Victoria (LSE:VCP) — Interim Results

0:00 Good afternoon, and welcome to the VICTORIA PLC results investor presentation. Throughout this quarter presentation, investors will be in listen only mode. Questions are encouraged, and they can be submitted at any time using the q and a tab situated in the right hand corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question it receives in the meeting itself. Hope the company can review all the questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll. And I'd now like to hand you over to executive chairman, Jeff Walden. Good afternoon, sir.

0:32 Good afternoon, everybody, and thank you for joining the call. The demand for flooring products continue to be materially below the twenty five year trend line, during the first half of this financial year due to macroeconomic conditions. However, it is stabilizing. And after the large drops we've seen in previous years, it was more or less flat for demand, but subdued. Management's therefore focusing on self help actions to improve the efficiency and take market share. Firstly, by accelerating the integration of recent acquisitions, and secondly, by aggressively going after every available cost saving. As a result, 12,000,000 of cost has been removed during h one, and there is further savings totaling £20,000,000 per annum are underway that will be fully realized by, March of next year.

1:29 So that the impact for FY '26 will be 32,000,000 of of savings. And with that, I'll hand over to Brian to take you through the h one numbers. Thank you, Jeff. Good afternoon, everyone. I'll run through some of VICTORIA's key financial metrics for for a period where demands has continued to be weak, and we have been focused on managing costs and liquidity. I will then hand it over to Philip, who will take you through more detail on each of the divisions.

1:56 The financial information presented here is the continuing operations of VICTORIA. As subsequent to the period end, in November, we disposed of Grancer, our ceramic tiles business in Turkey, and its performance has been excluded from continuing operations in this period and comparative periods and included in discontinued operations. Slide six shows the group results for the period for the continuing operations. As we updated the market in October, we saw a continuation of tough trading conditions in the first half of the financial year, and this can be seen in volumes being lower by 2.1% or 1,600,000 square meters compared with the first half of FY twenty four. The knock on impact of the volume decline was revenue at 569,000,000, being 9% lower than the period the prior period with all divisions except Australia being impacted.

2:44 Revenue declined more than volume as a result of a mixed impact in UK and Europe soft flooring, where one of our businesses saw a significant increase in volumes of lower priced products. From a margin perspective, UK and Europe soft flooring and UK and Europe ceramic tiles were particularly impacted by the drop off in volumes falling through to the bottom line despite cost savings in both divisions. EBITDA margin in Australia improved, and North America remained relatively stable as those divisions have a higher level of distribution businesses compared to the other divisions. In line with the guidance we gave the market in October, we delivered EBITDA of EUR 50,200,000 and EBITDA margin of 8.8%. Moving on to slide seven. This slide shows exceptional and non underlying items.

3:31 These are items that are either irregular and therefore included in the assessment of the business performance would lead to a distortion of trends or technical accounting adjustments, which ensure that the group's financial statements are in compliance by IFRS, but do not reflect the operating performance of the business at period or in their goals. There are only two items which are cash and the rest are noncash. The cash items are acquisition and disposal related costs. This de minimis amount relates to fees paid to advisers for acquisition targets, which we were tracking in the period. The other cash item is reorganization costs in relation to the integration of our acquisitions, mainly Valsa. And of these reorganization costs, 1,100,000 is a cash item for redundancies, which we could not provide for the prior years, which is partly offset by a provision release of 800,000.

4:22 Overall, cash acceptables have fallen significantly from prior years. And as we indicated in our FY twenty four year end presentation, we expect these costs to be below single millions going forward. The remaining items on this page are noncash items. I'll just quickly run through the the the relevant ones. Impairments of intangible and intangible assets as a result of accounting standards were required to assess the value of goodwill, intangible, and tangible assets when there's an indication of impairments. The current low level of market demand is such an indication, and as a result, we were required to assess the current value of all of our businesses at the period end. To do this, we prepared discounted cash flow models using current trading as the base. Given where demand has been in the last two years, these models start from a low base and show an impairment to two of our businesses.

