Victoria (LSE:VCP) — Annual results for year ended 28 March 2026

0:00 Good afternoon, and welcome to the VICTORIA PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time by the q and a tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. And I'd like to hand you over to the management team. Jeff, good afternoon, sir.

0:30 Good afternoon. Thanks everybody for joining the call. And we'll get straight into it so that we have a little bit more time for q and a at the end. And so I'll get Alec to take you through the financial overview of the year, and then we'll pick up. Right. Thanks, Jeff. Great. So just to start with a couple of headlines. Obviously, since we updated at the half year, you know, the revenue outlook was probably a little bit softer than we'd anticipated.

0:57 So revenue for full year '26 was 1,000,000,000.045. That's revenue down about 6%. Volume was a little bit softer than that, so down almost 9%, really reflecting just that tough macro environment. We'll come on to, you know, more recent trading, which has been a lot more positive. But, you know, I think that lower volume has been a main driver of performance last year. EBITDA came in at 92,300,000. That is broadly in line with the guidance we provided back in February. We have aimed to be relatively conservative on the balance sheet movements at the end of the year. So we think that is a good clean number, a little bit of margin compression there, which we'll come on to explain later.

1:45 Clearly, financing has been a big focus for the year overall. Net debt was just over 1,000,000,000 at one point zero three zero six three. We will spend a bit of time in the presentation talking you through the different steps that we're financing. Obviously, delighted to announce the 90% acceptance on our refinancing yesterday, and we'll explain that in a little bit more detail.

2:15 Clearly, kind of leverage also came up a little bit during the year to 11.5 times. Obviously, Polarify, we are reducing that. So we'll explain that in more detail later. Jeff, just for exact sum. Sure. So as Alex just mentioned, the second half of the year was weaker than we expected. A lot of that was driven from the the war in Iran breaking out at the very towards the very end of the year, and that caused quite a sharp drop off in both commercial demand and consumer demand. And so the the final few months of the year were much weaker than we expected. However, the the one encouraging factor during that period was that we were able to improve the average selling price to demonstrate which demonstrates the desirability of the group's products we've got for consumers.

3:16 The main focus of the business over the last twelve months has been executing the various profit improvement programs that we have in place. We have outlined those to you in the half year and also the full year result last year, what those projects are. We've made good progress. Most are on track or ahead of schedule. And although the lower volumes that the market is showing at the present time means that the impact is somewhat dampened, we are very comfortable that the projects will deliver the the upturn in earnings in the medium term.

3:57 Alex is gonna take you through the refinancing shortly and the details of it because I know we wanna get a clean balance sheet for everybody to understand exactly what the moving parts have been, so I'll leave that to him. Lastly, the start of this year has been very, very encouraging. We've managed to achieve volume growth. Most of that has been in Australia and The UK where some of our competitors have been struggling badly, and we've made major market share gains. But volume's up 3%. We've put prices up as well, so we've achieved 7% revenue growth. And the profitability for the quarter was ahead of q one of last year, and that's particularly encouraging because q one of last year was the best quarter the company had during f y twenty six.

4:50 And being ahead of that for the first quarter of this year, comfortably ahead of it, is very encouraging. So looking very good. So, obviously, a lot going on the balance sheet over the last twelve months, so I'll step everyone through that. Look, a lot of detail here. We'll try to say kind of at headline level. Obviously, we can kind of dip into any further q and a after that. So so two two main steps this year. So last summer, we basically refinanced all of our twenty twenty six maturities. That was both our super senior RCF and 2026 bonds. That was done through an exchange and basically extended out maturities out to 2029.

5:37 And then, obviously, more recently, we announced, you know, a extension of those 2028 bonds, which is the next maturity, as well as refinancing of Coke's preferred equity, which had the option to convert into ordinary equity in November. So, you know, delighted to be able to kind of, you know, effectively refinance about £1,200,000,000 of liabilities, which I think is a great achievement for the team, both, you know, central and local management. So thank you for everyone's support in that. Yesterday, we announced 90% approval from the bondholders. There is still, yeah, about three, four months before that completes, which we are expecting to happen early in h two.

6:24 But subject to the shareholder vote, we're now very confident that that will progress. Now in terms of what that brings to the business, the two combination two transactions in combination extends our debt maturities significantly. So our first maturity is now only in 2029. Yeah. This gives us a great runway for the operational improvements that we are making. You know, Jeff and I will talk through some of those, you know, through the rest of the presentation. I think we've had good progress this year, somewhat masked by the kind of lower volumes in the market, but that's that is certainly coming through very tangibly. It also significantly reduced our balance sheet liabilities by over £300,000,000. So both for our external partners, whether, let's say, our customer suppliers, but also our shareholders, we think that is a great step forward.

