Worcestershire's Victoria plc focusing on costs amid severe flooring downturn

Worcestershire-headquartered flooring firm Victoria PLC has updated on trading for the six months to October 1 (first half) against the backdrop of the "most severe and longest decline in demand" in the flooring sector for the last 30 years.

First half revenue is expected to be around £580 million, the firm said in a statement, with underlying EBITDA coming in at around £50 million - continuing the lower demand experienced in the second half of fiscal 2024 of £64.9 million.

READ MORE: Victoria eyeing earnings and cash flow boost as it reports record revenue for fiscal 2023

Victoria said it was "actively working" on projects to optimise the business for an anticipated recovery, which include reorganisations and cost-cutting measures.

"The wider market is witnessing an estimated 20-25% decrease in demand versus 2019 levels, although the company has generally outperformed the market and continued to improve its competitive position - particularly in the UK," it said.

"There has been no fundamental change to the flooring industry, which has a very long track record of consistent growth, and the low demand presently being experienced is due to broad macro-economic factors."

These factors include interest rates and housing transactions, said Victoria, adding, however, that it had been encouraged by recent data.

The last quarter saw increased mortgage approvals, rising house prices, it noted, while lower interest rates have been reported in its key markets, which were "all precursors to increased transactions and consequently flooring demand as consumers refresh their property before placing it on the market or refurbish their new home".

"Similarly, as incomes have caught up with inflation alongside lower mortgage expenses, consumer discretionary spending is also likely to increase, which also drives flooring sales," the company said.

The board expects trading in the second half to be stronger as a result of the actions taken by management, alongside a small improvement in demand, although earnings are likely to be "below consensus expectations", it added.

Chief Executive Philippe Hamers, said: "The flooring sector is experiencing the most severe and longest decline in demand in the last 30 years. During this period, we have focussed on optimising productivity and reducing operational costs whilst maintaining the same potential production capacity.

"These actions will have a very material positive impact on earnings and cash flow as demand normalises with the anticipated improvement in the macro-economic environment and increase in housing transactions, a key driver of demand.

"Clearly the recovery continues to draw closer, although it is difficult to pinpoint precisely when it will begin. However, we remain prepared for growth when the time arrives, which will be delivered without any significant capex spend."