Eurocell (LSE:ECEL) — Preliminary Results

0:00 Good morning and welcome to the EUROCELL PLC full year results investor presentation. Throughout this quarter presentation, investors will be in listen only mode. Questions are encouraged and they can be submitted at any time by the Q and A tab situated in the right hand corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself, but the company can review all the questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to select the following poll. Now I'd like to hand you over to CEO, Darren Waters. Good morning to you, sir.

0:32 Thank you, Ali, and good morning, everyone. Welcome to EUROCELL's 2024 results presentation. I'm Darren Waters, CEO, and alongside me is Michael Scott, CFO. We're following the usual format for this morning's presentation, including an update on our strategic initiatives plus an overview of Valinet, our recent acquisition. So let's start by looking back over last year. Well, 2024 was another challenging year, but a year of progress for EUROCELL with adjusted profit before tax, bang in line with market expectations at £20,000,000. That's up 32% versus 2023. And I think against the backdrop of a tough market, we delivered a robust sales performance with revenues down just two percent 358,000,000.

1:17 And this is down to the good early progress we've made with all of our customer growth initiatives, and more detail on that later in our presentation. We also delivered on our commitment to drive improved shareholder returns, completing three share buybacks worth £15,000,000 in total, which reduced the number of shares in circulation from a 112,000,000 to a 101,000,000. In addition, we increased our ordinary dividend by 10%. And this morning, pleased to announce a further extension to the buyback of up to £5,000,000, which again underlines our confidence in the latent value and potential of the EUROCELL business. Despite the buybacks that we did last year, net debt increased marginally to £3,000,000, which enabled us to complete the acquisition of Alunet earlier this month for initial consideration of £29,000,000 without overly stretching our balance sheet.

2:09 Alunet is a compelling strategic fit and has significant growth potential under our ownership. With end markets remaining subdued and a 3,000,000 hit on national insurance contributions and national living wage following the budget, we are continuing to focus on overhead reduction opportunities, operational improvements, and cash management. And Michael will expand on that as he runs through the financials. And with that, I'll now hand over to him.

2:40 Thanks, Darren. So I'll start by going through the financial highlights on page five. As you know, trading conditions have continued to be challenging. Revenues were down 2% with volumes 1% lower. Despite lower sales, adjusted PBT increased by 32% compared to 2023. We have proactively managed our gross margin and benefited from lower input costs to drive profits higher. Although the impact of this was reduced by lower volumes, competitive pressure on selling prices in the branch network, ongoing cost inflation, and some targeted investments we made to generate momentum in our strategic initiatives. Adjusted earnings per share, up 31%, reflects improved profitability and a higher tax rate. Cash generation remains good despite being down against an exceptionally strong twenty twenty three, which included the benefits of a major stock reduction program.

3:29 Pre IFRS 16 net debt at year end was low at 3,100,000, leaving good headroom on our bank facility to support the recent acquisition of Alunet. The board remains focused on driving shareholder returns through a combination of a progressive ordinary dividend and share buybacks. Total dividends for the year of 6.05 p per share are up exactly 10% on 2023. And following completion of the £15,000,000 share buyback program, which commenced in January 2024, we've launched a new buyback of up to £5,000,000.

4:02 Turning to the full p and l on Page six. I'll come on to the drivers of our sales performance and the other components of EBITDA in a moment. But first, just looking below that line, depreciation and amortization was GBP 25,300,000, up slightly on 2023. And with our CapEx program, lease renewals and the addition of Alienet, we expect d and a for 2025 of up to £28,000,000. And just to note that I've summarized all of our technical financial guidance at the end. Finance costs were 2,800,000, down point four on 2023, reflecting lower utilization of our debt facilities, and I expect finance costs of up to 5,000,000 in 2025 with higher debt following the acquisition. The tax rate on underlying profits for 2024 was 23%, which is lower than the standard rate due to the benefit of patent box relief, but higher than 2023 due to the increase in the rate of corporation tax effective from April that year. And I expect a rate of around 24.5% for 2025.

