Genuit Group plc ($GEN)

Welcome, everybody. Joe Vorih, CEO, at Genuit. I think most of you know me by now. But I'm pleased to be here to present our fiscal year '25 results as well as a really interesting update on our strategy, and we're going to give you a bit of a divisional overview as well. So, as soon as I get the clicker here, importantly. So anyway, let's get started. Just a couple of notes. We're going to head through the agenda here. I'm going to give you a bit of an introduction, turn it over to Tim, who will take you through the financial update and a few words on the outlook. I'll come back for a bit of the strategic progress we did last year. And then, I have -- I'm being joined also in addition to Tim, our CFO, by Lee Mellor, who will talk to you about our Climate division, and Steve Currier, who will talk to you about our Water division. In addition, we've got the rest of our leadership team here. So I've got Martin, our Head of Strategy and Sustainability; Edel, our Chief -- Edel Conway, our Chief People Officer; and Emma, our General Counsel and Company Secretary here. So great team. Feel free to see any of us. We'll be around after as well. And importantly, as soon as we're done, we will have some Q&A after the whole session. And then upstairs, as you might have noticed in the way in, there's some really interesting demonstrations. So if you've got a few minutes, I definitely encourage you to ask the team up there. They're delighted to tell you about some of the things we're doing, including some systems and solutions from our newest acquisition. So a lot to get through. So first off, pleased to say that despite what, once again, was another challenging year, I seem to be really good at talking about challenging environments 4 years on. But revenue increased last year, 7.4% -- 7.3%, as we managed to outperform through a mix of both organic growth and share gains as well as integrating 2 really good acquisitions. Our underlying operating profit increased to GBP 94.4 million. And this is, of course, despite the market conditions we had and, of course, the headwinds from National Insurance and National Living Wage increases. We were able to deliver the sequential margin improvement from H1 to H2 that we had told you we would. And that's really important as we think about going forward, as we've absorbed those costs and continue to improve the business. And importantly, our strong operating cash flow generation, 102% this year, means that we continue to have the wherewithal to be able to reinvest in the business, both organically and, of course, inorganically, as you saw. As a result, the Board had confidence to declare a 12.9p increase in our dividend, which is in line with our progressive dividend policy, but also reflects both our strong balance sheet and our confidence in our strategic execution going forward. As resilient as our performance was, it was a year of great strategic progress. So as you know, we've been focusing on higher-growth markets, where sustainability leads and where we can actually drive better growth than our peers in the rest of the market. Some of these are, for example, the higher growth rates we saw in ventilation and in the blue-green roof sectors, among others. And of course, we continue to benefit from regulatory and other tailwinds, such as the AMP8 framework, where some of our AMP8 where some of the initial framework wins have started to come through, which is great. So that sets the tone for midterm growth and continued increased demand in things like ventilation, including mechanical ventilation, heat recovery as our customers prepare for the future home standard, start to build a passive house in some parts of the country. So again, these are just really good markets and businesses to be operating. We did deliver some targeted market share gains last year. We talked about the exit of one of our drainage competitors. We successfully captured that share. And importantly, we were able to leverage our relationship with Barratt following the Redrow acquisition and tender to use our strategic partnership with them and our more sustainable offering to really drive a much better value proposition and win that expanded business as well. It wouldn't be a presentation if I didn't point out that the Genuit Business System is at the heart of everything we do. It continues to allow people to drive productivity and efficiency in the business. And as we'll talk about in a bit when I come back, it's starting to now impact the growth rates of the business as we launch our growth tools as well. Finally, in terms of strategic progress, I'm really pleased with the acquisitions of Monodraught and the Davidson Group of companies, both of whom are represented upstairs. We spent over GBP 100 million in these acquisitions. These are fantastic. They're integrating really well. And both of them are both on track to be accretive this year as well as hit our midterm operating targets of 20% plus in the midterm. So they're on track for that, and we're really pleased. And of course, as you know, we'll keep cultivating that strong pipeline. So we'll have more exciting news in the future, I'm sure. The other thing, and I'll come back and tell you a little bit more about this, is we announced a divisional simplification. Just to say, this is continued evolution on our strategic plan. We'll address later -- Lee and Steve will talk to you about the Climate and Water divisions, and I'll give you a little more of the rationale before that right before. But for the meantime, we're going to go through with the results, and Tim will come and give you those financial results, but we will do that in the 3 divisions that we've been operating for the last few years. So, Tim, with that, over to you.

