Victoria (LSE:VCP) — Interim results for the six months ended 27 September 2025

0:01 Good afternoon, and welcome to the VICTORIA PLC Interim Results Investor Presentation. Simply type in your questions and press send. The company may not be in a position to answer every question we received during the meeting itself. However, the company can review all questions submitted today and publish responses when it is appropriate to do so. Before we begin, I would like to submit the following poll. And I would now like to hand you over to

0:32 Executive Chairman, Jeff Wilding. Good afternoon to you. Good afternoon. And thank you to everybody for joining the h one earnings call for VICTORIA. The macro environment continues to be challenging for consumer discretionary spending, and so we've continued to focus on internal initiatives to improve margins and lower operating costs, and we'll discuss these later on the call. However, we'll begin with Alec Pratt, the group CFO, taking us through the numbers for h one. Great. Thanks, Jeff.

1:04 So before we start, I'll just come with a few highlights. So key things have been ongoing pressure on volumes. So revenue for the half was down about 7%. We'll provide a bit more detail on the breakout of that later in the presentation. We're very pleased to improve EBITDA by just over £3,000,000 to 53,500,000, and so healthy margin increase there, you know, despite that volume reduction. We will provide more detail of that, and, actually, we believe there's a much stronger performance than that headline that the number suggests. On net debts, just over £1,000,000,000 of net debt. A lot of work is going to extending the maturity profile of our debts over the period. So, again, we'll run through that in a bit more detail.

1:52 So if we quickly flick over to the executive summary, I think it's worth reminding ourselves, you where we are in the cycle. We're very pleased with the resilient performance in what continues to be a fairly low volume environment. Demand remains about 20% to 25% below long term trends. However, we are beginning to see improving top line trend, which we're seeing throughout the first half, and we are expecting that to continue into the second half of the year. Management actions this year have been very significant. We're moving with pace across various divisions of the business, and actually, EBITDA margins are improving at divisional level. We have further cost savings to target as we go through the balance of the year, and we will look at that as we go through the budget, which will continue to benefit into FY '27.

2:45 I think the biggest updates from this morning is caution in the outlook. You know, we are flagging there have been some inefficiencies in the Belgian operations as we transition that manufacturing to Turkey. And, clearly, the macro outlook remains volatile, and we are mindful of that. So in the meantime, our focus remains on driving what is in our control. So these are the EBITDA initiatives that we've outlined at full year results. They're focusing on cash generation to help with deleveraging balance sheets and also rebuilding the company's credit rating overall. So

3:26 just to summarize key messages from the half. So as I mentioned, revenue growth was down about 7% overall. That is primarily volume driven. We'll come on to the split with that, but actually ASPs across the group were healthy. At a gross margin level, those were consistent. But as you go down the p and l, actually, you know, improvements in terms of the SG and A. And so you saw that improvement in both the absolute number of EBITDA, but also the margin improving to 10.1%. It's important to note, there were a few, you know, one off factors, which mask a bigger improvement in the operating performance. We have pulled down the benefit last year of a favorable gas gas hedging position, which is about 6,700,000.

4:16 And then also, the disruption, from the rugs reorganization, which again was a drag on h one performance. Excluding those two things, margins improved 390 basis points. We think this demonstrates very clearly how quickly we are moving to improve the underlying performance of the business.

4:41 So moving on to the drivers of revenue, this chart breaks out the divisional performance. You can see in every case, that actually volume is the main driver of the revenue decline. As a reminder, this chart is in pounds, and so both the Aussie dollar and US dollar were weaker through the periods. And so what that masks is that actually pricing in both of those geographies was a lot healthier. You can see in soft flooring, you know, healthy ASP increase of about 5%. Some of that is mix, but within business divisions, that was actually very solid. And in ceramic tiles, I think it would bring out that, yeah, the decline there is predominantly due to mix.

5:29 That gas hedge last year rolling off has meant that we've reduced production of some of the lower margin products that was using that hedge. Those were within the higher price points categories within within tiles, and therefore, that decline in ASP is just a mix effect of doing DIY orientated products.

5:56 In terms of EBITDA movements overall, you can see that predominantly that has been driven by the margin improvements that we have pulled out. Biggest move there is within soft flooring. Philip will come onto it, but that is despite the headwinds we've seen in the rugs reorganization, and we're very pleased with the underlying performance there as a result of lobby initiatives at the back end of last year and into this year. We'll also come on to touch on some of those actions in h '1 will flow into 2027 as well. In ceramics, you know, that reduction in low margin profitability is what we call, bottom slicing. So, a good degree of that revenue reduction is actually proactively trimming, you know, some of those sales.