4:57 Moving down the p and l, basic earnings per share were 14.4p, and dividends I've already covered. Nonunderlying charges of 6,200,000 in 2024 include 2,200,000 of implementation costs of our ERP systems replacement project. These costs have been charged to the p and l rather than capitalized in accordance with the accounting rules for IT solutions, are cloud based. And I'll pick up on our progress with the systems project later in the presentation. It also includes 800,000 of due diligence cost in relation in relation to Alunet and a 3,200,000 noncash right of use asset impairment charge in relation to the lease on a secondary warehouse. This follows a dispute with the landlord where there was significant deterioration to the flooring. Having taken legal advice, we terminated the lease and expect a mediation process to commence shortly.

5:44 Depending on the outcome, the impairment may be reversed in future periods, or the associate associated liability will be released.

5:54 Moving on to our sales performance on page seven. Revenues were down 2% in 2024 with volumes 1% lower. As you know, challenging macro conditions and weak consumer confidence have been further compounded by uncertainty following the autumn budget, and this has impacted activity levels in our key markets. Profile sales down 6% reflects reduced RMI activity and a weak new build housing market. Overall, in the branch network, sales were up 1% with volumes 3% higher. This includes underlying RMI volumes down 3%, and we have continued to experience competitive pressure on selling prices in the network. However, set against that, we've seen good early progress with our strategic initiatives, up 9,400,000 in the year, including garden rooms, ecommerce plus windows and doors, which has provided mitigation for the branch network.

6:44 On to adjusted operating profit on page eight. Profit of 22,800,000 represents an increase of 24% on 2023. Moving left to right across the chart, volume of 1,500,000 represents the adverse impact of sales volumes down 1%. The margin benefit of 8,900,000 has several components. Whilst revenues include the impact of 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 continue to proactively manage our gross margin and cost base and have benefited from a reduction in input costs, including PVC resin, electricity, and recycling feedstock. Whilst there are only a limited number of PVC resin and other key raw material suppliers, we have identified alternative sources and introduced other initiatives to reduce input cost pricing risk.

7:36 For electricity, we operate a rolling twelve month forward hedging policy. In 2023, we were paying rates locked in during '22 when wholesale energy prices peaked. We're now benefiting from the lower wholesale prices experienced in 2023. For our recycling business in 2023, a weaker RMI market and fewer window replacements restricted feedstock availability, resulting in a significant increase in purchase prices. However, we secured additional sources of supply, which alongside reduced demand and lower virgin costs, saw seed feedstock prices ease in 2024, resulting in costs £4,800,000 below the prior year. Looking beyond the chart, the net delta between the production cost of recycled material and the buying price of virgin compound remains similar to 2023, reflecting reduced feedstock prices and lower virgin costs.

8:26 So the economics of recycling remain attractive. The 18,000 tons of recycled material we consumed in 2024 delivered an absolute gross margin benefit of approximately 2,200,000 compared to the cost of using virgin material. Moving along the chart. Labor inflation of 4,600,000 primarily represents our April 24 payout of 4%. Variable labor costs is the net impact of increased share based payment charges and lower bonus and variable pay, and other overhead inflation of 2,400,000 includes higher property and IT license costs. Restructuring savings of £2,000,000 is the annualizing benefit of the cost reduction program completed in June 2023. And finally, whilst the other category is a net number, it does include the impact of targeted investment to generate momentum in the strategic initiatives in areas such as digital marketing, sales professionals for the extended living range, and central order processing capability for windows and doors, which we do expect to leverage as volumes increase.

9:27 In summary, profits are up despite lower sales volumes, primarily due to lower input costs, supported by our proactive management of gross margin and the cost base. Moving on to CapEx on page nine. Investment of £10,700,000 in 2024 includes £3,000,000 for the branch network, being a combination of new openings, refurbs, and relocations, with the balance primarily maintenance CapEx. Our guidance for 2025 is for total CapEx, including our Lienette, of approximately £15,000,000. This includes 3,000,000 in support of our strategic initiatives, 2,000,000 for the for branch refurbs and relocations. There's also 3,000,000 for health, safety, and welfare improvements across our property estate and £2,000,000 to develop our IT infrastructure, including ongoing cyber defenses, with the remainder primarily maintenance CapEx.

10:16 As noted earlier, implementation costs for cloud based IT solutions are charged to the p and l rather than capitalized. Our ERP system replacement falls into this category with 2,000,002,200,000 charged to the p and l as a non underlying item in 2024. We estimate costs for '25 will be approximately £6,000,000, and I'll cover the project in more detail in the strategy section of the presentation. Coming back to CapEx, the lower chart illustrates that we have manufacturing capacity in place well ahead of demand, which is an important component of being ready and well placed to deliver on our strategy and to benefit from a market recovery whenever that comes.

