Eurocell plc

good day and welcome to the eurocell four-year results all lines have been placed on mute to prevent any background noise after the speaker's remark there will be a question and answer session if you would like to ask a question during this time on the phone simply press star followed by the number one on your telephone keypad for operator assistance throughout the call please press star zero and finally i would like to advise all participants that this call is being recorded thank you I'd now like to welcome Will Truman, Chief Executive Officer, to begin the conference. Will, over to you.

Thank you. Welcome to URSL's 2025 results presentation. I'm Will Truman, Chief Executive, and I'm with Michael Scott, who you all know as the CFO. This morning we will follow a similar format to prior years, insomuch that I will give a brief overview, recognising that I was appointed as CEO in February of this year. Michael will then cover the financial review. i will pick up the strategy update focusing on our commercial initiatives and then hand back to michael who will cover esg business effectiveness and people first i will then wrap up with a summary as mentioned i was appointed after the year end but in overview 2025 can be summarized as an improved performance over the prior year principally by virtue of alunet's inclusion in the group results this shouldn't detract from the continued improvements made elsewhere but underlines the reality of the market within which Eurosol operates. Group revenues improved 13% to $404 million from $350 million in the prior year. Operating profit for the year was $24 million versus $23 million in 2024. Good financial management is evident from the strength of the balance sheet, with strong cash flows, low net debt and improving total shareholder returns. There is more to be done to improve the outcomes of the strategy, but good gains were made in 2025 with new branches opened and all branches now included in the window and door programme, together with further progress in garden rooms and digital sales. We are confident we can improve the pace and delivery against the strategy over the course of this year, mindful of course of recent events and the impact they can have on our input prices and demand. And with that, I'll hand over to Michael for the financial review.