All right. Thank you, Joe. Good morning, everyone. Thank you for coming this morning, and it's a pleasure for me to present the financial results for 2025 to you this morning. So the financial highlights, first of all, as Joe said, our revenue was up around 7% last year at GBP 602 million, and that represents organic growth of about 3%. So a great performance by the Genuit companies to generate growth despite the continued subdued market environment that we saw. We also increased our profitability. So profit is up by 2.4% to GBP 94.4 million or broadly flat on a like-for-like basis. Our margin was down slightly during the year, so about 70 basis point reduction in margin to 15.7%. However, we did consume additional employment costs in the form of National Insurance and National Living Wage, and that actually equated for about 70 basis points. So there are some ups and downs in the segmentation that I'll talk you through, but largely, that's about the same value. Importantly, our margin in the second half, as Joe mentioned, was larger than the first, actually, about 16.4%, which is back to the run rate of 2024, as we continue to improve the business, the efficiency, the productivity, and therefore, our operating margin. Cash conversion was really strong. So we aim to always be above 90% cash conversion. You can see we've had a strong performance here at over 100%, and that's because we continue to focus on improving working capital within the group. Because of that strong cash generation and because of the strength of our balance sheet, we've continued our progressive dividend policy, so 12.9p, up 0.4p for the dividend, so continuing to drive shareholder value there. And our leverage about 1.5x is bang in the range of the 1 to 2x that we aim to keep our leverage. And actually, we deliver -- we delever pretty quickly, about 1/3 of a turn a year. So you will see that our firepower to do further acquisitions will come fairly quickly as well through the year. So let's unpack the results a little bit more. If we look at our revenue, you can see that our proportion of revenue amongst the 3 business units was fairly stable year-on-year, so about 40% of our revenue comes from SBS and about 30% each from Climate Management and Water Management in our old 3 BU structure. And the proportion of that, to split slightly differently across the sector, shows that about 35% is from New Housebuilding, just under 30% from the RMI market and just over 25% from what we call Non-housing, so that's commercial, infrastructure and multistory residential and about 11%, which is consistent of International revenues as well. In terms of profit, as I say, profits are up year-on-year, whilst margin is slightly down. We did see that the contribution from the additional revenue that we've had is flowing through and helped to offset those additional employment costs that we've consumed during the year. And we obviously got some profit contribution at the end of the year as well from those acquisitions that we completed in August and in September. The Genuit Business System continues to drive at profitability improvement. And so that also helps us as well as balanced price management offset those additional employment costs. And our margin was bigger in Half 2, as I say, than Half 1. So a good run rate and trajectory coming into 2026. So if we look at the bridge of our business units, you can see that all 3 of our business units grew during the year. So strong healthy performance from them all. And in general, our profitability increased, most notably in SBS apart from in WMS, where we did have some challenges. So let's just dig into the detail of our segmented results and go through our business units one by one. Starting with Climate Management Solutions, here, we saw a really strong revenue performance. So revenue up over 10% year-on-year or about 6% on a like-for-like basis. Actually, within there, our Ventilation business grew at over 10%, and we saw really strong performance there, particularly with MVHR, mechanical ventilation heat recovery, with a cooling module in multi-story residential. And when Lee Mellor stands up in a moment to talk about our Climate business, this is a really exciting area of continued growth for us, as you'll see. We had a resilient performance within our Adey business concentrating on water filtration despite kind of subdued boiler market still. But we did see some softness in our underfloor heating business, which is particularly exposed to the RMI market, but it's a business that we certainly see growth potential in. So whilst that did drive some underperformance in terms of margin during the year, we see a route to improve that as we scale that Underfloor Heating business associated with future home standard, warm homes and so on. And as we integrate our Monodraught business, which is accretive to our margin overall, we do see the opportunity to grow those margins. The Water Management segment, revenue growth of about 5% year-on-year or about flat on a like-for-like basis. Here, we had a resilient performance within our Civils business, and the stormwater attenuation piece grew as well as blue-green roofs, which is really on a different growth trajectory, small, but rapidly growing for the future. Our profit here was down. We talked at the half year around an inventory provision that we made, and we've also had the effect of National Insurance and National Living Wage, which is slightly harder to pass on within this market at lower volumes. But again, looking forward, we see the opportunity to improve margin. Steve Currier has done a great job improving this business in the second half of the year and that's from a price, cost and Genuit Business System point of view. And we do see that as we scale our business, particularly the Blue-green Roof business, there are opportunities to grow our margin here, too. Sustainable Building Solutions is our largest business unit. Revenue here grew again 6.5% for the year or about 3% on a like-for-like basis. We did get some targeted market share gains here. So Drainage, we saw the exit of a competitor from the U.K. market, and we were successful in winning about GBP 20 million annually of business there. We also saw good growth in commercial markets, in particular, within this segment during 2025. And that helped to offset some softness in the new build and the RMI markets, particularly in the second half of the year and that run up to the U.K. government budgets. And overall here, we did see a strong improvement in profitability, really driven by that commercial performance. So about an 80 bps improvement in our margin. So really well done to the team here. And we continue to drive at that, both with the continuous improvement of the Genuit Business System and integrating the Davidson Group of companies, which will be delivering an EBIT of over 20% in line with our medium-term target in 2026. So that's the run-through of the old business unit structure. I wanted to give you as well a flavor of what the new 2 divisions will look like in the component parts. So we've got a number of our analysts within the room. This slide really is a one-off to help you reset your models and explain what goes where and what kind of trajectory we are on in terms of growth and profitability. So here, you can see our Climate and Water divisions and where the various logos our businesses end up and the proportion of those businesses and the growth in profitability rates. So if we take Climate, first of all, that's over GBP 170 million a year business, had a return on sales of over 13% in 2025. Here, you can see that our Ventilation business, which is about 55% of that division, is really growing very well. So that's our fastest growing element of the business at the moment, whereas in Heating, slightly slower growth, and that's really related to the fact that the RMI market hasn't picked up yet, but also technologies like underfloor heating are on a growth trajectory for the future, but are currently not at the scale that we would want them. That means that in both of these divisions or elements of this division, we've got opportunity to improve the margin as we look forward as we grow the business, but also, as we offer interoperable solutions across this division, and the opportunity to be able to sell heating with ventilation systems is really a very strong point for Genuit as a group. Our Water division, that's an over GBP 400 million business, nearly 17% return on sales. Here, you can see our Civils and Infrastructure business is one of the lower margin areas of the group and lower growth, but we do see very strong growth as we look forward, particularly with the AMP8 water cycle that Steve Currier will talk a bit more about when he's presenting. And that means that the volume increase and the economies of scale and operating leverage we can get from that will drive our margin profile as we do. And that will complement our existing residential and commercial business, which, as you can see, is our highest profitability component of the business right now, but also growing at a decent rate as well. So a little bit more detail on some of the results. So non-underlying items first of all, here, you can see that the amount of exceptionals reduced year-on-year to GBP 25 million. A big chunk of that, about GBP 14 million, relates to the usual amortization of intangibles. We did have some restructuring in the year, so we've invested around GBP 5 million in restructuring, which is partly to create those 2 divisions and really set them up for the future, but also tackle some of the improvement in the Water Management sector and improve profitability there, Half 2 versus Half 1 and into 2026. We spent about GBP 3 million on our acquisitions. As Joe mentioned, over GBP 100 million worth of spend on those acquisitions. We're really pleased with them. These are the costs that are associated with buying those. And we've also continued to invest in our systems as well. So really investing in the future of the group here. So creating really efficient processes complementing the Genuit Business System and setting ourselves up to be able to use future technologies, like artificial intelligence, to really create manufacturing operations that are fit for the future, and you'll see this as a continuing theme that we'll continue to invest in. And then, some costs associated with some impairments associated with holding the Polydeck business for sale. This is a business that we've concluded in the year, is not strategic to us, relatively small, but we'll look to divest that business in Half 1. So, on to cash flow, as I said, really strong cash flow performance by the team, over 100% cash conversion. We've really focused on improving that working capital, which is as much about Genuit Business System as it is in the operations and productivity. And that allows us to fund the acquisitions of over GBP 100 million, that dividend payment of over GBP 30 million as well. And it means that our balance sheet remains really strong and puts us on a great footing to be able to invest for the future. So we'll continue to invest in the capital of the group. We spent just under GBP 30 million of CapEx in 2025. We'll spend a similar number, we think, GBP 30 million to GBP 35 million in 2026. We'll continue to prosecute that acquisition pipeline. And as we delever, that will certainly have opportunity to look at similar strategic bolt-on-size acquisitions. We'll continue to provide shareholder value in the form of our progressive dividend policy as well. So those are the results for 2025. Just a word then on the outlook for 2026 before we go back to the strategy and our divisional deep dive. We have seen the continued subdued environment that we saw in Q4 come into January and February. That was expected given the soft end to the year. And we have seen that compounded by wet weather in the U.K. in January and February. So hopefully, as we go into the spring, we'll see some sunnier weather and construction site activity will improve. Certainly, we have seen some positive signs in our order intake that would suggest that sites are gearing up for more activity in the spring. So we'll see how that goes. Obviously, at the moment, we've got the evolving situation in the Middle East to think about as well. Our primary concern there is for the people we have there. So we've got about 30 people in the Middle East. Keeping them safe is the utmost priority. And we do hope that things will settle down there quickly. It's probably too early to really predict what's going to happen from a business point of view at this stage, but we'll continue to monitor that situation and see how things evolve. Despite whatever market conditions we'll see, our focus is really on outperforming the market. And there are certain parts of our market that are not necessarily linked to GDP or the housing market, particularly in the commercial sectors, the schools rebuilding program, which Lee will talk a bit more about, the AMP8 water cycle, the drive towards urban re-greening and blue-green routes. We've got lots of things in the group that we can focus on to drive market outperformance whatever the economic conditions. And we'll continue to improve the business as well through the Genuit Business System. So you'll see continual focus on working capital improvement, productivity and efficiency of the group. And that -- all of that means that we remain very confident in achieving our medium-term targets, outperforming the market by 2% to 4% and growing our profitability to over 20% operating margin over the medium term. So that's the outlook. And now, I'll invite Joe back to the stage to talk around our strategy.

