Headlam Group (LSE:HEAD) — Final Results

0:01 Good morning, and welcome to the HEADLAM GROUP PLC final results investor presentation. Throughout this quarter presentation, investors will be in listen only mode. Questions are encouraged, they can be submitted at any time just by using the q and a tab that's situated in the right corner of your screen. 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. However, the company can view all the questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to CEO, Chris Payne. Good morning to you, sir.

0:33 Good morning, and thanks for joining our presentation today. I've I'm joined in the room here all over on two different screens. Adam Phillips, the group CFO, is with me as well. So we'll both be presenting today. Just by way of introduction, there's just a a slide here which is just outlining what we're gonna cover. So I'll be covering an update on our transformation plan, which is progressing well. I'll be talking a little bit about the contribution that we're already seeing from our strategic initiatives that we started a while ago. And Adam I'll be handing over to Adam shortly to talk about performance in 2024 and how various parts of the business have fared. So let me turn to Adam to start with, who will talk you through an update on last year's performance.

1:21 Thanks, Chris. Good morning, everyone. So I've got a handful of slides on the P and L, balance sheet, and cash flow, but I'll start with a brief update on the market and and how the market performed in 2024. So on this slide,

1:35 you'll see a few of the indicators that are relevant for the foreign market. We've shown these before. So top left hand side, consumer confidence, and you can see that's remained negative. It has been on a bit bit of an improving trend over the last eighteen months, but has remained negative and fragile. And you could in particular, you can see that drop down in the late summer autumn last year around the time of the the government's budget announcement. And and that what that means, that lack of confidence is is being that despite discretionary income improving, despite interest rates and inflation coming down, consumer spending on home improvements has been has been weak, and home improvements has been one of the weakest categories of retail spend, for the last couple of years. And that chart in the middle there shows that data on, on consumer spending on home improvements.

2:26 On the right hand side, on a more positive note, housing transactions, and this is a good lead indicator for future demand in the flooring market. That has been in growth now, for almost a year, which indicates there should be some good demand building, as and when confidence can be unlocked. So what does all of that mean for for the flooring market in 2024? And on the bottom of the slide there, you can see, we've now had three consecutive years of decline in volume in the flooring market. And in 2024, in particular, about 9% decline both in HEADLAM's UK revenue and also in the market. And HEADLAM maintained share overall in The UK in 2024.

3:12 So just turning to HEADLAM's revenue then, and I'll start at the top of the table, regional distribution. That's the part of our business that's been most impacted by the market conditions, particularly with the residential market being weaker than the commercial market. And in that part of the business, revenue declined 16%. We continue to deliver growth in the strategic initiatives of larger customers and trade counters despite a weak end consumer demand, and larger customers revenue up 4%. And, actually, this is despite actually quite a bit of change in that channel this year with three retailers dropping out. So we've had Carpet Right and Homebase, entering administration, and then SCS made a strategic decision to exit the flooring category.

4:01 And now Carpet Right was only a tiny customer of ours, but Homebase was more meaningful, and we we we delivered revenue of 7,000,000 with Homebase in 2024. But despite that good growth, and that's reflecting the relationship we've got with Tappy who've taken a large proportion of the CarpetRide business, as well as two new customer wins in that segment, in 2024. Trade counters, good growth 7%. We've seen continued good growth in trade counters, and those investments are performing in line with the business case despite the market headwinds. We ended the year with 76 sites, and we expect to end the investment phase of the trade counter business this summer, with around about 83 sites. So just moving down the table, overall UK then down 8.9%.

4:51 And as I mentioned, that's in line with the market overall. In Continental Europe, the market conditions were were even more challenging than in The UK, and we saw revenues there declined 14.9%. So just taking a look at the income statement, we've covered revenue on the previous slide. Gross margin then of 29.9%, that was a 180 basis points lower than the previous year, and this was due to four factors. Firstly, stock clearance, and we undertook significantly heightened levels of clearance activity during the year linked to the transformation plan to, to simplify the network and ranges. Secondly, rebates, and it's a combination of the volume decline in the market combined with our drive to improve stock turn in the year, which reduced purchases from suppliers in the year, which impacts on rebates or rebate tiers, etcetera.

5:44 Thirdly, mix, and the revenue from larger customers whilst contributing positively at operating margin is at a lower gross margin than than revenue from retail distribution, for example. And then fourthly and finally, price and promotional activity. And in response to market activity on price, we did respond with some price and promotional activity in the period, but this was overall a relatively modest driver of the overall move in gross margin in the year. So moving down the p and l, operating costs, these increased by 6.9% in the year mainly due to cost inflation. So cost inflation added 7,500,000 of additional cost in the year now. And then year before, in 2023, added 10,000,000 of cost. So it's come down, but it's still elevated compared to historic levels where we perhaps would see about 4,000,000 or so of cost inflation a year. And in 2024, that was driven by still elevated pay inflation across both The UK and Continental Europe. So in The UK, average pay inflation was about 6%, and that was particularly driven by the national minimum wage increase of 10% at the start of last year.

6:48 And then in terms of costs, we also invested in new trade counter sites, which added about 5,500,000 of operating costs into the business in 2024. Now mitigating actions offset some of that, and this that includes the benefit of the introduction of the dynamic route planning in our transport network, which we introduced towards the end of 2023. But it's important to note the transformation plan, which we'll talk about in more detail later, didn't have any impact on 2024 operating costs. These benefits have started to be recognized in 2025. So just moving down the rest of the p and l, interest costs were higher year on year reflecting the average borrowings prior to the property disposals at the end of the year. And, all of this resulted in an in an underlying loss before tax of 34,300,000, which was before non underlying items of 7,200,000 expense, which I'll go through now on this slide.

7:42 So a net p and l expense of 7,200,000, but actually a net cash inflow of 48,500,000. And if I take if I just focus on the middle rows, which are the larger ones, so if you see the third row down, business restructuring change related costs, that was a charge to the p and l of 19,700,000, although only around about half of that was cash. So the 10,200,000 cash cost, principally comprised severance payments, restructuring costs, relocation, and jewelry and running costs associated with moving operations from Ipswich to Raleigh. And the non cash element of 9,500,000, in that row related to stock write downs. Next row down, profit on sale of property. So, I'll talk a bit more detail about property sales in a moment. We've got a separate slide on that, but profit of 21,000,000 and cash inflow of 61,000,000 generated from those in the year.

8:35 And then lastly, ERP system development, we guided at the start of the year to a spend of around 3,000,000, and we came in slightly below that. So 2,600,000, cash spend on the ERP replacement project in the year. So moving on to cash flow. Good operating cash generation with underlying operating cash flow of 27,600,000, in the year. Now that does include 11,000,000 of VAT that we collected on the property disposals in December, which we then paid over to HMRC in January. But nonetheless, still a good positive underlying operating cash flow even if you strip that out. And this reflects working capital movements. And so if you move down those one by one, you can see inventories there. So we reduced stock levels in the year.

