Eurocell plc

Hello everyone and welcome to Eurocell half-year 2026 conference call. Please note that this call is being recorded. After the speaker's prepared remarks, there will be a question and answer session. If you would like to ask a question during that time, please press star followed by one on your telephone keypad. Thank you. I'd now like to hand the call over to Bill Truman, Chief Executive Officer. Please go ahead.

Thank you and welcome to Eurocell's 2026 half-year results presentation. I'm Will Truman, Chief Executive and I'm with Michael Scott, the Chief Financial Officer and Matt Worcester, CFO Designate. This morning I'll give you a brief overview of the half-year before handing over to Michael who will take you through the financial results in more detail before handing back to me for the strategy update. Michael will then cover the ERP upgrade, restructuring and ESG. I will then wrap up with a brief summary. As you know I was appointed in February of this year and my reflection on the first half year's results is that we have made some good progress. Alunet has continued to trade in line with our expectations and there has been an improvement in the underlying business despite the soft first quarter. The improvement in the sales momentum we saw in Q2 has continued into the second half of the year. As part of this we have seen gains in each of the strategic initiatives but importantly in the underlying business. Alongside this, we have also made progress with further restructuring and strong cost disciplines. As a result, group revenues improved 6% in comparison to the first half of the prior year from £193 million to £205 million. Adjusted operating profit also showed improvement from £10.1 million in the first half of 2025 to £11.1 million in the first half of this year. as in prior presentations i'm pleased to report good financial management is evident in the strength of the balance sheet strong cash flows low net debt and improving total shareholder returns i'm also pleased to report on the acquisition of att the manufacturer of our garden buildings this is a small but important acquisition in the pursuit of delivering the extended living strategy and with that i'll now hand over to michael for the financial review