5:11 As a result, we impaired assets of 80,000,000 in our Spanish ceramics cash generating unit along with assets of 40,000,000 in our gross cash generating unit. The next item to point out on this slide is the gain on disposal of fixed assets and investments. In September, we entered into a sale leaseback arrangement on a property in Belgium, which generated 30,000,000 of cash and resulted in a a gain against book value of 2,900,000. The next item is the loss and disposal of subsidiary. During the period, we disposed of Hannover Flooring, a subsidiary in our UK and Europe soft flooring business, which results in this loss. A very small item in the cash flow is sorry. Not in excuse me. In the non underlying items relates to acquisition related performance plans.

5:57 These are noncash p and l charges related to earn out liabilities for businesses which we acquired using that earn out mechanism. As we've not acquired any business using this mechanism in the last couple of years, this adjustment has become smaller and continue to do so. We've also continued to amortize our acquired intangibles as required by IFRS, and we exclude the amortization of these from underlying performance as once the acquired intangibles have been fully auto amortized, they will not be replaced. We have also excluded depreciation on the fair value uplift, of properties that we've acquired. This is because we treat this depreciation as non underlying as we do not revalue other properties in the group and is therefore does not represent underlying performance of the business. Hyperinflation as in previous periods, we've excluded this.

6:45 And you remember that under IFRS, we're required in '9 in f y twenty three to start to adopt hyperinflation accounting for the businesses that we operate in Turkey as cumulative inflation over the previous three years was in excess of a 100%, and this continues to be the case. All of the income statement and balance sheet items have been reindexed to update them for a notional purchasing power. We do not believe that the indexation reflects the underlying performance of those businesses. And then just on the financial, items, there are some adjustments which are noncash and therefore preferred equity, and this relates to the, the payment in time that we have on the preferred equity. And that's it in terms of major items from a a exceptional point of view. Moving on to cash generation.

7:34 The operating cash flow before interest tax and exceptional items was 31,700,000 for the period compared with 54.8 in the same period last year. The positive news on this is the, the change in working capital. We saw an inflow of 2,100,000 in the first half versus an outflow of 20,700,000 in the same period last year as our management team is focused on generating cash by reducing working capital. This has been delivered despite a reduction in demand and against the historical seasonality, which tended to see a buildup in working capital in the first half of the year. We expect to see further improvements in working capital in the remainder of FY '25. A stake focus remains on this with each management team having targets and incentives to achieve reductions.

8:21 Other items to note on this slide are the CapEx items. There were some in relation to the restructuring of Valsa, which have now become a much smaller number. And we expect the total CapEx for the year to be 60,000,000 in line with FY '24 despite the timing of the CapEx spend being slightly ahead of the same period last year. With the sale and leaseback entered into on the property in Belgium, we received 30,000,000 of cash in September this year, which is shown on the bottom half of this table. Exceptional cash items mainly relate to redundancies for restructuring in Valsa. With the completion of the major part of restructuring, this amount has fallen substantially from prior years. We expect circa $10,000,000 will flow out for the full year FY '25.

9:08 On slide nine, we've got a graphical representation of some of the numbers that we've just talked about on slide eight. We ended the period with net debt of 658,200,000, in line with the March 2024 position. The major movements here are the free cash flow before exceptional items, which we just discussed, of 12,700,000, along with the expansionary CapEx and cost for synergy projects mainly related to Valsa of nine point three. You'll also see the sales proceeds from the, the proceeds, sorry, from the sale leaseback of the Belgian property, and a small, inflow from disposal of the subsidiary in that thirty one point six. Granus' net debt increased by 15,200,000 in the in the period, and that that's a part of the bridging item.

9:57 The proceeds for this disposal of 10,000,000 will be reported in h two. We factored 8,000,000 less receivables, and also that was funded out of the the net debt that we show on the slide. And finally, we had a positive FX impact of 17,600,000 related to the revaluation for FX of our euro your borrowings. On the next slide, the net debt, we you can see the net debt of, 652,800,000 is pretty much in line with, with the March 24 closing position, but this results in a leverage of 6.2 times. You'll also see from the slide that we've over 68 point or 68,000,000 of net cash compared to 73 at March, and included in this net cash was an RCF drawing of 15,000,000, which is in line with the position at the end of March.