7:14 And then finally, it also reduces our ongoing finance costs and pick dividends by about £34,000,000. So that also includes a £5,000,000 cash interest reduction. So, again, very helpful to keep more capital in the business and reduce those ongoing costs. Now I think overall, what this demonstrates is that actually, you know, we do have very strong access to finance. You know, we're very lucky to have a diverse capital structure, lots of different lenders of different types. And actually, you know, what the last twelve months have shown is that kind of ongoing support for the business. Hopefully, you know, their approval of those processes also demonstrate their belief in the recovery profile of the business, which again we'll hope to demonstrate in the coming months.

8:02 Now as part of the transactions, Coke will become our largest shareholder. They will take approximately a 24.9% stake in the equity, we'll be providing an additional board member. Think, you know, a couple of points to note there. Yeah. As part of that process, that's been very fulsome. They have gone through, full diligence process with, both Jeff and I and, say, the local teams. I think I'm sure they'll agree that actually, you know, the local management teams are impressive, and kind of key points in their belief in the business. And going forward, you know, we're looking forward to the additional skills that we bring to the board. So very pleased to have them on board for the next phase of the journey.

8:47 So next page, you know, just goes into a little bit more detail on the maths. I think we can probably talk through that in more detail on the next page. Key key thing for the twenty eighths, they're exchanging their 2028 bonds into new 2031 maturity notes at 75¢ in the euro. They're also receiving 34,800,000 shares, which is approximately 19% of the equity. And then there are some work fees, you know, as part of that transaction as well. On the COVID side, the balance sheet value of the pref at the end of March was 394,000,000. You know, in return for that, they are getting just over €20,000,000 of those new 2031 notes.

9:35 They're reducing the pref balance down to £50,000,000 of amended pref, again, with an extended maturity of 2031. And as we touched on, they'll increase their equity stake up to 24.9%. The final piece is that they will receive a contingent value rights. This is a financial derivative that will sit on the balance sheet. We estimate that will have a value of about £34,000,000. We are still working through the accounting and tax treatment of that, but, obviously, taking some advice in providing that number. It has a redemption value of £270,000,000. That is basically offset against the value of the new shares that they have been given.

10:21 The way to think about that is it's a, you know, value protection mechanism for for their equity value. So as the share price recovers, the liability comes down. So I think that's a, you know, fairly novel and unique way of providing that protection whilst demonstrating their belief in recovering the business. Now the CVR has a couple of, you know, trigger trigger rights in that. So once we deliver £400,000,000 of cumulative EBITDA from closing or if the market cap gets £800,000,000, that has the rights to convert. I think in in those situations, yeah, I think your shareholders will be very pleased by the progression of the business at that stage. So worth being aware of, but, yeah, not a particular constraint.

11:11 So go to the next page. I'm sorry. Did that on my laptop rather than screen. So so a relatively busy page. So I'll just give you a bit of an outline of of what's here. On the left hand side, that is the pre transaction balance sheet and interest rate values as of March. And then on the right hand side, it's what happens post transaction. The key changes are obviously with the 2028 and with the pref, so middle and bottom of the page. I think the key key punch lines there really highlighted in green. So the net indebtedness goes from that one two six seven, which excludes the lease liabilities and that goes down to 945,000,000.

11:59 So that's that broadly £300,000,000 reduction and balance sheet liabilities. And then the ongoing servicing cost of that capital will reduce from about 125,000,000 down to 91. Now at the bottom there, we've also just brought out a maturity profile extension. So left hand side is how the balance sheet looks sorry. The maturity profile looks this time last year. And, obviously, we've now pushed that out again to give that operational recovery runway. On the interest going forward, something is worth noting, the new twenty thirty one bonds, the interest there is paid in PIC. K? So that will help us retain more cash within the business and the same for the preferred equity.

12:47 You know, the new lower value has a lower dividend rate of only 8%, so the ongoing cost of that is much reduced.

13:00 So moving on to 2026. So this page gives us the usual overview of performance. Look. I I think, yeah, as we touched on the start, yeah, key driver of the year has really been the lower volumes, which is fed through to to lower revenues. I think in particular, the second half was weaker than anticipated. Obviously, we're all aware lots of macro noise, you know, not only reducing economic activity, but also putting a little bit of a dent in consumer confidence. In the final quarter, we probably were more conservative on stock provision, particularly in our ceramics division, and you can see that in the profitability.