Thanks. I'll start with the financial highlights on page 5. Despite tough market conditions, organic volumes were 1% up on H1 last year. We saw an improvement in the second quarter, which reflects the actions taken to increase sales volumes and gain share. And this momentum has continued into the second half. Total group sales were up 6%, enhanced by Alunet, which we acquired in March 2021. Adjusted operating profit increased by 10%. This includes a strong contribution from Alienet in good cost control, partially offset by competitive pressure on selling prices in the branches, plus continued labour and overhead cost inflation. Adjusted EPS up 2% includes increased finance costs on debt following the Alienet acquisition, plus the impact of our share buyback programmes. Cash generation remains good, despite being slightly down against last year, which benefited from falling raw material prices. and with leverage of 0.8 times, we have good headroom on our debt facility, which was refinanced in March. Finally, this year's interim dividend of 2.5 pence per share is up 9%. We're focused on shareholder returns, and following good delivery for 2024 and 2025, we do intend to continue share buybacks in due course, subject always to maintaining a strong financial position. Turning to the full P&L on page 6. I'll come on to our sales and the other components of EBITDA at the moment. But first, just looking below that line, depreciation and amortization was $14.3 million, up $1.2 on last year. And with our CapEx program and lease renewals, we expect DNA for the full year to be in the region of $29 million. And just to note that I've summarized all of our financial guidance at the end. Finance costs were $2.9 million, up on H125, reflecting the use of our RCF to fund it earlier in acquisitions. h1 taxes in line with the standard rate and we expect a slightly lower full year rate of 24 due to the benefit of payment box relief looking down the p l adjusted basic units per share was 6.1 pence up two percent and dividends of 2.5 pence i've already covered moving to the right of the slide non-underlying charges of 9.6 million includes restructuring costs of 9.4 million of which 6.7 is not cash plus implementation offset by a lease liability provision release of 2.7 million, following the resolution of a property dispute. And later in the presentation, I'll pick up restructuring in the systems replacement project, which is nearing conclusion. Finally, excluding Alunet, organic sales and overheads were both up 1% on H125, with the gross margin percentage only slightly down, which is a robust performance in the face of current trading conditions and ongoing cost inflation. Moving to sales on page seven, Revenues were up 6% in H1, with organic volumes 1% higher. As you know, we face difficult trading and macroeconomic conditions with weak consumer confidence and uncertainty over the impact of geopolitical events, and this has continued to weigh on activity in our key markets. Against this backdrop, we've taken action to increase volumes and gain share, and after a slow first quarter, it was good to see momentum improving in Q2, with organic sales up 4%. In profiles, first half sales were down 5%, with cost of living pressures, high interest rates, and falling house prices, all having an adverse effect. Optimism for housing market recovery in 2026 has faded, and we've seen an increasingly challenging market backdrop for new-build housing. In the branch network, sales were up 5%, with volumes 6% higher. This includes general RMI volumes down 2%, with homeowners still holding back on discretionary expenditure. but sales also include the impact of action to drive volumes of own manufactured products through the network as well as progress with our strategic initiatives where sales are up 6.6 million including windows and doors up 29% and e-commerce activity up 49% in addition branches open since the end of 24 deliver incremental sales of 1.8 million in the first half finally Alionet is performing strongly under our ownership with first half sales growth at 13% on our calendar day driven by market share gains. On to adjusted operating profit on page 8. Profit of $11.1 million is an increase of 10% on H125. Moving left to right across the chart, the adverse volume impact of $2.5 million follows organic sales down 4% excluding the strategic initiatives. The net margin decline of $0.8 million has several components. whilst revenues include selling price increases implemented early in the year to offset 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 whilst we saw increased pvc resin other raw material and electricity prices in the second quarter these are being recovered through a combination of surcharges and sales strategies the incremental from new ventures. Alunac made a strong contribution with operating profit of 2.4 million over the four-month post-acquisition period in which 125. Moving along the chart, labour inflation of 1.5 million includes the impact of our April 25 and 26 pay awards, plus the increases to national insurance and the national living wage affected from April 25. Finally, the other category to the right of the chart, which is a benefit of 1.5 million, includes the annualisation of last year's restructuring and cost reduction work, and I'll pick up on the new 2026 programmes when we cover business effectiveness later. Moving to CAPEX on page 9. Investments of 6.5 million in H1 includes 1 million in recycling, mostly related to the consolidation of our two plants. 0.9 million for warehousing is to support central distribution of traded goods from our main warehouse. and £1 million for the branch network is a combination of refurbs and relocations. The balance is primarily maintenance capex. Our guidance for the year is the total capex of up to £13 million. This includes £3 million for strategic initiatives such as branch refurbs and relocations and £3 million for site consolidation. There's also £3 million for facilities, welfare and safety improvements across our property estate with the remainder largely maintenance capex. As you know, implementation costs of cloud-based IT solutions are charged to the P&L rather than capitalized, and our ERP system replacement falls into this category, with $2.6 million charged to the P&L as a non-underlying item in the first half, taking the total cost incurred to date on the project to $9 million. The estimated non-underlying costs on ERP will be approximately $14 million for the 2024-27 period, and I'll provide further detail on the project in a moment. Coming back to CAPEX, the lower chart illustrates that we have manufacturing capacity in place ahead of demand, which is an important component of being ready to deliver growth. Going into the full cash flow on page 10, which sets out the components of an increase in pre-IFRS 16 net debt of 6 million for the first half. This includes a cash impact of 6.4 million for the non-underlying items I described earlier, plus earn-out payments of 2.6 million for moving left to right across the chart cash generation has continued to be good a small outflow from working capital in h1 includes stock invested aid broadly in line with their june 25 comparatives capex payments of 5.8 million are the asset additions covered earlier plus a small increase in our capital creditor and financing charges of 1.6 million include the arrangement fees payable on refinancing our rcf in march after share buybacks and treasury share purchases of 0.8 million dividends paid of 4 million this results in pre IFRS 16 net debt of 28.1 million at the end of June IFRS 16 adds 65.6 million to debt which you can see in the table is down 10.5 million compared to December 25 this reduction reflects cash payments on leases of 10.1 million which are accounted for within net cash from operating activities on the left of the chart plus a non-cash movement of 0.4 million being the net provision release I described earlier. Overall, this leaves us with a strong balance sheet, with leverage at 0.8 times either DART and a pre-IFR at 16 basis, and good heavily on our recently refinanced £75 million debt facility, thereby providing security, flexibility and options for the future. Turning to capital allocation on slide 11, we've delivered strong total shareholder returns over the last two years. equivalent to yields of 14% and 8% for 2024 and 2025 respectively. Looking ahead, we intend to drive returns through a combination of ordinary dividends plus share buybacks when appropriate. Moving left to right across the chart, our approach to capital allocation is to prioritise organic investment in line with the strategic plan, supporting initiatives to drive growth in the branch network, improvements in operations and to upgrade our IT systems. On dividends, our policy recognises the importance of the ordinary dividend with this year's interim of 9%. 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 vest over the next two years. Moving across the chart, RDNS and ATT demonstrated disciplined approach to acquisitions, justification thereafter we've been enhancing returns through share buybacks our intention remains to continue buybacks in due course subject to the impact of the middle east and as always to maintaining a strong financial position with net debt generally not to exceed one times even dollar unless there is a clear short-term deleveraging plan in place but to sum up on page 12 a robust underlying financial performance with adjusted operating profit up 10 percent We're focused on improving profitability. We've taken action to increase sale volumes and gain share, continue to demonstrate cost discipline, and implement a profit-focused restructuring which I'll cover shortly. We have a strong balance sheet and good headroom on our debt facility. Cash conversion remains good. The interim dividend is up 9%, and the acquisition of ATT for £5 million in September was funded from our RTF. The business is therefore in a good place to deliver on our growth strategy. we're confident that we'll deliver further progress in 2026 and we're 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 now over to will to update on our strategy thank you as in prior presentation the strategy remains unchanged and just as relevant and in focus principally it consists of growing the customer