6:46 And so the underlying performance and the market, we feel is much stronger than that 11% decline in revenue would suggest. And then moving on to the smaller divisions, a good performance in Australia. Very strong market position there for us. It's worth noting that, actually, the the EBITDA improvement in pounds, was was basically level, which means in local currency, that was actually a big improvement, for that business. In The US, big focus on margins there. Philip will come on to how that has been driven. And then finally, just on central costs, we are being very disciplined there, so just over a million pounds of saving. So overall, a modest increase in EBITDA, and we'll come on to some of the other drivers of that through the presentation.

7:37 So the next page here is just to pull out the non underlying items. These remain elevated as we go through business transformation. I think the key point here as with the full year is that, you know, only a modest amount of those are cash. So those are highlighted in orange. You can see at the top of the chart there, the actual reorganization cash costs were, you know, in the low single digits. We've also highlighted the refinancing costs related to the transaction over the summer, and we'll come back to that in following pages. So this chart shows cash generation over the periods. First thing to note is that, you know, we are free cash flow positive before CapEx and reorganization, so £8,000,000 for the half.

8:28 What we pull out there is that, you know, the interest cost there of £17,000,000 will be broadly level as we go into the second half. And it's also worth noting that we incurred £7,000,000 of cash tax. The majority of that was related to tax charges in the prior year. Obviously, as we go through this year and into next, we expect that cash tax charge to be relatively minimal, and so that will decrease going forward. This morning, we announced the CapEx guidance with a reduction that we'll come on to. I think what you can see in the first half was about £25,000,000 of CapEx. We expect that to be broadly level in h two, and we'll stay at that sort of level going forward. And then the other big cash cost there was a refinancing cost. So cash cost of £20,500,000, and so the overall cash movement was minus 40.8.

9:26 The noncash items there, which are kind of the majority of that, net debt movement relates to premium paid, to the bond investors to do the exchange over the summer. That was £41,400,000.

9:41 And then the balance of that is, £30,000,000 movement in our FX rates, given the bonds are in euros. So a 100,000,000 100 point, sorry. A 106,000,000 overall in terms of the increase in debt.

10:00 So this page breaks out the different different levels of the capital structure. You can see there the the increase to just over £1,000,000,000 of of true debt. The underlying EBITDA performance broadly flat on the half, so leverage overall at 8.6 times. I think it is important to point out that capital structure is very diversified. That gives us a lot of flexibility in sourcing new capital, and we'll come on to how that was developed. Final piece there is just on the Coke preferred equity. It's important to remind everyone that that is legal equity and equity in every sense. So the return the Coke earn on that is a preferred dividend, and that is paid, you know, in in PIC. So no cash cost.

10:49 There is no maturity on that piece of paper. And so, you know, it is not, you know, a concern from a gain concern perspective.

11:02 So the next page summarizes, you know, the impact of the refinancing over the summer. A couple of key points to mention there. So having dealt with all our short term facilities, our next maturity is in 2028. That is for a €167,000,000, which is about a £143,000,000. To put that in context, over the last six or seven months, we have refinanced over £700,000,000 of debt. So, it's obviously an area of focus, but, in context of the whole capital structure, we do think that is very manageable. We're very pleased with the runway that we have created through that refinancing process.

11:45 So I think with that, Philip, hand it to you to run through the operational performance. Okay. Thank you, Alec. So first division is UK and Europe, soft flowing, which consists of, four subdivisions, which are carpets UK, underlay, grass, and rugs. For the overall division, we've seen a reduction in revenue with about 3.7%, but with an average sales price growth and a margin growth of about 148, basis points. The rug division, which we are restructuring at this very moment, includes a shift, of almost all the production from Balta, Belgium to Balta, Turkey to the plant the existing plant in Buchak, and this is diluting the margin number. Without Balta, the EBITDA improvement year over year would be 4.1% to a profitability of about 15.9%.

12:42 In The UK in h one, clearly, we've taken market share, grown the revenue, and massively improved the margins. And we continue to progressively do in h two because there are clear opportunities in the market, due to some competitor weakness and our strong, service proposition which we have to alliance. The sales has continued, to benefit from the success of the premium residential brands which we have in the in the division. We are also expanding our product offering, as we've said in the previous presentation, into hard flooring with offerings in LVD, in laminate, and in engineered wood. And the revenue is expanding fast within these propositions, through the different brands which we have, which is, which are VICTORIA, Westex, and, Balta.