13:47 However, we have begun to see volumes recover volumes and revenue recover, as Jeff mentioned, in q one. That is the first time that has been consistent since our arrival business over a year ago. So really pleasing to see that, and we'll come on to the reasons. But as you know, it is outperformance of our local peers, so particularly pleasing on that front. In terms of profitability, it is worth noting that, you know, as we transition the rugs manufacturing from Belgium to Turkey that have us has obviously had an impact. So our runners division, you know, produced 9,500,000 less EBITDA than the year before. And then 2025 also benefited from about £10,000,000 of hedging benefits. Obviously, yeah, combination of those two things account for the majority of that EBITDA decline.

14:39 Yeah. Given our guidance on how volume impacts our profitability, you can see that actually a lot of hard work has been done across the business to improve, you know, the cost base of the business. And so excluding those two things, actually, EBITDA margin improved, you know, slightly by naught point 3% despite that significant volume decline. So, yeah, good performance by the team in terms of what we can control. We'll obviously keep on pushing forward with those business improvements wherever we can. So just very quickly on this this slide, I think, you know, what this brings out splits the volume and pricing dynamic by division. So I'm in two sets of slides. So you can see, you know, in every case, really, it is actually the volume decline here. So the left hand bar in each case, has generally, been the main driver.

15:37 I think, in North America, a little bit of mix shift there, which is what's bringing down that ASP rather than any pricing action. Generally, across the businesses, you know, it's a reasonable environment for for price changes, but we do obviously have quite a broad portfolio. And so a little bit of that change is really driven by mix. Within ceramics, we previously mentioned that we were kind of exiting some lower profitability

16:06 product lines. Possibly counterintuitively, those were actually some of the higher price items within our Italian business in particular. And so that's really what's brought down the ASP in ceramics. But, you know, the rest of this is actually trend wise probably, on a positive there.

16:26 Here we could see, the breakout of the EBITDA change. Again, you know, that is that is largely, margin compression. Obviously, because of the operational gearing in the business, as you guess, the volumes come down, the margins do compress, yeah, because of the gross profits, the drops drops at the bottom, you can see, you know, we have at the center looks to be saving costs and say, actually, that was an area of improvement through the year. Just quickly just touch on, exceptionals. Clearly, a lot of, a lot of moving parts here. Won't touch on everything.

17:14 The orange items are the cash items. So, whilst the headline numbers are obviously very large, actually, the cash impact, is is much smaller than that. Key ones there are really, you know, reorganization costs. We talked about what were the business changes, going on throughout the year, broadly about £21,000,000 in costs there. And then, obviously, the refinancing has incurred a number of costs, so just over 20,000,000 of cash costs for the refi. There will be more refi costs as we go through f y twenty seven, which will largely land in h two this year. Worth noting, yeah, we have taken provisions for the changes in Belgium, which is our exceptional provision charge of about £30,000,000.

18:03 There are also exceptional payment charges, which is affecting goodwill and other write downs related to, you know, historical investments, which, you know, are no longer supported by the cash flow forecast.

18:20 So moving on to cash flow itself. So, again, a relatively fulsome slide, not proposing to go through every block. Think just to pick out the the key items there. So in the kind of first teal bar, that is demonstrating the working capital inflow, we, discussed at Christmas that we were targeting a 40,000,000 inflow in steady state. Key areas there really around, you know, receivables inventory, which are in our control. So new processes put in place across the divisions. The team had done a great job of actually chasing down overdue payments that is now actually pretty well controlled. And so while that benefit has already flowed through on the inventory side, generally, are looking at SKU reduction and making sure that we are using raw materials effectively, you know, in terms of the products we are designing. So that has been charged to that inflow.

19:19 Teams have been working on the supplier side. So I think a lot of our partners, you know, have been very constructive in that. We are being more disciplined around asking for longer payment terms there. Again, that will begin to flow through as we go through this year. It's a slightly longer longer transition, I guess, get benefit of that. Now as Jake mentioned, we are beginning to see volume growth. So, yeah, having taken half of that original 40,000,000 target by March, I think the guidance for the guidance for the year ahead is that we are looking to be working capital neutral. That is effectively, you know, higher efficiency in our working capital offsetting the growth that we are expecting, you know, in the coming months. Other points mentioned just on interest costs here.

20:09 So just over £30,000,000 there in cash interest costs. As you remember, though, we have the ability to elect for pick on those first priority notes, which we did for the first payment in February. We will do that again in the August payments, where so we only pay 1% cash interest for those bonds for this period. The first full cash coupon will be due in February. So from that point, it'll be all cash pay. On CapEx for the year, you could see that split out between maintenance of about 40,000,000 and, you know, expansion in CapEx of 16,000,000. So around that 55 top level, we're expecting to keep that flat for the year, so the guarding is 55 CapEx for FY '27.

