Grafton Group plc (GFTU) Earnings Call Transcript & Summary

All right. Good morning, everyone, and welcome to the Grafton Full Year Results Presentation. A few operational highlights from me before I hand over to David, who will guide you through the financial numbers in more detail. Good morning. A resilient Group performance in 2025 with pleasingly a return to revenue and to profit growth. So revenue was up for the full year, 10.4%. Adjusted operating profit was up 7.1%, and our adjusted return on capital employed was up 60 basis points at 10.9%, comfortably exceeding our cost of capital. We made continued progress on our development activities to further strengthen the group, enhanced leadership teams and the talent pool in general across the Group, including bringing in -- for Iberia to really focus on our growth aspiration in that relatively new market for us. We successfully integrated the first platform acquisition we did, Salvador Escoda, which I'm pleased to say delivered the profit growth in line with our plan, and we made good work to prepare that business to be ready to accelerate growth going forward. We also strengthened our market position in the Republic of Ireland with the bolt-on acquisition of HSS Hire into the Chadwicks Group to further extend our hire proposition to our customers. And in general, we delivered a strong cash conversion and preserved a strong balance sheet to continue to support the future development of the Group. So I shall now hand over to David, who goes into more detail.

Thank you, Eric, and good morning, everyone. As Eric has already covered off some of the headline details of our performance in 2025, I'll talk you through some of the financial details now starting with the income statement. Revenue of GBP 2.52 billion was 10.4% higher than last year. Thanks to the hard work of our teams across the group, we delivered a resilient adjusted operating margin pre-property profit of 7.3%, only 30 basis points below last year. This reflects a continued focus on margin management with the group achieving a 50 basis point improvement in gross margin, together with a proactive management of our cost base to mitigate the ongoing inflationary environment on operating costs. It's pleasing to report that we saw a return to profit growth for the first time in 3 years, with the group's adjusted operating profit before property profit of GBP 184.3 million, 6.2% ahead of 2024. Adjusted operating profit, including property profit of GBP 5.9 million was 7.1% up to GBP 190.2 million. The net finance cost of GBP 10.1 million was higher and reflected 3 elements: lower interest income on deposits following interest rate cuts, lower cash balances due to acquisitions and share buybacks; and finally, a foreign exchange movement. The effective tax rate was 18.2%. That's lower than the 19.5% indicated at the half year and reflected the geographic mix of group's profits and a credit relating to updated estimates of liabilities relating to prior years. Adjusted earnings per share was 75.4p, 5.1% higher than 2024 and which benefited from our share buyback program. Since we first started our share buybacks in 2022, we've reduced our share count by over 20%, and I'm delighted that we're announcing a new GBP 25 million share buyback today. For more technical guidance on 2026, I've included some information in the appendices, which you may find helpful. As noted in our January trading update, the Group has adopted a new reporting structure that better reflects our strategy and management focus. The Group is now organized into 4 geographical areas, the Island of Ireland, Great Britain, Northern Europe and Iberia. And I've set out on this slide where the various brands now sit. For clarity, all results presented today follow the new reporting structure with comparatives restated. And we've included a couple of slides again in the appendices to help you track through the new segments. Let's look now at movements in revenue for the year in comparison to 2024. The organic movement, which I'll cover in more detail on the next slide, saw revenue increase by GBP 30 million. Acquisitions contributed GBP 195 million of incremental revenue in total, largely due to the full year impact of Salvador Escoda, which reflects the benefit of an additional 10 months of trading compared to 2024. The divestment of the noncore MFP piping business in the Republic of Ireland at the end of May reduced revenue by GBP 5 million. As MFP mostly supplied internal customers, the revenue effect is limited here, but you'll see a larger impact later when we discuss the operating profit impact. Finally, the strengthening of the euro against sterling accounted for an exchange gain of GBP 18 million in the year. This slide analyzes the net increase of GBP 30 million in organic revenue. It should be noted that revenue in the year was supported by modest levels of product price inflation, and that's in contrast to 2024 when product price deflation, particularly in our distribution businesses in Ireland and Great Britain, adversely impacted sales. The Island of Ireland segment, where all businesses delivered year-on-year growth was a key driver of organic growth with revenue up GBP 34 million. In a difficult market, organic revenue in Great Britain was broadly flat year-on-year, which we felt was a creditable performance. Revenue in Northern Europe declined by GBP 6 million, largely due to lower trading activity in Finland. Organic growth in Iberia relates only to the last 2 months of the year as the business was acquired on the 30th of October 2024. Turning now to the movement in reported