Carpet trading difficulties forecast

3:51pm Thursday 24th July 2008

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SALES revenues of Kidderminster carpet firm, Victoria, have risen by almost 11 per cent globally, year on year, during the first quarter, although margins have been under pressure, shareholders were told today.

Chairman, Alexander Anton, also warned: “Market conditions in the UK have hardened significantly since March and we are now likely to see a sustained period of difficult trading conditions in the floor coverings sector.”

Speaking about the UK performance during the company’s annual meeting, Mr Anton added: “Against this backdrop, Victoria has grown sales revenues by 2.9 per cent on a like-for-like basis.

“Weaker demand in residential sales has been offset by a strong debut by the company in the contract commercial market.

“There was, however, pressure on gross margins in the period, which declined by 3.6 per cent, brought about by raw material price increases, which we now plan to pass on to customers in the near future.”

In his interim management statement, he explained: “The overall performance of the group in the first quarter has been satisfactory, despite the challenging market conditions.

“Sales revenues in the first quarter have grown by 10.8 per cent - in constant currency terms - when compared to last year, although margins have been under pressure.

The group’s Australian business was reported to have produced a solid performance in the first quarter, in line with management expectations.

Sales revenues grew by 12.7 per cent, in local currency terms, with gross profit margins marginally down, by 0.7 per cent, in the period.

Expansion plans outlined in the annual report were progressing well, on time and within budget. The first of four new tufting machines was commissioned in June and the second machine was scheduled to commence production within the next few days.

The Irish companies had made a promising start to the new financial year with sales revenues up significantly, by 36.3 per cent, in local currency, although there was a negative 2.6 per cent impact on the gross profit margin, due to a change in sales mix.

Munster Carpets, the contract commercial division, had a good start to the year after securing several large contract orders, which had been identified last year. Navan Carpets, the residential division, saw an improved like-for-like performance on last year, despite the worsening domestic market conditions.

Colin Campbell & Sons, the group’s Canadian associate company, had grown sales revenues in the first quarter by 5.5 per cent but margins had been affected slightly by the planned discontinuation of older product ranges in preparation for the introduction of new product launches.

The roll-out of our new eco-friendly carpet programme, Nature’s Carpet, in both Canada and the United States was proceeding well.