9:23 And if you exclude the movements on provisions, the cash benefit of this was 17,600,000 as set out in this table. Receivables was an inflow reflecting the movement in revenue, and payables was an inflow of 10,700,000 in the year, but this does include that 11,000,000 of VAT. So if you normalize that out, payables were basically flat year on year. So no change in payables year on year. And we also saw no significant changes in suppliers or terms of supply, such as payment terms, etcetera, during the year. To move in further down the table, CapEx. So CapEx is 10,600,000 in the year, and that compares to 18,000,000 the year before, 14,000,000 the year before that. And we expect that CapEx number to drop further. We'd expect about six or seven million this year in 2025, and that will taper down particularly as the trade counter investment phase comes to an end, and as we cycle through the replenishment requirements on existing equipment, which was a driver of the CapEx spend in 2023.

10:25 Lease payments were a 12,900,000 cash outflow in the year, and there was a 4,800,000 cash outflow for dividends in June last year, which reflected the final dividend payment in respect of 2023. And then finally, towards the bottom of the of the table there, property disposals were 61,000,000 cash inflow, more on those in a moment. And the not other non underlying items represented a net 12,800,000 cash outflow as set out on the previous slide. So putting all of this together, all of this resulted in a net cash position at the end of the year of 10,900,000, and that compares to a net debt of just under 30,000,000 at the start of the year. And on this next slide here, I won't go through this in detail, but this this is just lays out a bridge of that 30,000,000 net debt at the start of the year to the 11,000,000 net cash at the end of the year. And you can see the working capital and property disposal green bars in there. That's cash inflows, offsetting lease payments, CapEx, dividend, the dividend from 2023, etcetera.

11:32 So just a little bit more detail on property disposals then. So we sold five properties in the year as set out in this table. Three of those, the first three were vacant sales, and these were properties that became surplus to requirements as a result of the network optimization initiatives in the transformation plan. Two of the properties, Gildersham and Leeds, were sale and leasebacks, and the implied yield on those leasebacks for those two properties is broadly equivalent to the group's cost of borrowing. So in total, the disposal disposal proceeds were 61,000,000, and all of those properties were sold for a significant premium to book value averaging 68 percent. And at the end of the year, the group continued to own property with a book value of 67,000,000 and a market valuation as of January 2023 of 94,000,000.

12:22 So final slide for me before I hand over to Chris. One of the characteristics of HEADLAM that we've talked about before is the strong balance sheet. And on this slide, I've put the the full balance sheet on the left hand side, drawn out on the right hand side, just a few of those few of the headline highlights. Firstly, being the good, good liquidity headroom, so 10,900,000 of net cash at the end of the year and 72,000,000 of borrowing facilities. And the progress we made in the year on the cash upside from the transformation plan has enabled us to reduce the size of facilities, that we need from a 100,000,000 to 72,000,000, which reduces the fees that we pay on unutilized facilities. The majority of the 72,000,000, facilities that we have is comprised of a 61,000,000 revolving credit facility with three lenders, and we have a revised covenant package in place whilst we implement the transformation plan.

13:19 Second point on the balance sheet, the orange box, strong asset backing, and that includes 94,000,000 of property assets and over £200,000,000 of stock and receivables that aren't leveraged in any way. And then finally, during the year, we also further strengthened the balance sheet by completing a pension buy in. And what this does is it significantly derisks the group's exposure to moving in pension assumptions, and it removes future contributions into the scheme. I'll now hand you back to Chris. Okay. Thanks, Adam. So I'm going to now focus on an update on our strategy, what have we been doing over the last year, and how we see that moving forward, and also the transformation plan. So a bit more detail about what we're doing to deliver the transformation plan, and then how we see the benefits in terms of p and l and cash working out over the next couple of years. So the first slide really for me is just a reminder. So this is, look standing back and looking at the market opportunity. So this is a slide we've shared before, and it talks about the amount of flooring spend in The UK. So 2.5 to £3,000,000,000 worth of flooring demand in The UK at at distributor prices. And this is a slide that I've shared and is real and underpinned to to the strategy and how we see things. So this slide shows different customer types.

14:38 So we've articulated seven different types of customer spending that 2.5 to £3,000,000,000 a year. On the left hand side of the slide are our retailers and this is the area which HEADLAM has had a degree of stronger part of the market and where most of our customers and most of our heritage has been in service in that customer group. And as you move further to the right, we see HEADLAM's weighting or share of that customer segment declining. So on the right hand side, large contractors and online buyers of flooring is where HEADLAM has had a lower market share, and on the left hand side is where HEADLAM's traditional kind of heartland has been around serving the independent retailer and local trades people. So that's really the shape of the market as we see it and is the key to why a part of our strategy has been to offer service to more of the market. So we've been looking at flexing our business model, flexing our operating model to offer service to as many parts of the market as possible in order for us to broaden our base, broaden the business base out to to to offer service elsewhere as well.

15:47 So that's just a reminder of the the market as we see it. If I move on to the the the next slide, has got two sides to it. So this is a bit of a reminder slide and bit of an update at the same time. So on the left hand side is our strategy. So that's the strategy which has got five pillars. So there are five pillars on this slide. And if I just got a run through where we've got to with those and then we overlay the transformation plan on the right hand side. And this is effectively an acceleration of the strategy that we've already articulated. So the the strategy of five pillars, the the first one on the left hand side, is really an articulation of of being great at service. So that traditional heartland of the independent retailer, which is still the most important part of our market, still the most critical customer segment for us, is imperative that we remain great at service, great at offering our existing customers the best service that we can. And we regularly interview and survey our customers, and we've we've always remained the best the best of service, the deepest, broadest range of products available in the marketplace.

16:53 It's important that we keep that keep that in place. The second element of our strategy is to look at growth. So how do we offer different types of service and broaden our customer base out? And that's a key from the previous slide is that we recognize that there are certain customer types that we've traditionally had a low share of their spend, and there's an opportunity for us to broaden our strategy out by offering service to new types of customers. And that's why we've moved into investing in the trade counter network, for example, and expanding our footprint in large customers to recognize that that's where HEADLAM traditionally has had low share. The third element of the strategy, the third pillar on that left hand side is our operating model. So this is around being operationally efficient and effective, and this is around, the use of technology, being cost efficient, and consolidating some of our network. And and it's why we've been doing things over the last couple of years such as transport consolidation, moving to a UK network rather than, a collection of regional businesses, which, HEADLAM has been for many years and have been growing up through that sort of acquisition strategy of the past.

