Annual Report and Accounts
for the 52 weeks ended 31 March 2018
www.victoriaplc.com
stock code: VCP
Welcome to Victoria PLC
Victoria is a designer, manufacturer
and distributor of innovative
flooring products.
BY APPOINTMENT TO
HER MAJESTY THE QUEEN
CARPET MANUFACTURERS
VICTORIA CARPETS LTD
KIDDERMINSTER
Group financial and operational highlights
Revenue (m)
Operating profit* (m)
18
17
16
15
127.0
424.8
330.4
255.2
18
17
16
15
21.9
9.4
48.8
33.7
Pre-tax profit* (m)
Basic adjusted earnings per share* (pence)
18
17
16
15
18.2
7.9
40.8
29.4
* Underlying and before exceptional items
18
17
16
15
16.9
10.6
31.4
25.3
• 2018 was the fifth consecutive record year for Victoria as the Group continued to grow in financial
strength and deliver upon its strategic objectives
• The Group achieved a record underlying EBITDA margin of 15.2%, a circa 140 basis point
increase year-on-year driven by efficiency measures actioned across the businesses
• Acquisition strategy continued with the completion and successful integration of earnings-
accretive acquisitions in Europe, Ceramiche Serra and Keraben Grupo
• Significant progress made during the year in the ongoing reorganisation of manufacturing and
logistics, expected to drive organic improvements and efficiencies
• Net debt at the year-end was £258.7m, less than 2.7 times annualised EBITDA.
Read the Victoria snapshot on pages 2 and 3
Victoria PLC Annual Report and Accounts 2018
Stock Code: VCP
Our Mission Statement
TO CREATE
WEALTH
FOR OUR
SHAREHOLDERS
Contents
Business and Performance
Group financial and operational
highlights
A Snapshot of Victoria PLC
Creating wealth for shareholders
Chairman’s statement
Strategic report
Financial review
Our Governance
Board of Directors
Directors’ report
Statement of Directors’ responsibilities
Our Financials
Independent Auditor’s report
Consolidated income statement
Consolidated statement
of comprehensive income
Consolidated and Company
balance sheets
Consolidated and Company
statements of changes in equity
Consolidated and Company
statements of cash flows
Significant accounting policies
Notes to the accounts
Other Information
Shareholder Information
Glossary
IFC
02
04
05
10
13
19
20
23
24
34
35
36
37
38
39
47
85
86
Read the Financial review on pages 13 to 18
Visit our corporate website www.victoriaplc.com
www.victoriaplc.com
01
Business and Performance A snapshot of Victoria PLC
Location of operations
The Group has operations in the UK, Europe and Australia, employing
approximately 2,500 people at more than 20 sites.
Revenue
UK & Europe
73%
Australia
27%
Operating profit*
UK & Europe
76%
Australia
24%
United Kingdom and Europe
Revenue
£312.0m
Operating profit*
£38.5m
Employees†
2,112
m2 flooring sold‡
46.0m
m2 underlay sold‡
44.0m
West Yorkshire
Production
Sales & marketing
Distribution
Lancashire
Underlay production
Sales & marketing
Distribution
Dumfries
Accessories production
Distribution
Newport, Wales
Production
Sales & marketing
Distribution
02
Oss, Netherlands
Sales & marketing
Distribution
Aalten, Netherlands
Sales & marketing
County Durham
Sales & marketing
Distribution
Keighly
Underlay production
Sales & marketing
Distribution
Ronse, Belgium
Sales & marketing
Kidderminster,
West Midlands
Head Office
Sales & marketing
Distribution
Castellon, Spain
Ceramics Production
Sales & marketing
Distribution
Sassuolo, Italy
Ceramics Production
Sales & marketing
Distribution
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP
Key products
The Group designs and manufactures a wide range of wool and synthetic
broadloom carpets, ceramic tiles, flooring underlay, LVT (luxury vinyl tile) and
hardwood flooring products, artificial grass, carpet tiles and flooring accessories.
1. Carpets
2. Ceramics
3. Underlay
4. Artificial Grass
5. Luxury Vinyl Tile (LVT)
and hardwood flooring
6. Flooring
Accessories
Australia
Revenue
£112.8m
Operating profit*
£11.6m
Employees†
388
m2 flooring sold‡
9.0m
m2 underlay sold‡
17.0m
Melbourne
Production
Sales & marketing
Distribution
Sydney
Production
Sales & marketing
Distribution
* Operating profit before non-underlying and exceptional items, excluding
† Number of employees as at 31 March 2018.
unallocated central expenses of £1.2m.
‡ m2 data is approximate annualised figure.
03
Business and Performancewww.victoriaplc.com
Creating wealth for shareholders
The Group’s strategy is designed to create wealth for its shareholders by
constantly increasing earnings per share and cash flow via acquisitions and
sustainable organic growth.
Philippe
Hamers
appointed as
Chief Executive
Michael Scott
appointed as
Group Finance
Director
Interfloor
acquired
Dunlop
acquired
Ezi Floor
acquired
Special dividend
Whitestone
Weavers
acquired
Abingdon
acquired
Avalon/
GrassInc
acquired
Brexit
referendum
Quest
acquired
Westex
acquired
Geoff Wilding
appointed
as Executive
Chairman
Serra
acquired
900p
800p
700p
600p
500p
Millennium
Weavers
acquired
Keraben
acquired
400p
300p
200p
100p
000p
2012
2013
2014
2015
2016
2017
2018
04
Victoria PLC Annual Report and Accounts 2018
Stock Code: VCP
Chairman’s statement
2018 was another record year for Victoria PLC as earnings and the Group’s
financial strength continued to grow:
• Revenue increased by 28.6% (28.1% in constant currency terms) from £330.4m to £424.8m, including acquisitions;
• 45.0% increase in underlying operating profit from £33.7m to £48.8m;
• Underlying profit before tax substantially increased from £29.4m to £40.8m;
• Expenditure on exceptional M&A and reorganisation costs of £11.2m, compared to £2.4m in the prior year;
• After exceptional and other non-underlying items, the Group reported profit before tax of £13.4m, compared with
£18.8m in the prior year;
• The Group achieved a record underlying EBITDA margin of 15.2%, c.140 basis points ahead of the prior year;
• Following the two significant acquisitions during the second half of the year, net debt at the year-end was £258.7m.
£m
Revenue
EBITDA*
Operating profit*
Pre-tax profit*
Pre-tax operating cash flow*
H1 FY18
£189.5m
£24.6m
£18.2m
£15.5m
£19.7m
H2 FY18
£235.3m
£40.1m
£30.6m
£25.3m
£44.6m
FY18
£424.8m
£64.7m
£48.8m
£40.8m
£64.3m
* Underlying and before exceptional items. Underlying operating cash flow is before interest, tax and exceptional cash items.
05
Business and Performancewww.victoriaplc.com Chairman’s statement
This was the fifth consecutive year
of growth in underlying earnings per
share, free cash flow, and operating
margins at Victoria – with challenging
market conditions in the UK, confirming
the value of diversifying our geographic
exposure. We are confident there
is further meaningful growth ahead
of us from both ongoing organic
improvements and efficiencies from
our manufacturing capabilities and
logistics (which I discuss in more
detail later in this statement), and
acquisitions. However, the benefits of
the Group’s strategy to achieve scale
through acquisitions is clear, with 2018
adjusted earnings per share up by
24.3% – despite our two acquisitions
only contributing for part of the year.
We took advantage of challenging
conditions in the UK to grow our
market share by remaining very
competitive on price. Initial pressures
on margins arising from the decision,
are being relieved by solid gains
in production efficiency from the
manufacturing reorganisation project
and, together with our increased
market share, have placed Victoria in
very good stead for the months and
years ahead. Indeed, we have seen
good growth in the first months of the
current year, as noted in our market
update in June.
There were some significant
exceptional costs in 2018 as we
completed acquisitions and continued
our planned reorganisation to improve
operating efficiency and increase
capacity. These fall into two general
categories:
• Much to the chagrin of London’s
advisory community, we use them
rarely. However due to the pace at
which we needed to move to secure
the acquisition of Keraben last
November and the requirement to
raise the necessary funds with speed
and certainty, we were left with
little option. Although the advisors
06
delivered an excellent service, given
the cost – a total of £5.8m in 2018 –
shareholders will understand why we
use them as sparingly as possible.
On a more positive note and to put
it in some perspective, the cost is
equivalent to only two months’ profit
from Keraben.
• Shareholders will recall we
announced our intention to
reorganise our UK manufacturing
footprint and logistics operation in
June 2017, to improve productivity,
manufacturing capacity, and
customer service. This exercise has
come in a little under budget but
has still been expensive with over
£4m spent to date – a significant
proportion on redundancy costs
– but the improvement to the
business’s profits from this year
making it well-worthwhile.
REVIEW
I was recently asked by what measure
shareholders should judge whether
Victoria is succeeding or failing. It is
a straightforward question and the
answer is equally straightforward. There
is only one measure: Are we delivering
on our mission statement, “To create
wealth for shareholders”?
Our business plan, capital allocation,
management compensation,
operational decisions, acquisitions, …
all these decisions are wholly focussed
on accomplishing this mission. This is
not to say we don’t treat employees
fairly, build solid relationships with
suppliers, invest in research and
development, create quality products at
competitive prices for our customers,
respect the environment, and act as
good corporate citizens. We do all this
(and more) as these things are essential
for building a quality, long-lasting
growth business but we never confuse
the means with the end – creating
wealth for shareholders.
So, we have, in 2018, stuck
unwaveringly to our overarching
successful strategy, which is to use
acquisitions to achieve scale and
open up new markets and distribution
channels and then use that scale to
deliver synergies, which reduce costs,
improve operational efficiencies, and
grow revenues.
The Group has a federal structure with
managers individually responsible for
the performance of their largely self-
contained divisions with oversight by,
but with very limited interference from,
head office. We are, in fact, a team of
teams. Within the limits of the Group’s
overall strategy and objectives, each
manager develops their own plan and
tactics (which are, of course, reviewed
by the board) to deliver their targets.
It is here that Victoria’s policy of only
employing talented managers with
deep technical expertise bears fruit.
The depth of their industry experience
and product knowledge, their
motivation, enthusiasm, and desire
to win shows through in every action
they take. I have absolutely no doubt
that we have the best management
team in the industry, with most having
a significant portion of their net worth
invested in Victoria.
There is no one right way to run a
business. However, this is the way we
do it at Victoria and shareholders can
look forward to Victoria continuing to
out-perform the sector.
Chief Executive
FY18 was Philippe Hamers’ first full
year as Group Chief Executive and I
want to express my appreciation for
his contribution. The energy and speed
of change he has bought to the group
has been remarkable and the effects of
those changes are delivering very good
growth in the current financial year.
Previously, Victoria was managed by
an enthusiastic industry amateur (me)
but in Philippe we have a consummate
professional who has forgotten more
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP about flooring than I will ever know.
His 25 years’ experience in the flooring
industry including, most recently,
heading Europe’s largest carpet
manufacturing operation, has given
him extensive experience in running
very large, multi-site, multi-national,
manufacturing and sales organisations.
Acquisitions
As I’m sure most of our shareholders
are aware, acquisitions are a key
part of our growth strategy and we
continued to be acquisitive during
the period under review, completing
two earnings-accretive acquisitions in
Europe.
Five years ago, the new Board
envisioned Victoria as a flooring
company, not just the carpet company
it had been historically. Our initial focus
on expanding our carpet manufacturing
capability was in order to achieve
the necessary scale to create real
margin-enhancing synergies. If we
had randomly acquired manufacturers
of wood flooring, ceramic tiles, LVT,
carpet, stone, laminate, etc., we
would never have achieved scale in
any sector and therefore been unable
to achieve the margin and revenue
growth we have been able to do with
synergies.
However, over 60% of all flooring
sold is ceramic tiles and we began
researching the ceramic flooring
market in late-2016. There are two
primary regions of ceramic production
in Europe – Castellon, Spain and
Sassuolo, Italy. We spent many
weeks in these industrial regions,
talking to numerous manufacturers,
suppliers, and distributors, gaining
an understanding of the industry
and identifying suitable acquisition
prospects. The result, so far, has been
two acquisitions, providing us with a
high-quality footprint in each region:
• Ceramiche Serra – Located in
Sassuolo, Italy Serra was acquired
in December 2017. It is a highly
efficient, mid-market manufacturer
supplying retailers, distributors,
and DIY chains throughout Europe.
Demand for its products has been
significantly outstripping Serra’s
production capacity and so we
invested in a new production line
in early 2018 (this was planned at
the time of the acquisition). The line
was installed in what must have
been record time and production
commenced in May 2018. Demand
continues to rise and we are
expecting very strong growth in the
current financial year.
• Keraben Grupo – Based in the
Castellon region of Spain, Keraben
is one of Spain’s largest and most
successful ceramic tile manufacturer
and was acquired in November
2017. It exports much of its
product throughout Europe and the
wider world and has an excellent
reputation for high quality products
and customer service. We were able
to secure the continued services
of the entire senior management
team (indeed, we would not have
proceeded without them) and they
have invested a substantial amount
of their net worth into the success of
the Group. Keraben gives Victoria a
very good platform for further growth
in the sector.
It is important to remember that, due
to completion of these acquisitions
occurring during the second half of
the year together with their integration
costs, Serra and Keraben contributed
only a small proportion of their normal
full-year performance. However, the
businesses are performing well and
shareholders can be confident that
profits from both acquisitions will make
a meaningful contribution towards our
growth in the current financial year.
We have continued to pursue
acquisitions this year. Victoria has, I
believe, a soundly-based reputation
in the industry for paying a fair price
for good businesses. We do not
aim to buy only bargains (I am firmly
of the view that, by and large, one
gets what one pays for), but nor will
we ever overpay. We stop listening
and start running if we ever hear the
words “strategic premium” or similar
in a sales pitch and are, through
bitter experiences in the distant past,
completely inoculated against ‘deal
fever’. If the price gets too high or
terms unfavourable, we just walk
away – a step made easier because
we always have other options due to
the dozens of opportunities we look
at every year. Shareholders can sleep
soundly knowing we will never be
profligate with their money.
Post period end events
We are always looking to improve
productivity. Longer term shareholders
will recall we successfully consolidated
our carpet manufacturing footprint in
Australia onto fewer sites during 2014
and more recently, we reorganised our
UK production and logistics to improve
efficiency and provide increased
capacity due to continued strong
demand for our products.
These moves have proven to be a
great success – delivering incremental
margin benefit from improved
production efficiency and customer
service.
Following on from these gains we
have therefore recently announced our
intention to reorganise the underlay
production facilities in Australia. The
Group acquired its Australian underlay
business as part of the purchase of
Dunlop Flooring in January 2017 and it
currently has two manufacturing sites,
in Sydney and Melbourne. The Group
has decided to focus all manufacturing
on the existing site in Sydney and
to close the Melbourne operation
when the current lease expires in
2019. Together with an investment of
approximately A$2.1m (£1.2m) in new
07
Business and Performancewww.victoriaplc.com Chairman’s statement
technology, this move is expected
to improve raw material processing,
finishing and packaging at the Sydney
site. The combination of consolidation
and investment will increase flexibility
and result in a more efficient and
productive operation. This project
is expected to complete during the
second half of 2019.
CASH FLOW AND
DIVIDEND POLICY
I have previously referred to Warren
Buffett’s acquisition of Shaw Industries,
one of the world’s largest flooring
manufacturers, in order to access
its cash flow. Well run flooring
manufacturers generate significant
cash – even when growing – due
to attractive supplier terms, quality
debtors, long life expectancy of key
plant, low technological change and
other factors.
Confirming this view, Victoria’s
underlying pre-tax operating cash flow
this year was £64.3m, representing
99% of underlying EBITDA, and
underlying free cash flow (i.e. after
interest, tax, replacement capex,
and asset disposals) was £35.0m,
representing 54% of underlying
EBITDA and 72% of underlying EBIT.
As a result, it is the Board’s expectation
that in the medium-term Victoria will
be capable of sustainably returning
a meaningful level of cash to
shareholders. However, in the short
term, we remain firmly of the view
that the most wealth will be created
for shareholders by deploying the
free cash-flow generated by Group
businesses towards paying down
debt quickly and acquiring other high
quality, earnings-accretive flooring
manufacturers.
Therefore, as in previous years,
we have resolved not to pay a final
dividend for FY18.
NET DEBT
Net debt at the recent year-end was a
little under 2.7x annualised EBITDA (as
calculated according to our banking
covenants), compared to 1.6x at the
prior year-end. This increase is due
to the size of the recent acquisitions,
in particular that of Keraben, which
was larger than all other historical
acquisitions by Victoria put together.
This is, of course, reflected in the
financial contribution that Keraben will
bring to the group in its first full year
this year, having contributed only four
complete months in the financial year
just ended.
This level of leverage is consistent
with our financial strategy, to efficiently
but also cautiously use debt funding
to improve equity returns for our
shareholders. Shareholders will recall
leverage immediately following our
previous largest acquisition, that of
Interfloor during the year ended March
2016, being circa 2.5x. This was then
reduced to below 2.0x during the
subsequent twelve months through a
combination of cash generation and
profit growth.
MARKET RISK
Although 2018 was another record
year for Victoria, shareholders can be
assured we are not complacent.
We recognise that, within a market,
flooring can be cyclical (like just
about every other business, in reality).
Therefore, we have striven to create
a business that is resilient to different
market conditions:
• We seek to reduce market risk by
balancing our product category and
geographic markets. Nearly 60% of
our profits now come from outside
the UK and the international share
of our profits is expected to increase
further in 2018.
• We have ensured our capital
structure will be resilient in any
down-cycles, with debt covenants
and liquidity that will enable Victoria
to ride out storms.
• We have a strong sales culture;
irrespective of title, everyone is a
sales person. The impact of this
culture is far more powerful than
many might think. For example,
collectively, the revenues of the
businesses comprising our group
continued to grow through the
2007-2010 downturn as the sales-
focussed nature of the businesses
aggressively took market share
from competitors in order to protect
profits.
• Even as our group grows, we
continue to maximise the variable
component of our costs and
minimise the fixed component. We
have reduced our relative operational
gearing, with a high proportion of
fully variable costs (circa 46% of
sales) and a low fully fixed overhead
(only circa 12% of sales).
• We outsource some production
to provide a buffer. In the event of
a market downturn, the first fall in
production demand will be absorbed
by our outsourcing suppliers, giving
us both protection for our own
manufacturing plants plus buying
us time to make any necessary
changes.
Down cycles will happen. But, overall,
the flooring market is growing steadily
as more and more buildings are
constructed and existing buildings are
renovated – the latter by far the more
important driver of the market.
08
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP OUTLOOK
I often hear non-shareholders worrying
that they have “missed the boat” with
Victoria – although I am at a total loss
to understand why they would think
that.
Our earnings per share growth has
happened for two reasons: firstly,
organic “self-help” actions (reducing
overheads, better raw material
procurement, more efficient logistics,
leveraging the knowledge of our
industry expert senior management
to rationalise our production footprint,
etc.), and secondly, earnings accretive
acquisitions. And what on earth would
make anyone think we will stop either
activity any time soon?
The market opportunity we have before
us is absolutely enormous. There is
around 1,700 million sqm of flooring
sold each year in Continental Europe,
300 million sqm sold in the UK, and
180 million sqm sold in Australasia1.
Victoria sells circa 55 million sqm of
flooring (excluding underlay), in total,
across all three markets. The point
I am emphasising is this: there is
almost unlimited scope for growth –
both organically through increasing
our market share and expanding
our product offering, and, of course,
through acquisition, for which we
continue to find many promising and
high quality opportunities. We could
continue making 3-4 acquisitions a
year for the rest of my (intended very
long) life and not run out of good
opportunities!
And by good opportunities I mean
potential acquisitions that meet the
key criteria set out below. This list is
not exhaustive and sometimes we will
not acquire a business that meets all
our criteria simply because of some
indefinable factor that makes us
uncomfortable with proceeding.
1. We never buy failing turnarounds.
The time and energy expended on
a turnaround is rarely worth it and
the outcome is always sufficiently
uncertain to make it too risky for us;
2. Modern, well-equipped factories.
As a company, Victoria is extremely
focussed on cash generation. It is
free cash that enables us to pay
down debt, fund growth, whether
acquisitions or organic, and in due
course progressively return capital
to shareholders through dividends
or share buybacks. So, the last thing
we want to have to do after buying
a business is spend all the cash it
generates bringing the factory up
to standard;
3. Committed, talented and honest
management. Anyone can lease
a factory and buy the machinery
to make flooring. The difference
between the average business and
the extraordinary businesses Victoria
acquires is the management;
4. Broad distribution channels.
Victoria’s sales are overwhelmingly
made to literally thousands of
retailers. We like the security this
diversity provides; and pay close
attention to customer concentration
when considering a potential
acquisition;
5. A fair price. To quote Warren
Buffett, “It’s far better to buy a
wonderful company at a fair price
than a fair company at a wonderful
price. We recognise that quality
businesses are rarely ‘cheap’ but
shareholders can take comfort from
the fact that we will not overpay.
Ever.
However, apart from acquisition-
led growth, we continue to have
considerable opportunity to grow
margins and earnings within our
existing businesses. Shareholders
have seen EBITDA/Revenue margins
more than double over the last five
years but more upside remains
through improving the efficiency of our
logistics operation, procurement, and
production footprint rationalisation.
Each 1% increase in our EBITDA
margin would increase net profits by
circa 10%.
I will finish with a comment I read
recently by a very successful fund
manager: “[Investment is] not a well-
behaved machine that cranks out
returns to owners of all equities...
Instead quite extraordinary returns flow
from a tiny fraction of the companies
in existence.”
We intend to be one of those
companies and look forward with
confidence to another successful year
of continued growth.
Geoffrey Wilding
Executive Chairman
24 July 2018
1 Source: Freedonia Global Flooring Market Report January 2017
09
Business and Performancewww.victoriaplc.com Strategic report
BUSINESS OVERVIEW
Victoria PLC is a designer, manufacturer and distributor of innovative flooring
products. The Group is headquartered in the UK, with operations across
the UK, Spain, Italy, the Netherlands, Belgium and Australia, employing
approximately 2,500 people at more than 20 sites.
The Group designs and manufactures a wide range of wool and synthetic broadloom carpets, ceramic tiles, flooring
underlay, LVT (luxury vinyl tile) and hardwood flooring products, artificial grass, carpet tiles and flooring accessories.
A review of the performance of the business is provided within the Financial Review.
BUSINESS MODEL
Victoria’s business model is underpinned by five integrated pillars:
Superior customer offering
Offering a range of leading quality and complementary flooring products across a number of different brands,
styles and price points, focused on the mid-to-upper end of the market or specialist products, as well as providing
market-leading customer service.
Sales driven
Highly motivated, independent and appropriately incentivised sales teams across each brand and product range,
ensuring delivery of a premium service and driving profitable growth.
Flexible cost base
Multiple production sites with the flexibility, capacity and cost structure to vary production levels as appropriate, in
order to maintain a low level of operational gearing and maximise overall efficiency.
Focused investment
Appropriate investment to ensure long-term quality and sustainability, whilst maintaining a focus on cost of capital
and return on investment.
Entrepreneurial leadership
A flat and transparent management structure, with income statement ‘ownership’ and linked incentivisation,
operating within a framework that promoted close links with each other and with the PLC Board to plan and
implement the short and medium-term strategy.
1.
2.
3.
4.
5.
10
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP STRATEGY
The Group’s successful strategy in creating wealth for its shareholders has not
changed and continues to be to deliver profitable and sustainable growth, both
from acquisitions and organic drivers.
In terms of acquisitions, the Group continues to seek and monitor good opportunities in key target markets that will
complement the overall commercial offering and help to drive further improvement in our KPIs. Funding of acquisitions is
primarily sought from debt finance to maintain an efficient capital structure, insofar as a comfortable level of facility and
covenant headroom is maintained.
Organic growth is fundamentally driven by the five pillars of the business model highlighted above. In addition, the Group
continues to seek and deliver synergies and transfer best operating practice between acquired businesses, both in terms of
commercial upside, and cost and efficiency benefits to drive like-for-like margin improvement.
KEY PERFORMANCE INDICATORS
The KPIs monitored by the Board and the Group’s performance against these are set out in the table below.
Revenue
Revenue growth at constant currency
Underlying EBITDA
Underlying EBITDA margin
Underlying operating profit
Underlying operating margin
EPS (basic, adjusted)
Adjusted net debt / EBITDA1
EBITDA interest cover1
1 As measured in line with our bank facility covenants
Year ended
31 March 2018
£’m
Year ended
1 April 2017
£’m
424.8
28.1%
64.7
15.2%
48.8
11.5%
31.38p
2.68x
9.34x
330.4
24.8%
45.7
13.8%
33.7
10.2%
25.25p
1.63x
12.09x
The Group has again delivered a strong set of annual KPIs in relation to growth and margins. The key capital structure
KPIs – leverage and interest cover – have tightened moderately versus the prior year-end, however this simply reflects the
timing and scale of acquisitions between the two years. The current leverage is consistent with our financial strategy and risk
appetite, whilst in 2017 the business was making much smaller acquisitions and had de-levered significantly from a similar
peak in 2016.
