operations involve the distribution of hard flooring and LVT.
Whilst additional information has been provided in the operational review on sub-segment
activities, discrete financial information on these activities is not regularly reported to
the CODM for assessing performance or allocating resources.
No operating segments have been aggregated into reportable segments.
Both underlying operating profit and reported operating profit are reported to the Executive
Board on a segmental basis.
Transactions between the reportable segments are made on an arm length's basis. The reportable
segments exclude the results of non revenue generating holding companies, including Victoria
PLC. These entities' results have been included as unallocated central expenses in the tables
below.
Income statement
26 weeks ended 2 October 2021 27 weeks ended 3 October 2020 (restated)
UK & UK & UK & UK &
Europe Europe Unallocated Europe Europe Unallocated
Soft Ceramic North central Soft Ceramic central
Flooring Tiles Australia America expenses Total Flooring Tiles Australia expenses Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- --------- -------- ---------- -------- ------------ ------- --------- -------- ---------- ------------ -------
Income statement
Revenue 214.0 182.5 53.4 39.1 - 489.0 126.0 132.5 47.0 - 305.5
Underlying operating
profit 27.0 25.9 4.8 2.1 (1.2) 58.6 10.2 15.2 3.8 (1.0) 28.2
Non-underlying operating
items (4.4) (13.4) (0.9) (3.4) (1.3) (23.4) (2.0) (10.3) (0.9) (0.9) (14.1)
Exceptional operating
items (4.0) (1.7) (0.1) (1.5) (0.2) (7.5) (1.6) (1.7) - (0.1) (3.4)
Operating profit 19.8 11.9 3.8 (1.6) (6.2) 27.7 6.6 3.2 2.9 (2.0) 10.7
Underlying net finance
costs (17.5) (14.5)
Non-underlying finance
costs (7.3) (0.9)
Profit/ (loss) before
tax 2.9 (4.7)
Tax (charge) / credit (6.0) 0.8
------------------------- --------- -------- ---------- -------- ------------ ------- --------- -------- ---------- ------------ -------
Loss for the period (3.1) (3.9)
------------------------- --------- -------- ---------- -------- ------------ ------- --------- -------- ---------- ------------ -------
26 weeks ended 2 October 2021 27 weeks ended 3 October 2020
UK & UK & UK & UK &
Europe Europe Unallocated Europe Europe Unallocated
Soft Ceramic North central Soft Ceramic central
Flooring Tiles Australia America expenses Total Flooring Tiles Australia expenses Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- --------- -------- ---------- -------- ------------ ------- --------- -------- ---------- ------------ -------
Depreciation and
amortisation of IT
software (including
depreciation of
right-of-use lease
assets) 11.6 11.5 2.2 0.5 0.1 25.9 9.0 12.5 2.4 0.3 24.2
Amortisation of acquired
intangibles 3.6 10.7 0.9 0.8 - 16.0 2.4 10.3 0.8 - 13.5
15.2 22.2 3.1 1.3 0.1 41.9 11.4 22.8 3.2 0.3 37.7
------------------------- --------- -------- ---------- -------- ------------ ------- --------- -------- ---------- ------------ -------
26 weeks ended 2 October 2021 27 weeks ended 3 October 2020
UK & UK & UK & UK &
Europe Europe Europe Europe
Soft Ceramic North Soft Ceramic
Flooring Tiles Australia America Central Total Flooring Tiles Australia Central Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- --------- -------- ---------- -------- ------------ ------- --------- -------- ---------- ------------ -------
Total capital
expenditure (cashflow) 7.4 19.2 1.8 0.1 0.1 28.6 3.2 7.0 1.1 - 11.3
------------------------- --------- -------- ---------- -------- ------------ ------- --------- -------- ---------- ------------ -------
4. Exceptional and non-underlying items
26 weeks ended 2 October 2021 27 weeks ended 3 October 2020
(restated)
GBPm GBPm
----------------------------------------- ------------------------------ ----------------------------------------
Exceptional items
(a) Acquisition and disposal related
costs (4.4) (0.4)
(b) Reorganisation and Covid-related
exceptional costs (1.2) (3.0)
(c) Negative goodwill reversal (1.9) -
Total exceptional items (7.5) (3.4)
------------------------------------------ ------------------------------ ----------------------------------------
Non-underlying operating items
(d) Acquisition-related performance plans (1.7) (0.1)
(e) Non-cash share incentive plan charge (1.0) (0.5)
(f) Amortisation of acquired intangibles (16.0) (13.5)
(g) Unwind of fair value uplift to
acquisition opening inventory (4.7) -
(23.4) (14.1)
----------------------------------------- ------------------------------ ----------------------------------------
All exceptional items are classified within administrative expenses.