18:03 And we've been able to move to a much more integrated model, certainly from an operational perspective, and the transport consolidation that we undertook a little while ago is one of those examples, and that's why, that's a key part of our strategy. And on the right hand side, of those final, two of the five pillars, is around how we, operate as a business, so our ESG credentials, how we present ourselves to our employees and making ourselves a great place to work. And these slides that we're gonna talk about today focus mostly on the first three elements of this strategy and the final two that I've just described. There's a bit more detail in our RNS and our report and accounts that we'll publish in due course. So it's not that we've overlooked those, but we've focused a lot more on the transformation of the business plan rather than those two elements of strategy which are detailed elsewhere.

18:59 So that's that's the sort of summary of our strategy. And the acceleration that I described is this overlay of the transformation plan. And I talked about this at the half year, and these slides just give us an update on what we've been doing since that, market update and how we see it playing out in the future as well. So we said that we'd provide a bit more clarity over the details of the transformation plan, but importantly, the value. So how much are we gonna create by by p and l benefit? How much cash are we gonna generate? And we'll come on to talk about that in a little bit more detail. So three elements. I like to think of this a little bit as sort of front office, which is the customer offer. So middle office, if you like, which is our network and operations, and then back office on how we actually operate. So those are the three three ways to think about it.

19:46 So if I start with the front office, the sort of sales piece, and that's really where we've started. When I say started, Adam was talking about the benefits of of transformation, not really in our 24 numbers. So we we announced this sort of big change in q four, so in in in September last year, so it really started to take effect in q four. We've migrated 17,000 customers. All of our customers now have been moved on to this sort of single account, Mercado account. All of our wholesale businesses, all those businesses that we're serving the independent retail in particular, have now been merged into the Mercado business. So 32 trading businesses all into one. 17,000 customers migrated. As you might imagine, that took some time, and we completed that at the end of January. So it took a few months to get through that process.

20:38 I'm pleased to say, you know, we started there. Customers responded positively to it. Some of the feedback was, can't believe it's taken you so long to do it. You know, I think it's the right thing to do. Simplicity, it makes it much easier for us to do business with you. Some really good feedback from customers. In doing that, we were able to, I suppose, invest in some of our sales team as well. So as part of that restructure, we've been able to organize ourselves so that our sales teams now can operate kinda hard line between postcodes. That means that in a territory, a town or whatever, a single salesperson will have the relationships with our customers in that territory rather than customers having two or three salespeople to talk to or some of our sales team, in some cases, even worrying about losing their sales to a a fellow HEADLAM salesperson. So we've we've we've cleaned all of that up, which has made it much easier for our customers to trade with us, And we've been able to invest in our sales team. So giving them better kind of incentives, rewards, giving them that kind of confidence to go and sell in their marketplaces.

21:42 So that activity completed. It's meant that we can now go forward into the market with confidence acting with one voice. I think that just look ahead. So the orange bars at the bottom are things that

21:55 we are now sort of focusing on. I think one of the important elements of the transformation so far from this front office piece is that we've been able to simplify our digital assets. So we've had, as you might imagine, each of those 32 businesses had their own websites. And that means it's one, confusing for the customer, but second, it makes it quite a big burden for us to maintain those websites, keep them cutting edge, keep them modern. So we're now able to move those onto a single ordering portal for customers for simplicity. But it also means we can now start to invest in that single portal and make it much more customer focused and enhancing that customer experience when when they go online. So, you know, I've I've long talked about the experience of, trying you to create an Amazon type experience for b to b customers, which is a bit of a holy grail. But, you know, for us, it's around, you know, customers should expect and should expect to see it when they log on to to place an order for products that, you know, we can make some suggestions for complementary products. Or if we're out of stock of a particular one, we could suggest some alternatives for products that are very similar.

23:02 And customers can also see what they've bought before, so it simplifies their ability to order again. So all those kind of investments now become possible. We're operating, on a on a single platform. I also talked about investing in the independent retail space. This is an important feature for us. As you might imagine, up until now, because we've been contemplating this transformation, we haven't launched an awful lot of new product. We haven't put many new stands out into the marketplace. This is really the lifeblood of the independent retail space. So now we have this sort of single Mercado model, it means that we can go and refresh the POS, the point of sale that's in the customer base. And we've now started to engage our customers about putting new equipment out there, new launches of new products that all of our salespeople can get behind. And it's quite an exciting change for the group that we can really get behind these new new launches, and we expect those products to start going

23:56 into the market at the end of q one and q two. So there's a big POS refresh we're planning for our customers to benefit from in the mid year. So I just talked about this sort of middle office, and I've got a couple of slides here just to bring this to life a little bit. This probably started a bit earlier. I talked about the transformation of the transport model, for example. We really needed to put the building blocks in place for this transformation to be a success, and that's why I think I've described it as an acceleration of our existing strategy. This isn't a new sort of strategy. This is something that just accelerates what we've already started doing. So this move to a sort of more of a UK wide network rather than a regional one is important for efficiency and effectiveness and consistency of service across the country. And this is something we started a while ago.

24:45 And Adam commented on this sort of things like the the fleet monitoring. So our customers can can get like a parcel tracking type service for their for their delivery so they know when trucks are turning up and delivering. And it means that our routes can be changed daily. So depending on where the customers are getting drops, and and and we can flex and move our delivery routes accordingly using technology, and the customers can see where their deliveries are. So that's been in place, and that meant that we can, now start to manage our network as a as a UK wide, operation, which is great. It has also meant that as a consequence of this sort of focus on efficiency and effectiveness, it's meant that we've been able to free up some of these, assets. So the things that were previously a bit locked, because they were needed for regional distribution.

25:37 Moving to this national network has meant that we've been able to liberate these assets. And as a consequence of the changes, been able to dispose of some of the buildings and create a sort of capital event. So there's more of this. Know, we're going to continue to review the opportunities. The other thing that that throws up is that you're able to go deeper on stock for sales of that product in the in the postcode. So in the past, we would have been holding stock based on the sales of that particular territory. But now we've moved to this national network. We've unlocked all of the sales of the 32 businesses in the postcode, so we can actually stock hold close to the customer. So those types of changes now are possible, which means we should see a level a second level of efficiency coming through. And that's the focus for this year is now starting to leverage that single view of the customer, a view of how many sales and what stock we need locally to be housed in each of the distribution centers. So that's the next phase of the kind of middle office.

26:39 We actually just put a slide in here. I had a couple of questions come up from shareholders about why do we do things. So Ipswich in particular was one that we had some really good conversations with shareholders on. So relatively new site and therefore, you know, why would we sell a new site and what what's it all about? So I did an extra slide here just to just to dive into the detail. Just as a really as an example of why we're doing what we're doing and and what the secret is to this sort of part of the of the strategy. So you might imagine if we if you look at this with UK network and the map of The UK, once once we're a regional business, clearly, we had the distribution centers in the center of the region in which they were servicing. But if you move to a national network, you need those distribution centers to be much more aligned with a a national network and shape of a sort of at least a South East, for example, in this case. So a site in Ipswich didn't really make sense when you're looking at servicing London at the South East.

