TIDMVCP
RNS Number : 2017F
Victoria PLC
11 July 2019
For Immediate Release 11 July 2019
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', the 'Company', or the 'Group')
Preliminary Results
for the year ended 30 March 2019
Victoria PLC (LSE: VCP) the international designers,
manufacturers and distributors of innovative floorcoverings, is
pleased to announce its preliminary results for the year ended 30
March 2019.
Financial and Operational highlights
Year ended Year ended Growth
30 March 31 March
Continuing operations 2019 2018
Revenue GBP574.4m GBP424.8m +35%
Underlying EBITDA(1) GBP96.3m GBP64.7m +49%
Underlying operating profit(1) GBP70.3m GBP48.8m +44%
Operating profit GBP24.0m GBP26.4m - 9%
Underlying profit before tax(1) GBP57.2m GBP40.8m +40%
Profit / (loss) before tax GBP(3.7)m GBP13.4m -
Underlying free cash flow(2) GBP50.4m GBP35.0m +44%
Net debt GBP339.9m GBP258.7m +31%
Net debt / EBITDA(3) 3.2x 2.7x
Earnings per share(4) :
- Diluted adjusted(1) 35.25p 30.61p +15%
- Diluted (6.44)p 8.37p -
-- 2019 was the sixth consecutive record year for Victoria as
the Group's competitive strength continued to grow and strategic
objectives were achieved.
-- Like-for-like revenue growth of 2.0% across the Group, despite challenging market conditions.
-- Achieved a record underlying EBITDA margin of 16.8%, c.160 basis point increase year-on-year.
-- Strong cash generation continues with GBP50.4 million of
underlying free cash flow during 2019, a 44% increase over the
previous year, which equates to a 72% conversion from underlying
operating profit.
-- Significant reorganisation of UK and European manufacturing
footprint and logistics structure completed on schedule and on
budget (GBP12.7 million in exceptional reorganisation costs), with
a materially positive impact on margin expected in FY2020.
-- GBP20.9 million investment in growth capex to deliver best in
class facilities, enabling revenue and margin growth in future
years.
-- Acquisition of Ceramica Saloni completed during the year,
expanding the Group's presence in the high-margin ceramic flooring
sector in Europe and internationally. Now fully integrated with
Keraben, Victoria's enlarged ceramics division is performing
strongly, in line with expectations.
-- Year-end leverage of 3.2x, consistent with the Group's
financial policy, with the increase in the year resulting from the
acquisition of Saloni and investments in synergy projects.
-- Committed long-term debt financing arrangement in place,
provided by Credit Suisse, NatWest, ING, HSBC, Bank of Ireland and
BBVA, with flexibility to replace a proportion in the bond
market.
(1) Underlying performance is stated before the impact of
exceptional and non-underlying items, including the amortisation of
acquired intangibles within operating profit. In addition,
underlying profit before tax and adjusted EPS are also stated
before non-underlying items within finance costs (comprising
mark-to-market adjustments, BGF redemption premium charge, deferred
consideration fair value adjustments, exchange rate differences on
foreign currency loans, and the release of pre-paid costs on
extinguished financing)
(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) As measured in line with our bank facility covenants
(4) Earnings per share on a fully-diluted basis
Geoff Wilding, Executive Chairman of Victoria PLC commented:
"Victoria achieved another record year in 2019 making it the
sixth consecutive year of growth in underlying earnings; and free
cash flow per share, and operating margins, despite continuingly
challenging market conditions.
There remains an enormous market opportunity for Victoria to
expand both in the UK and internationally, by organically improving
margins and earnings still further within our existing business, as
well as by acquisition, where we believe opportunities we have
identified will make a meaningful contribution to the Group. We
remain focused on increasing both earnings and free cash flow per
share.
2019 was a year when we invested GBP21 million in growth capex
in addition to synergy projects across the Group to accelerate
growth, increase margins and cash flow in the years ahead. At
times, reorganising a factory while still focussed on achieving
organic growth felt like conducting open heart surgery whilst the
patient was running a marathon but we are very pleased with the end
result. At the time of writing, we are just three months into our
new financial year but the numbers being reported by the operating
businesses to date, point to the expected positive outcomes being
achieved and I look forward to updating shareholders in due
course."
For more information contact:
Victoria PLC
Geoff Wilding, Executive Chairman
Philippe Hamers, Chief Executive +44 (0) 1562
Michael Scott, Group Finance Director 749 610
Cantor Fitzgerald Europe (Nominated Adviser
and Joint Broker)
Rick Thompson, Phil Davies, Will Goode (Corporate
Finance)
Caspar Shand Kydd, Andrew Keith (Equity +44 (0) 20 7894
Sales) 7000
Berenberg (Joint Broker)
Ben Wright, Mark Whitmore, Laure Fine (Corporate +44 (0) 20 3207
Broking) 7800
Buchanan Communications (Financial PR)
Charles Ryland, Victoria Hayns, Madeleine +44 (0) 20 7466
Seacombe, Tilly Abraham 5000
The person responsible for arranging the release of this
information is Michael Scott Group Finance Director of the
Company.
Victoria PLC
Chairman and CEO Review
Victoria's mission statement since October 2012 has been "To
create wealth for shareholders". Since that date to 30 March 2019,
Victoria's total shareholder return has been 62.0% per annum, a
cumulative 2,183.2%. In FY2019 diluted adjusted earnings per share
increased by 15.2% but, judged solely by our share price, we have
failed to deliver against our mission statement over the last 12
months.
While we do not pretend for one moment that the fall in
valuation over FY2019 is welcome, far more progress has been made
in continuing to deliver on the mission statement than the recent
share price performance would suggest. We will set out this
progress in the balance of this Review.
However, before we do, we will address the key factors which,
outside of general UK equity market conditions, have impacted our
share price and the rate of earnings growth in FY2019.
-- On 29 October last year, Victoria announced it intended to
issue bonds to refinance its bank debt and provide a source of
funding for future acquisitions. It was (and remains) the Board's
view that the bond market provides the optimal mix of cost, depth,
and flexibility to meet Victoria's long-term debt financing
requirements.
Unexpectedly, November 2018 turned out to be one of the worst
months in recent history to attempt a bond issue with investors
suddenly demanding much higher interest rates. Consequently, the
board of Victoria withdrew the issue. Due to poor communication,
for which your chairman takes responsibility, the equity market
took fright, and this materially impacted our share price. The
reaction seemed excessive as, despite the wasted money (a not
insignificant GBP7.3 million), our credit rating remained unchanged
and all our banks continued to be very supportive. We have
subsequently put in place very attractive committed long-term debt
financing arrangements, underwritten by Credit Suisse and a number
of other banks which, importantly, incorporates flexibility to
replace a proportion in the bond market at an appropriate time.
-- Like many other businesses, flooring manufacturing and
distribution is somewhat cyclical in nature, albeit with a less
pronounced peak and trough than one might expect given the market
is a fundamental one (everyone has a floorcovering, with a steady
refurbishment pattern) and is mature. Nonetheless, as long-term
shareholders, we are strongly of the view that it is preferable to
have somewhat variable, but on average higher, earnings growth than
lower, but regular earnings improvement.
In the UK, general trading conditions over the 2019 financial
year proved to be more challenging than in other recent periods.
Accordingly, given Victoria's very strong competitive position in
the UK, the board decided to secure market share gains by actively
taking advantage of the difficult conditions, when weaker
competitors would find it more difficult to counter our
initiatives. In mature, competitive markets, like flooring, there
is no "pixie dust" that will triple or quadruple organic growth
rates. However, a few percentage points increase in market share,
taken together with tightly managed costs can dramatically
beneficially impact earnings - especially as trading conditions
rebound. We therefore decided to temporarily absorb some raw
material price increases, launched a "value" range of products, and
spent heavily on improving our customer service levels. These
actions impacted the short-term rate of growth of our earnings but
accelerated the organic growth of our revenues (LFL +7.3% in a
market experiencing a mid-single digit decline)
and we are confident we have increased our competitive
superiority in the UK over the last 12 months. This will
permanently benefit the Group.
-- Australia simply has not performed well over the last 12
months. There are two reasons for this; neither, reassuringly, are
permanent: Firstly, the Reserve Bank of Australia ("RBA")
effectively tightened mortgage lending criteria, which reduced both
the number of housing transactions, and the number of people able
to utilise equity release loans to renovate their homes. A further
by-product was a small decline in the value of housing in
Australia, that, together with some of the political uncertainty
(resolved with the Federal election in May), impacted consumer
confidence.
We expect all our businesses to have ups and downs from
time-to-time and are not in the least disturbed by the downs. We
value the geographic diversification that our Australian businesses
provide and the region has performed exceptionally well for the
last 20 years. Most importantly, we have the highest confidence in
the Australian management team (which has not, after decades of
success, suddenly forgotten how to manufacture and sell flooring!)
and know they will be the first to capitalise on the inevitable
upturn. This may not be far away as over the last two months the
RBA cut interest rates by 0.5% and the Australian Prudential
Regulation Authority lifted its mandatory 7% interest rate buffer
(under which borrowers had to prove they could meet repayments at
an interest rate much higher than actual interest rates in order to
be approved for a mortgage), which will stimulate mortgage lending.
Furthermore, the new government has stated its intention to
legislate meaningful tax cuts for low- and middle-income earners as
soon as possible.
The outcome of the trading factors outlined above was that our
2019 diluted adjusted EPS growth of 15.2%, although strong, was
slower than some investors had expected. The result of this slower
growth in FY2019 has been a more than commensurate drop in our
share price. Having said that, it is only fair to note that there
have also been times over the last six years when the share price
growth has outpaced the growth in the underlying value of the
business. However, over time, these two figures should more-or-less
track each other and therefore we remain confident Victoria will
continue to create wealth for its shareholders.
Diluted Underlying Underlying EBITDA by geography
adjusted EBITDA free cash
EPS per share flow per
share[1]
year pence GBP GBP UK % Aus % Eur %
FY15 10.47 0.27 0.17 79.5% 20.5% -
FY16 16.32 0.39 0.19 79.3% 20.7% -
FY17 24.42 0.50 0.25 75.1% 23.6% 1.3%
FY18 30.61 0.64 0.34 48.3% 22.0% 29.7%
FY19 35.25 0.78 0.41 25.8% 9.7% 64.5%
OPERATIONAL REVIEW
Flooring manufacturing and distribution is a tough industry but
our management team has continued to excel themselves in FY2019. We
subscribe to little else he might have believed but concur
unreservedly with Mao Zedong's comment on leadership, "Weapons are
an important factor in war but not the decisive one; it is men and
not materials that counts." We have said before, and we will say
again, Victoria is fortunate in having the most talented management
team in the sector.
Structurally, the Group operates as a 'team of teams'. That is
to say, the managing directors of our subsidiaries work together to
execute on a common strategy, but, other than capital allocation,
we have delegated full operational authority and responsibility to
these managers to run their business unit and achieve their
strategic objectives. Apart from the low corporate overhead (five
FTE) this arrangement enables a sense of autonomy and ensures our
managers retain real passion for their businesses - even though
many are already independently wealthy, having created fortunes in
the business we have acquired from them.
There were three stand out performers in the Group this past
year: Yorkshire-based Ezi Floor, run by Saqib Karim, Ceramiche
Serra in Italy, run by Andrea Bordignon, and Grass Inc, led by Dave
Droomers in the Netherlands. These managing directors could not be
more different in style and temperament but they have delivered in
spades for shareholders.
Your Chairman was first introduced to Saqib in 2015 by the
former owner of a business Victoria had acquired earlier (this sort
of referral is worth a dozen cold approaches). Saqib had
established Ezi Floor a few years previously and had built an
incredible carpet underlay manufacturer business from the ground up
with a relentless focus on minimising costs. Negotiating with
Saqib, your chairman quickly learned one of the reasons he runs
such a successful business: he is a formidable negotiator.
Nonetheless we were able to agree a deal in October 2016.
In FY2019 Ezi Floor had to cope with softer demand in the UK for
underlay, and raw material price increases of more than 100%. The
key ingredient in underlay is PU foam offcuts from other
manufacturing processes such as furniture and car seats (PU is the
squishy foam inside seat cushions and similar products) and the
price can vary due to supply fluctuations (if, for example, sofa
manufacturers are going through a quiet period, there is much less
PU offcuts available) and/or demand (it is a global market and,
even if demand is low from the UK, demand from other geographies
can push up prices). Showing the sort of lateral thinking
entrepreneurs are famed for, Saqib discovered new sources of raw
materials and innovative production processes which enabled his
business to deliver record levels of revenues and profits, despite
these dramatic increase in raw material prices and softer demand.
