Eurocell plc (ECEL) Earnings Call Transcript & Summary

Good morning, and welcome to the Eurocell plc Full Year Results Investor Presentation. [Operator Instructions] I'd now like to hand you over to CEO, Darren Waters. Good morning to you, sir.

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 Alunet, 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 GBP 20 million. That's up 32% versus 2023. I think against the backdrop of a tough market, we delivered a robust sales performance with revenues down just 2% at GBP 358 million. And this is down to 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 3 share buybacks worth GBP 15 million in total, which reduced the number of shares in circulation from GBP 112 million to GBP 101 million. In addition, we increased our ordinary dividend by 10% and this morning, pleased to announce a further extension to the buyback of up to GBP 5 million, 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 GBP 3 million, which enabled us to complete the acquisition of Alunet earlier this month for initial consideration of GBP 29 million without overly stretching our balance sheet. Alunet is a compelling strategic fit and has significant growth potential under our ownership. With end markets remaining subdued and a GBP 3 million 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.

Thanks, Darren. So I'll start by going through the financial highlights on Page 5. 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 of 31% reflects improved profitability and a higher tax rate. Cash generation remains good despite being down against an exceptionally strong 2023, which included the benefit of a major stock reduction program. Pre-IFRS 16 net debt at year-end was low at GBP 3.1 million, 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 6.05p per share are up exactly 10% on 2023. And following completion of the GBP 15 million share buyback program, which commenced in January 2024, we've launched a new buyback of up to GBP 5 million. Turning to the full P&L on Page 6. 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 25.3 million, up slightly on 2023. And with our CapEx program, lease renewals and the addition of Alunet, we expect D&A for 2025 of up to GBP 28 million. And just to note that I've summarized all of our technical financial guidance at the end. Finance costs were GBP 2.8 million, down GBP 0.4 million on 2023, reflecting lower utilization of our debt facilities, and I expect finance costs of up to GBP 5 million 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. Moving down the P&L. Basic earnings per share were 14.4p, and dividends have already covered. Non-underlying charges of GBP 6.2 million in 2024 include GBP 2.2 million of implementation costs of our ERP systems replacement project. These costs have been charged to the P&L rather than capitalized in accordance with the accounting rules for IT solutions, which are cloud-based. And I'll pick up on our progress with the systems project later in the presentation. It also includes GBP 0.8 million of due diligence costs in relation to Alunet and a GBP 3.2 million noncash right-of-use asset impairment charge in relation to the lease of 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. Depending on the outcome, the impairment may be reversed in future periods or the associated liability will be released. Moving on to our sales performance on Page 7. 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 GBP 9.4 million in the year, including garden rooms, e-commerce plus windows and doors, which has provided mitigation for the branch network. On to adjusted operating profit on Page 8. Profit of GBP 22.8 million represents an increase of 24% on 2023. Moving left to right across the chart, volume of GBP 1.5 million represents the adverse impact of sales volumes down 1%. The margin benefit of GBP 8.9 million 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. For electricity, we operate a rolling 12-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 feedstock prices ease in 2024, resulting in costs of GBP 4.8 million 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. So the economics of recycling remain attractive. The 18,000 tonnes of recycled material we consumed in 2024 delivered an absolute gross margin benefit of approximately GBP 2.2 million compared to the cost of using virgin material. Moving along the chart. Labor inflation of GBP 4.6 million primarily represents our April '24 pay award of 4%. Variable labor cost is the net impact of increased share-based payment charges and lower bonus and variable pay and other overhead inflation of GBP 2.4 million includes higher property and IT license costs. Restructuring savings of GBP 2 million 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. 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 9. Investment of GBP 10.7 million in 2024 includes GBP 3 million 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 Alunet of approximately GBP 15 million. This includes GBP 3 million in support of our strategic initiatives, GBP 2 million for branch refurbs and relocations. There's also GBP 3 million for health, safety and welfare improvements across our property estate and GBP 2 million to develop our IT infrastructure, including ongoing cyber defenses with the remainder primarily maintenance CapEx. As noted earlier, implementation costs for cloud-based IT solutions are charged to the P&L rather than capitalized. Our ERP system replacement falls into this category with GBP 2.2 million charged to the P&L as a non-underlying item in 2024. We estimate costs for '25 will be approximately GBP 6 million, and I'll cover the projects 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. Turning to the cash flow on Page 10, which sets out the components of a small increase in net debt of GBP 3.5 million 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 GBP 13 million in 2023, driven by an inventory reduction program, working capital was broadly flat in 2024 with stock and debtor days in line with the '23 comparatives. Non-underlying costs result in a cash outflow of GBP 1.9 million, being payments for the ERP system project and Alunet due diligence. Tax paid and other of GBP 1.8 million includes tax payments on account of GBP 3 million, offset by share-based payments and other noncash items of GBP 1.2 million. CapEx payments of GBP 10.3 million include the asset additions covered