Thanks, Will. So I'll start by going through the financial highlights on page five of the presentation. With market conditions remaining tough, organic volumes were below 2024. However, organic revenues do include further progress with our strategic initiatives and total group sales were up 13% enhanced by the acquisition of Alunet in March. Adjusted operating profit increased by 6% compared to 2024. This reflects a strong contribution from aliasing good cost control, partially offset by lower organic sales volumes and competitive pressure on selling price in the branches, plus continued labour and other overhead cost inflation. At the same time, we've also progressed further targeted investments to maintain momentum on our strategic initiatives. Adjusted profit before tax down 5% includes the increased finance costs following the acquisition, and adjusted earnings per share of 1% includes the impact of our buyback program. Cash generation remains good thanks to a continued focus on working capital. Net debt of 22 million reflects the impact of funding the Alienet acquisition to our RTS and with leverage at 0.7 times, we have good headroom on our debt facility which was refinanced in March this year and now matures in 2030. Finally on this slide, we've now announced total returns of 11.4 million for 2025 which includes total dividends for the year of 6.4% per share, up 5% on 2024, plus the 5 million buyback which commenced in March 2025 and is now complete. Turning to the full P&L on page 6, I'll come on to our sales performance and the other components of EBITDA in a moment, but first just looking below that line. Depreciation and amortization was 27.4 million, up 2 million on 2024. And with our CAPEX program, lease renewals and Alunet, we expect DNA for 2026 to be in the region of 29 million. And just to note that I've summarized all of our technical financial guidance at the end. Finance costs were 5.1 million, up 2.3 on 2024, reflecting the use of our debt facilities to fund the acquisition. And the impact of new leases on our IFRS 16 interest charge. Tax rate for 2025 was approximately 22%. Looking down at P&L, basic earnings for share were 14.6 pence of 1% on 24 and dividends of 6.4 pence are already covered. Moving to the right of the slide, non-underlying charges for the year of 6.8 million includes 4.2 million of termination costs for our systems replacement project, 1.8 million of termination costs in respect of the structuring and 0.8 million of acquisition due diligence and other costs. Later in the presentation, I'll pick up on the systems replacement project. this which improved the structure. Finally on this slide it is worth noting that excluding alginate our organic sales and gross margin percentage are both flat with 2024 with overhead costs up just 1% demonstrating resilience in the face of difficult trading conditions and ongoing cost inflation. Moving on to our sales performance on page 7 revenues were up 13% of 2025 or flat excluding alginate. Profile sales at 1% with volumes 2% lower reflects reduced RMI activity through our trade fabricators, partially offset by a small improvement in the new build housing market in the first half. Overall in the branch network, sales were down 1% with volumes 2% lower. This includes underlying RMI volumes down 6%. However, set against that, we have made further progress with our strategic initiatives up 9.4 million, including windows and doors at 12%, driving rooms at 9% and e-commerce activity up 40%. Plus sales from new branches at 3.3 million. Alionet is performing well under our ownership, with post-acquisition sales growth of 28% over the same period in 2024, driven by market share gains. And we'll cover Alionet's performance and the other strategic initiatives later in the presentation. Onto adjusted operating profit on page 8, profit of $24.1 million is an increase of 6% versus 2024. Moving left to right across the chart, the adverse volume impact of $8.6 million follows organic sales down 2%. The margin benefit of $3.8 million has several components. One, revenues include selling price increases implemented to offset overhead cost inflation. Increased competition for limited demand has put pressure on selling prices in the branch network. However, we do proactively manage our gross margin and cost base and delivered stable raw material, recycling feedstock and electricity prices last year. Strategic initiatives include new branch openings, which create a short-term profit drag but drive longer-term profit growth. Incremental operating profit of $0.8 million on the other strategic initiatives came at a good even margin of 13%. Alunet made a strong contribution with post-acquisition operating profit of $4.8 million of £1.8 million on the same period in 2024. Moving along the chart, labour inflation of £4.8 million includes the annualisation of our April 24 pay award of 4% and our 25 award of 2%, plus the increases to national insurance and the national living wage affected from April 25, which have an annualised cost of approximately £3 million. Variable labour costs were down in 2025, reflecting lower bonuses and commissions payments. the restructuring we implemented in the first half delivered savings of 3.1 million in 2025, and I'll pick up on those programs when I talk about business effectiveness later. In summary, operating profit is up due to Alunet and effective cost control, despite weaker underlying volumes and ongoing cost inflation. Moving on to CapEx on page 9, investment of 11.8 million in 2025 includes 3.7 million for the branch network, being a combination of new openings, refurbishments and relocations. with the balance primarily maintenance capex. Our guidance for 2026 is the total capex of up to 15 million. This includes 3 million for strategic initiatives, such as new branches, refurbs and relocations, and 3 million for site consolidation, which I'll come back to when I talk about business effects. There's also 3 million for facilities, welfare and safety improvements across our property estate, with the remainder largely maintenance capex. As noted earlier, implementation costs for cloud-based IT solutions are charged to the P&L rather than capitalized. Our ERP system replacement falls into this category, with $4.2 million charged to the P&L as a non-underlying item in 2025, taking the total cost incurred to date on the project to $6.4 million. We now estimate non-underlying costs for the ERP project will be approximately $13 million for the period 2024-2027, and I'll provide further detail on the project itself in a month. Coming back to CapEx, the lower chart illustrates that we have manufacturing capacity in place in head of demand, which is an important component of being well placed to deliver growth. Turning to the full cash flow on page 10, which sets out the components of an increase in net debt of $19 million in 2025 on a pre-IFRS 16 basis. This follows the acquisition of Alienet in March, which was funded from our debt facility, and the non-underlying non underlying items of 6.8 million i described earlier moving left to right across the chart cash generations continue to be good with a work with an info from working capital of 3.7 million in 2025. the cash consideration for alunet net of cash acquired is 20.6 million and capex payments of 12.5 million include the asset additions covered earlier plus a small reduction in our capital creditor after financing charges of 2.1 million share buybacks and treasury share purchase of 6.0 million and dividends of 6.2 million this results in pre-IFRS 16 net debt 22 million at the end of the year IFRS 16 adds 76 million to debt which you can see in the table is up 17 million compared to December 24 this reflects the net impact of leases acquired with Alunet branch openings and lease renewals a total of 36 million less cash payments on leases of 19 million which are accounted for chart overall this leaves us with a strong balance sheet with leverage at 0.7 times EBITDA on a pre-IFRS 16 basis and good headroom on our recently financed 75 million pound debt facility thereby providing security flexibility and options for the future turning to capital allocation on slide 11 and moving left to right across the chart Our approach to capital allocation is to prioritise organic investment in line with a strategic plan, supporting initiatives to drive profitable growth in the branch network, continuous improvement in operations, and to upgrade our IT system. On dividends, our policy recognises the importance of the ordinary dividend, which figures token dividends up 5% on 2024. The Board has also taken the decision that employee incentivisation by equity should be through shares acquired rather than issued, and our target is to hold sufficient treasury shares to satisfy employee share options expected to best over the next two years. Moving across the chart, we believe that Alionet demonstrates a disciplined approach to acquisitions with a very clear strategic fit and a compelling financial justification. Thereafter, we've been enhancing returns through share buybacks. The £5 million buyback launched in March 25 is now complete. Our intention remains to continue buybacks, assuming no prolonged impact from the Middle East conflicts and as always, subject to maintaining a strong financial position, with net debt generally not to exceed one time due to DAR, unless there's a short-term deleveraging plan in place. So to sum up on page 12, a resilient financial performance with adjusted operating profit of 6%. We continue to focus on cost reduction and cash flow management. Cash conversion remains good. We have a strong balance sheet and good headroom. The business is therefore well-placed to deliver our growth strategy with well-invested facilities and available operating capacity. We're driving shareholder returns through ordinary dividends and share buybacks, with total returns for 2025 equivalent to a yield of 8%. We're planning to deliver further progress in 2026, and whilst we're monitoring the potential impact of conflict in the Middle East, we're also convinced that the medium and longer-term prospects for our sector remain attractive. Finally, to the right of the slide, there's a summary of our technical financial guidance, which I hope is helpful. So over to Will now to update you on our strategy.

