Kidderminster, England, September 7--Eight years of continuous growth by Kidderminster carpet maker Victoria has come to a halt with a warning that results for the full-year to March 2005 will show a significant shortfall, according to ICBirmington.co.uk.
At the end of the company's last financial year profits before tax were £4.19 million.
They are now forecast to drop to £2 million.
But the group will endeavour to maintain its dividend of 111/2p, giving a yield of about five per cent.
The company made a trading statement to the Stock Exchange yesterday saying its residential customer business in the UK and Ireland had been affected by rises in the bank rate and the uncertainties the increases had brought in the economy.
But the group expects to see some improvement in the second-half of the financial year, particularly given the "positive reaction" from customers to the launch of new ranges.
Alan Bullock, managing director of Victoria, who has played a large part in the company's modernisation and trading resurgence, said: "We are disappointed, but we want to let the market know that current trading is difficult."
He said that residential sales in the UK in the first four months were down by 10.8 per cent.
"We believe there is a general malaise in the high streets brought about by five interest rate increases since autumn last year and this is compounded by worries about the housing market and whether it will crash.
"Increases in interest rates take money out of disposable income as people pay more off on their credit cards and stay out of the shops.
"Residential sales are not good for us at present and there have been a number of important sporting events during the past few months and these have not helped the situation as people tend to put buying on one side."
Bullock said Victoria was struggling in its Axminster department at Kidderminster.
The order book, he said, particularly from the US, was healthy but the department had not managed to get the levels of production out.
"Consequently, this has had an adverse effect upon the profitability of our woven business despite continuing good levels of customer demand for our product," said Bullock.
Work had been contracted out and wholesale prices were paid instead of manufacturing prices when the overheads were taken into account. Customers were now reluctant to pay £40 or £50 a square yard for a heavily patterned Axminster.
Bullock said if the Axminster market continued to move away from Victoria faster than it could match it then the company may be forced to look at whether it remained in Axminster manufacturing.
There had been no decisions taken on that issue.
At the annual general meeting in mid-July the group stated the first three months of the year had been mixed and drew attention to the geographical diversity of the group's operations helping to balance business but that the UK residential sector was experiencing slightly reduced levels of activity.
The group's Australian operations were continuing to perform in line with expectations.
Carpet distributor Gaskell, which has a distribution warehouse at Kidderminster, dropped into a £1.3 million pre-tax loss in the first-half of 2004 to July 2 from a profit of £3.12 million 12 months earlier.
The group saw turnover from continuing operations edge up to £13.6 million from £13.5 million.
The first-half of 2004 was focused on restructuring which had resulted in a significant reduction in the group's cost base, as well as the re-sourcing of certain products from low cost, high quality manufacturers on the continent.
