(Bloomberg) -- Bonds and shares of Victoria Plc slumped after UK-based flooring company reported a “challenging” outlook and a board member resigned.

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Victoria reported an 11% slide in first-half adjusted operating profit, noting particularly weak demand in its ceramic tile business. In a separate statement, the company said Zachary Sternberg, co-founder of Victoria’s biggest shareholder The Spruce House Partnership, will leave the board to balance time commitments.

The New York-based investment partnership owns around 20.7% of Victoria shares and Sternberg has indirect beneficial ownership through the shareholding, according to the flooring firm’s website. His departure “doesn’t change anything in terms of Spruce’s support” for Victoria as a major shareholder, a company spokesman said in emailed comments.

Other investors in Victoria include Koch Equity Development, part of Koch Industries, and Vulcan Value Partners, a US-based boutique investment firm. KED has exposure to Victoria both through preferred equity as well as shares, with the firm’s Blake Ressel sitting on the board as non-executive director.

Sternberg’s departure has raised “many concerns about the evolution of the company’s shareholder structure,” said Rémi Ramadou, a high-yield credit analyst at Spread Research.

Victoria’s bonds maturing in 2028 fell as much as 3.3 cents on the euro to 64.6 cents, according to data compiled by Bloomberg, set for the largest daily drop since the bonds were issued in 2021. Shares in the company plunged as much as 25% to the lowest since June 2020, before paring some losses to trade down 18%.



The company faced investor scrutiny earlier this year when auditor Grant Thornton flagged potential irregularities at Victoria subsidiary Hanover Flooring Limited and said the company had curbed the scope of its inquiries. In the first-half results, Victoria said it would allocate additional finance resources to the subsidiary, which represents 1.25% of the group’s revenues, and put in place controls to ensure accounting records are maintained to a high standard.

The flooring firm also said in its earnings statement that margins have improved since it reorganized some of its businesses to cut costs. Demand will rebound when people have more money to spend on home improvements, according to the statement.

“The current lower demand is a result of purchase decisions deferred, not purchases forgone,” the company said. “Carpet continues to age, stains don’t magically disappear with the passing of time, ceramic tiles continue to chip or crack, style and fashion move on.”

--With assistance from Kwaku Gyasi.

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