Randy Baron's "Spicy" Victoria PLC Pitch

You're about to listen to yet another value podcast with close meet Andrew Walker. Look, it would mean a lot if you could rate subscribe view and based the rate subscription review on this episode because it's a really fun one with my friend Randy Barron. This is his fourth time on. It has been way too long since it's come on and he has, as I said at the start, a spicy one for you. It is a small UK company very levered. So nothing to invest in. You know, obviously, I just had small UK very levered that carries extra risk. So, you know, all the disclaimers at the end of the episode. But we have a really fun discussion about a lot of different things, a lot of different angles here, a lot of different ways they can pull. And you know, he's one of the people's most popular guests in the past for a good reason. It's a really fun interview. So we're going to get there in a second, but first a word from our sponsors. Today's podcast is sponsored by Fiscal.ai. 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Anyway, use my link, Fiscal.ai/yav. That's Fiscal.ai/yav for two weeks free plus 15% off any of their paid plans. That's Fiscal.ai/yav. All right, hello and welcome to another value podcast. I'm your host, Andrew Walker with me today. I'm so excited to have on for the first time in way way too long. My friend, Randy Barron, Randy, how's it going? It's good, Andrew. Always a pleasure to be with you. I think this is my fourth appearance. I'm working for the jacket. I'm coming for number two. We were just talking about one stock that might put you over the finish line for the year. I'm so excited to have you back on. It's been so great. We just haven't connected in too long, but it's been great just catching up 10 minutes before this. Before we get started, quick disclaimer, mind a room, nothing on this podcast is investing device, always true, today we're going overseas and we're going to a, as one of my friends said, we're not as perfect for this, a spicy spicy one because it's got a lot of leverage. So people should remember leverage overseas extra risk factors, nothing's investing advice to your own risk. Randy, the stock we're reconnecting on is Victoria PLC and I guess I'll just start and turn it over to you. What is Victoria PLC and why are they so interesting? Well, I like the fact that you use the word spicy because this is a UK security and UK cuisine not necessarily known for it in general, so I like that. But before we get into a deep dive on what Victoria is and why I think its equity is poised to materially re-rate in 2026, let me take a step back and talk about the why because we're recording this at the turn of the year and I've been spending a lot of time in the new year thinking about the concept of imperfection, right? So the world is not perfect, UNI's parents, not perfect, UNI's stock figures, you know, imperfect. Victoria is an example of an imperfect company in what has long been an imperfect equity market, the UK, burdened with an imperfect capital structure, right? But in imperfection lies opportunity. And so what is Victoria? Victoria is a 130 year old purveyor manufacturer or distributor of flooring. They make carpets, they make underlay, which are like the pads that go under carpet, they make tile, LVT, luxury vinyl tiles, these are tiles that look like wood grain or look like ceramics. They have a ceramics business, they have an astroturf business, they have bamboo flooring. So all sorts of flooring and while it's UK based, they are global in terms of their distribution. They distribute to the US, they don't manufacture the US, but they distribute there. They manufacture and distribute in the UK and Europe. They have a geographically, actually, their most profitable business is in Australia, but that's geographically non-contiguous. And I think we need to lead with this. They also have a lot of warts, a lot of a lot of things that have made the equity price essentially decline by 95 percent will be the last or the last three years. So that's a very high level view of what Victoria is and we can get into all those warts, I'm sure. No, that's great, look, you said, and I'll just reiterate, this was, if we were recording this podcast three years ago and it was interesting prepping for it, how many, you know, when the stock price was literally 20 times higher, how many big names were pitching this as roll-up, great business, you know, we're already at the bottom of the cycle is turning up already, all this sort of stuff. And the market gap was a billion plus and today, you know, the stock's down 95 percent everything. So I think that's a great place to start. Actually, let's start there, you know, again, if we were recording this three or four years ago, we would have said, Hey, we've got all these great compounders in here with us. The cycle is going to turn this is a great roll-up story and the stock's down 95 percent. What's gone wrong over the past three to four years that have kind of led to this stress investment? Let's start with why the market gap was where it was because I think that's important and then we'll come through this stress. So this is a company of 1890, 1895 gets founded 1963 listed in London. Okay. So this is a long standing company. It gets down listed in 2013 to what's called the Aim AIM market, the alternative investment market in the UK. We can get into all the nuances of that. But the current chairman, guy named Jeff Wilden, came in around 2013 and he's a roll-up guy. This is a guy who in his career has done at least three very successful roll-ups, but two were in the packing or no, the big one was in the packing space and the other two were in flea logistics, like vehicle logistics spaces. But the concept of buying businesses and rolling them up. So since he came in in 2013, 22 acquisitions, okay, like totally rolling up an industry. And this matters because the UK, which we'll get into, so conservative that ideally they would want one-times lever. So I don't know how you can have a roll-up if there's a ceiling on what a culture will allow, but revenue grew every year both organically and through acquisitions from 2013 to 2023. And really interestingly, at the end of the COVID cycle, this was a second derivative COVID play. Meaning you and I are sitting there at home and we're looking around our house or our office or wherever we're at and saying, boy, my floors need some work. Or your puppy pees on a carpet or your wife says, hey, you know, we just got this. Whatever it is, flooring tends to have a seven to ten-year cycle of replacement just because they get beat up, think about carpet against it gets beaten down. And so what should be generally speaking, a GDP-grower volume should grow to 3% a year. In COVID, you pulled forward a ton of demand. So yeah. Well, did you grow? That's the spike to that market cap you're talking about. And just to frame it for your audience, we're talking a stock price, roughly 12 or 13 pounds at the time. Today we're talking 40 pence. Yep. We're talking about 7.95% retransment. Since then, since that COVID acceleration of demand, you know, interest rates started to go up. The consumer gets a little more cautious. Maybe you put off a flooring replacement, played people like lows and home people worked through their inventory. So they're not ordering as much to distribute. And so you then have 23, 24, 25 instead of 3%, you know, ish Kager. You've got 14% decline in revenue. You've got 9%. This year, we're on pace for, and by the way, fiscal year end March 31st, which I hate it. I hate it. I hate it. I was at such a level. I can't even tell you like even to think what is the fiscal year we're in. And so anyway, we are in fiscal 26, but my