adjusted operating profit. We'll look at the movement in the profitability of the like-for-like business in a moment. The net impact of new and closed branches had a small positive impact on profits, while the impact of the MFP divestment, which I talked about earlier and is shown separately here, resulted in GBP 2.6 million reduction in profitability. Acquisitions added a total of GBP 13.2 million, mostly driven by Salvador Escoda in Spain with GBP 1.4 million coming from 7 months of trading from the bolt-on acquisition of HSS Hire Ireland. Property profit was up GBP 1.9 million in the year, while the stronger euro had a positive impact on reported sterling profitability. Looking at the movement in adjusted operating profit in our like-for-like business, you can see that all operating segments, except Northern Europe reported an increase in adjusted operating profit. Our businesses in the Island of Ireland delivered a strong profit growth as strong sales performance underpinned gross margin expansion. And in Great Britain, even in a very challenging market and with sales broadly flat, profits were higher, thanks to a 120 basis point improvement in gross margin. Northern Europe experienced a reduction in profits, driven by -- primarily by lower sales in Finland and ongoing operating cost pressures in both the Netherlands and Finland, which I'll cover in more detail in a few minutes. Finally, central costs were higher in the year, partly due to the planned investment made towards the end of 2024 and into 2025 to strengthen capabilities to support the group's strategic priorities. Moving on now to look at each segment in a little bit more detail. Our Island of Ireland segment delivered a strong performance during the year, supported by favorable economic conditions in the Republic of Ireland. Revenue of GBP 1.07 billion increased by 4.3% on a constant currency basis. Average daily like-for-like sales were up by 3.5%, with all businesses reporting year-on-year growth. Woodie's delivered another year of strong growth, supported by a particularly strong performance in plants and garden products with growth driven predominantly by increased transaction volumes alongside modest increases in average transaction values. Chadwicks saw good growth across the hardware, heating and plumbing categories. The gross margin increased by 20 basis points in the year, driven primarily by the strong performance of Chadwicks. Overheads increased due to inflationary pressure, while all our businesses continue to mitigate these impacts through productivity gains, better use of technology and more efficient rostering. Adjusted operating profit of GBP 111 million was 1.8% ahead on a constant currency basis, but the operating margin was slightly down by 20 basis points to 10.4%, largely due to operating cost pressures. The integration of HSS Hire Ireland into Chadwicks continues to progress well with a short-term focus on systems integration. The outlook for the construction market in Ireland remains positive with a focus on accelerating new housing supply expected to continue for at least the next decade. In Northern Ireland, market conditions were and remain more challenging with the construction sector delivering modest growth in 2025, primarily due to an increase in new housing, albeit from a low base. Moving next to the Great Britain. We were especially pleased that our targeted commercial actions delivered a 120 basis point improvement in the gross margin despite a very competitive market backdrop with subdued volumes. Around 60% of our sales in Great Britain are generated from London and the Southeast, and this market has been particularly affected by a weak housing market with London seeing the lowest level of housing starts in 40 years. After a positive start to the year, overall construction activity softened from late quarter 2 and remained that way into the second half with the U.K. government's autumn budget further weighing on consumer sentiment. Revenue in Great Britain of GBP 765 million was broadly unchanged in comparison to prior year. Average daily like-for-like sales were up 0.4% with strong growth in our manufacturing businesses, helped by softer comparators from 2024, largely offset by a modest decline in our distribution businesses, which represent a greater share of sales. Notwithstanding inflationary pressure on costs, especially with respect to labor and property, overheads were tightly controlled across our businesses with the increase in like-for-like overheads contained to 1.8%, well below general inflation levels. Adjusted operating profit of GBP 49.2 million increased by 6.2%, supported by that gross margin expansion. In our Northern Europe segment, performance in the year was below our expectations. Revenue of GBP 469.7 million declined by 1.1% on a constant currency basis. Average daily like-for-like sales increased -- decreased by 0.5% in 2025, with moderate growth in the Netherlands more than offset by a pronounced decline in Finland. Sales increased in the Netherlands, driven primarily by strong branch sales and growth in national key accounts, in addition to increases in project-related sales and modest product price inflation. After a strong start to the year, momentum in the Netherlands eased as several major construction projects reached completion and the start of new projects was delayed. Sales in Finland fell sharply due to difficult market conditions, unfavorably mild weather at the start of the year and temporary operational issues that disrupted our internal supply chain. Challenges have gradually eased in the second half as management