13:33 Alliance, our own developed logistic provider, as you may remember, is a is a key component to that success with on average processing about 20,000 order lines per week, to the three distribution centers. And we've even seen peaks up to 24,000 order lines per week in November. Alliance now services about 87% of the country next day, and it is further expanding its service as a third party logistics provider, and we are building trying to build for alliance itself a solid, p and l. The second leg we have in, UK and Europe soft flooring is the underlay business. We are currently, processing the integration of our two underlay brands, which is easy floor and, inter floor.

14:23 And the service proposition and product offering is generated through a separate in house distribution setup, so it's not going together with the with the carpet and the hoard floating setup to service all the retailers across, the country. The third leg in that division is, is the grass division. This performed flat, in the revenue and showed some decline in margin because of some challenging residential market, but we've largely made up for that to the to the selling of the sports surfaces. And as a result, this has been compensated. Yeah. On the next slide, you will see that we've separated out the rug division to see what impact it has had. The bulk restructuring, as you see and as we've said earlier and as Alec has referred to, is is weighing on the short term performance of the division.

15:18 I will come back or Alec will come back later on that restructuring model because there's a case study a bit further down the pack. It is fair to say that I mean, on both itself, it is fair to say that reorganization is on track to deliver significant cost savings in the next financial year. And h two, EBITDA is expected to be to be broadly breakeven. From q two twenty twenty seven onwards, we should see the full impact of the improved manufacturing costs in in Turkey.

15:52 Second division then, which we want to comment on is UK and Europe ceramics. You can see that we've had a volume reduction of about 8.6%, mainly driven by the proactive reduction of volumes and lower margin sales. The underlying EBITDA was about steady,

16:15 12.7 versus 12.9%. If we eliminate the favorable gas hedging in the same period in the prior year, we've had a margin improvement of 4.2%. In Italy, a new management was installed earlier in the year, and we have split the p and l's and brand between the DIY brands, which are Serra, Colli, and Keradon, and the medium to high end brands for independence, which is Ascot, Capri, and Valle Lunga. This allows us for an end user specific approach in terms of the product offering, minimum order quantities and the service proposition. In Spain, there there is a specific investment we've done we've done in large style manufacturing.

17:04 It is the famous v four project. There is a a separate sheet further in in the project to run through that project and the upside of that project project. It is a €31,000,000 investment which we've done in the course of in the in the last half year and which was successfully commissioned in November. This will have or this has had no impact in h one, but should start to deliver from q four and h two onwards. At full capacity, we should be in a position to do 5,000,000 square meters extra output in high volume formats. From a strategical point of view, the ceramics division continues to execute on four main drivers.

17:52 First of all, that's the intensifying of the approach of the integration of the ceramics group between Spain and Italy. Secondly, we are also starting to focus to expand on small sizes and the DIY approach.

18:07 And then as said, the most important project of investment which we have been running is the is the v four project in Spain for large tower manufacturing. And then the the fourth driver is the product portfolio rationalization and the cost reduction, which we have been performing throughout the division. Third division then is Australian. We've seen a slight drop in revenue, 3.4%, but the growth in profitability of a 126 basis points, which confirms the strength of our market position and resilient performance of the team. At Dunlop, we are focusing on expanding the market share further in underlay.

18:53 Further merchandising efforts has also contributed to substantial growth in the hoard flooring sales, which is mainly LVT and laminate. And our underlay factory, now which we have at Sydney, is currently at full capacity, and we are commissioning extra volumes outside of Australia to cope with the increased demand which we are seeing in the market. The carpet business, which we have through our two brands, Quest and VICTORIA, is solid, and we see more growth in man made fibers rather than in Wu currently. So we expect the volumes in Australia to remain broadly flat in h two with revenue expected to grow slightly from a positive pricing momentum.

