Half Year Results

25 November 2015

Victoria PLC

('Victoria', the 'Company', or the 'Group')

Half Year Results

for the 27 weeks ended 3 October 2015

Victoria PLC (AIM: VCP), a manufacturer, supplier and distributor of design-led carpets and flooring, is pleased to announce its Half Year results for the 27 weeks ended 3 October 2015.

Financial and Operational Highlights

(1) From continuing operations (adjusting for the disposal of Westwood Yarns).

(2) Profit before tax and exceptional items is before the deduction of £0.42m in respect of non-cash charges relating to: i) intangible asset amortisation on acquisitions and ii) The Business Growth Fund redemption premium interest and share option charges not considered to form part of the Group's underlying profit.

(3) Exceptional items are professional fees associated with undertaking and financing the acquisitions made in H1 and non-cash adjustments to deferred consideration.

· Significant increase in revenues reflecting first time contributions of acquisitions completed in Autumn 2014 and during 2015

· Record H1 profit before tax from continuing operations (pre-exceptional items3) of £5.89m (2014: £2.57m)

· The Group remained strongly cash generative from operating activities

· The Group continues to focus on generating cash, whilst looking for acquisition opportunities to further improve the product offering in the UK and Australia

Geoff Wilding, Chairman of Victoria PLC commented:

"I am pleased to report that the Group continued to perform well during the period, growing both organically and through acquisition. The UK and Australian flooring markets continue to experience very good demand from consumers and we are already seeing a growth in earnings and further operational synergies from the two acquisitions made since the start of the year.

"Our strong positive cash-flow and tight control over costs, together with supportive bankers and shareholders, ensures that the Group is well positioned for further growth as we continue to identify and explore acquisition opportunities. I am confident acquisitions will continue to be earnings enhancing and a useful tool to both strengthen the Group and create wealth for our shareholders.

"Therefore I am pleased to say the Board faces the balance of the financial year with positive sentiment."

For more information contact:

Chairman's Statement

This interim report marks three years since the shareholders appointed me to the board of Victoria and it has been a pleasure to work with some of the finest business people I have ever met. It has also been rewarding to hear one or two stories from individual shareholders where the wealth that has been created has made a material and genuine difference to their lives. So I am pleased to be able to briefly comment on the continued progress over the last six months:

First half revenues have increased to £105.61m (2014: £39.93m)

First half EBITDA increased to £9.02m (2014: £4.17m)

First half pre-tax earnings* increased to £5.89m (2014:£2.57m)

*excluding exceptional items

These results are not directly comparable with the same period last year as they reflect the inaugural full first half contribution from both Abingdon Flooring and Whitestone, 2 months' contribution from Quest Carpets, acquired on 7 August 2015, and some 3 weeks of Interfloor, acquired on 11 September 2015. Nevertheless operational synergies have been a primary driver of the significantly enhanced performance of the businesses that have been part of Victoria since the start of the year. Of course there is much more to achieve - the process is never ending - but the benefits of the Company's strategy of achieving scale through acquisitions are becoming clear.

Acquisitions

In August we were fortunate to complete the acquisition of Australian carpet manufacturer, Quest. There are just four major carpet markets in the world: North America, Europe, Australasia, and the UK. Victoria intends to be the number one or number two business in each market in which it trades as the advantages of scale - especially in terms of distribution and logistics - are significant.

Victoria has had factories in Australia for more than 60 years and the purchase of Quest makes the Group the number two flooring manufacturer in Australia (we are already the largest in the UK). Quest is an outstanding business and I am pleased to report that it has continued to go from strength to strength since acquisition.

In mid-September Victoria made its largest acquisition to date, that of the underlay manufacturer Interfloor. Interfloor's purchase price was funded by a mixture of debt and equity and the level of institutional support for the equity placing was very encouraging.

Two of our senior operational managers have joined the Interfloor board, bringing the benefit of their entrepreneurial approach to the undoubted experience and skill of Interfloor's management team. Some adjustments have already been made to the cost base of Interfloor since completion and there are opportunities for considerably more.