I'm delighted to have Saqib on our side.
Similarly, Serra did something extraordinary last year and much
of the credit must go to Andrea Bordignon, who runs this company
for us.
Andrea inherited sole responsibility for Serra in sad
circumstances. Pietro Fogliani, the former owner of Serra, was
declared missing, presumed drowned, by the Italian authorities
after a boating accident last summer. Pietro was a lovely human
being and a production genius. We will miss him for the former
quality and, along with all Victoria shareholders, be forever
grateful for his latter gift. With a combination of patented
technology and innovative thinking Pietro designed and built a
factory that could produce a greater quantity of good quality
ceramics tiles than the theoretical maximum output - and at a cost
below any of his "competitors" (we use the word loosely; genuine
competitors simply do not exist). Serra's lowest possible cost base
is perfectly illustrated by employee numbers. Serra employs 67
people. We have looked at numerous other similar-sized businesses
in the region in the (so far) forlorn hope of finding another one.
Not one has employed less than 150 people and some employ many more
than that. So, this productivity that is part of Serra's DNA,
together with some patented production processes, provides it with
a sustainable competitive advantage: no-one in Italy can produce a
ceramic tile like Serra's at a lower cost.
Effectively FY2019 was a year of two halves for Serra.
Immediately following our purchase Victoria commenced installing a
new production line to expand capacity. During the installation
process, which took until June 2018, Serra's production output was
reduced by about one third as we needed to remove one line (of
three) before installing the faster one. As you can imagine, the
reduced production output together with the general disruption from
construction impacted short-term profitability substantially, as we
were still carrying the full costs (all employees were retained
through the process) of the business with one third less
output.
However, once the new line was installed and the usual teething
issues ironed out, Andrea and his team lost no time in filling it
with orders from new and existing customers with the result that,
even with the factory disruption and full capacity available for
only part of the year, Serra generated more profits in FY2019 than
in any previous year of its history. It was a truly extraordinary
achievement.
Building on a solid year in FY2018, Grass Inc shot the lights
out in FY2019. An 'asset-lite' operation, Grass Inc designs its own
unique artificial turf products, imports the necessary raw
materials, and contracts the manufacturing to specialist factories
in Europe. In the fast-moving artificial turf sector this approach
has important advantages in terms of flexibility, speed to market,
operational leverage, and technology upgrades.
It is important to understand that Victoria's artificial turf
businesses are all focussed on the domestic and commercial
landscaping sector, not playing fields (football pitches, tennis
courts, etc). With increasing water restrictions in some regions
and increased apartment and townhouse dwelling throughout Europe,
this is a rapidly growing market that comes without the very
significant contingent risks associated with supplying playing
fields.
Dave Droomers' energy and enthusiasm has to be experienced to be
believed. He achieves more in a morning than most people do in a
week (or politicians in a lifetime). Watching Dave in action at a
trade show could be a spectator sport and I'm proud to have him as
part of our team.
Solid gains have also been made elsewhere within the Group.
Led by Steve Byrne, who joined the Group when we acquired his
successful Whitestone Weavers group in 2014, our UK carpet
operations underwent significant transformation in 2019 to improve
production efficiency and gain capacity. Although there are
regional differences, demand for carpet in the UK overall remains
constant at around two-thirds of residential flooring sold and
Steve's objective was to build a production capability (capacity
and efficiency) that would ensure we were able to materially grow
both our existing c.15% market share and our margins, in what
remains a highly fragmented market.
As noted elsewhere in this Review, we planned for and accepted
slower margin growth in 2019 in order to gain market share in the
certain knowledge that the changes Steve was making would quickly
make up the temporarily foregone margin opportunity. His
transformation had three aspects:
1. Consolidation. Steve completed the incorporation of our
Victoria Carpets production into the much larger Abingdon Flooring
factory in Newport, Wales. This was, of course, operationally
disruptive and the 200 FTE reduction enabled by the move was
expensive in terms of redundancies, with the total exceptional cost
amounting to GBP4.0 million. (This is covered in more detail in the
section on restructuring costs). However, reducing the factory
headcount has focussed the workforce and led to markedly increased
efficiency with productivity materially higher than ever
before.
2. Investment. Significant upgrades have resulted in a
state-of-the-art carpet manufacturer, which is, by far, the best
invested carpet factory in the UK. Carpet manufacturing consists of
two key stages; tufting, when fibres are stitched into a backing
cloth, and finishing, when a secondary layer is fixed to the back
of the carpet to 'lock' the fibres into place amongst other
processes. In 2019 we increased the number of tufting machines from
10 to 21, with the new machines also benefitting from being faster,
and so giving us almost three times the capacity, along with higher
quality output and different production gauges so that we will
always be able to manufacture the latest on-trend demands. In
addition, having invested GBP5.3 million in a new backing line with
the latest high-speed technology, we have more than doubled our
finishing capacity as well as improved the quality and finish of
our carpets.
3. Operational Integration. Full production integration across
our brands has delivered improved economies of scale. Working
capital and manufacturing complexity is reducing with better SKU
control across the brands (SKU's are falling from 3,000 prior to
the reorganisation to less than 2,000), and a 50% reduction in the
number of yarn systems being used from 28 last year to 14 this
year.
The outcome of this transformation is that the organic revenue
growth we are achieving this year is being matched with margin
increases. The reorganisation of the factory is now in its final
stages but Steve has promised there is still much more upside to
come, without, you will be pleased to learn, further significant
exceptional costs.
As part of our strategy to achieve market share gains in the UK
last year, we invested (capex and additional overhead) heavily into
our warehousing and logistics operation to improve our customer
service levels. Quite simply, there is a direct correlation between
customer service (essentially product availability and speed of
delivery) and sales. Retailers know that if they order a product
from us, it will be delivered on the date promised - not something
that is universal in the industry - which is important to someone
who will have arranged for installers to be at a home on a given
day and homeowners who will have vacated their house for the day,
possibly moving all their furniture out. We now have three modern
distribution centres located at strategic locations around the
country and a fleet of 124 trucks, capable of delivering nearly
1,000 tonnes of flooring per day. The fleet has about 15% spare
capacity, but with further route optimisation, this will grow to
over 20%, allowing for continued growth without extra capex or
costs.
We are pleased to say that even with all the improvements
completed to date, the management team sees further upside in
reducing inventory levels, gains in quality control, production
efficiencies, and enhanced logistics.
ACQUISITIONS
Victoria completed one acquisition in FY2019, Ceramica Saloni,
in Spain. As was explained at the time of the acquisition, we
believed there were significant operational synergies with our
existing Keraben subsidiary, which was based in the same region. We
are pleased to confirm that operational integration of Saloni was
substantially completed by March (at a cost of just under GBP3
million) and the synergies are being realised as anticipated.
1. Total integration of the Keraben and Saloni production
facilities in Spain. The factories are now being run as one
production unit, manufacturing product for both businesses. The
resulting efficiencies from longer production runs (lines no longer
shut down as frequently for product size changeovers) has meant the
combined factory is now able to produce the same output of tile
(approximately 23 million sqm per annum) with three fewer kilns
(out of 11) and a reduction in headcount of 25 FTEs. Energy,
labour, and maintenance savings are in excess of GBP3 million per
annum.
2. Integration of administrative functions and elimination of
duplicated roles, maintaining only one head office has reduced
costs by approximately GBP2 million per annum.
3. Utilisation of surplus capacity at Keraben's clay atomisation
plant to supply Saloni. Clay atomisation, which turns mined clay
into a fine powder at a specific humidity, is an essential first
step in the production of a ceramic tile. This synergy was a key
attraction of the Saloni acquisition as, like many manufacturers,
Saloni was previously buying atomised clay from third-party
suppliers at considerably higher cost.
4. Integrating raw materials procurement has, as previously
achieved at our UK carpet businesses, lower prices for raw
materials and energy.
Jose-Luis Lanuza, the managing director of Keraben who oversees
our ceramics division is an outstanding operator - one of the few
people we have met who has a very clear strategic understanding of
the sector, and yet is equally comfortable down "amongst the weeds"
of the daily operations of a business. Jose Luis and the team he
has built around him provide the Board with confidence that
Victoria possesses the essential management competence that will
enable us to continue to expand our ceramic flooring presence.
We have continued to research acquisition opportunities with an
emphasis on businesses that generate free cash and with synergy
opportunities. As and when we find a business that meet the key
criteria set out below, we will endeavour to acquire it, subject to
a sensible capital structure. This list is not exhaustive and
sometimes we will not acquire a business that meets all our
criteria simply because of some indefinable factor that makes us
uncomfortable with proceeding.
1. We never buy failing turnarounds. The time and energy
expended on a turnaround is rarely worth it and the outcome is
always sufficiently uncertain to make it too risky for us;
2. Modern, well-equipped factories. As a company, Victoria is
extremely focussed on cash generation. It is free cash that enables
us to pay down debt, fund growth, whether acquisitions or organic,
and in due course progressively return capital to shareholders
through dividends or share buybacks. So, the last thing we want to
have to do after buying a business is spend all the cash it
generates bringing the factory up to standard;
3. Committed, talented, and honest management. Anyone can lease
a factory and buy the machinery to make flooring. The difference
between the average business and the extraordinary businesses
Victoria acquires, is the management;
4. Broad distribution channels. Victoria's sales are
overwhelmingly made to literally thousands of retailers. We like
the security this diversity provides; and pay close attention to
customer concentration when considering a potential
acquisition;
5. A fair price. To quote Warren Buffett, "It's far better to
buy a wonderful company at a fair price than a fair company at a
wonderful price". We recognise that quality businesses are rarely
'cheap' but shareholders can take comfort from the fact that we
will not overpay. Ever.
It is common for acquisition valuations to be expressed as a
multiple of EBITDA and, rightly or wrongly, we have usually
announced our acquisitions using that metric. However, it is not
the methodology we use internally to assess value. Internally we
focus on the free cash flow return, with EBITDA as a waypoint, not
the finishing line. We adjust for depreciation (not necessarily the
accounting depreciation, but rather the actual assessed cost of
maintaining the required level of fixed assets on an accrued
basis), working capital - and taxes, which vary significantly
between jurisdictions. Identical EBITDA numbers from two different
businesses can produce vastly different amounts of cash.
While on the subject of acquisitions, we would like to comment
briefly on four related subjects: Goodwill, Return on Capital
Employed, Restructuring Costs, and Net Debt.
Goodwill
Due to their high return on tangible assets, we have paid
significantly more than the net tangible assets for almost all our
acquisitions and, as required by IFRS, the difference is shown on
our balance sheet as various categories of acquired intangibles and
goodwill. This amount has become a substantial figure, GBP465
million.
Some investors like companies with a high percentage of tangible
assets on the balance sheet on the basis that they somehow underpin
the value of the equity. Victoria's board does not share this view
for two reasons: firstly, we think this assumption provides a false
sense of security as tangible assets rarely, if ever, achieve their
stated book value in a distressed sale, and secondly (and far more
importantly), companies who need a high level of tangible assets to
generate their earnings will, when achieving organic growth, almost
certainly consume vast amounts of cash 'investing' in the
additional assets needed to support that growth. The result is a
poor return on capital. Needless to say, this prospect holds little
appeal for Victoria, who would rather deploy the cash more
productively.
There is one very important qualification to this statement: a
high level of goodwill is not automatically a good thing.
Overpaying for a business (the overpayment will appear as excessive
goodwill) destroys the economic argument set out above. That is why
we have walked away from numerous opportunities over the last six
years - even where the actual business was an extraordinary one,
but the price was excessive.
Return On Capital Employed (ROCE)
Over time, it is Victoria's ability to generate an above average
return on capital employed that will create wealth for its
shareholders.
However, there are two ways to look at Victoria's return on
capital employed: at the group level, and at the subsidiary level.
The two numbers are quite different but, over time, it is the
underlying return achieved at subsidiary level that will be more
important.
At group level, the capital employed is, of course, based on the
purchase price we paid for a business. Because we have only
acquired successful businesses, the price has invariably been a
substantial premium to the capital base of the actual business
being acquired. However, of course the price we paid had no impact
on the amount of capital the subsidiary's manager is deploying,
which remains unchanged.
