Victoria PLC · LSE:VCP
Victoria — FY2021 Earnings Presentation
46 slides from Victoria's earnings presentation, July 2021
Slide 1: Investor Presentation: Preliminary Results for Year Ending April 2021
JULY 2021 INVESTOR PRESENTATION Preliminary Results for Year Ending 3 April 2021
Slide 2: Disclaimer
Disclaimer • This presentation has been prepared by and is the sole responsibility of the directors of Victoria plc (the “Company”). This presentation does not constitute a recommendation or advice regarding the shares of the Company nor a representation that any dealing in those shares is appropria
Slide 3: Table of contents
Table of contents 01 Executive Summary 02 Operational Overview 2 03 Outlook 04 Post Year End Acquisitions 05 Capital structure and financing capacity 06 Investment Case 07 Appendices
Slide 4: Executive Summary 2021 Financial Results
Executive Summary 2021 Financial Results
Slide 5: Executive Summary Overview
EXECUTIVE SUMMARY Overview “2021 was another record year in terms of revenues and operating earnings, with consistent strong cash flow conversion and significant margin expansion post-lockdown” • REVENUE: £662.3m • OPERATING CASH FLOW3: £93.9m ‒ +6.6% y-o-y growth ‒ 83% conversion from pre-IFRS 16 E
Slide 6: Resilient performance and positive outlook despite the pandemic
EXECUTIVE SUMMARY 1 Resilient performance and positive outlook despite the pandemic - In spite of the COVID-19 related challenges in our markets, the Group achieved record results for FY21, highlighting the resilience of the business and the benefits of the 2019/20 synergy projects. - Consistent org
Slide 7: Track record of robust growth and margin improvement
EXECUTIVE SUMMARY Track record of robust growth and margin improvement Revenue (£m) Underlying EBITDA (£m) % 13.8% 15.2% 16.8% 19.0% 19.2% margin 662 622 574 127 118 21.0% 425 96 H1 results 330 impacted by COVID 65 H1 results impacted 46 by COVID 17.2% 2017A 2018A 2019A 2020A 2021A 2017A 2018A 2019A
Slide 8: Segmental Performance
EXECUTIVE SUMMARY Segmental Performance 2021 2020 Continuing operations1 UK & Europe – UK & Europe – Australia Central costs TOTAL UK & Europe – UK & Europe – Australia Central costs TOTAL £m soft flooring ceramic tiles soft flooring ceramic tiles Revenue 280.4 282.4 99.6 - 662.3 282.0 243.9 95.6 -
Slide 9: UK & Europe Soft Flooring – underlying EBITDA margin bridge
EXECUTIVE SUMMARY UK & Europe Soft Flooring – underlying EBITDA margin bridge Note 1. FY20 margin shown post credit loss provision 2. Initial lockdowns occurred during April and May 2020 3. Organic margin improvement calculated by capturing a full-year effect of prior year acquisitions and removing
Slide 10: UK & Europe Ceramic Tiles – underlying EBITDA margin bridge
EXECUTIVE SUMMARY UK & Europe Ceramic Tiles – underlying EBITDA margin bridge Note 1. FY20 margin shown post credit loss provision 2. Initial lockdowns occurred during April and May 2020 3. Organic margin improvement calculated by capturing a full-year effect of prior year acquisitions and removing
Slide 11: Australia – underlying EBITDA margin bridge
EXECUTIVE SUMMARY Australia – underlying EBITDA margin bridge Note 1. FY20 margin shown post credit loss provision 2. Initial lockdowns occurred during April and May 2020 3. Organic margin improvement calculated by capturing a full-year effect of prior year acquisitions and removing the impact of cu
Slide 12: Non-underlying items
EXECUTIVE SUMMARY Non-underlying items 2021 2020 Covid-19 Refinancing Acquisition Other TOTAL TOTAL Non-underlying items, £m related related related Exceptional items Acquisition and disposal related costs (3.0) (3.0) (2.2) Reorganisation costs (5.5) (5.5) (3.5) Negative goodwill arising on acquisit
Slide 13: Consistent strong operational cash generation
EXECUTIVE SUMMARY Consistent strong operational cash generation 2015-21 2015 2016 2017 2018 2019 20201 2021 £m CAGR Revenue 127 255 330 425 574 622 662 % growth 77.9% 100.9% 29.5% 28.6% 35.3% 9.7% 6.6% Underlying EBITDA 16 32 46 65 106 118 127.4 % margin 12.4% 12.7% 13.8% 15.2% 16.8% 19.0% 19.2% Pay
Slide 14: Free cash flow re-invested – £20m reduction in net debt
EXECUTIVE SUMMARY Free cash flow re-invested – £20m reduction in net debt from prior year Note 1. Net debt shown before right-of-use lease liabilities, bond premia and prepaid finance costs, consistent with the measure used by our lending banks 13
Slide 15: Reduction in net debt
EXECUTIVE SUMMARY Reduction in net debt 2021 2020 £m Net cash and cash equivalents 344.8 174.7 Senior secured debt (at par) (637.7) (523.4) Unsecured loans (51.7) (15.6) Finance leases and hire purchase arrangements (pre IFRS 16) (1.1) (1.6) Net debt (before obligations under right-of-use leases) (3