Thank you, Tim. All right. So just a few words on the progress we made last year, and then, we'll get into the divisional overviews. So first, recall that we're all here, 3,500 or so of us, because we believe in the purpose that together we create sustainable living. And unlike so many companies, one of the great things we don't have to worry about going forward with the questions around ESG is actually sustainability is so ingrained in the core of everything we do, it's actually, we believe, a long-term competitive advantage. And I got to tell you, when you're leading a team of people and your purpose and what you're trying to do as a business are so closely aligned, it's a great luxury. And as such, we've actually been on the same strategic journey since November of '22, when we launched this, and some of you were in the room then. And that is our sustainable solutions for growth strategy, still very much the strategy that we're working towards and have been for some time. It's underpinned by a focus on higher-growth, sustainability-driven markets, where we believe that actually helping our climate -- our customers deal with climate change and mitigation is actually really important and can be a competitive advantage. So we invest in organic growth in those segments as well as, as we did last year, finding great strategic bolt-on acquisitions that can help us enhance our position there. Sustainability is not just what we sell, it's also how we run the business, and I'll share with you some results as how we continue to improve that and make sure that we are a leader in operating sustainably and in being the lowest carbon supplier of choice. The Genuit Business System continues to gain momentum, and it is fundamentally lean thought processes at the heart of everything that we do. It's how we run the business, front to back, from sales all the way through to how we install products, manufacture them all the way, how we run our back office. And that continues to gain momentum. And importantly, it's now starting to inform how we drive growth, a set of growth tools that are part of the Genuit Business System going forward. And of course, last and definitely not least, perhaps most importantly, it's about investing in the very best people, the best leadership, the career development for everyone and the fundamental belief that an inclusive and diverse environment actually is a competitive advantage. So just a couple of words on some of those bits. If you think about growth for a minute, a couple of examples here. I mean, Ventilation going into long-term, structurally-driven markets like the need for more housing, the need to reinvest in education in our schools are the types of markets that we like to play in, right? We have a supportive regulatory environment. We're preparing for the future home standard. When it eventually comes, it's the right thing to do. We know we're going in that direction anyway. And as I said earlier, some of our customers are already building there in anticipation of that. And the recently announced Warm Homes Plan, which is a really welcome sign from the U.K. government to get on with trying to accelerate the upgrading of the 20 million-plus homes that are already out there. These are definitely good tailwinds for us, of course. And as you see or you can see upstairs, some of the high-quality bolt-on companies and brands that came last year, where Monodraught strengthened our ventilation presence and the Cistermiser & Keraflo, Salamander and Talon brands fit really well into our Water business. In terms of sustainability, what's really interesting to me is that this is long term, this is on a growing trend to be something that really matters to our customers, will help drive demand and differentiate us as a leading supplier of choice, okay? We actually continue to make improvements on our journey to net zero. And perhaps one of the harder things is actually to reduce not just your absolute emissions, but also your carbon intensity. It's another form of productivity, if you will, on the path to net zero. We did -- we made a 15.7% decrease in our carbon intensity last year, great accomplishment, and we continue to work on that journey and build it in as part of how we run the business and really being more efficient in everything we do. We continue to be a leader in the use of recycled polymers and in the use of low-carbon materials in all of our businesses. Our recycled polymer content remains around 50%. But importantly, we have invested in some substantial projects that will keep advancing that long term. So this is one of those areas where we retain our leadership position, and we do believe that long term, it will be a competitive advantage and continue to be. In terms of the Genuit Business System, this is something we've been sort of tracking the permeation of it through the business, last year, we delivered 75 kaizen events, nearly 4x as many as we did in '24. That's a huge step up. And part of it is because our leaders all committed to being part of this process. And the 7 of us and the 70 or so other of the senior leaders across the business, all participating themselves hands-on in kaizen because we believe leading from the front is the right thing to do. As such, over 23% of our employees across the whole business so far have been part of a kaizen event or a lean training. And then, as I said, we launched the lean GBS tools for growth. So these are tools that we can deploy across the organization to help our sales, marketing and innovation colleagues advance the progress that we actually deliver new products to market that are truly what our customers desire. I thought it would be helpful since we're not at one of our sites right now to take you there. So last fall, let me just set the stage here, one of our new acquisitions, Sky Garden, right, delivers complete blue-green solutions to site that are then installed. It's a very complex process and several Lawries need to leave with everything exactly the way it's needed. So going forward, they need to be able to really increase their output, and this is the site that they actually stage everything from. So let's have a look. [Presentation]

