Berenberg halves target price on Victoria

Analysts at Berenberg slashed their target price on floorings manufacturer Victoria from 600.0p to 300.0p on Thursday but reiterated their 'buy' rating on the stock.

Berenberg said Victoria's ad hoc trading update for the year ending March 2024, released on Wednesday, saw it lower guidance for underlying earnings to £160.0m for FY24, versus prevailing consensus at £187.0m, with a greater impact at the EBIT and pre-tax profit levels given the level of depreciation and interest cost in the business.

"In itself, the weakness in demand is not hugely surprising given the trends reported by other UK- and European-focussed building products companies, although we note that the company has significantly more moving parts than the average building products company due to prior acquisitions and restructuring, and also obviously has more debt," said Berenberg.

The German bank said the group had cash on-balance-sheet of £91.0m and then total liabilities outstanding of £1.144bn, split between £651.0m senior bonds, £131.0m other debt, £295.0m preferences shares and £163.0m IFRS 16 leases. Given that bond purchase liquidity was currently constrained, management has announced a £25.0m share buyback.

"On updated numbers, we see FY24 net debt pre-IFRS 16 pre-preference shares at £681.0m, falling to circa £637.0m in FY25,: added Berenberg.

Reporting by Iain Gilbert at Sharecast.com