Slide 16: Operational Overview – driving revenues and margins
Operational Overview – driving revenues and margins
Slide 17: UK & Europe Soft Flooring – record underlying EBITDA margin of 17.5%
UK & Europe Soft Flooring – record underlying EBITDA margin of 17.5% FY21 FY20 Growth Revenue £280.4 million £282.0 million -0.6% Underlying EBITDA £49.0 million £41.3 million +18.7% Underlying EBITDA margin 17.5% 14.6% +290bps Underlying EBIT £28.7 million £21.7 million +32.3% Underlying EBIT margi
Slide 18: UK & Europe Ceramic Tiles – revenue growth of 15.8%
UK & Europe Ceramic Tiles – revenue growth of 15.8% FY21 FY20 Growth Revenue £282.4 million £243.9 million +15.8% Underlying EBITDA £63.1 million £68.3 million -7.7% Underlying EBITDA margin 22.3% 28.0% -570bps Underlying EBIT £40.4 million £51.5 million -21.4% Underlying EBIT margin 14.3% 21.1% -68
Slide 19: Australia – underlying EBITDA margin +590bps
Australia – underlying EBITDA margin +590bps FY21 FY20 Growth Revenue £99.6 million £95.6 million +4.1% Underlying EBITDA £16.6 million £10.3 million +60.7% Underlying EBITDA margin 16.7% 10.8% +590bps Underlying EBIT £11.9 million £5.8 million +105.4% Underlying EBIT margin 12.0% 6.1% +590bps • Our
Slide 20: Outlook
Outlook VICTORIA PLC
Slide 21: Positive Industry and Business outlook
Positive Industry and Business outlook Economic factors • Residential renovation market proven to be extremely resilient as consumers are spending more time at home and re- focusing expenditure away from travel and leisure • Household savings have increased dramatically - Weighted towards higher inc
Slide 22: Revenue and Margin outlook for FY22 is positive
Revenue and Margin outlook for FY22 is positive • Uplift in margin performance is sustainable due to completed synergy projects • Recent increases in raw material prices have been successfully mitigated Key organic growth initiatives / drivers Development of new brands and new product ranges, broade
Slide 23: Post Year End Acquisitions +£27 million EBITDA
Post Year End Acquisitions +£27 million EBITDA
Slide 24: Victoria’s strategy
Victoria’s strategy 1 2 3 SUSTAINABLE ORGANIC AND SYNERGIES AND INTEGRATION TO GENERATION OF FREE CASH FLOW ACQUISITIVE GROWTH DRIVE MARGINS TO ENABLE STRONG DELEVERAGING Consistent organic revenue growth and margin improvement coupled with synergistic acquisitions has delivered strong profit growth
Slide 25: Recent Acquisitions
Recent Acquisitions: £27m EBITDA added for an investment of c.£160m First steps towards adding £100m of EBITDA Substantial financial firepower remains Acquisition of ceramic tile businesses, Ceramica Colli, Vallelungo, & Ceramiche Santa Maria • Total consideration: €35m (£30.1m); post-integration EB
Slide 26: Acquisition criteria & strategy
Acquisition criteria & strategy Competitive advantage – across production, Identification & relationship distribution or products Potential development Target Potential Target Growing and profitable businesses – no turnarounds Potential Structuring Target Sustainable, above average margins Due Dilig
Slide 27: Attractive acquisition opportunities
Attractive acquisition opportunities All acquisitions evaluated under strict disciplines • Deep industry expertise Consolidator in a fragmented industry • Contingent earn outs European flooring sector is worth €23 billion Risk management • Attractive valuation at factory gate • Sustainable capital s
Slide 28: Capital structure and financing capacity
Capital structure and financing capacity
Slide 29: Capital structure and capital allocation summary
Capital structure and capital allocation summary Stable leverage profile (Net debt / PF EBITDA) Approach to dividends 3.2x 3.0x 3.1x • Over the last eight years Victoria has consistently converted operating profits into cash (after paying tax), and then reinvested this cash into further acquisitive
Slide 30: Koch Equity Development Investment
Koch Equity Development Investment £175 million of preferred equity to accelerate Victoria’s acquisition plans Koch Equity Development (“Koch”) becomes a major shareholder in Victoria • Koch undertook extensive due diligence on Victoria’s business, management team, and the market opportunity • Koch
Slide 31: Koch Equity Development Investment: supportive long-term partner
Koch Equity Development Investment A supportive long-term partner with demonstrated experience in industrial investments Koch Industries Koch Equity Development (“KED”) • Founded in 1940 • Koch Equity Development is Koch’s acquisition and investment subsidiary and has the primary responsibility in •
Slide 32: Investment Case
Investment Case VICTORIA PLC
Slide 33: Why invest in Victoria?