(a) One-off third-party professional fees in connection with prospecting and completing specific
acquisitions during the period.
(b) One-off costs relating to a number of efficiency projects during the year, including post-acquisition
integration activities in Italy and the closure of the Westex factory in West Yorkshire, of
which the majority were redundancy costs. In the prior period, this figure included one-off
expenditure relating to precautionary measures for health and safety in light of Covid-19.
Other than redundancy payments these items relate entirely to exceptional third-party purchases
and fees, and do not include any allocation of internal resources.
(c) Negative goodwill of GBP2.2m arising on the acquisition of Hanover was credited to the
income statement during the prior period. In accordance with the terms of the contract, an
adjustment to the cash consideration paid on completion was subsequently assessed and settled.
This payment of GBP1.9m was made following the year end and is therefore recognised as a charge
to the Income Statement in the period.
(d) Charge relating to the accrual of expected liability under acquisition-related performance
plans (see Note 11 for further details).
(e) Non-cash, IFRS2 share-based payment charge in relation to the long-term management incentive
plans.
(f) Amortisation of intangible assets, primarily brands and customer relationships, recognised
on consolidation as a result of business combinations.
(g) One-off charge reflecting the IFRS 3 fair value adjustment on inventory acquired on new
business acquisitions, given this is not representative of the underlying performance of those
businesses (see Note 9 for further details).
5. Finance costs
26 weeks ended 2 October 2021 27 weeks ended 3 October 2020
(restated)
GBPm GBPm
----------------------------------------- ------------------------------ ----------------------------------------
Underlying finance items
Interest on bank facilities and notes 13.8 11.2
Interest on unsecured loans 0.4 0.4
------------------------------------------ ------------------------------ ----------------------------------------
Total interest on loans and notes 14.2 11.6
Amortisation of prepaid finance costs on
loans and notes 1.1 1.3
Unwinding of discount on right-of-use
lease liabilities 2.2 1.5
Net interest expense on defined benefit
pensions - 0.1
17.5 14.5
----------------------------------------- ------------------------------ ----------------------------------------
Non-underlying finance items
(a) Finance items related to preferred 10.4
equity -
----------------------------------------- ------------------------------ ----------------------------------------
Preferred equity related 10.4 -
(b) Other adjustments to present value of
contingent earn-out liabilities - 0.5
(c) Unwinding of present value of
acquisition-related performance plans - 0.6
------------------------------------------ ------------------------------ ----------------------------------------
Acquisitions related - 1.1
(d) Interest on short-term draw of Group
revolving credit facility - 1.4
(e) Fair value adjustment to notes
redemption option (1.1) (0.7)
(f) Unsecured loan redemption premium
charge 0.1 -
(g) Mark to market adjustments and gains
on foreign exchange forward contracts (2.4) 2.6
(h) Translation difference on foreign
currency loans 0.3 (3.5)
------------------------------------------ ------------------------------ ----------------------------------------
Other non-underlying (3.1) (0.2)
7.3 0.9
----------------------------------------- ------------------------------ ----------------------------------------
(a) The net impact of non-cash items relating to preferred equity issued to Koch Equity Development
during the prior year. This comprises: i) accrual of preferred dividends and other value movements
of the host contract (GBP5.0m); ii) fair value adjustment to embedded derivative representing
a cash settlement option (GBP1.8m); iii) amortisation of associated instrument representing
the option to issue additional preferred equity (GBP0.9m); iv) fair value adjustment to contractually-linked
warrants (credit: GBP0.3m); and iv) 6% ticking fee on option to issue GBP100.0m additional
preferred equity (GBP2.9m).