online customers and fabricators this runs alongside digital transformation and an efficient operating model i'll give some updates as we move through the following slides in comparison to the half year 2025 results there is the benefit of a full six months in 2026 compared to four months prior alinet has continued to perform in line with expectations and the acquisition model Sales for the group were $28.4 million, up $10.7 million to that included in half one 2025. Adjusted operating profit of $4 million is up $2.4 million in comparison to half one 2025. The sales of $28.4 million comprises alley net sales of $10.1 million, comp door $11.9 million and garage doors of $6.4 million. on a like-for-like basis, six months versus six months, the performance is impressive, with Alienet increasing 15% and Comptor 21%. Garage doors have declined marginally, with lower volumes in a highly competitive market. Eurocell currently operates 205 branches, which is down from the end of the prior year, following the closure of 10 branches in July. The strategy remains to expand the network of branches, but after a detailed review of the current estate it was clear that the number were not going to become profitable and contribute to the group's results. So the decision was made to close them with immediate effect and transfer accounts to nearby branches. The performance of the branch network itself improved in the first half with sales up 5% and volumes up 6%. This improvement was particularly evident in Q2 and I am pleased to say that this has continued into the second half of the year. In a highly competitive market, we need to support our branch managers, and to that end, we have given more freedom to trade in local markets, refreshed our own made-to-order range, and reviewed our traded goods offering. This is alongside a clearer sales support structure with a revised divisional leadership. In support of customer growth, we've continued to promote the Power Up loyalty scheme, with 11,000 registered customers to date and a target of 15,000 by the year end. this scheme is an important aid to the branches with members demonstrating an enhanced level of spend and frequency of visit digital sales of 4.4 million have increased by 49% compared to the prior year this follows improvements made to the website to drive traffic and improve the site experience in addition the site is an important portal to fabricators and helps to drive new trade accounts We're working with new partners to explore ways to drive these gains further. These will improve the site itself and the efficiency with which customers find us when searching. The relaunch of windows and door sales was a key facet to the strategy. All branches were live with the initiative by June 2025. Whilst no distinction can therefore be drawn in comparisons of this half year to last, I can report that each month in 2026 has set a new record in terms of sales. While some ground was initially lost to the original strategic plan, this gap has narrowed with a new expert sales support network. Alongside this we have improved the processes for customers making enquiries through to the delivery of windows and we are working with our partners to drive these efficiencies further. Our fabricator partners remain vital to the group and we have looked to support them through this period of higher input prices in a highly competitive market with lower volumes being evident from end users. urusl will continue to lead as a technical systems house and add value to our customers where we can to that end we have strengthened our team with a new technical director joining the group in the second half of the year garden room sales were 4.8 million in the first half in line with the prior year and we have just announced the acquisition of att our partner in the manufacturer of the rooms This acquisition will underpin the future growth in sales whilst also capturing the end-to-end margin. During the half year we have reviewed and enhanced the range. We are in the process of introducing new routes to market and have changed the way that sales leads are generated through to how we engage with our customers. With the acquisition now complete the group will have a clearer organisational structure with complete control over the end-to-end process. And I'll now pass back to Michael to cover the systems upgrade and restructuring.