earlier, plus a small increase in our capital creditor. So after financing charges, the share buyback of GBP 14.5 million and dividends paid of GBP 6.1 million, this results in pre-IFRS 16 net debt of GBP 3.1 million at the end of the year. IFRS 16 adds GBP 59 million to debt, which, as you can see in the reconciliation table, is up GBP 0.8 million compared to December 2023. This reflects the net impact of branch and other lease renewals of GBP 18.1 million, less cash payments on leases of GBP 17.3 million, which are accounted for 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 GBP 75 million bank facility, thereby providing the funding for the Alunet acquisition as well as security, flexibility and options for the future. Turning to capital allocation on Slide 11. Following the launch of our strategy at the beginning of 2024, 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 investments in line with our strategic plan, supporting initiatives to drive profitable growth in the branch network, continuous improvements 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. And therefore, we will look to maintain sufficient treasury shares to satisfy employee share options expected to vest over the next 2 years. Moving on, we believe that Alunet 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 1x EBITDA. And we're pleased to confirm that following completion of the GBP 15 million buyback commenced in January 2024, we've now launched a new buyback of up to GBP 5 million, 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. 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 Alunet acquisition, we do expect net debt will be below 1x pre-IFRS 16 EBITDA at the end of 2025. 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. 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 we announced this time last year in which we set out the initiatives that will drive this business towards GBP 500 million of revenues and GBP 50 million of operating profit by 2028. And I'm pleased to report that we're making good progress on all of these. So if 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 Stortford and Watford that we opened in quarter 4 last year, Slough and Tonbridge both opened their doors this month with Hemel Hempstead, Winchester, Bury St Edmunds, Croydon and Collindale, all due to open in quarter 2. So that will represent in total 9 branches over the past kind of -- well, if you include the half year over an 8-month period. We also did 3 relocations in 2024, and we'll complete a further 5 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've strengthened our branch leadership team with the appointment of Stuart Livingstone as Chief Operating Officer. Stuart brings a wealth of trade and retail operations experience gained with the likes of Howdens 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 GBP 27 million in 2024. That's up GBP 3 million 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 rate on quotations remained high at just above 40%, and we are therefore confident in our ability to deliver the GBP 35 million of incremental sales that we targeted in our strategy by 2028. The addition of Alunet 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 6 of our largest fabricators already committed to switching to Alunet. In fact, 3 have already placed their first order. Our extended living category delivered GBP 10 million of sales in '24, more than double what we achieved in 2023 and is firmly on track to hit GBP 30 million of sales by 2028. We're delivering a high-quality product and exceptional customer experience as evidenced by the number of 5-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 GBP 30 million target for this category. And again, the quality of the product, speed of installation and affordability are all scoring high with homeowners. On digital, e-commerce sales of GBP 4.7 million were up 57% in 2024 with organic web traffic up 22%. The website also generated 38,000 leads, a 138% increase. We also signed up 11,000 new accounts, generating a spend of GBP 10 million last year. The launch of our 1-hour Click & 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 we'll provide a further update on our plans for that at our interim results in September. On people first, I just want to 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 4. Our world class is often considered to be less than 2. So with the progress that we've made over the last 2 years, we are on course to do that. In September, we initiated our first ever external people survey administered by Great with Talent, and we had a 70% response rate, generating a score of 59%, which we are told is a creditable result for a first survey. Great with Talent 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%. Our new Careers website has increased direct hires to 85%, saving money on agency fees. Now still a lot to do here, but I strongly believe that we are 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. Intact IQ 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 by 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 9 months critical to its overall success. As previously reported, we estimate total costs will be approximately GBP 10 million over the '24 to '26 period, and we expect transition to complete around mid-2026. We'll manage risk very carefully with Board oversight and a highly experienced IT director in place. We're also embedding a continuous improvement philosophy into the business, which is highlighting opportunities for efficiencies. For example, in January '25, we've done a restructuring of the branch network by removing a layer of regional management and reducing the size of the sales force. In parallel, we're upskilling branch managers to drive greater ownership for branch performance. We expect to complete the restructuring by the end of Q1, generating annualized savings of approximately GBP 2 million. 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 million 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 and the ESG Committee. 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 1 and 2 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 3 actions include optimizing the use of recycled material and 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 traditional PVC resin progressively over time. 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. that, back to Darren to talk about Alunet.