goodness, it's a pain anyway. We're on pace for like a 7% and volume and revenue are pretty aligned decline. And then simultaneous to that, you know, so you've got that macro backdrop, simultaneous to that, you had a capital structure that was done to fuel these roll ups and coke industries at private company in the U.S. become the big lender and lend several different times at preferred, which we'll get into to roll up the flooring industry. Coke has a flooring division in the U.S. as well. And, you know, acquisition slowdown, that's not going to happen because the macro is what it is. And then simultaneously, and this is where the British press, when they smell blood in the water, I think it was calendar 23, Grant Thornton, which had been their auditor going back to the 2015, bring on a new auditor. And he smells blood in the water and finds a one of their subsidiary company called Hanover. And I should frame by like Victoria in total about 1.2 billion pounds in revenue, so about a billion and a half U.S. dollars. You're talking at that time, around 190 million pounds of EBITDA, okay? They find in their audit that they can't find an invoice for one of the orders. So in other words, no cash median. This is not like a qualified opinion. There's no cash missing. It's in the till it's in about, but they can't find an invoice over 150,000 pounds. So again, 150,000 pounds over 1.2 billion and they flagged the audit. And that in the British press becomes a huge opportunity. The British press a little more salacious than ours in the U.S. And I don't know if that's true anymore, but I'd like to speak generally. And finally, you pay food also spicy. More spicy than it used to be. You know, if we talk about generalities, but the point being the orders who pause on that one year later come back in and say not only clean opinion for 24, but also they went back and re-audited to it totally clean, no issues, but by then the damage is done, right? And then simultaneously you've got this debt cliff that was coming due in 2026 and there and begins the pressure. And also one other thing we'll get into all these things in detail. The Coke preferred is I'm sure there's a more technical term for this, but it's a spiral. It's an uncolored preferred, meaning straight equity. And as the equity price fell from 10 to 8 to 6 to 5 to 50 pence, you know, the denominator, the amount of shares that's going to convert into, you know, there's 114 million shares in this company today. If you were to convert or redeem that Coke preferred today, that would be roughly 870 million shares. Yeah. A death spiral. It doesn't matter until the share price gets really hit. And then all of a sudden, you know, they're taking literally every share. All right. That's a great overview. Let me hop into a few things. I guess the first thing I want to happen in the US market listeners may or may not be familiar, but the US market is for flooring is dominated by two firms. There's Mohawk and there's Shaw and Berkshire halfway owns Shaw. And I think the two of them have more than 50% of the market. It's roughly split between the two of them, right? Internationally, it is just so fragmented. And the thesis behind the Victoria rollup was, hey, let's go roll this industry up and we'll make it look like US. I mean, we can talk about the puts and takes the roll up, but why was the UK market so fragmented? And it doesn't seem like this roll up has been that successful, ignoring macro. Like, I just don't think it's done as well. What are the barriers that make, you know, as I'm just thinking about it, why is that market so much different than the US market where it's kind of consolidated to do awfully? I mean, you could, well, first off, you could make a joke about, you know, English homes being a lot colder than the US. Like that's where my head went initially for the comedy perspective. But, you know, there's something fundamental about the US liking big box, right? Like I do think there's a correlation for housing between like why is Lowe's and Home Depot so successful, right? And Victoria, by the way, distributes to these players. There were more mom and pops. I think there's also more history. You know, like I mentioned to Victoria started in the 1890s as a carpet company along the way, some of the businesses they divested was like a would spit a wool spinning business, right? This was a terrible business, you know, kind of making it. These are the things that get outsourced to, you know, other countries. And this is what the US apparel industry has gone through in a material way. There's Berkshire Hathaway again, right? You just talk to styles apparel, yeah. Well, yeah. And then we, yeah, we want a company Unify, which is doing the same thing in North Carolina. And like they have to go to South America and they go to Asia and there's reasons for that. I, I think fundamentally the UK is a smaller market in total than the US. And therefore, mom and pops, there's less opportunity for scale, right? So like the three main publicly listed companies for flooring in the UK. And I, I don't even like phrasing it that way because again, Victoria is more global than just the K, but there's headlum, which is H A D. There's likewise L.I.K. and there's Victoria VCP. And what's been fascinating, at least in the UK, is those three players have seen similar pressures, right? Likewise is doing a little better on revenue, but also they've never made any money for their, for their investors, headlum, which is not the purpose of this podcast, but is in distress. There's some theory that they're going to go bankrupt this year. I have no opinion on that. They did hire a restructuring firm, Alvarez, and Marcia Alvarez, Marshall. Yeah. Like that. Again, I'm not saying that, but they, they did a couple of restatements of their expectation. This is again, headlum, we're talking about they did a couple of restatements this year. They fired their CEO. They put in the chairman who's not really an operator. And like what was 600 million in revenue is now on pace, certainly to be below 500 million, but maybe even less than that. So like, the question is for headlum, can they cut costs enough, because you've got fixed leases. You've got things that are really tough to do. If revenue is going down, the only way you get the profitability is you've got cost more. And that looks really difficult at this stage. What I would say about that market is headlum was the price competitor, right? Victoria's always been a premium. The appeal of Victoria has been, if you're a small shop like on a main street or high street in the UK, you get treated as a commercial entity, meaning even though you're small, 85% of the UK is next day delivery from Victoria. I'm the small mom and pop. I call up. I get treated. I get my palette, whatever it is I need for flooring. The customer's happy. It's, it's service. And so for that service premium, Victoria was the premium, meaning maybe 10% price premiere. So as headlum stops gouging on pricing, relatively speaking, you know, as the pricing goes to be more rational, it's probably a good net move for Victoria. And I certainly wouldn't be surprised if Victoria starts taking some business from headlum and distress. Well, so I mean, I think the headlum thing, it's interesting, right? Like you've got this industry rollout probably hasn't worked out well, but it's not just the UK. It's the US too. You know, I was reading Victoria's call and they said, look, we think the foreign markets down 20 to 25% kind of below trend right now. US residential, it's the exact same thing, right? Across the board, you're seeing the COVID hangover, whether it's flooring, bedding, whatever you're talking about. So that makes sense. And then they might