Further commentary on these KPIs is provided in the Financial Review.
11
Business and Performancewww.victoriaplc.com Strategic report
CORPORATE RESPONSIBILITY
Victoria PLC is committed to being
an equal opportunities employer and
is focused on hiring and developing
talented people.
The health and safety of our
employees, and other individuals
impacted by our business, is taken
very seriously and is reviewed by the
Board on an ongoing basis.
A Company statement regarding
the Modern Slavery Act 2015 is
available on the Company’s website at
www.victoriaplc.com.
As a manufacturing and distribution
business, there is a risk that some
of the Group’s activities could have
an adverse impact on the local
environment. Policies are in place
to mitigate these risks, and all of
the businesses within the Group are
committed to full compliance with
all relevant health and safety and
environmental regulations.
On behalf of the Board
Geoffrey Wilding
Executive Chairman
24 July 2018
are put in place, the vast majority of the
Group’s cost base remains in domestic
currency (Sterling, Euros and Australian
Dollars). Furthermore, the recent
acquisitions in Continental Europe have
created a natural hedge within the UK
& Europe segment as there are material
earnings in Euros as well as Sterling.
Acquisitions – acquisition-led growth
is a key part of the Group’s ongoing
strategy, and risks exist around the
future performance of any potential
acquisitions, unforeseen liabilities, or
difficulty in integrating into the wider
Group. The Board carefully reviews
all potential acquisitions and, before
completing, carries out appropriate
due diligence to mitigate the financial,
tax, operational, legal and regulatory
risks. Risks are further mitigated
through the retention and appropriate
incentivisation of acquisition
targets’ senior management. Where
appropriate the consideration is
structured to include deferred and
contingent elements which
are dependent on financial
performance for a number of years
following completion of the acquisition.
Other operational risks – in common
with many businesses, sustainability
of the Group’s performance is subject
to a number of operational risks,
including major incidents that may
interrupt planned production, and
the recruitment and retention of key
employees. These risks are monitored
by the Board and senior management
team and appropriate mitigating
actions taken.
PRINCIPAL RISKS AND
UNCERTAINTIES
The Board and senior management
team of Victoria identifies and monitors
principal risks and uncertainties on an
ongoing basis. These include:
Competition – the Group operates in
mature and highly competitive markets,
resulting in pressure on pricing and
margins. Management regularly review
competitor activity to devise strategies
to protect the Group’s position as far
as possible.
Economic conditions – the operating
and financial performance of the Group
is influenced by economic conditions
within the geographic areas within
which it operates, in particular the UK,
Australia and the Eurozone. Economic
risk in any one region is mitigated
by the independence of the UK &
Europe Division, and the Australia
Division. The Group remains focused
on driving efficiency improvements,
cost reductions and ongoing product
development to adapt to the current
market conditions.
Key input prices – material adverse
changes in certain raw material prices
– in particular wool and synthetic
yarn, polyurethane foam, and clay –
could affect the Group’s profitability.
A proportion of these costs are
denominated in US Dollars and Euros
which gives rise to foreign exchange
risk, which is currently impacted in
the UK by the uncertainty in medium-
to-long term exchange rates against
Sterling in light of Brexit. Key input
prices are closely monitored and the
Group has a sufficiently broad base of
suppliers to remove arbitrage risk, as
well as being of such a scale that it is
able to benefit from certain economies
arising from this. Whilst there is some
foreign exchange risk beyond the
short-term hedging arrangements that
12
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP Financial review
OVERVIEW
The year to 31 March 2018 has seen substantial positive changes to the Group. We continued our acquisition growth
strategy, acquiring two sizeable businesses in Spain and Italy, which have transformed the scale and shape of the business,
as well as correspondingly increasing the levels of both equity and debt funding. We have also made material investments –
both operationally and financially – in two organic restructuring initiatives as announced during the year, which are expected
to deliver operational and commercial benefits going forward.
The acquisitions in the year have significantly diversified the revenues of the Group and the UK & Europe segment in
particular. Both Keraben (in Spain) and Serra (in Italy) are manufacturers and distributors of ceramic tiles, thereby broadening
the Group’s product portfolio into a completely new segment of the market. Furthermore, in terms of geographic end
markets, these businesses have a greater spread of revenues across Continental Europe, in addition to sales into the UK.
Having now successfully integrated these acquisitions in terms of legal structuring and administrative functions, we are
reviewing potential synergy and distribution opportunities alongside the rest of the UK & Europe business.
The total cost of the acquisitions (net of cash and debt acquired or refinanced) was €311.5m (£276.5m, applying exchange
rates at the time). In addition the Group spent a total of £5.8m on exceptional acquisition costs and fees in the year, the
majority in relation to these acquisitions but some also in relation to our broader M&A prospecting activity.
Both Keraben and Serra generate significant returns on assets employed, with underlying operating profit (earnings before
interest and tax) / net assets of over 30% between them. As a result, given the purchase price for each was based on
sustainable profitability and cash generation rather than just the value of assets, the acquisitions have generated significant
goodwill and acquired intangible assets in the consolidated balance sheet.
Significant progress has been made during the year on the manufacturing and logistics restructuring initiatives previously
announced, with the rationalisation of the UK manufacturing footprint completed, and the strengthened UK logistics network
– including the new Southern distribution centre – on track to be fully operational later this year. The total cost of these
projects in the year was an exceptional cost of £4.5m, plus one-off capital expenditure to drive the necessary expansion in
capacity of circa £3.3m.
Further review of the profit and cash performance of the Group in the year is detailed below.
REVENUE AND GROSS PROFIT
Group revenue increased by 28.6% during the year from £330.4m to £424.8m, primarily driven by acquisitions. This
comprised 29.1% annual growth in the UK & Europe Division and 25.5% annual growth in the Australia Division on a
constant currency basis. The overall translational impact of changes in value of the Euro and Australian dollar against Sterling
were relatively immaterial in the period.
Underlying trading conditions in our traditional carpet and underlay markets have been slightly softer this year compared to
the prior year. Despite this, the Group still experienced positive LFL sales growth in the year of +1.2%1. This growth has been
driven by healthy sales volumes, offset slightly by a drop in average selling price due to changes in sales mix and a strategic
decision in certain areas to remain highly competitive on pricing to help to drive market share.
Year ended 31 March 2018
Year ended 1 April 2017
Revenue and gross profit
UK & Europe
£’m
Revenue
Revenue growth
Reported
Constant currency2
Gross profit
Margin
312.0
29.1%
29.1%
111.2
35.6%
Australia
£’m
112.8
27.2%
25.5%
34.3
30.4%
Total
£’m
424.8
UK & Europe
£’m
241.7
Australia
£’m
88.7
Total
£’m
330.4
28.6%
28.1%
145.4
34.2%
84.5
34.9%
25.1
28.4%
109.6
33.2%
1 LFL sales growth adjusted for the impact of acquired and restructured entities.
2 Revenue growth at constant currency is calculated applying the same GBP:AUD exchange rate to both years of 1.7206 (being the average exchange rate
during the year ended 31 March 2018).
13
Business and Performancewww.victoriaplc.com
Financial review
Reported gross margin for the Group was 34.2%, an increase of circa 100bps on the prior year. This was driven by a
number of factors, in particular the evolving product mix across the group and operational improvements (albeit the full
benefit from the key restructuring activities in the UK will not be seen until the following year). Australia in particular delivered
a circa 200bps margin improvement.
OPERATING PROFIT
The Group’s underlying operating margin has seen a further significant improvement in the year, rising from 10.2% to 11.5%.
This circa 130 basis point increase follows from the gross margin improvement noted above, which is slightly improved due
to a small operational leverage effect on fixed overheads.
Reported operating profit (earnings before interest and taxation) was broadly flat at £26.4m, having been impacted by higher
non-underlying and exceptional items during the year. After removing these items, underlying operating profit was £48.8m,
representing a 45% increase over the prior year. This growth comprised 47% growth in the UK & Europe segment and 40%
growth in the Australia segment, plus a small increase in central expenses.
Operating profit
Reported operating profit
Add back: non-underlying items
Underlying operating profit
Year ended 31 March 2018
Year ended 1 April 2017
UK &
Europe
£’m
Australia
£’m
Central
expenses
£’m
22.5
16.0
38.5
9.4
2.2
11.6
(5.5)
4.2
(1.3)
Total
£’m
26.4
22.4
48.8
UK &
Europe
£’m
21.8
4.4
26.2
Australia
£’m
Central
expenses
£’m
7.0
1.3
8.3
(2.1)
1.3
(0.8)
Total
£’m
26.7
7.0
33.7
Underlying operating margin
12.3%
10.3%
–
11.5%
10.8%
9.4%
–
10.2%
Reported profit before tax
Underlying profit before tax
Underlying PBT margin
13.4
40.8
9.6%
18.8
29.4
8.9%
EXCEPTIONAL AND OTHER NON-UNDERLYING ITEMS
The total net exceptional and non-underlying charge in the year was £23.0m, compared to £10.4m in the prior year. This
reflects the increased scale of the acquisitions that were made (and prospected), as well as the operational restructuring
projects, for which the year to March 2018 was the key implementation period. As a result, whilst reported profit before tax
declined from £18.8m to £13.4m, underlying profit before tax grew by 39% to £40.8m.
Non-underlying and exceptional items
Amortisation of acquired intangibles
Exceptional costs:
M&A related costs
Restructuring costs
Non-underlying finance costs:
Change to deferred and contingent earn-out liabilities
Retranslation of foreign currency loans
Other non-underlying finance costs
Non-underlying tax
Total non-underlying costs
Non-underlying costs comprise four items:
− Amortisation of acquired intangibles
UK & Europe
£’m
Australia
£’m
9.4
2.5
4.2
–
–
0.5
(3.8)
12.8
1.8
–
0.3
0.1
–
(0.3)
(0.6)
1.3
PLC
£’m
–
3.3
0.9
–
3.5
1.2
–
8.9
Total
£’m
11.2
5.8
5.4
0.1
3.5
1.4
(4.4)
23.0
This cost has increased this year from £4.4m to £11.2m, of which £9.4m related to the UK & Europe segment and £1.8m
to the Australia segment. Within UK & Europe, over half of this amount related to the new acquisitions.
14
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP Under IFRS, the Group is required to fair-value all items in the opening balance sheet of any acquisition made, including
the identification of any intangible assets. Across our historical acquisitions, we have recognised three categories of
such assets: key customer relationships, brand names, and relevant technical IP. Where an acquisition is structured as
a purchase of shares in the target company, these intangible assets are only recognised on consolidation in the Group
accounts, not in the target company’s accounts themselves. The remainder of the purchase price, after subtracting
both the tangible and intangible net assets, is then allocated to goodwill. Under IFRS, whilst goodwill is not subject to
accounting amortisation but rather an annual impairment test, the intangible assets are subject to amortisation across their
determined useful economic lives. Further details are provided in Note 10 to the Accounts.
As noted in the overview section above, one of the common characteristics of acquisitions that Victoria seeks is a high
return on assets employed. This is certainly true of both Keraben and Serra. As a result, with purchase price based on
profits and cash generation, it is a direct consequence of a high return on tangible assets that larger intangible assets and
goodwill will be generated on consolidation, with the former resulting in larger amortisation charges going forward.
It is important to note that these amortisation charges are non-cash items, and that once the intangible assets have been
fully written-down, they do not need to be replaced or reassessed in the accounts unless another acquisition occurs.
Hence why these charges are considered to be non-underlying (see further details in the Significant Accounting Policies).
− Exceptional costs
These costs are often cash costs, but by definition are non-recurring. They tend to fall into one of two categories: M&A
related costs or restructuring costs.
M&A related costs of £2.5m were incurred in the year in relation to the acquisitions completed, comprising advisory, due
diligence and legal fees. In addition, a further £3.3m were incurred in relation to broader M&A prospecting activities (again,
comprising advisory fees). These costs have increased in size (2017: £2.1m) as the acquisitions have increased in size.
Restructuring costs of £5.4m were incurred in the year in relation to the UK manufacturing and logistics reorganisation
projects, comprising redundancy costs, consulting fees, legal fees, as well as internal one-off costs in relation to the
projects. Some further restructuring costs were incurred in the UK & Europe segment, in relation to post-acquisition
integration, and in Australia in relation to smaller operational and legal restructuring matters.
− Non-underlying finance costs
These costs sit within financial items in the income statement due to their nature, but are considered to be non-underlying.
They fall into three broad categories: fair value adjustments to financial liabilities (primarily the BGF subordinated debt
and any foreign exchange or interest rate hedging contracts); fair value adjustments to deferred and contingent earn-out
liabilities (i.e. not the creation of the liabilities themselves, which are built into the value of the investments and therefore
goodwill, but accounting adjustments to the value of these liabilities); and foreign exchange impacts on the translation
of foreign currency loans (the Group has historically borrowed to fund acquisitions in the same currency as the reported
earnings of the target company).
In the year ended March 2018, these costs totalled £5.0m versus £3.6m in the prior year. This is primarily due to the
foreign currency impact on loans, which accounted for £3.5m of this charge. It is important to note that all of these costs
are non-cash in nature.
− Non-underlying tax
This figure relates to the impact on the Group’s tax charge as a result of the above items.
TAXATION
The reported tax charge in the year was £4.8m against a reported pre-tax profit of £13.4m, giving an effective tax rate of
35.6%. This was distorted by the impact of the exceptional and non-underlying costs, the majority of which have been
treated as non-deductible for tax purposes. The underlying effective tax rate measured against adjusted profit before tax
is 22.5%.
15
Business and Performancewww.victoriaplc.com Financial review
EARNINGS PER SHARE
As a result of the significant increase exceptional and non-underlying costs in the year as detailed above, basic earnings per
share decreased from 13.84p to 8.58p. However, adjusted earnings per share (before non-underlying and exceptional items)
increased by circa 24% from 25.25p to 31.38p.
Earnings per share
Basic earnings per share
Basic adjusted earnings per share
Year ended
31 March 2018
pence
Year ended
1 April 2017
pence
8.58p
31.38p
13.84p
25.25p
OPERATING CASH FLOW
The Group delivered underlying EBITDA in the year of £64.7m, an increase of 42% on the prior year.
Cash flow from operating activities before interest, tax and exceptional items was £64.3m, which represents a conversion
of 99% of underlying EBITDA, an improvement on the prior year. This is a 48% increase on the prior year operating
cash flow.
Underlying operating profit from continuing operations
Add back: underlying depreciation & amortisation
Underlying EBITDA
Non-cash items
Underlying movement in working capital
Operating cash flow before interest, tax and exceptional items
% conversion against underlying operating profit
% conversion against EBITDA
Interest paid
Corporation tax paid
Capital expenditure - replacement / maintenance of existing capabilities
Proceeds from fixed asset disposals
Free cash flow before exceptional items
% conversion against underlying operating profit
% conversion against EBITDA
Year ended
31 March 2018
£’m
Year ended
1 April 2017
£’m
48.8
15.9
64.7
(0.2)
(0.2)
64.3
132%
99%
(6.7)
(10.6)
(14.1)
2.1
35.0
72%
54%
33.7
12.0
45.7
(0.5)
(1.6)
43.6
130%
95%
(3.6)
(5.8)
(10.8)
0.2
23.7
70%
52%
Pre-exceptional free cash flow of the Group – after interest, tax and net replacement capex (see the capital expenditure
section below) – was £35.0m. Compared with underlying operating profit (i.e. post-depreciation), this represents a
conversion ratio of 72%, similar to the prior year.
A full reported statement of cash flows, including exceptional and non-underlying items, is provided on page 38.
CAPITAL EXPENDITURE
The year to March 2018 saw a significant increase in capital expenditure, from £11.2m in the prior year to £29.3m (these
figures are inclusive of capex funded via finance leases and hire purchase, as well as cash flow). The majority of this increase
relates to expenditure for restructuring and expansion purposes, in particular post-acquisition investments in Keraben and
Serra and the manufacturing and logistics restructuring projects.
16
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP Capital expenditure
UK & Europe
£’m
Australia
£’m
Capital expenditure - expansion / restructuring
Capital expenditure - replacement / maintenance of existing capabilities
Total capital expenditure
14.5
12.0
26.5
0.4
2.1
2.5
PLC
£’m
0.3
–
0.3
Total
£’m
15.2
14.1
29.3
During the acquisition process for Keraben, a number of capex projects were identified to increase its manufacturing
capacity for the future. One of these projects was initiated immediately on completion of the acquisition, and up to March
2018 a total of €6.7m (circa £5.9m) was invested.
Similarly, as part of the acquisition process for Serra, it was agreed that one of its three manufacturing lines would be
immediately replaced and upgraded. This investment costs €6.5m (circa £5.7m) in total, of which €5.0m (circa £4.4m) had
been spent prior to the end of March. Following the year-end, installation of the new line has been successfully completed
and it is now operational.
Approximately £3.3m was invested during the year in relation to the UK manufacturing and logistics restructuring projects,
plus a further circa £1.8m on other specific expansion and improvement projects around the Group.
Replacement capex – ongoing annual expenditure to maintain existing capacity and capabilities – increased from £11.2m to
£14.1m as a result of the acquisition-led growth of the Group.
NET DEBT
As at 31 March 2018 the Group’s net debt position was £258.7m. This compares with £89.6m as at the previous year-
end, 1 April 2017. The principal reason for this increase during the year was due to the substantial acquisitions in the year
of Keraben and Serra. Total acquisition-related expenditure in the year (including deferred consideration payments) was
£362.3m, of which £178.1m was funded from the net proceeds of an equity raise in November 2017, and the rest from cash
flow and new borrowings.
Total initial cash consideration for acquisitions (net of cash acquired)
Total debt acquired or refinanced
Deferred and contingent consideration payments
Acquisition costs (cash paid)
Gross acquisition related expenditure
Net proceeds from issue of share capital
Net acquisition related expenditure
Capital expenditure - expansion / restructuring
Net investment financed from free cash flow or debt funding
Free cash flow before exceptional items (see above)
Non-underlying items impacting net debt:
Other exceptional items (cash paid)
Mark to market adjustment on corporate bonds held
Non-cash adjustment to BGF loan recognised
Foreign exchange differences on opening cash / debt
Movement in net debt
Opening net debt
Closing net debt
Year ended
31 March 2018
£’m
Year ended
1 April 2017
£’m
(276.5)
(66.0)
(15.3)
(4.5)
(362.3)
178.1
(184.2)
(15.2)
(199.4)
35.0
(3.4)
(0.1)
(1.1)
(0.1)
(169.1)
(89.6)
(258.7)
(37.8)
(0.7)
(10.3)
(2.1)
(50.9)
–
(50.9)
–
(50.9)
23.7
(0.3)
–
(0.4)
(0.6)
(28.5)
(61.1)
(89.6)
Applying our banks’ adjusted measure of financial leverage, the Group’s year-end net debt to EBITDA ratio was 2.68x (2017:
1.63x). This is consistent with our financial strategy to use a sensible but cautious level of debt in the overall funding structure
of the Group. The acquisition of Keraben was significantly larger than any previous acquisition made by the Group, and
therefore the level of debt and equity funding sought as part of that transaction was structured to target this level of leverage.
17
Business and Performancewww.victoriaplc.com Financial review
Net debt
Net cash and cash equivalents
Bank loans
BGF loan
Finance leases and hire purchase arrangements
Net debt
Adjusted net debt / EBITDA3
3 As measured in line with our bank facility covenants
31 March 2018
£’m
1 April 2017
£’m
53.1
(298.5)
(11.3)
(2.0)
(258.7)
2.68x
28.0
(105.9)
(10.2)
(1.6)
(89.6)
1.63x
ACCOUNTING STANDARDS
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), as
endorsed and adopted for use in the EU. There have been no changes to IFRS this year that have a material impact on the
Group’s results. Whilst the majority of forthcoming new IFRSs are not expected to have a material impact on the financial
statements of the Group, the effects of applying IFRS16 is still under review.
There have been no material changes in the accounting policies of the Group and its subsidiaries this year.
FUNDING AND GOING CONCERN
On 5 July 2017, the Group entered into a new, extended multi-currency revolving credit facility. This facility matures in
October 2020, with a one-year extension option, providing a medium-term platform for the continued debt financing of the
Group and further potential acquisitions.
On 15 November 2017, the Group entered into an additional senior syndicated Euro term loan, to contribute towards the
funding of the acquisitions of Keraben and Serra. The maturity of this facility is in line with the revolving credit facility.
The facilities are subject to various financial covenants measured against Group results on a quarterly basis. All such
covenants have been satisfied to date.
In conjunction with the bank facilities, on 5 July 2017 the Group entered into a revised £10 million unsecured loan with the
Business Growth Fund maturing in 2021.
The current facilities across the Group provide sufficient capacity in Sterling, Australian Dollars and Euros to cover all
anticipated capital expenditure and working capital requirements during the year ahead.
The consolidated financial statements for the Group have been prepared on a going-concern basis. The Group’s business
activities, together with the factors likely to affect its future development, performance and position, are set out in the
Chairman’s Statement, the Strategic Review and this Financial Review. In addition, Note 25 to the financial statements
includes details of the Group’s financial instruments and its exposure to and management of credit risk, liquidity risk,
currency risk and interest rate risk.
Having reviewed the Group’s budgets, projections and funding requirements, and taking account of reasonable possible
changes in trading performance, the Directors believe they have reasonable grounds for stating that the Group has adequate
resources to continue in operational existence for the foreseeable future.
The Directors are of the view that the Group is well placed to manage its business risks. Accordingly, the Directors continue
to adopt the going concern basis in preparing the Annual Report and Accounts.
Michael Scott
Group Finance Director
24 July 2018
18
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP Board of directors
Geoff Wilding
Executive Chairman
Philippe Hamers
Chief Executive Officer
Michael Scott
Group Finance Director
Geoff Wilding BSc is a former
investment banker. He set up his own
investment company in New Zealand in
1989. Geoff was appointed Executive
Chairman at the General Meeting on
3 October 2012 and is a member of
the Nominations Committee.
Philippe Hamers was appointed to the
Board on 20 March 2017. Philippe
has over 25 years’ experience in the
flooring industry and headed Europe’s
largest carpet manufacturing operation
at Balta Group for the previous six and
a half years. Prior to joining the Balta
Group he was General Manager of the
Tufted and Woven Division of Beaulieu
International Group.
Michael Scott was appointed
to the Board of Victoria PLC
on 4 January 2016. Prior to this,
Michael spent eight years at Rothschild
where, as part of their Global Financial
Advisory business, he worked across
a wide range of public and private
company transactions, mergers and
acquisitions and debt and equity-
related fund raisings. He qualified
as a Chartered Accountant with
PricewaterhouseCoopers and holds an
Engineering degree from the University
of Cambridge.
Alexander Anton
Non-executive Director
Andrew Harrison
Non-executive Director
Gavin Petken
Non-executive Director
Alexander Anton, a member of the
founding family of Victoria, was
appointed to the main Board in 1995
and is a former Chairman. He is
currently Chairman of Legacy Portfolio.
Alexander was appointed to the Board
at the General Meeting on 3 October
2012 and is a member of the Audit,
Remuneration and Nominations
Committees.
Andrew Harrison has more than twenty
years experience as a solicitor in private
practice, specialising in company
law. He has advised on a wide variety
of corporate transactions, including
management buy-outs and buy-ins,
corporate acquisitions and disposals
and listed company take-overs.
Andrew was appointed to the Board
at the General Meeting held on
3 October 2012 and is the Senior
Independent Non-executive Director.
Gavin Petken is the Business Growth
Fund’s Regional Director for the
Midlands and has developed the
firm’s local investment activities
in the Midlands region for smaller
entrepreneurial companies. He has
also been actively involved with
the Business Growth Fund’s major
strategic initiative to extend the firm’s
provision of growth capital to listed
companies providing similar access to
long-term funding. He is a Chartered
Accountant, qualifying with Arthur
Andersen.
Gavin was appointed to the Board in
September 2014 and is a member
of the Audit and Remuneration
Committees.
19
www.victoriaplc.comOur Governance Directors’ report
The Directors present their Annual Report and the audited financial statements for the Group for the year ended
31 March 2018.
Principal activities and Strategic Report
The Group’s principal activities are the manufacture, distribution and sale of floorcoverings.
The Company is required by the Companies Act 2006 to prepare a Strategic Report that includes a fair review of the Group’s
business, the development and the performance of the Group’s business during the year and its future development, of
the position of the Group at the end of the financial year to 31 March 2018 and a description of the principal risks and
uncertainties faced by the Group. The Strategic Report can be found on pages 10 to 12.
Results and dividends
The results include those of Victoria PLC and its subsidiaries for the full year and are set out in the financial statements on
pages 34 to 84.
Profit attributable to shareholders
Total dividend paid in the financial year
Retained profit
£000
8,636
–
8,636
The Directors do not recommend the payment of a final dividend for the financial year ended 31 March 2018.