took decisive actions. Gross margin increased by 90 basis points in the year, reflecting strong performances in both geographies. In the Netherlands, active commercial management actions more than offset the adverse mix effects of large construction projects and key accounts, which accounted for a higher proportion of sales, whilst gross margin in Finland improved primarily through optimization of rebates and procurement efficiencies. Overheads remained under pressure in the year, reflecting general inflationary pressures, the high settlement agreement under the industry-wide collective labor agreements in the Netherlands and strategic investments which we made to strengthen the Finnish business. Adjusted operating profit of GBP 29.6 million was 17.2% below prior year on a constant currency basis. The operating margin was 120 basis points lower at 6.3%, reflecting the impact of lower sales in Finland and the inflationary pressure on overheads across both geographies. Salvador Escoda is one of Spain's leading distributors of HVAC, water and renewable products, which we acquired at the end of October 2024. We're very pleased with how the integration of the business has progressed and its trading performance in its first full year under Grafton ownership was in line with our pre-acquisition expectations. We've strengthened the business further during 2025, adding resources and support to its experienced management team to create a strong foundation for Salvador Escoda to accelerate organic and inorganic growth in the coming years. Salvador Escoda reported revenue of GBP 212.9 million and delivered an adjusted operating profit of GBP 13.6 million, representing an adjusted operating profit margin of 6.4%. The year-on-year increase reflects the benefit of an additional 10 months of trading in 2025. On a pro forma basis, in comparison to prior year, average daily like-for-like revenue was 6.1% higher, driven by strong growth in the air conditioning, ventilation and refrigeration categories as well as favorable market backdrop. The Spanish economy continues to be one of the fastest-growing economies in Europe with GDP expected to have grown by approximately 3% in 2025. The Spanish construction market is forecast to grow slightly faster by around 3% to 4% in 2026, supported by sustained housing demand, substantial investment in renewable energy and transport infrastructure and the accelerating shift towards energy-efficient and sustainable building practices. Within the construction sector, the HVAC segment is well positioned for strong growth, driven by tighter energy efficiency rules, rising consumer focus on efficiency and higher temperatures across the Iberian Peninsula. Despite navigating significant change in 2025, the business delivered a strong trading performance, outperforming the prior year on both a reported and pro forma basis. The group continues to support the local management team in driving organic growth. New business -- new branches opened in Vic in Catalonia and Plasencia in Extremadura, enhancing our existing market positions in these regions. We continue to assess further growth opportunities in the attractive Iberian market with a strong pipeline of potential new branch locations in hand. Now this slide analyzes our cash flow in the year. As you can see, the group generated strong free cash flow of GBP 168 million in 2025, representing an 88% conversion of adjusted operating profit into cash and contributing to more than GBP 700 million of free cash flow generated over the last 4 years. And some key highlights to note. We were pleased to see a reduction in net working capital of GBP 12 million in the year despite higher sales. Optimizing our investment in net working capital, whilst not compromising our customer proposition continues to be a key focus across the group. We continue to reinvest to strengthen our businesses, notwithstanding current market weakness in certain geographies with a net GBP 41 million invested in replacement and development CapEx. There was a GBP 14.3 million investment in net M&A activity, being the acquisition of HSS Hire Island, partially offset by proceeds from the divestment of our MFP piping business in the Republic of Ireland. And finally, we returned GBP 128 million of capital, net of issued shares under the LTIP and SAYE schemes to shareholders in the year. Of that, GBP 72.6 million was paid in dividends. And you'll have seen from today's results that we propose to increase the full year dividend by 2% to 37.75p per share. Dividend cover for the year was 2x, and it is our intention to restore dividend cover more firmly within the 2 to 3x dividend cover ratio as we move forward. The cash-generative nature of businesses continues to support both shareholder returns and a strong balance sheet, providing significant firepower for the group to capitalize on organic and inorganic development opportunities. At the end of December, our net debt was GBP 123 million, representing a lease-adjusted net debt-to-EBITDA ratio of just under 0.4x, slightly better than at the end of 2024. And finally, just turning to the balance sheet. I'd just note the net working capital increase, which you see there of GBP 8.8 million in comparison to the end of 2024, and that's largely due to the recognition of the deferred consideration related to the divestment of MFP. Adjusted return on capital employed was 10.9%, almost 2 percentage points higher than our estimated weighted average cost of capital and 60 basis points higher than 2024. And I'll now hand back to Eric to talk about current trading trends, our strategy and outlook.

