Australian recovery for Victoria

16th Nov 2010 12:24

A strong profit performance in Australia offset losses in the UK and Ireland and helped carpet manufacturer Victoria to improve its overall profit in the first half of the financial year. Revenues grew from £30.2m to £33.3m, with Australia contributing £20.9m - one-fifth higher than the year before. However, the Australian increase was flattered by foreign exchange movements, so in Australian dollars the increase was 2%.Pre-tax profit improved from £202,000 to £561,000 and this has enabled Victoria to increase its interim dividend by 15% to 3p a share. Last year's total dividend of 8p a share was not quite covered by earnings but this year an increased dividend should be comfortably covered. Rising wool prices hit the first half but price rises have been pushed through recently. The UK is technically out of recession but consumer confidence is still fragile. Carpet sales were slightly lower but that was more than made up for by doubled yarn sales to competitors. A new contract with the biggest carpet claims handler in the insurance replacement market has helped to boost carpet sales and there will be more benefit from the contract in the second half. Chief executive Alan Bullock believes that Victoria's move into synthetic carpets through the launch of the EASICARE brand will help to boost sales. Up until now Victoria has concentrated on wool carpets, which are 30% of the UK carpets market. Victoria will concentrate on the higher end of the synthetic market with its polypropylene product. Any sales will represent gains in market share. Sales continue to decline in Ireland but cost cutting has reduced the loss. There was a cash outflow in the first half because of a build up in stock of new products ahead of pre-Christmas trading. Net debt was £8.55m at the beginning of October 2010, which is lower than 12 months before. Depreciation is much higher than capital expenditure so the net debt should be lower at the end of the year. House broker Arden forecasts a rise in profit from £1.1m to £1.6m in the year to March 2010. That is still relatively low compared with the profit made a few years ago so there is plenty of scope for further recovery.