Victoria describes solid year, reassures over accounting concern

29th Sep 2023 11:42

(Sharecast News) - Victoria described a year of success in a trading update on Friday, briefly overshadowed by accounting concerns at a small subsidiary.

The AIM-traded firm, which was holding its annual general meeting, revealed its 10th consecutive year of increasing revenue and underlying profit growth.

Executive chairman Geoff Wilding said this marked a historic achievement for Victoria, with sales surpassing 200 million square metres of flooring products and an impressive annual revenue exceeding £1.45bn.

He said the growth would soon facilitate higher productivity, efficient logistics, broader distribution, and reduced input costs, placing Victoria ahead of its competitors.

However, there was a recent qualified opinion from its auditor concerning incomplete accounting records at its subsidiary, Hanover Flooring.

Wilding noted that Hanover Flooring accounted for less than 1.25% of the group's overall turnover, with the board emphasising that there was no misconduct affecting the group's financial statements, which the auditors corroborated.

The core concern at Hanover was a heightened financial risk associated with roughly £0.4m of customer receipts due to inadequate accounting records.

Addressing the concerns, Wilding assured stakeholders that appropriate measures had been instituted to rectify the issues.

"We had identified the issues at this small subsidiary and allocated additional experienced finance resources who have put appropriate controls in place," he affirmed.

Additionally, all payments due had been received, no funds were unaccounted for, and Victoria said it had experienced no financial loss.

The chairman stressed that the firm remained robust in its operations.

"The 2024 financial year is expected to be a year of two halves, with stronger second-half earnings as the productivity gains from completion of the major integration projects come to fruition," he said.

The integration, on completion, was projected to lead to a £20m-plus per annum surge in EBITDA, with free cash flow expected to rise substantially in the second half of 2024 and further in 2025.

"As already confirmed, first-quarter trading was in line with the board's forecast and consistent with consensus expectations for the 2024 financial year," Geoff Wilding added.

"Demand remains generally stable across the group's markets, and margins are improving in line with a fall in input costs.

"Our objective in 2024 is not to chase volumes but to protect and improve margins, and we have right-sized production capacity to promote this whilst anticipating modest volume growth in the coming quarters."

Wilding said the company's ability to create "design to cost" products allowed it to maintain margins while continuing to meet customer demand at given price points.

"Given the anticipated productivity improvements, cost savings, and working capital enhancements expected later this year and the increase in financial performance these bring, the board remains confident that Victoria will continue to deliver outsized returns for its shareholders."

At 1120 BST, shares in Victoria were up 1.33% at 534p.

Reporting by Josh White for Sharecast.com.