REG - Victoria PLC - Interim Results <Origin Href="QuoteRef">VCP.L</Origin> - Part 1

VictoriaAnnouncement

22/11/2016 07:07

RNS Number : 7662P
Victoria PLC
22 November 2016
22 November 2016
Victoria PLC
('Victoria', the 'Company', or the 'Group')
Interim Results
Strong Performance Continues - Well Positioned For Further Growth
Victoria PLC (LSE: VCP) the international designers, manufacturers and distributors of innovative floorcoverings, is pleased to announce its consolidated interim results for the 26 weeks ended 1 October 2016.
Financial and Operational Highlights
Continuing operations
H1 FY17
H1 FY16
Growth
Revenue
153.4m
105.6m
+45%
Underlying EBITDA1
20.2m
12.6m
+60%
Underlying operating profit1
14.4m
7.9m
+82%
Operating profit
12.0m
6.4m
+88%
Underlying profit before tax1
12.3m
6.4m
+92%
Profit before tax
8.4m
3.9m
+115%
Net debt
67.7m
80.5m
-16%
Adjusted net debt / EBITDA2
1.93x
2.25x
Earnings per share3:
- Basic adjusted
10.43p
6.59p
+58%
- Basic
6.57p
0.88p
+647%
Victoria's successful growth has continued:
 Group revenues for the six months ending 1 October 2016 grew by 45% from 105.6m to 153.4m
 Like-for-like revenues grew by 8.0% (4.9% on a constant currency basis)4
 Underlying operating profit increased from 7.9m to 14.4m
 Underlying profit before tax substantially increased from 6.4m to 12.3m
 Net debt as at the half year was 67.7m, representing a very comfortable 1.93x annualised EBITDA2 (2015 H1: 2.25x)
 Acquisition of Ezi Floor on 30 September 2016 for initial cash consideration of 6.5m and deferred consideration of 6.5m, plus contingent cash consideration of up to a further 6.5m wholly dependent on improved EBITDA over the next four years
1. Underlying performance is stated before the impact of exceptional items, amortisation of acquired intangibles and asset impairment within operating profit. Underlying profit before tax and adjusted EPS are also stated before non-underlying items within finance costs (comprising mark-to-market adjustments, BGF redemption premium charge and deferred consideration fair value adjustments)
2. Adjusted net debt / EBITDA as measured in relation to the Group's bank facility covenants
3. Basic and basic adjusted earnings per share calculations set out in Note 7
4. Like-for-like revenue growth based on a complete half year of revenue for all businesses acquired excluding Ezi Floor. Figures are adjusted for the 26 week period to 1 October 2016 as compared to the 27 week prior period
Geoff Wilding, Executive Chairman of Victoria PLC commented:
"During the last six months we remained focused on executing our plan, with the acquisition of Ezi Floor extending the Group's underlay offering and earnings. The Board continues its effective cash management whilst at the same time being quick to identify and implement potential commercial and margin enhancing synergies across the Group as we gain market share both in the UK and Australia. With no shortage of acquisition opportunities in the UK and Europe, the Board is confident it can continue to grow Victoria and create more wealth for shareholders."
For more information contact:
Victoria PLC 
Geoff Wilding, Executive Chairman
Michael Scott, Group Finance Director
+44 (0) 15 6274 9300
Cantor Fitzgerald Europe (Nominated Adviser & Broker)
Rick Thompson, Phil Davies, Michael Reynolds (Corporate Finance)
Mark Westcott, Caspar Shand- Kydd ( Sales)
finnCap (Joint Broker)
Matt Goode, Grant Bergman (Corporate Finance)
Tim Redfern (Corporate Broking)
+44 (0) 20 7894 7000
+44 (0) 20 7220 0500
Buchanan Communications
Charles Ryland, Victoria Hayns, Jane Glover 
+44 (0) 20 7466 5000
The information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.