It is important to understand that Victoria PLC is a flooring business, not just a carpet business. Whilst historically Victoria was a carpet manufacturer, the recent acquisitions and product initiatives are leveraging our very strong distribution channels and we now manufacture and distribute other flooring products such as hard flooring (wood, tiles, LVT) and underlay. Underlay is sold alongside nearly two-thirds of carpet sales in the UK and hence, with the potential synergies in distribution, Interfloor was an ideal acquisition for Victoria.

Bank Debt

Over the half year net debt increased from £36.28m to £81.11m, principally as result of the acquisition of Quest and Interfloor. However it is important shareholders appreciate that while net debt has increased, so have the Group's earnings.

Furthermore, since the half year, £8.46m was received following shareholder approval of the second part of the equity fund raising undertaken at the time of the Interfloor acquisition and these monies have been applied to reduce debt. Together with the strong cash generative nature of the Group's businesses, our debt to EBITDA ratio for bank covenant purposes is now less than 2.25x (well within our agreed bank covenants) and this is expected to continue to fall.

While on the subject of bank debt I would like to briefly talk about our bankers. Banks have had a hard time from politicians and the media over the last few years and, possibly, some of the opprobrium has been deserved. However I feel I need to balance this view with the observation that the turnaround in Victoria's fortunes could not have happened without the support of the Company's bankers, Barclays and, more recently, HSBC. We have not always seen eye to eye (especially over fees!), but our banks have made a genuine effort to understand the business and its strategy, and have always been ready to provide us with capital to execute our plans.

Divestment

Since 1989 Victoria PLC had owned a small spinning mill in Yorkshire, Westwood Yarns Limited, which had manufactured and supplied woollen yarns to, primarily, Victoria Carpets and generated £1.3m of external turnover in 2014. The new Board recognised quite early on that the mill, which had been loss-making for a number of years, had a permanent competitive disadvantage to its lower cost Eastern European competitors and large scale UK competitor and there was little prospect of it returning to sustained profitability. Furthermore, although there will always be a place for wool carpets, there is an undeniable consumer migration towards synthetic carpets and this reducing demand for wool will eventually make operation of the Westwood mill unviable and the cash closure costs would have been very high.

Therefore we decided to sell Westwood Yarns and free up capital to pay down debt and deploy more profitably.

Deciding to sell and achieving a sale are two very different things. You won't be surprised to hear there are a limited number of buyers willing to pay actual money for a loss-making, structurally uncompetitive, sub-scale business operating in a declining sector. Nevertheless the business was sold in September and, although we are taking a loss of £1.46m on the asset's carrying value (importantly, a non cash item), we received nearly £1m cash on completion and have freed-up another £1m previously tied up in working capital.

Outlook

Both markets in which Victoria trades - the UK and Australia - continue to perform well.

The Australian flooring market is experiencing very good demand from consumers. The continued weakness in the Australian dollar (against Sterling) has impacted the paper translation of earnings but has had no impact on revenues or margins within the Australian trading businesses. Furthermore we borrowed in Australian dollars to fund the purchase of Quest and so earnings are being applied to reduce that debt; a step that is not affected at all by AUD/GBP exchange rates. (Without the impact of exchange rate movements in the period, Group revenues would have grown to £108.82m (£105.61m reported) and profit before tax and exceptional items would have grown to £6.13m (£5.89m reported)).

The UK, which represents about 75% of our business, is also trading well. At the time of writing this statement, consumer confidence has risen for the seventh consecutive quarter, according to Neilson Holdings, the global information and measurement company. With rising wages and low inflation, households are more positive about their finances than they have been for the past nine years. Nonetheless shareholders will be pleased to hear we are continuing to be parsimonious with their money and maintaining tight control over costs and inventory to ensure that the Group is well positioned should economic conditions change.