Obviously, they have been modest actually because he's the site supervisor there, and I spent a week there with him and with the team. And the transformation that site went through in the space of 1 week is really remarkable. And you might associate lean methods and thinking with shop floors, but you can do it here, you can do it anywhere, right? And what we're going to look for Sky Garden to do is actually they're in such a growing market in blue-green that their aim is to be able to double the output of that site. And so we'll be tracking that metric going forward. So hopefully, that helps you kind of see how this all comes to life. And of course, the last and most important piece really is investing in our people. I've alluded to the strength of our leadership team, and importantly, the succession and talent development that we drive throughout the whole organization to create more opportunities for people. It starts right at the very beginning of somebody's journey. So we've been committed members of the 5% club for some time, which means that we invest in accredited earn-and-learn programs for people either early in their careers or retraining or perhaps getting some of the training education they never got. Last year, I'm proud to say we had 18.9% of our employees were involved in earn-and-learn programs, which is really remarkable. And it's a great investment and very well received. We promoted internally 94 colleagues last year, of whom 40% were female leaders. And our leaders -- 1/3 of our senior leadership team are female now. Of course, we invest in all the forms of diversity and continue to make this an absolute part of what we do. It's something that personally matters to me and to all of us. But in the end, the best team wins, and we think that is truly key. Let me just say a few words about the division announcement that we just made, and then, I'll turn it over. So those of you who have been on this journey with us for a bit recall that we used to operate the business, 5 and 10 years ago, very, very decentralized, right? And in fact, there was no collaboration really across any of the different companies. We were reporting in 4 different segments. And then, in '22, late '22, we went to 3 segments, 3 business units, right: Climate Management Solutions, Water Management Solutions, Sustainable Building Solutions. Last year, we had the opportunity to actually operate Sustainable Building Solutions and Water Management Solutions, both involved in different aspects of water and together. And Steve Currier actually led those 2 businesses. He led Water on an interim basis. And as a part, we were able to really uncover some great opportunities to further collaboration with those businesses. We think there are both efficiencies to gain, but also importantly, ways that we can leverage that collaboration to really focus on driving growth and to accelerate our investment in customer-led innovation. So that's really the rationale. So going forward, we will be reporting as the way we manage this business as a Climate business and a Water business. You can see some of the brands that are in there. But rather than hearing me talk about it, I'd like to invite Lee and Steve up, starting with Lee, to take you through the Climate division. There you go. Lee, over to you.

So good morning. I'm excited to be here to tell you this story. But before I do, I'll introduce myself. So you've heard I'm Lee. I joined this company from a background of very growth-centered large P&Ls operating across Europe, the Middle East and Africa, where actually tailwinds were not the thing that grew you. It was about how you drove your company. So I'm really happy to be here, and I'm going to share with you why. So Climate Solutions, we are a group of problem-solvers and solution-makers for a world that's warming and where you need to mitigate and adapt. On the right-hand side, you will see our Heating Solutions business. We start off with Adey. We filter things so the system works better, extends its life, heat and keeps you warm. We've then got Surestop. Surestop is a stopcock. It's very innovative. And if you've got Adey, it's a cross-sell. Your installer is installing the filter at the same time as stopcock. In Nu-Heat, and I'll go into this some more later, we design and commission underfloor heating systems and more and more renewable technologies. So when you put in a heating system, you're putting alongside that things like storage batteries. We have Alpha. Alpha is a testing business. Now, this offers the opportunity such as hospitality, where we are today to make sure that the water in the building is safe and another cross-sell. We then go into our ventilation divisions, and we have Nuaire, Domus, which are in the residential and commercial building spaces. This is where we're seeing very, very fast growth and our newly acquired Monodraught business. You've seen some of this in operation on the boards upstairs. This is hybrid technology with software. And actually, the software is a huge part of the mix, and I'll explain that further. So where are we focused and how are we helping in mitigation and adaptation? Three stories to pull out. One is the transition to low-carbon heating. It's fair to say the U.K. is some way behind the rest of Europe in adopting, for example, lower temperature heating systems. So we're very much at the early stages of this, but actually, we've got interoperable solutions to deliver. In a world that is warming and where people live, you actually have to help ventilate and ventilate in a different way. So I'll give you an example of that. And in a need to provide clean and healthier, how do you deliver that, particularly where there's heavy regulation, so a hospital, a school as 2 key examples. So let's talk about our homes. First and foremost, we have a suite of products, solutions and design and commissioning services, which means only Genuit can package together a heating system, which is operated from a heat source, which we will design and commission, however, complex the building actually is with interoperable controls, you've actually seen some of them upstairs today, and you're more than happy to play with those later. And then putting in more and more ventilation systems as our homes, because they are heavily sealed, require a lot of mechanical and hybrid ventilation. So we have a package of goods and the solutions to deliver that. And I want to introduce you to Jeremy to show you our solution and services. [Presentation]