Chairman's Statement
The first half of this financial year was another successful trading period of continued growth and performance for Victoria. Despite the prognostications of the doom-sayers, Brexit has had no discernible impact on demand for our products in the UK with like-for-like revenues up 3.5%. Growth in Australia continues apace (up 8.9% AUD like-for-like). We remain confident in achieving all of our objectives for the financial year.
Ezi Floor
Underlay is sold alongside nearly two-thirds of carpet sales in the UK and, as such, some 18 months ago we formed the view that an underlay manufacturer would be an ideal addition for Victoria.
September 2015 saw the initiation of this strategy, with the acquisition of underlay manufacturer Interfloor. Over the last year, in particular with a focus on minimising costs, Interfloor has become a highly valuable contributor to the Group's earnings.
Following the success of Interfloor, we acquired another underlay manufacturer, Ezi Floor, on 30 September this year. This is a very entrepreneurial and successful business and its acquisition means Victoria is now able to provide a full range of underlay products across the market. Whilst, as with previous acquisitions, Interfloor and Ezi Floor will remain largely independent in terms of marketing and sales, we are highly confident operational synergies can be achieved between these two businesses and believe Ezi Floor will also make a material contribution to Victoria's earnings.
Acquisitions
Buying a company is easy; making it successful is another matter entirely. Many acquisitions fail to meet expectations and, understandably, many investors are sceptical of a business plan that incorporates acquisitions as part of its strategy. I have completed literally dozens of acquisitions in my business career, making my share of mistakes, but the end product achieved in several sectors over many years has been the creation of significant shareholder wealth.
So, the fact remains that acquisitions can be - and have been - a powerful tool for growing a business and opening new market opportunities.
Having said that, we have made just six acquisitions in four years. This steady pace enables us to ensure each acquired business is properly integrated into Victoria before we proceed with securing the next earnings enhancing deal.
At the risk of boring shareholders with repetition, let me once again set out the key criteria Victoria uses when assessing a potential acquisition opportunity. This list is not exhaustive and sometimes we will not acquire a business that meets all our criteria simply because of some indefinable factor that makes us uncomfortable with proceeding.
1. We never buy struggling businesses or turnarounds. The time and energy expended on a turnaround is rarely worth it;
2. Modern, well-equipped factories. As a company, Victoria is extremely focussed on cash generation. It is free cash that allows us to pay down debt, fund growth, whether acquisitions or organic, and progressively return capital to shareholders through dividends or share buybacks. So, the last thing we want to have to do after buying a business is spend all the cash it generates bringing the factory up to standard.
3. Committed, talented and honest management. Anyone can lease a factory and buy the machinery to make carpet (or other flooring). The difference between the average business and the extraordinary businesses Victoria acquires is the management;
4. Broad distribution channels. Victoria's sales are overwhelmingly made to literally thousands of retailers. We like the security this diversity provides; and pay close attention to customer concentration when considering a potential acquisition.
5. A fair price. To quote Warren Buffet, "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price. We recognise that quality businesses are rarely 'cheap' but shareholders can take comfort from the fact that we will not overpay. Ever.
Debt
Debt is a business tool like any other. Properly used it can transform growth and shareholder returns and, given the very high levels of cash generation by the business, Victoria makes use of prudent levels of debt to grow the business and improve earnings.
We have consistently demonstrated over the last four years that, while there is a significant seasonal profile in Victoria's net debt (our working capital levels peak in September each year due to the increase in demand during the pre-Christmas rush, plus the timing of our deferred consideration payments are substantially weighted to H1), overall cash generation is aligned to annual earnings. Management across the entire Victoria Group is very focussed on cash generation, which gives the Board the confidence to appropriately deploy debt to fund acquisitions.
Outlook
Both markets in which Victoria trades - the UK and Australia - continue to perform well.
The Australian flooring market is experiencing very good demand from consumers. Although Australia housing stock is about one-third that of the UK, the houses themselves are about three times the size of the average UK house and therefore the addressable market is quite similar in size. I have been delighted by the performance of both our historical business in Australia and Quest, the acquisition we made in August 2015.
The UK, which is about 75% of our business, also continues to trade well. Brexit has had no discernible impact on demand for product and, with some 60% of carpet sold in the UK imported - primarily from Europe - weaker Sterling has benefited us by making our main competitors product materially more expensive whilst less than 20% of our cost base is in Euros or US dollars.
Unlike most other retail purchases, consumers typically only decide to invest in a new carpet for their home once every seven to nine years. As a result, consumers have little awareness as to what a square metre of carpet "should" cost. It is for that reason that the price at which we can sell product is governed moreover by the price point of our competitors than consumers expectations. This, therefore, makes it easier to pass on any production-based inflationary pressures due to all manufacturers broadly being in the same position; all seeking to increase prices at similar inflection points.
In the same regard, as consumer spend for carpet averages at 300-500 per room, any marginal increase in price per square metre will have limited impact on them deciding whether or not to proceed with the purchase.
Nonetheless we continue to maintain tight control over costs and inventory to ensure that the Group is well positioned should selling conditions change. To that end, I thought it might be helpful for shareholders to understand the level of variability in our cost base. Victoria is more lowly geared operationally than I suspect some shareholders appreciate. Over half of Victoria's cost base fluctuates directly with sales (e.g. raw materials and energy) and a further circa 30% is capable of being varied within a few weeks (e.g. labour, logistics and marketing costs), should conditions change.
Growth in earnings per share will continue from both organic improvements and acquisitions. There is no shortage of opportunities both in the UK and Europe - although we take care to only proceed once we are confident the last acquisition has been properly integrated. Our strong positive cash-flow, together with supportive bankers and shareholders ensure further acquisition-based growth can be funded. By maintaining very strict criteria and strong price discipline, I am confident acquisitions will continue to be earnings enhancing and a useful tool to both strengthen the Group and create wealth for shareholders.
Therefore, once again, I am pleased to say the Board faces the balance of the financial year with a positive outlook.

