10:52 This net cash position combined with undrawn facilities at the end of the period means we have significant liquidity of over 200,000,000. Management is committed to reducing leverage ahead of the next round of refinancing by generating cash from operations and the sale of noncore assets. This includes the disposal of Granite Granite Surf, which had a point five times beneficial impact on leverage. And finally, for me on slide 11, at the FY twenty four year end presentation in June, we highlighted that whilst we could not control market demand, we will be taking a number of self help actions to limit the impacts on our liquidity of the lower demand. Firstly, we've taken 12,000,000 of cost out of the business when compared to the same period last year, and this has come from headcount reduction from restructuring and a focus on procurement.

11:39 We expect the benefits of these programs to continue in h two and have a bigger impact in f y twenty six. Secondly, working capital has improved with an inflow in the first half as discussed earlier, and we're on target to achieve further improvement in h two. Thirdly, we realized the benefits of the sale and leaseback transaction from a Belgian property of 30,000,000 and with potential further property monetization in h 2. And finally, while not contemplated at the time of the, year end announcement, in November, we disposed of Grand Assert, improving our balance sheet by 30,000,000, which, as said, had a a impact on leverage of reducing it by point five times. And we'll continue to focus on managing costs and liquidity into the second half. And with that, I'll hand you to Foote. Thank you, Brian. Good afternoon to all.

12:27 The first slide, Brian, yeah, on the cost saving initiatives. Okay. The first slide gives you a perfect overview of the cost savings. We've done an FY '25 of 12,000,000 and a cumulative forecast of FY '26 for 32,000,000. And this is all the initiatives we've currently been deploying. And I will explain what drives all of that, all of these cost cutting initiatives in the different divisions. Yeah? So the first division is The UK and Europe soft flooring. As you can see, there has been a severe decline in revenue, and especially in earnings. So what we all do in every division, we will first explain the environment, and then, talk about mitigating actions we've been lining up.

13:21 So as mentioned earlier, the top line decline is, due to a drop in demand, which has had a severe impact on the cost absorption. Some of the volume gains, which we've had in certain pockets of, of the market, have been offset by pricing pressure and a negative, product mix. There was also, a large impact due to the increase of the cost of distribution, especially with our distribution logistics set up in UK. We've had two distribution outlets which have been which have had lease reviews to market conditions. So and this has impacted earnings as well in the first half year and will continue to be in the second half.

14:10 And then there is the immediate effect of the demise of carpet chart. So but it is fair to say that

14:19 a competitor, TAPI, who's the largest retailer in UK, has taken over from the receivership 54 shops. And this should or is in the process to to make us recover about a third of the revenue and probably another third to our other channels to all the retailers going forward. Then in that same environment, we need to mention as well that The US market has been weak in terms of demand for rugs. So this is the landscape we've been operating in, so tough trading conditions. And for these reasons, we have conducted sharp mitigating actions for to start off with Broad Room. So we have focused on reduction of overheads.

15:06 We've been integrating two brands, Carpetline Direct and UMACI with other existing brands, Ulta and VICTORIA. So we've been eliminating the northern commercial setup, and this has saved us about 50 FTEs. So there was a reduction of sales fee, reduction of the SKUs, administration, marketing, and other. So the impact of what we've done in Broadbloom was about 1,300,000 ton for FY '25, and we reckon the full time the full year effect is gonna be about 2,800,000. It has also working capital effect of for a saving of £4,000,000 on working capital.

15:54 There is also the full completion of the integration of the Balda ranges in The UK since we have closed the factory in Belgium. Part of that collection is currently being sourced in Turkey, and the South Wales factory and the Yorkshire factory can cope with the volume since we moved also some of the capacity from Belgium into these plants. So interesting, want to make is that there is a solid double digit growth in cut lengths. If we look at the the four week average of what we've seen in the first half and continuing into the second half, there's a four week average of plus 15% versus the same year as last year in the cut lengths. And I just want to reiterate that this cut line business is the core of our business. It comes with a service proposition, which we deliver to Alliance, and Alliance is our logistics leg of the VICTORIA group in UK.