For example, in September 2015 Victoria acquired market-leading
underlay manufacturer, Interfloor. In the year prior to its
acquisition, the company was using capital of GBP1.6 million in net
working capital and GBP9.3 million of tangible assets, a total of
GBP10.9 million. Adjusted pre-tax profits were GBP8.7 million, an
extraordinary 79.8% pre-tax return on capital employed. The capital
employed by the business did not, of course, suddenly change
immediately after its acquisition and yet, measured at the Group
level, where we paid GBP65 million for the business, the return on
capital employed became 13.4%.
(Incidentally, since the acquisition Interfloor has returned
over GBP35 million of operating profit to Victoria).
Subject to the proviso noted above about not overpaying for a
business, it is the underlying ROCE that is more important because,
over time, it is that ratio that determines how much cash the
managers will require to grow their business and, therefore, how
much of the cash they generate they can return to the Group for
deployment elsewhere. Businesses able to achieve a high return are
able to return more capital while still growing and this is a key
factor in our investment analysis when we are considering a
potential acquisition opportunity.
Victoria's unlevered, underlying pre-tax return on tangible
assets exceeds 49% per annum, and by doing so the cash required to
maintain the assets is low as a percentage of our earnings, which
will, over time, result in ever higher returns on capital employed
at Group level.
Restructuring Costs
Frequently the most significant synergy gains require a
significant amount of reorganisation of the acquired business. As
you would expect, these actions can be expensive in terms of
closure costs, redundancy payments, and other costs. When we are
assessing a potential acquisition, we attempt to establish the
likely total cost of these items and, internally, incorporate them
into our valuation alongside the likely improvement in earnings and
working capital that the synergies will deliver. This is not, of
course, the accounting treatment and we have recorded some large
'Exceptional Costs' in 2019 totalling GBP20.4 million, which we
will explain in detail below.so that investors can have a better
understanding of the financial workings of the company. The better
shareholders are informed, the greater confidence they can have in
the judgements they form about the business.
The Exceptional Costs fall into four main categories;
(i) A total of GBP12.7 million was spent across the Group on
one-off reorganisation costs (e.g. redundancy payments, closure
costs, relocation expenses, as detailed in the table below) in
FY2019. This is a very substantial amount of money and will not be
repeated in FY2020. Indeed, we expect the final stages of our
reorganisation will cost no more than GBP2 million in FY2020.
Despite the cost, we expect the payback on the FY2019
reorganisation expense to be less than two years.
Exceptional reorganisation Redundancy Legal Asset Other Total
costs & professional impairment
(non
cash)
GBPm GBPm GBPm GBPm GBPm
------------------------------ ----------- ---------------- ------------ ------ ------
Project 1 - UK manufacturing 2.2 0.1 1.3 0.5 4.0
Project 2 - UK logistics 0.1 0.2 - 1.6 1.9
Project 3 - Spain
integration 2.2 - 0.7 - 2.9
Project 4 - Australia
manufacturing 1.3 0.3 0.5 0.3 2.4
Other projects 0.1 0.9 - 0.5 1.5
Total 5.9 1.5 2.5 2.9 12.7
------------------------------- ----------- ---------------- ------------ ------ ------
(ii) Acquisition-related expenses such as due diligence, fees to
advisors, legal costs, etc. were GBP1.8 million in FY2019.
Obviously, these would immediately drop to nil if we stopped our
acquisition activity. However, the value added to the Group by
continuing to grow is substantial and, to our minds, the one-off
cost incurred in making an acquisition is more than offset by the
additional earnings that accrue to the Group in perpetuity as a
result. Shareholders can expect to see a similar level of
acquisition-related exceptional costs in the years ahead but, by
the same token, shareholders can equally expect Earnings Per Share
and Cash Flow Per Share growth to exceed organic growth rates. In
other words, if the fees are taken into account, so must the
additional earnings from the acquisition be taken into account.
(iii) Bond and related structuring costs totalled GBP7.3
million. There is no way to view the majority of these costs other
than, with the benefit of hindsight, a waste of money.
(iv) Due to a High Court ruling in October 2018, all companies
with Defined Benefit pension schemes were required to equalise
Guaranteed Minimum Pensions for men and women. One of our
subsidiaries, Interfloor, has a small pension scheme and this
ruling required a one-off, catch-up charge for past service costs
of GBP0.4 million. It will not be repeated.
Offsetting a small portion of these one-off costs was a GBP1.8
million gain on the sale of Victoria's disused (for about 20 years)
sports field.
(Further information is set out in the Financial Review
section).
Net Debt
Victoria finished the year with GBP339.9 million of net debt.
This was as forecast although a little higher than it could have
been due to our Brexit planning and the aborted bond process. As
stated at the time of our interim results, we decided to
temporarily carry a greater quantity of raw materials (around GBP14
million) to protect our UK production in the event of Brexit
disruption. Of course, in the event, Brexit did not happen on 29
March as scheduled but, by the time the delay was announced, we had
already stockpiled the raw materials. This position is now being
unwound (with the expected positive impact on cash), but, depending
on events, may need to be built up again later this year.
There is no such absolute measure as "too much leverage" and we
have been surprised by how simplistic (or 'lazy', if one was being
less kind) some commentators' thinking is in respect of leverage: A
generic multiple of X times EBITDA is "too high" for a business, Y
times, is "ok". That's a bit like saying everyone who weighs 90kg
is fat. That might be true of a 1.6m tall pastry chef, it probably
isn't true of a 1.9m rugby player.
An assessment of leverage must, therefore, at the least, always
be qualified by the financial characteristics of the business being
assessed (e.g. earnings consistency, cash conversion, and free cash
flow), the terms of the debt (e.g. covenant headroom and duration)
and the economic outlook. There are companies with net debt/EBITDA
ratio of 1x, and they are too highly leveraged. Conversely, there
are other companies with net debt/EBITDA of 6x and are
appropriately leveraged.
Shareholders have probably noticed that over the last five years
our debt/EBITDA ratio has moved up and down between 1.50x and
3.25x. This is intentional and planned. At the point of completing
an acquisition we are, subject to careful analysis, usually
comfortable taking our debt up to around 3x EBITDA (our internal
policy). As noted elsewhere in this Review, the flooring industry
is remarkably steady, stable, cash generation
We then focus on reducing the debt ratio as rapidly as possible
before proceeding with the next acquisition; we are not comfortable
with just sitting at 3x. Historically we have been able to reduce
the ratio rapidly due to our ability to move both the denominator
(synergies have quickly lifted the earnings of the acquired
business) and numerator (in addition to operational free cash flow,
we have invariably been very successful in reducing working capital
- primarily by improving stock turn). This policy helps us manage
debt risk effectively.
In summary, we view debt as a useful and important part of our
capital structure that, carefully used, is of enormous value in
executing our strategy. One has to go back more than two hundred
years to find interest rates as low as they are today. And Victoria
can borrow at these historically low interest rates and use the
money to buy some of the finest companies in the flooring industry
who will deliver exceptional - and growing - profits into the
future as far as we can see. Therefore, while we will always
operate within prudent boundaries, we will continue to make use of
appropriate levels of debt to execute our wealth creation
strategy.
BOARD OF DIRECTORS
Since the year end, long-standing Victoria director Alexander
Anton retired due to increasing commitments with his other business
interests and Zach Sternberg joined the board. Mr Sternberg is the
co-founder of The Spruce House Partnership, a highly successful
private investment partnership based in New York with $3 billion of
assets under management. We are delighted to have the benefit of
his extensive knowledge of capital markets as well as his
perspective as a material shareholder
Your chairman is not a big fan of large boards for a company
with the size and simplicity of Victoria. However, we will, when
the right candidate turns up, look to add one more independent (in
the sense they must think and speak independently) director to the
board. The key attributes we are looking for are practical business
experience and knowledge, and a strong sense of their
responsibility to help create wealth for shareholders.
DIVID POLICY
Well run flooring manufacturers generate significant cash - even
when growing - due to attractive supplier terms, quality debtors,
long life expectancy of key plant, low technological change and
other factors.
Confirming this view, Victoria's underlying pre-tax operating
cash flow this year was GBP105.7 million, representing 110% of
underlying EBITDA (even after temporarily increasing raw material
levels by GBP14 million as part of our Brexit planning), and
underlying free cash flow (i.e. after interest, tax, replacement
capex, and asset disposals) was GBP50.4 million, representing 52%
of underlying EBITDA and 72% of underlying EBIT. Over the last six
years we have consistently converted 70-80% of operating profits
into free cash flow (after paying tax).
Nevertheless, the Board has consistently stated Victoria has no
intention of paying a dividend for the foreseeable future as we
remain of the view that the most wealth will be created for
shareholders by deploying the free cash-flow generated by the Group
businesses within the Group. There are two reasons for this:
Firstly, many investors have no requirement for an income and we
see no reason to compel them to take a dividend with the resulting
obligation to pay tax on the amount. Under current UK tax
legislation dividends are effectively subject to double taxation -
Victoria pays tax on the profits and then the shareholder pays
further tax on receipt of the dividend. Leaving the capital in the
company allows it to compound returns on both the value of the
dividend and the value of the tax that would have had to be paid by
the shareholder.
For example, assuming Victoria was able to consistently achieve
a 12% return on capital employed (and we certainly expect to do
considerably better than that), after 10 years GBP100 retained in
the company would have grown to GBP310. If that GBP100 was instead
paid out to a shareholder as a dividend and that shareholder (a)
was also able to achieve a 12% return on the net proceeds, and (b)
was a higher rate taxpayer, the same GBP100 will have grown to just
GBP211. (In both cases tax would then need to be paid when the sum
was distributed reducing the gains to GBP275 and GBP165,
respectively). Effectively, by retaining the capital inside the
company, the higher rate taxpayer is getting an interest-free
'loan' of 47% of his/her capital from the government on which it is
possible to achieve an investment return indefinitely.
Secondly, paying out a dividend and then returning to
shareholders a few months later to ask for capital to fund an
attractive, high quality, earnings-accretive acquisition seems
illogical to us. It is doubly illogical when the recipient will
have been obliged to pay tax on the dividend received and therefore
has to find capital from other sources just to place them back in
the same position had the dividend not been paid in the first
place.
Therefore, as in previous years, we have resolved not to pay a
final dividend for FY2019.
SUMMARY FROM THE CHAIRMAN
I'm sometimes asked why I decided to get involved with Victoria.
Fundamentally it was because I could see there was an opportunity
to create significant value by selectively consolidating what was
(and still is) a highly fragmented, readily understood industry,
where scale would deliver significant synergies.
The flooring industry's consistent organic revenue growth over
time, combined with ongoing margin gains from operational
improvements and high cash conversion provide Victoria a very solid
investment platform with which we will continue to acquire
high-quality businesses with readily realisable synergies at very
attractive prices. The events of the last 12 months have not
changed that view. As a committed shareholder I'm not bothered by
whether the industry is cyclical or not, just as long as it is
going to generate a lot of cash over the business cycle.
2019 was a year where we invested heavily in growth capex
(GBP20.9 million) and reorganisation (GBP12.7 million) to deliver
accelerated growth, margins, and cash flow in the years ahead. At
the time of writing, we are just three months into our new
financial year but the numbers being reported by the operating
businesses to date evidence the expected outcome is being achieved
and I look forward to updating shareholders in due course.
Geoffrey Wilding Philippe Hamers
Executive Chairman Chief Executive Officer
10 July 2019
Victoria PLC
Strategic Report
BUSINESS OVERVIEW
Victoria PLC is a designer, manufacturer and distributor of
innovative flooring products. The Group is headquartered in the UK,
with operations across the UK, Spain, Italy, the Netherlands,
Belgium and Australia, employing approximately 3,000 people at more
than 20 sites.
The Group designs and manufactures a wide range of wool and
synthetic broadloom carpets, ceramic tiles, flooring underlay, LVT
(luxury vinyl tile) and hardwood flooring products, artificial
grass, carpet tiles and flooring accessories.
A review of the performance of the business is provided within
the Financial Review.
BUSINESS MODEL
Victoria's business model is underpinned by five integrated
pillars:
1. Superior customer offering
Offering a range of leading quality and complementary flooring
products across a number of different brands, styles and price
points, focused on the mid-to-upper end of the market or specialist
products, as well as providing market-leading customer service.
2. Sales driven
Highly motivated, independent and appropriately incentivised
sales teams across each brand and product range, ensuring delivery
of a premium service and driving profitable growth.
3. Flexible cost base
Multiple production sites with the flexibility, capacity and
cost structure to vary production levels as appropriate, in order
to maintain a low level of operational gearing and maximise overall
efficiency.