have a little bit of added up, hey, headlum has been aggressive on pricing. If they go bake, BK, they file, they kind of take the monkey off their back, maybe you get more rational prices. So you've got those two. But I guess I want to ask you, this is a company as we noted. Some of the bonds, the 2028s, I think, are trading at 20% apart. We just, I use the term death spiral for the preferred that I think can convert next year. How much should we be thinking about this as a business story, a fundamental story versus how much should we be calling up the stress that lawyers and thinking about, hey, we need the cycle to turn right now or else we need to start thinking about how we're going to knife people and negotiating with the, the co-family and how much like, you know, if they convert and they get 95% of the equity or 99% of the equity. And then the cycle turns, well, that's great. But as equity holders ourselves, we're not really getting any upside anymore. So how much do you need to, like, kind of that distract desk hat versus the business hat? So it's funny when I was preparing for this and thinking about how I wanted to talk about because I know how you're going to get deep on stuff. In my brain, this was not like when you and I talk about data centers, which are core to my heart and 60% EBITDA margins, and I love them as a business. I don't have an opinion on flooring as a business, right? It's a 10 to 15% EBITDA margin business steady state grower over time that comes back. I view Victoria as an idiosyncratic one-off special situation. I like the fact that it's a roll up and I disagree with some of you said, impassing, which is it's unsuccessful, successful in the stock price, right? But it also affords them a lot of opportunity to divest of things. I think it would be worth going through all the different debt instruments and kind of for your audience explaining, but like some of the stuff they bought, like artificial grass, private equity wants and would pay 18 to 10 times for Australia geographically, non-contiguous. I wouldn't be surprised if we saw sale of that at some point, just a little bit away from the UK. Right? But before we even get into what the positives are and why I think this is poised to materially re-rate, let's just take a snapshot of that balance sheet that you mentioned because it isn't distress and just frame it for your audience. So if I look at enterprise value, there's 114 million shares, you know, 40 pens roughly is where it's at while we're recording today. So your market cap is, you know, somewhere around 15 million. All of this is in GDP just to keep it coherent. On the debt side, you have three main pieces of debt. You have a super senior credit facility that was just issued in 2025. That's due in 2030. You have a 2029, no, this is the big one that replaced two notes, which I'm going to come back to in a second. That's 530 million drawn on that today. That's the one that's trading at 80 cents, 80% apart. Then you have these 2028 notes. So that's the nearest maturity is 2028, which is 145 million pounds drawn on that trading at one point in the fourth quarter, 12% apart. But I think the market market for the people that own it was roughly 17% or 18% apart. We'll call it 20% apart at year end. And then you've got some other, you know, minor things. But in total, you're talking about 900 million pounds of debt, face value. If I market to market, again, two of those significantly distressed, you're at 680 million marked to market. On top of that, I have the toxic convert from co-equity development, which is 300, just under 350 million. That's a pick instrument. So just keep to crewing why that matters. And this is what's really stressed, the stock price is in November of this year, 2026, is when it is first putable to the company. And when they put it, again, they can convert into just the stock. And it's just, hey, it's an equity, it's an equity instrument. And we should probably, at some point, talk about the difference between IFRS and GAP, because, you know, you and I came up in GAP, and I get it a lot more IFRS, I have a lot of issues with, but one of which is, one of which is like leases have to get treated as debt, even though it's an operating lease, and something you can get out of. But two, you know, they have to treat that, it's really a debt instrument, even though it is straight equity, it is straight equity. And like we said before, 800 and something million shares that would go, well, let's take with the prep. Actually, before we say the prep, it is funny, as it was researching this, we've mentioned Berkshire two times already, and I'm just going to make it, you know, follow the rule of three and make it a third. You know, this investment does remind me of a lot of the, like, the famous Todd Westchler investments in kind of 2000 that got his career started where, you know, you've got this highly levered player, there's firm asset value there. If it works, the stock is a multi-multi-backer. Now, the heavy quote he invested on is on IF, because I also know ones that have been, if it works, and it goes the other way, but I think it's just because as you said, like, they do have, they've been selling real estate, they've got a little bit more real estate they can sell. They can sell the Australia reparations, they can sell this one. And they've got, like, I do think the kind of critical thing is they've got to make you know, remember with the press, but on the debt side, if that's on 2028, so they've got a little bit of breeding room there, but let's talk about the press again. I think because they're deathspire press, you're in a situation where you need either the stock to go a lot higher or I don't think you can go higher so you negotiate the press. So like, well, how do you think the press kind of play out? Because I think that is the critical swing here. Okay. So just to be totally candid. And again, we've put as many disclaimers as we can. This is like levered stub in the UK, like, all these things, it can go a lot of different directions. But I think the preferred securities don't get addressed until the 2028 notes do. So for my brain, the sequence of events would be resolve the 2028, it's got the nearest maturity in terms of like proper, secure debt. And then the perhaps which seem at least from the outside to be aligned with Victoria's management. And I'll get into what I mean by that. So the history of the preferred is that in some time, the COVID era 2020, Coke comes to Victoria. It's not clear on that origin story. I'm not sure if it's they were trying to buy Victoria the chairman, by the way of this company owns 20% of it. So like we talk about eat your own cooking. Like this is a guy who paid himself for the longest time, 60, 65,000 a year, GBP. And all of his, you know, net worth would going up or down with the stock price. So this guy on paper lost 250,000 million pounds. I mean, it's real, it's real numbers because there's other times when you talk about companies and like the CFO doesn't own any sales, the CEO, and it's really frustrating. And you want me to hop up on my soapbox and talk about directors and CEOs and see if that's not right. I'm always ready to touch on soapbox. So Coke shows up in whatever mechanism. But again, like you said, it's a big space, but small space, you know, the players and Coke starts supporting and writing checks for Victoria to do this role. And they didn't do once. They did twice or three times. And as they got a board seat and saw the way that these guys are operating, they said, we want to be a ball. So they kept writing bigger checks. Ironically, at that time, again, 2020, the coupon was going down as they kept writing it, right? And so in that era, that's when