Thanks, Michael. So 2 weeks ago, we announced the acquisition of Alunet, a group of 4 privately owned businesses, comprising aluminum door and window profiles, solid timber core composite doors and aluminum garage doors. Group generated sales of GBP 43 million last year, split equally between the 3 product categories. The consideration of GBP 29 million with an initial payment of GBP 22 million represents a 6.5x multiple on the 2024 EBITDA of GBP 4.5 million. With the earn-out, the maximum consideration increases to GBP 35 million, which would equate to a 4x multiple on Alunet's projected 2028 earnings. Our net debt is, therefore, forecasted to finish this year below 1x EBITDA, and the acquisition will be accretive to our underlying 2025 earnings. Building a meaningful position in aluminum was the primary driver for the acquisition, particularly as aluminum has grown its share to 17% of the U.K. 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. If you look at this, the addition of Alunet's Aluna aluminum door and window system perfectly complements our leading position in PVCU profiles and provides fabricators with a one-stop shop. 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 suite of products from Eurocell. Look at Alunet then in terms of 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 Aluna window system in early April, combined with Eurocell's new aluminum lanson will create the Aluna whole house concept and a sector-leading proposition to PVC fabricators who also fabricate aluminum, and there's more and more of those that are doing that. As I mentioned earlier, 6 Eurocell fabricators have already decided to switch to Alunet, and I expect more to follow. Turning to comp door based on Stoke-on-Trent. They are a fast-growing manufacturer of premium solid timber core composite doors and the combination of Comp Door and Vista, our PVCU panel and GRP foam composite door business positions Eurocell as the market leader in entrance stores with a good, better, best offering. We see opportunities to cross-sell comp door and vista to existing installers of both brands as well as distributing comp doors through our branch network. We're also ramping up comp door's digital marketing activity to generate homeowner leads for their growing network of loyal installers. And then lastly, on garage doors, JD U.K. are a supplier of sectional and side long aluminum garage doors. U.K. doors Midlands manufacture aluminum 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. The acquisition of Alunet is a great fit and enhances our home improvement proposition, which will accelerate our path towards GBP 500 million of sales and GBP 50 million 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 are, therefore, continuing to take decisive action to reduce costs, improve efficiencies and control cash. And 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. There's a few that have appeared already on the Q&A board. So perhaps we'll start there. Do you want to take the first one, Michael?

Yes, I'll take that. Okay. So the first question is the RNS 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 slide show 6.05p with 6.1p on Slide 6 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 chose my words very carefully there, you would have heard me say the dividend is up exactly 10%. So the final dividend for 2023 was 3.5p. Exactly 10% on top of that would be 3.85p, added to 2.2p from the interim gives you the 6.05p. You'll see that in the first 2 pages of our RNS and in our slides with that appropriate footnote. The rest of the RNS 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 September at our half year when we delivered the interim dividend and half year results.

Okay. Thanks, Michael. Next one, which was pre-submitted in your own words, what are your unique selling points? Well, look, I think there's 2 things here. One, we are a one-stop shop for all exterior home improvement opportunities with probably the roof tiles being the exception. We cover every aperture, and we're agnostic on material, covering the 2 main key products in the market, both PVC and now aluminum with the Alunet 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 say, building plastic outlets. But obviously, that, again, is now different because of the Alunet acquisition and that we also now offer aluminum products as well. So we have a large network of penetration trade counters, double our nearest competitor. And obviously, we're adding to those as part of our strategy. So I think those are the 2 things that really make us unique. Next one.