About 10%, 15% of our projects every year look like that, where they're highly complex buildings. But it doesn't matter if they're complex or simple, we can provide you with both the service and the products to make sure that you transition into low-carbon heating as a way of adapting to a new way of working through the future home standard. So let's talk to you about Ventilation. So apartment buildings, simple example of how we need to mitigate. So in this example, about 1 in 5 of us live in apartment buildings, particularly prevalent in cities like this, Central London. And in an apartment that is well sealed, ventilating that room or those rooms from heat, or on the other extreme being cold, it's very difficult to do. You can't open the window because of noise. You can't open the window because of safety regulations. So as problem-solvers, we developed a product for house-builders to put into the building to make sure that you're recycling warm air and bringing in cool air. And as a result of that, the person living in the apartment is living well. This has been a multimillion-pound product for us and is still rapidly growing with projects out through 2026 and 2027 already. In acquiring Monodraught, the power of actually creating something that at present time only we can bring to the market, which is a benefit for the end-user living with the building, but also the installer. We are able now to combine mechanical ventilation with hybrid ventilation using fresh air, control it from 1 source. And we've all been there where the controls in rooms do not control single source. We can talk to the heat source, so the heat pump in this example, and we can monitor every single room with the use of acuity upstairs. It really is a very unique proposition and something that is going to pay a great dividend for us when it comes to growth. And in this transition, I wanted to show you what the companies look like apart, and when bringing them together, the sum of the parts are far greater. In yellow, Monodraught were able to sell hybrid ventilation units, predominantly into classrooms. That's where they live. Mechanical ventilation was Nuaire specialty, actually a lot bigger in a school. And in mechanical ventilation, you're doing this in high work areas, so gymnasiums, kitchens to mention a few. Now, we're able to ventilate all of the property. We can control it from one source, and that means in a funded area of growth, it creates us an opportunity, which is very, very significant on an annual basis of around about GBP 150 million. In fact, it's the deployment speed, i.e., the installations that our current challenge, not the acquired order book where we are growing quite rapidly. So I want to introduce you to Everard, who, again, will show you what living with one of these systems looks like. [Presentation]

So listening to Everard there, slight segue before my final slide I wanted to give to you is the international opportunity that also presents itself for Genuit. Many of the things that I've showed you today in ventilation are actually attributable to European markets, where the climate is broadly similar, but also standards. What is driving that school are also very prevalent in markets such as France, Belgium, et cetera. So as part of our future mid- to long-term pathway, it's about how we commercialize this also outside of the U.K. So we're standing here today in the middle of a world that's pretty chaotic, but it always has been. And hopefully, what you've seen today is we have a great opportunity to grow this business and take control of growing it above the marketplace. We have a group of very uniquely positioned ventilation and heating services that we believe are at market-leading edges with future product development pathways that we can expand where you live, work and play. So that's enough for me today. I wanted to hand you over to Steve to talk to you about our Water division.

Thanks, Lee. Good morning, everybody. I'm Steve Currier. I've been with business 3.5 years. Prior to that, I was with Eaton Electrical. And for 15 years, prior to that, I was in the automotive industry for another 15 years. And I really want to talk you through how we're handling one of life's most precious substances, which is water. So this slide really sort of covers the scope of our activity, and it really encompasses the path of water through the built environment. So we start with water supply with Polypipe and Terrain into the buildings. Slight issue there. We'll just attend to that. Okay. Right. We'll go again. So Polypipe and Terrain supplying water into the buildings through the point-of-use applications with Cistermiser and Salamander, 2 of our new acquisitions. And then, we bring in rainwater with Permavoid and Sky Garden, also Manthorpe. And then finally, back to Polypipe again for drainage from the buildings, attenuation tanks and then our work to support sort of civils. So that's the way the business looks. And we structured the businesses into 3 segments, and they're focused around route to market. So they're civils and infrastructure, residential and commercial buildings. And we've done this fairly recently, and we've done it very deliberately so that we bring our businesses closer together so that we can prompt and promote the ability to sell full solutions for common customers. There's a reasonable amount of international presence here as well. We have facilities in France, Italy and the Netherlands, and also, as we mentioned, the Middle East. And one of the aspects of the new structure is that we are transforming some of those to be country organizations to sell the full portfolio across those various territories. Now, in terms of the problems we're trying to address, there are really 3 key challenges. And the first on the left, which I'm sure everybody is more than familiar with, is sort of excess rainfall and flooding. If you're a King gardener, a golfer or if you have recently holidayed in Spain, you'll be sort of more than familiar with this. And it's really caused by warm air giving more intense periods of rainfall. And I'll cover off some of the sort of solutions, how we're tackling that. But the real thing is, yes, okay, we might have a sort of a little poor sort of winter break, but the real issue here is the overwhelming of aging sewage systems, leading to the well-publicized instances of brown rivers and the associated health and environmental impacts. Paradoxically, the second problem is not having enough water. And this is due to higher temperatures and more frequent instances of drought in the summer. And this is a growing area of concern for the customers. And there's a couple of issues here really. The first is that in some areas of high-stress water, we can't get planning permission to build the homes we need. But also the customers, as we do, see the impact of approaching legislation, reducing water consumption to 110 liters per person per day and actually less in some water distressed areas. So a key area of focus moving forward. And actually, the recent acquisition of Davidson Holdings has brought some new products and solutions in this sphere. And we see water conservation in buildings as an area that will only grow with opportunity for us. The third challenge that we're trying to address is to continue to support construction. And a lot of our customers have got ambitious, but more importantly, committed carbon targets there, and they have to sort of achieve this combined with the ongoing problems of scarcity of labor in the construction segment and also the impacts of inflation, which have to be sort of mitigated through that. So those are the issues we're trying to address. I'd like to really sort of talk through a couple of solutions here. So the project you see on there is a deep attenuation tank, and that's designed to intercept flood water, hold it and release it in a controlled manner after the event. The alternative being an overload of flood water and sewage in the system, which then breaches the capacity at water treatment works, and that leads to the aforementioned sewage overfills. Now, the good news here is that we're entering a cycle of funding with AMP8, and there's GBP 104 billion committed with focus on flood mitigation and sewage segregation. Of that, the addressable market is around about GBP 100 million for Genuit and part of which actually funded the project you see on the screen. And if I can plug my colleague, Jason, there's actually some drone videos of this project being installed, which is in leads that you can look at. There is bad news, though, is that inevitably, these projects are down a country lane or in a crowded urban environment, usually next to a very flashy listed building, you name it, there is always problems, and they always have time constraints to deliver. But actually, this is where we feel the Genuit solution can support. And we use a sort of a modular approach. It's multifaceted. We have a combination of assembly in the factory, and then, final configuration on site. And this, when you combine it with the light weight of a polymer system gives really good advantages to the contractors and the consultants on site. And actually, the fact that we use a lot of recycled polymer here helps the utility businesses supporting their carbon aspirations. One of the other facets of the water offering from Genuit is nature-based solutions. And these can range from green roofs, including bio-solar, which you might have seen in the previous video of the school through to green walls, planters, rain gardens, et cetera. And these, together with our traditional solutions and more increasingly controls, can give us a real range of opportunities to tackle very complex-built environments. Now, we've been present here for a while, but where we're starting to gain traction is designing these systems holistically at the start of project on a roof-to-river basis, as they say. And one of the things we've recently done to test and look at our value proposition is go back over a number of projects, and in effect, redesign them as we would now. One of the notable ones is on the slide here, which is a Stockport Interchange. We had most of the data for the project. So using that, we went and redesigned it with the full range of control solutions now available to us. And we found that, that would have saved the main contractor GBP 600,000 in the total cost of installation of the system. In addition to that, they would have gained additional sustainability credentials and a GBP 20,000 cost reduction in the -- in water supply annually for them as a business. All this at the same time as giving Genuit increased scope of supply and revenue to the project, we think, is a real compelling value proposition and actually a genuine win-win customer Genuit situation. I'm convinced, but don't take my word for it. Let's hear from one of our customers. [Presentation]