(b) Non-cash items relating to changes in contingent earn-out consideration arising from the
evolution of actual and forecast financial performance of the relevant acquisitions during
the prior period.
(c) Non-cash cost relating to unwinding of the present value discount on acquisition-related
performance plans during the prior period.
(d) Interest cost associated with the drawing of the Group's GBP75m revolving credit facility
in March 2020, as a precautionary measure in response to the Coronavirus pandemic.
(e) Fair value adjustment to embedded derivative representing the early redemption option
within the terms of the senior secured notes.
(f) Unsecured loan redemption premium charge - non-cash item relating to the GBP2.1 million
redemption premium on the BGF loan.
(g) Non-cash fair value adjustments on foreign exchange forward contracts.
(h) Net impact of exchange rate movements
on third party and intercompany loans.
6. Taxation
26 weeks ended 2 October 2021 27 weeks ended 3 October 2020
GBPm GBPm
------------------------------------------ ------------------------------ ------------------------------
Current tax
- Current year UK 2.4 -
- Current year overseas 7.6 1.1
10.0 1.1
------------------------------------------ ------------------------------ ------------------------------
Deferred tax
- Credit recognised in the current year (4.0) (1.9)
(4.0) (1.9)
------------------------------------------ ------------------------------ ------------------------------
Total tax charge / (credit) 6.0 (0.8)
--------------------------------------------- ------------------------------ ------------------------------
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; 29% in Belgium; 12.5% in Ireland an 26% in North
America.
The overall effective corporation tax rate on underlying profit is 25.0% (2020: 25.5%), representing
the best estimate of the weighted average annual corporation tax rate expected for the full
financial year.
7. Earnings per share
The calculation of the basic, adjusted
and diluted earnings / loss per share is
based on the
following data:
26 weeks ended 2 October 2021 27 weeks ended 3 October 2020
Basic Adjusted Basic Adjusted
(restated) (restated)
GBPm GBPm GBPm GBPm
-------------------------- ------------ ------------------ ------------------------- --------------------------
Loss attributable to
ordinary equity holders
of the parent entity (3.1) (3.1) (3.9) (3.9)
Exceptional and
non-underlying items:
Income statement impact
of preferred equity - 10.4 - -
Amortisation of acquired
intangibles - 16.0 - 13.5
Other non-underlying items - 7.4 - 0.6
Other exceptional items - 7.5 - 3.4
Interest on short -term
draw of Group revolving
credit facility - - - 1.4
Amortisation of prepaid
finance costs - - - -
Fair value adjustment to
notes redemption option - (1.1) - (0.7)
Translation difference on
foreign currency loans - 0.3 - (3.5)
Other non-underlying
finance items - (2.3) - 3.7
Tax effect on adjusted
items where applicable - (4.3) - (4.3)
(Loss) / earnings for the
purpose of basic and
adjusted earnings per
share from continuing
operations (3.1) 30.8 (3.9) 10.2
--------------------------- ------------ ------------------ ------------------------- --------------------------
(Loss) / earnings for the
purpose of basic and
adjusted earnings per
share (3.1) 30.8 (3.9) 10.2
--------------------------- ------------ ------------------ ------------------------- --------------------------
Weighted average number
of shares
26 weeks ended 2 October 27 weeks ended 3 October
2021 2020
Number Number
of shares of shares
(000's) (000's)
Weighted average number of shares for the purpose of basic
and adjusted earnings per share 116,852 125,398
Effect of dilutive
potential ordinary
shares:
Share options 1,657 625
--------------------------- ------------ ------------------ ------------------------- --------------------------
Weighted average number of ordinary shares for the purposes
of diluted earnings per share 118,509 126,023
Preferred equity and
contractually-linked
warrants 7,990 -
Weighted average number of ordinary shares for the purposes
of diluted adjusted earnings per
share 126,499 126,023
------------------------------------------------------------- ------------------------- --------------------------
The potential dilutive effect of the share options has been calculated in accordance with
IAS 33 using the average share price in the period.
