Over the last 15 months, Geoff Wilding – executive chairman of Victoria (VCP) – has travelled around Europe looking at potential acquisition opportunities. He feels confident about the company’s pipeline, following a recent spate of ‘earnings-accretive’ purchases by the carpet and flooring producer. Victoria’s top line grew 29 per cent over the full year, with a 1.6 per cent operating margin increase and strong organic growth. The shares were trading up 5 per cent on the day of the announcement.
Victoria purchased Interfloor – an underlay manufacturer – nearly two years ago, and the improved earnings subsequently achieved for this business inspired Victoria to purchase both Ezi Floor and Dunlop in the last 12 months. These are also underlay businesses, with Dunlop enabling Victoria to enhance its presence in Australia. In a rather more unusual move, the company also purchased GrassInc and Avalon BV – two 'high-margin' artificial grass producers, which typically supply ground cover for roof-terraces and gardens as opposed to sports pitches.
Victoria recorded a surge in reported earnings, while gross profit was up 29 per cent to £110m at a steady margin of 33.2 per cent. The company generated net free cash flow of £23.7m and management confirmed that the company could theoretically pay a dividend – but cash will continue to be reinvested for the time being. There's also the debt overhang to consider.
Analysts at Cantor Fitzgerald lifted their forecasts after Victoria beat expectations by 5 per cent. The company is expected to achieve revenue of £396.3m for FY2018, with EPS of 31.3p.
| VICTORIA (VCP) | ||||
| ORD PRICE: | 498p | MARKET VALUE: | £453m | |
| TOUCH: | 490p-505p | 12-MONTH HIGH: | 565p | LOW: 222p |
| DIVIDEND YIELD: | nil | PE RATIO: | 36 | |
| NET ASSET VALUE: | 87.1p* | NET DEBT: | 113% | |
| Year to 01 Apr | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p)** | Dividend per share (p)** |
| 2013 | 70.9 | -3.3 | -7.91 | 1.60 |
| 2014 | 71.4 | 2.3 | 4.90 | nil† |
| 2015 | 127 | -1.6 | -6.06 | nil |
| 2016 | 255 | 9.3 | 4.63 | nil |
| 2017 | 330 | 18.8 | 13.8 | nil |
| % change | +29 | +102 | +199 | nil |
| Ex-div: | na | |||
| Payment: | na | |||
*Includes intangible assets of £126m, or 138.6p a share **Adjusted for 5:1 share split, which became effective on 12 Sep 2016 †Excludes a special dividend payment of 292p paid in Jul 2014 | ||||