27:41 So by changing the viewpoint of the network, by putting the underpinning of all of that transport network that I talked about, the investment in systems where you could move routes around seamlessly, it's meant that we've been able to move to a new site and create a much better location for customers. So the sales that are being made in London and the Southeast can now be serviced from a site that's much closer to to the territory. The site that we've now moved to in Radian Essex is a lower cost to serve and a much smaller footprint than the old site, and therefore, there's an improvement in the the operational costs. And in doing so, we've been able to free up the capital by disposing of the old site. So not only have we moved service to a better location for customers, we've reduced our cost to serve, we've also created capital event for the benefit of the business. So lots to like about that type of thing. And and I and in a way, it sort of shows the

28:40 this sort of middle office benefit that we're able to create through consolidation of the network. And then thirdly, the third element, this sort of back office piece if you like. It's not just about, I suppose, consolidating the back office processes. This is moreover about giving us the ability to act as a single business. So I talked earlier about now presenting a single face to our customers. We can also now act as a single face to our suppliers. And up until now, we've only partly been able to do that. So we've been buying through these different entities around around the country. And now we can consolidate buying efforts and our energy into talking to our supply chain as a single voice.

29:27 It means that we can

29:28 stock in-depth of the of the best selling ranges. We can order with confidence. Our suppliers know that we're gonna order in-depth and deploy our stock around the country as we see fit. So it it does mean that we can, really leverage that scale in a way that we've been to do before. I think that's that's really a focus for this year. So a lot of the processes and a lot of the tidying up's been done, but now we're able to get after some of the benefits of scale, and go after that in a in a more meaningful way and and work with our suppliers to really understand what's selling and and frankly, not stop the stuff that isn't selling and remove that duplication from the the network that we had in the past.

30:08 So just to talk about the scale of the benefits and the timing under which they might fall, I'm just gonna hand back to Adam who can talk you through this in a little bit more detail. Thanks, Chris. So in September, we set out some targets for profit and cash from the transformation plan, which we put in that first column. And then we've now upgraded those targets. So

30:29 in the middle of this slide, you can see our latest targets on those, and I'll just step through those one by one. So from an annual profit improvement point of view, we're targeting 25,000,000 once fully implemented, and that's up from at least 15,000,000 was our target in September. And that is net of reinvestment, So that's an important note to make. So where we are, for example, investing, we've reinvested in market leading remuneration packages for the sales teams. We've reinvested perhaps in lease costs where we've moved Ipswich, which owned into Rayleigh, which is leased. That 25,000,000 is net of any of those reinvestment costs.

31:13 Gross one off cash benefit. So we had a target of at least 70,000,000 in September. We've now upgraded that to a at least 90,000,000, and that reflects some of the initial strong progress we've we've made. And that is through a combination of disposal of property and working capital optimization. And then one off cash costs, we estimate those to be around 30,000,000. That's slightly higher than the 25,000,000 we said in September, and that reflects the fact that we've now identified further projects for p and l and cash benefit. And those one off cash costs include things like restructuring, relocation costs, fit out of new sites, advisory costs, and also significant investment in point of sale materials such as display staff.

32:01 So just to, give you a sense of how those benefits phase in over the next few years, and on this slide, you can see we've set out the profile of those through to the end of twenty twenty seven and taking the annual profit benefit to start with, ultimately getting to an annual profit benefit of 25,000,000 recurring profit, stream from this program.

32:23 None of that was in 2024. We are targeting around 10,000,000 in the current year that we're in and then getting to the 25,000,000 annual run rate in around two years time or so. So get that 25,000,000 benefit in 2027. The the cash benefits then, so 90 mil at least 90,000,000 once fully, fully complete, 57 in 2024. So I've taken the the cash benefits we've achieved in the second half of twenty twenty four on the basis that we launched the transformation plan around about halfway through the year. So 57,000,000 of one off cash cash benefit in the second half of last year. We're targeting to cumulatively achieve at least 80,000,000 by the end of this year and then get to the target of at least 90,000,000 by the end of next year.

33:10 And then finally, cumulative one off cash costs. So we incurred 9,000,000 in the second half of last year, and we expect around about 10,000,000 additional this year, and then the rest phased over 2026 and 2027.

33:25 I'll, I'll hand back to Chris now on summary and outlook. Thanks, Adam. So I've just got a few slides here just to, finish off the presentation before we move to questions. I think the just in terms of current trading, you know, it's it's still been a relatively slow start to the year. I think if you look at the macro as as Adam described earlier, there's there's a lot of I suppose, feeling like the the market's going to improve, you know, at some point that that there will be a market recovery or there'll be an uplift in in demand. But we feel like we've been saying that for a little while.

33:56 We're not certainly not seeing it yet. So I think it's a bit of a slow start to the year, albeit the expectation is that the market will turn and there will be a bit of a positive contribution. So we're not really getting a helping hand from the market at the moment. So it is really important that we focus on our self help measures, and and I'll come into that in a minute. But in terms of delivering the in year benefits from the transformation plan, and as Adam just said, you know, there's £10,000,000 in year that will start to to impact 25.

34:27 The maturity of the initiatives also, you know, we'll we'll complete the trade counter rollout the initial investment phase this year, and that will start to therefore generate year on year benefits going forward. So, yeah, we're not getting a helping hand from the market at the moment. However, we do expect that the indicators, the macro indicators suggest that that will turn around at some point this year is the expectation. So on the longer term then, it's important that we focus on these self help self help measures. You know, getting us back towards profitability and breakeven and then beyond. You know, the the much of the existing initiatives, the maturity of the trade counters, the transformation plan we said, we just heard from Adam will generate £25,000,000 over the next couple of years. We don't need to see a significant recovery in the market for us to return to profitability.

35:15 But just a sort of a flat thing and a modest recovery of market recovery will will give us that following win, will really help us get there more quickly. But we're focusing on the bits that we can control, deliver the strategic initiatives, deliver the transformation plan, all of the benefits that Adam's just articulated are there for us to control and deliver with our own self help measures. So it's important that we can focus on those things, and the market will recover, at some point. So that's really the summary that I wanted to sort of finish the finish the presentation with, that we are progressing well on the transformation. It's given that confidence to us to upgrade the level of contribution both in terms of p and l and cash benefits from it, which is important that we've seen the continued growth from the strategic initiatives coming through, we've been able to report on

36:04 that. And those will start to mature and start to give some drop through profitability to help that recovery shape. And yes, of course, there there is some short term performance weakness there, particularly from the market, but to say controlling the things that we can control, delivering those self help measures is really the key for us turning the business around and getting back into profitable territory. So thank you very much for listening in to the presentation today. I think we're about to turn to some questions. Chris, Adam, thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions. You can do so just by using the q and a tab that's situated on the top right hand corner of your screen. But just while the company take a few moments for you the questions that have been submitted today, I'd like to remind you that recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboards.

