Comment on the Second UK Lockdown & Recent Trading
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For Immediate Release
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03 November 2020 |
The information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.
Victoria PLC
('Victoria', the 'Company', or the 'Group')
Comment on the Second UK Lockdown
And
Recent Trading
The Board of Victoria PLC (LSE: VCP) the international designers, manufacturers and distributors of innovative flooring, notes the announcement regarding the imminent one-month lockdown in England. Based on the Company's experience of the UK-wide lockdown earlier this year, the Board believes that, in the long run, this second lockdown will make little material difference to Victoria.
Victoria has used the last six months to adapt its factories to enable production to be maintained whilst providing a Covid-safe environment. Health monitoring, social distancing, staggered shifts, PPE, education, and other practises have been adopted throughout the Group to enable full production schedules through another lockdown. All the Group's factories will remain open and continue to accept and deliver orders. Victoria's experienced management team intends to continue production throughout the next month, which is expected to minimise the impact of the lockdown on Victoria'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. 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.
Recent Trading
Trading in recent months exceeded the Board's expectations, with sales for the 3 months to 3 October 2020 recovering above both management's pre-Covid budget (which included the anticipated benefit of productivity investments made over the previous 18 months), and last year's levels. The Board believes this favourable outcome is 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.
For the September quarter, Group revenues were as follows:
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3 months to 3 October (£ millions) |
% of pre-Covid-19 budget |
% of same period last year |
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Group Revenues |
195 |
109% |
128% |
Additionally, the Group continues to maintain a strong liquidity position and finished the quarter with cash and undrawn credit lines in excess of £200 million - up from £180 million as at 30 June. Shareholders will also recall that, despite the lockdown in all of Victoria's geographies in the June quarter, negative cash flow was just £7 million for the three months.
Outlook
The Board is also pleased to have announced the proposed £175 million investment by an affiliate of Koch Equity Development, LLC, together with the off-market buyback by the Company of 8.55 million ordinary shares at 350 pence, neither of which will be impacted by the lockdown.
It remains premature to provide meaningful earnings guidance for FY2021, although the Board looks forward to updating shareholders on 30 November, with the publication of the Interim Results for the six months ending 3 October 2020.
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