19:45 Unfortunately, within that division, there's still some persisting currency weakness, as you can see, which impacts the the pound denominated reported numbers. Last but not least in the divisions is North America, where the performance is constrained by US market volatility and FX weakness, but this has been navigated successfully by the management. The current strategy of being only a distributor in The US, so as you know, we

20:16 are not a manufacturer in The US. It is still the best one. We have revenue, revenues of about $300,000,000 in The US between Cali, IWT, and Baltahome and exports to The US from our European businesses. The North the Northern American trading conditions, as we all know, remain challenging in terms of the macro. So there's high end mortgages, which we continue to see and which have driven The US existing housing transactions to lowest level in in the last thirty years.

20:53 IWT, which is our East Coast distribution of ceramics, It's been very strong in the Northeast and is progressing the sales attempts to go into the Texas market. Cali continues to further focus on builder and the business to business segment.

21:16 And Cali in the first half has also taken more initiatives to deliver cost savings in terms of the the sourcing model, the marketing spend, the merchandising, and the minimum order quantities. So more initiatives have been planned to reduce the inland transportation and the reduction of the number of warehouses, mainly third party logistic warehouses, which we have. And then last but not least on a Balta Home, this was a setup which we've done in the past to better serve the distributors and the big box retailers and to split the volumes over the two channels. And there's a cost saving initiative there as well where we will be cutting out one distribution facility.

22:04 So and the distribution in the two in in the future will only be done to the Savannah warehouse. So, Alec, I think I'll hand back over to you. So this is the overview of the the divisions there. Mhmm. Great. Thanks, Lee. So next section is on our EBITDA improvement initiatives. As we laid out at the full year results, we are moving very quickly to drive changes that are in our control. Clearly, we don't have control of the macro environment. What we can do is drive big improvements of the business, you know, across our divisions.

22:40 So the charts on the left hand side, just a restatement of what we showed at full year. I think key messages to take away is that we have now completed all of the actions that we were targeting in f y twenty six, which is, like, on 20,000,000 of improvement this year, and that we are on track for all the improvements that we are driving through for FY '27. The two large projects there are the V four plants in Spain and then the Belgian reorganization of rugs to move that manufacturing to Turkey, which we'll come on to in a bit more detail. Obviously, those two projects are, you know, within that manufacturing efficiencies bucket. Those two projects are the vast majority of that 30,000,000.

23:28 And so, yeah, we are now confident that those savings will come through. It's worth noting that as we go through the budget process in calendar q one next year, we will be pushing the teams to see what else we can deliver in the coming years. I think we are confident that there are further savings to go for, particularly in that, you know, procurement and integration categories as well as a little bit more to go for in the manufacturing side as well. We intend to update the market at the next set of results on those initiatives. So this slide just gives a bit more context around what has been delivered this year. Clearly, a lot of this work has been offset by weaker volumes.

24:17 So as a reminder, you know, generally, guided to a 5% change in revenue drop through to kind of a 20 to 25% so 20 to £25,000,000 change in EBITDA, obviously, with revenues declining slightly through the course of the year. That has largely offset some of the some of these actions.

24:38 What you can see from the page is that, yeah, those are very broad based. Right? So that has been across, you know, every one of our divisions and across every one of our geographies. I think we do operate in a federated federated structure, so we have the ability to manage a lot of these projects at the same time. The other key points to take away from this slide is that, you know, whilst all this work has been going on within FY '26, there is obviously an incremental benefit as we go into FY '27. So we know that those EKDAR improvements will come through as we go through its next June.

25:15 So just to provide a bit more detail on the larger projects. So, you know, the picture on the right is part of the kiln for the v four line. Yeah. As you can see, kind of, yeah, it is a very large construction. It has been, you know, under construction for about two years. As Philippe touched on, that has been a €31,000,000 investment for the group. I think that's indicative of the fact that, yeah, we have continued to invest in the asset base through the cycle, and that is what is gonna allow us to be a bit more disciplined around CapEx over the coming years.

25:49 Now we have uploaded a video onto our website, you know, giving you a bit more color around that that site. I think what you'll notice from that is, number one, the scale of the project itself. Number two, the lack of, you know, physical labor involved in the new setup. So there is a very efficient line. As we alluded to, that will deliver about €15,000,000 of additional EBITDA at full capacity. I think the key question for the team as we go through the start of next year is, you know, whether we purely use that for replacement capacity at better margins or whether that becomes incremental capacity being able to target lower price points. So, yeah, that balance between speed of filling the the line and unit profit is something that we are working through, but it, you know, gives a lot of flexibility in terms of how we attack the market now.