Condensed Consolidated Income Statement












For the 26 weeks ended 1 October 2016 (unaudited)













26 weeks ended 1 October 2016

27 weeks ended 3 October 2015 (1)

53 weeks ended 2 April 2016 (Audited)


Underlying performance
Non-
underlying
items
Reported numbers

Underlying performance
Non-
underlying
items
Reported numbers

Underlying performance
Non-
underlying
items
Reported numbers














re-stated
re-stated
re-stated







Notes
000
000
000

000
000
000

000
000
000

Continuing operations














Revenue

3
153,405 
- 
153,405 

105,607 
- 
105,607 

255,174 
- 
255,174 

Cost of sales


(103,007)
- 
(103,007)

(70,365)
- 
(70,365)

(169,930)
(249)
(170,179)

Gross profit


50,398 
- 
50,398 

35,242 
- 
35,242 

85,244 
(249)
84,995 

Distribution costs


(29,285)
- 
(29,285)

(22,754)
- 
(22,754)

(49,852)
(157)
(50,009)

Administrative expenses (including intangible amortisation)


(6,997)
(2,440)
(9,437)

(4,732)
(1,525)
(6,257)

(13,753)
(3,787)
(17,540)

Other operating income


291 
- 
291 

130 
- 
130 

292 
- 
292 

Operating profit/(loss)


14,407 
(2,440)
11,967 

7,886 
(1,525)
6,361 

21,931 
(4,193)
17,738 

Comprising:














Operating profit before exceptional items and intangible amortisation
3
14,407 
- 
14,407 

7,886 
- 
7,886 

21,931 
- 
21,931 

Intangible amortisation


- 
(1,946)
(1,946)

- 
(197)
(197)

- 
(2,315)
(2,315)

Asset impairment


- 
- 
- 

- 
- 
- 

- 
(160)
(160)

Exceptional items

3,4
- 
(494)
(494)

- 
(1,328)
(1,328)

- 
(1,718)
(1,718)

Finance costs

5
(2,116)
(1,470)
(3,586)

(1,531)
(975)
(2,506)

(3,714)
(4,734)
(8,448)

