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Victoria continued scope for growth

The flooring group made two acquisitions during the year, and more could follow
July 25, 2018

You get a better idea of how Victoria (VCP) is placed through underlying performance, even though the flooring specialist revealed its fifth straight year of 'record' revenue growth. However, anyone with a cheque book can grow the top line – more meaningful metrics come in the form of a 1.4 percentage point increase in the underlying cash profit margin to 15.2 per cent, with related cash flows representing 99 per cent of cash profits.

IC TIP: Hold at 843p

The group also revealed a 39 per cent rise in underlying pre-tax profits to £40.8m, although reported numbers were held in check by restructuring and acquisition-related expenses of £5.4m and £5.8m, respectively. The former stems from the ongoing reorganisation of Victoria’s UK manufacturing and logistics operations, aimed at generating “organic improvements and efficiencies”, while the latter relates to the purchase of two European ceramics businesses.

Indeed, last November, Victoria bought Spain-based Keraben Grupo, and in December it bought Italy-based Ceramiche Serra – amounting to €312m in total (£277m using exchange rates at the time). Both were bought in the second half, making relatively small contributions to full-year trading, but profits from both are expected to make a “meaningful contribution” this year. More transactions could follow, as over 60 per cent of all flooring sold constitutes ceramic tiles.

Broker Cantor Fitzgerald forecasts adjusted pre-tax profits of £70.8m and EPS of 46p for the year to March 2019 (from £40.8m and 30.6p in FY2018).

VICTORIA (VCP)   
ORD PRICE:843pMARKET VALUE:£996m
TOUCH:834-852p12-MONTH HIGH:882pLOW: 482p
DIVIDEND YIELD:nilPE RATIO:98
NET ASSET VALUE:225p*NET DEBT:97%
Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)**Dividend per share (p)**
201471.42.34.9nil
2015127-1.6-6.1nil†
20162559.34.6nil
201733018.813.8nil
201842513.48.6nil
% change+29-29-38-
Ex-div:na   
Payment:na   
*Includes intangible assets of £398m, or 337p a share **Adjusted for 5:1 share split, which became effective on 12 Sep 2016 †Excludes a special dividend payment of 292p paid in July 2014