Specialist
Former manager at Balta Group SA
Agenda
- Key demand trends in the European flooring industry, highlighting manufacturing dynamics and difference across UK vs wider Europe
- Category dynamics and impact of supply chain constraints and inflationary environment, highlighting operators’ ability to pass through cost
- Victoria's (LON: VCP) positioning vs competitors – effectiveness of M&A strategy including recent acquisition of Balta
- Key risks, opportunities and ESG concerns
Questions
1.
Could you outline the route-to-market from manufacturer to end user in the carpets and flooring industry in Europe and the UK?
2.
You mentioned that UK-based manufacturers tend to use their own distribution. Has there been a big trend of moving manufacturing into the UK from mainland Europe or outside, or is still a very small portion made within the UK?
3.
Do you expect more manufacturing to come into the UK over the next 5-10 years? Do you think that’s a trend that will continue? If so, what do you think will drive that trend?
4.
Could you outline the balance of import-export trade between the UK and Europe and how that has been evolving?
5.
How have the pandemic and Brexit impacted route-to-market strategies, import and export?
6.
Are you expecting demand to continue through 2022?
7.
Does the growth in commercial and expected downturn in domestic impact the industry’s margin profile?
8.
Have you noted any consumption or mix behaviours between the product categories such as carpets, tiling or flooring?
9.
Victoria’s management mentioned that despite a slight decline, carpet continues to occupy about 60% of UK flooring market share. Do you think 60% is quite a good gauge of where carpet will continue to operate and occupy, or do you expect a slow trickle downstream in the coming years?
10.
How do you think supply chain challenges and cost inflation will be impacting the carpet and flooring industry and Victoria specifically?
11.
Do you expect additional costs to be passed on lumpily and there to be a lag from when companies take cost to when they take price?
12.
How do you foresee Victoria’s EBIT margin growth evolving given the current environment? Do you think the company will be able to remain stable or experience a lag but stabilise over a two-year period?
13.
How are some products sheltered or more severely impacted by margin pressures?
14.
How significant or big a portion of total COGS is transportation logistics, especially on the vinyl side? Do you have any estimate there?
15.
Could you help us understand Victoria’s positioning within the UK and European markets?
16.
Are there any other pros or cons of Victoria’s operating model? You mentioned flexibility.
17.
Do you think Victoria is good at driving synergies within the businesses it acquires to drive synergies?
18.
You mentioned Victoria is very good at buying businesses, the most recent being Balta in November 2021. Are there any gaps in the company’s wider business portfolio or product offering that might need filling or indicate any structural risk that it might be looking to in the short term?
19.
Is Victoria well-represented across Europe and the UK, or do you think the company will be looking at an acquisition to get into a certain region? If so, are there any regions that stand out?
20.
Is there anything structurally or fundamentally different within the UK vs Europe that might just make the UK more attractive in the eyes of Victoria?
21.
Who are Victoria’s biggest competitive threats, given it now owns Balta? How might the company position itself to combat such threats over the coming months and years?
22.
What is the quality and price point that carpets coming from Turkey can select? Is it quite competitive vs what Victoria is putting out there?
23.
You might have mentioned that a lot of this volume from Turkey goes to the US. Is there any risk of that getting diverted from the US to the UK and it ultimately just ends up flooding the UK market, or is that US demand strong?
24.
Are there any other UK-specific threats that we should be cognisant of?
25.
How might the supply issues and inflationary pressure be impacting Victoria’s working capital?
26.
M&A has been core to Victoria. Is there any risk that the company starts coming onto the Competition Commission’s radar, or might it be a way off getting to that size?
27.
Victoria’s management and many commentators have commented on the growth in artificial grass. Do you think this is a trend here to stay, or a once-off niche growth spurt?
28.
Has ESG become a factor for Victoria or any other players within the flooring industry? If so, how might these companies start to think about ESG pressure from investors vs consumers?
29.
Do you think the pressure to recycle or change products will fall on the manufacturer? Do you think recycling will be more downstream with third parties and maybe be the responsibility of government?
Gain access to Premium Content
Submit your details to access up to 5 Forum Transcripts or to request a complimentary one week trial.
The information, material and content contained in this transcript (“Content”) is for information purposes only and does not constitute advice of any type or a trade recommendation and should not form the basis of any investment decision.This transcript has been edited by Third Bridge for ease of reading. Third Bridge Group Limited and its affiliates (together “Third Bridge”) make no representation and accept no liability for the Contentor for any errors, omissions or inaccuracies in respect of it. The views of the specialist expressed in the Content are those of the specialist and they are not endorsed by, nor do they represent the opinion of, Third Bridge. Third Bridge reserves all copyright, intellectual and other property rights in the Content. Any modification, reformatting, copying, displaying, distributing, transmitting, publishing, licensing, creating derivative works from, transferring or selling any Content is strictly prohibited