4. Focused investment
Appropriate investment to ensure long-term quality and
sustainability, whilst maintaining a focus on cost of capital and
return on investment.
5. Entrepreneurial leadership
A flat and transparent management structure, with income
statement 'ownership' and linked incentivisation, operating within
a framework that promoted close links with each other and with the
PLC Board to plan and implement the short and medium-term
strategy.
STRATEGY
The Group's successful strategy in creating wealth for its
shareholders has not changed and continues to be to deliver
profitable and sustainable growth, both from acquisitions and
organic drivers.
In terms of acquisitions, the Group continues to seek and
monitor good opportunities in key target markets that will
complement the overall commercial offering and help to drive
further improvement in our KPIs. Funding of acquisitions is
primarily sought from debt finance to maintain an efficient capital
structure, insofar as a comfortable level of facility and covenant
headroom is maintained.
Organic growth is fundamentally driven by the five pillars of
the business model highlighted above. In addition, the Group
continues to seek and deliver synergies and transfer best operating
practice between acquired businesses, both in terms of commercial
upside, and cost and efficiency benefits to drive like-for-like
margin improvement.
KEY PERFORMANCE INDICATORS
The KPIs monitored by the Board and the Group's performance
against these are set out in the table below and further commented
upon in the Chairman and CEO Review and the Financial Review.
Year ended
30 March Year ended
2019 31 March 2018
GBP'm GBP'm
Revenue 574.4 424.8
Revenue growth at constant
currency 36.9% 28.1%
Underlying EBITDA 96.3 64.7
Underlying EBITDA margin 16.8% 15.2%
Underlying operating profit 70.3 48.8
Underlying operating margin 12.2% 11.5%
EPS (diluted, adjusted) 35.25p 30.61p
Operating cash flow before interest,
tax and exceptional items 105.7 64.3
% conversion against underlying
EBITDA 110% 99%
Free cash flow before exceptional
items 50.4 35.0
% conversion against underlying
operating profit 72% 72%
Adjusted net debt / EBITDA(1) 3.2x 2.7x
(1) As measured in line with our bank facility covenants
PRINCIPAL RISKS AND UNCERTAINTIES
The Board and senior management team of Victoria identifies and
monitors principal risks and uncertainties on an ongoing basis.
These include:
Competition - the Group operates in mature and highly
competitive markets, resulting in pressure on pricing and margins.
Management regularly review competitor activity to devise
strategies to protect the Group's position as far as possible.
Economic conditions - the operating and financial performance of
the Group is influenced by economic conditions within the
geographic areas within which it operates, in particular the UK,
Australia and the Eurozone. Economic risks in any one region is
mitigated by the independence of the UK & Europe Division, and
the Australia Division. The Group remains focused on driving
efficiency improvements, cost reductions and ongoing product
development to adapt to the current market conditions.
Key input prices - material adverse changes in certain raw
material prices - in particular wool and synthetic yarn,
polyurethane foam, and clay - could affect the Group's
profitability. A proportion of these costs are denominated in US
Dollars and Euros which gives rise to foreign exchange risk, which
is currently impacted in the UK by the uncertainty in
medium-to-long term exchange rates against Sterling in light of
Brexit. Key input prices are closely monitored and the Group has a
sufficiently broad base of suppliers to remove arbitrage risk, as
well as being of such a scale that it is able to benefit from
certain economies arising from this. Whilst there is some foreign
exchange risk beyond the short-term hedging arrangements that are
put in place, the vast majority of the Group's cost base remains in
domestic currency (Sterling, Euros and Australian Dollars).
Furthermore, the acquisitions in Continental Europe have created a
natural hedge within the UK & Europe segment as there are
material earnings in Euros as well as Sterling.
Acquisitions - acquisition-led growth is a key part of the
Group's ongoing strategy, and risks exist around the future
performance of any potential acquisitions, unforeseen liabilities,
or difficulty in integrating into the wider Group. The Board
carefully reviews all potential acquisitions and, before
completing, carries out appropriate due diligence to mitigate the
financial, tax, operational, legal and regulatory risks. Risks are
further mitigated through the retention and appropriate
incentivisation of acquisition targets' senior management. Where
appropriate the consideration is structured to include deferred and
contingent elements which are dependent on financial performance
for a number of years following completion of the acquisition.
Other operational risks - in common with many businesses,
sustainability of the Group's performance is subject to a number of
operational risks, including major incidents that may interrupt
planned production, cyber security breaches and the recruitment and
retention of key employees. These risks are monitored by the Board
and senior management team and appropriate mitigating actions
taken.
CORPORATE RESPONSIBILITY
Victoria PLC is committed to being an equal opportunities
employer and is focused on hiring and developing talented
people.
The health and safety of our employees, and other individuals
impacted by our business, is taken very seriously and is reviewed
by the Board on an ongoing basis.
A Company statement regarding the Modern Slavery Act 2015 is
available on the Company's website at www.victoriaplc.com.
As a manufacturing and distribution business, there is a risk
that some of the Group's activities could have an adverse impact on
the local environment. Policies are in place to mitigate these
risks, and all of the businesses within the Group are committed to
full compliance with all relevant health and safety and
environmental regulations.
On behalf of the Board
Geoffrey Wilding
Executive Chairman
10 July 2019
Victoria PLC
Financial Review
The year ended 30 March 2019 was another significant
evolutionary year for Victoria, with the Group making another
acquisition in ceramic tiles during Q2 and executing a number of
organic commercial initiatives, synergy and cost reduction
programmes against the backdrop of more challenging markets. These
acquisitive and organic activities have continued to drive
significant growth as well as margin development.
Revenue grew by 35% versus the prior year to GBP574.4m (2018:
GBP424.8m), whilst gross profit grew by 41% to GBP204.3m (2018:
GBP145.4m). On an unadjusted basis, operating profit was impacted
by a number of non-underlying items, contributing to the increase
in administrative expenses of GBP53.1m, including non-cash
amortisation of acquired intangible assets (predominantly value
recognised on acquisition for customer relationships) of GBP22.5m
and one-off exceptional costs (predominantly redundancy and other
reorganisation costs) of GBP20.4m, resulting in an unadjusted
operating profit for the year of GBP24.0m (2018: GBP26.4m). In
addition to increased interest costs of GBP5.1m resulting from
acquisitions, profit before tax was also impacted by a number of
non-cash, non-underlying finance items totalling GBP14.6m,
including fair value adjustments to deferred and contingent
consideration of GBP7.2m and translation differences of GBP3.6m,
resulting in an adjusted loss before tax of GBP3.7m (2018: profit
of GBP13.4m). Before exceptional and non-underlying items, the
Group delivered an underlying operating profit for the year of
GBP70.3m (2018: GBP48.8m) and an underlying profit before tax of
GBP57.2m (2018: GBP40.8m). Further details of the exceptional and
non-underlying items are provided below in this Financial
Review.
ACQUISITION OF SALONI
The acquisition of Ceramica Saloni was completed on 7 August
2018. Saloni is a designer, manufacturer and distributor of
branded, mid-high end, ceramic tiles for both walls and floors
(www.saloni.com/en).
In the 7 1/2 months since acquisition, Saloni has contributed
revenue of GBP57.5m (EUR65.2m) and PBT of GBP5.1m (EUR5.8m).
As with previous acquisitions, and in particular the more recent
ceramics acquisitions of Keraben in Spain and Serra in Italy,
Saloni generates a significant return on net operating assets, in
line with our acquisition criteria. As a result, consolidation of
the investment of into the Group accounts gives rise to substantial
goodwill of GBP40.1m and acquired intangible assets of GBP58.4m, in
accordance with IFRS.
Since the acquisition a major project has been undertaken in
Spain to deliver cost synergies between Saloni and Keraben
(discussed further below).
MARKET ENVIRONMENT AND REVENUE PERFORMANCE
The Group experienced a more challenging trading environment in
FY19 compared to the prior year. This was particularly true of the
UK and Australia, which are predominantly soft-flooring markets.
Based on our specific experience and market interactions,
management believe that the markets in these geographies saw
declines in the year of 5-10 %. The UK market has been impacted by
softer consumer activity resulting from, we believe, Brexit
uncertainty. The Australian market has been impacted by tighter
mortgage lending caps put in place by the Australian Prudential
Regulation Authority in 2017. More recently, in 2019, these caps
have been removed and the Reserve Bank interest rate has also been
cut.
These conditions in our core soft-flooring markets were
characterised by consumers 'trading down' to some extent, looking
for slightly cheaper products on average. Our experience has been
that high-end product sales have been robust, but within the
mid-range consumers have sought prices of up to circa 10% lower
than during times of greater confidence. In anticipation of this
behaviour, in late FY18, the Group implemented an initiative to
review the existing portfolio of soft flooring product ranges and
ensure that this is correctly balanced to meet the revised mix in
demand. This predominantly required a strong and focused sales
effort on the 'correct' products within the existing portfolio, but
also involved the re-engineering of certain products and the
introduction of some new lower-priced products and brands.
Management believe that this strategy has proven to be highly
successful, in particular when considering the trends in the
broader soft flooring market.
As a result, in FY19 the Group delivered like-for-like growth in
revenue of +7.3%[2] in UK & Europe Soft Flooring. The downturn
in the Australia market has proven more of a challenge, hence
revenue declines in that region have resulted in overall soft
flooring like-for-like performance of +3.2%. Whilst Australia has
been the most challenging market for the Group in FY19, management
take a long-term view on performance and it is important to
remember that Australia has delivered several years of consistent
growth, and so is being compared to a very strong peak in the prior
year.
Like-for-like revenue performance in UK & Europe Ceramic
Tiles has remained resilient, with a small decline of -1.3%(2) .
Despite the one-off impact at Serra of the significant factory
disruption in the first quarter due to installation of a new
porcelain production line, following completion of this in June
2018 these new products have seen substantial take-up by customers,
resulting in strong overall sales performance.
Revenue 2019 2018 LFL growth(2)
(constant
currency)
GBPm GBPm %
--------------------------- ------ ------ --------------
UK & Europe Soft Flooring 280.5 265.0 +7.3%
UK & Europe Ceramic
Tiles 193.9 47.0 -1.3%
Australia 100.0 112.8 -6.9%
Total 574.4 424.8 +2.0%
---------------------------- ------ ------ --------------
UNDERLYING MARGIN PERFORMANCE
In terms of margin performance, soft flooring saw a decline of
2.1ppts in gross margin and 2.9ppts in underlying EBITDA margin,
driven by:
-- Primarily, the market conditions and product mix strategy
described above - whilst steps are of course taken to minimise the
cost and maximise the margins achieved on products targeted at
lower price points, inevitably a lower margin is achieved. This is
solely a result of product mix, with no discounting on any given
product (other than any ordinary course volume and payment-based
incentives);
-- Reorganisation projects to drive synergies - two key projects
undertaken in the UK to drive future margin improvement (further
described below) had a one-off adverse impact. Whilst certain
project-related costs have been classed as exceptional items in
line with IFRS, there are other factors such as operational
disruption that have impacted the underlying result;
-- Input prices - whilst no material raw material price pressure
has been experienced in carpets, our underlay businesses have seen
an adverse impact from inflation during the year in polyurethane
trim, the key component of foam underlay. This was mitigated to
some extent with our hedging strategy (balancing forward and spot
prices), and we are now seeing the input prices declining
again.
UK & Europe Ceramic Tiles has delivered consistent
like-for-like gross and underlying operating margin performance in
FY19, albeit the reported operating margin has seen a reduction due
to the acquisition made in the year. Saloni historically achieved
an underlying EBITDA margin (before any synergies) of approximately
half that of our incumbent ceramics business, and as this has
consolidated into the Group results (since the acquisition in
August 2018) it has lowered the average margin of the division.
2019 2019 2018 2018
GBPm Margin % GBPm Margin %
------------------------------ ------ --------- ------ ---------
Gross Profit
UK & Europe Soft Flooring 88.9 31.7% 89.5 33.8%
UK & Europe Ceramic Tiles 87.5 45.1% 21.6 45.9%
Australia 27.9 27.8% 34.3 30.4%
Total 204.3 35.6% 145.4 34.2%
------------------------------- ------ --------- ------ ---------
Underlying EBITDA
UK & Europe Soft Flooring 29.2 10.4% 35.2 13.3%
UK & Europe Ceramic Tiles 59.2 30.5% 16.2 34.5%
Australia 9.5 9.5% 14.6 12.9%
Unallocated central expenses (1.6) (1.3)
Total 96.3 16.8% 64.7 15.2%
------------------------------- ------ --------- ------ ---------
PRO-FORMA EBITDA AND LIKE-FOR-LIKE TR
Whilst it is a non-IFRS measure, many analysts often ask about
underlying EBITDA performance (earnings before interest, tax,
depreciation, amortisation and exceptional items), as well as
like-for-like trends (i.e. adjusting for acquisitions).