21:03 The second tier of our is on asset disposals. So the teams, yeah, have been asked to remain focused on cash generation. Some of those are small property assets. Some of those are, you know, old bits of machinery. So that person that has begun will come on to our asset sale target for the year ahead, but people are already getting on with that, which is which is great to see. In terms of other bars there, so exceptions and reorgs, we talked about kind of cash about $2,028,000,000. Sounds exceptional real m and a. Also flagged about 12.5 of m and a extend expenditure. That is largely the final, you know, material deferred m and a payment, which we made in December.

21:56 So going forward, very limited deferred payments to be made on historical m and a.

22:03 Obviously, the right hand side of the page there, yeah, there are, yeah, a number of noncash movements in the debts. So broadly, million pounds between FX, pick interest of non noncash movements. So those far two bars just provide an average for me.

22:29 K. So this page, we largely touched on it already in terms of how the the balance sheet will progress. Small, you know, senior net debt reduction as part of transaction, which is the right hand column. And, obviously, the preferred equity, you can see on the bottom right hand side, reducing very significantly. So don't suppose we can spend any time on that. So, Jeff, I think back over to you for the operational review. Thanks. So I'll just begin with a a more general comment, and then we'll get into the individual businesses because we've made a some key management changes in the last six months where it was felt that the business could benefit from renewed energy and experience in the senior management team.

23:25 So there are we've made changes in The UK flooring business, in the rugs division, and also in our ceramics business, and we're we're starting to see some results from that. The UK business is making some very short market share gains since the start of this year. One of our major competitors has struggled and continues to struggle with the difficult trading conditions, and the management team our management team are capitalizing on that. The growth that we're securing is essentially down to having superior product availability and our best in class logistics service that we have set up a number of years ago and talked about frequently for alliance.

24:11 So I think we'll continue to see good growth in the in The UK flooring business this year, both in revenue and also in profitability. It's it's very, very encouraging. The rugs business, the focus remains on execution of the transition of the manufacturing from Belgium to Turkey. We have Turkey is a much lower cost environment manufacturer. There's savings of labor and energy, and we are well advanced. This is a project that was begun about fourteen, fifteen months ago. It's scheduled to complete in calendar q three, so we've got a couple of months to go.

24:58 It's been a very substantial project. We've we've had to dismiss some 600 employees in Belgium. We've had to hire nearly 300 new employees in Turkey. We've moved some 40 odd looms, which is and these looms are generally the size of a house. These these are big pieces of kit. And trying to do that while maintaining customers service to customers has been probably more challenging than we expected. The the the managing director that runs the division makes the analogy that it's it's kind of like having to track change the the wheel, a flat tire on a car while the car is still driving along the road.

25:47 We we certainly underestimated the inefficiency as production scaled down in Belgium, and that this led to higher production costs and also disruption in shipping goods to customers. And you can see that in the the drop in earnings in the rugs business, which you can come just go to the next slide. Yeah. You can see that in the drop in volume and earnings in the rugs rugs business. However, I'm pleased to say customers continue to value a product that's made by Balta, and as a result, they've continued to place orders and there's now a back order book of nearly four months. And as the looms come into production in Turkey, we will start to catch that up and we're expecting, obviously, a that will dramatically change these numbers both in terms of volume and margin and profitability.

26:47 The ceramics division, if I talk briefly about Italy, first, the big change we've made in Italy is we consolidated production onto one fewer site. That happened in March of this year, and the savings from that consolidation is about 6,000,000 a year.

27:09 So that's been fully in effect since April 1. The it has it has left us with one empty site in Italy that we will look now to sell. So that won't be a sale on leaseback. It'll just be a sale of an empty piece of real estate, and I'll come on to that a little bit later on. In Spain, the key project has been the installation and commissioning of the v four production line. This has started in production. It is a much more efficient piece of equipment than the equipment it replaces. And as it scales up production over the next few months, margins will improve and profitability will improve in the ceramics business in Spain.

27:57 So we're expecting a much better result this year of the in the ceramics division, not relying on any major macro recovery in demand, but more because of the cost savings that we've put through the business in the last twelve months. Go to Australia.

28:16 Can see that Australia has continued to produce well. I I and remain delighted with the consistent performance of Australia. It's been a remarkably consistent business and growing business now for fifteen years, and we're seeing, again, good growth this year. It is another major competitor in that part of the world has has continued to struggle quite badly, and we've we've picked up market share gains there, and that's flowing through into the f y twenty seven performance.

28:50 The US has, in the last two years, and it's good to have, has suffered from very low housing transactions due to high mortgage rates in The US. Mortgage rates been up around 6% plus, and that has that has constrained the housing transactions severely, which flows straight through the impact on the flooring sector. However, the business has since the since balance date, so in other words, in this financial year, our North American business has secured two major customer wins that are already giving the business a material boost in revenues and earnings, and you can expect to see a much improved result out of North America in this financial year.