We will come back to that in 6 months because unfortunately, we'll present the results in March, which isn't the greatest time to see the abundance of greenery float up. But, I guess, as my hairdresser always says, some you win, some you lose. Okay. So changing tack slightly. So the last thing I'd like to talk through is how we're supporting construction. And the first thing just to really pick up is shortage of labor in the construction world. This is a well-trailed problem with around about 250,000 less people in the sector pre-COVID and has led to a lot of focus on modern methods of construction. But I'm sure you're aware there's been many, many missteps here and many business failures. And when you look at those, they're generally in high fixed-cost businesses that haven't been able to cope with the fluctuations of volumes, particularly in the period of sort of fairly sustained low activity that we've had. But what we found at Genuit is that really having adjacent systems with our traditional product and channel supply next to our design and prefabrication service has allowed us to flex to meet that fluctuating demand. And actually, having both solutions to offer the customer means we tend to offer the customer the right solution for them rather than just the one that we have to offer. And actually, in a similar manner to the Stockport Interchange, we can often find with that prefabrication in addition to supporting them in terms of labor availability. We can reduce the total cost of installation for them. So another win-win situation. We've actually seen over the last 3 years, a doubling of our MMC and prefabrication offering. And last year, it was 20% growth as well, which is a further year. And that through a period of downturn means we think we're really well set for the long publicized and trailed, but not yet here recovery in the housing market. So we're really excited with that. And last slide to cover is actually embedded carbon in the products themselves. We've made good progress here on a couple of points. Firstly, from a data perspective, so we've now got 70% of our revenue covered by environmental product declarations. And that allows the customer to make informed, but also accredited choices in terms of the product that they want to sort of design into their system. But the other element of progress has been on the embedded carbon itself. And last year, over 50% of the products had recycled polymer in, which is one of the ways that we help to reduce the embedded carbon. The others are designing the product for mass out and efficiency and then responsible sourcing there. And we know this is really important for the customers because we can track the search of EPD databases. And actually, the 2 most searched product sets are piping systems and HVAC. So we think it's really important. And actually, as was mentioned earlier, last year, we've run the combined Barratt Redrow tender. And in addition to our system capabilities and obviously sort of the value that we provided as part of that, the sustainable carbon credentials of the offer were really fundamental in winning that. So in summary, we think we're set up to leverage sustainability and regulatory growth drivers in that water -- that world of water. Three points of how we do this really. Firstly, broad holistic solutions for the water problems of today and tomorrow. Secondly, design optimized for the lowest cost of installation to maximize customer value. And third, at all times, maintaining the lowest embedded carbon we can. And that's water, and I'll hand back to Joe to finish off.

Great. Thanks, Steve. Hopefully, that helps give a bit of a view into this. And again, like I said, there's some great demonstration with some colleagues upstairs, so feel free to stick around after the Q&A. But let me just kind of wrap up here. So in the end, as I said, our -- look, we will continue to focus on being a well-run, high-performing and resilient business, at the same time, positioning ourselves really well for the long term. We think our sustainable solutions for growth strategy is very much aimed at that, and we're making good progress. I hope you can see by now that we are, in fact, very well positioned to benefit from the regulatory tailwinds by serving higher growth markets. We've demonstrated the ability, and we'll continue to be able to grow organically as well as inorganically with strategic bolt-on acquisitions funded from the good cash flow that we get from this well-run business and that we are and remain well positioned to hit the midterm targets. And I'll just leave you with the investment case. This is quite the same direction investment case we've been working, and we're very confident in achieving these midterm targets. So that's all we brought. Tim -- if Tim, Steve and Lee can come up, and we'll just take a bit of Q&A, and then, we'll all be available upstairs afterwards, and we'll go from there. So Tim, why don't you coordinate questions and farm out as you see fit there.

Okay. So just put your hand up if you would like to ask a question in the room, perhaps? Rob, you are first.

Guys, really interesting across all the different points. Yes, just a couple for me. I suppose, firstly, on full year '26, clearly, evolving situation, et cetera, but is there any indication on the H1-H2 split of margins given the quite significant step-up in H2, I think, 140 bps higher? So any H1, H2 thoughts for '26 on margin? And then secondly, when I think Lee was running through, I guess, the Climate division. You mentioned one of the businesses called Alpha, which seems to have, I guess, testing capability. Could you just kind of set briefly, I guess, the opportunity for Genuit to do a lot more on the kind of the testing front here? Because clearly, a lot of what you do is kind of install products. Are there different economics, more recurring revenues, different opportunities to consolidate into the testing market related to water and climate?

Okay. So yes, our margins, our run rate going into 2026 is more akin to the margins we achieved in 2024, around that 16.4% achieved in H2. The market remains subdued, similar to the end of last year. So really, obviously, Rob, our margin kind of continuing at that level. And then, we'll see for the second half, whether things pick up. In terms of comp, first half is harder this year than second half because we actually started off with some bright spots, if you remember first half last year, whereas it then weakened in the second half of the year towards the government budget in November. So we'll -- the comp will get easier in the second half, but obviously, there's risks and opportunities abound, I think, as we look forward to the year. Do you want to tackle the testing question?

Yes. So taking that capability, I want to bring you back to the transition to low carbon homes. So in a heating system that's running at around 50 degrees with wet, essentially, the problem is that you're going to get a different form of sludge, as we call it, in the system. So this year, Nu-Heat, we'll actually launch a warranty-based system, where for the homeowner, we will test the system every year for system efficiency. The logic of that is we can tell you preemptively before the actual heat source starts to break down of challenges to come. And that gives you an example that's tied to today's presentation, but testing is definitely something that we see both in residential and commercial buildings, we can extend into different uses.

