Flooring manufacturer Victoria PLC has reported strong growth in line with market expectations as well as an update on its acquisition of rugs and carpet maker Balta Group.
According to its latest full year trading update, total sales are expected to be more than £1.45bn, with volume sold to exceed 200 million square metres (more than 29,500 football fields) for the first time in the Company’s history.
Despite challenging macro-economic conditions, Victoria said it is set to deliver its tenth consecutive year of revenue and underlying operating profit growth for the year ended 1 April 2023.
Furthermore, back in April 2022, the Company acquired the rugs and UK carpet divisions of Balta Group, together with the internationally-known brand, “Balta”, establishing Victoria as Europe’s largest carpet and rug manufacturer.
“The integration of Balta is proceeding successfully with the reorganisation programme on schedule and the Board anticipates completion this calendar year, with a materially positive impact on future earnings and cash flow. The Board expects to realise synergy gains of no less than €15 million per annum (+2% margin for the division) upon completion,” Victoria said.
The reorganisation consists of three key projects, which include, “the relocation of Balta’s carpet manufacturing from Belgium to the Group’s more modern and more productive UK factories in Wales and Yorkshire, with a net reduction of 295 employees. 80% of Balta’s carpet is sold in the UK, Europe’s largest carpet market, and this move will enable Balta to sell the same historical quantity (c. € 100 million revenue per annum), but with lower production and transport costs alongside improved customer service from shorter delivery times.
“The consolidation of the Balta rug manufacturing operation onto Victoria’s large site at Sint-Baafs Vijve, Belgium, with the closure of the nearby factory at Avelgem, together with the relocation of some production to Usak, Turkey, where the Group has two very modern rug and yarn extrusion factories. These changes will improve efficiency and lower production costs, with the same output (c. €240 million revenue per annum) being achieved with 220 fewer employees.
“The sale of non-core assets acquired with the Balta transaction where the opportunity for synergies with the Group’s existing businesses are minimal, with the proceeds being used alongside the Group’s operational cash generation to further reduce Group leverage,” Victoria said.
Looking ahead, Victoria added that it is “well-positioned” to deliver further earnings and cash flow growth in FY24 and beyond, underpinned by the known synergy gains from completion of the Balta reorganisation.
Executive Chairman Geoff Wilding said: “We are laser-focussed on the reorganisation of Balta and the integration of other recent acquisitions. Completion of these projects is expected to deliver a significant uplift in productivity and cash flow, even during a period of economic uncertainty, which underpins our confidence in outlook for FY24 earnings growth and deleveraging.”