10:57 Turning to cash flow on Page 10, which sets out the components of a small increase in net debt of £3,500,000 in 2024 on a pre IFRS 16 basis. Moving left to right across the chart, cash generation has continued to be good. After an inflow of £13,000,000 in 2023, driven by an inventory reduction program, working capital was broadly flat in 2024 with stock and debtor days in line with their 23 comparatives. Nonunderlying costs result in a cash outflow of 1,900,000, being payments for the ERP system project and Alienet due diligence. Tax paid and other of 1,800,000 includes tax payments on account of 3,000,000, offset by share based payments and other noncash items of 1,200,000.

11:43 CapEx payments of 10.3 include the asset additions covered earlier, less a small increase in our capital creditor. So after financing charges, the share buyback of 14,500,000 and dividends paid of 6.1, this results in pre IFRS 16 net debt of 3,100,000 at the end of the year. IFRS 16 adds £59,000,000 to debt, which, as you can see in the reconciliation table, is up 0.8 compared to December 2023. This reflects the net impact of branch and other lease renewals of 18,100,000, less cash payments on leases of 17,300,000, which are accounted for within net cash within net cash from operating activities on the left of the chart. Overall, this leaves us with a strong balance sheet and liquidity position with good headroom on our £75,000,000 bank facility, thereby providing the funding for the Alunet acquisition as well as security, flexibility, and options for the future.

12:40 Turning to capital allocation on slide 11. Following the launch of our strategy at the beginning of twenty twenty four, we updated our capital allocation policy at the half year in September. We intend to drive shareholder returns through a combination of a progressive ordinary dividend and supplementary distributions currently in the form of share buybacks. Moving left to right across the chart, our overall approach to capital allocation remains unchanged. We will continue to prioritize organic investment in line with our strategic plan, supporting initiatives to drive profitable growth in the branch network, continuous improvement in operations, and to upgrade our IT systems. On dividends, our policy recognizes the importance of the ordinary dividend, and we believe a progressive dividend is right for this business, providing a predictable income stream for our investors. The board has also taken the decision that employee incentivization by equity should be through shares acquired rather than issued.

13:30 And therefore, we will look to maintain sufficient treasury shares to satisfy employee share options expected to vest over the next two years. Moving on, we believe that Alienet demonstrates our disciplined approach to acquisitions with a very clear strategic fit and a compelling financial justification. Thereafter, we intend to enhance shareholder returns through supplementary distributions currently in the form of share buybacks, subject always to maintaining a strong financial position with net debt not to exceed one times EBITDA. And we're pleased to confirm that following completion of the £15,000,000 buyback commenced in January 2024, we've now launched a new buyback of up to 5,000,000, which will begin shortly. So to sum up on page 12, adjusted PBT was up 32% despite lower sales, reflecting proactive gross margin management combined with lower input costs, partially offset by reduced sales volumes, competitive pressure on selling prices in the branches, continued labor and other cost inflation, and some targeted investment to generate momentum on our strategic initiatives.

14:33 Cash flow conversion remains good. We've continued to focus on working capital management, have good headroom and liquidity on our bank facility. And following the Alienet acquisition, we do expect net debt will be below one times pre IFRS 16 EBITDA at the end of twenty twenty five. We have well invested facilities and available operating capacity, which leaves the business well positioned to deliver on our strategy and to benefit when markets recover. Finally, we remain focused on driving shareholder returns through a combination of a progressive ordinary dividend and share buybacks.

15:07 To the right of the slide, there's a summary of our technical financial guidance, which I hope is helpful. And with that, back to Darren to update you on progress with our strategy. Thank you, Michael. So just a reminder of the strategy that announced this time last year in which we set out the initiatives that will drive this business towards £500,000,000 of the revenues and 50,000,000 of operating profit by 2028. And I'm pleased to report that we're making good progress on all of these. So we start by, taking a look at the branch network. We're now really starting to build momentum with our expansion strategy. So following the addition of Bishop's Salford and Watford, they'll be opening quarter four last year. Slough and Tonbridge both opened their doors this month with Hemmel Hempstead, Winchester, Bury St Edmunds, Croydon, and Collendale, all due to open in quarter two.

