Directors of the Kidderminster carpet-maker Victoria struck a confident note yesterday after reporting a 71 per cent profit setback for the year to early April, mostly due to the Axminster weaving operation and the cost of closing it in March after 50 years.
Without Axminster's losses of £1.84 million, including nearly £1 million of closure costs, Victoria's continuing activities would have made £3.07 million, down from £4.19 million the year before.
The Axminster closure involved 66 redundancies, 20 fewer than first expected, costing about £200,000 less than the original estimate.
Victoria, which pays no interim dividend, is holding its pay-out for the year at 11.5p, absorbing all the year's taxed earnings, but 2.7 times covered by the earnings of the continuing activities.
"The fact that we are maintaining the dividend is a statement of the underlying confidence the board has going forward," said Alan Bullock, chief executive.
"We are not sitting back accepting lower turnover and profits."
Mr Bullock accepts that the market for carpets will remain difficult, possibly well into next year.
But he is speeding up the launch of new products, including ten new designs in the first half of the 2005/06 year.
He hopes to benefit, too, from the absence of competitors who have gone out of business - removing perhaps ten per cent of the UK's carpet-making capacity. Last year their surplus stock depressed an already weak market.
The dividend, coupled with Mr Bullock's confidence, lifted the shares to 230p, although they later settled back to 2221/2p, 5p higher on the day and yielding 5.2 per cent.
The tufted carpet operation, where Victoria has invested in new equipment, is much less labour intensive than Axminster, so less exposed to imports from Turkey, Poland, China, Egypt and other low-cost countries.
"The labour element is comparatively small, as little as ten per cent, compared with
50 per cent for woven Axminster," Mr Bullock said
Victoria is now one of the few remaining makers of Wilton carpets, which he sees as a specialist market where it can hold its own.
In Australia, the market for carpets became highly competitive and the economy turned quiet and brought in low-cost imports.
Navan Carpets in Ireland, bought for £1.5 million two years ago, made money coping with a depressed market for residential carpets, but not "the levels we aspire to" Mr Bullock added.