16:52 So Alliance talking about Alliance, it provides a best in class service in UK. We've done in the first half 550,000 order lines. That could be a role. That could be a cut with an OTIF score of 99.8 on all available stock. 88% was delivered the next day, and 97% was delivered within forty eight hours. We also expanded our IT systems into The Republic Of Ireland and Northern Ireland. So the Irish retailers can benefit from the same service as in The UK. Important for alliances, alliance does not only work for the VICTORIA brands. Alliance also works for third parties. So and Alliance has managed to grow its business with 13 non VICTORIA brands.

17:46 In terms of green initiatives, alliance is on track to move about 9,000,000 square meters of carpet from the VICTORIA manufacturing site in South Of Wales to the alliance distribution fully carbon free, and that is done with the small fleet which we have invested in recently of electric vehicles. We are also expanding. This is something we said in the in the previous presentations so that we will be expanding on the hard floating offer. This is what we've done. So we've added laminate and l e d u collection and not only into one sales team, but in a multiple of sales teams. For underlay, which is also an important part of the business, so to remind you, we have two plants in in UK in underlay. One is interfloor and one is easy floor. So we have merged the manufacturing of underlay and accessories and optimized the commercial policy.

18:44 We've currently integrated the two underlay manufacturing facilities in UK, which include closure of a plant in Scotland that was in Dumfries where we were making the accessories, and the upgrade of a manufacturing plant through the acquisition of a small competing manufacturer in the crumb underlay. So all of this has happened. The project, what we call project brief, so that was good for a cost saving of £1,000,000 in this financial year and will be £4,000,000 in the next financial year. Then for RUX, we've executed on the planned closure complete sorry, process completed with increased manufacturing footprint in Turkey, partially in Turkey, partially in another plant in Belgium.

19:35 So we are improving or we are we are moving more business to Turkey because its impact on the COGS. And there's further reduction of FTEs planned in Belgium and US distribution. Already 700 FTEs, we've we've already reduced 700 FTEs since, we first acquired Balta two years ago. All the Balta projects, including last week's further reduction of another 28 FTEs account in h one, of this financial year for £5,000,000 and, in f y twenty six will be £10,000,000. Furthermore, there's also pricing initiatives, price increase initiatives because, we will have increased labor cost in Belgium and in Turkey, as of the beginning of next year.

20:33 So next to that, there's also an ambitious plan to boost the productivity in Belgium with 1015%, in Turkey. So this is for The UK soft flooring. So then we move to the next to the second reported division, which is UK and Europe ceramics. Again, first, we present the environment. So overall, as I mentioned before, soft demand. We've also seen import of much cheaper Indian product, but we need to mention there that there is imminent import tariffs imposed by the US chamber of commerce in The US and potential tariffs will be luring in Europe, and that could soften the pain going forward. What we've also seen in the environment of of ceramics is new market entrants, what we call category killers.

21:25 Because of the pressure of the ceramics volume, some of the big manufacturers in Spain and in Italy have entered the more margin enhanced service proposition, and they have come with a different price setting, which has put some pressure on prices. We've also continued in the first half, probably for a bit too long, our margin policy, and we have now reviewed, a more margin or a more volume driven brand proposition. A bit late in the process, but, okay, we're mitigating that action, as we speak. So this is the environment. What have we done about it? So we have taken aggressive action to mitigate the effects of low demand whilst we wanted to ensure also the production capacity.

22:15 So what we've done, we've intensified intensified the the approach to integrate the the ceramics group in Italy and Spain. So we've reset the organizational structure at ceramics group level, not not so much in the individual countries. So we're working much more as an integrated group, and we have executed on the allocation of specific sizes to plant across geographies. So we've also been rightsizing the operational base. I think Brian and Jeff had just mentioned also the recent divestment of Grangesa in Turkey, whilst having continued access to cost effective towns, through sourcing agreement.

23:04 So we've divested, but we've made with the buyer a good solid sourcing agreement, so that we are in a position, to to buy product, at the equivalent price of our manufactured price. We've also we're we're pretty strong in ceramics in the in the small size offer and in the DIY channel. So we do that to and Serra brands, and we will further intensify that piece or that part of the market to our other Spanish brands as well. Important as well here, and this is in terms of the cost the COGS reduction. So the decision was made to install a super efficient line in the Saloni factory in Spain, which will still take twelve months to complete.