these two initial pieces of debt were originally a 2026 note, which has been resolved last year and at 2028 note, the one we're talking about trading at 20% a part, that that's all like the backstop that goes into it. So what happens over time? Coke keeps the board seat and gets really involved in operations. And today, and they talked about this publicly and their calls, their Victoria is benefiting despite 100 plus years of history from best practices from Coke industries worldwide. Now what's really interesting to me is if you say to yourself, would Coke take this company over, right? And I think we should get into that for a second. One thing that's important to stress is that if people don't on this podcast don't know the history of the Coke family, they are traditionally in the pre 2020, 2016 era, a super supporter of conservative political actors in the US. And not surprising from that train of thought. The thing that's been in the last couple of years and no one really picked up on is that Coke has exited, or at least Coke actually development, Katie has exited its UK and European operations. So they're London office to focus on the US and US operations. So when bankers conceptually met them in London before now, they're flying to Wichita to meet with them. Okay. So I would argue there's a fundamental canary in the coal mine that these guys are less interested in owning UK or European operations than US. Just I don't think that's a bold statement. Simultaneously, I'm going to take a tangent here to just talk about the difference between the UK and US on an important thing, which is disclosures. So I think your listeners will understand, generally speaking, the UK investor and the UK investor base is more conservative than the US base. And so it won't surprise your listeners to realize the threshold at which they have disclosures are different. So in the US, for example, when we cross 5%, you follow a 13 D or 13 G, if you're going to go past your active and, you know, this is all reported, the threshold in the UK is 3%. Right. So when you look at the register, you know, there's even a podcast of yours, philosophy capital shows up on there and, you know, some known players is the point. The interesting thing for this company today is Coke owns the preferred and it also owns some of the equity and owns roughly 10% of the equity. If any company or any player crosses 30% in a UK security, there is, and I'm laughing as to white men talking on a podcast, there used to be something called the whitewash rule. It's now called rule 9 of the takeover panel, but basically it means that unless the company whitewash is you or creates a circular 11 annual meeting to allow it, you have to make a takeover for the entire company. It's not uncommon in all of your, I believe Sweden has this law, I think there's, it is not uncommon in European. But I say that because in the US, like we know like short form mergers at 91% like the thresholds are totally different. And so like that's 30% and that's why it's a 29.9 is going to be important for the story because you don't want to cross 30 and why not? In this instance, you could say on paper, okay, Coke can take all the equity and they're going to have by the way, once you cross 90%, which is what that 950 million odd on plus 114 would end up being, you have not only is it a change of control mandatory, which means that the bonds are callable at par, but the way the indentures read is there's a 10% premium. So then you say to yourself, all right, so you're going to be spending extra $300 million or something that I can give you 20% of the company and equity or 19 point, whatever to get under 29.9. And if we are right in this scenario, you're going to get upside that will more than make up that difference. And so I think the Coke, the elite, again, this is me speculating the way I see the Coke playing out is there will be some resolution before November of this year because they don't want to let it come to that point. And I think Coke has been generally supportive at least when you kind of hear what Victoria, which is bias has been saying, which they'll have some other debt instrument, some equity dilution. And you know, in so doing, take out what is perceived under IFRS that to the tune of 50 or 100 million pounds just on that alone. So just to clear, so again, if this is UK law, you go over 30%, you have to make an offer. And if I remember the offer has to be at like the highest of the, the share, the highest price you paid, like there, there, it's very favorable to minority shareholders. And what you're saying is they are not going to want to go over 30% and so in November when this comes, you think there's a negotiator probably involved in the 20, 28 notes, these Coke preferred and the company, you think there's a negotiation that gets resolved favorably to equity in some way, shape or form. And you know, I don't think it's crazy to say, Hey, with notes shared in 20% preferred that I just said that spiral, that is a huge overhang of the company. If that happens, you know, the stock can kind of just on the extended optionality of liquidity alone goes, goes screaming higher. Yeah. And I might, yes, to all of that, except I think anything resolved here is favorable to equity. So I want you to say it's like fable equity. I mean, any resolution, because this is an overhang for supplier, for distributor, for investors. Like this clearly is something that's pressuring them. But I think, again, I want to reiterate, I just feel that when people look at this, because this is a company that screens terribly to our opening comments about imperfection. This is something that screens, though, you're not going to dig into it. And so people don't realize the corollary that if Coke were to take it over, they have hundreds of millions of payments to the bond holders that they otherwise would not have to make if they were saved under 30% and that's what I'm trying, that's my soapbox. Yeah. Absolutely. You know, I guess if I was, if I was, why wouldn't I not just, I mean, you don't have to put it all at once, right? And so why would it not just come to November, instantly go from, they have 10 right now, convert and also get to 29.9. And then look to sell down or if I love the cycle, like kind of hold that and ride that up. Like why would they not be a little bit more aggressive? Why would they kind of want to get it all hold on? Yeah. And listen, your crystal ball is as murky as mine, right? There's lots of iterations on how they could come out. And you're right. Maybe it's 10% of it gets resolved, 20% whatever the point is. My point is you have 114 million shares for every 100 million of that you take out. You're adding, you know, rough number 90 cents, 90 pounds of equity to something that's trading at 40 and I think, I think your point, if I'm just like over, my word was death spiral, right? This comes to November. The stock prices are not, they can burn it all and all of a sudden co-cones 90%. I think the nice thing here is you just listen, you literally got four ways in reasons why they can't death spiral, right? They're packed at it. So that just means, even if we don't get 20, 28 bond bond resolution, even if we don't get full resolution, the first, it just means, hey, we've got, you know, probably another 18 months to try to get the cycle to turn. And it's the cycle turns, you know, as I mentioned, you go from 20, 25% below demand to at demand or cycles longer than a press, they tend to turn really violently. You go above demand, like all of a sudden, this thing could be looking a hell of a lot different. I'm going to say, and there's got two things on that one. This company has said for every, I think it's 5% volume recovery. And