Financial risk management
Details of the Group’s financial risk management policies are set out in Note 25.
Directors and their interests
The current Directors of the Company together with their biographical details are listed on page 19.
The Directors of the Company who held office at 31 March 2018 had the following interests in the Ordinary shares of the
Company:
Geoffrey Wilding(a)
Philippe Hamers
Michael Scott(b)
Alexander Anton
Andrew Harrison
Gavin Petken
31 March 2018
1 April 2017
Beneficial
26,438,650
100,000
21,250
494,025
179,530
–
Non-
Beneficial
–
–
–
–
–
–
Beneficial
30,438,650
–
21,250
494,025
179,530
–
Non-
Beneficial
–
–
–
–
–
–
(a) Geoffrey Wilding and his family are discretionary beneficiaries of The Camden Trust which in turn owns Camden Holdings Limited. Camden Holdings Limited
is the owner of the above shareholding of 26,438,650 Ordinary Shares and as a result Mr. Wilding is the beneficial owner of this shareholding.
(b) On 7 June 2018 Michael Scott exercised his right to exchange B shares held by him in Victoria Midco Holdings Limited into Ordinary Shares, which resulted
in the issue of 395,476 Ordinary Shares. Following this issue, Michael Scott holds 416,726 Ordinary Shares. Further details on the share based payment
scheme are disclosed in Note 5.
Alexander Anton is also deemed by the Panel on Takeovers and Mergers to form part of the concert party formed in
December 2011. At 31 March 2018 the concert party held 3.42% of the issued shares in the Company.
In accordance with the Company’s Articles of Association, the Directors retiring by rotation at the 2018 Annual General
Meeting are Geoffrey Wilding and Gavin Petken whom, being eligible, offer themselves for re-election pursuant to Article 86.
No Director, either during or at the end of the financial year, was materially interested in any significant contract with the
Company or any subsidiary undertaking, with the exception of Gavin Petken, who is the Business Growth Fund’s (‘BGF’)
Regional Director for the Midlands. On 30 September 2014 the Company entered into a £10m 2021 unsecured loan facility
with the BGF. The BGF was also granted an option over 3,730,000 new Ordinary 5p shares in the Company (re-stated for
20
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP the effect of the five for one share split effective from 12 September 2016), representing 5% of the Company’s deemed
enlarged issued share capital at the time of grant. In November 2017, the BGF exercised this option resulting in the issue of
3,730,000 new Ordinary 5p shares in the Company.
Directors’ insurance and indemnities
The Company maintains directors’ and officers’ liability insurance which gives appropriate cover for any legal action brought
against its directors. In accordance with section 236 of the Companies Act 2006, qualifying third- party indemnity provisions
are in place for the directors in respect of liabilities incurred as a result of their office, to the extent permitted by law. Both the
insurance and indemnities applied throughout the financial year ended 31 March 2018 and through to the date of this report.
Directors’ emoluments
The emoluments of all Directors for the financial year ended 31 March 2018 were:
Executive
Geoffrey Wilding
Philippe Hamers (from appointment on 20 March 2017)
Michael Scott
Non-executive
Alexander Anton
Andrew Harrison
Gavin Petken*
Benefits in
kind
£000
Share based
payment
charge
£000
Bonus
£000
Salary/Fees
£000
65
580
126
35
35
35
876
–
–
14
–
–
–
14
–
–
206
–
–
–
206
–
–
20
–
–
–
20
Total
2018
£000
65
580
366
35
35
35
1,116
Total
2017
£000
65
22
265
35
35
35
457
* There is no annual fee payable directly to Mr Petken in respect of his services to the Company. He is the Business Growth Fund’s (‘BGF’) Regional Director
for the Midlands and the Company entered into a £10m loan agreement with the BGF in September 2014. BGF receive an annual fee of £35,000 which is
commensurate with that paid to the Company’s other non-executive directors.
The share based payment charge relates to a long term incentive plan established in April 2016. Further details on the
scheme are set out in Note 5 ‘Staff Costs’.
The National Insurance Contributions made in respect of the Directors during the period ended 31 March 2018 amounted to
£66,702 (2017: £34,311).
Directors’ pension entitlements
No Director who held office during the year ended 31 March 2018 was a member of a money purchase scheme.
Employees
Employees are encouraged to attend training courses and there is regular consultation with employee representatives to
ensure that employees are informed of all matters affecting them. Applications for employment by disabled persons are given
full and fair consideration having regard to their particular aptitudes and abilities. Appropriate training within their capabilities
is provided for disabled employees seeking career development. Employees who become disabled during their employment
have continued in employment wherever possible.
Political donations
The Company made no political donations during the year in line with its policy (2017: £nil).
Financial instruments
The Group’s financial risk management objectives and policies are set out within Note 25 of the financial statements. Note
25 also details the Group’s exposure to foreign exchange, share price, interest, credit, capital and liquidity risks. This note is
incorporated by reference and deemed to form part of this report.
Taxation status
The Directors are advised that the Company is not a ‘close company’ within the provisions of the Income and Corporation
Taxes Act 1988.
21
www.victoriaplc.comOur Governance Directors’ report
Corporate Governance Statement
As an AIM listed group, Victoria PLC is not required to comply with the UK Corporate Governance Code. The Group applies
certain principles of good governance it believes appropriate to a group of its size.
It is the Company’s intention to use the QCA code as its benchmark going forward.
Going concern
After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. Accordingly, the Directors consider it appropriate to continue to adopt the
going concern basis in preparing the accounts. Further details are set out in the Financial Review on page 18.
Post balance sheet event
A new long-term management incentive plan was implemented post year end (see Note 28 for full details).
Auditor
Each person who is a Director at the date of approval of this Annual Report confirms that:
(a) so far as the Director is aware, there is no relevant audit information of which the Company’s Auditors are unaware; and
(b) the Director has taken all steps that he ought to have taken as a Director in order to make himself aware of any relevant
audit information and to establish that the Company’s Auditors are aware of that information.
The above is in accordance with the provisions of Section 418(2) of the Companies Act 2006.
Grant Thornton UK LLP has expressed its willingness to continue in office as Auditors and a resolution to reappoint them will
be proposed at the forthcoming Annual General Meeting.
Annual General Meeting
Notice of the 2018 Annual General Meeting to be held on 10 September 2018, together with a description of the business
to be discussed at the AGM, is set out in the accompanying Notice. The Notice of this year’s Annual General Meeting will be
available to view on the Company’s website at www.victoriaplc.com.
The Directors consider that each of the proposed resolutions to be considered at the Annual General Meeting are in the best
interests of the Company and its shareholders and are most likely to promote the success of the Company for the benefit of
its shareholders as a whole. The Directors unanimously recommend that shareholders vote in favour of each of the proposed
resolutions, as the directors intend to do in respect of their own shareholdings.
By Order of the Board
David Cressman
Company Secretary
24 July 2018
22
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP Statement of directors’
responsibilities
The Directors are responsible for preparing the Strategic Report, the Directors’ Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year.
Under that law, the Directors are required to prepare the Group financial statements in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European Union and have also chosen to prepare the parent
company financial statements under the IFRSs as adopted by the European Union. Under company law, the Directors must
not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Group and
Company and of the profit or loss of the Group for that period. In preparing these financial statements the Directors are
required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state that the financial statements comply with IFRSs as adopted by the European Union subject to any material
departures disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and
Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and the
Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the Group and the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the
Company’s website, www.victoriaplc.com. Legislation in the United Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
On behalf of the Board
Michael Scott
Group Finance Director
24 July 2018
23
www.victoriaplc.comOur Governance Independent auditor’s report
to the members of Victoria PLC
Opinion
Our opinion on the financial statements is unmodified
We have audited the financial statements of Victoria PLC (the ‘parent company’) and its subsidiaries (the ‘group’) for
the period ended 31 March 2018 which comprise the Consolidated Income Statement, the Consolidated Statement of
Comprehensive Income, the Consolidated and Company Balance Sheets, the Consolidated and Company Statements
of Changes in Equity, the Consolidated and Company Statements of Cash Flows and notes to the financial statements,
including a summary of significant accounting policies. The financial reporting framework that has been applied in the
preparation of the group financial statements is applicable law and International Financial Reporting Standards (IFRSs)
as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance
with the provisions of the Companies Act 2006.
In our opinion:
• the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at
31 March 2018 and of the group’s profit for the period then ended;
• the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European
Union;
• the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union and as applied in accordance with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of the group and the parent company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as
applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Who we are reporting to
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you
where:
• the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not
appropriate; or
• the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant
doubt about the group’s or the parent company’s ability to continue to adopt the going concern basis of accounting for a
period of at least twelve months from the date when the financial statements are authorised for issue.
24
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP Overview of our audit approach
• Overall materiality: £1,600,000, which represents 4% of the group’s profit before tax after
exceptional items, amortisation of acquired intangibles and other non-underlying finance
costs have been excluded;
• Key audit matters were identified as valuation of goodwill and intangibles, valuation of
contingent and deferred consideration, impairment of goodwill, and valuation of defined
benefit pension scheme for the group;
• We performed full scope audit procedures on significant components in the United
Kingdom, Spain, the Netherlands, Italy and Australia. We performed analytical procedures
over non-significant components in the Netherlands and Belgium, and the United
Kingdom; and
• We issued group instructions to component auditors in respect of their full scope audit of
the significant components
Key audit matters
The graph below depicts the audit risks identified and their relative significance based on the extent of the financial statement
impact and the extent of management judgement.
High
Revenue
recognition
Potential
financial
statement
impact
Existence of
trade debtor
balances
Management
override
of controls
Valuation of
inventory
(gross and net)
Existence
of inventory
Valuation of
contingent and
deferred
consideration
Valuation of
defined benefit
pension scheme
Valuation of goodwill
and intangibles
Impairment
of goodwill
Acquisition accounting
(Keraben Grupo S.A. and
Ceramiche Serra S.p.A.)
Low
Completeness of
creditors
Valuation of financial
instruments
Low
Extent of management judgement
High
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not
due to fraud) that we identified. These matters included those that had the greatest effect on: the overall audit strategy; the
allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the
context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
25
www.victoriaplc.comOur Financials Independent auditor’s report
to the members of Victoria PLC
Key Audit Matter – Group
How the matter was addressed in the audit – Group
Risk 1 – Valuation of goodwill and intangibles
Our audit work included, but was not restricted to:
During the year the group acquired the entire share
capital of Keraben Grupo S.A. (Keraben) and Ceramiche
Serra S.p.A. (Serra). These acquisitions have had a
material impact on the financial statements, resulting in
the recognition of goodwill and intangible assets upon
consolidation of these entities.
The group measures goodwill at the acquisition date as
being the fair value of consideration transferred less the
net recognised amount of identifiable assets acquired
and liabilities assumed. Goodwill of £113.3 million and
£14.9 million was recognised as a result of the acquisitions
of Keraben and Serra respectively.
Intangible assets acquired in a business combination and
recognised separately from goodwill are initially recognised
at their fair value at the acquisition date, which is regarded
as their cost. Intangible assets of £131.4 million and £29.0
million were recognised as a result of the acquisitions of
Keraben and Serra respectively. These intangibles were
valued, using input from a third party valuation expert,
based on discounted cash flow forecasts, which require
judgement by the Directors around key assumptions such
as revenue growth, discount rates, brand royalty rates,
customer attrition and long term growth rates.
We therefore identified valuation of goodwill and intangibles
recognised in respect of current year acquisitions as a
significant risk, which was one of the most significant
assessed risks of material misstatement.
• documenting our understanding of management’s
process for evaluating the valuation of goodwill and
intangibles and assessing the design effectiveness of
related key controls;
• reperforming management’s calculation of the fair value
of the consideration transferred less the net recognised
amount of identifiable assets acquired and liabilities
assumed;
• using our internal valuation specialist to evaluate and
challenge the assumptions used, including discount rates,
growth rates and forecast future trading performance,
in the calculation of the fair value of the intangibles
recognised; and
• testing the completeness and accuracy of the data used
in the intangibles valuation by agreeing data to pertinent
supporting documentation such as long-term growth
forecasts.
The group’s accounting policy on intangibles is shown on
pages 42 and 43 and related disclosures are included in
notes 9 and 10.
Key observations
Based on our audit work, we found that the assumptions
and judgements used in management’s estimation of the
valuation of goodwill and intangibles recognised in respect
of current year acquisitions were reasonable. We found no
errors in the underlying calculations.
26
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP Key Audit Matter – Group
How the matter was addressed in the audit – Group
Risk 2 – Valuation of contingent and deferred
consideration
At 31 March 2018 amounts owing in respect of deferred
and contingent consideration were £31.3 million, with
additional amounts recognised on the acquisition in the
period of Serra of £12.4 million.
Deferred and contingent consideration in respect of
acquisitions is measured in accordance with International
Financial Reporting Standard (IFRS) 3 ‘Business
Combinations’. Contingent consideration is recognised
initially at fair value with subsequent changes to the fair
value of the contingent consideration recognised in the
Consolidated Income Statement. Deferred consideration
is initially recognised at fair value and subsequently at
amortised cost.
The valuation of contingent consideration upon both
acquisition and at each reporting date requires management
to make judgements and estimates around the future
performance of the relevant businesses and the discount
rates to be applied. Estimated payments are calculated
using such financial projections for the next 12 months
and applying growth assumptions for future years where
relevant.
Given the high level of estimation uncertainty in these
judgements, we therefore identified valuation of contingent
and deferred consideration as a significant risk, which
was one of the most significant assessed risks of material
misstatement.
Our audit work included, but was not restricted to:
• documenting our understanding of management’s
process for evaluating the valuation of contingent
and deferred consideration and assessing the design
effectiveness of related key controls;
• confirming that the deferred and contingent consideration
conditions as defined in the respective share purchase
agreements have been appropriately reflected in
management’s calculations;
• challenging the appropriateness of the assumptions used,
including discount rates, growth rates and forecast future
trading performance, in the calculation of the fair value of
the deferred and contingent consideration; and
• testing the appropriateness of management’s accounting
policy through the above procedures and confirming it
was correctly applied during the period.
The group’s accounting policies in respect of deferred and
contingent consideration are shown on pages 45 and 46,
and related disclosures are included in note 17.
Key observations
Based on our audit work, we found that the assumptions
and estimates used by management’s evaluation of the
valuation of deferred and consideration were reasonable.
Note 17 also appropriately discloses the assumptions used
in determining the estimate. We found no significant errors
in the underlying calculations.
27
www.victoriaplc.comOur Financials Independent auditor’s report
to the members of Victoria PLC
Key Audit Matter – Group
How the matter was addressed in the audit – Group
Risk 3 – Impairment of goodwill
The process for assessing whether an impairment
exists under International Accounting Standard (IAS) 36
‘Impairment of assets’ is complex. When carrying out the
goodwill impairment review, determining the recoverable
amount for each cash-generating unit (“CGU”) requires the
management to make judgements over certain key inputs
in the value in use discounted cash flow models. These
include revenue growth, discount rates and long term
growth rates.
We therefore identified impairment of goodwill as a
significant risk, which was one of the most significant
assessed risks of material misstatement.
Our audit work included, but was not restricted to:
• documenting our understanding of management’s
process for evaluating the impairment of intangible assets
and assessing the design effectiveness of related key
controls;
• testing the methodology applied in the value in use
calculation complies with the requirements of IAS 36;
• testing the mathematical accuracy of management’s
model;
• testing the key underlying assumptions for the financial
year 2019 budget (FY19);
• challenging management on its cash flow forecast and
the implied growth rates for FY19 and corroborating to
relevant evidence such as external market data to support
these assumptions;
• assessing the discount rates and long term growth rates
used in the forecast including comparison to economic
and industry forecasts where appropriate; and
• testing the sensitivity analysis performed by management
in respect of the key assumptions, such as discount and
growth rates, to ensure there was sufficient headroom in
their calculation.
The group’s accounting policy on goodwill is shown on
pages 39 and 40 and related disclosures are included in
note 9.
Key observations
Based on our audit work, we found that the assumptions
made and estimates used in management’s assessment
of goodwill impairment were balanced. Note 9 also
appropriately discloses the assumptions used in
determining the estimate. We found no errors in the
underlying calculations.
28
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP Key Audit Matter – Group
How the matter was addressed in the audit – Group
Risk 4 – Valuation of defined benefit pension scheme
The group operates a defined benefit pension scheme
that provides benefits to a number of current and former
employees. At 31 March 2018 the defined benefit pension
schemes net liability was £9.1 million (2017: £11.1 million).
The gross value of pension scheme assets and liabilities
which form the net liability amount to £24.2 million and
£33.4 million, respectively.
The valuation of the pension liabilities and assets in
accordance with IAS 19 ‘Employee benefits’ involves
significant judgement and is subject to complex
actuarial assumptions. Small variations in those actuarial
assumptions can lead to a materially different defined
benefit pension scheme asset or liability being recognised
within the group financial statements.
We therefore identified valuation of defined benefit pension
scheme as a significant risk, which was one of the most
significant assessed risks of material misstatement.
Our audit work included, but was not restricted to:
• documenting our understanding of management’s
process for evaluating the defined benefit pension
scheme and assessing the design effectiveness of related
key controls;
• using an internal actuarial specialist to challenge the
assumptions used, including discount rates, growth rates,
mortality rates and the calculation methods employed in
the calculation of the pension liability;
• testing the accuracy of underlying membership data used
by the group’s actuary for the purpose of calculating the
scheme liabilities by selecting a sample of employees
and agreeing key member data to source records and by
testing a sample of movements in the pension scheme
membership; and
• directly confirming the existence of pension scheme
assets with the entity pension scheme’s external asset
managers.
The group’s accounting policy on the defined benefit
pension scheme is shown on page 41 and related
disclosures are included in note 20.
Key observations
Based on our audit work, we found the valuation
methodologies and the actuarial assumptions applied by
management to be reasonable and consistent with the
expectation of our actuarial specialists. We consider that the
group’s disclosures in note 20 appropriately describe the
significant degree of inherent imprecision in the assumptions
and estimates and the potential impact on future periods
of revisions to these estimates. We found no errors in the
underlying calculations.
We did not identify any Key Audit Matters relating to the audit of the financial statements of the parent company.
29
www.victoriaplc.comOur Financials Independent auditor’s report
to the members of Victoria PLC
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality in determining the
nature, timing and extent of our audit work and in evaluating the results of that work.
Materiality was determined as follows:
Materiality measure
Group
Parent
Financial statements as a whole
£1,200,000, which represents
approximately 2% of the parent
company total assets, capped at 75%
of group materiality. The benchmark
is considered the most appropriate as
it most accurately reflects the parent
company’s status as a non-trading
holding company.
Materiality for the current year is higher
than the level that we determined for
the period ended 1 April 2017 to reflect
the parent company’s increased total
assets in the current period.
£1,600,000, which represents
approximately 4% of the group’s profit
before tax after exceptional items,
amortisation of acquired intangibles,
and other non-underlying finance costs
have been excluded. This benchmark
is considered the most appropriate
because this is a key performance
measure used by the Board of
Directors to report to investors on the
financial performance of the group.
Underlying profit before tax is also
a consistent basis for determining
materiality compared with the previous
periods.
Materiality for the current year is higher
than the level that we determined
for the period ended 1 April 2017 as
a result of the increased underlying
group profit before tax in the current
period.
Performance materiality used to drive
the extent of our testing
Specific materiality
Communication of misstatements to
the audit committee
Based on our risk assessment,
including the group’s overall control
environment, we determined a
performance materiality of 75% of the
financial statement materiality.
Based on our risk assessment,
including the company’s overall
control environment, we determined a
performance materiality of 75% of the
financial statement materiality.
We determined a lower level of
materiality for directors’ remuneration
and related party transactions.
We determined a lower level of
materiality for directors’ remuneration
and related party transactions.
£80,000 and misstatements below
that threshold that, in our view, warrant
reporting on qualitative grounds.
£60,000 and misstatements below
that threshold that, in our view, warrant
reporting on qualitative grounds.
30
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for potential
uncorrected misstatements.
Overall materiality – group
Overall materiality – parent
25%
25%
75%
75%
Tolerance for potential uncorrected misstatements
Performance materiality
An overview of the scope of our audit
Our audit approach was a risk-based approach founded on a thorough understanding of the group’s business, its
environment and risk profile. The components of the group were identified by the group audit team based on a measure of
materiality, considering each as a percentage of the group’s total assets, revenues and profit before taxation, to assess the
significance of the component and determine the planned audit response.
A full scope audit approach for all significant components was determined based on their relative materiality to the group and
our assessment of the audit risk. For significant components requiring a full scope approach we evaluated the processes
and controls over the financial reporting system identified as part of our risk assessment, reviewed the financial statement
production process and addressed critical accounting matters such as those related to the key audit matters as identified
above. We then undertook substantive testing on significant transactions and material account balances.
In order to respond to the audit risks identified in our risk assessment, we performed a full scope audit of the financial
statements of the parent company, Victoria PLC (in the United Kingdom), and of other significant component entities in
the United Kingdom, the Netherlands, Spain, Italy and Australia. The significant components represented 91.7 percent of
consolidated revenues and 92.4 percent of underlying profit before taxation. Statutory audits of subsidiaries, where required
by local legislation, were performed to a lower materiality where applicable.
The non-significant group components were subject to analytical procedures with a focus on the key audit matters as
identified above and the significance to the group’s balances.
Detailed audit instructions were issued to the auditors of all the significant components. The instructions highlighted
the significant risks to be addressed through their procedures and detailed the information to be reported to the group
audit team. The group audit team conducted a remote review of the work performed by the component auditors, and
communicated with all component auditors throughout the planning, fieldwork and concluding stages of the local audits.
31
www.victoriaplc.comOur Financials
Independent auditor’s report
to the members of Victoria PLC
Other information
The directors are responsible for the other information. The other information comprises the information included in the
annual report set out on pages 1 to 23, other than the financial statements and our auditor’s report thereon. Our opinion
on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in
the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material misstatement in the financial statements or a
material misstatement of the other information. If, based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic report and the Directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
• the strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the
course of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to
report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit
32
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP Responsibilities of directors for the financial statements
As explained more fully in the Statement of directors’ responsibilities set out on page 23, the directors are responsible for
the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal
control as the directors determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or
have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
David White
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Birmingham
24 July 2018
33
www.victoriaplc.comOur Financials Consolidated income statement
For the 52 weeks ended 31 March 2018
52 weeks ended 31 March 2018
52 weeks ended 1 April 2017
Underlying
performance
£m
Non-
underlying
items
£m
Reported
numbers
£m
Underlying
performance
£m
Non-
underlying
items
£m
Reported
numbers
£m
–
–
–
–
(22.4)
–
(22.4)
–
(11.2)
(11.2)
424.8
(279.4)
145.4
(59.4)
(61.0)
1.4
26.4
48.8
(11.2)
(11.2)
(5.0)
(13.0)
–
(0.2)
(0.3)
–
(4.5)
(27.4)
4.4
(23.0)
(6.6)
(1.2)
(0.4)
(0.3)
(4.5)
13.4
(4.8)
8.6
8.58
8.37
330.4
(220.8)
109.6
(54.9)
(21.5)
0.5
33.7
33.7
–
–
(4.3)
(3.6)
(0.4)
(0.2)
(0.1)
–
29.4
(6.4)
23.0
25.25
24.43
–
–
–
–
(7.0)
–
(7.0)
–
(4.4)
(2.6)
(3.6)
–
–
(0.2)
–
(3.4)
(10.6)
0.2
(10.4)
330.4
(220.8)
109.6
(54.9)
(28.5)
0.5
26.7
33.7
(4.4)
(2.6)
(7.9)
(3.6)
(0.4)
(0.4)
(0.1)
(3.4)
18.8
(6.2)
12.6
13.84
13.60
Notes
1
Continuing operations
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Other operating income
Operating profit/(loss)
Comprising:
424.8
(279.4)
145.4
(59.4)
(38.6)
1.4
48.8
Operating profit before non-
underlying and exceptional items
1
48.8
Amortisation of acquired intangibles
Exceptional items
1, 2
Finance costs
Comprising:
Interest payable on loans
Amortisation of prepaid finance costs
Interest accrued on BGF loan
Net interest expense on defined
benefit pensions
Other non-underlying finance costs
Profit / (loss) before tax
Taxation
Profit / (loss) for the period
Earnings per share - pence
basic
diluted
3
3
3
3
3
3
4
6
7
7
–
–
(8.0)
(6.6)
(1.0)
(0.1)
(0.3)
–
40.8
(9.2)
31.6
31.38
30.61
34
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP
Consolidated statement of
comprehensive income
For the 52 weeks ended 31 March 2018
Profit for the period
Other comprehensive income / (expense):
Items that will not be reclassified to profit or loss:
Actuarial gains / (losses) on defined benefit pension scheme
(Decrease) / increase in deferred tax asset relating to pension scheme liability
Items that will not be reclassified to profit or loss
Items that may be reclassified subsequently to profit or loss:
Retranslation of overseas subsidiaries
Items that may be reclassified subsequently to profit or loss
Other comprehensive expense
Total comprehensive income for the year attributable to the owners of the parent
Note
20
52 weeks
ended
31 March 2018
£m
52 weeks
ended
1 April 2017
£m
8.6
12.6
2.0
(0.4)
1.6
(2.1)
(2.1)
(0.5)
8.1
(7.8)
1.4
(6.4)
1.9
1.9
(4.5)
8.1
35
www.victoriaplc.comOur Financials Consolidated and Company
balance sheets
As at 31 March 2018
Non-current assets
Goodwill
Intangible assets other than goodwill
Property, plant and equipment
Investment property
Investments in subsidiaries
Investments in associates
Trade and other non-current receivables
Deferred tax assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other current payables
Current tax liabilities
Other financial liabilities
Total current liabilities
Non-current liabilities
Trade and other non-current payables
Other non-current financial liabilities
Deferred tax liabilities
Retirement benefit obligations
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium
Retained earnings
Foreign exchange reserve
Other reserves
Total equity
Group
Company
31 March 2018
£m
Notes
1 April 2017
£m
31 March 2018
£m
1 April 2017
£m
9
10
11
12
12
12
14
19
13
14
17
15
17
16, 17
15
16
19
20
21
22
22
22
188.1
210.3
142.9
0.8
–
1.0
–
4.6
547.7
100.3
88.2
54.0
242.5
790.2
121.5
1.0
3.0
125.5
29.2
306.1
54.7
9.1
399.1
524.6
265.6
5.9
229.8
26.7
2.9
0.3
265.6
59.8
66.3
41.8
0.2
–
–
–
5.0
173.1
73.1
55.1
28.0
156.2
329.3
82.8
4.3
0.6
87.7
19.9
116.1
15.2
11.1
162.3
250.0
79.3
4.5
52.5
16.5
5.0
0.8
79.3
–
0.2
–
0.2
49.3
–
14.8
0.2
64.7
–
484.0
6.2
490.2
554.9
3.1
–
12.9
16.0
0.4
300.7
–
–
301.1
317.1
237.8
5.9
229.8
1.8
–
0.3
237.8
–
–
–
0.2
49.3
–
14.1
0.3
63.9
–
132.9
0.3
133.2
197.1
6.6
–
10.4
17.0
–
115.1
–
–
115.1
132.1
65.0
4.5
52.5
7.2
–
0.8
65.0
The loss of the Company for the year determined in accordance with the Companies Act 2006 was £5,430,000
(2017: profit of £2,733,000). Company Registered Number (England & Wales) 282204
The financial statements on pages 34 to 84 were approved by the Board of Directors and authorised for issue
on 24 July 2018.