24:00 But and this project implies the installation of it's basically a longer kiln with a continuous press. All of these initiatives should bring us an extra £3,000,000 into FY twenty six next to some of the other initiatives which we're currently conducting to to reduce the cost base in Spain and in Italy. The third division we report is is Australia. So as you can see, there's only good news from Australia, so they are performing to budget. The margin has been well maintained in in despite of some of the demand softness, we've seen even in Australia.

24:49 So all segments in corporate or whether that is, synthetic or in wool, also in Nandaleh have performed, to budget. We've seen some more pressure in the LVT segment because there's more import from China and from Vietnam. There's a few more distributors on LVT. This has driven some more competition and some more price pressure. But in terms of development, we are have located a few niches in that product group where we would have profitable continued growth. So the likelihood of Australia to perform in half two as it has done in h one is is very likely.

25:35 Fourth division, we are presenting is North America. The same overall demand softness in flooring products, we've seen and this is what has has put a lot of pressure on the margin. We've seen a rise in COGS due to the sea freight, which has been absorbed by the business for most. And, of course, this has weighted on the on the margin. And we did that to protect our market share. In US, it's maybe important to remind that in The US, we only have distribution facilities. We are not manufacturing at all. We only distribute. So anything we bring in or anything we sell is being brought in either from the Far East or from Europe. So the impact of a container cost rise is is is massive.

26:28 Yep. So and next to that, in that same environment, as we're talking about the environment we're trading in, so we we've seen some East And West Coast disruption as well in the first half. So the mitigating actions we've been undertaking, partially, we've been redoing the product architecture, and we've scaled back on some of the new introductions we've done earlier this year at surfaces. We've done product introductions in laminate and LVT. We've scaled back a little bit on these product introductions because we want to manage the working capital in a in in in a better way. So the warehouse capacity also will be integrated with Vault of Brooks and IWT disorder.

27:17 So we have different warehouses in in The US, all on the East Coast, in in Charleston, in Palm City, then in Roman and Savannah. So to the different product groups, most of that will be integrated going forward. The commercial, then there is commercial excellence initiatives as well to improve the profitability, including minimum order quantity policies, improved inventory positioning, and pricing enhancement to achieve improved margin performance and reduce the transportation spend. So all of that is in the process of happening and should bring us in f y twenty six about $7,500,000.6000000 pounds.

28:06 Important to know as well, so that we've been able to negotiate solid cost cuts at the corporate factories in the Far East, so which will help to drive the COGS down. There's been also across the board price increases to offset some of the increases in in these COGS, albeit we haven't done much of that because we wanted asset earlier, protect the market share. But still, we will find ourselves in a position, to do that in the next few months, and this should offset some extra margin in this financial year. So that was the last reported division. Then a quick word on the outlook.

28:52 So what we see is that some of the macroeconomic factors are becoming more favorable for demand recovery. We've seen some interest reduction, and the likelihood of further interest cuts is there. But, okay, it is not not happened yet. So we we have not seen the impact yet, but we're expecting there to be an impact. So the as well is that the production production capacity has been maintained. So this is very important. So it's not that we have just tried to get rid of production capacity even when we were selling.

29:34 Have made, as I explained, that deal so that we could be buying at manufactured cost. So it's important to have these third party manufacturing facilities as well. And then the operational leverage, so the the cost reduction we've done and the efficiency improvements should improve also our operating leverage. Then there's a there's a few or there's a couple of slides in in the deck, which talks about the the drivers of of flooring demand. So, important is is the replacement cycle. Improvement and repair, is very important for our business. 80% of our business is improvement and repair. It's not so much the the construction and the new construction.