Underlying EBITDA in FY19 was GBP96.3m (2018: GBP64.7m), an
increase of 49% over the prior year. This growth was predominantly
driven by acquisitions, both the full-year effect of the prior year
acquisitions (of Keraben and Serra) and the current year
contribution of Saloni. The organic trend in EBITDA is the
accumulation of all the factors described above, with revenue
performance holding steady despite challenging conditions, and some
softening of margin in soft flooring as detailed.
EBITDA 2019 2018 Growth
GBPm GBPm %
-------------------------------------------------- ----- ----- -------
Underlying operating profit 70.3 48.8 44%
Add back: Depreciation 25.9 15.8
Add back: Underlying amortisation of IT software 0.1 0.1
Underlying EBITDA 96.3 64.7 49%
The FY19 performance of the Group only incorporates 7 1/2 months
of Saloni, since its acquisition. Pro-forma adjusted EBITDA, which
includes additional EBITDA contribution from Saloni had it been
acquired at the start of the year on 1 April 2018, is GBP107.1m.
This figure also includes two smaller adjustments, for the assessed
one-off impacts during the year of disruption in Serra (due to the
new line installation and resultant reduction in capacity during
that process) and in UK logistics (due to the transition to new
distribution centres - see further details below)[3]. This
pro-forma adjusted EBITDA figure is of particular focus for the
Group's lenders and is a measure used in assessing our banking
covenants.
Bridge from underlying EBITDA to pro-forma
adjusted EBITDA
--------------------------------------------- ------------
FY19 underlying EBITDA GBP96.3m
Saloni full-year impact GBP8.2m
One-off business interruption - UK logistics GBP2.4m
One-off business interruption - Serra line GBP0.2m
closure
--------------------------------------------- ------------
FY19 pro-forma adjusted EBITDA GBP107.1m
--------------------------------------------- ------------
The trend in pro-forma adjusted EBITDA over the last two years
(i.e. incorporating the contribution from acquisitions as if they
were acquired at the start of FY17) has been stable, growing in
FY18 by circa 2.0% before declining in FY19 by circa 1.4%. This
decline was entirely driven by a fall in margin, specifically in
soft flooring, partially offset by margin growth in ceramic tiles.
Group pro-forma EBITDA margin was consistent in FY17 and FY18 at
circa 17.8%, and declined in FY19 to circa 17.1% due to the factors
set out above.
INVESTMENT IN SYNERGY REORGANISATION PROJECTS, CAPEX AND
EXCEPTIONAL COSTS
In addition to the acquisition of Saloni, FY19 has been a
substantial year for investment in organic operating activities, in
continuation of certain projects undertaken and commenced during
the prior year. A total of GBP33.6m has been invested in organic
initiatives.
The Group has undertaken over the last 18 months a number of
projects to deliver synergies and cost savings, whilst at the same
time expanding our production and distribution capacity.
Furthermore, there has been a large project in Spain to deliver
synergies between Saloni and Keraben, which commenced immediately
upon completion of the acquisition of Saloni. All of these key
projects have been previously disclosed and have now been completed
(during Q4 of FY19; some running until Q1 of the new financial
year):
1. Reorganisation of South Wales carpet factory (UK & Europe
Soft Flooring) - following the closure of the Kidderminster carpet
factory during the prior year and relocation of certain production
assets to the South Wales factory, a substantial follow-on project
was undertaken in FY19 to simplify and reorganise the latter,
optimise production across the larger platform, and also install a
new finishing line with substantial production speed and efficiency
benefits over the existing lines.
2. Reorganisation of UK logistics (UK & Europe Soft
Flooring) - as discussed in the previous annual report, this
project commenced in FY18 and was scheduled to complete in FY19,
which has been delivered. This involved the introduction of two new
large distribution centres, one in the South of England (close to
London) and one in the Midlands (using our previous factory
building in Kidderminster), with a large distribution centre
already existing in the North. The primary aim of this project was
to underpin and improve service levels for the long-term, with an
ancillary benefit of some reduction in logistics cost per item via
consolidation of the vehicle fleet.
3. Integration of Saloni with Keraben (UK & Europe Ceramic
Tiles) - ahead of completing the acquisition of Saloni, alongside
the Group's usual financial, commercial and legal due diligence
process, an exercise was undertaken to assess the likely cost
synergies that could be delivered from combination of its
operations with our existing Spanish ceramics business, Keraben.
This was identified to be substantial (totalling circa 30% of
Saloni's historical adjusted EBITDA), and formed a key part of our
acquisition rationale for that business on top of the fact that it
was a growing, highly profitable business in its own right, with a
strong brand and reputation for high quality. Implementation of the
synergy initiatives commenced immediately on completion of the
acquisition and were completed in Q4 FY19 and Q1 of the new
year.
4. Reorganisation of Australia underlay manufacturing
(Australia, soft flooring) - at the time of acquiring the
Australian underlay business, Dunlop Flooring in January 2017, a
potential synergy project had already been identified to close an
underlay factory and consolidate into another, whilst still being
able to maintain overall production capacity. Execution of this
project was announced by the Group on 13 June 2018, involving the
closure of the Melbourne site and consolidation of production in
the Sydney factory. It is currently exactly on plan and expected to
complete during Q2 of the current financial year, therefore being
the one key project that is still ongoing at this time.
The table below summarises the level of investment that has been
made during FY19 in each of these projects. This investment, in
terms of accounting treatment, comprises both exceptional
reorganisation costs and growth capital expenditure (not including
replacement capital expenditure).
Investment in synergy projects Exceptional reorganisation costs Growth Total
capex
GBPm GBPm GBPm
------------------------------------- --------------------------------- ------- ------
Project 1 - UK manufacturing 4.0 5.3 9.3
Project 2 - UK logistics 1.9 0.3 2.2
Project 3 - Spain integration 2.9 7.4 10.3
Project 4 - Australia manufacturing 2.4 0.9 3.3
Other projects 1.5 7.0 8.5
Total 12.7 20.9 33.6
-------------------------------------- --------------------------------- ------- ------
In addition to the key projects detailed above, there were
other, smaller reorganisation and cost reduction projects
undertaken within a few of the businesses across the group,
incurring exceptional costs totalling GBP1.5m between them and
growth capex of GBP7.0m.
The GBP12.7m of exceptional reorganisation costs have been
further broken down in the table below, by project and by type of
cost. The largest category by type is staff redundancy costs, which
across the various projects totalled GBP5.9m in the year. Also
included are asset impairments (where the net book value of assets
that became redundant as a result of the project have been
written-off) totalling GBP2.5m, which are a non-cash cost. All of
these activities and costs are one-offs and will not repeat in the
future.
Exceptional reorganisation costs Redundancy Legal & professional Asset impairment (non cash) Other Total
GBPm GBPm GBPm GBPm GBPm
--------------------------------- ----------- --------------------- ---------------------------- ------ ------
Project 1 - UK manufacturing 2.2 0.1 1.3 0.5 4.0
Project 2 - UK logistics 0.1 0.2 - 1.6 1.9
Project 3 - Spain integration 2.2 - 0.7 - 2.9
Project 4 - Australia
manufacturing 1.3 0.3 0.5 0.3 2.4
Other projects 0.1 0.9 - 0.5 1.5
Total 5.9 1.5 2.5 2.9 12.7
---------------------------------- ----------- --------------------- ---------------------------- ------ ------
The GBP20.9m of growth capital expenditure has been further
broken down in the table below. A total of GBP13.9m was spent
within the four key synergy projects described above, of which:
-- GBP5.6m related to the new carpet finishing line in South
Wales;
-- GBP6.6m related to a new continuous clay mill and new floor
tile production plant in Keraben as part of the integration of
Saloni's manufacturing
-- a further GBP0.9m was spent between Keraben and Saloni on
equipment to help optimise the shared manufacturing operation;
and
-- GBP0.8m was spent in Dunlop Flooring to implement certain
changes to the Sydney underlay manufacturing operation ahead of
consolidating the volumes from Melbourne.
Additionally, the GBP7.0m of growth capex on smaller projects
comprises:
-- GBP3.0m related to additional classification and glazing
lines at Keraben to increase capacity in these areas (committed
prior to the acquisition of Saloni);
-- GBP0.9m related to the final parts of the new Serra porcelain
line, a project that continued over the previous year-end and
completed in Q1;
-- GBP1.7m related to new investments to accelerate the back-end
of the underlay production process in the UK; and
-- GBP1.4m related to other, smaller incremental
initiatives.
Growth capex Key synergy projects Other Total
GBPm GBPm GBPm
-------------- ----------------------------------------------------------- --------------------- ------ ------
Carpet Additional / upgraded carpet finishing line 5.3 0.9 6.2
Other (including new tufting, lab and sampling equipment) 0.3 0.4 0.7
------------------------------------------------------------ ------------- --------------------- ------ ------
Ceramics Additional floor tile production lines 6.6 3.9 10.5
Investment to allow different tile sizes 0.9 0.1 1.0
------------------------------------------------------------ ------------- --------------------- ------ ------
Underlay Upgraded cutting, wrapping, packaging, sorting 0.8 1.7 2.5
Total 13.9 7.0 20.9
---------------------------------------------------------------------------- --------------------- ------ ------
It is important to note that these projects are substantially
complete and, other than the few items that continued into Q1 of
the new financial year noted above, and the smaller Australia
project completing by Q2, related expenditure (both exceptional
reorganisation cost and growth capex) is not expected to continue
in the future.
OTHER EXCEPTIONAL AND NON-UNDERLYING ITEMS
Separate from the synergy project-related exceptional costs
detailed above, the group incurred further exceptional costs in the
year, predominantly related to legal and advisory fees on the
acquisition of Saloni (GBP1.8m) plus significant advisory and
structuring fees on the aborted bond refinancing (GBP7.3m), net of
an exceptional gain on the sale of unused land by PLC (GBP1.8m). In
total these additional one-off items came to a net cost of
GBP7.8m.
Consistent with previous periods, there are also a few
non-underlying operational items that are not classed as
exceptional as they will continue beyond the end of the year, but
are non-underlying due to their nature as being non-cash or
acquisition-related:
-- Amortisation of acquired intangibles - the amortisation over
a finite period of time of the fair value attributed to, primarily,
brands and customer relationships on all historical acquisitions
under IFRS. The nature of this item was set out in some detail in
the previous annual report (FY18). It is important to note that
these charges are non-cash items and that the associated intangible
assets do not need to be replaced once fully written-down in the
accounts;
-- Non-cash share incentive plan charge - the charge under IFRS
2 relating to the pre-determined fair value of the senior
management share incentive scheme put in place on 10 April 2018.
This charge is also non-cash as the scheme cannot be settled in
cash;
-- Acquisition-related performance plan charge - relates to the
expected liability under the acquisition-linked performance plan
with the Keraben senior management team, who invested EUR8.3
million into the plan at the points of acquisition (rolled over
from the value of their pre-acquisition stake in Keraben). The
value of the plan is linked to the financial results of Keraben
over a five year period and can go up or down, depending on
performance.
Further details of exceptional and non-underlying items are
provided in the Accounting Policies.
OPERATING PROFIT AND PBT
The table below summarises the underlying and reported operating
profit of the Group, further to the commentary above on underlying
performance and non-underlying items.
2019 2019 2018 2018
GBPm Margin % GBPm Margin %
--------------------------------------------------------------- ------ --------- ----- ---------
Underlying operating profit 70.3 12.2% 48.8 11.5%
Reported operating profit (after exceptional items) 24.0 4.2% 26.4 6.2%
Underlying profit before tax 57.2 10.0% 40.8 9.6%
Reported (loss) / profit before tax (after exceptional items) (3.7) -0.6% 13.4 3.2%
Reported operating profit (earnings before interest and
taxation) declined slightly to GBP24.0m, having been impacted by
higher non-underlying and exceptional items during the year. After
removing these items, underlying operating profit was GBP70.3m,
representing a 44% increase over the prior year.
TAXATION
The reported tax charge in the year of GBP4.2m was distorted by
the impact of the exceptional and non-underlying costs, many of
which have been treated as non-deductible for tax purposes. On an
underlying basis, the tax charge for the year was GBP13.9m against
adjusted profit before tax of GBP57.2m, implying an underlying
effective tax rate of 24.3%.