36:56 As you can see, we have received a number of questions both pre submitted and throughout today's live presentation. And, Chris, I'll hand over to you now. Just start running through the questions, and I'll pick up from you at the end. Yeah. Okay. Thank you. I had a question here. If I just read it out, Consolidation of HEADLAM trading businesses seemed like an obvious strategy for a long time. Why did it take so long to finally do it?

37:18 I think of the way I described it earlier, you know, we needed to put a lot of building blocks in, a lot of foundations. So it's not really until we were able to unlock this UK network that we've been able to move away from the regional wholesale businesses into one of the sort of national brand, really. So I think it's important that we put all of those building blocks in place first. And we lined everything up, had the investment in, say, the transport network. We had some of the, I suppose, digital enablement there to go and and hence, we've been able to do it. And we spent quite a bit of time making sure that we communicated that cleanly and and clearly with our not only our colleagues, but with the customers as well. So, yeah, it it took quite a while to get there in terms of just putting those building blocks in place.

38:08 And so that's why, I mean, that's why we it's it's it's been now, it's been the right time. And frankly, we we need to do it anyway. You know, this is the time where the luxury of of of a buoyant market isn't there to to reserve. So we've gotta be as efficient and effective as we can, and this is the time to really simplify our offer to the customer, I think.

38:29 Okay. That's, the first one. So there's a question around mortgage approvals. Secretary housing transactions improved significantly towards the end of twenty four. And why are carpet volumes still depressed? So this is a question around sort of macro data. And in the past when we've tracked the housing transactions, they have been a really good lead indicator. So in the past when you look at we go we track data all the way back to 2000, various influences, if you like, or indicators on on subsequent flooring demand. And mortgage applications then leading into housing transactions leading into flooring demands, there is a pretty good

39:18 relationship between those. So mortgage applications, sort of three or four months, then lead to housing transactions which then sort of six, seven months later then lead to flooring transaction increasing. I haven't really seen that so much this time around. The first time we haven't really seen it. And the the one element that's been held back seems to be consumer confidence. So people's ability and desire to spend money on big ticket seems to be the thing that's holding us back. So all the macro indicators point to an increase in demand, whether it's

39:48 really comfort, for example, so wage inflation, outstripping inflation, interest rates, perhaps tendency just to start to drop. But even if it isn't dropping, the feeling is it might not go back up. And then this sort of housing transaction is the final piece. So I think we're just waiting for that consumer confidence to come back, and then I I think the expectation is there will be an increase in Florida demand as a as a result.

40:13 Adam, I might hand over to you for the Yeah. January and February sales performance. Yeah. So the question we've had here, for January and February sales in 2025, please advise the performance a, the difference in January and February 2024, and the difference between your 2025 budget for sales. So year on year, January and February this year, as Chris mentioned, down 6% year on year. So compared to 2024, January and February down 6%. February, a little bit better than January. We don't, we don't kinda comment on specific months in terms of budget, But as we've set out in the outlook, the expectation for the year based on the external data points is that the flooring market and related markets like RMI, etcetera, will show some some modest growth this year, likely to be back half weighted. But for the year overall, some modest growth.

41:15 Next one? Yeah. I'll take the next one. So quite technical on this one, so just bear with me while I read it out. So can you provide an update on how total equity per share changed over the past year? Additionally, how much was spent on dividends and share buybacks ideally on a per share basis? Lastly, what are the company's projections for these figures in the coming year? Okay. So so we don't give forward guidance on on these kind of things and on these numbers. We don't put projections out, but what I can tell you is what these numbers are and have been over the last year or so. So if I take equity per share to mean net assets per share, we ended 2024 with net assets per share of about £2.40. And the year before that, so end of twenty twenty three, it was about £2.75.

42:06 And that reflects the the the the financial results in the year that we've gone through. The question on dividends and share buybacks in the year in 2024, the only cash outflow on those was the 4,800,000 dividend relating to 2023 that and that equated to about 6p per share. But if you look back over 2020 over the last three years, 2024, 2023, 2022, there's been £59,000,000 of of buybacks or special dividends or ordinary dividends. So a total 59,000,000, and that equates to about just about just under 75p per share of dividends and share buybacks over the last three years. Thanks, Adam. Next question. So there's there's a there's a couple like this. I'll use this as an example.

42:54 So market share. So we made a statement in our results and in the presentation that we've we've held market share broadly flat, and we think the market was down around about 9% last year in The UK. So the question is, how you you've claimed to have maintained market share, but you got a 16% decline in reach distribution, but the market's not 16% down. Others have done better, for example, likewise. So, yes, that so those things are true. However, if you look at the other elements of our UK market, and we talked about trade counts as being quite growth over seven despite the weak weak market. And our larger customers also are showing some growth. The the we subscribe to some market data analysis, and we actually have some market share commissioned as well. So we're able to track our market share and the market data on a regular basis.

43:48 So in total, our market share has maintained, but it's true to say that we would have lost a little bit share in the regional distribution market and gained a little bit of share where we deploy trade counters, for example, and gain a little bit of share in in larger customers as well as we expand into those areas where we previously had low share. So when you look at it as a whole, our market share is maintained. And that's why what it's really quite important that we do address the the independent retail part of our marketplace. So it's still the largest customer segment for us. And as I said in in the presentation just now, it it didn't make sense for us to invest in new POS and a new range launches last year whilst we were going through that transformation and and consolidating the 32 brands into one. But now we can, and I think it's it's important that our sales teams have got that confidence to go and talk to customers and whether it's to regain share, we're certainly gonna be investing in that part of the market here, putting new POS into the market in order to go after that customer segment. Just to show the level of investment that that we're putting into that space. So it is important, and I think we lost a little bit of ground last year. It's important that we do get back into that and recover some share. But I think it's around the timing of when we could make the investment in new POS, the new range launches, and all of that's coming in this year.

45:16 Okay. Next one, Adam, for you. Yeah. Next question. So can you clarify and confirm the phasing of the benefits and costs transformation plan, please? The table shows cumulative profit benefit by 2027 of 25,000,000, but cumulative one off costs of 30,000,000. So does this mean a negative net contribution of 5,000,000 from the plan over these three years? So the way to look at this is that 25,000,000 of profit benefit is a recurring that is the what we're targeting is the recurring annual profit improvement stream from this program. The one offs then, the one off cash inflow and one off cash outflows, they're just one off in one year. They don't recur every single year. So it's not 25,000,000 less 30,000,000 is minus 5,000,000 recurring going forward. The way to look at it the best way to look at it the output of this transformation plan gives a 25,000,000 recurring profit improvement.