Profit/(loss) before tax


12,291 
(3,910)
8,381 

6,355 
(2,500)
3,855 

18,217 
(8,927)
9,290 

Taxation

6
(2,802)
395 
(2,407)

(1,458)
- 
(1,458)

(4,302)
961 
(3,341)

Profit/(loss) for the period from continuing operations


9,489 
(3,515)
5,974 

4,897 
(2,500)
2,397 

13,915 
(7,966)
5,949 

Loss for the period from discontinued operations


- 
- 
- 

- 
(1,746)
(1,746)

- 
(2,132)
(2,132)

Profit/(loss) for the period


9,489 
(3,515)
5,974 

4,897 
(4,246)
651 

13,915 
(10,098)
3,817 

Earnings per share from continuing operations (2)














basic (pence)

7


6.57 



3.23 



7.22 

diluted (pence)

7


6.46 



3.29 



7.11 

Earnings per share (2)














basic (pence)

7


6.57 



0.88 



4.63 

diluted (pence)

7


6.46 



0.98 



4.60 
(1) Re-stated to reflect the new accounting policy adopted in relation to expenditure on sampling assets and the change in accounting treatment of the Business Growth Fund Loan to split the debt and equity components. The effects of these changes were detailed in Note 31 of the Annual Report and Accounts for the 53 weeks ended 2 April 2016. 
(2) The prior year earnings per share metrics have been recalculated to reflect the five for one share split which was effective from 12 September 2016.

Condensed Consolidated Statement of Comprehensive Income
For the 26 weeks ended 1 October 2016 (unaudited)







26 weeks
ended
1 October
2016
27 weeks
ended
3 October
2015
53 weeks
ended
2 April
2016
















(re-stated)
(Audited)





000

000
Profit for the period




5,974
651
3,817
Other Comprehensive (expense)/income:







Items that will not be reclassified to profit or loss:







Actuarial (losses)/gains on pension scheme




(6,550)
329
(152)
Increase/(decrease) in deferred tax asset relating to pension scheme liability


1,214
(60)
53








Total items that will not be reclassified to profit or loss




(5,336)
269
(99)








Items that may be reclassified subsequently to profit or loss







Currency translation gains/(losses)




1,716
(1,533)
708
Totals items that may be reclassified subsequently to profit or loss


1,716
(1,533)
708








Other comprehensive (expense)/income for the year, net of tax


(3,620)
(1,264)
609








Total comprehensive income/(loss) for the year attributable to the owners of the parent
2,354
(613)
4,426


Condensed Consolidated Balance Sheet



As at 1 October 2016 (unaudited)




1 October
2016
3October
2015
2 April
2016





















(re-stated)
(Audited)





000
000
000








Non-current assets







Goodwill




48,949
68,389
37,205
Intangible assets 




42,174
8,661
43,476
Property, plant and equipment




41,220
35,206
38,811
Investment property




180
180
180
Deferred tax asset




4,818
3,148
3,287
Total non-current assets




137,341
115,584
122,959








Current assets







Inventories




63,261
54,679
58,970
Trade and other receivables




46,415
45,767
42,562
Cash at bank and in hand




21,501
7,846
19,078
Other financial assets




374
180
384
Total current assets




131,551
108,472
120,994








Total assets




268,892
224,056
243,953








Current liabilities







Trade and other payables




70,488
60,493
66,913
Current tax liabilities




3,750
2,630
2,891
Other financial liabilities




617
3,644
596
Total current liabilities




74,855
66,767
70,400








Non-current liabilities







Trade and other payables




14,850
10,735
11,524
Other financial liabilities




87,617
84,690
78,522
Deferred tax liabilities




8,393
1,681
9,129
Retirement benefit obligations




9,734
2,665
3,345
Total non-current liabilities




120,594
99,771
102,520








Total liabilities




195,449
166,538
172,920








Net assets




73,443
57,518
71,033








Equity















Share capital




4,548
4,370
4,548
Share premium




52,467
44,164
52,462
Retained earnings




15,695
8,302
13,341
Other reserves




733
682
682
Total equity




73,443
57,518
71,033
Condensed Consolidated Statement of Changes in Equity



For the 26 weeks ended 1 October 2016 (unaudited)