Thank you, David. On the left, you can see the average daily like-for-like revenue change in constant currency for Q1 '25 and for the first couple of months in 2026. It's early in the year and the important trading months are still to come. So if you go to the Island of Ireland, wet weather impacted the trading on the Island of Ireland and in Great Britain. However, Ireland delivered some growth, supported by the softer comparators following the storm Eowyn in the prior year during that period. In GB, in Great Britain, the market environment remains challenging, as you can see on the like-for-like numbers. We had modest growth in Northern Europe with a strong Finnish performance, offset by some softer trading in the Netherlands, which was impacted by a change of holidays. In other words, they had the Carnival period in the like-for-like period, which will not deliver the sales you would hope during the period. But ongoing strong momentum in Iberia. From an outlook point of view, Island of Ireland, the construction outlook remains positive in the Island of Ireland with the retail consumer slightly more cautious than previously, but we have a positive outlook overall for the Island of Ireland. In terms of Northern Ireland, we don't expect any significant uplift during 2026. Moving to GB, a slow start, as I mentioned. However, the important months are yet to come and January, February was certainly impacted by bad weather conditions in Great Britain. We would expect a modest market growth in the second half of the year. Northern Europe, the Netherlands construction market is expected to gradually recover during the year. And in terms of Finland, we don't expect any meaningful improvement of the construction market until the second half of the year. Iberia, as David already mentioned, the construction market is expected to grow 3% to 4% during 2026, and we would expect our product segments to do well within that market environment. In terms of medium-term outlook, positive across all geographies because they all are supported by the structural growth drivers of not enough housing and aged housing stock. So the long-term drivers are very positive, and we have strong position in all of those markets. The recovery potential is especially great in Great Britain and Northern Europe, where we have a lot of operating leverage and the business has not cut into the muscle. So whilst we are lean in those businesses, we are ready to take advantage of increasing volumes when they will arrive. Tight cost control really gives us the benefit of the operating leverage as volumes return. So let me say a few words about our strategy. So how do we intend to drive growth and create value going forward. As you know, we focus on European markets with long-term growth characteristics. And within each geographic market, we build strong positions to distribute construction-related products and solutions to our predominantly trade customers. In terms of operating model, we have a federated operating model with local execution, supported by strong group capabilities, how we help the businesses to improve and drive results across the geographies. So what sets us apart are really strong and experienced leaders in each market supported by the group, but the accountability really sits in the market and the ownership. That drives very high colleague engagement and a relentless focus on providing customer service and a real sense of ownership. And I think that's something which really sets us apart because our businesses really care. We also have a very resilient model based on the geographic diversification we have. And you can see this again in this year's results where 2 of our markets are challenged, let's say, in 2 of our markets are in a more positive macro environment, which overall still leads to a very, very strong generative -- cash-generative business, which is a real underlying strength. And as David mentioned earlier, we are very disciplined in terms of our financial discipline. So we will maintain our credit grade rating, and we have a very clear structured approach to capital allocation, which you can see on the right of the slide. So it's really around, first, fund organic growth and keep our existing estate fresh and make sure we have sufficiently invested into the existing estate, pay a dividend in the range of a dividend cover of 2 to 3x with an ambition to move closer to 3x over time than we are at the moment. Third priority, inorganic growth. We have a very strong pipeline, and we are focused on driving growth at this moment in time in our already existing markets. So it's not about planting a flag in another country at this moment in time, focused on the existing markets and then to return surplus capital to our shareholders, which we did again with the announcement this morning of a further GBP 25 million share buyback. And I think the next slide nicely illustrates this in practice when you look around the capital allocation between 2022 and 2025. We started in '22 with a net cash position. We generated over GBP 700 million of free cash flow after replacement CapEx. We then allocated a good chunk, namely GBP 721 million to pay dividends and execute share buybacks and return that money to shareholders, whilst we also invested roughly GBP 100 million in development CapEx and over GBP 160 million in acquisitions. So I think that's a very nice illustration around the cash generation of the business and how we allocate the capital mindfully. But of course, we want to tell you more about all of that and how we drive future growth with a Capital Markets Event, which will be held on May 20 here in London. And the event will focus on the group's strategy and growth ambitions over the medium term and you will have the opportunity to not just meet David and me, but of course, many other senior leaders and see more about the bench strength of the management team we have from all the different geographies. So shall we move over to Q&A.