29:43 So we I mentioned earlier that we're looking to sell some real estate. This slide sort of gives a quick summary of of the key pieces of real estate. We're targeting this year to sell 70,000,000 of of real estate. We sold or completed you will have seen an announcement, I think, last week. We've completed on one piece of real estate, which was €34,000,000.

30:11 There are two more pieces of real estate that are on the market. Some others will be placed on the market shortly, and we've are quite confident that this year, given the quality of the real estate and the location, we will achieve 70,000,000 of real estate sales during the this financial year. So so, I mean, the the pictures on the right hand side, just a selection of bodies we're looking at, That is a broad mix of things across UK, Italy, and Spain. K? So on the right hand side, so you can see my cursor, but the pictures on the right, you know, versus manufacturing sites, top right, which, you know, would be a sale leaseback.

30:56 Bottom right, just an example of some of the unused lands that we do own, but it's adjacent to, you know, a commercial park. So planning on that is is going through to increase the value.

31:09 Bottom left here is, you know, a large distribution site. Just off the right of the picture is actually one of our large manufacturing sites. Effectively, of that is covered and uncovered distribution space as part of the consolidation within that business. That site will become free. Again, that can be sold rather than selling leaseback. And then the pictures in the top left of the right hand side are basically three of our Italian assets. So look like big buildings, but all, you know, relatively small sales, but we are working through those, you know, over the coming weeks and months. And so that portfolio is what underpins that 70,000,000 targets through the course of f y twenty seven.

31:59 There will be some additional sales in FY twenty eight, but it will be a smaller number. Okay. So the final slide here before before handing over to q and a. So this is current trading outlook. You know, really great performance in in q one. So revenue up 7%, Jeff mentioned, and volumes up 3%. This is all kind of market share or largely market share based.

32:31 Yeah. Profitability also up versus our most profitable quarter last year. So that really strong start. I think that's what gives us confidence in the year ahead. You know, this is kind of a theme that we were hoping slash expecting probably this time last year of, you know, smaller competitors beginning to struggle with the same cycle. I think it is a good demonstration that, actually, we do not need aggressive market growth to take share and grow volumes, you know, over the next couple of years. It's good to see that coming through, you know, right now. That is all about, you know, winning new clients and pushing to, you know, kind of white space within our local market. So,

33:16 yeah, as we look at the guidance for the year ahead, is really about what we have already achieved rather than hoping we're gonna do more of that for the balance of the year. Obviously, the Iran conflict, you know, has flared up a little bit over the last few days.

33:33 I think the way to think about that, obviously, the biggest impact there really is around input cost prices. So we, you know, are a user of diesel and natural for moving moving things around. That hits your p and l very quickly, obviously, because, you know, petrol prices go up. You then also have gas input prices on ceramic side. So very ballpark, you know, the cost of a ton is about 20% energy normally. And then on the synthetic carpet side, obviously, that is made from, you know, oil derivatives as well.

34:10 Now, you know, the teams have a pretty well well established playbook from the Ukraine disruption a few years ago. So I think we'd be very pleased with, you know, how quickly everyone reacted. In some markets, that has meant, you know, price increases, whether that's whether that's been relevant.

34:32 In others, actually, we use it as an opportunity to kind of reposition, you know, price points within within markets, but that is being very proactively managed. Clearly, you know, there is a bit of a disconnect between the speed at which your input prices wise and how quickly those prices can flow through to our customers. So there is a little bit of margin headwind if things continue to be be volatile.

34:59 In total, we're guiding to at least a 115,000,000 EBITDA in the year ahead. That's obviously good strong growth. That is primarily driven by those market share gains being offset by temporary margin dilution from those higher higher energy input prices. Obviously, the lowest starting volumes at the start of this year has meant that certain EBITDA improvement initiatives that were slated for FY '27 We'll probably only get the full benefit of those into FY '28 and '29 now. So

35:32 pushing back some of those those synergy gains we were targeting, but that's already factored into the 01/15. And we are assuming a gradual easing of energy prices. I don't think any of us can sit here today and say, handle part. We know which way that goes and how quickly, but we have factored in a fairly conservative level of oil and gas into how we're budgeting that. Other key pieces of guidance on cash flow. So property and asset sales, so targeting about £70,000,000. CapEx will remain in line with last year about 55. And then as we execute that move from Belgium to Turkey, some other initiatives, we expect about £55,000,000 of cash exceptionals through the year.