EARNINGS PER SHARE
As a result of the material exceptional and non-underlying costs
in the year as detailed above, the Group delivered a basic loss per
share of 6.44p (2018: reported earnings per share of 8.58p).
However, adjusted earnings per share (before non-underlying and
exceptional items) on a fully-diluted basis increased by 15.2% from
30.61p to 35.25p.
Earnings per share Year Year
ended ended
30 March 31 March
2019 2018
Basic (loss) / earnings per share (6.44p) 8.58p
Basic adjusted earnings per share 35.27p 31.38p
Diluted adjusted earnings per share 35.25p 30.61p
OPERATING CASH FLOW
Cash flow from operating activities before interest, tax and
exceptional items was GBP105.7m which represents a conversion of
110% of underlying EBITDA. This is a 64% increase on the prior year
operating cash flow.
Year Year
ended ended
30 March 31 March
2019 2018
GBP'm GBP'm
Underlying operating profit 70.3 48.8
Add back: underlying depreciation & amortisation 26.0 15.9
Underlying EBITDA 96.3 64.7
Non-cash items (0.8) (0.2)
Underlying movement in working capital 10.2 (0.2)
Operating cash flow before interest, tax and exceptional items 105.7 64.3
% conversion against underlying operating profit 150% 132%
% conversion against underlying EBITDA 110% 99%
Interest paid (16.5) (6.7)
Corporation tax paid (16.2) (10.6)
Capital expenditure - replacement of existing capabilities (23.5) (14.1)
Proceeds from fixed asset disposals 0.9 2.1
Free cash flow before exceptional items 50.4 35.0
% conversion against underlying operating profit 72% 72%
% conversion against underlying EBITDA 52% 54%
Pre-exceptional free cash flow of the Group - after interest,
tax and net replacement capex - was GBP50.4m. Compared with
underlying operating profit (i.e. post-depreciation), this
represents a conversion ratio of 72%, consistent with prior
years.
A full reported statement of cash flows, including exceptional
and non-underlying items, is provided in the Consolidated Statement
of Cash Flows.
NET DEBT
As at 30 March 2019 the Group's net debt position was GBP339.9m.
This compares with GBP258.7m as at the previous year-end, 31 March
2018. The principal reasons for this increase during the year were
the acquisition of Saloni and the organic investment in the synergy
projects detailed above.
Year Year
ended ended
30 March 31 March
Reconciliation of free cash flow to movement in net debt 2019 2018
GBP'm GBP'm
Free cash flow before exceptional items (see above) 50.4 35.0
Capital expenditure - growth (20.9) (15.2)
Exceptional reorganisation cash cost (11.5) (3.4)
Investment in synergy projects (32.5) (18.6)
Acquisitions of subsidiaries (82.6) (276.5)
Net proceeds of equity raise 59.3 178.1
Total debt acquired or refinanced (68.0) (66.0)
Deferred and contingent consideration payments (8.9) (15.3)
Exceptional M&A costs (1.8) (4.5)
Acquisitions related expenditure (102.0) (184.2)
Exceptional bond issue & structuring costs (7.3) -
Proceeds from disposal on investment property 2.0 -
Other exceptional cash items (5.3) -
Other debt items (0.6) (1.2)
Translation differences on foreign currency cash and loans 8.7 (0.1)
Other exceptional items 8.2 (1.3)
Total movement in net debt (81.2) (169.1)
Opening net debt (258.7) (89.6)
Closing net debt (339.9) (258.7)
Applying our banks' adjusted measure of financial leverage, the
Group's year-end net debt to EBITDA ratio was 3.2x (2018: 2.7x)[4].
This increase in the year is due to the acquisition of Saloni and
the split of debt and equity funding utilised. Current leverage is
consistent with our financial strategy to use a sensible but
cautious level of debt in the overall funding structure of the
Group.
Net debt 30 March 31 March
2019 2018
GBP'm GBP'm
Net cash and cash equivalents 60.2 53.1
Bank loans (387.0) (298.5)
BGF loan (11.6) (11.3)
Finance leases and hire purchase arrangements (1.6) (2.0)
Net debt (339.9) (258.7)
Adjusted net debt / EBITDA(4) 3.2x 2.7x
FUNDING
On 7 August 2018, in conjunction with the acquisition of Saloni,
the Group signed a EUR445 million term loan with HSBC and Barclays.
This loan was used to provide funding towards the acquisition
(alongside new equity funding) and to refinance the entire amount
of previously existing senior debt. This facility matures in August
2020 and is secured by way of debenture over the assets of the
Group.
More recently, the Group has signed a commitment from Credit
Suisse, NatWest, ING, HSBC, Bank of Ireland and BBVA to provide
five-year facilities to refinance the above term loan. The Company
is currently considering options to replace a proportion of these
committed facilities with bonds in the debt capital markets.
The Group is also funded by a revolving credit facility of GBP60
million for working capital headroom and general corporate
purposes. This facility has remained undrawn since it was put in
place last year. In addition, the Group has a GBP10 million
unsecured loan from the Business Growth Fund, maturing in 2021.
ACCOUNTING STANDARDS
The financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS), as endorsed and
adopted for use in the EU. There have been no changes to IFRS this
year that have a material impact on the Group's results. Whilst the
majority of forthcoming new IFRSs are not expected to have a
material impact on the financial statements of the Group, the
estimated impact of applying IFRS16 has been calculated and is
explained in more detail within the Significant accounting policies
section of the accounts.
There have been no material changes in the accounting policies
of the Group and its subsidiaries this year.
GOING CONCERN
The consolidated financial statements for the Group have been
prepared on a going-concern basis. The Group's business activities,
together with the factors likely to affect its future development,
performance and position, are set out in the Chairman and CEO
Statement, the Strategic Review and this Financial Review. In
addition, Note 25 to the Accounts includes details of the Group's
financial instruments and its exposure to and management of credit
risk, liquidity risk, currency risk and interest rate risk.
Having reviewed the Group's budgets, projections and funding
requirements, and taking account of reasonable 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.
The current bank facilities across the Group along with the
recently arranged new committed facilities (see above for further
details) provide sufficient capacity to cover all anticipated
capital expenditure and working capital requirements during the
year ahead. These facilities are subject to financial covenants
measured against Group results on a quarterly basis. All such
covenants have been satisfied to date.
The Directors are of the view that the Group is well placed to
manage its business risks. Accordingly, the Directors continue to
adopt the going concern basis in preparing the Annual Report and
Accounts.
Michael Scott
Group Finance Director
10 July 2019
Financial Statements
Consolidated
Income Statement
For the 52 weeks ended 30
March
2019
52 weeks ended 30 March 2019 52 weeks ended 31 March 2018
Non- Non-
Underlying underlying Reported Underlying underlying Reported
performance items numbers performance items numbers
Notes GBPm GBPm GBPm GBPm GBPm GBPm
----------------- --------- ------ ------------- ------------ --------- ------------- ------------ ---------
Continuing
Operations
Revenue 1 574.4 - 574.4 424.8 - 424.8
Cost of Sales (370.1) - (370.1) (279.4) - (279.4)
Gross profit 204.3 - 204.3 145.4 - 145.4
Distribution costs (71.1) - (71.1) (59.4) - (59.4)
Administrative expenses (66.0) (48.1) (114.1) (38.6) (22.4) (61.0)
Other operating income 3.1 1.8 4.9 1.4 - 1.4
----------------------------
Operating profit 70.3 (46.3) 24.0 48.8 (22.4) 26.4
---------------------------- ------ ------------- ------------ --------- ------------- ------------ ---------
Comprising:
Operating profit before
non-underlying
and exceptional items 1 70.3 - 70.3 48.8 - 48.8
Amortisation of acquired
intangibles 1,2 - (22.5) (22.5) - (11.2) (11.2)
Other non-underlying items 1,2 - (3.4) (3.4) - - -
Exceptional items 1,2 - (20.4) (20.4) - (11.2) (11.2)
---------------------------- ------ ------------- ------------ --------- ------------- ------------ ---------
Finance costs 3 (13.1) (14.6) (27.7) (8.0) (5.0) (13.0)
----------------------------
Comprising:
Net interest payable on
loans 3 (11.3) - (11.3) (6.6) - (6.6)
Amortisation of prepaid
finance
costs and accrued interest 3 (1.6) (3.1) (4.7) (1.1) (0.5) (1.6)
Translation difference on
foreign
currency loans 3 - (3.6) (3.6) - (3.5) (3.5)
Net interest expense on
defined
benefit pensions 3 (0.2) - (0.2) (0.3) - (0.3)
Other non-underlying,
non-cash
finance costs 3 - (7.9) (7.9) - (1.0) (1.0)
---------------------------- ------ ------------- ------------ --------- ------------- ------------ ---------
(Loss) / profit before tax 57.2 (60.9) (3.7) 40.8 (27.4) 13.4
Taxation (13.9) 9.7 (4.2) (9.2) 4.4 (4.8)
(Loss) / profit for the
period 43.3 (51.2) (7.9) 31.6 (23.0) 8.6
---------------------------- ------ ------------- ------------ --------- ------------- ------------ ---------
Earnings /
(loss) per
share
- pence basic 4 35.27 (6.44) 31.38 8.58
diluted 4 35.25 (6.44) 30.61 8.37
--------------------------- ------ ------------- ------------ --------- ------------- ------------ ---------
Consolidated Statement of Comprehensive Income
For the 52 weeks ended 30 March 2019
52 weeks ended 52 weeks ended
30 March 2019 31 March 2018
Note GBPm GBPm
------------------------------------------------------- ----- --------------- ---------------
(Loss) / profit for the period (7.9) 8.6
------------------------------------------------------- ----- --------------- ---------------
Other comprehensive income / (expense):
Items that will not be reclassified to profit or
loss:
Actuarial gains on defined benefit pension scheme 6 1.8 2.0
Decrease in deferred tax asset relating to pension
scheme liability (0.3) (0.4)
Items that will not be reclassified to profit or
loss 1.5 1.6
------------------------------------------------------- ----- --------------- ---------------
Items that may be reclassified subsequently to profit
or loss:
Retranslation of overseas subsidiaries (0.6) (2.1)
Items that may be reclassified subsequently to profit
or loss (0.6) (2.1)
------------------------------------------------------- ----- --------------- ---------------
Other comprehensive income / (expense) 0.9 (0.5)
------------------------------------------------------- ----- --------------- ---------------
Total comprehensive (loss) / income for the year
attributable to the owners of the parent (7.0) 8.1
------------------------------------------------------- ----- --------------- ---------------
Consolidated Balance Sheet
As at 30 March 2019
Group
30 March 2019 31 March 2018
Note GBPm GBPm
----------------------------------------- ----- -------------- --------------
Non-current assets
Goodwill 223.7 188.1
Intangible assets other than goodwill 241.4 210.3
Property, plant and equipment 190.6 142.9
Investment property 0.2 0.8
Investments in associates - 1.0
Deferred tax assets 5.8 4.6
-----------------------------------------
Total non-current assets 661.7 547.7
----------------------------------------- ----- -------------- --------------
Current assets
Inventories 140.5 100.3
Trade and other receivables 116.0 88.2
Cash and cash equivalents 66.4 54.0
Total current assets 322.9 242.5
-------------- --------------
Total assets 984.6 790.2
----------------------------------------- ----- -------------- --------------
Current liabilities
Trade and other current payables 168.6 121.5
Current tax liabilities - 1.0
Other financial liabilities 10.4 3.0
Total current liabilities 179.0 125.5
----------------------------------------- ----- -------------- --------------
Non-current liabilities
Trade and other non-current payables 19.5 29.2
Other non-current financial liabilities 392.3 306.1
Deferred tax liabilities 66.1 54.7
Retirement benefit obligations 6 7.8 9.1
Total non-current liabilities 485.7 399.1
----------------------------------------- ----- -------------- --------------
Total Liabilities 664.7 524.6
-------------- --------------
Net Assets 319.9 265.6
----------------------------------------- ----- -------------- --------------
Equity
Share capital 6.3 5.9
Share premium 288.7 229.8
Retained earnings 20.6 26.7
Foreign exchange reserve 2.3 2.9
Other reserves 2.0 0.3
Total Equity 319.9 265.6
----------------------------------------- ----- -------------- --------------
Consolidated Statement of Changes in