Okay, so just to recap on the strategy, which was a pathway to achieve turnover of $500 million, operating property of $50 million with a 10% margin. This was predicated on some market recovery, increasing existing shares. Clearly the last two years have not borne that assumption out, with demand remaining weak, the group is currently behind on the plan. The strategy encapsulates increasing the size of the branch network, improving the sale of windows and doors through the branches, combined with additional sales of garden rooms and a further improvement in digital sales. I will touch on each of these together with the performance of Alunet in a minute. It's fair to say that 2026 is about regaining some ground. again cognizant of recent events but the aim is to quicken the pace to that end we have realigned the sales teams operating within the branch network and the wider group with a renewed focus on improving all volume sold this is particularly important with our own manufactured goods with which increasing volumes improve the manufacturing efficiency of our factories it also leverages the largely fixed cost base we have particularly in the branch network This is in tandem with new product innovations and introductions to some specific categories to revitalise demand. The benefits of the Alunet acquisition have been felt throughout 2025, not only in the financial contribution to the group but also the wider benefits, with the potential to cross-sell across both customer sets, as well as improvements in product categories such as doors, now including garage doors and solid timber core composites. The improving financial performance across the year is a result of market share gains, particularly in Alunet Systems and Comtor, and the growth plan assumes a continuation of this together with furthering the synergistic benefits for the imparts of a wider group. Alunet Systems grew by 26% in 2025. The acquisition complements our proposition to fabricators. It provides a one-stop shop for PVC and aluminium door and window systems, As a result of this, 14 Eurocell PVC fabricators have now switched their aluminium requirements to Alunet. Commodore grew by 41% last year and has continued to acquire installers, with the new sleek skin door now representing more than 15% of its sales. We expect the business to benefit from cross-selling opportunities and supply chain synergies with Vista. To the branch network, Eurosol currently operates a 215 strong branch network and the plan remains to increase this further together with improvements made to existing sites and relocations to more favourable locations where available. Moving to slide 18, in 2025 the group opened seven new branches and relocated six. We're expecting at least five new branches in 2026 and we're also in the middle of a program to refresh branch exterior and signage for the entire network during this year we also need to build on the successful launch of the customer loyalty program power up whilst ensuring we improve on the functionality of the branch network most importantly we need to drive volumes an important part of that is the windows and doors program i set out on slide 19 during 2025 the rollout was accelerated searched by the end of the year we had all branches live and widened to include contours and aluminium windows. Key to increasing volumes is to have a dedicated sales support to branches and to cross-sell with made-to-order manufactured products. There is also an opportunity in sustainable construction which Michael will pick up in ESG. Digital sales have increased year on year and totaled 6.6 million in 2025, 40% up on the prior year. This has been achieved through further marketing support, improved website demand and the usability together with new initiatives such as click and collect from branch. In 2026 we want to further invest and improve this offering to maintain the growth. Extended living sales improved from 8.8 million to 9.6 9.6 million in 2025 while struggling initially to deliver consistent margins from erratic demand the offering was was refined and improved such that the greater expectation is placed on 2026. furthermore the decision was taken to exit extent extensions due to the complexity of each site and reliance on other providers and now i'll pass back to michael to cover the other strategic initiatives

