Victoria PLC results: recovery signs meet a £1.06 billion debt challenge

Victoria PLC's full-year numbers are difficult reading, but the flooring group is beginning FY2027 with better trading and a proposed refinancing that could materially reduce its liabilities.

The central investor question is whether operational improvements can translate into cash quickly enough to bring down elevated debt. Net debt reached £1,063.2 million at the year-end, while the accounts identify a material uncertainty related to going concern.

Against that, Q1 FY2027 volumes rose by around 3%, revenue increased by around 7%, and profitability was ahead of the corresponding period. Victoria now expects to deliver at least £115 million of EBITDA for FY2027.

Victoria's FY2026 results at a glance

Key measure	FY2026	FY2025 restated	Change
Underlying revenue	£1,045.5m	£1,115.2m	-6.3%
Underlying EBITDA	£92.3m	£113.7m	-18.8%
Underlying EBITDA margin	8.8%	10.2%	-1.4 percentage points
Underlying operating profit	£7.3m	£29.5m	-75.3%
Statutory operating loss	£153.3m	£225.4m	Improved
Statutory net loss after tax	£326.3m	£275.8m	Worsened
Underlying free cash flow	£14.7m outflow	£36.2m outflow	Improved
Net debt including lease debt	£1,063.2m	£897.9m	Increased
Net debt to EBITDA	11.5 times	7.9 times	Increased

Revenue fell less sharply than volumes, which were down around 9%. This suggests Victoria retained some pricing power and improved its average selling prices, although that was not enough to prevent a substantial decline in profit.

Underlying EBITDA fell by £21.4 million and the margin narrowed to 8.8%. On a pre-IFRS 16 basis, which removes the accounting treatment of leases, EBITDA dropped to £58.3 million from £81.0 million.

The statutory figures were considerably weaker. Victoria recorded a £153.3 million operating loss and a £326.3 million net loss after tax. These included impairments, restructuring costs, refinancing charges and finance costs relating to preferred equity.

Debt remains the defining issue

Net debt before preferred equity increased by £165.3 million to £1,063.2 million. This pushed net debt to 11.5 times EBITDA, up from 7.9 times.

Victoria also had preferred equity liabilities of £393.5 million on its balance sheet, taking statutory net debt, net of prepaid finance costs, to £1,456.7 million.

The group refinanced its material debt maturing in 2026 during August 2025. A further transaction announced in July 2026 is intended to extend the 2028 maturities to 2031 and address KED Victoria's preferred shares.

If completed, the latest refinancing is expected to reduce balance-sheet liabilities by approximately £300 million. It is also expected to cut ongoing finance costs, including payment-in-kind dividends, by around £34 million, of which approximately £5 million is an annual cash cost. Payment-in-kind, or PIK, means the charge is added to the liability rather than immediately paid in cash.

Holders representing more than 90% of the bonds maturing in March 2028 have joined the Transaction Support Agreement, meeting the threshold needed to implement the proposal through a consent solicitation.

That is meaningful progress, but completion remains subject to conditions, including shareholder approval and the wider consent process. Investors should therefore distinguish between the expected benefits and the balance sheet as it currently stands.

Going concern uncertainty deserves attention

Victoria's directors continue to use the going concern basis, meaning they believe the business can continue operating for at least the assessment period to the end of July 2027.

However, the accounts contain a material uncertainty that may cast significant doubt on the group and parent company's ability to continue as a going concern.

This reflects three areas that are not entirely within management's control:

• Completion of the proposed refinancing.
• Receipt and timing of asset-sale proceeds.
• Renewal or replacement of uncommitted local credit facilities.

The going concern forecast assumes approximately £63 million of asset-sale proceeds during the assessment period. Across FY2027 and FY2028, Victoria expects at least £70 million of net proceeds from identified property assets.

At the year-end, the group had £67.6 million of cash, net of overdrafts. Around £18 million of borrowed amounts mature during the following 12 months, while approximately £64 million relates to uncommitted credit lines.

Cash flow improved, but remained negative

Underlying free cash flow before exceptional items was a £14.7 million outflow, compared with a £36.2 million outflow in FY2025.

Working capital generated a £17.6 million inflow, helped by lower inventory and tighter management of debtors and payables. Operating cash flow before interest, tax and capital expenditure was £66.4 million.

However, after all capital expenditure and exceptional costs, free cash flow was a £72.0 million outflow. This matters because reducing leverage requires Victoria to turn accounting earnings into sustainable cash generation.

Capital expenditure is expected to be around £55 million in FY2027, broadly matching FY2026's £56.1 million. The company does not intend to pay dividends in the medium term, with debt reduction taking priority.

Divisional performance was mixed

Australia was the clear bright spot. Revenue increased by 0.6% to £104.3 million, while EBITDA rose by 11.5% to £15.6 million. Its EBITDA margin improved to 14.9%, supported by market-share gains, cost control and the Wonderlay value brand.

UK and European soft flooring revenue fell by 5.1% to £551.3 million, with EBITDA down 21.7% to £50.3 million. The UK gained market share, but this was overshadowed by the relocation of Balta's rugs production from Belgium to Turkey.

The rugs project involves moving 25 weaving looms and reducing the workforce from around 500 employees in Belgium to fewer than 300 in Turkey. Completion is expected in Q3 FY2027, with material financial benefits anticipated in FY2028.

Ceramic tiles remained under pressure. Revenue declined by 7.8% to £258.5 million and EBITDA dropped by 26.1% to £25.8 million. Victoria exited an Italian production site in March 2026, while its more efficient V4 production line in Spain entered service towards the end of FY2026.

North American revenue fell by 12.4% to £131.4 million, with EBITDA declining by 55.7% to £3.3 million. Victoria has repositioned CALI from a business-to-consumer model to business-to-business and introduced further pricing and cost measures.

FY2027 has started more positively

Q1 FY2027 delivered volume growth of around 3% and revenue growth of around 7%. Profitability was ahead of Q1 FY2026 despite input-price and cost volatility linked to the Iran conflict.

The board expects at least £115 million of EBITDA for FY2027. That would represent an increase of at least £22.7 million from FY2026, although management expects temporarily higher input costs to dilute margins.

Victoria estimates that each 5% increase in volume could add approximately £20 million to operating profit. That illustrates the potential operational leverage if demand recovers, but it can work in both directions, as FY2026's weaker volumes demonstrated.

What investors need to see next

There are credible signs of operational progress: positive Q1 growth, Australian momentum, UK market-share gains and several cost-saving projects moving towards completion.

Yet the investment case remains dominated by leverage, negative cash flow and execution risk. The most important milestones are completion of the refinancing, delivery of asset sales, improvement towards the £115 million EBITDA target and a return to positive free cash flow.

Until those pieces are delivered, Victoria's recovery potential sits alongside substantial financial risk rather than replacing it.