They were signed on its behalf by:
Michael Scott
Group Finance Director
36
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP Consolidated statement of
changes in equity
For the 52 weeks ended 31 March 2018
At 3 April 2016
Profit for the period to 1 April 2017
Other comprehensive loss for the period
Retranslation of overseas subsidiaries
Total comprehensive profit
Issue of share capital
Share-based payment charge
Transactions with owners
At 1 April 2017
Profit for the period to 31 March 2018
Other comprehensive profit for the period
Retranslation of overseas subsidiaries
Total comprehensive profit / (loss)
Issue of share capital
BGF equity transfer
Share-based payment charge
Transactions with owners
At 31 March 2018
Share
capital
£m
Share
premium
£m
Retained
earnings
£m
Foreign
exchange
reserve
£m
Other
reserves
£m
4.5
–
–
–
–
–
–
–
4.5
–
–
–
–
1.4
–
–
1.4
5.9
52.5
–
–
–
–
–
–
–
52.5
–
–
–
–
176.6
0.7
–
177.3
229.8
10.3
12.6
(6.4)
–
6.2
–
–
–
16.5
8.6
1.6
–
10.2
–
–
–
–
26.7
3.1
–
–
1.9
1.9
–
–
–
5.0
–
–
(2.1)
(2.1)
–
–
–
–
2.9
0.7
–
–
–
–
–
0.1
0.1
0.8
–
–
–
–
–
(0.7)
0.2
(0.5)
0.3
Company statement of
changes in equity
For the 52 weeks ended 31 March 2018
At 3 April 2016
Profit for the period to 1 April 2017
Total comprehensive profit
Issue of share capital
Share-based payment charge
Transactions with owners
At 1 April 2017
Loss for the period to 31 March 2018
Total comprehensive loss
Issue of share capital
BGF equity transfer
Share-based payment charge
Transactions with owners
At 31 March 2018
Share
capital
£m
Share
premium
£m
Retained
earnings
£m
Other
reserves
£m
4.5
–
–
–
–
–
4.5
–
–
1.4
–
–
1.4
5.9
52.5
–
–
–
–
–
52.5
–
–
176.6
0.7
–
177.3
229.8
4.5
2.7
2.7
–
–
–
7.2
(5.4)
(5.4)
–
–
–
–
1.8
0.7
–
–
–
0.1
0.1
0.8
–
–
–
(0.7)
0.2
(0.5)
0.3
Total
equity
£m
71.1
12.6
(6.4)
1.9
8.1
–
0.1
0.1
79.3
8.6
1.6
(2.1)
8.1
178.0
–
0.2
178.2
265.6
Total
equity
£m
62.2
2.7
2.7
–
0.1
0.1
65.0
(5.4)
(5.4)
178.0
–
0.2
178.2
237.8
37
www.victoriaplc.comOur Financials Consolidated and Company
statements of cash flows
For the 52 weeks ended 31 March 2018
Group
Company
52 weeks
ended
31 March 2018
£m
52 weeks
ended
1 April 2017
£m
52 weeks
ended
31 March 2018
£m
52 weeks
ended
1 April 2017
£m
Note
Cash flows from operating activities
Operating profit / (loss)
Adjustments for:
Depreciation charges
Amortisation of intangible assets
Amortisation of government grants
Loss on disposal of property, plant and equipment
Share-based employee remuneration
Defined benefit pension
Net cash flow from operating activities before
movements in working capital
Change in inventories
Change in trade and other receivables
Change in trade and other payables
Cash generated / (used) by operations
Interest paid
Income taxes paid
Net cash inflow / (outflow) from operating activities
Investing activities
Purchases of property, plant and equipment
Proceeds on disposal of property, plant and equipment
Purchases of intangible assets
Loan to subsidiary companies
Deferred and contingent consideration payments
Acquisition of subsidiaries net of cash acquired
Net cash used in investing activities
Financing activities
Increase in long-terms loans
Issue of share capital
Repayment of obligations under finance leases / hire
purchase
Net cash generated in financing activities
Increase / (decrease) in net cash and cash equivalents
Net cash and cash equivalents at beginning of period
Effect of foreign exchange rate changes
Net cash and cash equivalents at end of period
Comprising:
Cash and cash equivalents
Bank overdrafts
17
17
26.4
15.8
11.3
(0.3)
0.1
0.2
(0.2)
53.3
(8.0)
2.6
6.4
54.3
(6.7)
(10.6)
37.0
(25.9)
2.1
(0.7)
–
(15.3)
(276.5)
(316.3)
128.8
178.1
(0.3)
306.6
27.3
28.0
(2.2)
53.1
54.0
(0.9)
53.1
26.7
12.0
4.4
(0.2)
–
0.1
(0.2)
42.8
(0.5)
(5.9)
4.7
41.1
(3.6)
(5.8)
31.7
(9.4)
0.2
–
–
(10.3)
(37.8)
(57.3)
34.3
–
(0.9)
33.4
7.8
19.1
1.1
28.0
28.0
–
28.0
(4.0)
–
0.1
–
–
0.2
–
(3.7)
–
0.1
1.2
(2.4)
(6.5)
(0.2)
(9.1)
–
–
(0.3)
(288.5)
(5.8)
–
(294.6)
129.2
178.1
–
307.3
3.6
(10.1)
(0.2)
(6.7)
6.2
(12.9)
(6.7)
(2.1)
–
–
–
–
0.1
–
(2.0)
–
–
0.4
(1.6)
(3.4)
(0.1)
(5.1)
–
–
–
(28.5)
(5.8)
–
(34.3)
34.9
–
–
34.9
(4.5)
(5.6)
–
(10.1)
0.3
(10.4)
(10.1)
38
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP Significant accounting policies
Basis of accounting
The financial statements have
been prepared in accordance with
International Financial Reporting
Standards (IFRS) as adopted by the
EU, IFRIC interpretations and the parts
of the Companies Act 2006 that apply
to companies reporting under IFRS.
The financial statements have been
prepared on the historical cost basis,
except for certain financial instruments
which are recorded at fair value in
accordance with IAS39. Land and
buildings were professionally valued
at 4 April 2004 and this valuation was
adopted as deemed cost on adoption
of IFRS. The accounting policies have
been applied consistently in the current
and prior year. The principal accounting
policies adopted are set out below.
Basis of preparation
The consolidated financial statements
have been prepared on a going
concern-basis. The Strategic Report on
pages 10 to 12 sets out the justification
for this basis of preparation.
Basis of consolidation
The consolidated financial statements
incorporate the financial statements of
the Company and entities controlled by
the Company (its subsidiaries). Control
is achieved where the Company is
exposed, or has the rights, to variable
returns from its involvement with the
investee and has the ability to affect
those returns through its power over
the investee.
The results of subsidiaries acquired
or disposed of during the year are
included in the consolidated income
statement from the effective date of
acquisition or up to the effective date of
disposal, as appropriate.
All intra-group transactions, balances,
income and expenses are eliminated
on consolidation.
The Company has taken advantage of
the exemption provided under section
408 of the Companies Act 2006 not to
publish its individual income statement
and statement of comprehensive
income and related notes.
Business combinations
Business combinations are accounted
for using the acquisition method as at
the acquisition date, which is the date
on which control is transferred to
the Group.
The consideration transferred for
the acquisition of a subsidiary is the
fair values of the assets transferred,
the liabilities incurred and the equity
interests issued by the Group. The
consideration transferred includes
the fair value of any asset or
liability resulting from a contingent
consideration arrangement. Identifiable
assets acquired and liabilities and
contingent liabilities assumed in the
business combination are measured
initially at their fair values at the
acquisition date.
The Group measures goodwill at the
acquisition date as:
• the fair value of the consideration
transferred; less
• the net recognised amount of the
identifiable assets acquired and
liabilities assumed.
Costs related to acquisition, other than
those associated with the issue of debt
or equity securities that the Group
incurs in connection with a business
combination, are expensed as incurred.
If the contingent consideration is
classified as equity, it is not remeasured
and settlement is accounted for within
equity. Otherwise, subsequent changes
to the fair value of the contingent
consideration are recognised in profit
or loss.
Investments in associates
An associate is an entity over which
the Group has significant influence
but not control or joint control. This is
generally the case where the Group
holds between 20% and 50% of the
voting rights.
The results and assets and liabilities
of associates are incorporated in
these financial statements using the
equity method of accounting. Under
the equity method, the investments
are initially recognised in the Balance
Sheet at cost and thereafter adjusted
for post-acquisition changes in the
Group’s share of the net assets of
the associate, less any impairment
in value. The carrying values of
investments in associates include any
acquired goodwill. The goodwill is
included within the carrying amount
of the investment and is assessed for
impairment as part of the investment.
If the Group’s share of losses in an
associate exceeds its investment in
the associate, the Group does not
recognise further losses, unless it has
incurred obligations to do so or made
payments on behalf of the associate.
Investments in subsidiaries and
associates held by the Company
Investments in subsidiaries and
associates held by the Company are
included at cost less accumulated
impairment.
Goodwill
Goodwill represents the excess of the
fair value of the cost of a business
acquisition over the Group’s share of
the fair value of assets and liabilities
acquired as at the date of acquisition.
For the purposes of assessing
impairment, assets are grouped at
the lowest levels for which there are
separately identifiable cash flows (cash-
generating units). Goodwill is allocated
to those cash-generating units that are
expected to benefit from synergies of
the related business combination and
represent the lowest level within the
Group at which management controls
the related cash flows.
Goodwill with an indefinite useful
life is tested for impairment at least
annually. All other individual assets
or cash-generating units are tested
for impairment whenever events or
39
www.victoriaplc.comOur Financials Significant accounting policies
changes in circumstances indicate that
the carrying amount may not
be recoverable.
An impairment loss is recognised for
the amount by which the asset’s or
cash-generating unit’s carrying amount
exceeds its recoverable amount. The
recoverable amount is the higher of
fair value, reflecting market conditions
less costs to sell and value in use,
based on an internal discounted cash
flow evaluation. Impairment losses
recognised for cash-generating units,
to which goodwill has been allocated,
are credited initially to the carrying
amount of goodwill. Any remaining
impairment loss is charged pro rata to
the other assets in the cash generating
unit. With the exception of goodwill, all
assets are subsequently reassessed
for indications that an impairment
loss previously recognised may no
longer exist.
If the impairment is subsequently
reversed, the carrying amount,
except in the case of goodwill, is
increased to the revised estimate of
its recoverable amount, limited to the
carrying value that would have been
determined had no impairment been
recognised previously. Impairment
losses in respect of goodwill are not
subsequently reversed.
Segmental reporting
The Group’s internal organisation
and management structure and its
system of internal financial reporting
to the Board of Directors are based
on the geographical locations of
its businesses. The chief operating
decision-maker has been identified as
the Board of Directors.
Non-current assets held for sale
Non-current assets and disposal
groups are classified as held for sale if
their carrying amount will be recovered
through a sale transaction rather than
through continuing use. This condition
is regarded as met only when the
sale is highly probable and the asset
40
(or disposal group) is available for
immediate sale in its present condition.
Management must be committed to
the sale, which should be expected to
qualify for recognition as a completed
sale within one year from the date
of classification.
Non-current assets (and disposal
groups) classified as held for sale are
measured at the lower of the assets’
previous carrying amount and fair value
less costs to sell.
Investment properties
Investment properties are valued on
an historical costs basis. In adopting
this historical cost approach, the
requirements to disclose fair value are
set out in Note 12.
Revenue recognition
Revenue is measured by reference
to the fair value of consideration
receivable by the Group for goods
supplied, excluding VAT and trade
discounts and after deducting rebates.
The Group has one revenue stream in
relation to the sale of flooring products.
Revenue is recognised upon sale of the
goods at the point of delivery when
all of the following conditions have
been satisfied:
• the Group has transferred to the
buyer the significant risks and
rewards of ownership of the goods;
• the Group retains neither the
continuing managerial involvement
to the degree usually associated with
ownership nor effective control over
the goods sold;
• the amount of revenue can be
measured reliably;
• it is probable that the economic
benefits associated with the
transaction will flow to the Group;
and
• the costs incurred or to be incurred
in respect of the transaction can be
measured reliably.
Cash and cash equivalents
Cash comprises amounts held
short-term on deposit with financial
institutions.
Cash equivalents comprises short-
term highly liquid corporate bonds with
maturities of three months or less from
inception that are readily convertible
into known amounts of cash and which
are subject to an insignificant risk of
changes in value.
Bank overdrafts that are repayable on
demand are included as a component
of cash and cash equivalents for the
purpose of the cash flow statement.
Interest income
Interest income is accrued on a time
basis, by reference to the principal
outstanding and at the effective interest
rate applicable, which is the rate that
exactly discounts estimated future
cash receipts through the expected life
of the financial asset to that asset’s net
carrying amount.
Dividend income
Dividend income from investments in
subsidiaries is recognised when the
shareholders’ rights to receive payment
have been established.
Leasing
Leases are classified as finance leases
whenever the terms of the lease
transfer substantially all the risks and
rewards of ownership to the lessee.
All other leases are classified as
operating leases.
Assets held under finance leases are
recognised as assets of the Group at
their fair value at the inception of the
lease or, if lower, at the present value
of the minimum lease payments. The
corresponding liability to the lessor
is included in the balance sheet as
a finance lease obligation. Lease
payments are apportioned between
finance charges and reduction of
the lease obligation so as to achieve
a constant rate of interest on the
remaining balance of the liability.
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP Finance charges are charged to
profit or loss, unless they are directly
attributable to qualifying assets, in
which case they are capitalised.
Rentals payable under operating leases
are charged to profit or loss on a
straight-line basis over the term of the
relevant lease. Benefits received and
receivable as an incentive to enter into
an operating lease are also spread on a
straight-line basis over the lease term.
Where sale and operating leaseback
transactions are entered into at fair
value, the transaction is treated as
a disposal and any profit or loss is
recognised immediately in the
income statement.
Foreign currencies
The individual financial statements of
each Group entity are presented in
the currency of the primary economic
environment in which the entity
operates (its functional currency).
For the purpose of the consolidated
financial statements, the results and
financial position of each entity are
expressed in Sterling, which is the
functional currency of the Company,
and the presentation currency for the
consolidated financial statements.
In preparing the financial statements
of the individual entities, transactions
in currencies other than the entity’s
functional currency (foreign currencies)
are recorded at the rates of exchange
prevailing on the dates of the
transactions. At each balance sheet
date, monetary items denominated
in foreign currencies are retranslated
at the rates prevailing on the
balance sheet date. Non-monetary
items carried at fair value that are
denominated in foreign currencies
are retranslated at the rates prevailing
on the date when the fair value was
determined. Non-monetary items that
are measured in terms of historical
cost in a foreign currency are not
retranslated.
Exchange differences arising on the
settlement of monetary items, and on
the retranslation of monetary items,
are included in profit or loss for the
period. Exchange differences arising
on the retranslation of non-monetary
items carried at fair value are included
in profit or loss for the period except for
differences arising on the retranslation
of non-monetary items in respect of
which gains and losses are recognised
in equity. For such non-monetary
items, any exchange component of
that gain or loss is also recognised in
equity. In order to hedge its exposure
to certain foreign exchange risks, the
Group enters into forward contracts
and options (see below for details of
the Group’s accounting policies in
respect of such derivative financial
instruments).
For the purpose of presenting
consolidated financial statements,
the assets and liabilities of the
Group’s foreign operations (including
comparatives) are expressed in Sterling
using exchange rates prevailing on
the balance sheet date. Income and
expense items (including comparatives)
are translated at the average exchange
rates for the period, unless exchange
rates fluctuated significantly during that
period, in which case the exchange
rates at the dates of the transactions
are used. Exchange differences arising,
if any, are classified as equity. Such
translation differences are recognised
in profit or loss in the period in which
the foreign operation is disposed of.
Government grants
Government grants relating to property,
plant and equipment are treated
as deferred income, and released
to profit or loss over the expected
useful lives of the assets concerned.
Other government grants, including
those towards staff training costs, are
recognised in profit or loss over the
periods necessary to match them with
the related costs and are deducted in
reporting the related expense.
Retirement benefit costs
(a) Defined contribution schemes
Payments to defined contribution
retirement benefit plans are charged as
an expense as they fall due. Payments
made to state managed retirement
benefit schemes are dealt with as
payments to defined contribution
plans where the Group’s obligations
under the plans are equivalent to
those arising in a defined contribution
retirement benefit plan.
(b) Defined benefit schemes
Typically defined benefit plans define
an amount of pension benefit that an
employee will receive on retirement,
usually dependent on one or more
factors such as age, years of service
and compensation.
The liability recognised in the Balance
Sheet in respect of defined benefit
pension plans is the present value of
the defined benefit obligation at the
end of the reporting period less the
fair value of plan assets. The present
value of the defined benefit obligation
is determined by discounting the
estimated future cash outflows using
interest rates of high quality corporate
bonds that are denominated in the
currency in which the benefits will be
paid, and that have terms to maturity
approximating to the terms of the
related pension obligation.
Actuarial gains and losses arising
from experience adjustments and
changes in actuarial assumptions are
charged or credited to equity in other
comprehensive income in the period
in which they arise, net of the related
deferred tax.
Administrative expenses incurred
by the Trustees in connection with
managing the Group’s pension
schemes are recognised in the
Consolidated Income Statement other
than costs associated with managing
plan assets which are deducted from
the return on plan assets.
41
www.victoriaplc.comOur Financials Significant accounting policies
Taxation
Income tax expense represents the
sum of the tax currently payable and
deferred tax.
The tax currently payable is based
on taxable profit for the year. Taxable
profit differs from profit as reported
in the income statement because it
excludes items of income or expense
that are taxable or deductible in other
years and it further excludes items
that are never taxable or deductible.
The Group’s liability for current tax is
calculated using tax rates that have
been enacted or substantively enacted
by the balance sheet date.
Deferred tax is recognised on
differences between the carrying
amounts of assets and liabilities in
the financial statements and the
corresponding tax bases used in the
computation of taxable profit, and are
accounted for using the balance sheet
liability method. Deferred tax liabilities
are generally recognised for all taxable
temporary differences and deferred
tax assets are recognised to the
extent that it is probable that taxable
profits will be available against which
deductible temporary differences can
be utilised. Such assets and liabilities
are not recognised if the temporary
difference arises from goodwill or from
the initial recognition (other than in a
business combination) of other assets
and liabilities in a transaction that
affects neither the taxable profit nor the
accounting profit.
Deferred tax liabilities are recognised
for taxable temporary differences
arising on investments in subsidiaries
and associates, and interests in joint
ventures, except where the Group
is able to control the reversal of the
temporary difference and it is probable
that the temporary difference will not
reverse in the foreseeable future.
42
The carrying amount of deferred tax
assets is reviewed at each balance
sheet date and reduced to the extent
that it is no longer probable that
sufficient taxable profits will be available
to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax
rates that are expected to apply in
the period when the liability is settled
or the asset realised. Deferred tax is
charged or credited to profit or loss,
except when it relates to items charged
or credited to equity, in which case the
deferred tax is also dealt with in equity.
Deferred tax assets and liabilities
are offset when there is a legally
enforceable right to set off current tax
assets against current tax liabilities and
when they relate to income taxes levied
by the same taxation authority and the
Group intends to settle its current tax
assets and liabilities on a net basis.
Property, plant and equipment
Land and buildings held for use in
the production or supply of goods
or services, or for administrative
purposes, are stated in the balance
sheet at their deemed cost, being
the fair value at the date of adoption
of IFRS, less any subsequent
accumulated depreciation and
subsequent accumulated impairment
losses. Depreciation on buildings is
charged to profit or loss.
Other fixed assets are stated at cost
less accumulated depreciation and
any accumulated impairment losses.
Depreciation is charged so as to write
off the cost or valuation of assets,
other than land and properties under
construction, less any anticipated
residual value, over their estimated
useful lives.
Assets held under finance leases are
depreciated over their expected useful
lives on the same basis as owned
assets or, where shorter, the term of
the relevant lease. The expected useful
lives of assets are:
Buildings: 50 years
Plant and equipment: 3 to 20 years
Fixtures and equipment: 3 to 20 years
Motor vehicles: 4 to 5 years
Sampling assets: 2 to 5 years
The gain or loss arising on the disposal
or retirement of an item of property,
plant and equipment is determined
as the difference between the sales
proceeds and the carrying amount of
the asset and is recognised in profit or
loss.
Sampling assets consist of a variety of
product samples and sample books,
as well as point of sale stands. The
Group places these assets with retail
customers for the purpose of helping
to generate future consumer sales, and
therefore sales for the Group. Sampling
assets are included within the category
‘Fixtures, vehicles and equipment’ as
shown in Note 11.
Intangible assets
(i) Intangible assets acquired in a
business combination
Intangible assets acquired in a
business combination and recognised
separately from goodwill are initially
recognised at their fair value at the
acquisition date, which is regarded as
their cost.
Subsequent to initial recognition,
intangible assets acquired in a
business combination are reported at
cost less accumulated amortisation
and accumulated impairment losses,
on the same basis as intangible assets
that are acquired separately.
(ii) Amortisation of intangible assets
Amortisation is charged to the income
statement on a straight-line basis over
the estimated useful lives of intangible
assets. The expected useful lives of
intangible assets are:
Customer relationships: 10 to 20 years
Brand names: 20 to 35 years
Developed Technology: 4 years
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP Amortisation commences from the
date the intangible asset becomes
available for use.
iii) Derecognition of intangible assets
An intangible asset is derecognised on
disposal, or when no future economic
benefits are expected from use or
disposal. Gains or losses arising from
derecognition of an intangible asset,
measured as the difference between
the net disposal proceeds and the
carrying amount of the asset, are
recognised in profit or loss when the
asset is derecognised.
(iv) Impairment of tangible
and intangible assets
At each balance sheet date, the
Group reviews the carrying amounts
of its tangible and intangible assets
to determine whether there is any
indication that those assets have
suffered an impairment loss. If any
such indication exists, the recoverable
amount of the asset is estimated in
order to determine the extent of the
impairment loss (if any). Where it is not
possible to estimate the recoverable
amount of an individual asset, the
Group estimates the recoverable
amount of the cash-generating unit to
which the asset belongs.
Recoverable amount is the higher of
fair value less costs to sell and value
in use. In assessing value in use,
the estimated future cash flows are
discounted to their present value using
a pre-tax discount rate that reflects
current market assessments of the
time value of money and the risks
specific to the asset.