Equity
For the 52 weeks ended 30
March 2019
Foreign
Share Share Retained exchange Other Total
capital premium earnings reserve reserves equity
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- --------- --------- ---------- ---------- ---------- --------
At 2 April 2017 4.5 52.5 16.5 5.0 0.8 79.3
--------------------------------- --------- --------- ---------- ---------- ---------- --------
Profit for the period to
31 March 2018 - - 8.6 - - 8.6
Other comprehensive profit
for the period - - 1.6 - - 1.6
Retranslation of overseas
subsidiaries - - - (2.1) - (2.1)
Total comprehensive profit - - 10.2 (2.1) - 8.1
--------------------------------- --------- --------- ---------- ---------- ---------- --------
Issue of Share capital 1.4 176.6 - - - 178.0
BGF equity transfer - 0.7 - - (0.7) -
Share-based payment charge - - - - 0.2 0.2
Transactions with owners 1.4 177.3 - - (0.5) 178.2
--------------------------------- --------- --------- ---------- ---------- ---------- --------
At 31 March 2018 5.9 229.8 26.7 2.9 0.3 265.6
--------------------------------- --------- --------- ---------- ---------- ---------- --------
Loss for the period to
30 March 2019 - - (7.9) - - (7.9)
Other comprehensive profit
for the period - - 1.5 - - 1.5
Retranslation of overseas
subsidiaries - - - (0.6) - (0.6)
Total comprehensive loss - - (6.4) (0.6) - (7.0)
--------------------------------- --------- --------- ---------- ---------- ---------- --------
Issue of Share capital 0.4 58.9 - - - 59.3
Exercise of share options - - 0.3 - (0.3) -
Share-based payment charge - - - - 2.0 2.0
Transactions with owners 0.4 58.9 0.3 - 1.7 61.3
--------------------------------- --------- --------- ---------- ---------- ---------- --------
At 30 March 2019 6.3 288.7 20.6 2.3 2.0 319.9
--------------------------------- --------- --------- ---------- ---------- ---------- --------
Consolidated Statement of Cash Flows
For the 52 weeks ended 30 March 2019
Group
52 weeks ended 52 weeks ended
30 March 2019 31 March 2018
GBPm GBPm
-------------------------------------------------- --------------- ---------------
Cash flows from operating activities
Operating profit 24.0 26.4
Adjustments For:
Depreciation charges 25.9 15.8
Amortisation of intangible assets 22.8 11.3
Asset impairment 0.5 -
Amortisation of government grants (0.7) (0.3)
(Profit) / loss on disposal of property, plant
and equipment (0.1) 0.1
Profit on disposal of investment property (1.8) -
Loss on disposal of associates 0.7 -
Share incentive plan charge 1.9 0.2
Acquisition-related performance plan charge 1.5 -
Defined benefit pension 0.3 (0.2)
Net cash flow from operating activities before
movements in working capital 75.0 53.3
Change in inventories (13.8) (8.0)
Change in trade and other receivables 7.1 2.6
Change in trade and other payables 16.8 6.4
Cash generated by operations 85.1 54.3
Interest paid (16.5) (6.7)
Income taxes paid (16.2) (10.6)
Net cash inflow from operating activities 52.4 37.0
---------------------------------------------------- --------------- ---------------
Investing activities
Purchases of property, plant and equipment (43.7) (25.9)
Purchases of intangible assets (0.7) (0.7)
Proceeds on disposal of property, plant and
equipment 0.9 2.1
Deferred consideration and earn-out payments (8.9) (15.3)
Acquisition of subsidiaries net of cash acquired (82.6) (276.5)
Proceeds from disposal of investment property 2.0 -
Net cash used in investing activities (133.0) (316.3)
---------------------------------------------------- --------------- ---------------
Financing activities
Increase in long-terms loans 43.9 128.8
Issue of share capital 59.3 178.1
Repayment of reverse factoring facility acquired
with Saloni (13.4) -
Repayment of obligations under finance leases
/ hire purchase (1.0) (0.3)
Net cash generated in financing activities 88.8 306.6
---------------------------------------------------- --------------- ---------------
Net increase in cash and cash equivalents 8.2 27.3
Cash and cash equivalents at beginning of period 53.1 28.0
Effect of foreign exchange rate changes (1.1) (2.2)
Cash and cash equivalents at end of period 60.2 53.1
---------------------------------------------------- --------------- ---------------
Comprising:
Cash and cash equivalents 66.4 54.0
Bank overdrafts (6.2) (0.9)
60.2 53.1
-------------------------------------------------- --------------- ---------------
1. Segmental information
The Group is organised into three operating divisions: the sale of soft flooring products in UK & Europe;
ceramic tiles in the UK & Europe and the sale of soft flooring products in Australia. The entities that
comprise each division are combined into one reporting segment on the basis that they share economic
characteristics.
The reportable segments have changed in the current year and the corresponding items of segmental information
for the prior year have been restated.
Geographical segment information for revenue, operating profit and a reconciliation to
entity net profit is presented below.
Income
statement
52 weeks ended 30 March 2019 52 weeks ended 31 March 2018
UK & UK & UK & UK &
Europe Europe Unallocated Europe Europe Unallocated
Soft Ceramic central Soft Ceramic central
Flooring Tiles Australia expenses Total Flooring Tiles Australia expenses Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- --------- -------- ---------- ------------ ------- --------- -------- ---------- ------------ -------
Income
statement
Revenue 280.5 193.9 100.0 - 574.4 265.0 47.0 112.8 - 424.8
Underlying
operating
profit 17.0 48.2 6.8 (1.7) 70.3 24.8 13.7 11.6 (1.3) 48.8
Non-underlying
operating
items (5.1) (17.7) (2.0) (1.1) (25.9) (4.8) (4.6) (1.8) - (11.2)
Exceptional
operating
items (7.4) (4.7) (2.4) (5.9) (20.4) (6.7) - (0.3) (4.2) (11.2)
Operating
profit 4.5 25.8 2.4 (8.7) 24.0 13.3 9.1 9.5 (5.5) 26.4
Underlying net
finance
costs (13.1) (8.0)
Non-underlying
finance
costs (14.6) (5.0)
(Loss) / profit
before
tax (3.7) 13.4
Tax (4.2) (4.8)
---------------- --------- -------- ---------- ------------ ------- --------- -------- ---------- ------------ -------
(Loss) / profit
for the
period (7.9) 8.6
---------------- --------- -------- ---------- ------------ ------- --------- -------- ---------- ------------ -------
Management information is reviewed on a segmental basis to operating profit.
During the year, no single customer accounted for 10% or more of the Group's revenue. Inter-segment sales
in the year and in the prior year between the UK & Europe and Australia were immaterial.
The Group's revenue for the period was split geographically
as follows:
52 weeks 52 weeks
ended 30 ended 31
March 2019 March 2018
GBPm GBPm
---------------------------------------------------- ------------ ------------
Revenue
UK & other European countries 280.6 265.0
Spain 167.8 41.3
Italy 26.0 5.7
Australia 100.0 112.8
574.4 424.8
---------------------------------------------------- ------------ ------------
Materially all revenue within 'UK & other European
countries' relate to the UK.
Balance
sheet
52 weeks ended 30 March 2019 52 weeks ended 31 March 2018
UK & UK & UK & UK &
Europe Europe Europe Europe
Soft Ceramic Soft Ceramic
Flooring Tiles Australia Central Total Flooring Tiles Australia Central Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------- --------- -------- ---------- -------- -------- --------- -------- ---------- -------- --------
Total Assets 233.1 634.6 75.0 41.9 984.6 228.1 468.9 77.8 15.4 790.2
Total
Liabilities (94.8) (159.7) (20.8) (389.4) (664.7) (88.7) (115.5) (25.0) (295.4) (524.6)
Net Assets 138.3 474.9 54.2 (347.5) 319.9 139.4 353.4 52.8 (280.0) 265.6
------------- --------- -------- ---------- -------- -------- --------- -------- ---------- -------- --------
The Group's non-current assets as at 30 March 2019 were
split geographically as follows:
As at 30 As at 31
March 2019 March 2018
GBPm GBPm
--------------------------------------------------------------- ------------ ------------
Non-current assets
UK & other European countries 129.7 130.5
Spain 451.7 332.2
Italy 44.7 49.1
Australia 35.6 35.9
661.7 547.7
--------------------------------------------------------------- ------------ ------------
Materially all non-current assets within 'UK & other European
countries' relate to the UK.
Other
segmental
information
52 weeks ended 30 March 2019 52 weeks ended 31 March 2018
UK & UK & UK & UK &
Europe Europe Unallocated Europe Europe Unallocated
Soft Ceramic central Soft Ceramic central
Flooring Tiles Australia liabilities Total Flooring Tiles Australia liabilities Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- --------- -------- ---------- ------------ ------ --------- -------- ---------- ------------ ------
Other
segmental
information
Depreciation 12.3 10.9 2.7 - 25.9 10.3 2.5 3.0 - 15.8
Amortisation
of
acquisition
intangibles 4.7 16.1 1.7 - 22.5 4.8 4.6 1.8 - 11.2
Amortisation
of other
intangibles 0.2 0.2 - - 0.4 0.1 0.0 - - 0.1
-------------- --------- -------- ---------- ------------ ------ -------- ---------- ------------ ------
17.2 27.2 4.4 - 48.8 15.2 7.1 4.8 - 27.1
-------------- --------- -------- ---------- ------------ ------ --------- -------- ---------- ------------ ------
52 weeks ended 30 March 2019 52 weeks ended 31 March 2018
UK & UK & UK & UK &
Europe Europe Unallocated Europe Europe Unallocated
Soft Ceramic central Soft Ceramic central
Flooring Tiles Australia expenditure Total Flooring Tiles Australia expenditure Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- --------- -------- ---------- ------------ ------ --------- -------- ---------- ------------ ------
Investments
in fixed
assets
Purchases of
property,
plant
and
equipment 20.1 19.5 4.5 - 44.1 17.3 8.8 2.5 - 28.6
Disposals of
property,
plant
and
equipment (0.4) (0.1) (0.2) - (0.7) (0.5) (0.4) (0.3) - (1.2)
Purchases of
intangible
assets 0.2 0.5 - 0.1 0.8 0.4 - - 0.3 0.7
Total capital
expenditure 19.9 19.9 4.3 0.1 44.2 17.2 8.4 2.2 0.3 28.1
-------------- --------- -------- ---------- ------------ ------ --------- -------- ---------- ------------ ------
2. Exceptional and non-underlying
items
2019 2018
GBPm GBPm
------------------------------------------ ------- -------
Exceptional items
(a) Acquisition related costs (1.8) (5.8)
(b) Reorganisation costs (12.7) (5.4)
(c) Bond issue and related structuring
costs (7.3) -
(d) Pension adjustment (0.4) -
(e) Gain on sale of investment property 1.8 -
(20.4) (11.2)
------------------------------------------ ------- -------
2019 2018
GBPm GBPm
------------------------------------------ ------- -------
Non-underlying items
(f) Acquisition-related performance
plan charge (1.5) -
(g) Non-cash share incentive plan
charge (1.9) -
(h) Amortisation of acquired intangibles (22.5) (11.2)
(25.9) (11.2)
------------------------------------------ ------- -------
All exceptional items are classified within administrative expenses.
(a) Professional fees in connection with prospecting and completing acquisitions during the period.
(b) Reorganisation costs comprise various fees, redundancy and other one-off costs in relation to a
number of synergy projects and performance improvement programmes. The key projects comprise: (1) the
integration of the operations and administration of the most recent acquisition, Saloni, with our incumbent
Spanish ceramic tiles business, Keraben; (2) the optimisation of the Group's South Wales carpet factory
(further to the closure and consolidation of the Kidderminster factory in the prior year), including
a substantial increase in speed and capacity of manufacturing; (3) the transfer of our UK logistics
operation to two new distribution centres in the South and Midlands to optimise service levels and cost;
and (4) the closure of the Group's underlay factory in Melbourne, Australia, and consolidation into
the Sydney factory. Further details are provided in the Financial Review.
(c) One-off advisory, legal and structuring costs in relation to the aborted financing exercise during
the year.
(d) Guaranteed Minimum Pension one-off equalisation charge on the sole defined benefit pension scheme
in the Group (within Interfloor).
(e) Gain on the sale of property held as an investment.
(f) Charge relating to the accrual of expected liability under the acquisition-linked performance plan
with the Keraben senior management team as part of the acquisition in the prior year.
(g) Non-cash, IFRS2 share-based payment charge in relation to the long-term management incentive plan
that was put into place in April 2018. See Accounting Policies for further details.