15:59 So that will represent in total nine branches over the past kind of well, if you include the, you know, the half year over eight over an eight month period. We also did three relocations in 2024, and we'll complete a further five this year. The new branches all display our new branding and signage with doors and windows now featuring more prominently, and they're all now trading well. In addition, we strengthened our branch leadership team with the appointment of Stuart Livingston as chief operating officer. Stuart brings a wealth of trade and retail operations experience gained with the likes of Houdons and Screwfix. And I'm pleased to say Stuart is settling in well, joining us in early January. In terms of windows and doors, we generated sales of 27,000,000 in 2024.

16:48 That's up 3,000,000 on '23, ending the year with 92 branches live on the program. Our plan now is to accelerate the rollout further and have all branches operational by midyear. Our conversion rates on quotations remains high at just above 40%, and we are therefore confident in our ability to deliver the 35,000,000 of incremental sales that we targeted in our strategy by 2028. The addition of value nets will enhance our aluminum offering through the branches and extend our composite door range, providing further impetus to this initiative. The response and support from our fabricator partners has been fantastic. They all see the growth opportunity, and we are now leveraging that to cross sell aluminum with six of our largest fabricators already committed to switching to Alienet. In fact, three have already placed their first order.

17:44 Our extended living category delivered £10,000,000 of sales in '24, more than double what we achieved in 2023, and is firmly on track to hit 30,000,000 of sales by 2028. We're delivering a high quality product, an exceptional customer experience as evidenced by the number of five star Trustpilot reviews that we've got. And after a slow start, extensions are beginning to take off, and we believe that this addition to the range will become a major contributor to our 30,000,000 target for this category. And, again, the quality of the product, speed of installation, and affordability are all scoring high with homeowners. On digital, ecommerce sales of 4,700,000 were 57% in 2024 with organic web traffic up 22%.

18:32 The website also generated 38,000 leads, a 138% increase. We also signed up 11,000 new accounts generating a spend of £10,000,000 last year. The launch of our one hour click and collect service, drop ship on adjacent products, bulk buys, and web exclusives are all helping to drive improved customer acquisition and loyalty. And on that note, we're currently trialing a new loyalty program in our East Midlands Region and will provide a further update on our plans for that at our interim results in September.

19:04 On people first, I just wanna give you some snippets, which I think highlight the progress we are making on culture. First of all, on health and safety, we improved our lost time incident frequency rate by 30%, finishing the year at four. World class is often, considered to be less than two. So with the progress that we've made over the last two years, we're on course to do that. In September, we initiated our first set of external people survey administered by Greatwood Talent, and we had a 70% response rate generating a score of 59%, which we are told is a credible result for a first survey. Great Britain also administer our people onboarding surveys, which we launched last May, and it's encouraging to see that we are already getting a 63% response rate and a high engagement score of 84%.

19:53 Our New Careers website has increased direct hires to 85%, saving money on agency fees. Now still lots to do here, but I strongly believe that we're beginning to see a positive shift in our culture. And that is what I'm hearing from employees during my brew with the boss sessions, which is another initiative that we launched last year. I'll now hand over back to Michael who will talk about business effectiveness and ESG. Thanks, Darren. Our objective with business effectiveness is to make EUROCELL a lean and efficient business. So we're upgrading our business systems to increase efficiencies and improve the customer experience. As you know, we're in the process of replacing our ERP systems. The first part of this is a new trade counter system in the branch network.

20:39 IntactIQ will transform the way we interact and transact with our customers in the branches, including simplified processes and the use of electronic point of sale functionality. The second part is a new ERP system to support all other functions of the business, including manufacturing, recycling, and finance. With IFS, the objective is to improve efficiency via the automation of key business processes and deliver management information, better management information for faster decision making. The project is progressing on time and to budget with the next nine months critical to its overall success. As previously reported, we estimate total costs will be approximately £10,000,000 over the twenty four to twenty six period, and we expect transition to complete around mid twenty twenty six. We'll manage risk very carefully with board oversight and a highly experienced IT director in place.

21:29 We're also embedding a continuous improvement philosophy into the business, which is highlighting opportunities for efficiencies. For example, in January 25, we began a restructuring of the branch network by removing a layer of regional management and reducing the size of the Salesforce. In parallel, we're upskilling branch managers to drive greater ownership for branch performance. We expect to complete the restructuring by the end of q one, generating annualized savings of approximately £2,000,000.