If the recoverable amount of an asset
(or cash-generating unit) is estimated
to be less than its carrying amount,
the carrying amount of the asset
(cash-generating unit) is reduced to its
recoverable amount. An impairment
loss is recognised immediately in profit
or loss, unless the relevant asset is
carried at a revalued amount, in which
case the impairment loss is treated as
a revaluation decrease.
Where an impairment loss
subsequently reverses, the carrying
amount of the asset (cash-generating
unit) is increased to the revised
estimate of its recoverable amount, but
so that the increased carrying amount
does not exceed the carrying amount
that would have been determined had
no impairment loss been recognised
for the asset (cash-generating unit) in
prior years. A reversal of an impairment
loss is recognised immediately in profit
or loss, unless the relevant asset is
carried at a revalued amount, in which
case the reversal of the impairment
loss is treated as a revaluation
increase.
Inventories
Inventories are stated at the lower of
cost and net realisable value. Cost
comprises direct materials and, where
applicable, direct labour costs and
those overheads that have been
incurred in bringing the inventories to
their present location and condition.
Cost is calculated using the weighted
average method. Net realisable value
represents the estimated selling price
less all estimated costs of completion
and costs to be incurred in marketing,
selling and distribution.
Business Growth Fund loan
and share option
The Group’s fully subordinated £10m
2021 loan facility with the Business
Growth Fund (‘BGF’) includes a
redemption premium of £2.1m payable
in 2019 and a warrant owned by the
BGF to acquire 3,730,000 shares in
Victoria PLC at 57.2p per share (figures
adjusted for the five for one share split
effective 12 September 2016). This
facility has been accounted for using
split accounting to recognise separate
debt and equity components.
The debt component is recognised on
the date of inception or modification
at the fair value of a similar liability
that does not have an equity
conversion option. The equity element
is recognised as the difference
between the fair value of the financial
instrument as a whole and the fair
value of the debt component. Any
directly attributable transaction costs
are allocated to the equity and debt
components in proportion to their initial
carrying amounts.
Subsequently, the debt component is
measured at amortised cost using the
effective interest rate method.
In September 2017 the terms of the
BGF loan agreement were modified.
The changes to the loan agreement
were determined to give rise to a
substantial modification, and as such
has been accounted for under IAS
39.40 ‘extinguishment accounting’.
In adopting extinguishment accounting
the Group has:
− De-recognised the existing liability
and recognised a new liability at fair
value.
− Recognised a gain or loss equal
to the difference between the
carrying value of the old liability and
the fair value of the new liability.
The unamortised element of the
transactions costs from the original
loan have also been included in the
determination of the gain or loss;
− Calculated a new effective interest
rate for the modified liability which
will be used in future periods.
In November 2017 the BGF exercised
the share option in full, acquiring
3,730,000 shares. Following the issue
of the shares in the period, the equity
component was transferred from other
reserves to share premium.
Share-based payments
The equity settled share based
incentive programme allows certain
Group employees to exchange growth
shares issued in the intermediate
holding company Victoria Midco
Holdings Limited into Ordinary Shares
in Victoria PLC of equivalent value. The
fair value of the growth shares is based
43
www.victoriaplc.comOur Financials Significant accounting policies
on growth in the share price of Victoria
PLC above a hurdle, and is measured
using an appropriate valuation model
(Black-Scholes or Monte Carlo) at
grant date. The fair value is spread over
the expected term, representing the
Company’s best estimate of the time
in which the participant will exchange
growth shares for Ordinary Shares
in the Company, with the charge to
the income statement recognised
as an employee expense, and a
corresponding increase in equity.
Long term employee benefits
As part of the acquisition of Keraben
Grupo S.A.U., the senior management
team of the business invested in a
new incentive structure under Victoria
ownership. This investment has
been structured through the holding
company of Keraben, Kinsan Trade
S.L, within which there are 82,093
B ordinary shares owned by certain
individuals. The fair value of the B
shares is linked to the future operating
profit performance of Keraben over
a five year period. The shares are
considered to have no value other
than through redemption in cash
and redemption is based on EBITDA
performance and not linked to share
price. Due to this along with the nature
of the leaver provisions within the
originally agreed contractual terms of
the B shares, the accounting treatment
has been assessed as a long-term
employee benefit, with the original
investment held within short-term
liabilities and the expected uplift in fair
value spread over the five year term.
Exceptional items
Operating costs which are material
by virtue of their size or incidence and
are not expected to be recurring are
disclosed as exceptional items.
Non-underlying items
Non-underlying items are material
non-trading costs and non-
underlying finance costs as defined
by the Directors. They are disclosed
separately in the Consolidated Income
44
Statement where in the opinion of
the Directors such disclosure is
necessary in order to fairly present
the results for the period. Determining
the presentation of an item as non-
underlying is considered to be a
significant judgement in the preparation
of the annual report.
Non-underlying items comprise:
Operating costs
(a) Intangible amortisation
The amortisation of intangible assets
arising from business combinations is
non–cash in nature and, unlike other
assets, is not expected to result in a
future capital cost to the business in
relation to replacement or renewal.
Finance costs
(b) Release of prepaid arrangement
fees on refinanced bank facilities
Certain one-off costs in relation to
arrangement of new debt facilities
are held on the balance sheet
against the relevant debt liability and
amortised over the life of the facility. On
refinancing of facilities, any outstanding
prepaid costs are released
to the income statement and treated as
a non-underlying finance cost.
(c)(i) BGF redemption premium charge
The annual finance charge for the BGF
loan and option includes an element
in relation to the future redemption
premium payment, the quantum of
which matches the payment that would
be received by the Company from BGF
when exercising their share options in
full. As such, this element of
the annual charge is treated as a non-
underlying finance cost.
(c)(ii) BGF charge arising on modification
As a result of changes to the terms
of the BGF loan in September 2017,
the Group adopted extinguishment
accounting as set out earlier in this
section. This has resulted in a one
off charge equal to the difference
between the carrying value of the old
liability and the fair value of the new
liability. The unamortised element of
the transactions costs from the original
loan have also been included in the
non-underlying charge.
(d) Mark-to market adjustments
on foreign exchange contracts and
interest rate swaps
The mark to market valuation of
forward foreign exchange contracts
and interest rate swaps is entirely
dependent on closing exchange and
interest rates at the balance sheet date,
and therefore not considered to form
part of the underlying performance of
the business.
(e) Contingent consideration
fair value adjustments
Contingent consideration in respect of
acquisitions is measured under IFRS
3, initially at fair value discounted for
the time value of money. Subsequently,
the present value is reassessed to
unwind the time value of money, as
well as for any changes to contingent
earn-outs arising from actual and
forecast business performance. Such
adjustments are non-cash in nature
and are not considered to form part
of the underlying performance of the
business.
(e)(ii) Deferred consideration charge
Deferred consideration in respect
of acquisitions is measured under
IFRS 3 at amortised cost. Such
adjustments are non-cash in nature
and are not considered to form part
of the underlying performance of the
business.
(f) Deferred tax charge in respect
of non-qualifying sampling assets
As a result of the accounting policy
change in 2016, there is a deferred
tax charge in 2017 in respect of timing
differences on non-qualifying sampling
assets. This charge is not expected to
recur in future periods.
(g) Retranslation of foreign
currency loans
The impact of exchange rate
movements on foreign currency
loans presented in Sterling within the
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP balance sheet of the Company or of its
consolidated UK subsidiaries is treated
as a non-underlying finance cost.
Financial instruments
(a) Financial assets
The Group’s financial assets fall into the
categories discussed below, with the
allocation depending on the purpose
for which the asset was acquired.
Although the Group occasionally
uses derivative financial instruments
in economic hedges of currency rate
risk, it does not hedge account for
these transactions. The Group has not
classified any of its financial assets as
held to maturity.
Unless otherwise indicated, the
carrying amounts of the Group’s
financial assets are a reasonable
approximation of their fair values.
The Group derecognises a financial
asset only when the contractual rights
to the cash flows from the asset expire;
or it transfers the financial asset and
substantially all the risks and rewards
of ownership of the asset to another
entity.
(i) Loans and receivables
These assets are non-derivative
financial assets with fixed or
determinable payments that are
not quoted in an active market.
They arise principally through the
provision of goods and services to
customers (e.g. trade receivables)
and deposits held at banks but
may also incorporate other types
of contractual monetary asset.
They are initially recognised at
fair value plus transaction costs
that are directly attributable to
the acquisition or issue and
subsequently carried at amortised
cost less provision for impairment,
where appropriate.
The effect of discounting on
these financial instruments is not
considered to be material.
Impairment provisions are
recognised when there is objective
evidence (such as significant
financial difficulties on the part
of the counterparty or default
or significant delay in payment)
that the Group will be unable to
collect all of the amounts due
under the terms receivable; the
amount of such a provision being
the difference between the net
carrying amount and the present
value of the future expected
cash flows associated with the
impaired receivable. For trade
receivables, such provisions are
recorded in a separate allowance
account with the loss being
recognised within distribution
expenses in the income statement.
On confirmation that the trade
receivable will not be collectable,
the gross carrying value of the
asset is written off against the
associated provision.
(ii) Fair value through profit or loss
This category comprises “in
the money” foreign exchange
derivatives and interest rate
swaps to the extent that they exist
(see (b)(ii) for “out of the money”
derivatives) and investments in
listed corporate bonds, which are
held in cash and cash equivalents.
They are carried in the balance
sheet at fair value with changes in
fair value recognised in the income
statement.
The fair value of the Group’s
foreign exchange derivatives is
measured using quoted forward
exchange rates and yield curves
derived from quoted interest rates
matching maturity of
the contracts.
The listed corporate bonds are
held for short term trading and
are highly liquid with maturities
of three months or less from
inception, and are therefore readily
convertible into cash. The fair value
of the Group’s corporate bonds is
measured using quoted prices in
active markets.
(b) Financial liabilities
The Group classifies its financial
liabilities into one of two categories
depending on the purpose for which
the liability was incurred. Although
the Group uses derivative financial
instruments in economic hedges
of currency risk, it does not hedge
account for these transactions.
Unless otherwise indicated, the
carrying amounts of the Group’s
financial liabilities are a reasonable
approximation of their fair values.
The Group derecognises financial
liabilities when, and only when, the
Group’s obligations are discharged,
cancelled or they expire.
(i) Financial liabilities measured
at amortised cost
These liabilities include the
following items:
• Trade payables and other short-
term monetary liabilities, which
are initially recognised at fair
value and subsequently carried
at amortised cost.
• Bank borrowings and loan
notes are initially recognised at
fair value net of any transaction
costs directly attributable to
the issue of the instrument.
Such interest bearing liabilities
are subsequently measured
at amortised cost. Interest is
recognised as a finance expense
in the income statement.
• Deferred, non-contingent
consideration payable in
relation to acquisitions, which is
initially recognised at fair value
and subsequently carried at
amortised cost.
(ii) Fair value through profit or loss
These liabilities include the
following items:
45
www.victoriaplc.comOur Financials Significant accounting policies
• “Out of the money” foreign
exchange derivatives and
interest rate swaps to the extent
that they exist (see (a)(ii) for “in
the money” derivatives). They
are carried in the balance sheet
at fair value with changes in
fair value recognised in finance
income or expense. Other
than these derivative financial
instruments, the Group does
not have any liabilities held for
trading nor has it designated any
financial liabilities as being at fair
value through profit or loss.
The methods used for
calculating the fair value of the
Group’s interest rate and foreign
exchange derivatives have been
described in (a)(ii) above.
• Contingent consideration
payable in relation to
acquisitions, which are carried
in the balance sheet at fair
value with changes in fair value,
including movements in the
discount rate, recognised in
finance income or expense.
(c) Share capital
The Group’s Ordinary shares are
classified as equity instruments. Share
capital includes the nominal value
of the shares. Any share premium
attaching to the shares are shown as
share premium.
Adoption of new and revised standards
The Group has adopted the following
new standards, or new provisions of
amended standards:
• IAS 7 Statement of Cash Flows
(amendment)
• IAS 12 Income Taxes (amendment)
There has been no material impact on
either amounts reported or disclosure
in the financial statements arising from
first time adoption.
Adopted IFRS not yet applied
At the date of authorisation of
46
these financial statements, certain
new standards, amendments and
interpretations to existing standards
have been published by the IASB but
are not yet effective and have not been
applied early by the Group.
• IFRS 15 Revenue from
Contracts with Customers
(effective 1 January 2018)
• IFRS 16 Leases
(effective 1 January 2019)
• IFRS 9 Financial Instruments
(effective 1 January 2018)
IFRS 15 ‘Revenue from Contracts
with Customers’ was issued in 2014
and was endorsed by the EU in 2016.
IFRS 15 establishes a comprehensive
framework for determining whether,
how much and when revenue is
recognised. It replaces existing revenue
recognition guidance, including IAS
18 Revenue. IFRS 15 is effective for
annual periods beginning on or after
1 January 2018, with early adoption
permitted. The Group plans to adopt
IFRS 15 in its financial statements for
the year ending 30 March 2019.
At present, revenue is recognised
at the point in time when the risks
and rewards of ownership transfer
to the customer, which is deemed
to be at the point of delivery of the
product. Under IFRS 15 revenue will
be recognised when performance
obligations are satisfied. We have
undertaken a detailed analysis of
the impact of IFRS 15 on the Group
which has shown that the recognition
of revenue will be consistent with the
transfer of risks and rewards to the
customer under IAS 18. We have
concluded following this assessment
that the implementation of IFRS 15
will not have a significant impact on
the Group’s consolidated financial
statements.
IFRS 16 ‘Leases’ will be effective for
annual periods beginning on or after
1 January 2019. The standard removes
the classification of leases as either
operating leases or financial leases and
introduces a single lessee accounting
model where the lessee is required to
recognise lease liabilities and ‘right of
use’ assets on the Balance Sheet, with
exemption for low value and short-term
leases. The Group is in the process of
evaluating the impact of IFRS16 on its
current lease arrangements.
IFRS 9 Financial instruments revises
the approach to financial instruments
framework replacing IAS 39 Financial
Instruments: Recognition and
Measurement. The classification and
measurement of the group’s financial
instruments are not anticipated to be
impacted significantly upon adoption
of IFRS 9.
Certain other new standards and
interpretations have been issued but
are not expected to have a material
impact on the Group’s financial
statements as follows:
− Amendments to IFRS 2:
Classification and Measurement of
Share-based Payment Transactions
(IASB effective 1 January 2018, EU
endorsed)
− Amendments to IFRS 4: Applying
IFRS 9 Financial Instruments with
IFRS 4 Insurance Contracts (IASB
effective 1 January 2018, EU
endorsed)
− Annual improvements to IFRS 2014-
2016 Cycle – Relating to IFRS 12
Disclosure of interest in other entities
(IASB effective 1 January 2018, not
yet EU endorsed)
− IFRIC Interpretation 22 Foreign
currency transactions and advance
considerations (IASB effective 1
January 2018, not yet EU endorsed)
− Amendments to IAS 40: Transfers of
investment property (IASB effective
1 January 2018, not yet EU
endorsed).
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP Notes to the accounts
1. Segmental information
The Group is organised into two operating divisions, the sale of floorcovering products in the UK & Europe and in Australia.
The CGUs that comprise the UK & Europe division are combined into one reporting segment on the basis that they share
economic characteristics.
Geographical segment information for revenue, operating profit and a reconciliation to entity net profit is presented below.
Income statement
52 weeks ended 31 March 2018
52 weeks ended 1 April 2017
UK &
Europe
£m
312.0
38.5
(9.3)
(6.7)
22.5
Australia
£m
112.8
11.6
(1.9)
(0.3)
9.4
Unallocated
central
expenses
£m
–
(1.3)
–
(4.2)
(5.5)
UK &
Europe
£m
241.7
26.2
(3.6)
(0.8)
21.8
Australia
£m
88.7
8.3
(0.8)
(0.5)
7.0
Unallocated
central
expenses
£m
–
(0.8)
–
(1.3)
(2.1)
Total
£m
330.4
33.7
(4.4)
(2.6)
26.7
(4.3)
(3.6)
18.8
(6.2)
12.6
Total
£m
424.8
48.8
(11.2)
(11.2)
26.4
(8.0)
(5.0)
13.4
(4.8)
8.6
Revenue
Underlying operating profit
Non-underlying operating items
Exceptional operating items
Operating profit
Underlying finance costs
Non-underlying finance costs
Profit before tax
Tax
Profit for the period
Management information is reviewed on a segmental basis to operating profit.
During the year, no single customer accounted for 10% or more of the Group’s revenue. Inter-segment sales in the year and
in the prior year between the UK & Europe and Australia were immaterial.
The Group’s revenue for the period was split geographically as follows:
52 weeks
ended
31 March 2018
£m
52 weeks
ended
1 April 2017
£m
Revenue
UK & other European countries
Spain
Italy
Australia
265.0
41.3
5.7
112.8
424.8
Materially all revenue within ‘UK & other European countries’ relate to the UK.
Balance sheet
Total Assets
Total Liabilities
Net Assets
As at 31 March 2018
As at 1 April 2017
UK & Europe
£m
Australia
£m
712.7
(467.0)
245.7
77.5
(57.6)
19.9
Total
£m
790.2
(524.6)
265.6
UK & Europe
£m
277.0
(216.3)
60.7
Australia
£m
52.3
(33.7)
18.6
241.7
–
–
88.7
330.4
Total
£m
329.3
(250.0)
79.3
47
www.victoriaplc.comOur Financials Notes to the accounts
1. Segmental information (continued)
The Group’s non-current assets as at 31 March 2018 were split geographically as follows:
Non-current assets
UK & other European countries
Spain
Italy
Australia
As at
31 March 2018
£m
As at
1 April 2017
£m
130.5
332.2
49.1
35.9
547.7
130.4
–
–
42.7
173.1
Materially all non-current assets within ‘UK & other European countries’ relate to the UK.
Other segmental information
Depreciation and
amortisation
Depreciation
Amortisation of acquisition
intangibles
Amortisation of other intangibles
52 weeks ended 31 March 2018
52 weeks ended 1 April 2017
UK &
Europe
£m
Australia
£m
Unallocated
central
liabilities
£m
12.8
9.4
0.1
22.3
3.0
1.8
–
4.8
–
–
–
–
UK &
Europe
£m
Australia
£m
Unallocated
central
liabilities
£m
9.3
3.6
–
12.9
2.7
0.8
–
3.5
–
–
–
–
Total
£m
15.8
11.2
0.1
27.1
52 weeks ended 31 March 2018
52 weeks ended 1 April 2017
UK &
Europe
£m
Australia
£m
Unallocated
central
expenditure
£m
Total
£m
UK &
Europe
£m
Australia
£m
Unallocated
central
expenditure
£m
Investments in fixed assets
Purchases of property, plant
and equipment
Disposals of property, plant and
equipment
Purchases of intangible assets
Total capital expenditure
26.1
(0.9)
0.4
25.6
2.5
(0.3)
–
2.2
–
28.6
–
0.3
0.3
(1.2)
0.7
28.1
9.4
(0.2)
–
9.2
1.8
–
–
1.8
–
–
–
–
Total
£m
12.0
4.4
–
16.4
Total
£m
11.2
(0.2)
–
11.0
48
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP 2. Exceptional items
(a) Acquisition and disposal related costs
(b) Reorganisation costs
(c) Prior year preference payment claim
2018
£m
(5.8)
(5.4)
–
(11.2)
All exceptional items are classified within administrative expenses.
(a) One-off professional fees in connection with prospecting and completing acquisitions during the year.
(b) One-off reorganisation costs, including redundancy costs, in relation to the Group’s manufacturing and logistics
operations, as well as other corporate restructuring.
(c) Potential preference payment claim in respect of an Australian customer that went into administration during the
prior year.
3. Finance costs
Interest payable on bank loans and overdrafts
Cash interest payable on BGF loan
Interest payable on Hire Purchase and Finance Leases
Total interest payable on loans
Amortisation of prepaid finance costs
Interest rolled up into BGF loan
Net interest expense on defined benefit pensions
Underlying interest costs
Non-underlying finance costs:
(a) BGF loan, one-off non-cash adjustments arising on modification
(b) BGF loan and option, redemption premium charge
(c) Unwinding of present value of contingent earn-out liabilities
(c) Unwinding of present value of deferred consideration liabilities
(c) Other adjustments to present value of contingent earn-out liabilities
(d) Mark to market adjustment on corporate bonds held
(e) Mark to market adjustment on foreign exchange forward contracts
(f) Retranslation of foreign currency loans
2018
£m
5.7
0.8
0.1
6.6
1.0
0.1
0.3
8.0
0.9
0.3
2.6
0.4
(2.9)
0.1
0.1
3.5
13.0
2017
£m
(2.1)
(0.3)
(0.2)
(2.6)
2017
£m
2.5
1.0
0.1
3.6
0.4
0.2
0.1
4.3
–
0.2
1.8
0.4
1.6
–
–
(0.4)
7.9
(a) Non-cash charge relating to a significant modification to the terms of the BGF loan, on which the coupon was reduced
from 10% to 6% in September 2017. The charge comprises an extinguishment charge of £705,000 and a release of
prepaid costs of £210,000.
(b) Non-cash annual cost of the redemption premium in relation to the BGF loan and option.
(c) Non-cash costs relating to the revaluation of deferred consideration and contingent earn-outs. Deferred consideration is
measured at amortised cost, while contingent consideration is measured under IFRS 3 at fair value. Both are discounted
for the time value of money. The present value is then remeasured at each half-year and year-end in relation to the
appropriateness of the discount factor and the unwind of this discount. In addition, any changes to contingent earn-outs
arising from actual and forecast business performance are reflected as other adjustments to present value of contingent
earn-out liabilities.
(d) Fair value adjustments on corporate bonds held.
(e) Non-cash fair value adjustment on foreign exchange forward contracts.
(f) Net impact of exchange rate movements on third party and intercompany loans.
49
www.victoriaplc.comOur Financials Notes to the accounts
4. Profit/(loss) on ordinary activities before taxation
After charging / (crediting):
Net foreign exchange losses / (gains)
Depreciation of property, plant and equipment (see Note 11)
Amortisation of intangible assets (see Note 10)
Staff costs (see Note 5)
Cost of inventories recognised as an expense
Profit on sale of fixed assets
Government grants (see Note 24)
Operating lease rentals
Auditor’s remuneration
Fees payable to the Company’s Auditor in respect of audit services:
The audit of the Group consolidated accounts
The audit of the Company’s subsidiaries pursuant to legislation
Total audit fees
Tax compliance services
Taxation advisory services
Services relating to corporate finance transactions (etiher proposed or entered into) by or on behalf of
the Company or any of its associates
Pension scheme advisory services
Total non-audit fees
2018
£m
0.2
15.8
11.3
76.7
230.2
(0.1)
(0.3)
6.5
2018
£m
0.08
0.30
0.38
0.05
0.07
0.01
–
0.13
5. Staff costs
Wages and salaries
Social security costs
Share-based employee remuneration
Other pension costs
Group
Company
2018
£m
65.7
7.1
0.2
3.7
76.7
2017
£m
52.0
4.4
0.1
3.3
59.8
2018
£m
0.6
0.1
0.2
–
0.9
2017
£m
(1.9)
12.0
4.4
59.8
183.9
–
(0.2)
5.4
2017
£m
0.05
0.25
0.30
0.04
0.02
0.09
0.02
0.17
2017
£m
0.4
–
0.1
–
0.5
Directors’ remuneration is included as part of the staff costs above. Directors’ remuneration is disclosed separately on
page 21 of the Directors’ Report and forms part of these financial statements.
Average number employed (including executive directors of subsidiaries):
Group
Company
2018
50
381
1,893
176
2,500
2017
38
242
1,397
125
1,802
2018
2017
6
–
–
2
8
6
–
–
1
7
Directors
Sales and marketing
Production, logistics and maintenance
Finance, IT and administration
50
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP 5. Staff costs (continued)
Share based payment schemes
On 29 April 2016, the Group Finance Director, Michael Scott, was awarded 5,000 B ordinary shares (the “B Shares”) in a
new intermediate holding company, Victoria Midco Holdings Limited, in connection with a share-based incentive plan as
recommended by the Remuneration Committee. Between the second and third anniversary of his joining the Company, Mr
Scott is able to exchange the B Shares into ordinary shares in Victoria PLC (“Ordinary Shares”) of equivalent value.
The monetary value of the award represents approximately 0.611% of the growth in value of the Ordinary Shares above a
share price of £3.00. Since the year end, Mr Scott has exercised his option, exchanging the B Shares for 395,476
Ordinary Shares.
On 8 June 2017, Mr Scott was awarded 5,350 C ordinary shares and certain other employees 1,070 C ordinary shares
(collectively the “C Shares”) in connection with the share-based incentive plan. Between the 1 July 2019 and 30 June 2020
participants will be able to exchange the C Shares into Ordinary Shares of equivalent value. The monetary value of the award
represents approximately 0.733% of the growth in value of the Ordinary Shares above a share price of £6.75. The Plan is
subject to good leaver and bad leaver provisions.