Shane Carberry, Goodbody. Two, if I can, please. The first one, just in terms of the gross margin in the U.K., really impressive 120 bps increase year-over-year. Could you talk a little bit about the dynamics behind that and some of the levers that you had to pull to achieve that outturn? And then the second was just to get a little bit more color around Iberia. It's been kind of 14, 15 months now since you bought Salvador Escoda. So how has that process been? Has it integrated as well as you thought it would to date? And just thinking looking forward, now that you've hired a CEO, how should we think about how things are going to evolve from here from an organic and inorganic growth perspective relative to what you might have thought 14, 15 months ago?

Okay. So let's start with GB and the margin improvement. I think in general, given we have, as you know, a federated structure, we have people in the businesses who are focused on the bottom line. This is a performance-led culture. And as -- for example, as demand was soft, we saw in some of the activities we did early in the year when we drove promotions that even with support of suppliers, the incremental volume you generate on the promotion activities actually led to a lower gross profit than in absolute pound sterling numbers than if you wouldn't have run a promotion. So the businesses will have been very tactical picking their battles, if you want, and more making sure we deliver an overall attractive basket for our customers rather than drive aggressive price promotions into a market where you will not have the incremental revenue and will be net-net out of pocket. So those were some of the levers. Of course, others were working hard on some of our exclusive and own brands and how are they positioned and what's the share of those and all sorts of commercial activities and collaboration with the suppliers to manage the gross margin overall. But I think that is really something where you have to be nimble and you have -- and I really attribute the strength of the federated structure and that operating model for the businesses to take the right decisions because it will be impossible for us to legislate if you want from a Group point of view, how they have to react to daily trading. So that's the bit on GB. If you look at Iberia, I think that has been a great success so far, right? So we have -- we are absolutely in line with where we expect to be. This is a business we acquired and in year 1 of acquisitions had a higher ROCE than our cost of capital. So we buy a platform which already in year 1, ROCE is greater than our cost of capital. So that's a good thing. Secondly, we had an experienced management team in a family setup, which had to learn a lot about how we do things in a PC environment. So we had to strengthen, for example, the finance function, the HR functions, the health and safety function, property, right? We have growth ambitions, but we wouldn't have had the infrastructure at the moment we acquired the business to accelerate growth beyond 2 or 3 branches a year, even if the opportunities come up, we just didn't have the infrastructure. Nobody have had the backbone and the infrastructure to absorb a bolt-on acquisition and integrate it, right? So that's really the work we have done during this year to create that, if you want the engine room within Salvador Escoda. And now we are ready to accelerate growth organically, but also to absorb bolt-on acquisitions as they might present themselves to execute. So that's within Salvador Escoda. So we strengthened the management team. We still have the same CEO or Managing Director for that operating business, which is Marta Escoda, the daughter of the founder, who already run the business when we bought it. The plan was always -- we singled out Spain or the European Peninsula as a very, very attractive market for 2 reasons. One, it's a growing market. Secondly, it's highly, highly fragmented, right? So it kind of really gives opportunities for M&A as well as organic growth across multiple verticals. So with Marta, we have an excellent person to run Salvador Escoda, but you need a different animal in the local geography to drive our growth ambitions, to help us to get the position we would want to have by 2030. So -- and that was the backdrop why very early on, we made the decision to go out and bring a CEO in for the Iberian Peninsula. And I'm very pleased, Mario has started in January. And I'm convinced we will have more to report over time from how we will successfully grow across Iberia.