26:52 So on the rugs reorganization, as a reminder, that is moving manufacturing from our Belgian plants into an existing facility that we operate in Turkey. Yeah. We have gone through a number of these processes before, so it is pretty well tried and tested. I think what is different around this transition is, frankly, the scale of the operation. So, yeah, we concluded the social plan negotiations with the labor unions around the time of the end of the periods. And that was kind of executed in line with our expectations in terms of cost and the scale of that. So what that will do is reduce our headcount in Belgium by about 500 people.

27:42 That process is now well well underway. You know, 170 colleagues have exited the business already. There will be a further round in the next kind of month or so. We are targeting being fully operational at the end of, you know, financial quarter one next year, and so we'll have majority of the benefits as we go through FY twenty seven.

28:10 The new piece of disclosure today is around the size of of that move. The total cost will be about €50,000,000. The majority of that, so about 80%, is related to severance costs, which is part of that negotiation I just referenced, and the cash costs will be split about €10,000,000 in FY '26, 30,000,000 next year, and then 10,000,000 in FY '28. The provision for that move was taken at the half year of just over €40,000,000, and, you know, we are moving at pace to ensure that that is funded. As we touched on previously, the program will be financed by sales of the Belgian properties.

29:00 So we'll provide a bit more color around this on on this slide. So you can see in the picture on the right hand side of the page just the scale of some of those facilities. So, technically, that gray building taking up the majority of the of the page, you know, is is all of ours. You then see a road at the top of the page and another gray building extending out to the distance. That is also one of our sites. So, the team have begun the sale processes for those facilities. That was a mix of manufacturing, and distribution. We will be looking to exit those buildings for a combination of straight sales and sale and leasebacks, and we're expecting, the first completions there in calendar h one, 2026.

29:46 We're obviously able to obtain those proceeds within the bond documentation up to a maximum £45,000,000. So continuing the theme of controlling the things that we can control, big focus the last kind of month or so has been around, you know, our cash flow targets. So this is new disclosure for today. In terms of CapEx, we are, you know, reducing our guidance going forwards to about 50 to £55,000,000 per annum. That's a reduction from previous guidance of about £65,000,000, so at least a £10,000,000 improvement going forwards. That is broadly split between £40,000,000 of maintenance CapEx and 10 to 15 of expansion CapEx.

30:34 So whilst we are very cash flow focused currently, we will continue to selectively invest in the business to drive efficiency going forward. In terms of working capital improvements, we are targeting £40,000,000 of savings that is split between reduction in receivables, overdues. That is gonna be one of the quicker initiatives to push through. So that will kind of be going full pace in q one, you know, calendar twenty six. We then have a segment of inventory reductions. This will be done through SKU optimization, so effectively reducing the number of products that we're selling and therefore reducing the amount of inventory that has to be held. That is pretty broad based across across the divisions.

31:23 And then finally, an improvement in payables days. Now this will be longer lead time, so that is to do with negotiation with our suppliers. As we previously touched on, as we've gone through the refinancing process, we have seen a tightening of payables days. We are beginning to see incremental improvements, you know, in that environment, and the teams are very focused in negotiating with their suppliers to make sure that we are getting the benefits of being a large, well diversified player in the in the market. And we do think there is, you know, probably upside to that fourteen day number as we demonstrate progress on both the operation improvements and cash flow generation. Now the final point is additional property sales.

32:12 So we are targeting £20,000,000 plus over the next eighteen months. Those are very much, the smaller assets, so diversified across, you know, effectively spare manufacturing assets, some showrooms, some, spare, you know, land assets beside manufacturing facilities. So none of them are significant in their own rights, but across the different divisions, people are being asked to focus on that. Those proceeds will be retained for driving liquidity across the business. So next stage on the governance controls. As we touched on the half year, also full year, yeah, this has been focused on the boards. This is about doing simple things well.

33:02 The aim here is to give us more visibility, more control, and actually and making sure that we are making the right decisions. So pretty broad based. Some of that has been around people. So we have strengthened management teams that I've talked about in Italy. Obviously, the rugs business as well, that has been strengthened very significantly, and we will continue to upgrade teams as and where required. But it's not just purely around cost saving. That is also adding skills as well. On the kind of the probably less exciting stuff, you know, refreshing refreshing policies, also rolling out internal audit program. Again, that is an element of control, but also identifying where we can be more efficient. So we're very fortunate having, you know, a very diverse base of businesses. What that means is, hopefully, we'll be taking the learnings from some of the more efficient businesses and applying those elsewhere across the group.

