Historic decline in flooring industry... but recovery draws closer
"The flooring sector is experiencing the most severe and longest decline in demand in the last 30 years," says industry leader Philippe Hamers, CEO of Victoria PLC.
He added: "Clearly the recovery continues to draw closer, although it is difficult to pinpoint precisely when it will begin."
- As the UK's top flooring conglomerate, Victoria PLC is the best placed commentator on trading conditions and says the market is witnessing an estimated 20-25% decrease in demand versus 2019 levels.
Victoria was delivering its current trading update to shareholders yesterday and says it has generally outperformed the market and continued to improve its competitive position – particularly in the UK.
For the six-month period ended 1 October 2024, revenue is expected to be about £580m and EBITDA profits are anticipated at £50m compared to £64.9m in the previous half-year.
The Boards' statement continued: "“The Board expects H2 trading [in 2024] to be stronger as a result of the actions taken by management alongside a small improvement in demand, although earnings are likely to be below consensus expectations.
“Whilst industry-wide low demand is impacting margins due to operational leverage, pricing remains stable and management is taking actions to optimise the cost base and this will drive better margin results when demand recovers.
“There has been no fundamental change to the flooring industry, which has a very long track record of consistent growth, and the low demand presently being experienced is due to broad macro-economic factors,” it said.
- There was hope for the future in the company's statement: "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," said the statement.
Savings from re-structuring
Victoria also mapped out how re-structuring across its operations was improving its efficiency.
The PLC's statement commented: "Victoria's various UK brands continue to be important in market positioning, but the full integration of Balta's UK carpet business during H1 allowed the Company to recently merge the brands of Balta & Carpet Line Direct and Victoria & Hugh Mackay, and separately consolidate our underlay operations with immediate savings in rent, logistics, and personnel totalling c.£5 million per annum
"Optimising the synergy gains from the completed relocation of production capacity from Belgium to Turkey alongside cost-cutting in Belgium: there will be some benefit in the current financial year, although the first full year impact of the cost savings, expected to be an additional €6.1 million per annum, will be seen in FY2026.
"For the first time Victoria has had, since July, a Group-wide procurement team responsible for approximately £500 million of purchasing - raw materials, logistics, and finished goods for resale. Each 1% cost saving delivers c. £5 million annually of increased earnings and meaningful savings have already been secured, although the full impact is heavily weighted to FY2026," it said.
The group said that these actions are expected to drive a £25m increase in Victoria’s earnings, supporting EBITDA margin expansion back towards the Group’s historical levels of mid-high teens.