And just to add to that, that's one of the things we love about the Alpha business is that, as Lee said, since that is something that you'll do every year in a home or a commercial setting that the ability to build a recurring revenue stream is very attractive there and a good differentiator.

Great. Thank you, Lee. Clyde?

A couple for me. Obviously, there's an awful lot of volatility around oil prices at the moment -- Clyde Lewis, Peel Hunt. Obviously, an awful lot of volatility around oil prices. So it would be useful to get an update as to maybe the group's energy cost, total fuel diesel costs within the business. And then, also attached to that is sort of what sort of coverage have you got around PVC brought forward? And how quickly would that higher oil price lead into higher cost for you? That was the first one. And the second was really around the wet weather start for this year. Would you like to sort of help us a bit as to how wet and how much of a negative impact it's been? Because I'm...

Really, really wet.

Yes. No, I'm a golfer. So I know how wet it has been, but anything on that side would help. I mean, clearly, we'd expect to sort of see better conditions, but it would be helpful to get an idea for the first couple of months of the year.

Yes. Okay. So if we take the Middle East situation, from an energy cost perspective, we're actually pretty well covered. So we're 90% hedged for the summer and 80% hedged for the winter of this year. So from 2026 perspective, I'm not expecting energy costs to hit us hard. From a direct revenue point of view, 3.5% of our revenues come from the Middle East, so small within the group, but still there's some revenue there. As I say, the priority at the moment is keeping people safe, activities are lower, but it's early days, and we'll see how that pans out. And then, of course, you've got the indirect effects, which could affect things like inflation, interest rates at home and so on. It's really too early to see what's going on there. But in terms of magnitude, we buy about GBP 80 million of polymers each year, GBP 50 million of virgin, GBP 30 million of recycled. Clearly, virgin will correlate more closely to the cost of things like oil and gas, but recycled can as well depending on substitution effects and substitution demand as well. We buy a very good discount from the market price given the scale that we have, but it will move with a short lag to that. So we'll see how we go. We do have a history of being able to pass on price in this industry. It is rational in that sense. And there may be a bit of a short lag. But if this is more structural than temporary, and it's too early to say whether it is, then obviously, we would look to work with our customers in the right way to manage the right commercial outcome. Okay. In terms of wet weather, well, it is the U.K. So yes, I think the subdued market conditions in January and February are expected in the sense that Q4 was subdued. And it's also expected that January and February might be quite damp. It's hard to say exactly how much of what you see in the market is down to this. But there's no doubt that when it rains, site activity is lower in terms of the construction industry. So -- many of you who walked here this morning, as I did, will have enjoyed the very dry and pleasant morning this morning, so hopefully, that's the shape of things to come. There's no doubt to say there's a slight uptick in some order flow, which suggests some gearing up for the spring, and over the next couple of months, hopefully, we'll see that improve. Okay. Christen?

Two for me. Christen Hjorth from Deutsche Bank. First, just looking at the addressable market for education, I think that was more than GBP 150 million now. Just to give us a bit of a sense of where Genuit is currently there in terms of market share and so the sense of the opportunity in terms of market share gains as well. And then, one for Steve. Obviously, SBS margins have moved up really nicely over the last few years. How similar is the opportunity in WMS? Is it the same playbook in essence to put there? Or are there differences that we need to be aware of?

Lee, do you want to take that one?

Very large market, ventilation, lots of different systems. We hold somewhere between 10%, 15% share, and actually, our industry, there isn't anybody that holds anymore, and it gives you the runway of growth. There is a huge growth opportunity if you can simplify this. And that's why you see upstairs, the interoperable controls. As soon as somebody starts to do that, your share gain becomes more relevant because the system is easier to install and talks to each other. Steve?

So yes, to answer that, it's a similar playbook with some nuances. And I think the first thing -- one of the things we found when looking at the businesses together is they're quite connected. There's a lot of intercompany supply and sales. And actually, sort of it's not as stark as SBS was at this level and WMS was that level when you look at it from an end-to-end sort of perspective. So it's not a stark anyway. However, the things that are similar are some of the consolidation and structure elements that we previously did in SBS that we are now working through in WMS. Tim, mentioned some of those changes that we've made, and there are more to make there. There's then the process efficiency, the lean work, the Genuit Business System, and we are, in effect, slightly less mature in the WMS businesses than we are in the SBS businesses. And we deliberately started the SBS businesses because they are more mature markets with less potential sort of growth drivers. The bit that's different is that in those key areas of WMS with the blue-green space, the AMP8 funding, there are some growth drivers there, and they will really help cover economies of scale and fixed cost in what is generally a more capital-intensive part of our business. So very similar, but with some nuances.

Yes. The volume point from AMP8 is really important because when we look at the civils business, we actually see very good gross profit levels, but we haven't seen the kind of constant throughput that you need in a business like this. So the operating gearing is there with that additional volume from AMP8 and particularly because these are engineered solutions. It's not just about buying cheap pipe. We do see the potential to grow our margin significantly in Water.

It's Jeremy from JPMorgan. I've got 2, please. The first one is just on the order intake, where you mentioned some positive signs there. Can you maybe elaborate on what exactly you are seeing on the ground? And then the second one is just around M&A. What's your current thinking there? And how is the pipeline looking? Any particular areas where you're focusing at the moment?

Okay. Well, so I'll take the order point, and then, Joe talk about M&A. So yes, I think particularly in the commercial spaces that are not so linked to GDP or perhaps the housing sector, where there's perhaps more question mark at the moment, we're seeing pockets of good order intake. So Lee has talked about the schools rebuilding program. That's one area we're seeing an increasing activity around AMP8. We've got Jason Shingleton with us today, who some of you can talk to afterwards if you like to learn more about that. But really, the contractors and the water utilities are ramping up their activities there. Things like blue-green rooms that you've seen some examples of today, that's on a different growth trajectory because of the need for greater urban regreening. So even though perhaps there's some softness in multistory construction with holdups with the building safety regulator, where people are getting planning permission, they're having to do that urban regreening. So there are these exciting pockets of commercial areas where we are seeing the order flow there. We do need that site activity to pick up, as I say, so that weather improvement will help that, but certainly some pockets of opportunity that we see. Joe, do you want to talk about M&A?