People first, after improved safety results in 2024, our LTIFR slipped back from 4.1 to 6.4 in 2025. Given these results, we made some changes to health and safety leadership in Q4 last year and developed an improved health and safety plan focusing on the behaviours needed to drive a more proactive safety culture. As you know, under business effectiveness, we are replacing our ERP systems. Genetic, the new trade counter system, will transform the way we interact and transact with our customers in the branches, including simplified processes and the use of e-commerce functionality. With IFS, the new ERP system, our objective is to improve efficiency by the automation and standardization of business processes. The build is now well advanced and will start the testing and training programs later in the second quarter, with transition to the new systems taking place at the end of the year. this is a few months later than previously reported but we're confident that the revised timeline is robust we estimate total non-underlying costs on the project will be approximately 13 million over the 24 to 27 period with 6.4 million incurred to date this is higher than our previous estimates reflecting the later transition plus the extra third-party resources now engaged to secure a successful delivery also under business effective will deliver £4 million of annualised savings of which £3.1 million was realised in 2025. The branch network restructuring was completed at the end of Q1 2025 and will generate annual savings of £2 million. We also captured further overhead cost reductions of £2 million in Q2 2025 including restructuring now completed in operations and shared services. Looking ahead to improve our recycling operations We began a project in February 26 to consolidate our two recycling plants onto the existing facility at Ilkeston. This requires relocation of some critical equipment from the Selby site, plus investment in the Ilkeston plant to eliminate single points of failure and to improve the layout. We expect to close operations in Selby and begin processing at Ilkeston in H226, with a Selby exit to be concluded by the end of the year. CapEx is estimated at £2.6 million with annualised cost savings of about £1.5 million running from 2027. Non-underlying charges are expected to be in the region of £3 million including non-cash asset write downs of £1.5 million. On ESG, Eurocell is already a leader in PVC recycling preventing 3 million waste windows being sent to landfill every year and our use of recycled material and extrusion remains substantial at 30%. we've also made progress on our other carbon reduction initiatives including further investment in on-site electricity generation through the installation of solar panels at our largest operating facilities our net zero targets have been validated by sbti and we've published our transition plan we've also maintained our cdt climate disclosure rating of b and our msci rating of double n finally we do think there's an opportunity for usl with sustainable construction government regulation and consumer demand is pushing our sector towards sustainability the future home standard final implementation begins in 2026 with all new homes required to comply by 2028 the objective is to reduce the emissions of new homes by 75 to 80 percent and halve the energy use of new buildings by 2030 the government has also launched the warm homes plan earlier in 2026 with a target to upgrade 5 million existing homes by 2030 yourself products can help our customers meet or exceed future home standard many of our standard profiles of high recycled content and our window and door systems such as logic and a little plus energy efficient with ratings well above industry standards we therefore believe we're well placed to benefit from these tightening regulations as they're coming into effect and now back to will to wrap up in summary then

