Flooring group Victoria PLC has reported a decline in half year sales as subdued demand impacts performance.
According to its latest trading update for the six months ended 28 September 2024, total half year sales were down to £568.8m from £624.6m against the same period in 2023.
Underlying EBITDA resulted at £50.2m, down from £92.7m, while underlying pre-tax losses stood at £13.6m, down from a profit of £31.5m year-on-year.
“The flooring industry continues to experience the longest period of subdued (albeit now appearing to be stabilising) consumer demand in a generation as a result of macroeconomic pressures,” the group said.
“We are confident the factors that have been impacting demand are transitory, and at some point, the headwinds the industry has experienced for the last two years will turn into tailwinds and the Board is encouraged by recent positive data in Victoria’s end markets.
“For example, a key driver of demand is housing transactions and in the last quarter increased mortgage approvals, rising house prices, and lower interest rates have been reported in our key markets and these are all precursors to increased transactions and consequently flooring demand as consumers refresh their property before placing it on the market or refurbish their new home.
“Similarly, as incomes have caught up with inflation alongside lower mortgage expenses, consumer discretionary spending is also likely to increase, which also drives flooring sales.
“Weak consumer demand for flooring has historically always resulted in revenue deferred, not revenue forgone – the threadbare rug or stained carpet reluctantly tolerated during economic hard times is immediately replaced when a recovery in discretionary spending power allows.”
Looking ahead, Victoria said that it expects revenue to recover in the medium term and it has a “clear path” to return to mid-high teen EBITDA margins.
Geoff Wilding, Executive Chairman of Victoria PLC commented: “The long-term prospects for Victoria, continue to be exciting and we believe we have a clear path to return to mid-high teen EBITDA margins.
“In the short term, even with subdued demand profits should begin to recover with the effects of the ‘self-help’ work undertaken to improve efficiency and take market share.
“In the medium term, as demand normalises, we are confident Victoria’s revenue will recover and with the higher operational leverage now inherent in the business due to the integration projects and cost initiatives management have executed this year (and which are ongoing), we anticipate earnings increasing sharply with mid-high teen margins achievable.”