The B and C Shares have been valued for the purposes of IFRS 2 (Share-based Payments) using a Black Scholes model.
The key inputs and assumptions applied in this model for the B and C Shares are set out in the table below:
Inputs and Assumptions
Grant date
Victoria Plc share price at grant
Exercise price
Expected term
Risk free rate (continuously compounded)
Expected dividend yield
Expected volatility
B Shares
C Shares
29 April 2016
£2.81
£3.00
2.18 years
0.50%
0%
32.76%
8 June 2017
£5.53
£6.75
2.56 years
0.13%
0%
31.30%
Based on this model, the aggregate fair value of the B Shares was assessed to be £263,150 and for the C Shares £322,733.
The fair value of the respective B and C Shares are charged to the income statement over the expected terms.
The expected volatility assumption has been determined based on historical share price volatility over a period
commensurate with the expected maximum term of the respective B and C Shares issued.
51
www.victoriaplc.comOur Financials Notes to the accounts
6. Taxation
Current tax
– Current year UK
– Current year overseas
– Adjustments in respect of prior years
Deferred tax (Note 19)
– Credit recognised in the current year
– Charge in respect of non-qualifying sampling assets
– Adjustments in respect of prior years
– Effect of rate change
Total tax
2018
£m
2017
£m
2.0
5.3
0.2
7.5
(2.7)
–
–
–
(2.7)
4.8
4.6
2.5
(0.2)
6.9
(1.3)
0.7
(0.1)
–
(0.7)
6.2
Corporation tax is calculated at the applicable percentage of the estimated assessable profit for the year in each respective
geography. This is 19% in the UK; 25% in the Netherlands and Spain; 27.9% in Italy; 30% in Australia; and 29% in Belgium.
The charge in respect of non-qualifying sampling assets incurred in the prior year of £682,000 is a non-recurring timing
difference resulting from the change in accounting policy in the year ended 2 April 2016.
The tax charge for the year can be reconciled to the profit per the income statement as follows:
Profit before tax from continuing operations
Tax charge at the UK corporation tax rate of 19% (2017: 20%)
Tax effect of items that are not deductible/non-taxable in determining taxable profit
Effect of different tax rates of subsidiaries operating in other jurisdictions
Deferred consideration fair value remeasurement non-taxable
Effect of change in rate
Effect of change in future tax rate enacted on deferred tax recognised on intangible assets
Movement in deferred tax on revalued land no longer required
Tax losses not recognised as a deferred tax asset
Adjustments to prior periods
Tax charge and effective tax rate
2018
2017
£m
13.4
2.5
1.1
1.0
–
–
(0.1)
–
0.1
0.2
4.8
%
19.0
7.8
7.8
–
–
(1.0)
–
0.7
1.3
35.6
£m
18.8
3.8
1.5
0.6
0.8
–
(0.1)
–
–
(0.4)
6.2
%
20.0
7.9
3.3
4.3
–
(0.7)
–
–
(1.9)
32.9
52
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP 7. Earnings per share
The calculation of the basic, adjusted and diluted earnings per share is based on the following data:
Profit attributable to ordinary equity holders of the parent entity
Exceptional and non-underlying items:
Amortisation of acquired intangibles
Acquisition and disposal-related cost
Reorganisation costs
Other exceptional items
BGF loan and option, non-underlying charges
Unwinding of present value of deferred and contingent consideration
Other adjustments to present value of contingent earn-out liabilities
Mark to market adjustment on corporate bonds held
Mark to market adjustment on foreign exchange forward contracts
Retranslation of foreign currency loans
Tax effect on adjusted items where applicable
Deferred tax charge in respect of non-qualifying sampling assets
Earnings for the purpose of basic and adjusted earnings per share
Weighted average number of shares
Basic
2018
£m
8.6
–
–
–
–
–
–
–
–
–
–
–
–
8.6
Adjusted
2018
£m
8.6
11.2
5.8
5.4
–
1.2
3.0
(2.9)
0.1
0.1
3.5
(4.4)
–
31.6
Weighted average number of shares for the purpose of basic and adjusted earnings per share
Effect of dilutive potential ordinary shares:
BGF share options and growth shares
Weighted average number of ordinary shares for the purposes of diluted earnings per share
Basic
2017
£m
12.6
–
–
–
–
–
–
–
–
–
–
–
–
12.6
Adjusted
2017
£m
12.6
4.4
2.1
0.3
0.2
0.2
2.2
1.6
–
–
(0.4)
(0.9)
0.7
23.0
2018
Number
of shares
(000’s)
100,701
2,533
103,234
2017
Number
of shares
(000’s)
90,968
3,080
94,048
The potential dilutive effect of the share options has been calculated in accordance with IAS 33 using the average share
price in the period.
The Group’s earnings per share are as follows:
Earnings per share
Basic adjusted earnings per share
Diluted adjusted earnings per share
Basic earnings per share
Diluted earnings per share
2018
Pence
31.38
30.61
8.58
8.37
2017
Pence
25.25
24.43
13.84
13.60
53
www.victoriaplc.comOur Financials Notes to the accounts
8. Rates of exchange
Australia - A$
Europe - €
9. Goodwill
At 3 April 2016
Arising on acquisition
Exchange movements
At 1 April 2017
At 2 April 2017
Arising on acquisition
Exchange movements
At 31 March 2018
2018
2017
Average
Year end
1.7206
1.1373
1.8246
1.1370
Average
1.7435
1.1785
Year end
1.6448
1.1777
Goodwill
£m
37.2
21.7
0.9
59.8
59.8
130.7
(2.4)
188.1
Goodwill is attributed to the businesses identified below for the purpose of testing impairment. These businesses are the
lowest level at which goodwill is monitored and represent cash generating units (“CGUs”). The CGUs within a reported
segment share similar characteristics to each other and to the other businesses within that segment.
The aggregate carrying amounts of goodwill allocated to each CGU are as follows:
Westex (Carpets) Limited
Whitestone Weavers Group
Interfloor Limited
Quest Flooring Pty Limited
Ezi Floor Limited
Primary Flooring Pty Limited
GrassInc. B.V. and Avalon B.V.
Keraben Grupo S.A.
Ceramiche Serra S.p.A.
Reporting
segment
UK & Europe
UK & Europe
UK & Europe
Australia
UK & Europe
Australia
UK & Europe
UK & Europe
UK & Europe
2018
£m
2.7
1.4
25.2
8.0
7.1
6.3
7.8
114.7
14.9
188.1
2017
£m
2.7
1.4
25.2
8.8
7.1
7.1
7.5
–
–
59.8
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired.
The recoverable amounts of the goodwill have been determined based on value in use calculations. The key assumptions
for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling
prices and direct costs during the period. The discount rates used of 10.4% for CGUs within the UK; 9.1% for CGUs within
Holland; 10.4% for CGUs within Spain; 12.7% for CGUs within Italy; and 11% for CGUs within Australia are estimated using
weighted-average costs of capital that reflect current market assessments of the time value of money and the risks specific
to the markets in which the businesses operate. The primary reasons for the difference in the rates between the UK, Europe
and Australia are the differences in underlying risk-free rates and cost of debt. The calculation uses cash flow projections
extrapolated for five years from the budget for the year ending 30 March 2019. Mid-term growth rates in EBITDA are
estimated at 4% for CGUs within the UK; 4% for CGUs within Australia; and 7% for CGUs within Continental Europe. At the
end of the discrete forecast period, a terminal value is calculated based on a terminal growth rate assumption of 2.0%.
The Group does not consider it probable that any reasonable changes to the key assumptions would result in impairment to
any of the Goodwill balances. As at 31 March 2018 no impairment provision was therefore considered necessary.
Goodwill comprises intangible assets that do not qualify for separate recognition, in particular the existing workforce.
None of the goodwill is expected to be tax deductible.
54
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP 10. Intangible assets
Group
Cost
Amortisation
Net book value
Company
Cost
Amortisation
Net book value
Customer
relationships
£m
Brand
names
£m
Other
acquired
intangibles
£m
IT
software
£m
37.1
24.2
0.7
62.0
62.0
–
119.4
(2.5)
178.9
2.4
4.0
0.1
6.5
6.5
9.4
–
(0.2)
15.7
163.2
55.5
34.7
9.3
2.4
0.1
11.8
11.8
–
32.9
(0.5)
44.2
0.6
0.4
–
1.0
1.0
1.4
–
–
2.4
41.8
10.8
8.7
–
–
–
–
–
–
4.8
–
4.8
–
–
–
–
–
0.4
–
–
0.4
4.4
–
–
–
–
–
–
–
0.7
0.3
–
1.0
–
–
–
–
–
0.1
–
–
0.1
0.9
–
–
Customer
relationships
£m
Brand
names
£m
Other
acquired
intangibles
£m
IT
software
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.3
0.3
–
0.1
0.1
0.2
At 3 April 2016
Business combinations
Exchange difference
At 1 April 2017
At 2 April 2017
Additions
Business combinations
Exchange difference
At 31 March 2018
At 3 April 2016
Charge for the period
Exchange difference
At 1 April 2017
At 2 April 2017
Charge for the period
Disposals
Exchange difference
At 31 March 2018
At 31 March 2018
At 1 April 2017
At 2 April 2016
At 2 April 2017
Additions
At 31 March 2018
At 2 April 2017
Charge for the period
At 31 March 2018
At 31 March 2018
Group
total
£m
46.4
26.6
0.8
73.8
73.8
0.7
157.4
(3.0)
228.9
3.0
4.4
0.1
7.5
7.5
11.3
–
(0.2)
18.6
210.3
66.3
43.4
Total
£m
–
0.3
0.3
–
0.1
0.1
0.2
55
www.victoriaplc.comOur Financials Notes to the accounts
11. Property, plant and equipment
Freehold land
and buildings
£m
Plant and
machinery
£m
Fixtures, vehicles
and equipment
£m
Cost
At 3 April 2016
Additions
Disposals
Business combinations
Exchange differences
At 1 April 2017
At 2 April 2017
Additions
Disposals
Business combinations
Exchange differences
At 31 March 2018
Accumulated depreciation
At 3 April 2016
Charge for the period
Disposals
Exchange differences
At 1 April 2017
At 2 April 2017
Charge for the period
Disposals
Exchange differences
At 31 March 2018
Net book value
At 31 March 2018
At 1 April 2017
At 2 April 2016
13.8
0.1
–
0.1
–
14.0
14.0
0.7
–
61.6
(0.7)
75.6
0.3
0.4
–
0.1
0.8
0.8
0.7
–
(0.1)
1.4
74.2
13.2
13.5
43.0
3.6
(1.4)
3.1
2.9
51.2
51.2
16.5
(2.8)
28.0
(3.2)
89.7
26.7
4.1
(1.4)
2.4
31.8
31.8
6.3
(1.9)
(2.5)
33.7
56.0
19.4
16.3
13.9
7.5
(6.8)
0.2
0.5
15.3
15.3
11.4
(6.4)
1.4
(0.5)
21.2
4.9
7.5
(6.6)
0.3
6.1
6.1
8.8
(6.1)
(0.3)
8.5
12.7
9.2
9.0
The Company holds no property, plant and equipment.
Included within fixed assets are the following:
Plant and
machinery
hire purchase
£m
Fixtures, vehicles
and equipment
hire purchase
£m
Plant and
machinery
finance lease
£m
Fixtures, vehicles
and equipment
finance lease
£m
Held under hire purchase / finance leases:
Cost at 31 March 2018
Accumulated depreciation at 31 March 2018
Depreciation charged in year
Held under hire purchase / finance leases:
Cost at 1 April 2017
Accumulated depreciation at 1 April 2017
Depreciation charged in year
1.2
0.1
0.1
0.6
0.1
0.1
1.4
0.5
0.2
1.0
0.4
0.2
4.1
3.3
0.3
4.2
3.1
0.3
Capital expenditure authorised and committed at the period end:
Contracts placed
0.8
0.3
0.1
0.5
0.2
0.1
2018
£m
6.1
Total
£m
70.7
11.2
(8.2)
3.4
3.4
80.5
80.5
28.6
(9.2)
91.0
(4.4)
186.5
31.9
12.0
(8.0)
2.8
38.7
38.7
15.8
(8.0)
(2.9)
43.6
142.9
41.8
38.8
Group
total
£m
7.5
4.2
0.7
6.3
3.8
0.7
2017
£m
0.3
The Company held no assets under finance lease or hire purchase agreements and had no capital commitments at either
year-end.
56
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP 12. Fixed asset investments
Investment property
Investment in subsidiaries
Investment in associates
Group
Company
2018
£m
0.8
–
1.0
2017
£m
0.2
–
–
2018
£m
0.2
49.3
–
2017
£m
0.2
49.3
–
Note
(a)
(b)
(c)
(a) Investment property held in the opening balance sheet relates to the legacy ownership of a small area of land in
Kidderminster, which is held at cost. The fair value of this land is dependent on future use and therefore cannot be
accurately estimated.
The increase in investment property during the year relates to properties obtained as part of the acquisition of Keraben.
These are held at cost, according to the opening balance sheet of Keraben, which is equal to their total fair value at the
date of acquisition. The fair value at 31 March 2018 is deemed to be materially unchanged.
(b) Victoria PLC owns directly or indirectly the whole of the allotted ordinary share capital of the following subsidiary companies.
As at 31 March 2018
Victoria Midco Holdings Limited
Victoria Carpets Limited
Whitestone Carpets Holdings Limited
View Logistics Limited
A&A Carpets Limited
Abingdon Flooring Limited
Alliance Flooring Distribution Limited
Distinctive Flooring Limited
Globesign Limited
Westex (Carpets) Limited
Interfloor Limited
Ezi Floor Limited
The Victoria Carpet Company Pty Limited
Primary Flooring Pty Limited
Quest Flooring Pty Ltd
Victoria Bidco BV
Avalon BV
GrassInc BV
Serra Holdings S.p.A
Ceramiche Serra S.p.A
Kinsan Trade, S.L.
Keraben Grupo S.A.U
Victoria Belgium N.V
The Victoria Carpet Company Limited
Munster Carpets Limited
V-Line Carpets Limited
Carpet Line Direct Limited
Whitestone Weavers Limited
Thomas Witter Carpets Limited
Gaskell Mackay Carpets Limited
Interfloor Group Limited
Interfloor Operations Limited
Tacktrim Limited
Stikatak Limited
Flooring at Home Limited
Keraben Guatemala
Kerainvest S.L.
Country of incorporation
and operation
Nature of
business
Ownership
England
England
England
England
England
England
England
England
England
England
England
England
Australia
Australia
Australia
The Netherlands
The Netherlands
The Netherlands
Italy
Italy
Spain
Spain
Belgium
England
Ireland
England
England
England
England
England
England
England
England
England
England
Guatamala
Spain
Holding company
Carpet manufacturer
Holding company
Logistic services
Carpet distributor
Carpet manufacturer
Logistic services
Flooring distributor
Holding company
Carpet manufacturer
Carpet underlay manufacturer
Carpet underlay manufacturer
Carpet manufacturer
Carpet underlay manufacturer
Carpet manufacturer
Holding company
Artificial grass distributor
Artificial grass distributor
Holding company
Ceramics manufacturer
Holding company
Ceramics manufacturer
Carpet distributor
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Ceramics manufacturing services
Non-trading
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Direct
Indirect
Indirect
57
www.victoriaplc.comOur Financials Notes to the accounts
12. Fixed asset investments (continued)
(c) Victoria PLC indirectly holds investments in the following associate companies.
As at 31 March 2018
Ceramica Navagres S.A.
Keraben Bolivia, S.R.L.
Cong Ty Tnhh Taicera Keraben (Vietnam)
The agregate result for the associated undertakings during the period was immaterial.
Due to the immaterial nature of these investments, further detailed disclosures have been omitted.
13. Inventories
Inventories held at year-end
Raw materials
Work-in-progress
Finished goods
Percentage
ownership
40%
50%
49%
2018
£m
22.2
3.6
74.5
100.3
2017
£m
18.8
3.4
50.9
73.1
During the year to 31 March 2018, the total movement in stock provisions resulted in a credit to the income statement of
£477,000 (2017: £189,000).
The Company held no inventories at either year-end. There is no material difference between the balance sheet value of
inventories and their replacement cost.
14. Trade and other receivables
Amounts falling due within one year:
Trade debtors
Amounts owed by subsidiaries
Other debtors
Prepayments and accrued income
Amounts falling due after one year:
Amounts owed by subsidiaries
Group
Company
2018
£m
79.1
–
4.1
5.0
88.2
2017
£m
51.5
–
0.2
3.4
55.1
2018
£m
–
484.0
–
–
484.0
Group
Company
2018
£m
–
–
2017
£m
–
–
2018
£m
14.8
14.8
2017
£m
–
132.7
–
0.2
132.9
2017
£m
14.1
14.1
Where intercompany loans have been formally documented, interest is charged on amounts owed by subsidiaries to the
Company at market rates. There are no repayment terms attached to those loans classified as being due within one year.
Amounts owed by subsidiaries to the Company are not considered to be impaired.
58
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP 14. Trade and other receivables (continued)
The above amounts are stated net of an allowance (net of VAT) of £2,014,000 (2017: £777,000) made for estimated
irrecoverable amounts from sale of goods. The movement of this allowance account during the year is summarised below:
Opening balance at 2 April 2017
Acquisition opening balances
(Decrease)/Increase in provisions
(Recovered)/written off against provisions
Exchange differences
Closing balance at 31 March 2018
2018
£m
0.8
3.1
(0.1)
(1.7)
(0.1)
2.0
An analysis of the age of trade receivables that are past due at the reporting date but not impaired can be seen in the
table below:
1-30 days overdue
31-60 days overdue
> 60 days overdue
Total
An analysis of the age of impaired trade receivables is as follows:
Current
1-30 days overdue
31-60 days overdue
> 60 days overdue
Total
2018
£m
12.2
2.6
2.2
17.0
2018
£m
0.3
0.1
0.1
1.8
2.3
The main factors in assessing the impairment of trade receivables are the age of the balance and the circumstances
of the individual customer. The Directors consider that the carrying amount of all receivables, including those impaired,
approximates to their fair value.
2017
£m
1.0
0.2
0.5
(0.9)
–
0.8
2017
£m
8.9
0.9
1.0
10.8
2017
£m
–
–
–
0.9
0.9
59
www.victoriaplc.comOur Financials Notes to the accounts
15. Trade and other payables
Amounts falling due within one year:
Trade creditors
Amounts due to subsidiaries
Deferred and contingent earn-out liabilities
Other creditors
Accruals
Employee incentive plan liability
Deferred income
Amounts falling due after one year:
Deferred and contingent earn-out liabilities
Deferred income
Other creditors
Group
Company
2018
£m
77.1
–
6.1
20.5
10.5
7.2
0.1
121.5
2017
£m
46.4
–
14.7
12.0
9.5
–
0.2
82.8
2018
£m
–
1.1
–
–
2.0
–
–
3.1
Group
Company
2018
£m
25.2
0.9
3.1
29.2
2017
£m
19.3
0.2
0.4
19.9
2018
£m
0.4
–
–
0.4
2017
£m
–
–
5.8
–
0.8
–
–
6.6
2017
£m
–
–
–
–
Deferred and contingent earn-out liabilities (Group and Company) are in connection with the acquisitions of Globesign
Limited, Quest Carpet Manufacturers Pty Limited, Ezi Floor Limited, Avalon B.V., Grass Inc B.V., and Ceramiche Serra
S.p.A. Under IFRS 13 Fair Value Measurement this is classified under the fair value hierarchy as Level 3. The deferred and
contingent earn-out liabilities falling due after one year of £25.25m is split as follows: between one to two years is £11.20m
and between two to five years is £14.05m.
Deferred income relates to government grants as shown in Note 24.
Employee incentive plan liability relates to an incentive plan put in place for the senior management of Keraben Grupo S.A.U.
which involved an initial investment by participants. The fair value of the scheme is linked to the performance of Keraben over
a five year period, and the difference between the expected future fair value and the initial investment is being spread over
this term. See accounting policies for further details.
60
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP 16. Other financial liabilities
Amounts falling due within one year:
Bank overdraft
Bank loans
Finance leases & hire purchase agreements
Amounts falling due after one year:
Bank loans:
- due between one and two years
- due between two and five years
- due over five years
Subordinated loans:
- due between one and two years
- due between two and five years
- due over five years
Finance leases & hire purchase agreements:
- due between one and two years
- due between two and five years
- due over five years
Group
Company
2018
£m
0.9
1.2
0.9
3.0
2017
£m
–
–
0.6
0.6
2018
£m
12.9
–
–
12.9
Group
Company
2018
£m
–
293.7
–
–
2.1
9.2
–
–
0.7
0.4
–
306.1
2017
£m
–
105.2
–
–
2.9
5.4
1.6
–
0.6
0.4
–
116.1
2018
£m
–
289.4
–
–
2.1
9.2
–
–
–
–
–
300.7
2017
£m
10.4
–
–
10.4
2017
£m
–
105.2
–
–
2.9
5.4
1.6
–
–
–
–
115.1
Bank loans as at 31 March 2018 relate to a Group multi-currency Revolving Credit Facility and Euro Term Loan, each
provided by a number of banks. Both facilities mature on 15 October 2020, and are secured by way of debenture over the
assets of the Group.
The Subordinated loans relate to the debt component of the BGF loan and option instruments. During the year there was a
significant modification to the terms of the loan, on which the coupon was reduced from 10% to 6% in September 2017. A
corresponding extinguishment charge of £705,000 and release of prepaid costs of £210,000 have been charged to finance
costs within the income statement (see Note 3).
The Group’s net debt position as at 31 March 2018 was £258.7m (2017: £89.6m), before netting off prepaid finance costs.
The contractual maturities of financial liabilities and average effective interest rates are set out in Note 25.
61
www.victoriaplc.comOur Financials Notes to the accounts
17. Financial assets and liabilities
The financial assets of the Group comprised:
At 31 March 2018
At 1 April 2017
Financial
assets
held at
fair value
through
profit and
loss
£m
Assets
not
within the
scope of
IAS 39
£m
Loans and
receivables
£m
6.7
2.7
27.7
11.2
0.3
–
48.6
83.1
–
–
131.7
–
–
–
–
–
5.4
5.4
–
–
0.1
5.5
–
–
–
–
–
–
–
5.0
100.3
–
105.3
Financial
assets
held at fair
value
through
profit and
loss
£m
Assets not
within the
scope of
IAS 39
£m
Loans and
receivables
£m
10.9
1.5
1.4
14.1
0.1
–
28.0
51.7
–
–
79.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3.4
73.1
–
76.5
Total
£m
6.7
2.7
27.7
11.2
0.3
5.4
54.0
88.1
100.3
0.1
242.5
Total
£m
10.9
1.5
1.4
14.1
0.1
–
28.0
55.1
73.1
–
156.2
Cash and cash equivalents
Sterling
US Dollars
Euros
Australian Dollars
New Zealand Dollars
Investments in listed corporate
bonds
Current assets
Trade and other receivables
Current inventories
Forward foreign exchange
contracts
Current assets
Investments in listed corporate bonds are held for short-term trading and are highly liquid, and are therefore treated as cash
equivalents and designated at fair value through profit and loss.