The Group's earnings /
(loss) per share are as
follows:
26 weeks ended 2 October 27 weeks ended 3 October
2021 2020
(restated)
Pence Pence
-------------------------- ------------ ------------------ ------------------------- --------------------------
Earnings / (loss) per
share
Basic loss per share (2.68) (3.11)
Diluted loss per share (2.68) (3.11)
Basic adjusted earnings
per share 26.32 8.13
Diluted adjusted earnings
per share 24.32 8.09
--------------------------- ------------ ------------------ ------------------------- --------------------------
Diluted earnings per share for the period is not adjusted for the impact of the potential
future conversion of preferred equity due to this instrument having an anti-dilutive effect,
whereby the positive impact of adding back the associated financial costs to earnings outweighs
the dilutive impact of conversion/exercise. Diluted adjusted earnings per share does take
into account the impact of this instrument as shown in the table above setting out the weighted
average number of shares.
8. Rates of exchange
26 weeks ended 2 October 2021 27 weeks ended 3 October 2020 53 weeks
ended
2 Apr 2021
------------------------------- ------------------------------ ------------------------------ ------------
Australia (A$) - average rate 1.8161 1.8665 1.8049
Australia (A$) - period end 1.8649 1.8053 1.8377
Europe (EUR) - average rate 1.1659 1.1151 1.1344
Europe (EUR) - period end 1.1683 1.1038 1.1624
USD ($) - average rate 1.3849 N/A N/A
USD ($) - period end 1.3545 N/A N/A
-------------------------------- ------------------------------ ------------------------------ ------------
9. Acquisition of subsidiaries
(a) Colli and Vallelunga
On 21 April 2021 the Group completed the purchase of the business and assets of ceramic tile
distributors, Ceramica Colli and Vallelunga.
Located near Victoria's existing Italian operations, these successful, growing brands bring
significant additional spare production capacity and enable continued growth in Victoria's
already established Italian ceramics business through the utilisation of that spare production
capacity.
The total cash consideration for Ceramica Colli and Vallelunga was EUR15.3m (GBP13.3m(1) ).
The valuation exercise to identify intangible assets acquired, as required under IFRS3, has
been provisionally applied as at the half year. The final valuation will be reflected in the
Annual Report and Accounts for the Group for the year ending 2 April 2022 together with the
appropriate IFRS 3 disclosures. Identifiable net assets with a total fair value of EUR13.6m
(GBP11.8m(1) ) and goodwill of EUR1.7m (GBP1.5m(1) ) have provisionally been recognised in
the opening balance sheet.
Within net assets we have provisionally recognised EUR1.4m (GBP1.3m(1) ) in relation to the
fair value uplift of inventory in accordance with IFRS 3. The fair value has been assessed
as the estimated selling price less any estimated selling costs, therefore by definition no
operating profit is recognised on sale of the opening inventory. As of 2 October 2021, all
of the applicable inventory had been sold. Given the resulting uplift in cost of sales is
not representative of the underlying performance of the business in relation to the actual
costs incurred in acquiring and producing the inventory, but instead represents the one-off
impact of this fair value accounting adjustment within the purchase price allocation, this
uplift has been separately disclosed as an exceptional cost.
(b) Ceramiche Santa Maria
On 21 April 2021 the Group acquired 100% of the equity of the Italian ceramic tile manufacturer,
Ceramiche Santa Maria.
The purchase of Santa Maria will further support the growth in our Italian ceramics brands.
The total cash consideration of EUR8.5m (GBP7.3m(1) ) was paid on completion.