again, we said the outset. So if you compare 2019, so pre-COVID spike levels, we are 20 to 25% below on volume for every 5% increment. It's 25 million pounds that flow through the net income, which is 190 million of EBITDA. So today we're at 115 or even 135, if you conclude that the synergies that they say that captured, you're going to add 100 million to that. I mean, that these are big enough, because again, you can't control the macro. You can control your costs, right? And the more you can take out, they're taking out 80 million of cumulative costs on a company that at Troth EBITDA was 115 million, I mean, that's remarkable. The other thing you mentioned in passing with the 20, 28 notes, and I think it's important for your audience to know that they're not sitting idly by watching the clock and waiting for it to get to next year. So in the fourth, third or fourth quarter of 2025, they made an exchange offer to take out those notes at 55% of par. They then pulled the exchange offer. And of course, with this kind of company under distress, people assume the worst. What your audience may not realize is we look at a 13F holding, we can see who the equity holders are. As I mentioned, you can look at the top 10 holders of Victoria. You can see philosophy, capital, et cetera, and spruce and all of them. On the bond side, it doesn't work that way. So I am of the opinion, again, this is my speculation, that they use that exchange offer to flush out the dentist in Germany who's got it in his drawer. You know, you know who maybe the big holders are, but you don't know the tail. And so I'm of the opinion that while the exchange offer at 55% of par was pulled, that is going to be resolved this year. Something else that also happened, and this is just one step back for history. This company had, past tense had 500 million of, now we're in Euro, of Euro debt that was due in 26 and 250 million that was due in 20, but that 28 notes still exists. When they, you could, the indentures were so broad, you could drive a truck through them. So when they were resolved and those 26s were resolved last year with the new note, that's the 29 note now, you could drive a truck through it. And what they did was basically treat that as one class, meaning the 250 notes became subordinated. And so that's why I said they issued this new super senior note. These guys, that's why it's the thing of trading at 20% of par. Interestingly, you could make an argument that you could just buy that debt and 5x by 2028. That would be a prudent investment. It's really hard to buy. I've tried that. You know what I hear? I'm going to come back to that in a second, but let me ask another question, just on the cycle, right? So I think my questions or my framing has been a lot on trough on trough, right? You've got this low multiple and you're just hoping to kind of stay alive, stay breathing until the second term. And then if it turns and you get back to trend and it's plus 20% on volume, as you said, you're basically adding the whole market cap and that income or more than the whole market cup. If it goes even higher, I mean, you know, when these cycles go look at coal in 2022, right? When you've got something that's been under invested in it in 10 years and it gets hot, it gets really hot. They did have a question on their most recent earnings call and somebody said, Hey, you guys keep saying we're 20% below demand line. It's been three years of this. Why do we, why should we believe that this isn't a structural, not cyclical change where this is just the new demand line? And to me, that is, it all, it gets asked at the bottom of every market, right? People say, Hey, it's a structural drawdown. We're never going back, but it's a question worth pondry because there have been sometimes that's happened. So why should we believe this is not structural? Why should we believe like this drawdown is cyclical and we're just kind of waiting on the term? Well, I don't think it's new news to anyone that's listening that the housing market has been in distress, right? I, I, if we all know interest rates have gone up, the consumer field stretch, et cetera. 90% of Victoria's business is, I was going to say the word replacement, but basically buying a home, like a used home, like you have a new construction and the vast majority of us have homes that were owned by other people before us and we, you know, life cycle in and out, most people when they come in and out of a house in the first two years, as when they spend the bulk of their money on upgrading the house, whether that's the paint or the floors, whatever it is. In this case, because housing is so below trend, both the new housing starts, but also just in the general velocity of housing turnover, I, and again, it's my opinion. You may be right. Maybe this is dire straits and people are living their parents' basements forever and we're never going to have a, that that's totally to quote something else that United talked about before recording a totally malthusian, you know, to life. I'm just of the opinion that, you know, you're going to get to some normalized housing, and especially we're going into a cycle where interest rates are coming down. But that having been said, let's say this is worst case scenario, right? For now, at this, this is the new trend 2019 minus 20 or 25%, they have taken out, or by the end of 27, fiscal 27, which is March of 27, they will have taken out 80 million and cumulative savings. So while I have trothy, but thought 115 million on that same call you just referenced, they talked about how they have now realized 20 million that by, you know, the end of this fiscal year and two months is fully there. Next year, there's another 20 coming on top of that. So I'm at 115 plus 20, right? So I'm at 135 plus another 20 is 155 and by the way, where is consensus for 27? So 160, I don't view it as a stretch and I don't think, you know, the only thing they can control their costs, they can't control the customer going back to. And again, I'm also not saying we've got a COVID cycle coming, thank goodness, where everyone's going to be trapped and everyone's going to do this whole cycle. I think we should go back to normal. We go back to growing 2 to 3% a year. If we have that, that's whatever is not even grand, it's like beyond, it would make owning the equity much more attractive than owning the 2028 debt, which has a 5x return by 2028. Well, let me ask the 2020 stuff. So I can understand why the equity is trading down here, right? And you've got it's 8x lover. You've got the death spiral prefers as we've, as we've mentioned a few time in that death spiral is my words, not yours, not an official term or anything, that's just my words. You've got all these issues in front of the equity. For the death, the 2028 bonds, which as you said are very liquid, but still they're trading down to about 20% of face, right? And when I look at this and I say, hey, a company that's trading at kind of 8x, trow, EBITDA with assets to sell as we've talked about, the real estate assets, the cost cuts they've done, the maybe non-core businesses, like 20% of face, no, it's only 120, there's a super senior risk here. But it doesn't imply you're creating the business for much. So I just went as like, what are the bonds to worry about? Because if you told me distressed, trowel, I'd say 60%, 70%, 20% is like hard, core distressed. So what are the bonds to worry about that they're trading so low? Well, again, these are subordinated, right? Like as the dominoes fell, the 2028 were the ones left out in the cold, right? And so part of the reason, and again, this is my thinking for like economic rational actors is you have a bunch of, okay, so this note conceptually is held by some