21:55 Finally, we're also targeting efficiencies in operations with work in progress to reduce production scrap, improve labor utilization, and make better use of our property footprint. With ESG, we want to earn a reputation for being a truly responsible company. As you know, EUROCELL is already a leader in PVC recycling, preventing 3,000,000 waste windows being sent to landfill every year. We've now increased the proportion of recycled material used in our manufacturing up to 32%, which drives significant cost and carbon savings compared to the use of virgin materials. And we have a target to reach 36% by 2030. We're working with a specialist ESG consultancy on the development of our ESG objectives, data collection, and disclosures, supported by appropriate governance and controls monitored through our board led social values in the ESG committee.

22:46 We're targeting net zero carbon emissions by 2045. Early in 2025, we filed science based targets with SBTI. And yesterday, we published our net zero transition plan, which will be summarized in the 2024 annual report. The transition plan includes a near term target to reduce scope one and two emissions by 70% by 2034, primarily through a transition to 100% renewable energy, the conversion of our commercial fleet to HVO plus moving company cars and vans to EVs. Medium term scope three actions include optimize optimizing the use of recycled material in production, and over the long term, engaging with our suppliers on their own science based targets, which we hope will support switching to a commercially viable low carbon alternative to to traditional PVC resin progressively over time.

23:40 Finally, we've also made progress with the other initiatives we have to drive carbon reduction, including further investment in on-site electricity generation through the installation of solar panels at our largest operating facilities and using a lower carbon PVC resin in the production of our modus profile this year. And with that, back to Darren to talk about Alienet. Thanks, Michael. So two weeks ago, we announced the acquisition of Alienet, a group of four privately owned businesses comprising aluminum door and window profile, solid timber core composite doors, and aluminum garage doors. Group generated sales of 43,000,000 last year, split equally between the three product categories. The consideration of 29,000,000 with an initial payment of 22,000,000 represents a six and a half times multiple on the 2024 EBITDA of 4,500,000.

24:32 With the earn out, the maximum consideration increases to 35,000,000, which would equate to a four times multiple on our unit's projected 2028 earnings. Our net debt is therefore forecasted to finish this year below one times EBITDA, and the acquisition will be accretive to our underlying 2025 earnings. By building a meaningful position in aluminium was the primary driver for the acquisition, particularly as aluminium has grown its share to 17% of The UK door and window market by volume and 36% by value. However, the other businesses are all natural product adjacencies to our existing portfolio, which is highlighted in the next slide. So if you look at this, the addition of Alunet's alumina aluminum door and window system perfectly complements our leading position in PVCU profiles and provides fabricators with a one stop shop.

25:30 The addition of solid timber core composite doors to our entrance door range and garage doors under our extended living range will enable trade installers to offer homeowners a complete range of suited products from EUROCELL.

25:45 Look at Alunet then in terms of, you know, the aluminum systems business. Currently, 85 of their sales are patio doors, and 70% of revenues are from pure aluminum fabricators. The launch of the new Alluna window system in early April, combined with EUROCELL's new aluminum lantern, will create create the Alluna whole house concept and a sector leading proposition for PVC fabricators who also fabricate aluminum. And there's more and more of those that are doing that. As I mentioned earlier, six EUROCELL fabricators have already decided to switch to Alunet, and I expect more to follow. Turning to Comdoor based in Stockholm, Trent. They're a fast growing manufacturer of premium solid timber core composite doors. And the combination of Comdoor and Vista, our PVC panel and GRP foam composite door business, positions EUROCELL as the market leader in entrance doors with a good, better, best offering.

26:46 We see opportunities to cross sell Comdoor and Vista to existing installers of both brands as well as distributing Comdoor through our branch network. We're also ramping up Comdoor's digital marketing activity to generate homeowner leads for their growing network of loyal installers. And then lastly, on garage doors, JD UK are a supplier of sectional and side hung aluminium garage doors. UK Doors Midlands manufacture aluminium roll shutter garage doors. And many garage door installers are already existing EUROCELL customers through the branch network. So, again, a fantastic opportunity to cross sell this range of products. We also see opportunities to generate homeowner leads to create pull through for partner installers. So in summary, a decent set of results against a tough market backdrop with promising growth and progress on all of our strategic initiatives.