The valuation exercise to identify intangible assets acquired, as required under IFRS3, has
been provisionally applied as at the half year. The final valuation will be reflected in the
Annual Report and Accounts for the Group for the year ending 2 April 2022 together with the
appropriate IFRS 3 disclosures. Identifiable net assets with a total fair value of EUR7.8m
(GBP6.7m(1) ) and goodwill of EUR0.7m (GBP0.6m(1) ) have provisionally been recognised in
the opening balance sheet.
(1) Applying the GBP to EUR exchange rate at the date of acquisition of 1.1573.
(c) Edel Group
On 4 May 2021 the Group acquired 100% of the equity of Edel Group BV ("Edel"), Netherlands-based
designers, manufacturers, and distributers of artificial grass and carpets.
Established in 1918, Edel primarily supplies artificial grass for domestic and landscaping
purposes across Europe, a market in which Victoria already has a strong presence following
its February 2017 acquisitions of Avalon and GrassInc.
Consideration of EUR49.8m (GBP43.1m(2) ) was paid in cash on completion.
The valuation exercise to identify intangible assets acquired, as required under IFRS3, has
been provisionally applied as at the half year. The final valuation will be reflected in the
Annual Report and Accounts for the Group for the year ending 2 April 2022 together with the
appropriate IFRS 3 disclosures. Identifiable net assets with a total fair value of EUR13.1m
(GBP11.4m(2) ) and goodwill of EUR36.7m (GBP31.7m(2) ) have provisionally been recognised
in the opening balance sheet.
Within net assets we have provisionally recognised EUR1.0m (GBP0.9m(2) ) in relation to the
fair value uplift of inventory in accordance with IFRS 3. The fair value has been assessed
as the estimated selling price less any estimated selling costs, therefore by definition no
operating profit is recognised on sale of the opening inventory. As of 2 October 2021, all
of the applicable inventory had been sold. Given the resulting uplift in cost of sales is
not representative of the underlying performance of the business in relation to the actual
costs incurred in acquiring and producing the inventory, but instead represents the one-off
impact of this fair value accounting adjustment within the purchase price allocation, this
uplift has been separately disclosed as an exceptional cost.
Subsequently, on 17 August 2021 the Group acquired 100% of the equity of Edel Grass.
Consideration of EUR6.1m (GBP5.2m(3) ) was paid in cash on completion.
The valuation exercise to identify intangible assets acquired, as required under IFRS3, has
been provisionally applied as at the half year. The final valuation will be reflected in the
Annual Report and Accounts for the Group for the year ending 2 April 2022 together with the
appropriate IFRS 3 disclosures. Identifiable net assets with a total fair value of EUR4.7m
(GBP4.0m(3) ) and therefore goodwill of EUR1.4m (GBP1.2m(3) ) have provisionally been recognised
in the opening balance sheet.
(2) Applying the GBP to EUR exchange rate at the date of acquisition of 1.1561.
(3) Applying the GBP to EUR exchange rate at the date of acquisition of 1.1675.
(d) Cali Bamboo Holdings Inc
On 23 June 2021 the Group acquired 100% of the equity of Cali Bamboo Holdings Inc. ("Cali").
Cali is a multi-channel US flooring distributor with the majority of revenue generated through
sales of luxury vinyl tile / luxury vinyl plank, along with engineered hardwood, composite
decking and other items.
Total consideration of Cali was $112.1m (GBP80.3m(5) ). The consideration of $111.6m (GBP79.9m(5)
) was paid in cash on completion and $0.5mn (GBP0.4m(5) ) was paid subsequently in November
2021 as a closing cash adjustment. The total consideration paid included repayment of existing
debt at time of acquisition.
The valuation exercise to identify intangible assets acquired, as required under IFRS3, has
been provisionally applied as at the half year. The final valuation will be reflected in the
Annual Report and Accounts for the Group for the year ending 2 April 2022 together with the
appropriate IFRS 3 disclosures. Identifiable net assets with a total fair value of $62.1m
(GBP44.5m(4) ) and goodwill of $50.0m (GBP35.8m(4) ) have provisionally been recognised in
the opening balance sheet.
