Victoria expecting 'little material difference' from second lockdown

Flooring company Victoria updated the market on the impact of the imminent one-month Covid-19 lockdown in England on Tuesday, explaining that, based on its experience of the UK-wide lockdown earlier in 2020, it believed that the second lockdown would make “little material difference” to it in the long run.

The AIM-traded firm said it had used the last six months to adapt its factories to enable production to be maintained, while providing a Covid-safe environment.

Health monitoring, social distancing, staggered shifts, PPE, education, and other practices had been adopted throughout the company, to enable a full production schedule through another lockdown.

All of the group's factories would remain open, and continue to accept and deliver orders, the board confirmed.

It said its management team intended to continue production throughout the next month, which was expected to minimise the impact of the lockdown on the company’s UK business.

“The board believes the group's liquidity position is strong, and we expect to continue to grow at the expense of weaker competitors, particularly those with UK-centric businesses, that do not have Victoria's advantage of generating a very significant majority of earnings and cash from outside the UK,” the directors explained in their statement.

“Therefore, whilst the group may not be as cash generative had the second lockdown not happened, with net debt therefore reducing slightly less, the board expects improved profitability as we capitalise on the decline of weaker competitors.”

Trading in recent months exceeded the board's expectations, Victoria reported, with sales for the three months ended 3 October recovering above both management's pre-Covid budget, which included the anticipated benefit of productivity investments made over the previous 18 months, and the prior year's levels.

The board said it believed that favourable outcome was a result of people spending more time in their homes, and working remotely.

“This trend is encouraging increased investment by consumers in home redecorating, as well as driving new home purchases across all the markets where the group trades.”

Additionally, the company said it was continuing to maintain a strong liquidity position, finishing the quarter with cash and undrawn credit lines of more than £200m, up from £180m as at 30 June.

Victoria also noted that, despite the lockdown in all of its geographies in the June quarter, negative cash flow was relatively low at £7m for the three months.

“The board is also pleased to have announced the proposed £175m investment by an affiliate of Koch Equity Development, together with the off-market buyback by the company of 8.55 million ordinary shares at 350p, neither of which will be impacted by the lockdown,” the board added.

“It remains premature to provide meaningful earnings guidance for the 2021 financial year, although the board looks forward to updating shareholders on 30 November, with the publication of the interim results for the six months ended 3 October.”

At 1222 GMT, shares in Victoria were down 4.6% at 415p.