33:58 We've also rolled out improved reporting, yeah, both the group and divisional level and, yeah, applying a bit more rigor both around CapEx and approvals to make sure we're delivering returns with our incremental capital, but also rolling out a new delegation authority framework so that we are being joined up in how we're making decisions. So, finally, just in terms of where we are in the cycle. So, clearly working very hard to drive, you know, efficiency of the business. It's worth remembering that we are, you know, 10 sorry, 20 to 25% below, long term trends. And so whilst we can't sit here and promise the timing of that recovery, we are, very confident that it will come.

34:46 In the meantime, we are doing whatever we can in our control to make sure that we are the strongest strongest positions, you know, both for where we are in the cycle, but also versus our competitors. We've removed a lot of costs from the business already this year and last year. We have a further 50,000,000 of savings to target in f y twenty seven and '28. And, actually, all the core drivers of the fraud industry remain intact. So, you know, that is, you know, obviously, housing linked and economic activity linked. You know, we don't fundamentally believe that anything has changed over the last couple of years to mean that we won't recover to those levels. So just to summarize, hopefully, it's very clear that, you know, we have made a lot of progress in the last six months. I think we're pleased with where we got to.

35:37 In a difficult environment, there is no benefit of complaining about that. Yeah. It's incumbent on us and the traditional management team to keep on driving performance. I think we're excited to do that. And, actually, you know, we do feel that in a number of markets, we are outperforming the competition. So maybe with that, over to Jim. Right. There's been quite a number of questions arrive during the presentation, and I'll paraphrase some of them because quite a few of them are on similar topics. But so the first first question, which I'll have Philip answer, is can you talk us through the competitive landscape in the main divisions? Okay. Well, if we talk about carpets, so we have to broadly make a a difference between local competitors in The UK and overseas competitors.

36:36 I think it has become life has become a bit more complicated from overseas competitors because of the the effects and also because of the lack of distribution in the in The UK. We've as you know, with Alliance, as I have alluded to, so Alliance is there in the the market with the next day delivery performance, which is bringing which is attracting a lot of a lot of business. Of course, there locally, we are as strong as our local competitors, but we have recently spurred some competitor weakness where we can build upon the business. And we've seen that. Okay. I know we're reporting here h one, but we've seen and there was another question, and I will jump on on that one in a minute to to know what, what the, what the the current demand, was.

37:34 I can say that normally in the second half is the is the is the better season, and we've seen, some, good sales, started from the end of October, through to the first week of December as well, so which is, which is a positive. So, Jeff has asked me to speak about competitors. So that was, UK based. If we look at, ceramics, the the situation, and it's associated with another question that I can see coming up here in terms of Indian imports. We are facing some of these Indian imports, not so much in in Europe, but we see that in our export markets, which is mainly The US and into The Middle East. So we suffer a bit more competitive there in Europe. It is we we don't see that.

38:28 So, also, the competitive landscape in ceramics is very scattered, so there's not like one extremely dominant player. So and we are pretty focused on the medium to high end in Spain and in some of the brands in Italy. So I've also mentioned that we are, very keen in, trying to have, separated out, the approach, towards product, towards end consumer end use. So in that DIY market, this is mainly an issue. So we we are we don't see any extra competitors there than the ones we've we've been facing. So all of that is in we have not seen a lot of change there. There's another question, if I may, Jeff.

39:22 Another question here, which has been a question if there's a structural change that means that the volumes will not recover in the in The UK. I would say absolutely absolutely not. The The UK market is still the largest flooring market in in Europe with about a guesstimated 150,000,000 square meters. This market has not declined in the course of this year, but what has happened is that we have taken a stronger position due to our service proposition, which we have in, as with our logistics provider alliance. Then another okay. The question imports, we've seen the upswing demand. Okay.

40:11 I've talked about that in h '2. So, we the season, it was a normal season. And if looking into h two and looking into into the next financial year, I can see lots of potential for the soft flooring division, not only for the soft flooring products or for carpet, but for all the other products we've added as well and the product portfolio being LVT and and engineered wood. So there's a question in fact, there's been a number of questions about the relationship with Coke Industries or Coke Equity Development who are the holders of the preferred shares. They're also they have 12,500,000 ordinary shares in Victoria.