Share
Share
Retained
Other 
Total





capital
premium
earnings
reserves
equity





000
000
000
000
000










At 28 March 2015 (re-stated)




3,639
10,144
8,915
682
23,380










Profit for the period to 3 October 2015




----
----
651
----
651
Other comprehensive loss for the period




----
----
(1,264)
----
(1,264)
Total comprehensive loss




----
----
(613)
----
(613)










Issue of share capital




731
34,020
----
----
34,751
Transactions with owners




731
34,020
----
----
34,751










At 3 October 2015 (re-stated)




4,370
44,164
8,302
682
57,518




















At 28 March 2015 (re-stated)




3,639
10,144
8,915
682
23,380
Profit for the period to 2 April 2016




----
----
3,817
----
3,817
Other comprehensive income for the period




----
----
609
----
609
Total comprehensive income




----
----
4,426
----
4,426










Issue of share capital




909
42,318
----
----
43,227
Transactions with owners




909
42,318
----
----
43,227










At 2 April 2016




4,548
52,462
13,341
682
71,033










At 3 April 2016




4,548
52,462
13,341
682
71,033










Profit for the period to 1 October 2016




----
----
5,974
----
5,974
Other comprehensive loss for the period




----
----
(3,620)
----
(3,620)
Total comprehensive income




----
----
2,354
----
2,354










Issue of share capital




----
5
----
----
5
Movement in other reserves




----
----
----
51
51
Transactions with owners




----
5
----
51
56










At 1 October 2016




4,548
52,467
15,695
733
73,443


Condensed Consolidated Statements of Cash Flows



For the 26 weeks ended 1 October 2016 (unaudited)








26 weeks
ended
1 October
2016
27 weeks
ended
3 October
2016
53 weeks
ended
2 April
2016
















(re-stated)
(Audited)




Notes
000
000
000
Cash flows from operating activities







Operating profit from continuing operations




11,967
6,361
17,738
Adjustments for:







- Depreciation charges




5,829
4,689
10,347
- Amortisation of intangible assets




1,946
197
2,315
- Goodwill adjustment




----
----
(43)
- Asset impairment




----
----
160
- Profit on disposal of property, plant and equipment




(1)
(129)
(143)
- Defined benefit pension cash contributions




(221)
----
----
- Exchange rate difference on consolidation




235
(425)
594
Net cash flow from operating activities before movements in working capital

19,755
10,693
30,968
Change in inventories




(1,592)
(3,666)
(7,767)
Change in trade and other receivables




(1,190)
(683)
215
Change in trade and other payables




(3,034)
2,495
7,628
Cash generated by continuing operations




13,939
8,839
31,044
Interest paid




(1,841)
(1,392)
(3,243)
Income taxes paid




(2,721)
(1,627)
(3,243)
Net cash flow from discontinued operations




----
65
65
Net cash inflow from operating activities




9,377
5,885
24,623








Investing activities







Purchases of property, plant and equipment




(6,030)
(4,896)
(9,752)
Proceeds from disposal of Westwood Yarns Limited




----
-----
431
Proceeds on disposal of property, plant and equipment 




48
827
1,034
Deferred consideration and earn-out payments




(8,332)
(5,155)
(7,453)
Acquisition of subsidiaries net of cash acquired




----
(16,478)
(19,265)
Net cash used in investing activities




(14,314)
(25,702)
(35,005)








Financing activities







Increase/(decrease) in long term loans




7,385
(657)
(4,573)
Issue of share capital




----
34,592
43,043
Repayment of obligations under finance leases/HP




(475)
(539)
(650)
Net cash generated by financing activities




6,910
33,396
37,820








Net increase in cash and cash equivalents




1,973
13,579
27,438
Cash and cash equivalents at beginning of period




19,078
(8,502)
(8,502)
Effect of foreign exchange rate changes




450
(177)
142
Cash and cash equivalents at end of period



8
21,501
4,900
19,078










Notes to the Condensed Half-Year Financial Statements
1
General information

These condensed consolidated financial statements for the 26 weeks ended 1 October 2016 have not been audited or reviewed by the Auditors. They were approved by the Board of Directors on 21 November 2016.