Thanks. Under business effectiveness, with near-term market outlooks likely to remain challenging, we've prioritised restructuring to increase profitability. The three major projects shown here should deliver more than £5 million of annual savings, with £2 million realised this year. Non-underlying charges of £9.4 million have been recorded for these programmes, of which 6.7 is non-cash asset breakdowns and impairments. First, we're consolidating our two reciting plants onto the existing facility at Ilkeston. This required relocation of some critical equipment on the site at Selby, plus capex of 2.6 million at the Ilkeston plant to eliminate single points of failure and improve the layout. We've now ceased operations at Selby and begun processing at Ilkeston, with a Selby site exit to be concluded shortly. To improve profits in the branch network, we closed 10 sites in July, consolidating our footprint in the London region and exiting Ireland. We've retained 10 branches inside the X25 and transferred customer accounts where possible. Given the much higher property and staff costs in London, the consolidated footprint should deliver a stronger overall result. We've also withdrawn from Ireland, where the transport and the admin costs for operating two sites were disproportionate to the returns generated. Finally, we've implemented a targeted headcount reduction to deliver a more efficient business, with several management roles being removed from the structure. Moving to the right of the chart, as you know, we're replacing our business systems. Genetics, the new trade cancer system, will transform the way we interact and transact with our customers in the branches, including simplified processes and the use of EPOS functionality. With IFS, the new ERP system, we expect to improve efficiency by the automation of process. we've covered the estimated cost of the project earlier we're now in the testing and training phases with transition to the new systems on track to take place at the end of the year on people first after improved safety results in 24 our LTIFR slipped back in 2025 given these results we made some changes to health and safety leadership in q4 last year and developed an improved plan focusing on the behaviour needed to drive and walk around the safety culture. And the early signs are that this is now embedding across the group. On ESG, Euricell is already a leader in PVC recycling, preventing 3 million waste windows being sent to landfill every year. And our use of recycled material in extrusion remains substantial at 28%. We've also made progress on other carbon reduction plans, with our use of renewable electricity now at 100%, and the recent investments in onsite electricity generation are now delivering good returns. 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 this year, with all new homes required to comply by 2028. USL's products can help our customers meet or exceed the future home standard, many of our standard profiles have a high recycled content and our window and door systems such as logic and the lunar plus are energy efficient with ratings well above industry standards we therefore believe we're well placed to benefit from the tightening of these regulations as they come into effect we're now back to will to hand to wrap up okay in summary a stable and improving performance for the first half of the year with momentum continuing into the second half