62
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP 17. Financial assets and liabilities (continued)
The financial liabilities of the Group comprised:
At 31 March 2018
At 1 April 2017
Financial
liabilities
held at
fair value
through
profit and
loss
£m
Other
financial
liabilities at
amortised
cost
£m
Liabilities
not
within the
scope of
IAS 39
£m
0.9
0.9
106.4
7.2
–
–
0.9
1.2
116.6
7.4
–
–
1.1
293.7
11.3
313.5
430.1
–
–
1.6
–
–
0.4
–
–
2.0
20.9
–
–
–
–
–
20.9
22.9
–
–
5.9
–
1.0
–
–
–
6.9
0.9
54.7
9.1
–
–
–
64.7
71.6
Financial
liabilities
held at fair
value
through
profit and
loss
£m
Other
financial
liabilities at
amortised
cost
£m
Liabilities
not
within the
scope of
IAS 39
£m
–
–
70.1
–
–
–
0.6
–
70.7
10.2
–
–
1.0
105.2
9.9
126.3
197.0
–
–
7.7
–
–
0.1
–
–
7.8
9.5
–
–
–
–
–
9.5
17.3
–
–
4.9
–
4.3
–
–
–
9.2
0.2
15.2
11.1
–
–
–
26.5
35.7
Total
£m
0.9
0.9
113.9
7.2
1.0
0.4
0.9
1.2
125.5
29.2
54.7
9.1
1.1
293.7
11.3
399.1
524.6
Total
£m
–
–
82.7
–
4.3
0.1
0.6
–
87.7
19.9
15.2
11.1
1.0
105.2
9.9
162.3
250.0
Overdraft
Sterling
Current liabilities
Trade and other payables
Employee incentive plan liability
Current tax liabilities
Forward foreign exchange
contracts
Finance leases and hire purchase
Bank loans
Current liabilities
Non-current liabilities
Trade and other payables
Deferred tax liabilities
Retirement benefit obligations
Finance leases & hire purchase
Bank loans
BGF loan
Non-current liabilities
Total liabilities
63
www.victoriaplc.comOur Financials Notes to the accounts
17. Financial assets and liabilities (continued)
The financial assets of the Company comprised:
At 31 March 2018
At 1 April 2017
Financial
assets
held at
fair value
through
profit and
loss
£m
Assets
not
within the
scope of
IAS 39
£m
Loans and
receivables
£m
Financial
assets
held at fair
value
through
profit and
loss
£m
Assets not
within the
scope of
IAS 39
£m
Total
£m
Loans and
receivables
£m
0.9
2.8
2.5
6.2
484.0
490.2
14.8
–
14.8
505.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.2
0.2
0.2
0.9
2.8
2.5
6.2
484.0
490.2
14.8
0.2
15.0
505.2
–
–
0.3
0.3
132.7
133.0
14.2
–
14.2
147.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.2
0.2
–
0.3
0.3
0.5
Cash and cash equivalents
US Dollars
Euros
Australian Dollars
Current assets
Trade and other receivables
Current assets
Non-current assets
Amounts owed by subsidiaries
Deferred tax assets
Non-current assets
Total financial assets
The financial liabilities of the Company comprised:
At 31 March 2018
At 1 April 2017
Financial
liabilities
held at
fair value
through
profit and
loss
£m
Other
financial
liabilities at
amortised
cost
£m
Liabilities
not
within the
scope of
IAS 39
£m
12.9
12.9
3.1
–
16.0
–
289.4
11.3
300.7
316.7
–
–
–
–
–
0.4
–
–
0.4
0.4
–
–
–
–
–
–
–
–
–
–
Financial
liabilities
held at fair
value
through
profit and
loss
£m
Other
financial
liabilities at
amortised
cost
£m
Liabilities
not
within the
scope of
IAS 39
£m
10.4
10.4
0.8
–
11.2
–
105.2
9.9
115.1
126.3
–
–
5.8
–
5.8
–
–
–
–
5.8
–
–
–
–
–
–
–
–
–
–
Total
£m
12.9
12.9
3.1
–
16.0
0.4
289.4
11.3
301.1
317.1
Overdraft
Sterling
Current liabilities
Trade and other payables
Current tax liabilities
Current liabilities
Non-current liabilities
Trade and other payables
Bank loans
BGF loan
Non-current liabilities
Total liabilities
64
Total
£m
–
–
0.3
0.3
132.9
133.2
14.2
0.3
14.5
147.7
Total
£m
10.4
10.4
6.6
–
17.0
–
105.2
9.9
115.1
132.1
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP 17. Financial assets and liabilities (continued)
Fair value measurement of financial instruments
Financial assets and financial liabilities measured at fair value in the balance sheet are grouped into three levels of fair
value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement as follows:
− Level one: quoted prices in active markets for identical assets or liabilities
− Level two: inputs other than quoted prices included within Level one that are observable for the asset or liability, either
directly or indirectly
− Level three: unobservable inputs for the assets or liabilities
All financial assets and liabilities have been identified as Level one with the exception of:
− Forward foreign exchange contracts, which are Level two financial assets/liabilities and all expire within 12 months from
31 March 2018.
− The Group’s interest rate swap contract, which is a Level two financial asset and expired in May 2018.
The Group has relied upon valuations performed by third party valuations specialists for complex valuations of the forward
exchange contracts and interest rate swap contract. Valuation techniques have utilised observable forward exchange rates
and interest rates corresponding to the maturity of the contract. The effects of non-observable inputs are not significant for
forward exchange contracts and the interest rate swap contract.
− Contingent earn-out liabilities, which are Level three liabilities.
The fair value of the contingent earn-out liabilities arising from acquisitions is determined considering the value of estimated
future payments, discounted to present value. Payments are determined by mechanisms set out in each acquisition
agreement, and are generally based on EBITDA performance over a three to four year period. Estimated future payments
are calculated using financial projections based on operational budgets for the next 12 months and then applying growth
assumptions for future years as appropriate. Discount rates are reviewed annually for each acquisition, and range between
11.5% and 18.5%.
The most significant inputs, all of which are unobservable, are the estimated growth rates in future profits and the discount
rates applied. The estimated fair value increases if the estimated growth rates increase or the discount rates decrease. The
overall valuations are sensitive to both assumptions. The Board considers that changing the above unobservable inputs to
reflect other reasonably possible alternative assumptions would not result in a significant change in the estimated fair value.
There were no transfers between Level one, Level two and Level three in 2018 or 2017.
65
www.victoriaplc.comOur Financials Notes to the accounts
17. Financial assets and liabilities (continued)
Analysis of net debt
Reconciliation of movements in the Group’s net debt position:
At 1 April
2017
£m
Cash flow
£m
Capital
expenditure
under finance
leases / HP
£m
Other
non-cash
changes
£m
Exchange
movement
£m
Acquisitions
£m
Cash and cash equivalents
Bank overdraft
Net cash and cash equivalents
Finance leases and hire purchase
agreements:
- due in less than one year
- due in more than one year
Bank loans:
- due in less than one year
- due in more than one year
Subordinated loans:
- due in less than one year
- due in more than one year
Net debt
Prepaid finance costs
Net debt including prepaid finance costs
28.0
–
28.0
(0.6)
(1.0)
–
(105.8)
–
(10.2)
(89.6)
0.9
(88.7)
10.4
(0.9)
9.5
0.3
–
–
(128.8)
–
–
(119.0)
3.9
(115.1)
–
–
–
0.2
(0.9)
–
–
–
–
(0.7)
–
(0.7)
17.8
–
17.8
–
–
(1.2)
(64.8)
–
–
(48.2)
–
(48.2)
–
–
–
(0.8)
0.8
–
–
–
(1.1)
(1.1)
(1.2)
(2.3)
(2.2)
–
(2.2)
–
–
–
2.1
–
–
(0.1)
–
(0.1)
The bank loans and subordinated loans are disclosed in the table excluding prepaid finance costs.
The Group’s policy on Derivatives and Other Financial Instruments is set out in Note 25.
Reconciliation of movements in the Company’s net debt position:
At 1 April
2017
£m
Cash flow
£m
Capital
expenditure
under finance
leases / HP
£m
Other
non-cash
changes
£m
Exchange
movement
£m
Acquisitions
£m
Cash and cash equivalents
Bank overdraft
Net cash and cash equivalents
Finance leases and hire purchase
agreements:
- due in less than one year
- due in more than one year
Bank loans:
- due in less than one year
- due in more than one year
Subordinated loans:
- due in less than one year
- due in more than one year
Net debt
Prepaid finance costs
Net debt including prepaid finance costs
0.3
(10.4)
(10.1)
–
–
–
(105.8)
–
(10.2)
(126.1)
0.9
(125.2)
5.8
(2.2)
3.6
–
–
–
(129.2)
–
–
(125.6)
3.9
(121.7)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(60.0)
–
(1.1)
(61.1)
(1.2)
(62.3)
0.1
(0.3)
(0.2)
–
–
–
2.0
–
–
1.8
–
1.8
The bank loans and subordinated loans are disclosed in the table excluding prepaid finance costs.
At 31
March
2018
£m
54.0
(0.9)
53.1
(0.9)
(1.1)
(1.2)
(297.3)
–
(11.3)
(258.7)
3.6
(255.1)
At 31
March
2018
£m
6.2
(12.9)
(6.7)
–
–
–
(293.0)
–
(11.3)
(311.0)
3.6
(307.4)
66
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP 17. Financial assets and liabilities (continued)
Amounts falling due within one year:
Group
Company
Deferred earn-out liabilities
Contingent earn-out liabilities
Amounts falling due after one year:
Deferred earn-out liabilities:
- due between one and two years
- due between two and five years
Contingent earn-out liabilities:
- due between one and two years
- due between two and five years
Reconciliation of movement in contingent earn-out liabilities
Contingent earn-out liabilities as at 2 April 2017
Additional liabilities from acquisitions in the period
Payments made during the period
Unwinding of present value
Other fair value adjustments
Exchange rate difference
Contingent earn-out liabilities as at 31 March 2018
2018
£m
4.5
1.6
6.1
Group
2018
£m
4.5
1.1
–
7.9
11.7
25.2
2017
£m
7.0
7.7
14.7
2017
£m
4.4
5.4
–
4.4
5.1
19.3
2018
£m
–
–
–
Company
2018
£m
–
–
–
0.4
–
0.4
2017
£m
–
5.8
5.8
2017
£m
–
–
–
–
–
–
Group
Company
£m
17.2
12.4
(8.2)
2.6
(2.9)
0.1
21.2
£m
5.8
–
(5.9)
0.3
0.2
–
0.4
67
www.victoriaplc.comOur Financials Notes to the accounts
18. Operating lease arrangements
The Group and Company as lessee
Details of operating lease arrangements for the Group and Company are as follows:
Payments under operating leases recognised in income statement for the year
Group
Company
2018
£m
6.5
2017
£m
5.0
2018
£m
0.5
2017
£m
–
At the balance sheet date, the Group and Company had outstanding commitments for future minimum lease payments under non-
cancellable operating leases, which fall due as follows:
Minimum lease payments
Within one year
In the second to fifth years inclusive
After five years
Group
Company
2018
£m
7.3
20.8
20.2
48.3
2017
£m
6.5
15.1
12.9
34.5
2018
£m
0.5
2.1
5.8
8.4
2017
£m
0.5
2.1
6.3
8.9
Operating lease payments represent rentals payable by the Group and Company principally for vehicles and certain of its
properties. Leases of vehicles are usually negotiated for a term of 3-5 years and rentals are fixed for the term of the lease.
Leases of land and buildings are usually negotiated for 5-20 years.
19. Deferred taxation
At 3 April 2016
Credit to income statement (see Note 6)
Charge in respect of non-qualifying sampling assets (see Note 6)
Deferred tax in relation to pension scheme
Deferred tax on intangible assets acquired
Adjustment for acquisitions in the year
Exchange adjustment
At 1 April 2017
At 2 April 2017
Credit to income statement (see Note 6)
Deferred tax in relation to pension scheme
Deferred tax on intangible assets acquired
Adjustment for acquisitions in the year
Exchange adjustment
At 31 March 2018
Group
£m
Company
£m
5.8
(1.4)
0.7
(1.4)
6.8
(0.3)
–
10.2
10.2
(2.7)
0.4
40.2
2.7
(0.7)
50.1
(0.3)
–
–
–
–
–
–
(0.3)
(0.3)
0.1
–
–
–
–
(0.2)
68
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP 19. Deferred taxation (continued)
The provision for deferred taxation is as follows:
Fixed assets
Investment property
Deferred grant income
Tax losses
Deferred tax on intangible assets acquired
Deferred tax on defined benefit pension
Other timing differences
Group
Company
2018
£m
(1.3)
(0.1)
–
(2.6)
51.3
(1.7)
4.5
50.1
2017
£m
(0.8)
(0.1)
(0.1)
(0.5)
14.9
(2.1)
(1.1)
10.2
2018
£m
–
(0.1)
–
(0.1)
–
–
–
(0.2)
2017
£m
–
(0.1)
–
(0.2)
–
–
–
(0.3)
The provision is based on taxation rates of 30% in respect of balances relating to the Australian businesses (2017: 30%),
25% in respect of balances relating to the Dutch businesses (2017: 25%), 25% in respect of balances relating to the Spanish
business (2017: n/a), 29% in respect of balances relating to the Belgian business (2017: n/a), and 27.9% in respect of
balances relating to the Italian business (2017: n/a). The rates applied to UK balances vary dependent on the timing of when
the balances are expected to unwind as noted below.
Effect on UK deferred tax balances of proposed changes in the UK corporation tax rate
The UK corporation tax rate reductions, from 20% to 19% on 1 April 2017, and to 17% on 1 April 2020, have been
substantively enacted. Accordingly, deferred tax balances at 31 March 2018 have been calculated at the rate at which the
relevant balance is expected to be recovered or settled.
Deferred tax assets and liabilities
The deferred tax balances shown on the balance sheet are:
Deferred tax liabilities
Deferred tax assets
Group
Company
2018
£m
54.7
(4.6)
50.1
2017
£m
15.2
(5.0)
10.2
2018
£m
–
(0.2)
(0.2)
2017
£m
–
(0.3)
(0.3)
69
www.victoriaplc.comOur Financials Notes to the accounts
20. Retirement benefit obligations
Defined contribution schemes
The Group operates a number of defined contribution pension schemes. The companies and the employees contribute
towards the schemes.
Contributions are charged to the Income Statement as incurred and amounted to £3,712,000 (2017: £3,265,000), of which
£2,126,000 (2017: £2,111,000) relates to the UK schemes. The total contributions outstanding at year-end were £nil
(2017: £nil).
Defined benefit schemes
The Group has two defined benefit schemes, both of which relate to Interfloor Limited.
Interfloor Limited sponsors the Final Salary Scheme (“the Main Scheme”) and the Interfloor Limited Executive Scheme (“the
Executive Scheme”) which are both defined benefit arrangements. The defined benefit schemes are administered by a
separate fund that is legally separated from the Group. The trustees of the pension fund are required by law to act in the
interest of the fund and of all relevant stakeholders in the scheme. The trustees of the pension fund are responsible for the
investment policy with regard to the assets of the fund.
The last full actuarial valuations of these schemes were carried out by a qualified independent actuary as at 31 July 2015.
The contributions made by the employer over the financial period were £95,000 (2017: £95,000) in respect of the Main
Scheme and £126,000 (2017: £126,000) in respect of the Executive Scheme.
Contributions to the Executive and Main Schemes are made in accordance with the Schedule of Contributions. Future
contributions are expected to be an annual premium of £95,000 in respect of the Main Scheme and £126,000 contributions
payable to the Executive Scheme. These payments are in line with the certified Schedules of Contributions until they are
reviewed on completion of the triennial valuations of the schemes as at 1 August 2018.
As both schemes are closed to future accrual there will be no current service cost in future years.
The defined benefit schemes typically expose the Company to actuarial risks such as: investment risk, interest rate risk and
longevity risk.
Investment risk
The present value of the defined benefit schemes’ liability is calculated using a discount rate determined by reference to high
quality corporate bond yields; if the returns on schemes’ assets are below this rate, it will create a scheme deficit. Due to the
long-term nature of the schemes’ liabilities, the trustees of the pension fund consider it appropriate that a reasonable portion
of the schemes’ assets should be invested in equity securities to leverage the return generated by the funds.
Interest risk
A decrease in the bond interest rate will increase the schemes’ liability but this will be partially offset by an increase in the
return on the plan’s debt investments.
70
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP 20. Retirement benefit obligations (continued)
Longevity risk
The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan
participants both during and after their employment. An increase in the life expectancy of the schemes’ participants will
increase the schemes’ liability.
The present value of the defined benefit liabilities was measured using the projected unit credit method.
The expected rates of return on plan assets are determined by reference to relevant indices. The overall expected rate of
return is calculated by weighting the individual rates in accordance with the anticipated balance in the plan’s investment
portfolio.
Principal actuarial assumptions (expressed as weighted averages) at the consolidated balance sheet date were as follows:
Discount rate
Revaluation rate of deferred pensioners of CPI or 5% p.a. if less
Pension in payment increases of RPI or 5% p.a. if less
Pension in payment increases of CPI or 3% p.a. if less
Inflation (RPI)
Inflation (CPI)
2018
2.5%
2.3%
3.1%
2.1%
3.3%
2.3%
2017
2.5%
2.4%
3.2%
2.1%
3.4%
2.4%
The assumptions relating to longevity underlying the pension liabilities at the Consolidated Statement of Financial Position
date are based on 115% of the standard actuarial mortality tables and include an allowance for future improvements in
longevity. The assumptions are equivalent to expecting a 65 year-old to live for a number of years as follows:
(i) Current pensioner aged 65: 20.9 years (male), 22.8 years (female).
(ii) Future retiree (aged 45) upon reaching 65: 22.0 years (male), 24.1 years (female).
Amounts recognised in income in respect of these defined benefit schemes are as follows:
Net interest expense
Components of defined benefit costs recognised in profit or loss
2018
£m
0.3
0.3
2017
£m
0.1
0.1
The net interest expense has been included within finance costs. The remeasurement of the net defined benefit liability is
included in the statement of comprehensive income.
Amounts recognised in the Consolidated Statement of Comprehensive Income are as follows:
The return on plan assets (excluding amounts included in net interest expense)
Actuarial gains arising from changes in demographic assumptions
Actuarial gains and (losses) arising from changes in financial assumptions
Actuarial gains arising from experience adjustments
Remeasurement of the net defined benefit liability
2018
£m
0.9
0.4
0.4
0.3
2.0
2017
£m
3.0
–
(11.1)
0.3
(7.8)
71
www.victoriaplc.comOur Financials Notes to the accounts
20. Retirement benefit obligations (continued)
The amount included in the Consolidated Balance Sheet arising from the Group’s obligations in respect of its defined benefit
retirement benefit schemes is as follows:
Present value of defined benefit obligations
Fair value of plan assets
Net liability arising from defined benefit obligation
Deferred tax applied to net obligation
Movements in the present value of defined benefit obligations in the period were as follows:
Opening defined benefit obligation
Interest cost
Remeasurement (gains)/losses:
Actuarial gains arising from changes in demographic assumptions
Actuarial (gains)/losses arising from changes in financial assumptions
Actuarial gains arising from experience adjustments
Benefits paid and expenses
Closing defined benefit obligation
Movements in the fair value of plan assets in the period were as follows:
Opening fair value of plan assets
Interest income
Remeasurement gains:
The return on plan assets (excluding amounts included in net interest expense)
Contributions from the employer
Benefits paid and expenses
Closing fair value of plan assets
2018
£m
(33.4)
24.3
(9.1)
1.7
2018
£m
36.5
0.9
(0.4)
(0.4)
(0.3)
(2.9)
33.4
2018
£m
25.4
0.6
1.0
0.2
(2.9)
24.3
The major categories and fair values of plan assets at the end of the reporting period for each category are as follows:
Cash and cash equivalents
Government bonds
Corporate bonds
LDI
UK equities
Property
Overseas equities
Closing fair value of plan assets
2018
£m
0.2
1.6
8.9
3.8
0.6
1.8
7.4
24.3
2017
£m
(36.5)
25.4
(11.1)
2.1
2017
£m
26.0
0.9
–
11.1
(0.3)
(1.2)
36.5
2017
£m
22.6
0.8
3.0
0.2
(1.2)
25.4
2017
£m
0.7
2.6
3.0
–
9.9
1.4
7.8
25.4
None of the fair values of the assets shown above include any of the employer’s own financial instruments or any
property occupied by, or other assets used by, the employer. All of the schemes assets have a quoted market price in an
active market.
72
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP 20. Retirement benefit obligations (continued)
The actual return on plan assets was £1,551,000 (2017: £3,795,000).
Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate, expected salary
increase and mortality. The sensitivity analyses below have been determined based on reasonably possible changes of the
respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.
If the discount rate decreased by 0.25% per annum, the defined benefit obligation would increase by 4.5%.
If the rate of inflation increases by 0.25% per annum, the defined benefit obligation would increase by 3.3%.
If the life expectancy increases by one year for both men and women, the defined benefit obligation would increase by 4.5%.
The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation
as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may
be correlated.
In presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the
projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined
benefit obligation liability recognised in the Consolidated Balance Sheet.
The Group expects to make a contribution of £221,000 (2017: £221,000) to the defined benefit schemes during the next
financial period.
21. Share capital
Allotted, called up and fully paid
Ordinary shares
2018
£m
5.9
2017
£m
4.5
The Company has one class of Ordinary shares which carries no right to fixed income.
Capital risk management
The Group considers its capital to comprise its Ordinary share capital, share premium, accumulated retained earnings and
net debt. In managing its capital, the Group’s primary objective is to ensure its continued ability to provide a consistent return
for its equity shareholders through a combination of capital growth and distributions.
In order to achieve this objective, the Group monitors its gearing to balance risks and returns at an acceptable level and
also to maintain a sufficient funding base to enable the Group to meet its working capital and strategic investment needs. In
making decisions to adjust its capital structure to achieve these aims, either through altering its dividend policy, new share
issues, or the reduction of debt, the Group considers not only its short-term position but also its long-term operational and
strategic objectives.
The Group is subjected to a number of financial covenants in connection with its Group bank facilities. These covenants are
tested quarterly and were not breached during the year.
73
www.victoriaplc.comOur Financials Notes to the accounts
22. Reserves
(a) Retained earnings
Retained earnings for the Group as at 31 March 2018 were £26,659,000 (2017: £16,451,000).
The loss of the Company for the year determined in accordance with the Companies Act 2006 was £5,430,000 (2017: profit
of £2,733,000). The Company is exempt under Section 408 of the Companies Act 2006 from presenting its own Income
statement and Statement of Comprehensive Income.
(b) Foreign exchange reserve
The foreign exchange reserve for the Group as at 31 March 2018 was £2,878,000 (2017: £5,027,000), in respect of foreign
exchange differences on consolidation of overseas subsidiaries.
(c) Share premium
The share premium account for the Group as at 31 March 2018 was £229,822,000 (2017: £52,472,000), in respect of
premium received on the issuance of equity above the nominal value of the shares issued.
(d) Other reserves
In September 2014, the Company entered into a fully subordinated £10m 2022 unsecured loan note facility provided by the
Business Growth Fund (“BGF”) at the time of the acquisition of the Abingdon Flooring group and granted BGF an option for
3,730,000* new Victoria PLC ordinary 5p shares at an exercise price of £0.572* (together, the “BGF loan and option”). The
BGF loan and option is accounted for as separate debt and equity components. The equity component was determined
to have a fair value of £682,000. Following the exercise of the BGF share option, in November 2017, this amount was
transferred to Share Premium.
The above decrease in the current year was partially offset by an increase of £222,000 relating to a share-based payment
charge (see further details in Note 5).
* Figures restated for the effect of the five for one share split effective from 12 September 2016.
23. Acquisition of subsidiaries
(a) Keraben Grupo
On 16 November 2017 the Group acquired 100% of the equity of Keraben Grupo S.A.
Keraben is a large ceramic tiles business, based in Castellon, Spain. It designs, manufactures and distributes a range of
white body and porcelain tiles for both wall and floor covering. Its products are priced at the medium to high-end of the
market and are sold throughout western Europe under three different brands, each with a strong market reputation.
The acquisition is expected to be significantly earnings-accretive, with additional commercial synergy opportunities to drive
incremental profits. The enlarged group is substantially diversified in terms of both product and geography, and Keraben is
considered an ideal platform for further potential acquisitions within this market segment.
The Group results for the year ended 31 March 2018 include contribution from Keraben of €46.8m (£41.1m1) of revenue and
€10.8m (£9.5m1) of profit before tax (before amortisation of acquired intangibles and acquisition costs). If the acquisition had
been completed on the first day of the financial year Group revenue and profit before tax would have been higher by €82.9m
(£72.9m1) and €21.0m (£18.5m1) respectively.
1 Applying the average exchange rate over the financial year of 1.1373.
Consideration
Cash consideration of €274.1m (£243.4m2) was paid on completion of the acquisition. There is no deferred or contingent
consideration.
2 Applying the GBP to € exchange rate at the date of acquisition of 1.1258.
74
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP 23. Acquisition of subsidiaries (continued)
Net assets acquired
Property, plant and equipment
Investments in associates
IT software
Trade and other receivables
Inventories
Trade and other payables
Other taxes and social security
Deferred tax liabilities
Net cash / (overdraft)
Loans
Finance leases and hire purchase
Book value of net assets acquired
Fair value adjustments:
Intangible assets arising on acquisition - Customer Relationships (see Note 10)
Intangible assets arising on acquisition - Brand Names (see Note 10)
Deferred tax liability on intangible assets acquired
Fair value of total identifiable net assets
Goodwill (see Note 9)
Total consideration
Satisfied by:
Cash
Deferred consideration
Amounts
recognised at
acquisition date
£m
89.1
0.9
0.3
29.8
17.7
(28.2)
(21.5)
(3.0)
6.4
(60.0)
–
31.5
97.5
30.6
(32.0)
127.6
115.8
243.4
243.4
–
243.4
Other than where fair value adjustments have been made, the book value of assets acquired is considered to approximate
their fair values. Gross trade receivables acquired are considered to equate to the fair value of contractually collectable
cash flows.
The other taxes and social security figure in the acquired balance sheet of £21.5m is a one-off transaction-related tax liability
which crystallised on acquisition and was settled following completion. As such, whilst it does not form part of the cost of
investment in the Group balance sheet, it has been treated as an investment-related item in the Group cash flow statement
and included as part of investments in subsidiaries net of cash acquired.
As a condition of the acquisition, the senior management team of Keraben Grupo S.A.U were required to invest £7.2m in a
new incentive structure under Victoria ownership (see Note 15). This cash inflow has been treated as investment related and
deducted from the investment in subsidiaries net of cash acquired.