46:08 It also generates 90,000,000 plus of one off cash inflow at a one off cash outflow cost of 30. So you could net those two off if you want. You could go a net 60,000,000 of cash, and then you get 25,000,000 a year profit improvement from 2027. K. I think you've covered the next question, which is effectively capital allocation policy around return to to shareholders. And then there's a clarification question around underlying operating cash flow by changing payables. You want to cover that one? Yeah. Sure. So the question is underlying operating cash flow is helped by a large swing in change in payables of 34,700,000. How did this come about?

46:55 So the so payables in year, if you compare payables at the end of twenty twenty four compared to the end of twenty twenty three, they increased by 11,000,000, which was and, actually, that was all to do with the VAT on the property disposals, which we then paid over in January this year. So if you strip that out, payables are flat year on year. So there's no there'd been no sort of big swing in payables. It's pretty steady. Payment terms stay the same. Supply arrangements stay the same. So underlying, if you strip out and normalize the VAT bit, payables pretty flat. Over the next few years, you'd expect as as revenues and cost of sales increase, you'd expect payables to increase. So you'd expect over the medium term there to be an inflow from payables coming over the next few years.

47:44 Thank you. So we'll perhaps share this one. The next question is that we've got 76 trade counters as of today, and they're generating sales of annualized around a 100,000,000. So they must be making a loss. How much are losing currently? So, they're not making a loss. The way that we, allocate cost is we've been trying to track the the level of profitability with the investment we're making in expanding the footprint and reinvesting in the sites and then the maturity. So what we've been talking about is a reduction in profitability. So they are contributing at the moment. But what we've seen is a reduction in our profitability as a result of the investment drag in new sites. And we now expect to see that moving into the maturity part of its life cycle from the second half of this year, really, when we finish the investment phase, and that will start to generate profit accretion year on year from the second half. So it's not that the cohort are loss making, but we've seen a reduction in the profitability for the cohort as we've invested in new sites, and we should see that come out the other side from the second half onwards.

48:52 Okay. Next question is, how can sales to large customers have increased with the loss of SES and home base? And maybe I'll ask Adam to cover that because you did sort of talk to that in your in your presentation, I think. Yeah. So, excuse me, we had three retailers drop out in 2024. One, obviously, Carver Eye was not really a customer of ours, but SCS and Homebase were, and they're fairly meaningful customers. However, despite that, we we grew revenue through a combination of growth in other customers and, you know, one example being Tappy where Tappy picked up quite a large proportion of the carpet ride business. So they bought about half of the business effectively, and then they've just organically then grow you know, mocked up some sales that have been displaced from Carpet Right, and we've grown with Tappy.

49:43 And then we also won a couple of new customers. One was a retailer, a a multiple chain of chain retailer. And then we also won a piece of business as distribution as a service. So doing a distribution service for a a manufacturer. So we won those two in a year. So net, that all offset it, and we generated a 4% revenue increase net net of all those movements. Thank you. Next question. I think market share, we we sort of talked about. Next question's around, are we happy with trade counter growth given we're sort of in rollout? Now, perhaps let me answer that one. There's a there's a degree of first year benefit and arguably second year benefit, but that's sort of the reason we're doing it. So, yes, we would expect there to be tray counter growth. Now in theory, the growth that we see should be even higher because we're seeing obviously a market shrinkage issue. So that's offsetting the growth that we are reporting.

50:42 So it's pleasing to see that we've seen some good growth, in trade counters despite those market headwinds. But we should we should see growth because we're putting down some more space. So that that point is is well made. I think what we have done is go back to our investment case. So we at this at the outset of this, we we said, okay. We're gonna be deploying 25,000,000 of capital to invest and refresh our trade counter estate to grow the number of sites, but also to move to a common blueprint, a common footprint, and to access parts of the market we're not currently accessing. So that sort of investment case in its broader sense, we are still on track to deliver the benefits that we articulated at the start of that despite the market headwinds. So good news is that we're we're seeing that coming through. It's still got a couple of years to move to maturity, and I've always said that, you know, we'll we'll track this and report on it as we go because it's it's still got to hit that main part of the maturity curve.

51:43 And we good news is we will have finished the investment phase or the first part of that investment phase this year. So we should now start to see that year on year recovery and profitability. As the revenue grows, it will create that drop through impact because we've got our footprint established and the marginal benefit therefore will be a higher profit gearing. Next question, I am going to ask Adam to handle the leases question. Yeah. Question is capital leases seem to have averaged 35 to 40,000,000 for many years, but now jumped 20,000,000 to 61,000,000. This means a considerable increase in expense, that revenue has to climb in order to reach profitability. Please correct me if I'm wrong or missing something. So this comes back to the that 25,000,000 of of annual profit benefit, which is net.

52:31 So that is net of any changes or reinvestments we're doing as part of this transformation plan. So for example, we sell we sold Ipswich, which we own the freehold on. We've moved into Raleigh. It's a more efficient footprint for us. It's a better location, as Chris described. We have to lease Raleigh, whereas we didn't with Ipswich, But it's the the operating cost savings by having a more efficient footprint, having almost half the size because we didn't need the size that we had in Ipswitch offsets the lease cost. So that 25,000,000 annual profit improvement we talked about as part of the transformation plan includes any net any reinvestments such as these these lease lease costs. Next one's probably for me as well, actually.

53:21 So question on cash flow. The question reads, obviously, was great to be able to dispose of some properties and have a one off release of cash from working capital. Going forward, as revenue stabilize, what's your expectations for cash flow? So, yeah, if you take the guidance and target that we've given on cash, which is the 90,000,000, at least at least 90,000,000 of one off cash benefit less the the 30,000,000 of one off cash costs, you know, there's an opportunity for us over the over the coming year over the coming years, over the medium term, to be in a minimal to zero net debt to the net cash kind of position. And, you know, we we've set out a we've set out a capital allocation framework a couple of years ago. It was been in place for many years. We just we we confirmed it a couple of years ago.

54:11 And within that, we set out a debt framework, a leverage framework where we said we think the right amount of leverage for this business is half to one times net debt to EBITDA. Now we'll we'll we'll obviously revisit that once we're through the transformation plan, but, but that that would suggest if we're at a a zero net debt or a net cash position in over the medium term and we've and and we've got a leverage target in place, then we may have a quality problem in the years ahead where there's a bit of surplus, bit of surplus capital, which we can consider what to do. But the focus for us right now is is executing the, is sticking to be focused on executing the transformation plan over the next couple of years. I think the next one has been answered.