The information for the 53 weeks ended 2 April 2016 does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The Auditors' report on those accounts was unqualified and did not include a reference to any matter to which the Auditor drew attention by way of emphasis without qualifying the report and did not contain statements under Section 498(2) or 498(3) of the Companies Act 2006.


2
Basis of preparation and accounting policies

These condensed consolidated financial statements should be read in conjunction with the Group's financial statements for the 53 weeks ended 2 April 2016, which were prepared in accordance with IFRSs as adopted by the European Union.

The accounting policies and basis of consolidation of these condensed financial statements are consistent with those applied and set out on pages 27 to 33 of the Group's audited financial statements for the 53 weeks ended 2 April 2016.



Having reviewed the Group's projections, and taking account of reasonable possible changes in trading performance, the Directors believe they have reasonable grounds for stating that the Group has adequate resources to continue in operational existence for the foreseeable future. 



Accordingly, the Directors continue to adopt the going concern basis in preparing the financial statements of the Group.


3
Segmental information



The Group is organised into two operating divisions, the sale of floorcovering products in the UK and Australia. 



Geographical segment information for revenue, operating profit and a reconciliation to entity net profit is presented below.
Income statement










26 weeks ended 1 October 2016

27 weeks ended 3 October 2015

UK
Australia
Unallocated
central
expenses
Total

UK
Australia
Unallocated
central
expenses
Total






re-stated
re-stated

re-stated

'000
'000
'000
'000

'000
'000
'000
'000




















Revenue from continuing operations
112,082
41,323
-----
153,405

81,069
24,538
-----
105,607










Underlying operating profit
11,062
4,141
(796)
14,407

6,420
1,964
(498)
7,886
Non-underlying operating items
(1,578)
(368)
-----
(1,946)

(197)
-----
-----
(197)
Exceptional operating items
-----
-----
(494)
(494)

-----
-----
(1,328)
(1,328)
Operating profit from continuing operations
9,484
3,773
(1,290)
11,967

6,223
1,964
(1,826)
6,361










Underlying interest charges



(2,116)




(1,531)
Non-underlying finance costs



(1,470)




(975)
Profit before tax from continuing operations



8,381




3,855










Tax



(2,407)




(1,458)
Profit after tax from continuing operations



5,974




2,397










Loss from discontinued operations *



-----




(1,746)
Profit for the period



5,974




651




















* Loss from discontinued operations relates to the disposal of Westwood Yarns Limited, which was sold on 2 October 2015.
Management information is reviewed on a segmental basis to operating profit.
Other segmental information










26 weeks ended 1 October 2016

27 weeks ended 3 October 2015

UK
Australia
Unallocated
central
liabilities
Total

UK
Australia
Unallocated
central
liabilities
Total






re-stated
re-stated

re-stated

'000
'000
'000
'000

'000
'000
'000
'000




















Depreciation (from continuing operations)
4,612
1,217
-----
5,829

3,755
934
-----
4,689
Amortisation of acquired intangibles
1,578
368
-----
1,946

197
-----
-----
197

6,190
1,585
-----
7,775

3,952
934
-----
4,886











26 weeks ended 1 October 2016

27 weeks ended 3 October 2015

UK
Australia
Unallocated
central
expenditure
Total

UK
Australia
Unallocated
central
expenditure
Total






re-stated
re-stated

re-stated

'000
'000
'000
'000

'000
'000
'000
'000




















Capital expenditure (from continuing operations)
5,092
938
-----
6,030

4,298
598
-----
4,896




















4
Exceptional Items from continuing operations










26 Weeks

27 Weeks







ended
1 Oct 2016

ended
3 Oct 2015







000

000












(a) Acquisition costs




 494 

 1,066 


(b) Bank refinancing costs




----- 

 262 

















 494 

 1,328 


All exceptional items are classified within administrative expenses.




