We’ll cut debt now says Wilding
Flooring group Victoria is to focus on reducing its huge debts while Geoff Wilding has insisted that its recent stock market turmoil which saw it abandon plans to refinance the debt and a plunge in its share price in the face of strong short-selling, has not distracted management.
The group’s executive chairman said following the acquisition of Ceramica Saloni in August, net debt was £342.7m at the end of the half-year on 29 September. This is 3.09 times its adjusted EBITDA. ‘The group has significant headroom in its covenants at this level, but the board sees this level as an internal ceiling and is therefore emphasising paying down debt at this time. Victoria has consistently demonstrated over the last five years that, while there is seasonality in its net debt (our working capital levels generally peak in September due to building stock levels to meet increases in demand during the pre-Christmas rush), overall cash generation is aligned to annual earnings. Flooring manufacturers structured like Victoria can generate large amounts of cash, with the group generating pre-tax operating cash flow of between 95% and 100% of underlying EBITDA over the last three years. Management across the entire Victoria Group is very focused on cash generation.
‘I, the board and management are confident in the outlook for the group, and believe that Victoria is on track to meet its objectives for the current financial year. Material market share gains in the UK will secure long-term earnings growth. The group's Australian businesses are expected to return to growth next year as a result of actions being taken today. In Europe, we are achieving greater than expected operational synergies in our Spanish businesses, which will add to earnings in FY 2020, together with strong performance from our Italian business, which is producing record profits.
‘We will continue to seek and review high-quality companies to ensure there are suitable acquisition opportunities when the time is right to execute them.
‘I am acutely aware that Victoria's share price is not where I believe it should be given our current trading and prospects. As one of the largest shareholders, you can be assured that I, and the other directors and management, are focused on building the confidence of investors and delivering the financial results expected of Victoria.
‘It is important to remember, together we own a very robust, well-managed, and growing business with over 3,000 employees who manufacture and sell some of the finest flooring in the world. The events of the last couple of months have not distracted management from delivering and for that reason I am highly confident of Victoria's continued long-term success.’