After fair value adjustments, goodwill of £115.8m is created on the consolidation of Keraben, which relates to expected
future profits of the business.
Transaction costs amounting to £836,000 relating to the acquisition have been recognised as an expense and included in
exceptional administrative expenses in the Group income statement.
(b) Ceramiche Serra
On 1 December 2017 the Group acquired 100% of the equity of Ceramiche Serra S.p.A.
Serra, operating from sites in Serramazzoni, Sassuolo (near Bologna), the heart of the Italian ceramics industry, manufactures
ceramic flooring, which is sold domestically and exported internationally. It sells to a combination of wholesalers, retail
groups, and independent stores throughout Continental Europe, North America, and the Far East.
75
www.victoriaplc.comOur Financials Notes to the accounts
23. Acquisition of subsidiaries (continued)
The Group results for the year ended 31 March 2018 include contribution from Serra of €6.5m (£5.7m1) of revenue and
€2.5m (£2.2m1) of profit before tax (before amortisation of acquired intangibles and acquisition costs). If the acquisition had
been completed on the first day of the financial year Group revenue and profit before tax would have been higher by €12.8m
(£11.3m1) and €5.6m (£4.9m1) respectively.
1 Applying the average exchange rate over the financial year of 1.1373.
Consideration
The consideration for the acquisition comprises:
(i) Initial cash consideration of €38.1m (£33.6m2);
(ii) Contingent cash consideration of up to €20.0m (£17.6m2) dependent on improved EBITDA and other criteria over the next
four years.
2 Applying the GBP to € exchange rate at the date of acquisition of 1.1341.
Net Assets Acquired
Property, plant and equipment
IT software
Trade and other receivables
Inventories
Trade and other payables
Deferred tax assets
Net cash / (overdraft)
Loans
Book value of net assets acquired
Fair value adjustments:
Intangible assets arising on acquisition - Customer Relationships (see Note 10)
Intangible assets arising on acquisition - Brand Names (see Note 10)
Intangible assets arising on acquisition - Developed Technology (see Note 10)
Deferred tax liability on intangible assets acquired
Fair value of total identifiable net assets
Goodwill (see Note 9)
Total consideration
Satisfied by:
Cash
Deferred consideration
Amounts
recognised at
acquisition date
£m
2.1
–
5.8
1.2
(4.6)
0.2
11.4
(6.0)
10.1
21.9
2.4
4.8
(8.1)
31.1
14.9
46.0
33.6
12.4
46.0
Other than where fair value adjustments have been made, the book value of assets acquired is considered to approximate their
fair values. Gross trade receivables acquired are considered to equate to the fair value of contractually collectable cash flows.
Contingent consideration is measured at fair value, so depending on the future performance of Serra, the contingent element
of consideration could vary from the present value assessed above. However, based on the overall quantum and sensitivity
to changes in assumed future growth rates, the range in potential outcomes of contingent consideration is considered to
be immaterial.
After fair value adjustments, goodwill of £14.9m is created on the consolidation of Serra, which relates to expected future
profits of the business.
Transaction costs amounting to £1,657,000 relating to the acquisition have been recognised as an expense and included in
the administrative expenses in the Group income statement.
76
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP 23. Acquisition of subsidiaries (continued)
(c) Millennium Weavers Europe
On 1 June 2017 the Group acquired the business and assets of Millennium Weavers Europe, a carpet distribution business
based in Belgium. The acquisition further enhances the Group’s coverage of the UK volume market.
Cash consideration of €3,494,000 (£3,069,000) was paid, with transaction costs of £170,000 recognised within
administrative expenses. The fair value of the acquired assets and liabilities was equal to the price paid. No goodwill is
recognised on acquisition and no separately identified intangible assets were acquired.
1 Applying the GBP to € exchange rate at the date of acquisition of 1.1386.
24. Government grants
Deferred income at 2 April 2017
Grant income received in the year
Amortisation to deferred income by release through cost of production
Adjustment for acquisitions in the year
Exchange adjustment
Deferred income at 31 March 2018
Presented in:
Current liabilities
Non-current liabilities
2018
£m
0.4
0.2
(0.3)
0.7
–
1.0
0.1
0.9
1.0
2017
£m
0.6
–
(0.2)
–
–
0.4
0.2
0.2
0.4
There are no unfulfilled conditions or other contingencies attaching to government assistance.
25. Financial instruments
Background
In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note
describes the Group’s objectives, policies and processes for managing those risks and the methods used to measure them.
Further quantitative information in respect of these risks is presented throughout the financial statements.
There have been no substantive changes in the Group’s exposure to financial instrument risks, its objectives, policies and
processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in
this note.
The “financial instruments” which are affected by these risks comprise borrowings, cash and liquid resources used to provide
finance for the Group’s operations, together with various items such as trade debtors and trade creditors that arise directly
from its operations, inter-company payables and receivables, and any derivatives transactions (such as interest rate swaps
and forward foreign currency contracts) used to manage the risks from interest rate and currency rate volatility.
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group’s risk management objectives and policies and, whilst
retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the
effective implementation of the objectives and policies to the Group’s finance function. The Board receives monthly reports
through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and
policies it sets.
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the
Group’s competitiveness and flexibility. Further details regarding these policies are set out below:
77
www.victoriaplc.comOur Financials Notes to the accounts
25. Financial instruments (continued)
Credit risk
The Group’s principal financial assets are bank balances and cash, trade and other receivables and investments.
The Group’s exposure to credit risk is primarily attributable to its trade receivables. Credit risk is managed locally by the
management of each business unit. Prior to accepting new customers, credit checks are obtained from reputable external
sources. The amounts presented in the balance sheet are net of allowance for doubtful receivables. An allowance for
impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction
on the recoverability of the cash flows.
The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with low
credit risk assigned by international credit-rating agencies.
The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties
and customers.
The Company has no significant concentration of credit risk, other than with its own subsidiaries, the performances of which
are closely monitored. The Directors confirm that the carrying amounts of monies owed by its subsidiaries approximate to
their fair value.
Liquidity risk
Liquidity risk arises from the Group’s management of working capital and the finance charges and principal repayments on
its debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.
The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due.
To achieve this aim, the cash position is continuously monitored to ensure that cash balances (or agreed facilities) meet
expected requirements for a period of at least 90 days.
The Board monitors annual cash budgets and updated forecasts against actual cash position on a monthly basis. At the
balance sheet date, these projections indicated that the Group expected to have sufficient liquid resources to meet its
obligations under all reasonably expected circumstances.
The maturity of financial liabilities is detailed in Note 16.
Market risk
Market risk arises from the Group’s use of interest bearing and foreign currency financial instruments. It is the risk that the
fair value of future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk),
foreign exchange rates (currency risk), or market pricing (price risk).
a) Interest rate risk
The Group finances its operations through a mixture of retained profits, equity capital and bank facilities, including hire
purchase and lease finance. The Group borrows in the desired currency at floating or fixed rates of interest and may then use
interest rate swaps to secure the desired interest profile and manage exposure to interest rate fluctuations.
Interest rate sensitivity
The annualised effect of a 50 basis point decrease in the interest rate at the balance sheet date on the variable rate debt
carried at that date would, all other variables held constant, have resulted in an increase in post-tax profit for the year of
£1,209,000 (2017: increase in post-tax profit of £423,000). A 50 basis point increase in the interest rate would, on the same
basis, have reduced the profit for the year by the same amount.
78
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP 25. Financial instruments (continued)
Borrowings contractual maturities and effective interest rate analysis
In respect of interest bearing financial liabilities, the following table indicates the undiscounted amounts due for the remaining
contractual maturity (including interest payments based on the outstanding liability at the year end) and their effective interest
rates. The ageing of these amounts is based on the earliest dates on which the Group can be required to pay.
As at 31 March 2018
As at 1 April 2017
Effective
Interest
Rate
%
0-1
Years
£m
1-2
Years
£m
2-5
Years
£m
Over 5
Years
£m
Total
£m
Effective
Interest
Rate
%
0-1
Years
£m
1-2
Years
£m
2-5
Years
£m
Over 5
Years
£m
Total
£m
Group
Cash and cash
equivalents
Bank loans & overdraft
BGF loan
Finance lease and HP
Company
Cash and cash
equivalents
Bank loans & overdraft
BGF loan
0.00%
54.0
2.92% (320.6)
7.91% (13.8)
(2.0)
5.25%
(282.4)
54.0
(8.7)
(0.6)
(0.9)
43.8
–
(311.9)
(2.1)
(0.7)
(314.7)
–
–
(11.1)
(0.4)
(11.5)
–
–
– 13.30%
4.10%
–
–
0.00%
28.0
2.83% (110.4)
(16.1)
(1.6)
(100.1)
28.0
(3.0)
(1.0)
(0.6)
23.4
–
(107.4)
(3.1)
(0.6)
(111.1)
0.00%
6.2
2.96% (315.0)
7.91% (13.8)
(322.6)
6.2
(8.7)
(0.6)
(3.1)
–
(306.3)
(2.1)
(308.4)
–
–
(11.1)
(11.1)
–
–
– 13.30%
–
0.00%
–
2.83% (120.8)
(16.1)
(136.9)
–
(13.4)
(1.0)
(14.4)
–
(107.4)
(3.1)
(110.5)
–
–
(10.3)
(0.4)
(10.7)
–
–
(10.3)
(10.3)
–
–
(1.7)
–
(1.7)
–
–
(1.7)
(1.7)
In addition, the following table summarises the total undiscounted deferred and contingent consideration liabilities in relation
to past acquisitions, again aged based on the earliest dates on which the Group can be required to pay.
As at 31 March 2018
As at 1 April 2017
Total undiscounted obligations
Group
Deferred consideration liabilities
Contingent earn-out liabilities
Company
Contingent earn-out liabilities
Total
£m
(10.4)
(28.6)
(39.0)
(0.7)
(0.7)
0-1
Years
£m
1-2
Years
£m
2-5
Years
£m
Over 5
Years
£m
(4.5)
(1.6)
(6.1)
–
–
(4.7)
(8.5)
(13.2)
(0.7)
(0.7)
(1.2)
(18.5)
(19.7)
–
–
–
–
–
–
–
Total
£m
(17.6)
(22.3)
(39.9)
0-1
Years
£m
1-2
Years
£m
2-5
Years
£m
Over 5
Years
£m
(7.0)
(7.7)
(14.7)
(4.8)
(6.2)
(11.0)
(5.8)
(8.4)
(14.2)
(5.8)
(5.8)
(5.8)
(5.8)
–
–
–
–
–
–
–
–
–
Non-interest bearing liabilities
Details of trade and other payables falling due within one year are set out in Note 15.
b) Currency risk
The main currency exposure of the Group arises from the ownership of the continental European and Australian subsidiaries,
which account for approximately 62.8% and 9.8% of the Group’s total assets, respectively.
It is the Board’s policy not to hedge against movements in the Sterling/Australian Dollar and Sterling/Euro exchange rate.
Other currency exposure derives from trading operations where goods are exported or raw materials and capital equipment
are imported. These exposures may be managed by forward currency contracts, particularly when the amounts or periods to
maturities are significant and at times when currencies are particularly volatile.
79
www.victoriaplc.comOur Financials Notes to the accounts
25. Financial instruments (continued)
Currency risk sensitivity
The effect of a 10% strengthening of the Australian Dollar against Sterling over the full year would, all other variables held
constant, have resulted in an increase in Group post-tax profit for the year of £705,000 (2017: increased Group post-tax
profit by £176,000). A 10% weakening in the exchange rate would, on the same basis, have decreased Group post-tax profit
by £577,000 (2017: decreased Group post-tax profit by £144,000).
The effect of a 10% strengthening of the Australia Dollar against Sterling at year-end rates would have resulted in an increase
to equity of £2,235,000 (2017: an increase of £2,103,000). A 10% weakening in the exchange rate would, on the same
basis, have decreased equity by £1,828,000 (2017: decrease of £1,721,000).
The effect of a 10% strengthening of the Euro against Sterling over the full year would, all other variables held constant, have
resulted in a decrease in Group post-tax profit for the year of £309,000 (2017: decrease of £68,000). A 10% weakening in
the exchange rate would, on the same basis, have increased Group post-tax profit by £253,000 (2017: increase of £48,000).
The effect of a 10% strengthening of the Euro against Sterling at year-end rates would have resulted in a decrease to equity
of £280,000 (2017: decrease of £69,000). A 10% weakening in the exchange rate would, on the same basis, have increased
equity by £229,000 (2017: increase of £56,000).
The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting
date are as follows:
Australian Dollar
Euro
Liabilities
Assets
2018
£m
24.9
131.3
2017
£m
33.7
5.8
2018
£m
77.8
502.1
2017
£m
52.3
5.2
c) Price
The group is exposed to price risk in respect of corporate bonds held, which are accounted for within cash and cash
equivalents. The volatility of such securities is very low. If the quoted price for these securities increased or decreased by
10%, profit before tax for the period and equity would have changed by £540,000.
d) Trading
It is, and has been throughout the period under review, the Group’s policy that no trading in financial instruments shall
be undertaken other than in the corporate bonds held within cash and cash equivalents.
26. Key sources of estimation uncertainty
The preparation of the financial statements requires management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual
results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the estimate is revised. Information about significant areas
of estimation and critical judgements that have the most significant impact on the financial statements are described in the
following notes:
Estimates
Measurement of intangible assets
Intangible assets are recognised on acquisitions in relation to customer relationships, brands and developed technology.
The fair value of these assets are determined by discounting estimated future net cash flows generated by the asset
where no active market for the assets exists. These are assessed based upon management forecasts for each business in
question. Key assumptions are those regarding discount rates, growth rates, expected changes to selling prices and direct
costs, brand royalty rates and customer attrition.
80
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP 26. Key sources of estimation uncertainty (continued)
Measurement of deferred tax assets
The Group has potential deferred tax assets, principally in the form of tax losses but deferred tax assets are only recognised
to the extent it is probable that sufficient future taxable income will be available against which the losses and deductions can
be utilised. Recognition therefore involves assessment of the future performance of the particular legal entity in which the
deferred tax asset has been recognised. Deferred tax assets in respect of losses recognised at the balance sheet date are
based on the assumption that there is a high expectation that the asset will be realised in due course.
Valuation of deferred and contingent earn-out consideration
Liabilities are recognised in respect of acquisitions with outstanding deferred or contingent earn-outs at the end of the
period. These are assessed for each relevant business based upon management financial projections for the next 12 months
and applying growth assumptions for future years where relevant. Key assumptions are those regarding discount rates,
growth rates and expected changes to selling prices and direct costs. Further details are set out in Note 17.
Share based payments
The Group has share based payment incentive arrangements in place for certain employees. The fair value of the growth
shares is based on growth in the share price of Victoria PLC above a hurdle and is measured using appropriate valuation
model (Black-Scholes or Monte Carlo) at grant date. Key assumptions include expected volatility and the expected exercise
period. The growth shares awarded effectively track the market capitalisation of the Company, therefore historical share price
volatility has been used as a guide to the expected future volatility of the growth shares. As the fair value of the share based
payment charge is spread on a straight line basis to the income statement over the expected term this estimate impacts the
annual charge recognised.
Defined benefit obligation
The Group has two defined benefit pension schemes. The obligations under the schemes are recognised in the Consolidated
Balance Sheet and represent the present value of the obligation calculated by independent actuaries, with input from the
Directors. These actuarial valuations include assumptions such as discount rates, return on assets and mortality rates. These
assumptions vary from time to time according to prevailing economic conditions.
Because of changing market and economic conditions, the expenses and liabilities actually arising under the scheme
in the future may differ materially from the estimates made on the basis of the actuarial assumptions. The effects of any
change to these assumptions are accounted for in the next financial year as other comprehensive income. The calculation
of any charge relating to retirement benefits is clearly dependent on the assumptions used, which reflects the exercise of
judgement. Further details are set out in Note 20.
Judgements
Impairment of goodwill, investments or intercompany balances
Determining whether goodwill, investments or intercompany balances are impaired requires an estimation of the value
in use of the cash-generating units to which value has been allocated. The value in use calculation requires the entity to
estimate the future cash flows expected to arise from the cash-generating unit and to apply a suitable discount rate in order
to calculate present value. On an annual basis the Group is required to perform an impairment review to assess whether
the carrying value of goodwill, investments or intercompany balances are less than its recoverable amount. Recoverable
amount is based on a calculation of expected future cash flows, which include estimates of future performance. Details of
assumptions used in this review are detailed in Note 9.
81
www.victoriaplc.comOur Financials Notes to the accounts
27. Related parties
Transactions between the Company and its subsidiaries have been eliminated on consolidation.
Identity of related parties
The Group has a related party relationship with its Directors and executive officers.
The Company has a related party relationship with its subsidiaries and its Directors and executive officers.
Transactions with key management personnel
Key management personnel are considered to be the Directors of the Company and its subsidiaries.
As at 31 March 2018, the key management personnel, and their immediate relatives, controlled 25.0% of the voting shares of
the Company.
Details of the Group’s share-based incentive plan, which includes key management personnel, are provided in Note 5.
Furthermore, details of an employee incentive plan in relation to the key management personnel of Keraben, are provided in
Note 15.
The aggregate remuneration of the Group’s key management personnel, including the above incentive schemes, is set out
below for each of the categories specified in IAS 24 Related Party Disclosures.
Short-term employee benefits
Post-employment benefits
52 weeks
ended
31 March 2018
£m
52 weeks
ended
1 April 2017
£m
5.1
0.3
5.4
3.8
0.5
4.3
82
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP 27. Related parties (continued)
Company
Transactions with subsidiary undertakings:
Management fees - Victoria Carpets Ltd
Management fees - Whitestone Carpets Holdings Ltd
Management fees - View Logistics Ltd
Management fees - Abingdon Flooring Ltd
Management fees - Globesign Ltd
Management fees - Westex (Carpets) Ltd
Management fees - Interfloor Group Ltd
Management fees - Ezi Floor Ltd
Management fees - The Victoria Carpet Company Pty Ltd
Management fees - Quest Flooring Pty Ltd
Management fees - Primary Flooring Pty Limited
Management fees - Victoria Bidco B.V
Interest payable - Victoria Carpets Ltd
Interest payable - Whitestone Carpets Holdings Ltd
Interest payable - Abingdon Flooring Ltd
Interest payable - Globesign Ltd
Interest payable - Interfloor Group Ltd
Interest payable - Interfloor Operations Ltd
Interest payable - Ezi Floor Ltd
Interest payable - The Victoria Carpet Company Pty Ltd
Interest payable - Primary Flooring Pty Limited
Interest payable - Victoria Bidco B.V
Interest payable - Keraben Grupo S.A.
Interest payable - Kinsan Trade, S.L.
Dividend Income - Victoria Midco Holdings Ltd
Preference dividend Income - Quest Flooring Pty Ltd
Amounts due from subsidiary undertakings
Amounts due to subsidiary undertakings
52 weeks
ended
31 March 2018
£m
52 weeks
ended
1 April 2017
£m
–
–
0.03
0.03
–
0.03
0.03
0.03
0.03
0.03
0.03
0.03
0.32
0.68
0.44
0.25
1.49
0.57
0.31
–
1.20
0.36
0.73
1.31
2.75
0.76
0.03
0.03
–
0.03
0.03
0.03
0.03
0.02
0.03
0.03
0.01
–
0.29
0.58
0.45
0.33
1.65
1.54
0.15
0.08
0.20
0.04
–
–
5.11
0.77
52 weeks
ended
31 March 2018
£m
497.5
1.0
52 weeks
ended
1 April 2017
£m
146.9
–
83
www.victoriaplc.comOur Financials Notes to the accounts
27. Related parties (continued)
Transactions with the Business Growth Fund
Gavin Petken, a Non-Executive Director of Victoria PLC, is the Business Growth Fund’s (“BGF”) Regional Director for the
Midlands. On the 30 September 2014 the Company entered into a £10m 2022 unsecured loan facility with BGF. In addition,
BGF has been granted an option over 3,730,000* new Ordinary 5p shares in the Company at 57.2p* per share, representing
5% of the Company’s deemed enlarged issued share capital at the time of grant. During the year there was a significant
modification to the terms of the loan, on which the coupon was reduced from 10% to 6%, details are provided in Note 16.
The share option was redeemed in November 2017, details are provided in Note 22.
Interest charged to the income statement during the period in relation to the BGF loan was £1,182,000 (2017: £1,372,000).
Furthermore, during the period there was a one-off non-cash finance charge of £915,000 relating to the significant
modification.
* Figures restated for the effect of the five for one share split effective from 12 September 2016.
28. Post balance sheet events
Senior management long-term incentive plan
A new long-term management incentive plan was implemented post year end involving the issue of up to 100,000 ordinary
shares in Victoria Midco Holdings Limited (the “Incentive Shares”), a subsidiary of the Company. Participants in the Plan
will subscribe for these shares. The Plan will operate for a five year period, with the value of the Incentive Shares linked
to cumulative Total Shareholder Return delivered each year above a hurdle, being the current market capitalisation of the
Company increased annually by 20% p.a. on a compounding basis. At the end of the Plan, the Incentive Shares can be
exchanged for new ordinary shares in Victoria, at the then prevailing share price averaged over the month prior to exchange.
While the Company has the ability to buy back Incentive Shares after 3 years participants can only choose to exchange at
the end of the full five-year period of the Plan. Customary good and bad leaver provisions will apply. The financial impact of
the scheme has yet to be determined.
84
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP Shareholder information
Corporate website
The Annual Report, Company announcements and other information are available on the Group’s website at:
www.victoriaplc.com
Shareholder queries
If you have any queries in relation to Victoria PLC shares, please contact the Company’s registrars whose details are as
follows: Link Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU.
Telephone: 0871 664 0300 Overseas: +44 20 8639 3399 website: www.linkassetservices.com Calls cost 12p per minute
plus your phone company’s access charge. Overseas: +44 371 664 0300. Calls outside the UK will be charged at the
applicable international rate. Lines are open between 9.00 am – 5.30 pm, Monday to Friday excluding public holidays in
England and Wales. Website: www.linkassetservices.com
Dividend payments
Our registrars have the facility to pay shareholders’ dividends directly into their bank accounts, instead of receiving the
dividend payment by cheque. They are also able to convert dividend payments into local currency and send the funds by
currency draft or, again, if preferred, pay them straight into a bank account.
More information on the above services can be obtained from Capita Registrars or downloaded from the Group’s website:
www.victoria.plc.com/victoriaplc/investors/downloads/
Unsolicited mail
The Company is required by law to make its share register available on request to the public and organisations which may
use it as a mailing list resulting in shareholders receiving unsolicited mail. Shareholders wishing to limit such mail should write
to the Mailing Preference Service DMA house, 70 Margaret Street, London, W1W 8SS or register online at www.mpsonline.
org.uk
Victoria PLC Registered office
Worcester Road
Kidderminster
Worcestershire
DY10 1JR
Company Registered No. (England & Wales)
282204
Advisers
Auditor:
Bankers:
Registrar:
Solicitor:
Nominated Adviser
and Joint Broker:
Grant Thornton UK LLP – The Colmore Building, 20 Colmore Circus, Birmingham, B4 6AT
Barclays Bank PLC – PO Box 3333, One Snow Hill, Queensway, Birmingham, B3 2WN
HSBC Bank PLC – Penman Way, Grove Park, Enderby, Leicester, LE19 1SY
The Royal Bank of Scotland Group PLC – 5th Floor, 2 St Philips Place, B3 2RB
AlB Group (UK) p.l.c – 8th Floor, 63 Temple Row, Birmingham, B2 5LS
Link Asset Services – The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU
Brown Rudnick LLP – 8 Clifford Street, London, WS1 2LQ
Cantor Fitzgerald Europe – One Churchill Place, Canary Wharf, London E14 5RB
Joint Broker:
Joh Berenberg Gossler & co.KG – 60 Threadneedle Street, London, EC2R 8HP
Public Relations:
Buchanan Communications – 107 Cheapside, London, EC2V 6DN
85
www.victoriaplc.comOther Information Glossary
Business Growth Fund
Capital expenditure
Earnings before interest and tax
Earnings before interest, tax, depreciation and amortisation
Earnings per share
The 52 weeks ended 1 April 2017
The 52 weeks ended 31 March 2018
The 26 weeks ended 30 September 2017
The 26 weeks ended 31 March 2018
International Accounting Standards
International Financial Reporting Standards
Key performance indicators used to assess the business performance
Like for like
Luxury vinyl tile
Mergers and acquisitions
Profit before taxation
BGF
Capex
EBIT
EBITDA
EPS
FY17
FY18
H1
H2
IAS
IFRS
KPIs
LFL
LVT
M&A
PBT
86
Victoria PLC Annual Report and Accounts 2018Stock Code: VCP www.victoriaplc.com Victoria PLC
Worcester Road
Kidderminster
Worcestershire
DY10 1JR
Tel: +44 (0)1562 749300
www.victoriaplc.com