54:56 So if I can just turn to there's a there's another one here which is sort of a multipart question, which I'll I'll try and summarize summarize. So there's a you know, what should we think about a normalized level of inventory days or stock turn or however we describe it? Has there been any impact in the in the sort of price of purchases or goods or stock as a result of some of the people leaving the marketplace? How do we think about volumes? Can we can we facilitate volumes if they do recover? Can we reach the profitability we had in the past? So there's a few questions there in one. So I'll try and summarize an answer on that. You know, Adam and I have been talking about how do we drive working capital. You know, what's a as a result of the consolidation of our business model into a single product and price rate product list, we should be able to now consolidate our stock holdings. So we we remove the duplication and we we kind of harmonize and improve the the stock turn accordingly. So, you know, we've been down in the threes.

55:56 We're targeting the fours. So, you know, stock turn improvement is is quite significant and we think that's achievable. So that's that kind of an improvement in working capital that we're targeting. That's what's behind some of the cash flow assumptions that we've made in the in the guidance we've given. I don't think there's been a huge impact on some of the the people dropping out of the marketplace from sort of discounting stock and things like that. You know, people like Tapi obviously have have acquired some of the stock that the copyright had as part of the, the administration process, but that's a relatively short term, impact in the marketplace, and may or may not have been passed on customers and consumers in any event. So I don't think that has a huge impact. I think what does have a bigger impact is when you do have a a bit of a tough demand period, you know, people are very focused on on price and trying to maximize the the the benefit they get.

56:47 So, you know, customers driving prices down and and and suppliers trying to fight hard for the the business that is there. So you do get a little bit of a constraint happening with discounting during these types of periods, but, I think that's more effect than than people dropping out of the marketplace. And then the capacity question is a good one, actually. If, if we're seeing we're taking capacity out of our offer because we're consolidating our network and we're releasing some profitability back to our run rate. Can we still could we still deliver the capacity if the market returned? The the modeling that we've done, we are taking a fair bit of capacity out, but we felt that this was surplus capacity. We still have capacity as a result of the changes that we're proposing. We still have capacity for growth.

57:34 So there is a bit of a quality problem that Adam described earlier that should, you know, should the market go up at 50%, then we might need to put some more capacity back, but that's a nice problem to have. But but with a a good degree of the recovery of the market that's lost, we think we could still facilitate that with the capacity that we've retained. So we're so we're reducing our footprint. We're becoming more efficient, making our stock work harder, but we still think we've got capacity in the network to meet and increase demand, should it happen, which means that we would see a strong drop through to profitability. Think the next one, Adam, might be sort of year on year impact on costs.

58:22 Yeah. So the question is we have seen significant increase in distribution costs administrative expenses. What's your outlook for 2025? Do you plan to take any actions to reduce them? So if you look at the last couple of years, the key drivers of cost have been two things. So it's been cost inflation and, investment the investment phase in trade counters. So prior to the past couple of years, a typical average cost inflation for HEADLAM might be something like £34,000,000 a year. So £34,000,000 of additional cost a year, from cost inflation, and that would typically just be offset by price inflation in the market. So price rises from manufacturers through the distributors onto the end customers, that would just offset and the the two would be offset each other.

59:10 Cost inflation in the last couple of years has been has been elevated. So £10,000,000 in 2023 in one year alone, and it was 7,500,000 in 2024. So elevated cost inflation. We're seeing that ease. So we expect that to come down in 2025, and we expect that to come down again in 2026, and start getting back towards those long term average kind of annual cost inflation. We will, this year, have another leg of trade counter investment. So that's been adding 5 to 6,000,000 a year on the operating costs base. As we've been in that investment phase, we'll have another leg of that in 2025. And then as we end that investment phase, that will cease. So that will no longer be a driver of cost cost increase, when we get into 2026 onwards. To answer the question, do you plan to take any actions to reduce them? So that's all obviously wrapped up within the transformation plan.

59:59 So within that transformation plan, with the 25,000,000 of benefit, once fully implemented, that is predominantly through cost cost savings. There's a there's a number of questions coming up. So I'll I'll try and summarize some of these. So when do we plan to return to profit? So we're not we're not clearly giving guidance. There's yeah, unless guidance suggests that we might be getting back towards profit '26. Under '26 is is kind of a it feels like a good time now. That's a bit dependent on market and the small small end of market recovery, but most of our, as Adam's outlined, most of our recovery plan will be implementing during '25, '26, and the full run rate '27. So in that sort of '26, '27, you'd expect us to get back into profitability, and that's what's been picked up by the analysts.

1:00:49 Next question around market share, which we've answered, revenue and profit estimates, we've answered, policy on dividends, and and again, we've covered capital allocation and have covered that already. Next question on trade counters. So trade counters take a number of years to get to maturity and they make it initially, make losses. Can I provide some color on how quickly they take to move into profitability and what sort of profit margins do the mature trade counters generate? So this comes back to the question we asked earlier around sort of the as a cohort, what do they make? So in each individual trade counter, we think, for a new start, for example, if I just take an example there, the business case that we're working to and it seems to be being borne out by practice is we expect each tray counter to generate around about £2,000,000 of sales at that level because they come with a sort of an average fixed cost base, if you like, and a and a and a an assumption around gross margin. We expect them to be around 10% operating margin. So £2,000,000 worth of sales generating around £200,000 of operating profit at maturity.

1:01:50 Now they get to sort of a growth phase, you know, they start at zero, not zero sales, and as you start to move through maturity phase, somewhere sort of between twelve and and twenty four months, you expect them to to flip over from loss making to to profit enhancing. So there's a contribution phase in that sort of twelve to twenty four month period, as as they ramp up. And then, obviously, that sort of second half of the of the revenue, if you go from 1 to 2,000,000 is where you start to create that profitability. So, yeah, that's why we have this sort of bowel wave of new sites coming on that are starting to flip over into profit contribution. And as Adam described, up until now, we've been investing much of that and more in opening new sites. So that bow wave of kind of new site opening will start to now flip into a net contribution from the end of this year onwards. So we'll start to see that contribute then to the recovery and the profitability that we talked about.

1:02:53 Okay. Next question, which I'll So think some of your competitors such as Likewise appear to be growing revenues and are profitable, and they're taking share. And secondly, the strong balance sheet, unindependent uninhindered related receivables is figures, use payables. It's very useful. Thank you. So two there's sort of two questions to do in one there. So I'll answer the first bit and I'll hand over to Adam to talk about the the balance sheet. So on the first one, as I said in the presentation, there's parts of our market where we are taking share and parts where we're perhaps losing a little share. Likewise, there have been an example where they've been deploying space. They've been growing their footprint from a relatively low base, and they've been able to take share from us and and maybe others as well, but I suspect predominantly from us in the regional distribution independent space where we've traditionally had a higher share, where we've been in the business for for a long time. So we've been growing our share in new parts of the customer segment.