27:41 The acquisition of Alunet is a great fit and enhances our home improvement proposition, which will accelerate our path towards 500,000,000 of sales and 50,000,000 of operating profit by 2028. Although we've seen some early signs of a pickup in the housing sector through our new build fabricators, our core RMI market remains challenging. Although we do hope to see an improving picture as we move through the second half. We're therefore continuing to take decisive action to reduce costs, improve efficiencies, and control cash. I think this leaves us extremely well positioned to benefit from a sustained market recovery whenever that comes. So, that concludes our formal presentation. Obviously, Michael and I will now be happy to take questions.

28:28 There's a few that have appeared already on the the q and a board, so perhaps we'll start there. Do you want to take the first one, Michael, on for you? Yeah. I'll take that. Okay.

28:43 So the first question is the r and s states we paid an interim dividend of 2.2p per share in October 24. The board proposes a final dividend of 3.9p per share, which results in total dividends for the year of 6.1p per share. Why do your presentation side slide show 6.05 with 6.1 p on slide six annotated as dividends for 2024 of 6.05p per share rounded to one decimal place for the purposes of this chart? So to be clear, and I I chose my words very carefully there, you would you would have heard me say the

29:18 dividend is up exactly 10%. So the final dividend for 2023 was 3.5p. Exactly 10% on top of that would be 3.85 p. Added to 2.2 from the interim gives you the 6.05. You'll see that in the first two pages of our r n s and in our slides with that appropriate footnote. The rest of the r n s is rounded to one decimal place for consistency throughout that document. But to be absolutely clear, it's up exactly 10% year on year, which is what we guided to in in September at our half year when we delivered the interim dividend and half year results. K. Thanks, Michael. Next one, which was presubmitted.

30:06 In your own words, what are your unique selling points? Well, look, I think there's two things here. One,

30:15 we are a one stop shop for all exterior home improvement opportunities with the probably the roof tiles being the exception. You know, we cover every aperture, and we're agnostic on material covering the two main key products in the market, both PVC and now aluminum with the Alienet acquisition. And I think the other thing that makes us unique is obviously the strength of our branch network. We're already the largest network of, I'll I'll say, building plastic outlets, but, obviously, that, again, is now different because of the Alunet acquisition and that we also now now offer aluminum products as well. So we we're a you know, we have a large network of fenestration trade counters, double our nearest competitor.

31:06 And, obviously, we're adding to those as part of our strategy. So I think those are the two things that really make us unique.

31:14 Next one. Sorry. I've got it here. You got it. How has EUROCELL's branch network expanded in 2024, and what are the plans for 2025? Yeah. Well, I think I hopefully, I've covered that in the presentation. As I said, we we we've been aiming to do about 10 branches a year over the next five years, and we opened two at the end of last year, Bishop's Tortue and Watford. As I've said, seven opening in the first half of this year. At at that point, I mean, we're still searching for sites. We're still doing relocations, as as we said, to optimize the network, but we will continue to expand. We we know exactly the towns and cities where we want to be, And it's just a question of timing, obviously, making sure that we find the right locations, and then moving forward with those. But I think for this year, we've already made a a very good start.

32:15 Hopefully, that deals with that. Yeah. Next one is the garden rooms initiative has seen strong growth with sales doubling year on year. What are your expectations for this segment going forward, and how significant could it become in your overall mix? Yeah. I think, again, making good progress on our extended living range. Garden rooms, you know, continues to grow. I think in terms of the 30,000,000 target that we've set, I actually think extensions, which obviously we launched about a year ago, extensions will be a significant contributor to that target just because of the feedback that we're getting from customers. Customers that were considering extending and looking at, say, a traditional brick built option and finding how expensive that is and also very, very disruptive compared to our solution, which is, you know, almost an out of the box solution where we're using modern methods of construction.

33:15 As I say, far quicker to do, less disruption, and far cheaper than its traditional extension. So we found many examples where customers were probably not gonna go ahead, but then looks at our solution and it became affordable. So, yeah, I I think we're very confident about the the opportunities there. And I think I think, look, we've got a great product with our garden room range. If you check out the reviews on Trustpilot, you will see that it again, fabulous customer experience. Our team do a a brilliant job. It's high quality product, and I'm confident that we will continue to take share in that sector. So all positive. Next one is with the recent acquisition funded largely through your existing £75,000,000 RCF, how do you assess leverage and balance sheet flexibility post transaction?