30:26 So we are more in in that repair market. So the housing transaction is an important driver. So in in in the housing transactions, it's important to see that every transaction bring brings almost two different orders on of the the the buyer or the consume not the consumer. The buyer leaving the house and another one to get into the new house. So there's a lot a lot of activities. Housing transactions are very important for us. Of course, consumer confidence

31:00 is a very important one. K? And the drivers for consumer confidence is, okay, what happens to my wage, the wage growth, employment, security is important as well. And then the consumer discretionary spending is important to track. So this can be this can be seen as lower mortgage rates because of the interest rate cuts, the wage growth, or a lower inflation even, is which is helpful to improve the discretionary spending. So last point there in in the slide is is that floating is a stable product with a very long growth trend and then the sewage replacement assured replacement cycle. So, some some of the the, the indicators, which are tracked or they belong, below. So the higher household formation, the broad housing shortages, new construction, as part of that. But the main drivers are the first four drivers, on the page here.

32:07 Brian, I think, on the next slide. Yes. Thank you, Philip. So, as we said earlier, we can't control demands, but the business is still focused on growing cash generation. You would have seen that the exceptional costs has come down year on year in terms of the cash costs for reorganization,

32:27 and we expect that trend to continue. Capital expenditure has reduced back to a normal level of 60,000,000 after the reorganize of the restructuring of the Valsa acquisition. We've also talked earlier on about the improvement of working capital. After three consecutive years of increase, we're starting to see a reduction in that based on the good work of the teams in the business. We have sold some noncore assets. We had we were looking at 50,000,000 worth of property in the, at the year end announcements, in back in June, and we've realized, €40,000,000, 30,000,000 of issuance sterling in the first half of the year. I think there's a question that we submitted already. We have got on our balance sheet at book value over a 100,000,000 sterling worth of real estate, which if we decided to to to monetize that, then that would be a significantly higher value than the book value when we went to monetize that at market value.

33:25 We also disposed of Granocer, which is which is realized €36,800,000, and that's helped to reduce the the leverage in the business. And growing earnings, again, we've reduced cost year on year by 12,000,000 over the last eighteen months up to September. That's around about 35,000,000 that we've taken out with further cost to come out of the business in the second half of the year and and into FY '26.

33:53 Jeff, you want Yep. So I think in summary, it's the board of management, as you know, are very large shareholders in the business, and we remain very positive about the future of the company and very committed to its success. Firstly, as we've identified, here, the fundamental drivers for the foreign sector remain positive, notwithstanding the temporary demand, which is a result of macroeconomic conditions. But, we are confident that demand will normalize, in due course. The advantage of the cost cutting that we've made over the last eighteen months and are continuing to make today is that the company is now vastly more efficient. And although some of these cost savings have been masked by the drop in volume,

34:49 as Brian has just highlighted, we've taken out another 12,000,000 of cost in the first half of this year. There's 20,000,000 of cost coming out in projects being executed today. These are the this 20,000,000 is a defined number, and the which was in that earlier slide where we identified exactly where the cost is coming from. And the impact on f y twenty six will be a total of 32,000,000, of less cost than, we were expecting earlier. So the result of that is that even with subdued demand,

35:25 with a steady state demand where it sits today, we we believe we have a very clear path to mid teen EBITDA margins. And should demand recover or when it recovers, we believe those EBITDA margins can get back to the high teens. So with now, we'll move to questions. Perfect. Thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions. You can do that just based on the q and a tab, which is situated on the top right hand corner of your screen. But just while the company take a few moments to review the questions that have been submitted today, I'd like to remind you that the recording of this presentation along with a copy of the slides on the published Q and A can be accessed via your investor dashboard. As you can see, we have received a number of questions throughout today's presentation.

36:08 Brian, at this point, if I could just hand over to you to share the q and a, that'd great, and then I'll pick up from you at the end. Thank you. Jeff, did you wanna repeat that? Look. There's actually been quite a large number of questions submitted during during the presentation.

36:22 And so, rather than read each one out individually where they are very similar or largely duplicate, I'll I'll be combining them. However, nonetheless, I don't think we'll actually have time to to get through all of the questions.

36:38 The first question that we'll talk about or the first item is about potential for asset sales. Brian mentioned a few minutes ago that we have sold some real estate and noncore assets during the year to date. We have

36:58 further potential asset sales in terms of both the individual operating units. There there is no particular reason why we couldn't sell off certain divisions of the business should we feel there was a need to do so, and should the and should the valuation be sufficiently attractive to the business, that would obviously have a very material impact on the cash position of the company and deleveraging. So there is a potential, but we have nothing actively in play. There was also a question on the real estate values. We where Brian said the book value is in excess of a 100,000,000, but the market value is a multiple of that.