institutions and some individuals, like I mentioned anecdotally, the doctor in Germany. The institutions just marked their year end 2025 note at 20% apart, right? If conceptually Victoria can come in and offer 35, 30, whatever the number is, 32% apart in the first half of this year to then set up the next resolution, conceptual, the coax, that's really interesting. Like if I'm a PM sitting with a book that I can say, you know, I'm just doing it here in the calculator, you know, a 60% to 70% no, I don't disagree with any of that, but we'd start wondering, but the PMs can do that math too, right? And the math would work the same if I said, hey, the bonds, like we could go buy the bonds and we could keep trading them up to 40 and then we'd say, hey, they'd come and offer us 50, but like you're trading at 20 because people are worried that you're going to file and like you might not get a lot of recovery and also we're just that also mean that you're more willing to take a cash buy out them, like the thing that changed when they made the offer last fall for 55% apart with a new note, which would have been a 12% coupon, is they, and we should come to what I think the positives are, is they have realized they have real sources of cash that for a host of reasons, the market is not realizing. I think they can pay out these 20, 28 notes instead of issuing a new note with some function of cash. Maybe there's some note involved in it, but the point is, you know, this is a company with 86 million cash on the balance sheet today and one of the buckets, you know, and I don't know, we can get into the ethics of, of it's appropriate or not, but like when I spoke to the real turn bell, Jim, you know, saying, hey, what's for sale, like not talking about as a Victoria owner, but just curiosity, you know, I think they have, they had bought a business called balta in Belgium, and they've been selling. They sold one of their properties there last year, early in 25, and the losses from balta, the legacy loss, so they were able to keep through the subsidiary, they did a 20 million hour gain on the real estate, but they only paid one million tax. So the tax leakage is really, really diminished here, which is fascinating. But anyway, there's three pieces of property that are for sale, and then the CFO talked about this in the recent call, not the numbers. I think those three in total are worth somewhere between 80 and 100 million in a realize value market. And the first one, I'm of the opinion only because when you speak to the realtor there, he's, they're saying you're not taking bids. I think the first one's already sold. I think it's somewhere in the 45, 45 to 50 million euro range. You got another one that's going to come to the market in January, February of this year, and then the third one. So you took 100 million of asset value there. That is in the process, they've said in the process of being realized, you've got another call 10 million of properties being sold in the UK, another 40 to 50 in Italy. They own some stuff in Spain, they're not going to probably sell because that'd be a whole sale lease back thing for them. But the point is I can get conceptually my brain to 125 to 150 million of realized value. In Belgium, you do have to pay because they have 5,300 employees total, but they are to pay severance. Belgium is a super pro labor state. So you've got, you've got, you know, I think they've said 30 million or 40 million, whatever the number is, it comes out of that. But the point is you take 86 million of cash on the balance sheet today. Obviously, there's baskets and restrictions and whatnot yet, add some cash. I then go to the 28 notes. I say, hey guys, you know, you think we're not going to exist to your point, right? You think we're under so do you want to take 35% a par and be done with it? And that's a win all around. So for me, I view that as I'm not as concerned about why the company is perceived by those 28 note holders, other than I know that they're junior in the stack, but I can see as a rational actor that like if you get that offer, at least you have a conversation. I'm not saying you take it, but I imagine you have a conversation. Let me, let me, let me hard pivot to the CEO, right? And I mentioned this because you gave some of his background, right? It takes over in 2012 or 2013. I mean, this is a screaming home run, but I remember correctly the stocks two at a time. He says, hey, if I can pay you $2 for sharing dividends over the next two years, then I want an option to buy 50% of the company and I think shareholders sign up for that. And he does it. So, you know, that's crazy. That's where all of his ownership comes. When I go to the IR website, just, I think this is interesting. The IR website, when you look at it, the front page is his photo. And then on the right, it says, if you had invested $1 into the company, or I guess pound into the company, when he took over, you'd have $2.50 per shareish. And now I'm sure they did that, you know, four years ago when the answer was a lot higher than 250. But I think that's interesting for one reason. I think you put that there when you're proud of your returns and when the only thing you're thinking about is creating yourholder value. Now on the other end, as you said, he used to take like 60,000 pounds in salary. Now he's taking 1.2 million. So, I guess my question is like, how do you think about the chairman? He's the same guy who created this great empire and then kind of ran it into the ground. Yeah. It isn't there yet, but, you know, all the trouble's kind of the buck stops here. How do you think about him? Now he's taking a salary. How do you think about his end game? How do you think about all of that? So I like that you just said that Truman line about the buck stops here because I looked at the same site you did, which is why I chuckled because I'm sure at some point when it was a 12 pound stock that, that to like I remember was like a lot more compelling. I was thinking he did that. He was like, it's the proudest moment I live 10 acts of knowledge that I would say. I would also say to you, um, and just to just to all of the math real fast, just to give your listener some perspective, he owned about 23 million shares. So when that was 12 pounds, that was, you know, almost 300 million pounds. Okay. Um, I, I can look at his two ways and I know, I know the latter from personal experience, which is it's either they got really lazy in their IR site, which I think it's a decent, like I think their slides look decent. I think it's nice. I think they're pretty good. Yeah. Yeah. So I think that means that they're not being inattentive to the investor relations approach. So I think it's the latter, which is, you said he's proud of it when it goes up. And while you're not proud of being the steward of that going down, he also hasn't hid, right? And he has stood up and taken his lumps. And this guy, you know, it's funny. We talk a lot about flooring and about, you know, kind of that overview. I'm invested in this company because I'm of the opinion that Jeff Wilding is an excellent allocator of capital, like full stop. And it just happens to be that this roll up is in flooring and just happens to be, that's what the opportunity was in. But he's someone that when you speak with him, and you've mentioned Buffett three times, so let me make it a forward. He totally speaks in the paradigm of value creation in a real way. Like I love the fact that he's taken pain alongside with any of us that may have owned, you know, in that time. And I love the fact that he thinks about, you know, would he talks about things like share buybacks? I mean, you go back to that 2028 conversation with, you know, this thing traded 20% a par