While the profile side of the business remains challenging due to reduced end demand, particularly in new build housing, there has been an improvement in the branch network underpinned by the strategic initiatives. Alienet also continues to perform well. Further to this, we have made operational changes to improve efficiency and improve management structures to speed up decision making. and the second half of the year our focus remains on continued strong financial management cost control throughout the group whilst continuing to drive the commercial initiatives to increase volumes thank you that's the end of the presentation so we can now open the lines for q a we are now opening the floor for question and answer session if you'd like to ask a question please press star followed by one on your telephone keypad

that star followed by one on your telephone keypad we will pause for a brief moment to wait for the questions to come in your first question comes from the line of clyde louis appeal hunt please go ahead my gents um i think i've got three if i may um

just wondering i mean i think well you talked about the the momentum in q2 carrying on into uh into the second half of the year be interesting maybe if it gives a little bit more color on july and august whether you know it was the sales initiatives that were you know still driving the revenue number or whether you'd seen a sort of a pick up elsewhere that was the first one so do them one at a time uh yeah yeah by all means okay

I'll give you just a little bit of cover on the sales momentum there, Clive. So I think we said in the presentation that Q2 organically was up 4%, July itself was up 4% organically, and August up 5%. So that improvement that we saw through the second quarter continues.

And I think if you dig into that just a bit deeper, you see that profiles have remained quite difficult given the end demand, but within the

eurocell building plastics part of the business essentially the branches you've got a stronger return such that you've got that net effect that michael's just referred to okay thank you um just on the att deal um i think it'd be useful maybe to sort of understand a bit more about what what you're going to do there um i suppose in terms of how that will drive the garden rooms business on

yeah so ATT manufacture all the garden rooms that we currently sell and what's critical is having a very clear route to market and also a clear range and offering to customers and we wanted to maintain exclusivity of that range and also command the end-to-end margin obviously as it was working previously we had ATT manufacturing and delivering in some regards and then third parties installing and whilst we'll always use third parties to install the onus on eurocell really was clear from the outset so we may as well have that end-to-end control so despite us not manufacturing the rooms any problems after the factory doors come back through to eurocell so it's just a it's just a cleaner organizational structure make us able to control the rooster market and also the range more efficiently okay thank you um

i suppose well i've actually got two more for me um the digital sales dynamic it is i suppose how big are your aspirations there and is is a bigger push down that route likely to have a positive or negative impact on on margins for the group um well the gross profit measure it certainly has a

enhancing effect at the bottom line given that the fact that the goods are ultimately delivered through the branches that margin is taken down quite significantly i think there will always be a focus on this pushing digital sales wherever we can i think it's a much more price sensitive area of the business and we don't obviously want to cause conflict with other channels so it's about efficiency ultimately with digital sales it's how you generate the leads it's how you capture them on an efficient basis so without paying too much search costs okay okay thank you and the last one I had was on recycled resin and the costs and how that part of the supply chain has been evolving

in the last six months it's been very stable five um you know if you went back to 2023 when um the whole sector was pushing volumes in recycling we saw the price spike uh i think um we all learned our lessons from that so we've seen very stable um feet of prices for the recycling business through 2025 and through the first half of 2026 with with no significant movement and it importantly it didn't spike when um we saw the impact of the middle east on other raw material prices the the recycling feedstock prices stayed now okay perfect thank you again if you'd like to ask a question please press or followed by one on your telephone keypad that star followed by one on your telephone keypad

We will pause for a brief moment to wait for the questions to come in.

Operator, I've got a number of questions that have come through online. So, I'll now pick those up if that's okay?

You're right, sir. Thank you.

