Victoria Plc - comment

Victoria fell short of our expectations in H226 (to March). Revenue came in just shy of target and offset by gross margins, but expenses exceeded expectations, depressing EBITDA from an expected 7% to a mere 4.2%, or £22m. WC and CapEx were a little friendlier. Manageent attributed the second-half deterioration to the Iran conflict breaking out towards year-end, which apparently caused a sharp drop in both commercial and consumer demand in the final few months. Management admitted they underestimated the inefficiency as Belgian production scaled down, moving 40-odd looms (the size of a house) while keeping the lines running was apparently harder than planned. 600 employees were dismissed in Belgium, 300 hired in Turkey, and the transition is scheduled to complete in calendar Q3 2026, so in the next few weeks. We are told a four-month backlog of orders is building, and once Turkish capacity is live, should flow through quickly into volume and margin

Management were effusive on Koch becoming largest shareholder at 24.9%. Full diligence conducted with local teams, Koch is buying into the recovery thesis. A CVR with a £270m redemption value provides downside protection for Koch on the equity and extinguishes once cumulative EBITDA hits £400m or market cap reaches £800m.
Non-consenting '28s holders will see their bonds written to zero under the consent solicitation. The company itself owns £8m of the 2028s, which will also be written to zero.
The two big items: V4 (now rebranded Saint-Fran) in Spain and Project Himalaya (Belgium-to-Turkey) will only deliver their full run rate benefit in FY28. Management asked explicitly not to forget about those when building models: every 5% volume growth would deliver £20m of EBITDA, and management say that volumes are currently 20-25% below long-term trend, i.e. £80=100m EBITDA upside.

The Q&A ran over time and a number of questions were left to be published on the platform rather than answered live.