34:07 I think in the presentation, I talked about our capital allocation policy and as part of that policy, maintaining debt levels below one times EBITDA on a pre IFRS 16 basis, and and that's what we intend to do. You know, you you you can do the maths on the acquisition and and work out that we had £3,000,000 of debt at year end. The consideration of 29,000,000 is 22 plus deferred over four years of seven. So you can see debts probably at the moment in the high twenties. And we've also confirmed through this through this results release that we expect debt to be below one times EBITDA at the end of the year in line with the capital allocation policy. Now if I look at the what the analysts have published subsequent to the acquisition and subsequent to our results, that they've got pre IFRS 16 EBITDA of about $44.00 at the end of this year. So, you know, we're we're gonna be, I think, some way below that, maybe, again, looking at their consensus, if you will, for net debt, it's at about 30,000,000 at the end of this year.

35:22 So something around point seven to point eight times would be where we would be at the end of twenty twenty five. That's Michael. And we've got Matt. Which lead indicators do you monitor to predict trends in RMI? Well, look, in my experience, the the key leading indicator is all about housing activity, Whether you do mortgage approvals or mortgage completions, there's generally a six to nine month lag depending on which one you choose between a spike in housing activity in terms of mortgages and then seeing that in RMI. So we are we're definitely looking at those stats, which obviously are publicly available. But, also, we're monitoring closely sales through the branches because the branches are, you know, really all about RMI. So and then on top of that, you've got some of our trade fabricators.

36:17 So these are different to our new build fabricators that are predominantly focused on the RMI market. Again, we see, you know, or we we watch for activity in that space. So there's a number of data points that we can use, but, I would say, mortgages are are the main the main driver and activity in new build. The distance your customers this is can the customer the distance your customers are willing to travel to your branch network, is that changing, increasing, decreasing? Well, as a rough rule of thumb, our view is that twenty minutes is is probably the maximum distance that most tradespeople will travel to to pick up the materials.

37:03 Having said that, at all of our branches, we offer a delivery service through our own fleet of vans. So, you know, it's not always necessary for a trades person to to pop into a branch. But twenty minutes is is the rule of thumb. Is it increasing or decreasing? Not sure, if I'm honest. But, clearly, what we're trying to do is become a lot more convenient for our customers by offering things like the one hour click and collect. And tradespeople can can can get visibility of our stocking levels by going online to our website so they know we're gonna have the products in stock. But as I say, equally, we can we can deliver to sites as well. I don't know about the next one. Trying to assess your branch reach. I think that was connected to to the one I've just answered. Yeah. Okay.

37:51 That looks like all the questions we've got as it stands. Perfect. Darren, Michael, thank you very much for answering those questions from investors. Of course, the company can review all the questions submitted today, we will publish the response down in investor meet company platform. But just before redirecting investors, provide you their feedback, it's particularly important to you both. Darren, could I just ask you for a few closing comments? Yeah. Thanks, Ali. Well, as I say, I I think last year was a year of progress for EUROCELL despite a tough market backdrop. Yeah. I think we delivered a robust performance both on sales and, obviously, on profit being up 32%. We're very focused on driving shareholder returns.

38:37 I think we talked about the buyback and what we've done on the dividend. And, obviously, the announcements of the additional buyback this morning, again, underlines our confidence in the future of this business. What I would say as well, and hopefully, you can pick that up, very excited about the acquisition of Alunet. It's a deal we've been working on for some time, and I think it's gonna be a great fit and a great acquisition for the business moving forward where we're inheriting a good team of people that culturally fits in very well with us. We have a shared view of the opportunity in the market, and we're working hard to to bring about those synergies, which I'm absolutely convinced that we will. It's a really exciting time to be passed in the business. We've got a great team. And like I said, we could we could mope about the market. We can't do much about that, but we are extremely well positioned for any recovery when it comes. And but we are we're not resting on our laurels. We're we're working hard on our strategic initiatives, and, I think there's a bright future ahead for this business.

39:39 But appreciate, your attendance this morning. And, obviously, like, we said, Ali, always always grateful to get, people's feedback. Definitely. Darren, Michael, thank you once again for updating investors today. Could I please ask investors not to close the session? As you now be automatically redirected to provide your feedback in order management team can better understand your views and expectations. On behalf of the management team of EUROCELL PLC, we'd like to thank you for attending today's presentation, and good morning to you all.