Victoria Group’s share buyback scheme has failed to maintain its share price after an initial spurt despite the group anticipating major increases in profits.
The group began buying its own shares on 14 March and saw its share price rise from 644p to 914p, restoring its valuation above £1bn at £1.056bn. However, since 28 March its share price has fallen steadily, reducing its value to £892.75m with its share price at 738p. At the start of the year the price was 1,200p.
The group has told shareholders that for the year ended 2 April it expects underlying EBITDA to be about £28m higher at more than £155m and underlying EBIT to be a fifth higher at £100m. It says it expects EBITDA to be more than £200m for this year.
‘In recent weeks Victoria’s share price has, the board believes, completely decoupled from the group’s economic reality. Ongoing demand for product remains strong and the group continues to have the ability to successfully increase prices to mitigate inflation. Consequently, the board decided to deploy a proportion of excess cash to take advantage of the opportunity to make market purchases of its own shares at levels it believes are materially below the intrinsic value of the group, thereby serving Victoria’s mission to create wealth for shareholders,’ it says.
However, it warned it had no plans to start paying dividends. ‘The group’s potential pipeline of accretive acquisitions continues to be compelling. As such the recent opportunistic share repurchases are therefore not the start of a formal and regular programme to return capital to shareholders as we continue to see significant short and medium-term organic and acquisitive investment opportunities, notwithstanding current world events.
‘Heading into the new financial year, demand for the group’s products remains robust across our markets, with consistent demand from consumers driving our retailer channels. Furthermore, the group is also witnessing a strong resurgence in commercial demand, which is additive to consumer demand.
‘Victoria continues to have the ability to increase selling prices quickly (and is doing so) to mitigate the impact of inflationary pressures on profits. The group remains competitively very well placed in its markets to defend its position or capitalise on opportunities where gaps appear.
‘Victoria invested heavily in raw materials and continuity of operations last year to ensure production schedules and normal product availability were maintained, despite the global supply chain disruptions. This established Victoria as a reliable partner to our customers, when many alternative suppliers had extended delivery periods (or even no delivery at all), and this reputational enhancement has led to continued market share gains. Management believes that the group’s reliability will continue to drive long-term organic growth. As the group’s raw material supply continues to stabilise, and as Victoria’s management gain confidence this is sustainable, the group intends to return to normalised quantities of raw materials, thereby releasing additional cash for further growth investment.’
Despite the upbeat statement the share price dropped 3.4%.
Pictured is the group’s share price since 1 January.
Flooring group Victoria has seen its share price leap after it began a series of share buybacks.
Its share piece has risen from 644p to 914p after it began buying its own shares on 14 March. The 41.9% rise has seen the group’s value return above £1bn, at £1.056bn.
It bought 16,275 shares on 14 March at an average price of 663.38p; 4,000 shares on 15 March at 670p; 18,315 shares at an average of 682.53p on 16 March and 7,500 shares at an average of 909.49p on 25 March.
The group has shareholder approval to buy back 11,685,190 shares – about 10% of the group’s shares. The purchases, totalling £332,982, were funded ‘from excess cash’.
However, the rise has still some way to go to restore its value since the start of the year, when the share price was 1,200p.