(a) Professional fees in connection with prospecting and completing acquisitions during the period.


(b) The prior year bank refinancing cost was in connection with establishing the Company's multi-currency revolving facility with existing Group bankers, Barclays and HSBC.











5
Finance costs














26 Weeks

27 Weeks







ended
 1 Oct 2016

ended
3 Oct 2015







000

000


Interest on loans and overdrafts wholly repayable within five years



1,512

900


Interest payable on BGF loan




572

586


Hire purchase and finance lease interest




32

45


Underlying interest costs




2,116

1,531












(a) BGF loan and option, redemption premium charge




90

90


(b) Unwinding of present value of deferred and contingent consideration


1,317

885


(c) Mark to market adjustment on foreign exchange forward contracts


63

-----


Non-underlying costs




1,470

975












Total finance costs




3,586

2,506


(a) Non-cash annual cost of the redemption premium in relation to the BGF loan and option.


(b) Deferred and contingent consideration in respect to acquisitions is measured under IFRS 3, initially at fair value discounted for the time value of money. The present value is then re-measured at each half-year and year-end to unwind the time value of money. In addition, any changes arising from actual and forecast business performance are reflected, although such movements form an immaterial portion of the overall annual charge. All such adjustments are non-cash items.


(c) Non-cash fair value adjustment on foreign exchange forward contracts.











6
Tax from continuing operations














26 Weeks

27 Weeks







ended
1 Oct 2016

ended
3 Oct 2015







000

000









re-stated


Current tax









- Current year UK




2,392

1,637


- Current year overseas




1,187

637







3,579

2,274


Deferred tax









- Credit recognised in the current year




(1,236)

(796)


- Adjustments in respect of prior years




64

(20)







(1,172)

(816)


Total tax 




2,407

1,458


The overall corporation tax rate is 22.8% (2015: 22.9%), representing the best estimate of the weighted average annual corporation tax rate expected for the full financial year. 










7
Earnings per share









The calculation of the basic, adjusted and diluted earnings per share is based on the following data:
























26 Weeks
26 Weeks
27 Weeks
27 Weeks






ended1
Oct 2016
ended1 Oct 2016
ended 3 Oct 2015
ended 3 Oct 2015






Basic
Adjusted
Basic
Adjusted






'000
'000
'000
'000


Profit attributable to ordinary equity holders of the parent entity from continuing operations
5,974
5,974
 2,397 
 2,397 


Exceptional items:









Amortisation of acquired intangibles



----
1,946
----
197


Acquisition costs



----
494
----
1,066


Unwinding of present value of deferred and contingent consideration

----
1,317
----
885


BGF loan and option, redemption premium charge



----
90
----
90


Release of prepaid finance costs



----
----
----
262


Mark to Market adjustment on foreign exchange forward contracts and interest rate swap
----
63
----
----


Tax effect on adjusted items where applicable
----
(395)
----
----


Earnings for the purpose of basic and adjusted earnings per share from continuing operations
5,974
9,489
2,397
4,897


Loss attributable to ordinary equity holders of the parent entity from discontinued operations
----
----
 (1,746)
----


Earnings for the purpose of basic and adjusted earnings per share 

5,974
9,489
 651 
4,897














Weighted average number of shares



















2016
2015










Number of
Number of










shares ('000)
shares ('000)










(1)
(1)


Weighted average number of ordinary shares for the purposes of basic and adjusted earnings per share




90,967
74,300


Effect of dilutive potential ordinary shares:











BGF share options







2,973
1,215


Weighted average number of ordinary shares for the purposes of diluted earnings per share




93,940
75,515














(1) The number of shares in issue increased by a factor of five on 12 September 2016 following approval of a five-for-one share split at the AGM on 9 September 2016. The weighted average number of shares in issue over the period has been determined on this new basis.
















The potential dilutive effect of the share options has been calculated in accordance with IAS 33 using the average share price in the period.