in what rational world would someone be talking about buying your stock back, right? But the point is he's saying, you know, I see a lot of levers of value here that the market's not realizing if the market's going to let me buy something on the cheap, why wouldn't I benefit all shareholders? So I, I think he's an, I think he thinks really strategically. You did say one thing you called him the CEO. He's the chairman. Right. The CEO is actually retiring in this upcoming summer. So it gave, I think he gave like a nine months runway for them to bring in people. One of the other, you know, Randy spitballing things. I wouldn't be surprised to see two CEOs named, right? Because like at the end of the day, this is soft flooring, rugs and hard flooring tile ceramic, right? Like the synergies between the two aren't the greatest. I was actually going to ask that. I'm glad you mentioned that. Different across the board ceramics have a higher depreciation cycle. So anyways, it's a little different. Like how about this is a potential end game and again, this is like three derivatives of Randy thinking like through the whole thing. You know, we have the price today. You benefit from sorts or some sort of 2028 refinance. You benefit from a potential Coke resolution, whatever form that comes. You benefit from land sales. You benefit from maybe selling, like originally I approached it thinking, okay, Australia, Geographic, it could continue as it does 14 million a year in EBITDA. When you look at the numbers, both the like the US dollar, the Aussie dollar has been really weak relative to the pound. And so it looks not great. But when you look fundamentally, it's growing every year, it's doing really well. And it doesn't make geographically, it doesn't make geographic sense. So if you sell that at 14 times on the multiples, you know, it's roughly like 789 in that range, you get a hundred million dollars of, again, realize that you like it. So I'm keep looking at the levers, but the real kind of endgame, if all these things happen. And the stock price doesn't re-rate, which is a total possibility. Then I think you put two CEOs in, you sell one of the divisions and you just take all the dead out and just say screw it. We're done. We're totally done. And by the way, when I say he's a great capital allocator, that's what he's done before. So the 2026 and 2028 notes that the 26ers just got resolved. Those were at like 3.8, 3.6% respectively. Well, initially, those were like 5% notes that as he got leveraged down, he refied. Like you see in history in this company of just financial architecture. So while we are talking about flooring as the engineering of a house, what really appeals to me about the story is the financial engineering. This is a tough one to ask, but I'll try and frame it in the right. You know, we mentioned, again, this isn't just you, people can go look at the alt-fog stack in 2021. This guy is really highly regarded, right? And I guess who just says, for somebody who's really highly regarded, we've mentioned, this will be the fifth mention of Berkshire. And nobody's saying he's Warren Buffen, but you know, things, it's actually, we've mainly mentioned on the distressed Todd Washington angle, but for someone that's highly regarded, he's going to cap a location like, how did he get over his skis like this? I'm not in his seat. So that's a huge disclaimer. But I think, you know, I think he saw the, as we said, the difference in the US and the rest of the world is there's a lot of mom and pops. And I think he's a guy who's a relationship guy who's going out and meeting the ceramics, you know, grandma in Spain that's doing this. So the reason the CEO versus chairman distinction is that if a chairman is set for strategic priorities, the chairman is also the person who's outflushing for ideas so that the CEO and CFO can execute, right? The business goes on in it, you know, the train's run on time. I think if you had said to me that flooring was going to be down 25% off peak levels, I don't know what my opinion of that would have been. I probably would have said no, that seems extreme, but maybe I should have thought I'd said it is going to be down 50%. I wasn't in the name at that time. So for me, like, this is looking at it today, like you always make a decision about the players going to put on the field today, we're talking in January, 2026 about an opportunity today. But I imagine knowing this guy that he, you know, they're, the Koch support shows, they're good operators. And so when, you know, they have this new factory V4, there's a video on their site, anyone can go look at it. It's really kind of amazing that they're going into Spain. They spent 30, I think, 31 million on this factory for, you know, basically overhauling and being more efficient, just having more throughput and more production. They do it really, really well. And then by the way, like when you're four of the Ukraine war now, like, you know, you, you Middle East, you can rush our big ceramics markets, right? They sold the division that was selling to them. But like who would have thought that, like, you know, Gaza would happen. And guess what? Look, I think there's a lot of energy that goes with these, right? And it's not like Europe's been easy on energy. So prices, I guess, you know, it's just something because I look at the UK hope, so it's dropped by like 33% from 2007 to 2008, 2009, right? So that's an extreme drop. But you know, I do think these guys in Florida and cyclicals, like, you know, there's a cycle. So it's just hard for me when I look at the sky and we've come to a great Catholic. There you get to overseas, but then on the other hand, I'm like, hey, it's not like we were ever, like talking about top of cycle numbers, it's just like really interesting too, because the middle imperfection I talked about was the UK market, right? And it's actually where I was about to go and the UK has been a pariah since Brexit, which this is the part that's jaw dropping to me is 10 years ago this year. I mean, that's crazy town. And I always used to kind of have the tongue and cheek adage that even mushrooms can grow in the dark, right? But the truth is this was a loads market. They lost their financial center, it goes to Brussels, the whole thing. And yet when you look at what happens, at least that's the perception, right? But when you look at the actual things and what happened in the UK in 2025, like meaning this is now the Canadian to coal mine, maybe things are changing, you know, the UK market footsie. We're talking about beat the S&P by five points, right? Last year, really? Yeah. So here's the numbers. This is local, local return first, and then, you know, total returns like another five points. So the S&P was up 16 and a half. We know this. Fletsy 100 is up 21 and a half on a total return basis. So that difference is five points, total return basis, eight points to Fletsy's favor. And okay. So then you say, fine, this isn't a macro cap. This is a micro cap. So don't look at it that way. So then I started saying, all right, well, because this is a value podcast, what are the PE multiples? US forward PE, 12, my four PE right now, 23 and a half, roughly, US large cap, 28, US small caps, 30, but roughly speaking 23 UK's 13. So I think the UK is the most, the, I think we mentioned it very well. I think the UK is the most interesting market in the world right now, because Japan's been cheap forever might be changing, but UK, you get active. There are roles for activists. It is allegedly a Western market, roles for activists. There's room. A lot of these companies have, a lot of these companies have assets outside of London, and you're talking about economy that's just been bombed out. I mean, it