Why invest in Victoria? The Victoria Group presents a unique investment proposition 1 Entrepreneurial culture drives success 2 Global business diversified across products, customers and geographies 3 High structural barriers to entry 4 Stable flooring market underpinned by the resilient improvement
Slide 34: 1. Entrepreneurial Culture Drives Success
1. Entrepreneurial Culture Drives Success 49% inside ownership align interest and incentives with shareholders Unique, enterprising culture attracts and retains the highest calibre management “Team of Teams” management structure promotes co-operation and motivation Operational decisions pushed as fa
Slide 35: 2. Global business diversified across products, customers and geographies
2. Global business diversified across products, customers and geographies Highly diversified geographic exposure Well balanced mid- high end product portfolio Split of EBITDA by destination country(1) Split of EBITDA by product category(2) Artificial Other Grass 11% UK 30% 4% Underlay Ceramic tiles
Slide 36: 3. High structural barriers to entry
3. High structural barriers to entry Fragmented customer base & long-standing relationships = very high cost of customer acquisition by competitors Established and trusted brands, well known with retailers for certainty of supply and quality = customer (retailer) “stickiness” Manufacturing scale is
Slide 37: 4. Stable flooring market underpinned by improvement and repair segment
4. Stable flooring market underpinned by the resilient improvement and repair segment Victoria’s revenues have increased organically every year for the last 15 years Improvement & repair is the primary driver of the Western European and Australian residential flooring markets 15% Key advantages of I
Slide 38: 5. Resilient operating profits and high cash conversion
5. Resilient operating profits and high cash conversion Low Operational Gearing Cost of sales(1) SG&A(1) Total cost base(1) Administration Fixed Overheads 4% 10% 6% Direct Logistics Variable Labour 10% Semi- 43% 11% 61% Sales & 22% variable 83% of Marketing of 29% of revenues 8% revenues revenues Ma
Slide 39: 6. Proven acquisition track record and ability to realise synergies
6. Proven acquisition track record and ability to realise synergies Synergies create strong levers Value accretive acquisitions driving EBITDA growth for margin expansion Acquired Apr-21 Better buying power on raw materials Listed Acquired Acquired Acquired Acquired Acquired Acquired Acquired on AIM
Slide 40: 7. ESG strategy aligned with optimising profitability
7. ESG strategy aligned with optimising profitability Consistent with its mission statement Victoria is committed to its ESG responsibilities Meaningful reduction in environmental impact is entirely consistent with optimizing operating earnings: • Energy efficiency and carbon emissions - Investment
Slide 41: 8. Experienced management with a proven track record
8. Experienced management with a proven track record of sustainable value creation – more than 40% CAGR total shareholder return since 2012 Geoffrey Wilding Executive Chairman Experience, product knowledge, enthusiasm, skill, second to none Wider Management Team Actively incentivized in Victoria’s f
Slide 42: Appendices
Appendices VICTORIA PLC
Slide 43: Income Statement
Income Statement Continuing operations 2021 2020 2021 margin £m Revenue 662.3 621.5 Cost of sales (427.4) (395.1) Gross profit 234.9 226.4 35.5% Distribution and admin. Expenses (159.0) (153.2) Other operating income 3.9 4.0 Underlying operating profit 79.8 74.3 12.0% Underlying finance costs (29.7)
Slide 44: Balance Sheet
Balance Sheet Continuing operations 2021 2020 £m Property, plant & equipment 202.3 211.8 Current assets 314.5 309.5 Current liabilities (188.2) (202.7) Non-current liabilities (15.6) (15.2) Net tangible operating assets 313.0 303.4 Net cash and cash equivalents 344.8 174.7 Senior secured debt (at pa
Slide 45: Victoria’s locations
Victoria’s locations United Kingdom and Europe Australia Keighley Hartlepool Hanover Carpets Sydney Melbourne Dewsbury Rossendale Hemel North America Hampstead San Diego Newbridge Kidderminster Spain Italy Flooring Ceramic tiles Source: Company information. 44
Slide 46: Shareholder register
Shareholder register Rank Investor Name Holding as of May 2021 % IC 1. Mr Geoff Wilding 22,438,650 19.2 2. Spruce House Investment Mgt 22,170,000 19.0 3. KED Victoria Investments 12,500,000 10.7 4. Camelot Capital Partners 7,070,453 6.1 5. Morgan Stanley Investment Mgt 6,784,165 5.8 6. Vulcan Value