Within net assets we have provisionally recognised $3.6m (GBP2.6m(4) ) in relation to the
fair value uplift of inventory in accordance with IFRS 3. The fair value has been assessed
as the estimated selling price less any estimated selling costs, therefore by definition no
operating profit is recognised on sale of the opening inventory. As of 2 October 2021, all
of the applicable inventory had been sold. Given the resulting uplift in cost of sales is
not representative of the underlying performance of the business in relation to the actual
costs incurred in acquiring and producing the inventory, but instead represents the one-off
impact of this fair value accounting adjustment within the purchase price allocation, this
uplift has been separately disclosed as an exceptional cost.
(4) Applying the GBP to USD exchange rate at the date of acquisition of 1.3967.
10. Post balance sheet events
Acquisitions of B3 Ceramics Danismanlik ("Graniser")
On 10 November 2021 the Group signed a definitive agreement to acquire the shares of Turkish
ceramic tile manufacturer and exporter, B3 Ceramics Danismanlik ("Graniser") for total cash
consideration of EUR8.4 million (GBP7.1 m(1) ), which will be funded entirely from the Group's
cash balances. In addition, Graniser has approximately EUR39.8 million (c. GBP33.7m(1) ) of
net debt (including shareholder loans), which will be repaid on completion. For the 12 months
ended 31 December 2020, Graniser generated audited revenues of EUR59.3 million(2) (c. GBP52.8m(2)
). Current normalised EBITDA is approximately EUR9 million (c. GBP7.7m(1) ). Completion is
subject to procedural approval by the Turkish competition authorities and is expected to take
place in January 2022.
(1) Converted to GBP at a rate of 1.18 GBP/EUR.
(2) 2020 Revenue of 477.1mm Turkish Lira converted to EUR and GBP at 2020 average rate of
8.04 TL/EUR and 9.03 TL/GBP, respectively.
11. Restatement of acquisition accounting
The prior period income statement, balance sheet, cash flow statement and related other statements
and notes have been re-stated to reflect a change in accounting treatment of the contingent
earn-out consideration payable on certain historical acquisitions. Earn-outs are deferred
elements of consideration, typically paid in cash over a three to four-year period following
acquisition, that are contingent on the financial performance of the target business meeting
certain pre-determined targets over that period.
This accounting change has no impact on the underlying results, the cash flow or the tax
position of the Group.
Whilst earn-outs form part of the purchase price that was negotiated in the past with each
respective seller, and are contractually payments in exchange for the shares or assets of
a business, on review of developing and developed guidance regarding interpretation of the
relevant standards (including revisiting our assessment of IFRS Interpretations Committee
decision "IFRS 3 Business Combinations-Continuing employment") the Group has remedied the
accounting treatment of these items where leaver provisions exist that result in the earn-out
effectively being contingent on the continued employment of the seller(s) following the acquisition.
This is relevant where the leaver provisions included in the acquisition agreement result
in a "good leaver" scenario being highly unlikely or outside the control of the seller (a
good leaver scenario is where the seller is able to leave employment but still retain all
or a proportion of their unpaid earn-out). Such leaver provisions are included in our acquisitions
in order to protect the goodwill being acquired over the first few years of ownership. However,
in accordance with the IFRS interpretation noted above, in such circumstances the relevant
earnouts are now being treating as non-underlying remuneration costs, accrued over the earn-out
period (i.e. the period over which the effective employment condition is applicable). Previously
they were fully recognised at fair value at the point of acquisition, thereby forming part
of goodwill.
The restatement resulted in the prior period loss of GBP2.1m increasing by GBP1.8m to a restated
loss of GBP3.9m. Net assets decreased by GBP21.9m from GBP261.7m to GBP239.8m with the majority
of the decrease being within goodwill.
For further details of the restatement of acquisition accounting and impacts to prior periods
statements see note 29 of the Annual Report and Accounts for the year ended 3 April 2021.
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END
IR PPGPCGUPGUQW
(END) Dow Jones Newswires
November 23, 2021 02:00 ET (07:00 GMT)
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