The Group's earnings/(loss) per share are as follows:














2016
2015











re-stated










Pence
Pence


Earnings per share from continuing operations











Basic adjusted







10.43
6.59


Diluted adjusted







10.10
6.48


Basic







6.57
3.23


Diluted 1







6.46
3.29














Loss per share from discontinued operations











Basic







----
(2.35)


Diluted 1







----
(2.35)














Earnings per share 











Basic adjusted







10.43
6.59


Diluted adjusted







10.10
6.48


Basic







6.57
.88


Diluted 1







6.46
.98


1 Earnings for the purpose of diluted (basic) earnings per share have been adjusted to add back the Business Growth Fund ('BGF') redemption premium charge as this cost is only incurred if the BGF share options are not exercised. 
















The prior year earnings per share metrics have been recalculated to reflect the five for one share split which was effective from 12 September 2016.















8
Analysis of net debt













At
2 April
2016
Cash flow
Capital expenditure under finance leases/HP
Other
non-cash
changes
Exchange movement
At
1October
2016
















000
000
000
000
000
000


Cash


19,078
1,973
----
----
450
21,501


Cash and cash equivalents


19,078
1,973
----
----
450
21,501


Finance leases and hire purchase agreements










- Payable less than one year


(596)
264
----
(280)
(5)
(617)


- Payable more than one year


(513)
211
(657)
280
(20)
(699)


Bank loans 










- Payable more than one year


(69,280)
(7,385)
----
----
(1,242)
(77,907)


BGF loan










- Payable less than one year


----
----
----
----
----
----


- Payable more than one year


(9,796)
----
----
(163)
----
(9,959)


Net debt


(61,107)
(4,937)
(657)
(163)
(817)
(67,681)













Prepaid finance costs


1,067
75
----
(194)
----
948


Net debt including prepaid finance costs


(60,040)
(4,862)
(657)
(357)
(817)
(66,733)












9
Acquisition of subsidiaries





















Ezi Floor Limited










On 30 September 2016, the Group acquired UK underlay manufacturer Ezi Floor Limited, for an initial cash consideration of 6.5m and deferred cash consideration of 6.5m, payable in annual instalments over four years. Additional contingent cash consideration up to a maximum of 6.5m is wholly dependent on improved EBITDA over the next four years. The principal activity of Ezi Floor is the manufacture and distribution of a range of underlay and underlay accessories for both the residential and contract markets. Ezi Floor sells to wholesalers, retail groups, and independent stores throughout the UK. The acquisition is expected to be immediately accretive to the underlying earnings per share of the Company.








The Group results for the 26 weeks ended 1 October 2016 do not include any revenue or profit from Ezi Floor as it was acquired at the end of the first half period. 




The valuation exercise to identify intangible assets acquired, as required under IFRS3, has not been finalised as at the half year. The valuation will be reflected in the Annual Report and Accounts for the Group for the year ending 1 April 2017 together with the IFRS 3 disclosures. Accordingly, an element of the Goodwill recorded on the balance sheet as at 1 October 2016 will be reclassified to Intangible assets once the IFRS 3 valuation has been completed.



























10
Rates of exchange










The results of the Group's overseas subsidiary has been translated into Sterling at the average exchange rates prevailing during the periods. The balance sheet is translated at the exchange rates prevailing at the period ends:



















26 Weeks
27
Weeks
53
weeks








ended
1 Oct 2016
ended
 3 Oct 2015
ended
2 April 2016


Australia (A$) - average rate





1.8196
2.0489
2.0327


Australia (A$) - period end





1.6942
2.1544
1.8526

























11
Risks and uncertainties










The Board continuously assesses and monitors the key risks of the business. The key risks that could affect the Group's medium term performance and the factors which mitigate these risks have not changed from those set out on page 9 of the Group's 2016 Annual Report, a copy of which is available on the Group's website - www.victoriaplc.com. The Chairman's Statement includes consideration of uncertainties affecting the Group in the remaining six months of the year.












On behalf of the Board



















Geoffrey Wilding









Chairman




















21 November 2016





















This information is provided by RNS
The company news service from the London Stock Exchange
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