41:01 I'll I'll give some initial comments, which are that Coke remains very supportive of the business. We've got a very good relationship with them. I could not ask for a better partner, particularly going through the difficult environment of the last two or three years. And the state of the relationship is very, very solid, and they're very supportive of the business. And that's probably as much as I can comment about the actual relationship. But, Alec, you got any comments you wanna add about the conversion or update? No. No. No. I I echo that in terms of the current relationship. We also have access to, you know, a lot of the capabilities they can bring. Right? So they have been helping us with all the working capital exercise. I think that has been, you know, hugely hugely helpful to the business. Something that demonstrates their desire to get Pepsi price price up.

41:55 Yeah. As a reminder, they do have that conversion rights, you know, currently this time next year. You know, it is important to remember that, yes, whilst that would be effectively switching that preferred return into an ordinary equity return, it would also reduce the liability on the balance sheet. Right? So whilst it would change the percentage holding on the equity, actually, you know, it would reduce the liability by a very similar amount, and what we do would strengthen the balance sheet and the flexibility of the business going forward. So I think it's probably more appropriate to comment on, you know, discussions discussions with them, but we'll just echo that, yeah, that is a very positive relationship. And, actually, we we don't necessarily see it as a risk to the business, and it's obviously something we'll continue to look at over the coming months.

42:46 There's a question about VOLTA. Clearly, in fact, there's three of them which I've amalgamated into one. Clearly, the move of VOLTA's manufacturing from Belgium to Turkey will be very material for earnings. Are you satisfied management have this move under control, and when will it be completed? Philip? We are I mean, there's a new management on different positions there. So all the negotiations have been done with the trade unions. So the the plan is in in place, and it's it's ready for execution. Part of that has been done already. Alec has alluded to that. So a 170 people have already left. There's more to come.

43:32 And 90% of the production facilities will be based in in Turkey. I just want to reiterate, this is not new facilities which we have in Turkey. It's existing facilities, which we will expand. So there was we don't have to build for the record. The we've just added production there. So this will come at a better productivity, at the cheaper cost of goods sold. And as a result, we should be in a better position in a more competitive position. Is the team up for it? Yes. There's been quite a bit of restructuring done already on the BALTA file in the in the in the recent quarters with with a good result, and we will continue to do so.

44:20 So so, yeah, it's quite a modular move. So some of the machinery is already there and already operating. So total, we're moving about 24 rooms over to the tech facility. Two of those are up and running. Yeah. Those basically go on phase basis week by week. Right? So there there isn't a kind of specific risk around a single piece of machinery. Obviously, the total spend excluding the advanced dependents is only about €70. So I think that kind of probably gives you a bit more confidence around that. And, yeah, I think the team feels very confident now, so on track. Yep. Mhmm. The company is saying that CapEx spend is expected to be 10 to 15,000,000 lower in the future than it has been historically.

45:05 Are you under investing in the plant? I well, sorry. Mhmm. No. I think and and this is important. So we have with the with the investment, for example, in The UK, with the with all the investments we've done in logistics, in the factories and all that, Even if the market was to was to grow 25%, we don't need to spend more CapEx. Yes. We may have to add a few shifts. Yes. We may take an extra lease on a truck, but, we have all the capacity. We have all the agreements in place, with third party, production providers, in case we would be running out of capacity. So, we can make different decisions in terms of make or buy.

45:51 But I have to say, in today's market, we have a very competitive production base, in The UK, and I'm not scared of, Turkish imports here because Turkish imports, need a leg to go into distribution, and this leg we can provide for ourselves and for third party providers. Yeah. Just say that, you know, we've obviously invested fairly heavily in in CapEx over the last couple of years. Yep. V four mine is a good example of that. So despite challenges, you know, over the last couple of years, we've, you know, been spending money to make sure that we are well positioned for the future. Yeah. We do have capacity in all our key markets, you know, to kind of grow into that demand recovery. So, yeah, we are still allocating 10 to 15,000,000 of growth CapEx.

46:41 You know, we have had, you know, first pass of the budgeting of that for FY '27. Yeah. I think that really that's choice around where we are getting returns there, but certainly no pressing need for additional incremental spend. So what drives volumes, and what needs to change in the macro environment for there to be a recovery in volume? I'll give you some initial high level thoughts, and then maybe Philip can comment additionally. Because volume's primarily a is the result of consumer spending on redecoration with a much smaller amount from construction. In terms of the consumer spending, housing transactions are a key catalyst to consumer spending because there's a very high proportion of buyers of a home redecorate when they first move in.

