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Price cuts are hurting profit margins, causing the share price to collapse
Thursday 01 Nov 2018 Author: James Crux

High-flying floor coverings maker Victoria (VCP:AIM) has shocked the market with a very negative trading update which has triggered a 31% slump in its share price to 418p.

Operating margins at the carpets distributor-to-flooring underlay group are tracking below expectations as it cuts prices to capture share in a challenging market.

The company has also flagged pricing pressures in hard flooring and a slowdown in Australia, speaking for just shy of 20% of overall sales.

Chairman Geoff Wilding still expects margins to ‘significantly exceed the prior year due to organic growth and product mix effects from previous acquisitions’ and also plans to recover the margin investment in stages over the next 12 months.

We’re told by the company’s advisers that analysts won’t publish any new earnings forecasts until a financing initiative has completed. Victoria intends to offer €450m in senior secured notes to repay its existing senior bank facility.

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