36:24 Along with working capital neutrality, as we've touched on previously, that basically means we're looking to have cash levels remain flat through the year. There will be a little bit of increase in debt due to kind of the PIC interests that we are incurring. But, yeah, I think well well set for the year ahead. At this point, it's pretty worth saying, you know, what's happening a bit further out. So, yeah, as I said, the v four parts, which we are now calling Saint Flame, and we moved from Belgium to Turkey, which is probably Himalaya. The run rate benefits of those, you know, will come through in f y twenty eight. K? So as well as any kind of volume or pricing growth that we'd expect to see then, we will get those cost improvements,

37:15 you know, in f in f y twenty eight. So please don't forget about those as you're building your models. And then just a reminder that for each 5% of volume growth, we would typically expect to get about 20,000,000 pounds of EBITDA improvement. So, yeah, I guess with that, I guess, over to you, Jeff, to summarize and then move on to any questions. I'll do the summary at the end, but we can just we'll we'll take questions in a minute. That's great. Thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab situated on the right hand corner of your screen. Just while the company take a few moments to review those questions submitted today, I'd like to remind you that recording of this presentation along with a copy of the slides and the published Q and A can be accessed via investor dashboard.

38:01 As you can see, we have received number of questions throughout today's presentation. Could I please ask you to read out the questions and give responses where appropriate to do so? And I'll pick up from you at the end. Okay. Thank you. So I'll read the first question, and then I think the second question could be I'll hand over to to Alex to to answer. First question is the company is guiding for earnings up about 30% in f y twenty seven with further improvements in f y twenty eight and '29. Why should investors believe that VICTORIA has reached an inflection point after several difficult years? So it's a fair question, and the most encouraging evidence is that we've already seen the first signs of recovery.

38:49 Q one f y twenty seven delivered growth in both volumes and revenue with profitability ahead of the prior year even though that was the optimum optimum quarter of f y twenty six. So I think that demonstrates that the operational improvements made during f y twenty six are beginning to translate into financial performance. The important thing to appreciate is that the ongoing recovery in earnings is not dependent solely on a market rebound. We have improved our manufacturing footprint. We've reduced costs, integrated the acquisitions more effectively, and strengthened and the result of that is that our cost base is lower, our productivity is higher, and we're more efficient.

39:38 And all those initiatives are entirely within our control and continue to be delivered. So I think we can safely say that we are through an inflection point in the at the company. Now, like, there's a question revenue for the coming year. We've talked about earnings being up 30%, but what about revenue? So so they're broadly high single digits. Right? So, yeah, probably approaching a 100,000,000 of growth is what we're targeting. The majority of that is is kind of market share and gains, as we mentioned, in The UK and Australia plus, you know, the strong growth in The US. Yeah. I think there is, you know, a little bit of outperformance we saw in q one in the grass business as well, which is basically off the back of very poor weather, which is never a good reason for poor weather last year, which didn't repeat this year.

40:36 So, yeah, that is part of the reason for that outperforming over the last few months. Okay. So we're asked how much upside exists if the flooring market recovers. And I've commented previously in notes to shareholders that prior to 2022, the sector had a twenty five year track record of volume growth of one and a half to 3% per annum and price increases contributing another two to 3%. Now we've only got a data going back for the twenty five years, but that was consistent right across that period. And since 2022, demand's been negative for each of the last four years. So absent structural changes in the sector, and we're confident there aren't any.

41:27 In other words, people will still continue to need and buy flooring, reversion to the main is a powerful concept. And that suggests to us that volume could be 20 plus percent higher than it is today. The important factor for VICTORIA is that we have quite high operational leverage in the business at the current level of volume. So as Alex said a couple of minutes ago, every incremental increase in volume strove flows through very strongly into profitability such that I think we we have a view that every 5% increase in volume contributes approximately $2,020,000,000 of operating profit. So if we think that volume is currently 20% below where it should be or maybe 25%, there is very material upside for the business as demand recovers.

42:23 What will drive that will be a factor of three main things, housing transactions, consumer discretionary spending, and interest rates. We got it. You can read out the question. My voice is getting croaky. Sorry. It's a a very long room with a lot of Zoom. So it's not a So I've had a question. Does yesterday's announcement of consensus station mean less debt or shares will be issued than originally planned? If so, how much less? So so the announcement yesterday was that at least 90% of bondholders have consented.

43:09 What that means is that we can implement that consent solicitation, and we know that that will succeed when we get the documents out. The way that is structured is that anyone who does not consent basically has their bonds written down to zero. So, you know, that process will happen over the next few months. So, you know, as we sit here today, we don't we don't know if people won't turn up. If they don't, I guess, you know, 10% of the 166,000,000 is about €16,000,000 of potential reduction. I guess worth noting the company does own approximately €8,000,000 of bonds. Those were purchased earlier in h two.