A stable performance enhanced by the inclusion of Alunet with some important lessons learned. In 2026, our focus will be on continuous strong financial management and customer support throughout the group, with a renewed focus on driving commercial outcomes to increase volumes, which in turn will improve the operating profit and the associated margins. whilst mindful of global events we do expect to make further progress in 2026 and the group will continue to drive shareholder returns through a combination of ordinary dividends and share buybacks that's the end of the presentation so could the operator please now open up the questions if you wish to ask a question on the phone please press star followed by one on your telephone and wait for your name to be announced that is star one if you wish to ask a question on the phone

And your first question comes from the line of Robert Chantry of Berenberg. Your line is open.

Hi, guys. Can you hear me okay? Yeah. All right. Hope you're well. Yeah, three questions from me. So firstly, could you just talk a bit more about the pricing environment in the branch network versus the competition? Secondly, what parts of the product range in the branch network do you think you've got most catching up to do in terms of market share and how do you see that playing out? and then thirdly on the middle east impact clearly evolving by the day but could you just remind us of the mechanisms used to deal with higher resin prices back in 22 um when you're passing it through you're looking to pass through to kind of customers um thanks very much okay just to pick up the first uh two points around the volumes and the prices i think it's

I think it's different things for different product categories to be honest. The price sensitivity is around some of the higher volume mainstays such as roofline and rainwater. I think we certainly have some improvements to make around those prices without affecting our margins overall. In terms of some of the other categories, to improve on the volumes is more about innovation and widening the product that's available through the branches. in certain other sectors it's around speeding up our customer service in so much that we return quotes back to our end customers faster than what they have been doing and in fact chase up on those quotes to ensure that we convert them to an order in terms of the impact of the middle east and what that could mean for our cost base as you know we've seen

circumstances like this before we used a surcharge mechanism to pass increased costs through to our customers on a monthly basis and the surcharge because it can be put on but equally it can be taken off so that we're fair to our customers to give a sense of scale um based on where prices have got to at the end of last week that surcharge on pvc to cover resin transport and electricity would have been in the order of three percent but as we said in the presentation where this is going is too difficult to say right at this moment thanks very much

Once again, if you wish to ask a question on the phone, please press star followed by one on your telephone and wait for your name to be announced. That is star one if you wish to ask a question.

Operator, we've also got Clyde Lewis from Peel Hunt in the room, and I think Clyde's got a couple of questions.

A few as normal, yeah. Shall we kick off with where you think the market is at the moment? And I suppose, again, Priya, and it's hard to judge, as I said, around what impact the gulf's going to do but what were you thinking the market volumes were going to do for particularly rmi but a little bit in terms of new bill for for 2026 i'll take one at a time it's probably easier uh i'm not expecting a massive improvement in the market to be honest with you in terms of what our intention is around our market share of that market that's out there