Yes. And on the M&A front, I mean, really 2 sides. One is sort of the process, and the other is the targeting, if you will. As you can see this year, I mean, obviously, with last year's acquisitions, I mean, we're quite pleased with those. And they are the types of companies that we're looking for, right? Ones that expand our portfolio, that allow us to bring more solution and growth capability in the group that may bring access or strengthen access in a particular market is with the education sector. The one thing that they didn't do is actually increase our international exposure in the short term, which has been a key part of our M&A strategy. And we continue to cultivate that. We've got a really good corporate team that Martin leads. He'll be here afterwards, you can ask him as well. We continue to increase our targeting. And so we've expanded our pipeline intake, if you will, the universe of companies that were running the rule over. So you've heard us say in the past, it's sort of an 80-plus funnel. We're putting -- so it will be a 3-digit funnel clearly of things going in. And in our experience, that's what you need to do. You have to actually be cultivating quite a bit in order to find the right targets and always have a pipeline. So you will see us continue to, obviously, look at U.K. opportunities, but our focus increasingly on Europe, on Central and Northern Europe and to feed both water and climate. So he's working very closely with both teams there. So look, I can't obviously tell you much about exactly what's going to come down the pipeline or the timing. That is a hard thing to predict, as are a lot of things lately. But we are very active in the space. The only thing I would say is that we've demonstrated a disciplined process to integration with both of these acquisitions last year. We have a playbook that we run, and we've been refining that. And I'm really pleased to say that the Water and Climate teams did a brilliant job of integrating these 2 acquisitions, and they are on or ahead of our initial expectations. So that's been really pleasing.

Charlie Campbell at Stifel. Maybe a couple of kind of medium-term questions really, largely around ventilation, I think. Just wondering when the future home standard might start to bring through some extra volumes, if you had any more thoughts on timing around that? And also kind of a similar idea really around Awaab's law. Obviously, public sector now, but there is a thought that might be expanded into the private rented sector. Any thoughts and developments around that?

Joe, do you want to start us off, and then, we'll come to -- Awaab's law.

Future home standard. As we've been talking about this for quite a while, it is -- obviously, the legislation has been delayed. I think there have been other priorities. We're very heartened by the Warm Homes Plan because it does show the government hasn't abandoned the green agenda, and this is a key piece. And what I would say interestingly is what we've seen actually on both businesses is homeowner -- the house builders are continuing to put in place the work they need to do to be ready for it. And in many cases, there are actually some aspects building ahead. So we've sold in the thousands of sites with underfloor heating to some of the larger and mid-sized developers. Some of those are being installed as we speak. I mentioned passive house earlier, it's quite interesting. You see it more prevalent in Scotland, but also some of the developments that are either premium or with more proactive sort of local areas where that's quite attractive. And that drives you in the same direction. So look, we're doing the work. We are ready to scale up, but some of the activity is happening in advance of that. Do you want to say a few things about Awaab's law?

Yes. And I want to jump off from where Joe just left you. Many of the people that I meet are trying to predict a regulatory environment that's not in place, but they already have inflation. So actually adopting these ways of working is more prevalent. People are moving to the future home standard because the no man's land in the middle is very expensive, very expensive. So we're seeing adoption despite -- we're seeing adoption because people are trying to predict. Now, adoption has good signs and bad signs. So if you take Awaab's law, it's actually the loss of somebody's life. At the end of the day, local authorities grabbed that and through 2024 and 2025, council-driven homes started to adopt more ventilation. But the challenge was the ventilation systems that were being adopted, the variability in their performance probably wouldn't stop the mold spores that killed that young child. So it's up to suppliers like us in a bit of no man's land to actually take people to make better decisions about what type of ventilation units there are, where sometimes there is a law in place, but how you execute it is a little bit gray. And that's what we're busy doing, creating the ventilation units that would stop the mold spores in the first place and then educate the authorities and the installers and if they did go to private landlords on what good looks like, which is currently a gap.

Yes. It's an interesting point. It's something I've said before, some of you on the Future Homes Standard, too. A lot of these cycles are actually the beginning of innovation cycle, not the end. So what we're installing in houses 5 years from now will be better than what we're installing next year. And I think that's really the point we can continue to innovate and improve and bring better solutions for the developers, and importantly, the homeowners.

Okay. What other questions do we have?

Anything online?

Any online questions? Nothing from the webcast.

Okay.

Okay. Last chance then in the room for anyone who's got a question. Otherwise, we will finish up.

Yes. So look, thank you all for -- go on.

[ Max ] from [ Oghma ] Asset Management. If you could just help us. I know the outlook is quite good for water. So what sort of drop-through percentages could we expect if we do see, let's say, 5% volume improvement this year that is coming in?

Yes. So as a group, generally, we talk about a 30% to 35% contribution drop through from incremental business. That does vary, then you can adjust that up or down, probably based on the chart I showed earlier on, right, with the different margin profiles, although we won't talk specific margins for each of our businesses. So it's a really strong operating gearing that we have, and the group maintains at least 25% capacity to manufacture more if we see a recovery in the market. And so, as volumes increase, we can see a clear path towards that over 20% margin target.

Okay, which actually is a great kind of wrap up. If I go back to the investment case, we're committed to driving above-market organic growth, augmenting that with fantastic acquisitions that expand our ability to bring solutions and to serve additional markets. You know that sustainability is at the heart of everything we do. We serve a large market here in the U.K. and one that stands to be significantly expanded as we expand our global presence. We remain committed to hitting our 20% plus operating margin. Simple math tells you both of our divisions need that target as well, and we're confident both of them have the ability to get there. And making sure that we deliver really good returns on invested capital and that we redeploy that cash flow, the excellent cash conversion that we have, and we'll continue to strive for into both good organic growth investments and the type of acquisitions that you can go hear from upstairs. On that, thank you all very much for coming. I appreciate this was certainly more than our normal presentation, but I hope it was really useful. And we've got 4 different demonstrations from some of our own people here just to tell you a bit about it. So any of you who can stay, feel free to have coffee and Danish on us, and we'll see you upstairs. And we'll be around for questions. So thank you very, very much.