Good morning!

 

 

Victoria (LON:VCP)

I'm kicking myself for not buying any of these shares. Looking back at my previous notes here, on 31 Jul 2013 I noted the company's rather poor results for 2012/13, and had some concerns about the level of debt. However on 6 Nov 2013 I reported on the big reduction in net debt, and also the attractions of the asset and dividend backing, and came close to buying some shares but unfortunately didn't. They were 245p at the time.

That was a pity because Victoria shares are now 355p to buy, and are decidedly illiquid, so it's difficult to buy (or sell) in any size - there are only three Market Makers here, and two of them are only up in 500 shares (i.e. £1,775), which is hopeless.

There is a positive trading update issued this morning, with the key part saying;

 

The Board are pleased to announce that the Group's profits before tax and exceptional items are likely to be ahead of market expectations for the full year to 29 March 2014, as a result of continued improvements in like-for-like group profitability and including the impact of the acquisition of the Globesign group.

 

Somehow I'd missed this acquisition of Globesign Ltd (maker of "Westex" carpets) in Nov 2013, so have been looking back at the RNSs and it was a major deal (for the size of company), being for £16m initial cash consideration, plus further deferred consideration of £8m based on performance targets being met (being that Globesign has to achieve an average of £4.2m EBITDA over three years). So the acquisition will dramatically improve profitability by the looks of it. Globesign made £3.7m profit in the year ended 2 Mar 2013.

I couldn't see how the acquisition was funded (there were no shares issued), so have just rung the company's advisers, who told me it was financed by debt - from existng facilities, plus a new £12m acquisition facility provided by Barclays, which is repayable by quarterly instalments. That must make the group quite highly geared now, although a property sale & leaseback (on apparently rather unattractive terms) was announced in Mar 2014 to raise £5.8m (in return for an initial rental yield of 8.5% + annual RPI uplifts…

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