I've got it here. How has Eurocell's branch network expanded in 2024? And what are the plans for 2025?

Yes. Well, I think -- hopefully, I've covered that in the presentation. As I said, we've been aiming to do about 10 branches a year over the next 5 years, and we opened 2 at the end of last year, Bishop's Stortford and Watford, as I said, 7 opening in the first half of this year. And at that point, I mean, we're still searching for sites. We're still doing relocations, as we said, to optimize the network. But we will continue to expand. 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 very good start. Hopefully, that deals with that.

Yes. 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?

Yes. I think, again, making good progress on our extended living range. Garden Rooms continues to grow. I think in terms of the GBP 30 million 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 almost an out-of-the-box solution where we're using modern methods of construction, as I say, far quicker to do, less disruption and far cheaper than the traditional extension. So we've had many examples where customers were probably not going to go ahead, but then looked at our solution and it became affordable. So yes, I think we're very confident about the opportunities there. And 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, again, fabulous customer experience. Our team do a brilliant job. It's a 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 GBP 75 million RCF, how do you assess leverage and balance sheet flexibility post transaction? I think in the presentation, I talked about our capital allocation policy. And as part of that policy, maintaining debt levels below 1x EBITDA on a pre-IFRS 16 basis. And that's what we intend to do. You can do the math on the acquisition and work out that we have GBP 3 million of debt at year-end. The consideration of GBP 29 million is GBP 22 million plus deferred over 4 years of GBP 7 million. So you can see debt probably at the moment in the high 20s. And we've also confirmed through this results release that we expect debt to be below 1x 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, they've got pre-IFRS 16 EBITDA of about GBP 40 million at the end of this year. So we're going to be, I think, some way below that, maybe, again, looking at the consensus, if you will, for net debt, it's at about GBP 30 million at the end of this year. So something around 0.7 to 0.8x would be where we would be at the end of 2025.

And we've got Matt. Which lead indicators do you monitor to predict trends in RMI? Well, look, in my experience, the key leading indicator is all about housing activity, whether you do mortgage approvals or mortgage completions, there's generally a 6- to 9-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'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 really all about RMI. So -- and then on top of that, you've got some of our trade fabricators. So these are different to our new build fabricators that are predominantly focused on the RMI market. Again, we see -- we watch that activity in that space. So there's a number of data points that we can use, but I would say mortgages are 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 or decreasing? Well, as a rule of thumb, our view is that 20 minutes is probably the maximum distance that most trade people will travel to pick up materials. Having said that, at all of our branches, we offer a delivery service through our own fleet of vans. So it's not always necessary for a trade person to pop into a branch. But 20 minutes 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 1-hour click and collect and trade people can get visibility of our stocking levels by going online to our website. So we know we're going to have the product in stock. But as I say, equally, we can deliver to site as well. I don't know about the next one trying to assess your branch reach. I think that was connected to the one I just answered. Okay.

That looks like all the questions we've got.

Perfect. Darren and Mike, thanks very much for answering those questions from investors. Of course, the company can review questions submitted today and will publish the response on the Investor Meet Company platform. But just before redirecting investors to provide with their feedback, which is particularly important to you both. Darren, can I just ask you for a few closing comments?

Yes. Thanks, Ali. Well, as I say, I think last year was a year of progress for Eurocell despite a tough market backdrop. 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. I think we've talked about the buyback and what we've done on the dividend. And obviously, the announcement 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 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 going to be a great fit and a great acquisition for the business moving forward. We're inheriting a good team of people that culturally fit in very well with us. We have a shared view of the opportunity in the market, and we're working hard to bring about those synergies, which I'm absolutely convinced that we will. It's a really exciting time to be part of the business. We've got a great team. And like I said, we could move about the market. We can't do much about that, but we are extremely well positioned for any recovery when it comes, but we're not resting on our laurels. We're working hard on our strategic initiatives, and I think there's a bright future ahead for this business. But I appreciate your attendance this morning. And obviously, like we said, Ali, always grateful to get people's feedback.

Definitely. Darren and 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 the 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.