37:44 That's probably about as much as we should would share on on the market value, but we have looked at the real estate values, which are a multiple of the book value.

37:54 Probably a question for Philip. There is asked about where with the market being as challenging as it is, do we expect an increase in bad debts from our retailers in excess of historic levels? Yeah. No. We we are closely monitoring that. We did that we started doing that about six months ago. And, of course, there was the demise of of Cartagright. We've only been hit pretty pretty small there. We continue to monitor that whether that's in Europe, on the continent, or whether in The UK. So we we keep very good record. So I can't see I can't see that happening in the because also it's important to mention that we are very widespread.

38:45 So our customer base, have about on the continent, we have about 2,000 customers. In UK, we have about 4,000 customers. So the concentration of of our debtors is is there there's not a big concentration of debtors. So I think the risk is not bigger than what it was about six months or one year ago. Okay. Yeah.

39:15 So there's a question in terms of the the cash balance. So on the face of the balance sheet, we show a cash balance of 92,900,000. And on slide 10, we show a cash balance of 68.8. So on the balance sheet, that is gross cash of 92.9. From that, we need to deduct the, the RCF drawing of 15,000,000, and we also have some overdrafts, around the rest of the business, which brings us back to 68.8. And the RCF and the overdrafts are included under current liabilities in other financial liabilities. So part of that 81.5 other financial liabilities is the RCF joint plus overdrafts. Hello? There's a yeah. Sorry. I was gonna There there's also a question on the future of of Saloni. I have seen so the future of Saloni is is is bright.

40:07 So first of all, Saloni, for the people who don't know the company and the and the brand, Saloni is one of our Spanish brands and is mainly focused on the the construction business with good export to France and Germany, but also with a a good foothold on the Spanish market. So and don't forget, as I mentioned in the presentation as well, that we will be installing a complete new line, so which will drive the the cost down. So we we can be or we can stay very competitive on the southern ramp going forward. So this is the o two k is good. Jeff, did you other quick another question more. And did you around sales strategy?

40:52 Does VICTORIA intend to focus more on selling direct to retailers or via distributors? No. No. Okay. So so, clearly, the the whole the whole company, the whole strategy in UK is driven for retailer. The retailer is our friend. So we are not we do some business in private label to distribution, but the core focus is retail. This is why we've invested over the last years quite intensively on the logistics platform. We have three warehouses in UK. And as I said earlier in the presentation, we do both 550,000 order lines in the first in the first half. So this can be full rolls. This can be cuts. So we are interested. This is the prime business of VICTORIA.

41:41 This is the cutting business. So okay. Distribution, if need be, yes. By preference, retail. Yeah. And we are not opening trade counters as well for people because that was one of the questions as well. We're not opening trade counters. So we we fully support the retailer. Another question for you, Phil. Oh, okay. Yeah. How are you addressing pricing pressure from manufacturers based in low cost countries like India and China and and so on coming into both United States and also into Europe exporting carpet and tiles? Well, first of all, in The US, so as I said, we we are not a manufacturer. We are distributed. So if we want, we can take advantage of these low cost as well. So, ultimately, what is important is the bottom line. So if we and this is also something we've done in the past. If we decide to do so, we we can buy from India as well and sell if we make a good profit out of that. So we we are not forced to sell into The US. So the most important market in ceramics is the European market.

42:51 And so we are we will defend, as I explained, we will defend our strategy is to to protect that margin set segment. Yes. We have had some new entrants, but we are looking for pockets in the market. We are not a massive volume supplier. We're looking for pockets in the market to get away from that price pressure and that import. So one of them is these small tires, which we are which we are doing and which we are pushing. Another segment is the DIY with the service we delivered and the the the new product introductions which we're doing. So we continuously monitor the base to try and protect the margin. But, okay, there's some basic volume which is needed, but we we we are addressing that by trying to reduce the COGS through the various cost initiatives we we're doing and the COGS reduction, which we will have once we've the new installed line.

