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.