47:34 And so therefore, as interest rate comes down and housing transactions recover, that's a key driver. The other consumer spending on existing homes happens when people have money left over at the end of the week. So wage growth versus inflation and mortgage interest rates are important as is consumer confidence, which is clearly strongly correlated with employment prospects. So at a macro level, those are the factors that influence volumes. And I don't know if you've got any additional comments, Philip, in a practical level. Well, not really. I think I've alluded to that earlier. So we we can see if and I'm reverting back to The UK now. If we look at how the market is over here, yes, there's a bit we we have seen a bit of a swap from soft into hard flooring, but that doesn't really matter because we we we have both categories on on offer.

48:35 80% to 85% of of what we are selling is driven by refurbishing, not new homes. Yes. We are present in the in the in the new home market as well, but mainly to the refurbishing market. And we have not seen any declines of volume, and there's, according to us, there's absolutely no reason why there would be a structural change in in the demand anytime soon in this country. Is your growth in The UK due to a recovery in demand, or are you taking market share? So we we we are clearly taking a market share. So I think the market has been pretty flat this year in terms of demand.

49:22 So you've seen or I mentioned that in the presentation that we have grown about 3% top line, but much more in profitability in in h one. I think we'll we'll by far improve on that number in in the second half, and this is market share we're clearly taking now. And as said earlier as well, so not only in h two, but we can see that in the preparation of the budgets towards next year. So we we are looking forward on a good solid market in The UK coming up. Can you comment on the company's liquidity position, Alex? Yes. So the half year, you know, we kind of fell to that 86,000,000 as cash on balance sheet.

50:10 That we, you know, have the super senior facility is fully drawn, but we also have the ability to incur about a £187,000,000 in local local lines. Yeah. Broadly similar number, what as the cash balance was was drawn on the local lines, say, about an incremental 100,000,000 there at the half year period. K. Assuming a recovery does occur, what long term does management expect the EBITDA margins to be as with the normalization of demand? Well, look, at the at the full year, we laid out kind of the long term track records.

50:58 I don't think we see it being, you know, hugely different to that. I think what we are trying to deliver is, you know, more integration than we're through the last cycle that should bring further benefits. So look. There is no reason we shouldn't be able to get back to those historical levels. K. So is LVT damaging the demand for ceramics? Or is it more a wide consumer Yeah. Well spending issue? Yeah. I've I've I've seen that question here. So there's a some people say it does, others say it it it doesn't.

51:43 So we we are we have an offering in LVT as we have an offering ceramic and in carpets. It doesn't really it doesn't really I don't really care where the demand comes from. Has it got an impact? I think the sale of LVT has definitely some impact because in terms of decors, you can buy you can buy like a a wood decoration in LVT as you can buy it in ceramics. So there's probably a bit of back and forth between the day between the two product groups. But I think at the level where we are in in ceramics in terms of market share and LVT, it doesn't really so it it has no impact or influence on on on the numbers we're reporting. Yeah.

52:32 I think it's worth mentioning that the size of the ceramics market is absolutely enormous. There is about one and a half billion square meters of ceramic tiles sold in Europe each year, and the amount of LVT sold at the present time, albeit it's growing, is a rounding error given the overall size of the ceramic tile market. So I don't think that the in any shift of consumer spending from LV from, sorry, from ceramic tiles to LVT is having much of an impact in terms of the size of the overall ceramics market. Actually, I've just noticed the time. We better stop. There's still questions to go, which we'll try and answer otherwise, but online.

53:21 But I think we better bring the session to a close. Perfect. That's great, Jeff, Philip. Alex, thank you for addressing those questions from investors today. And of course, the company can review your questions submitted today. I will publish those responses on the investment company platform. But Jeff, before we direct investors for the feedback, which one is particularly important to the company, could I please just ask you for a few closing comments? Look, as I said, I appreciate everybody taking the time to join and and continue to take an interest in the business. I appreciate it's not it hasn't been a particularly salivary for the last couple of years, but we actually are feeling more confident about the future now than than we have it at any time in the last couple of years because of changes that have been made operationally that will ensure earnings grow next year.

54:07 So with that, we'll we'll wind up for today. That's great. Thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that board can better understand your views and expectations. This will only take a few moments to complete, and I'm sure we'll be greatly valued by the company. On behalf of the management team of VICTORIA PLC, we would like to thank you for attending today's presentation, and good afternoon to you.