Charlie Campbell from Stifel. A couple of questions following on from both of those really. So Spain margin 6.4% in the year. It was more like 7% before you bought it. I guess that comes from putting in more infrastructure to support the business and make growth more sustainable. But how should we think about margins longer term in Spain? Should we think about that 7% as achievable and perhaps more as volumes drop through? And secondly, on the GB and on the gross margin, did you change the incentive structure there at all? Are people perhaps more focused on growth than they were before because that really is an extraordinary performance.

Look, in Iberia, we do believe there is room to enhance the margins in Salvador Escoda over time. But if I look at Iberia in general, we would expect for this business to substantially grow, so in Iberia and have somewhere a margin corridor between 7% and 10%, would be kind of the margin corridor we would expect to be throughout the cycle in Spain. So I hope that answers that bit. In terms of incentive structure, no, we haven't changed the incentive structure in the business in GB. We have enhanced the management capabilities within GB. So we have a long-serving colleague, which has kind of oversight over CPI, EuroMix and StairBox. And then we have Frank Elkins, who joined us in 2024, right? Time flies when you have fun, in 2024. And he has been really, really focused with the team and enhancing, as I said, the bench strength, which is an ongoing process, right? I always compare this to like a football coach that you -- whenever you have the opportunity, you strengthen your team. It's a team sport, right? And that's exactly what we have done. So the focus or the achievement has been by targeted activities and focus. But people are bonused on delivering the outcome on the bottom line, right? So in a sense, that incentive has always been there. So the incentive hasn't changed.

And I suppose just on that financial piece around Spain, as Eric alluded to, the business is exceeding our cost of capital in its first full year and really very much return on capital employed is our sort of foremost guiding financial metric, I suppose. Operating margin is sort of -- is a good metric for quality. But really, it's about driving return on capital employed and cash.

Sam Cullen from Peel Hunt. I've got 3, if possible. Coming back on the Selco gross margins, I guess, how do you -- let's say, volumes do pick up second half of the year and they grow again next year. What's the sensitivity around kind of unwinding some of that gross margin increase to take more volume? And how do the guys on the ground judge if, when, how to do that? That's the first one.