43:51 There's a question about or a number of questions about, refinancing the company's debt. And the first thing I wanna say is it is not the company's intention, and we won't be providing a play by play commentary on the discussions and opportunities we have to refinance the company's debt. But as a general, overview, I would say the most important thing to understand is that the earliest of our senior notes are not due until August 26, nearly two years away, with the second tranche not due until 2028. So unless we are able to get a secure financing on terms that we think is attractive for all the stakeholders in the business, then we are quite happy and continue to wait and continue to improve the business and deleverage.

44:46 Philip, another question for you Yeah. About national insurance. And I was gonna say on national insurance. What's the impact going to be of national insurance, and how do we intend to address it? Well, the impact of wage. Yeah. So the impact of national insurance is gonna be bigger than the impact on the on on the minimum wage. So we reckon that's gonna be the impact for for next year is gonna be about a million and £0.5. We will okay. Like, all my British competitors, we're gonna have to address this. And, like, in every year, we do some price increases to prevent margin to slip, and that's gonna be part of that exercise. Yeah. So we will definitely have to consider price increases if if this if this and it will happen.

45:37 So this is what we will do. There's another question here as I can see on the on The US business as, of course, strategy or not. We are very I'll we're very glad to have a a decent US business and to have these distributors. Don't forget that for Vault up, The US is an important market as well. But it is not in represented in this segment, but 45% of the bulk of business is US business. So it is important remains important in our core strategy. And then it is good to have an omnichannel distributor where we can explore the values, whether that's distribution, whether that's retail, whether that's DIY, or any other channel which we would consider in the market.

46:30 So US remains utterly important for the group as a strategy. There was a question also about the EBITDA contribution made by Granissa, the Turkish business we sold recently, and what impact that sale will have on the on the group's EBITDA going forward. So firstly, Granite has made no material contribution to EBITDA in the in the recent period due to conflict in The Middle East, which was a large part of its market, it lost a lot of revenue. And, consequently, it was it made no real contribution in in h one. However, going forward, as you would have may have noticed from the announcement that we made last, Tuesday, the, the two critical things that we agreed was the, the buyer of Verenazza has agreed to supply us with, ceramic tiles at cost for the next four years.

47:36 So in other words, where we sit today, we know we now have the cash in our bank from the sale. We're no longer responsible for funding the working capital or the CapEx, but we are still able to access product as much as we require from that that manufacturing site at the same price as if we still owned it. So this gives us that still gives us continued access to very low cost manufactured product whilst having none of the capital committed to the business, and that is one of the reasons that we decided it was sensible when we we received an approach, from a third party. You guys have questions in terms of your Oh, I'm just mindful of time as well. We we probably only got one more minute, so let me just quickly I just we're just quickly gonna scan through and just see if we can consolidate another couple of questions.

48:37 Yeah. Look. There there there has been a serious number of questions about taking the company private. Clearly, we're not in a position where we can comment on anything specifically like that, but I don't want you to interpret that as meaning that we are about to take the company private or contemplating. It's just that if there is some type of corporate action like that, we wouldn't be able to comment on it in advance in any event. And I think given the time constraints, that's probably all the time we've got questions for at the moment. So I'll hand back to the to the the the investor the host. Perfect. Thank you very much for answering those questions from investors. Of course, the company can review the questions submitted today. We will publish out those responses on the investment company platform.

49:26 Just before redirecting investors to provide you their feedback, which is particularly important to the company, Jeff, I was wondering if I could just ask you for a few closing comments. Yep. I I think the board is acutely aware of the narrative that has recently enveloped Victoria. We we don't believe it has it stands scrutiny when one looks at the numbers. There's certainly there's no question that there is leverage in the company, but we are taking steps to address it both through generating cash, through operations, asset sales, and potentially refinancing. And we are making the company vastly more efficient with all the costs that's been taken out and will continue to be taken out.

50:13 And the result of that is when demand comes back, and it will, the company will be dramatically more profitable than it's been in its past. I think that's a fair summary of the position as the board sees it. Thank you. Thank you all for updating investors today. Could I please ask investors not close the session as you now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations? This will then take a few moments to complete, I'm sure it'll be greatly valued by the company. On behalf of the management team of VICTORIA PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all. Thank you.