(h) Amortisation of intangible assets, primarily brands and customer relationships, recognised on consolidation
as a result of business combinations.
3. Finance costs
2019 2018
GBPm GBPm
----------------------------------------------------------- ------ ------
Interest payable on bank loans and overdrafts 11.0 5.7
Cash interest payable on BGF loan 0.6 0.8
Interest payable on Hire Purchase and Finance Leases 0.1 0.1
Interest income (0.4) -
=========================================================== ====== ======
Total interest payable on loans 11.3 6.6
Amortisation of prepaid finance costs 1.5 1.0
Interest rolled up into BGF loan 0.1 0.1
Net interest expense on defined benefit pensions 0.2 0.3
------------------------------------------------------------ ------ ------
Underlying interest costs 13.1 8.0
(a) Release of prepaid finance costs 3.0 -
(b) BGF loan and option, redemption premium charge 0.1 1.2
(c) Unwinding of present value of deferred and contingent
consideration liabilities 2.9 3.0
(d) Other adjustments to present value of contingent
earn-out liabilities 4.3 (2.9)
(e) Mark to market adjustments on foreign exchange
forward contracts 0.7 0.2
(f) Translation difference on foreign currency loans 3.6 3.5
27.7 13.0
----------------------------------------------------------- ------ ------
(a) Non-cash charge relating to the release of prepaid costs on previous bank facilities, which were
extinguished and subsequently refinanced in August 2018.
(b) Non-cash annual cost of the redemption premium in relation to the BGF loan and option. Also included
in the prior year is a GBP0.9m non-cash charge relating to a significant modification to the terms of
the BGF loan, on which the coupon was reduced from 10% to 6%.
(c) Non-cash costs relating to the revaluation of deferred consideration and continent earn-outs. Deferred
consideration is measured at amortised cost, while contingent consideration is measured under IFRS 3
at fair value. Both are discounted for the time value of money. The present value is then remeasured
at each half year and in relation to the appropriateness of the discount factor and the unwind of this
discount.
(d) Non-cash changes to contingent earn-outs arising from actual and forecast business performance are
reflected as other adjustments to present value of contingent earn-out liabilities.
(e) Non-cash fair value adjustments on foreign exchange forward contracts. Also included in the prior
year is a GBP0.1m fair value adjustment on corporate bonds assets.
(f) Net impact of exchange rate movements on third party and intercompany loans.
4. Earnings per share
The calculation of the basic, adjusted and diluted earnings
per share is based on the following data:
Basic Adjusted Basic Adjusted
2019 2019 2018 2018
GBPm GBPm GBPm GBPm
-------------------------------------------------------- --------- ----------- ----------- ------------
(Loss)/profit attributable to ordinary equity
holders of the parent entity (7.9) (7.9) 8.6 8.6
Exceptional and non-underlying items:
Amortisation of acquired intangibles - 22.5 - 11.2
Acquisition related costs - 1.8 - 5.8
Reorganisation costs 12.7 5.4
Bond issue and related structuring costs - 7.3 - -
Pension adjustment - 0.4 - -
Gain on sale of investment property - (1.8) - -
Acquisition-related performance plan charge - 1.5 - -
Non-cash share incentive plan charge - 1.9 - -
Release of prepaid finance costs - 3.0 - -
BGF loan and option, non-underlying charges - 0.1 - 1.2
Unwinding of present value of deferred and
contingent consideration - 2.9 - 3.0
Other adjustments to present value of contingent
earn-out liabilities - 4.3 - (2.9)
Mark to market adjustments on forward foreign
exchange contracts 0.7 0.2
Translation difference on foreign currency
loans - 3.6 - 3.5
Tax effect on adjusted items where applicable - (9.7) - (4.4)
Earnings for the purpose of basic and adjusted
(loss) / earnings per share (7.9) 43.3 8.6 31.6
--------------------------------------------------------- --------- ----------- ----------- ------------
Weighted average number of shares
2019 2018
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 122,739 100,701
Effect of dilutive potential ordinary shares:
BGF share options and growth shares 64 2,533
Weighted average number of ordinary shares
for the purposes of diluted earnings per
share 122,803 103,234
--------------------------------------------------------- --------- ----------- ----------- ------------
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 per share are as follows:
2019 2018
Pence Pence
-------------------------------------------------------- --------- ----------- ----------- ------------
Earnings per share
Basic (loss) / earnings per share (6.44) 8.58
Diluted (loss) / earnings per share (6.44) 8.37
Basic adjusted earnings per share 35.27 31.38
Diluted adjusted earnings per share 35.25 30.61
--------------------------------------------------------- --------- ----------- ----------- ------------
5. Rates of exchange
2019 2018
Average Year end Average Year end
------------------------ -------- --------- -------- ---------
Australia - A$ 1.8049 1.8377 1.7206 1.8246
Europe - EUR 1.1344 1.1624 1.1373 1.1370
------------------------- -------- --------- -------- ---------
6. Retirement benefit obligations
Defined contribution schemes
The Group operates a number of defined contribution pension schemes. The companies and the
employees contribute towards the schemes.
Contributions are charged to the Income Statement as incurred and amounted to GBP3,831,000
(2018: GBP3,712,000), of which GBP2,257,000 (2018: GBP2,126,000) relates to the UK schemes.
The total contributions outstanding at year-end were GBPnil (2018: GBPnil).
Defined benefit schemes
The Group has two defined benefit schemes, both of which relate to Interfloor Limited.
Interfloor Limited sponsors the Final Salary Scheme ("the Main Scheme") and the Interfloor
Limited Executive Scheme ("the Executive Scheme") which are both defined benefit arrangements.
The defined benefit schemes are administered by a separate fund that is legally separated
from the Group. The trustees of the pension fund are required by law to act in the interest
of the fund and of all relevant stakeholders in the scheme. The trustees of the pension fund
are responsible for the investment policy with regard to the assets of the fund.
The last full actuarial valuations of these schemes were carried out by a qualified independent
actuary as at 31 July 2018.
The contributions made by the employer over the financial period were GBP95,000 (2018: GBP95,000)
in respect of the Main Scheme and GBP126,000 (2018: GBP126,000) in respect of the Executive
Scheme.
Contributions to the Executive and Main Schemes are made in accordance with the Schedule of
Contributions. Future contributions are expected to be an annual premium of GBP136,000 in
respect of the Main Scheme and GBPnil contributions payable to the Executive Scheme. These
payments are in line with the certified Schedules of Contributions until they are reviewed
on completion of the triennial valuations of the schemes as at 1 August 2021.
As both schemes are closed to future accrual there will be no current service cost in future
years.
The defined benefit schemes typically expose the Company to actuarial risks such as: investment
risk, interest rate risk and longevity risk.
2019 2018
GBPm GBPm
Net interest expense 0.2 0.3
Past service cost 0.4 -
Components of defined benefit costs
recognised in profit or loss 0.6 0.3
The net interest expense has been included within finance costs. The remeasurement of the
net defined benefit liability is included in the statement of comprehensive income. The past
service cost relates to a GMP equalisation charge and has been included within exceptional
costs in administrative expenses.
Amounts recognised in the Consolidated Statement of Comprehensive
Income are as follows:
2019 2018
GBPm GBPm
The return on plan assets (excluding amounts included
in net interest expense) 1.1 0.9
Actuarial gains arising from changes in demographic
assumptions 0.2 0.4
Actuarial (losses) / gains arising from changes
in financial assumptions (1.1) 0.4
Actuarial gains arising from experience adjustments 1.6 0.3
Remeasurement of the net defined benefit liability 1.8 2.0
The amount included in the Consolidated Balance Sheet arising from the Group's obligations in
respect of its defined benefit retirement benefit schemes is as follows:
2019 2018
GBPm GBPm
Present value of defined benefit obligations (32.6) (33.4)
Fair value of plan assets 24.7 24.3
Net liability arising from defined
benefit obligation (7.8) (9.1)
Deferred tax applied to net obligation 1.5 1.7
The Group expects to make a contribution of GBP136,000 (2018: GBP221,000) to the defined
benefit schemes during the next financial period
7. Acquisition of subsidiaries
Ceramica Saloni, S.A.
On 7 August 2018 the Group acquired 100% of the equity of each of Ceramica Saloni, S.A.U. and Sanicova,
S.L.U. (together "Saloni").
Saloni operates from a site in Castellon, Spain, close to the Group's existing business, Keraben. Saloni
designs, manufactures and distributes branded, mid to high-end ceramic tiles, which are sold domestically
and exported internationally. Saloni is a well-invested business, with a new production line installed
prior to the acquisition that has significantly increased the company's manufacturing capacity.
Even prior to any synergies delivered from the integration of Saloni with Keraben, the acquisition is
expected to be materially accretive to earnings per share in the first full year of ownership (after
accounting for the impact of the new Ordinary Shares issued by way of placing, as part of the acquisition
funding). For the year ended 31 December 2017, Saloni generated audited net revenues of EUR106.3 million
(GBP94.7 million) and adjusted EBITDA of EUR15.6 million (GBP13.9 million). For the twelve months ended
31 May 2018, Saloni generated unaudited adjusted EBITDA of EUR17.8 million (GBP15.9 million).
The Group results for the year ended 30 March 2019 include contribution from Saloni of EUR65.2m (GBP57.5m(1)
) of revenue and EUR5.8m (GBP5.1m(1) ) of profit before tax (before amortisation of acquired intangibles
and acquisition costs). If the acquisition had been completed on the first day of the financial year
Group revenue and profit before tax would have been higher by EUR43.1m (GBP38.0m(1) ) and EUR2.9m (GBP2.6m(1)
) respectively.
(1) Applying the average exchange rate over the financial year of 1.1344.
Consideration
Initial cash consideration of EUR96.7m (GBP86.2m(2) ) was paid on completion of the acquisition.
(2) Applying the GBP to EUR exchange rate at the date of acquisition of 1.1218.
Other than where fair value adjustments have been made, the book value of assets acquired is considered
to approximate their fair values. Gross trade receivables acquired are considered to equate to the fair
value of contractually collectable cash flows.
After fair value adjustments, goodwill of GBP40.1m is created on the consolidation of Saloni, which
relates to expected future profits of the business.
Transaction costs amounting to GBP1.8m relating to the acquisition have been recognised as an expense
and included in exceptional administrative expenses in the Group Income Statement.
8. Basis of preparation
The results have been extracted from the audited financial statements of the Group for the 52 weeks
ended 30 March 2019. The results do not constitute statutory accounts within the meaning of Section
434 of the Companies Act 2006. Whilst the financial information included in this announcement has been
computed in accordance with the principles of International Financial Reporting Standards ("IFRS")
as adopted by the EU, IFRIC interpretations and Companies Act 2006 that applies to companies reporting
under IFRS, this announcement does not itself contain sufficient information to comply with IFRS. The
Group will publish full financial statements that comply with IFRS. The audited financial statements
incorporate an unqualified audit report. The Auditor's report on these accounts did not draw attention
to any matters by way of emphasis and did not contain statements under S498(2) or (3) Companies Act
2006.
Statutory accounts for the 52 weeks ended 31 March 2018, which incorporated an unqualified auditor's
report, have been filed with the Registrar of Companies. The Auditor's report on these accounts did
not draw attention to any matters by way of emphasis and did not contain statements under S498(2) or
(3) Companies Act 2006. The accounting policies applied are consistent with those described in the
Annual Report & Accounts for the 52 weeks ended 31 March 2018.
The Annual Report & Accounts will be posted to shareholders in due course. Further copies will be available
from the Company's Registered Office: Worcester Road, Kidderminster, Worcestershire, DY10 1JR or via
the website: www.victoriaplc.com.
[1] Underlying free cash flow equal to underlying EBITDA less
non-cash items, movement in working capital, interest, tax and net
replacement capex.
(2) Number of shares based on diluted, weighted-average
calculation consistent with diluted EPS. FY15 adjusted for 5-for-1
share split; FY16 figures for continuing operations.
2 LFL growth assessed at constant currency, adjusted for the
impact of the acquisition of Saloni and the insured business
interruption caused by the South Wales factory roof collapse in
March 2018 following heavy snow.
[3] Pro-forma adjusted EBITDA does not include an adjustment for
business interruption caused by the South Wales factory roof
collapse in March 2018 as a successful insurance claim was later
made in relation to this event.
[4] Adjusted net debt / pro-forma EBITDA, as measured in line
with our bank facility covenants.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UASVRKSABARR
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