is an inefficient market to me and on your, on your podcast about the UK housing market, which I listened to, you described as a third world conceptually third world, maybe. But, you know, I would argue almost it's punitively first world, meaning, for example, and most of your audience probably won't know this. If you remember why the US revolution happened, there were standbacks put on. I read the tariff book in April, so I, I didn't know how much the standbacks had to do with it. Yeah. And do you know, do you know what you have when you buy a security in the UK? Oh, I do. A stamp. You got to pay 0.5% of your transaction volume to change. I might do, you can do the option. You can get around that if you're in people like, if you're big enough, but I mean, I think one of the things that you said, if you're a retail person, the kind of person that would look at a Victoria, like you're paying your, their friction is the point. And there was all this concern and consternation about Rachel Reeves in, in the September, November timeframe coming out the new budget. Taxes were never going to get cut, but they didn't spike in a meaningful way. And when you look at what they're trying to do, and this is the beginning, chapter one, in a whole process, they're trying to make the UK more investible. They've limited the amount of their individual savings accounts. It's kind of like our 401(k)s, where if you bite, putting a ceiling, you can get more money into the stock markets locally, they're trying to, they've done a pause on the stamp back. A, aim securities don't have a stamp, but that's a different point. You know, inflation seems to be moderating. You look at growth in the UK of the G7, it's the number two in 2025. So like, if I were to just blindfold you and say, forget biases, forget anything. You just look at something where I'm 10 points cheaper on value, I've got interest rates going my way, I can find ideas here. And by the way, the Japan distinction is really interesting because if you do international stuff, the MSCI index is a still 30% percent on the small capside, Japan, right, that's a legacy of the 80s. The UK is not, but culturally, and I've lived this experience to be able to access a Japanese company to be able to do the real work versus a UK company with the cultures and the more A's being very similar, it's a lot easier. So I feel, and again, this is a hopeful comment, but I feel the UK's moment is coming. Maybe it hasn't really come today, but it's, it's sooner than later and we're 10 years in the wilderness. So, I've got a few friends who'd be, including me, who'd be very happy as true. Let me, let me ask one last question. I've mentioned cycles and everything a lot here. You clearly are seeing a, a, a, a path for them to resolve the, it prefers in November, address the 2020, it's your scene of path. I just want to, if the cycle, forget if, if we went down another 20%, it, we'd be talking about something completely different, right? But if the cycle doesn't rebound, as we've talked about, and it could rebound four years for now, but if it doesn't rebound in the next 12 to 18 months, is there a path for them to, to do in all these kind of getting over this on their own, or do you think you need at least a little bit of moderation in the cycle for them to kind of get through all of us? Yeah, I, I, I think that's a really valid question given what they just went through, but I think realistically, if we said it's going to turn down another 20%, right? I mean, yeah, I think it's important because it means there's a nuclear event. Like there's something so, you know, external to the black swan that we're dealing with a lot of other issues than this. I think in a kind of realistic life and living, let's say there's 5% downturn, they can dig their way out of that. Like I've said, a couple times on here, 80 million of cumulative cost savings on 115 million of costs. So like, you know, I, I did this kind of just because I came from a free cash flow world, but this was fascinating to me. Like when I just, I just did it for myself. I asked them, they're like, we've never looked at this way and it's a levered stub you wouldn't. But if you kind of just do a free cash flow analysis on this, it's really fascinating. So this is on pro forma even though. So I've mentioned 115 million, they, they've realized 20 million of savings. So just make that 135, you take out your content, you know, I guess all the savings you think are dropping to reach to the bottom line. Well, that's the 20 that on that their December earnings, they said, we've realized this. It's here. So I'm going to say 135 consensus 27 expectations, 160. I'm not going to that. I'm just saying 135. Let's flow through cash tax. They've got huge NOLs in this decade. They're not paying cash tax. So cash tax is roughly two million a year, maybe three. Just which at peak in 2029 will be 74 million. The way they structured this 2029 note is that for the first 12 months, it's 1% plus 8.5% pick or 8.7% pick. So in terms of cash, we're just doing just cash, it's going to be 56 million of cash interest. So again, I'm at 135 minus two to 1/2 minus 56. Then catbacks, they, they, they used to be 60 million catbacks. Now they're 50 million. That's the new run rate. They, they've done all the bills they have to do. This is what I'm trying to telegraph. Like they're saying that publicly, we've done all the work. And then you have severance. So the severance is going to be 10 million this year, 30 million. So I'm just using 10 here, I get to a free cash flow of 16 and a half million pounds, which on a per share basis is 14 and a half pence, which is a 36% free cash flow yield. And by the way, when the competitors, you know, likewise has never made money. They pay a dividend, which is why people are attracted to them. People may not exist. So if you think Victoria could even maybe take some business from headlamps, conceptual demise, that's found money. I gave you trough. Yeah. No, the headlamp is the angle until we got in the podcast. I hadn't really thought about where, hey, it's not just you're at the bottom of the cycle. You've got a competitor and you know, sometimes this is how it works, right? You just, you hope you're, they've got the levers to pull and they've got the liquidity runway. You just kind of wait for that one competitor to die and see all their share. And you know, trucking had this and then the cycle took another turn, but you know, you kind of wait for yellow to hit the drain and then once they hit the drain, it's a free for all. I've already takes it. And you know, the whole thing resolves and everybody's just partying like it's 1999, I guess. Yeah. So again, I'm not telling your audience a certain share price. I'm not telegraphing anything. I'm just saying when I look at my universe, you know, if the downside risk is to your point 20%, let's just use that as a number. The upside potential is pretty incredible. Perfect. Well, Randy, I think we're going to have to wrap it up here unless you have any last thoughts because we've been, we talked for 10 minutes before we've been over an hour. And at some point I got to go pick up the kids from daycare, but anything else you want to hit on this? No, we're good, Andrew. Good to see you again. This is great. And you know, similar to the fast and furious for the 10th episode, I think we've already got eyes on the fifth episode. We're going to space, baby. So we're going to pull Walker forever. Looking forward to having you on and we'll chat soon. Everybody. All right. See ya. A quick disclaimer, nothing on this podcast should be considered investment advice. Guess or the hosts may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial advisor. Thanks.