43:57 You know, obviously, the reason I'd say, obviously, the reason for that was a block of bonds became available. Clearly, we were very keen to secure voting percentages, and so we kind took the opportunity to make sure those didn't fall into the wrong hats. So, obviously, as we go through that consent, we won't be able to vote into that. And so that debt will get written down, to zero. That is held on the balance sheet of March, you know, netted down anyway. So, it doesn't change the March number. But if you're projecting forward, you should assume, that bonds or new 2PN level is lower by that 8,000,020 eights, which will turn to 6,000,000 lower 2PNs. So why should investors believe margins can recover?

44:49 I think margins have been temporarily depressed by exceptionally low volumes and some very dramatic changes in input cost, particularly energy and oil based raw raw materials over the last three or four years. That that has begun with the the war in Ukraine, which drove up energy prices dramatically and raw material input prices. And obviously, Iran has happened more recently. So that's been the reason for the compression on the margins. However, historically, Victoria's generated EBITDA margins in the mid to high teens for nearly a decade. So I would I would suggest that the evidence exists, but that's that is a realistic possibility in in as as demand recovers and as we put through some of these productivity improvements.

45:44 It's important that despite the much lower demand and the operational leverage impact of that lower demand, Our belief, which we've shared previously with with investors, that we can secure another 50,000,000 of savings beyond where we were last year is sufficient to support to restore mid teen EBITDA margins even before there's a cyclical recovery. So the margins are currently running at about 9%. We put through another 50,000,000 of savings, which we said is achievable or we believe is achievable. That gets us to mid teens even before there is a recovery in volume and that will which drive which will drive margins up further because of operational leverage.

46:31 So in the future, margins will benefit from both the delivery of the productivity improvements and also a recovery in in demand. That one? Yep. So next one is going with many competitors under pressure, do you see opportunities to emerge from this downturn with a structurally stronger competitive position? So I think the simple answer is yes. Right? So, yeah, across our markets, we have different market shares. I think, you know, where we are a larger player, that is obviously the bigger opportunity. As we sit at group, we have choices about where we deploy capital.

47:17 I think we are looking to be very disciplined around, where we put more money to work. As with everything, you know, you usually, get better returns where you are already strongest. And so, certainly, you know, we've highlighted The UK and Australia as areas where, you know, we are able to push into a space where smaller competitors are struggling. So, yes, I think, you know, we will be able to double down on that in, you know, most of our geographies. I've had a question on net cash flow change from Turkey in FY '27, Turkey savings minus the Belgium costs.

48:06 We'll look in terms of the actual transition itself. So we've obviously completed that first Belgium sale. The net proceeds there were probably close to £25,000,000. We are looking to another one of the three sales within the year. You know, that will mean that, yeah, the vast majority of the transition costs are covered in FY '27. Third and final sale in Belgium will probably slip into FY '28, at which point the transition costs will have been all covered. Now as to if acquisitions are still part of a long term strategy, I think the immediate focus of the management team is on execution of the of the various internal projects to improve earnings and delever the the the business.

49:04 So that is what we are fully focused on today. However, even over the last two or three years, we've maintained contact with potential opportunities in the industry, and I'm not going to rule out the possibility to conduct leverage enhancing acquisitions or divestments where it where it is possible to get a very attractive price for a noncore asset. So acquisitions, divestments remain part of the strategy, but I think we're focused in the short term fully on just executing these projects. And then just to clarify, when we say leveraging, we mean deleveraging.

49:53 So, you know, obviously, if there are opportunities that come at a, you know, very low multiple, you know, if we can fund those, that actually delevers the business. Clearly, synergies are a big part of that. You know, I would be surprised if those end up being kind of, you know, big swings. Right? And kind of, you know, the clearer and quicker execution opportunities will be the smaller ones. So, you know, we're certainly open to those as and when they come up. I think, you know, there is a big focus on capital discipline within the business. Clearly, we need to be comfortable on the level of liquidity that we are rebuilding. We also have the opportunity to invest in our own debt. So when we look at those kind of senior bonds, those traded at 20% plus yields, that's obviously a, you know, an attractive opportunity as we sit sit here today. And so, you know, we are gonna look at the kind of benchmarking between external investment and, you know, call it internal investment when we're making those decisions.

51:03 We're next. You choose. The the highest is struggling. There's a lot of hate. Are you experiencing any increase in direct sales to retailers rather than via distributors? Do you want take that one on? Yeah. Look, I I'm assuming this refers to The UK business. And given given the sort of well known difficulties, a major distributor is in at the present time. So we are certainly seeing growth in revenue in The UK and market share gains. Our focus is or our business strategy in The UK is to supply retailers.