We continue to identify and explore acquisition opportunities. Our strong positive cash-flow, together with supportive bankers and shareholders, ensure further acquisition-based growth can be funded. By maintaining very strict criteria and strong price discipline, I am confident acquisitions will continue to be earnings enhancing and a useful tool to both strengthen the Group and create wealth for our shareholders.

I am pleased to say, therefore, that the Board faces the balance of the financial year with positive sentiment.

Geoff Wilding

Chairman

24 November 2015

Condensed Consolidated Income Statement

For the 27 weeks ended 3 October 2015 (unaudited)

(1) Re-stated to reflect the disposal of Westwood Yarns Limited which is now included above as discontinued operations.

Condensed Consolidated Statement of Comprehensive Income

For the 27 weeks ended 3 October 2015 (unaudited)

Condensed Consolidated Balance Sheet

As at 3 October 2015 (unaudited)

Condensed Consolidated Statement of Changes in Equity

For the 27 weeks ended 3 October 2015 (unaudited)

Condensed Consolidated Statement of Cash Flows

For the 27 weeks ended 3 October 2015 (unaudited)

(1) Re-stated to present the cash-flows from Westwood Yarns Limited as a discontinued operation.

Notes to the Condensed Half-year Financial Statements

1. General information

These condensed consolidated financial statements for the 27 weeks ended 3 October 2015 have not been audited or reviewed by the Auditor. They were approved by the Board of Directors on 24 November 2015.

The information for the 52 weeks ended 28 March 2015 does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The Auditor's report on those accounts was unqualified and did not include a reference to any matter to which the Auditor drew attention by way of emphasis without qualifying the report and did not contain statements under Section 498(2) or 498(3) of the Companies Act 2006.

2. Basis of preparation and accounting policies

These condensed consolidated financial statements should be read in conjunction with the Group's financial statements for the 52 weeks ended 28 March 2015, which were prepared in accordance with IFRSs as adopted by the European Union.

The accounting policies and basis of consolidation of these condensed financial statements are consistent with those applied and set out on pages 20 to 25 of the Group's audited financial statements for the 52 weeks ended 28 March 2015.

Having reviewed the Group's projections, and taking account of reasonably 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 financial statements of the Group.

3. Segmental information

The Group is organised into two operating divisions: The UK and Australia. Geographical segment information for revenue, operating profit and reconciliation to Group net profit is presented below:

* Loss from discontinued operations relates to the disposal of Westwood Yarns Limited. The £1.46m exceptional loss represents the difference between the disposal proceeds and the carrying value of the assets.

Intersegment sales between the Group's subsidiaries were immaterial in the current and comparative periods.

4. Exceptional items

All exceptional items are classified within administrative expenses.

(a) Relate to professional fees in connection with the acquisitions completed during the period.

(b) Deferred consideration in respect to acquisitions is measured under IFRS 3, initially at fair value discounted for the time value of money. Subsequently, deferred consideration is re-measured at each half-year and year end to unwind the time value of money and for changes to the earn-out value arising from actual and forecast business performance. Such adjustments are non-cash items.

(c) Relate to costs in connection with the Company's new multi-currency revolving facility with existing Group bankers, Barclays and HSBC.

(d) The prior year charge relates to the Contract for Differences between the Company and Camden Holdings Limited. There are no remaining liabilities outstanding in respect to the Contract for Differences.

5. Tax

The overall corporation tax is calculated at 23.3% (2014: 24.0%), representing the best estimate of the weighted average corporation tax charge expected for the full financial year.

6. Earnings per share

The calculation of earnings per ordinary equity share in the parent entity is based on the following earnings and number of shares:

(1) On 24 November 2015 the option agreement granted by the Company on 30 September 2014 with BGF Investments LP ("BGF"), was varied such that the period pursuant to which BGF is permitted to exercise the options and to subscribe for ordinary shares now commences on 24 September 2015 and expires 31 December 2022 without any other restrictions applying.