1:03:54 And as I described, it's important that we now we're acting as a single business, I think we've got an opportunity now to to harmonize and and and go take some of that share back again. So that's the focus for 2025 is to take some of the share back in the independent retail and regional distribution business. I think in the other parts of the market, we've we've actually done well. We've taken some share in other spaces. So I think that's the secret to the different parts of our business and the relative maturity of it. And now, as I said, we can act as a single voice. I think we can be taking share back. I think I'll hand over to Adam for the the balance sheet part of that question. Yeah. So balance sheet part of the question is to do with when I was talking about the strong balance sheet and 200,000,000 of stock and receivables that's not leveraged in any way, the question here is about does this figure deduct payables from that? And if not, is this a very useful figure? So it doesn't deduct payables. But if you deduct payables, it's just under a 100,000,000 of net positive working capital. So it kind of doesn't really change the message. But the reason I wanted to put the 200,000,000 unleveraged stock and receivables on there is that actually in our industry, it's it's not uncommon to secure funding, on stock and receivables in isolation as asset categories, which we which we don't do. The option is there for us to do it.

1:05:14 You know, receivables factoring, for example. There are distributors that factor up to 50% of their receivables, which for us, would be worth about 40,000,000 of additional financing if if we were to do it, but we we don't. So the the point here is just to say that there's 200,000,000 asset base there that can be leveraged if if we wanted to, but we have a revolving credit facility and have no no requirement to do so at the moment. Thank you. So it's a question here about on the segmented customer types, which one has the most opportunity? Are there margin differences? So this is where I described our strategy as one of broadening the base. Now our market opportunity is spread fairly well across the different customer segments.

1:06:03 As I said, it's imperative that we remain focused on our service and offer in the independent retail market. That is still a significant part of the market, perhaps a third of the market. It it operates in that space. And it's important, therefore, that we invest and continue to be market leading in that space, as well as developing growth opportunities in other areas. So if we've got a relatively high market share in the independent retail space, it follows that that will be harder to grow. But it's important that we preserve and we remain relevant for that part of the market because we can offer the best service, the broadest product range, and and that is something that we, are continuing to offer to that segment. So it's important there. So that remains a strong opportunity for us. I think the growth areas may well come in other areas where we've got low share and therefore can offer. It's very much service led. It's very much tailoring our offer to what the customer needs are.

1:06:56 If we can't add value to the customer, then we clearly won't add any sales to that. So we've got to be very mindful about the service and the value add we can offer to those segments. So I think in their own ways, all the segments present a good opportunity. We just gotta tailor our service accordingly. There's a good question here, is sort of a detailed question about how the regional distribution under the new Mercado model works. So question is, in a town where there were four independent retailers, previously they had multiple choices and they could have a different offering. But now we've gone to a single Mercado, that wouldn't they all have the same offer? How can they create some exclusivity? And this is a good example where the market operates in a way that each independent retailer tends to work with a number of distributors.

1:07:46 Now in the past, as you as your question sort of alludes to, several of them may well have been HEADLAM businesses, but they'll also be working with other people outside of the HEADLAM group. They'll be working with other distributors. And they, those independent retailers would have needed to have multiple accounts with HEADLAM to get different types of product, different ranges. Now nothing really changes from the perspective of access to range of product availability by acting as a single Mercado business. They will have access to all of the products ranges they had before, and they still have the opportunity to pick and choose which products they select from our portfolio. So nothing they don't lose anything as a result of us merging those sort of multiple touch points into a single voice. And indeed, they still have the competitors that they would have bought from before.

1:08:34 The key thing for us is that we make ourselves easy to do business with. So instead of them needing multiple touch points, with potentially overlapping samples and multiple conversations with with our salespeople trying to sell the same product. They don't need to do that anymore. They can have a single conversation about a much broader portfolio of products, and they still have, of course, the opportunity to go elsewhere as they had before. So it's it's important point to note that this isn't about reducing choice for customers. It's about increasing access to the product range that HEADLAM has to offer, but in a single offer, a single account, if you like, rather than just having to shop around. Okay.

1:09:19 Anything left to do? There's a question just on do we have a breakdown of where the £2.40 tNAV resides? So this is where I'd answer the question about equity per share. So that £2.40 is is is net assets per share. It's not not TNAV. So if you strip out intangible assets and do strictly a tangible net assets, so a TNAV, that £2.40 would about £2.16, £2 2.16. But the £2.40 is just simply the 191,000,000 in net assets at the end of twenty twenty four divided by a number of shares. Perhaps this is the last question for us. So could I elaborate on the company's digital sales strategy? And what's our current online presence and strategy going forward?

1:10:06 So if I if I can just sort of characterize this as as two it's probably two sides to the coin. The first one is our offer to our customers. So we're a b to b business. We only sell to to to tradespeople and businesses. So we offer there a a kind of service portal for our b to b businesses. You have to have an account. They come on, and they can look at our product portfolio and our stockholding of a particular product, and they can place their orders electronically. And now that works across all of our customer segments, whether they are customers of the trade council, whether they're customers of independent retailers, whether they're our large customers, and and I've described TAPI earlier. So they can place their orders electronically, they can search and scan availability of products and check prices. All of those things can be done electronically.

1:10:55 So that's what we have today. On the consumer facing side of things, although we don't sell to consumers, consumers can look up different websites of some of our branded products, for example, lifestyle or or something similar, and they can look at products and order samples as a consumer, and then we guide them to our customers, our retail customers, if you like, our partners to actually then transact. So they will they will be guided to our customers to place orders. So we act in two ways. One is a driver of activity to our customers through our branded sales teams, and one as a fulfillment channel to our customers for placing orders. And I described earlier the consolidation of our digital platform, if you like. So we're trying to move away from this sort of spread of discrete websites into a single platform, which we can then invest in. So to take our business forward on the b to b side, it now means that we can offer much more of an ecommerce field to our customers so that they can search and scan products. They can see, complementary products. They can see substitution products. They can look at what their previous transactions have been. They can pay for goods online. They can use credit cards. They can do what they like. So that's the area of investment we're making. So as I said, we've got consumer facing brands which we drive activity to our retailers. Then we've got b two b activity which is behind effectively a firewall, and our customers transact with us there.

1:12:19 And that's the area of investment going forward. So I think that's probably the end of the cost the the end of the questions and pretty much all the time that we've got left. So thank you for thank you for your contributions to a good q and a session, and thank you for listening. Chris, Adam, thank you very much for updating investors. They've been very generous with your time. Could I please ask investors not to close the session? As you know, we automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This then take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of HEADLAM GROUP PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.