51:56 We regard retailers as our partners, and our focus is on continuing to supply retailers who can who then in turn supply consumers and some of the some of the the individual sole traders doing fitting. We are we are not going to now or in the future compete with our our retailers. Okay. Next one, just on Coke. So so why would Coke feel comfortable becoming your largest shareholder, and what near term upside do they see? So I think, yeah, as we kind of talked about earlier, we have spent a lot of time with the Coke team over the last probably three to six months.

52:46 That has been kind of a full diligence exercise, you know, meeting most of the local management teams. Look. I think they, you know, have done a good job to understand the key drivers of the business. Clearly, they are big industrialists themselves. I think they do understand that we operate in cyclical markets and that actually they buy into that recovery longer term. I think we are pretty well aligned in terms of strategy as well. I think the opportunity for integration savings as well is is also exciting to them. Yeah. As I said earlier, we are looking forward to them, you know, having a bit more involvement on the board and the kind of skills that they can bring to us going forward because I think that'll be for the benefit of all shareholders.

53:31 Yeah. Coke a good pass. We don't necessarily see eye to eye on everything as you can imagine, but they they I cannot I I cannot ask for better partners than Coke on the business. The current board appointee of Coke has been extremely helpful over the last eighteen months in some with some of these projects providing support and analysis and advice. So I'm I'm I'm very pleased to that we have Kaiju as a partner and look for their economic creatures. They did not agree to the they did not do the the refinancing deal that you see because because of soft squishy reasons. They did it purely because they can see the potential upside of Victoria as the market recovers and as the projects gets executed, and the result of that will be a very significant recovery in in earnings.

54:38 And because of the high financial leverage in the business at the moment, the recovery in earnings will drive equity equity value creation very, very quickly. Yep. A couple of different questions on asset sales. Few people asking sort of the split of sale and leasebacks and pure sales in the real estate. That is broadly fifty fifty. So, yeah, that could include a banner. Yeah. So that is what we're looking at there. And then there's a question about revenue decline in UK soft flooring. So I would say the soft flooring division is combined UK artificial grass and rugs.

55:32 What we've seen last year was particularly a reduction in the rugs business. As Jeff touched on, within The UK itself, that we've seen double digit growth, in in the first quarter. So, that's not broken out for you in the numbers, but, yeah, very clear that that is coming through. So we've we've actually run out of time. I like the the I there's been a flood of questions. We've only got two minutes left to go. Think three minutes might be. So I think what we'll need to do is probably pause the questions and just what what I'll endeavor to do today is get some of these get the questions uploaded and along with answers because there's there's actually some very good questions here on on quite a lot of detail.

56:20 But I've just simply run out of time in the hour that we had to to answer them all. That's great. Thank you for answering these questions. You can have investors, and, of course, the company can review all questions submitted today, and we'll publish those responses on the investor meet company platform. Just before redirecting investors to provide you with their feedback, which is particularly important to the company, Jeff, could I please just ask you for a few closing comments? Look. I I think the key thing for us today and for you as investors is twofold. One, can we deliver on the the project plans? Can we execute on them? Because they have a very, very material impact, obviously, on earnings as they come through, both in f y twenty seven and through into f y twenty eight.

57:08 So that would be one significant question I would be asking is is can the company deliver on those? And, firstly, I think there's the the signs are from the outside are encouraging. We've had a very good q q one, very, very good q one. And yet and yet, we're still waiting for the two major projects to start delivering through into the into their numbers. So I feel very good about this year. We have been deliberately conservative in our guidance this year. You will have heard Alex saying that we will we expect to generate at least a 115,000,000 of EBITDA, that we have deliberately been conservative.

57:55 We're acutely aware that in the last three years, we have missed numbers on a number of occasions, and we need to rebuild trust with the markets. The first sorry. From 2012 throughout to 2022, we had something like 43 consecutive profit upgrades. Bar one, we had so we were so for ten years, the company consistently delivered profit upgrades, and I know the market, you know, what we saw in the equity value reflected that. So after three years of poor results, we are acutely aware of the need to rebuild trust, and so we've pitched our guidance conservatively, and we'll we'll see how the year unfolds.

58:44 But thank you very much for joining today. We'll get these as many of these questions answered for you and posted on the InvestoMe website in in before the end of the day. That's great. Thank you for updating investors today. Can I please ask investors not to close the session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations? This will only take a few moments to complete, and I'm sure it'll be greatly valued by the company. On behalf of the management team, we'd like to thank you for attending today's presentation, and good afternoon to you all.