7. Dividends

8. Notes to the cash flow statement

a) Reconciliation of operating profit/(loss) to net cash inflow from continuing operating activities

(1) Comparatives re-stated to exclude the cash-flows from Westwood Yarns Limited, which was discontinued in the first half. The net cash flow from discontinued operations is shown within the 'Condensed Consolidated Statement of Cash Flows'.

8. Notes to the cash flow statement (continued)

b) Analysis of net debt

9. Acquisition of subsidiaries

(a) Quest Carpet Manufacturers Pty Limited and Quest Carpet Manufacturers Unit Trust

On 7 August 2015, the Group acquired Australian carpet manufacturer Quest Carpet Manufacturers Pty Limited and Quest Carpet Manufacturers Unit Trust (together 'Quest'), for an initial cash consideration of A$24.3m (£11.3m) and deferred cash consideration of A$10.5m (£4.9m), payable in equal annual instalments on the anniversary of completion for each of the next three years. The acquisition has been funded in Australian dollars from existing facilities. The principal activity of Quest is the manufacture and sale of premium quality carpets across Australia and New Zealand. The business operates from facilities in Dandenong (near Melbourne), Australia. The acquisition is expected to be immediately accretive to the underlying earnings per share of the Company.

The Group results for the 27 weeks ended 3 October 2015 included A$11.5m (£5.7m) of revenue and A$1.4m (£0.7m) EBITDA from Quest. If the acquisition of Quest had been completed on the first day of the half year period, Group revenues would have been A$21.4m (£10.4m) higher and Group EBITDA would have been A$2.0m (£1.0m) higher. For the financial year ended 30 June 2015, Quest revenue was A$59.8m (£28.1m) and normalised EBITDA of A$7.1m (£3.3m).

The valuation exercise to identify intangible assets acquired, as required under IFRS3, has not been finalised as at the half year. The valuation will be reflected in the Annual Report and Accounts for the Group for the year ending 2 April 2016 together with the IFRS 3 disclosures. Accordingly, an element of the Goodwill recorded on the balance sheet as at 3 October 2015 will be reclassified to Intangible assets once the IFRS 3 valuation has been completed.

(b) Interfloor Group Limited

On 14 September 2015, the Group acquired the entire share capital and shareholder indebtedness of Interfloor Group Limited ('Interfloor'), for a total enterprise value of £65.0m. The acquisition has been funded by a share placing (£44.5m) and existing facilities. The principal activity of Interfloor is the manufacture of carpet underlay and supply of related flooring accessories. The business operates from facilities in Lancashire, UK. The acquisition is expected to be immediately accretive to the underlying earnings per share of the Company.

The Group results for the 27 weeks ended 3 October 2015 included £4.1m of revenue and £0.8m EBITDA from Interfloor. If the acquisition of Interfloor had been completed on the first day of the half year period, Group revenues would have been £31.4m higher and Group EBITDA would have been £5.2m higher. For the year ended 30 May 1015, Interfloor revenue was £72.3m and EBITDA of £10.0m.

The valuation exercise to identify intangible assets acquired, as required under IFRS3, has not been finalised as at the half year. The valuation will be reflected in the Annual Report and Accounts for the Group for the year ending 2 April 2016 together with the IFRS 3 disclosures. Accordingly, an element of the Goodwill recorded on the balance sheet as at 3 October 2015 will be reclassified to Intangible assets once the IFRS 3 valuation has been completed.

10. Rates of Exchange

The result of the Group's overseas subsidiary has been translated into Sterling at the average exchange rates prevailing during the periods. The balance sheets are translated at the exchange rates prevailing at the period ends:

11. Risks and uncertainties

The Board continuously assesses and monitors the key risks of the business. The key risks that could affect the Group's medium term performance and the factors which mitigate these risks have not changed from those set out on page 8 of the Group's 2015 Annual Report, a copy of which is available on the Group's website - www.victoriaplc.com. The Chairman's Statement includes consideration of uncertainties affecting the Group in the remaining six months of the year.