we've more pointed to improving our efficiency through the branches and improving what we're doing with our current fabricated base to improve our own volumes so i'm not sort of reliant on a huge concern in terms of the market in overall terms obviously there's so many outside factors at play here that it's hard to tell so what concentrated the team on is look at ourselves very hard let's look at what we're selling through the branches let's look at what we're manufacturing let's look at the products that we're offering are we offering the full set to our customers in order to sell the most we possibly can the three key initiatives around extended living doors and windows and then digital which ones were better than expected and which ones are in line and which ones are worse I suppose and why are they different I think if I take garden rooms, I think garden rooms has been difficult during the course of 2025 in terms of its profitability. I think we learned a lot of lessons during the course of that year. And that's to do with the use of marketing to drive leads and then the conversions of those leads to successfully sell a garden room. And we've understood that process better now and think we can convert a higher number of the leads that we generate those garden rooms in terms of a digital i think digital sales have been very successful during the course of 25 and we expect them to continue to be successful in 2026 albeit they're at lower base highly profitable it's about making sure that the offering's right the website can be incredibly complicated because we've got so many products for sale so it's about making sure that the more obvious commonplace products are front and center and available to trade and non-trade alike and then finally with windows and doors i think windows and doors has been successful and has got improving results the importance of availability through the branches is absolutely key but what is what is essentially if we want to push it further is to become experts such that our trades customers can call on us for advice can call on us for a quick return in order to become a trusted supplier to them that's the way that we'll win more business through that branch network and to that end we've got a dedicated sales force and a dedicated regional force that's able to lend expert advice can i keep going yeah new branch experience how has that gone have they been performing better or worse than expected because obviously they all go into a loss phase and and rebuild or build up to a to a crop real estate how has that gone uh i think in totality that they've been successful in so much that they're um they're filling a void that wasn't there that was there before i would i say that they're successful i i wouldn't to be honest i think the fact that the the pace with which they're gaining sales has been too slow so i think we need to drive more from them at a faster pace and that again is about acquiring custom it's a it's a tough market our customers are hard to win they're very easy to lose around price and i think when you open a new store it's about not only launching it with some marketing support but following that up over a consistent period and i think the regional teams

in so much as regional managers regional sales managers area sales managers have all got their parts to play in order to support our approach get new business okay that's it is to share a little bit about what you're seeing in terms of the competitive environment any changing the way they do things obviously f wins change of ownership a major sort of yeah difference suppose year on year

It's early days for me, right? But I haven't seen anything particularly new. I think in terms of the branch environment, it's as competitive as it's always been. There's been some openings from our larger competitors. In terms of the profile side, there's been very little that I've been aware of.

In terms of the VCAT app, what our sales teams have seen so far is that the two businesses seem to be operating independently as they were previously.

of the combination as yet talking about combination and consolidation I just want to say a bit about Alunet and I mean obviously it's had a great year I mean obviously growing and sharing what have you done in terms of using what you think is best practice within four years and maybe transferring some of those ideas across or maybe taking some of those good ideas across

Alunet into sort of Eurosale I think there is I think there is some support being given in so much as marketing some of the sales support some of the cross selling between the two customers I think on the whole we've left Alunet to do what Alunet's been doing because they've been doing it so well particularly with Commodore and I think that I think the other thing to note is the way that Commodore and Vista have started working together I think that's been a good thing and so they've got a real um a real business unit about them now and there's some commonality in the way they're being led but aside from that we haven't tried to integrate them to do and if i go into a eurocell branch can i find any net products for sale you can certainly get alinets uh products through the winds and doors program yeah and the doors are for sale in the branches albeit with specific product names you need to eurocell branches

um i think the last one was probably on the mood within the business i mean it's been a lot of change um you know you rationalize some of the sort of as you said the regional structure within within the branches probably the profile manufacturing hasn't changed that much but how do you think the mood is in in the business at the moment uh good i think i mean like i say there's been a lot of change in a very short period of time but i think that in itself

and the pace in the business. I think there's a widespread positivity about what we're doing. I mean, I myself spoke to 80 regional sales and area sales managers on Monday. They have a renewal about what they're doing, about what we're asking them to do in the market. So I think it's positive.

Probably last one, share buyback. Paused it for now. let's fingers crossed eyes and legs crossed that the conflict gets sorted sooner rather than later when do you sort of make a decision as to what you do on that front going forward as soon as we've got clarity I guess our next touch point will be AGM in May and we'll update on the circumstances at that time hopefully we'll have a clearer picture of where this is all headed at that point but

Okay, operator, that does the questions in the room. Do we have more on the line?

As a reminder, if you wish to ask a question on the phone, please press star one. Currently, there are no further questions on the phone, so I'd like to hand back.

Okay, well, thank you, everyone, for listening in and participating this morning. Have a good rest of the day. And with that, we'd like to end the call.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.