So, the first one's from Rob Chantry. Could you add some more color on the 5% reduction in volumes and profiles, specifically any volumes on new-built fabricators versus RMI? it's very difficult for us to to break that out role because um ultimately we don't know where our profile ends up you could work on the basis that um new builds about a third of our profiles business um the rmi performance would be down something similar to what we saw on the branch network underlying body is down two percent there so um the balancing figure will be the new build aspect of that in profile if that makes sense second question from Rob has your experience with Alionet whetted the appetite for more ongoing M&A in adjacent areas possibly I think the key to this is to make intelligent acquisitions at the right price obviously that are accretive to the overall group so I think ATTs are small but important acquisitions going forward yeah I mean we're open to more acquisitions but obviously the right kind next one I hope I get this pronunciation right I'm going to say Selchuk in the profiles division how is yourself market share developing following the M&A's in the industry especially from last year and I guess we're referring to Epwin and Beaker there yeah I don't think our market share has particularly moved over the course of this year just because of the

nature of what's going on in the profile side of the business we've had some incremental win the degree to which it's which is a slight gain in market share we haven't had any notable losses but I don't think our overall market share has changed really despite that acquisition by Vika I mean they're still both separately selling to the market so yeah I don't see any notable changes

got another one from rob here what do you view as a long-term sustainable margin in alienate given the quite material step up in h1 how does operational gearing here compare with the rest of the group um the alienate is is performing bang in line with the uh the acquisition model um that we put together at the time of the deal in march 2025 it's its operating margin was 14.14 in the first half of this year um we see that as sustainable through the development and growth of Alionet. It is not subject to the same level of operational gearing as the rest of the group. Remember, the reason why we are so operationally geared is the branch network where you have a significant degree of fixed costs. Alionet doesn't have that, so we are working on a sort of low-teen operating marginality moving forward uh max hayes um which end markets or product areas could you look to buy into via bolt-ons and do you see six and a half times you that are the ceiling based on recent acquisitions no i i i i i don't

which end markets or sorry just read that back on the first part so which end markets are probably areas could you look to buy into by about films um anything adjacent to what we currently do it would be would be applicable but i can't say that i'm currently looking at any or the business as a whole is looking at any adjacencies at the current time we're very much focused on the markets that we're in and maximizing the benefit and that we can gain from them and developing the as already noted. I don't think we're looking to particularly get into any new markets or product groups.

And deal multiples will be based on specific deals that I think it's difficult to generalise on. It depends on the business. How much of the first half price increases surcharge and are you able to keep passing input costs through in the second half?

Well, that has delayed the surcharge in so much that it came on late as it worked its way through our inventory. and as we previously stated we're looking to shoulder some of the burden of enhanced of higher costs with our partners such that they're not suffering the full effect of it i think um there was a second part to that michael what was that how does are you able to keep passing on input costs through the second half i don't think it's right to pass them all the way through um what we need to do is maintain the surcharge until the full effect of those higher prices is washed through our systems when it does actually come down We're looking to be pragmatic about our approach to this as opposed to some others in the industry.

Another question from Rob. On the shape of profitability in the branch network, 10 have been closed. How much more work is there to do at the bottom end of the curve? Are you still backing the 250 median term ambition?

Yes, and obviously we've reviewed all the branches in detail. There are some that are lower performing for us. obviously, and we've now got a clearer sales structure for the branches such that we can give them more support.

The reason those closures were limited to the number they were is that we felt that those that are currently underperforming have got the opportunity to improve over their previous results. And then a question here on windows and doors. The momentum in doors, windows and Q2 on Q1 is very positive. Can you talk about trajectory into H2 and how quickly you could get

the two boxes that show the potential upside which I think is referring to the spare capacity yeah I mean the momentum is continuing into the second half of the year we've got a good proposition we've enhanced the sales we've got an expert sales team now in support of that you know we need to become more efficient in the delivery and that will help us to improve the profitability of it

um but i don't see anything holding back in terms of our growth in sales with with windows and doors operator that's all of the questions uh that i've received online do you have any more on the phone lines as of right now we don't have any pending questions on the phone line Okay, well, with that, we'll wrap things up then. Thank you very much to everyone for listening. Thank you for your time, everyone, and have a good rest of the day.

Thank you for attending today's call. You may now disconnect. Goodbye.