Should we just pick them off as we've got another couple coming. I mean, look, I think on gross margin, yes, you've got to play the game that's in front of you. And I think in 2025, it was a game of weaker margins. And therefore, what do we do focusing on that bottom line. And I think that mantra continues going forward. So we just need to be nimble and responsive to how the volume and the strength of the market demand sits overall in GB in the same way that we're not focused on market share as a particular metric and are led by what's the impact on the bottom line. I just think we'll be nimble and the gross margin may come down if we see that strength in volume that we know that we can more than recover that by seeding some margin. So it's that flexibility and nimbleness that we need really.

Second one is on central costs. I think you highlighted there was a step-up in investment this year. Do we expect that to be at the end of that step-up and it to be kind of inflationary from here? Or do you envisage...

No, I think it's a modest amount. I mean, for example, to give a bit of color on some of the areas that we focused on, it was more support on transaction services so that, again, we were better placed to be able to pursue a broad pipeline of acquisitions. It was elements like cybersecurity and support for a number of the ERP implementations that we've got going on around the group. Some of it was bringing sensible things, for example, like payroll into the center and taking it out of the businesses and saving some of the costs in the businesses. So there were sort of a variety of tactical things. Do we think that there will be major moves or significant more increases in central costs? I don't think it will be significantly more in terms of the investment in additional functions or roles.

And the last one is back on the U.K. If we don't see a pickup in overall market volumes, do you see wider consolidation in the sector over the medium term, may not be from yourselves but from other players?

It's a good question, right? So we have private equity active in the U.K., right? Do I think they -- if there is no recovery, that was your question, do I think there will be a lot of appetite of those ICs to invest more money in the sector? I'm not sure, right? In terms of the listed players -- in theory, there should be more consolidation. If you look at how many general builders merchants there are in the U.K., you would expect there to be more consolidation. Whether that will play out like that is yet to be seen, right? So we -- again, and I'm clear on that, we are -- from our own investment point of view, we believe in the businesses which we have in the U.K. irrespective of where we now sit in the cycle, and we will continue to support those businesses. And if the right organic growth locations come up, whether that's for a Selco or for TG Lynes or for a Leyland or anything, we will invest the money into it if we believe in the case. You have to look throughout the cycle. You can't just sit and think, now it's bad, it will always be bad because the fundamental growth drivers are there in the U.K. The question is when. But if you then come to M&A capital, do we deploy M&A capital in the U.K. Well, for GB, I'm not saying no. But as you will have seen, we look at capital allocation in a framework, which says, do we actually believe this is the right allocation of capital. Do we get a return on capital and the cash generation out of this business, which we think is really accretive for our shareholders and the business over time. And if the answer is, yes, we do and we find a market like that in GB, well, we will allocate capital. But if it's in Spain or in Ireland or somewhere else within our existing markets, we will allocate it.

Flor O'Donoghue, Davy. Just 2 for me. One is just on OpEx for this year, just your sense of rents, rates, labor, what they're looking like. Second one then is just on selling prices. What's the current state of play in relation to them?

So I think on OpEx, I mean, if we look last year, there were a number of high areas of inflation. You take the Netherlands, for example, where there's a collective labor agreement, and we saw salary increases of 6% in 2025. That under the collective labor agreement for 2026 will be more like 4%. So we're definitely seeing it reduce. But I would still think that we'll be working really hard to contain it in that 3% to 3.5% level because of what we see in terms of some of the statutory increases, national insurance effectively for a full year. We've got what's happening on national living wage, for example, either in Ireland or in the U.K. Those pressures are still there. Pressures on property rents in terms of the inflation that we're seeing where you've got 5-year rents that are refixing this year that we've got the catch-up from a few years ago as well. So yes, we'll work really hard, but I would still say it still feels 3%, 3.5% we'll be doing well to contain it to that, I think. And we'll have to work really hard around efficiencies and cost control to mitigate some of the softness in the market. As regards overall, what we're sort of seeing across the piece on selling prices, I would say probably not a too dissimilar picture in '26 to what we saw in '25. Depending upon geography, Netherlands was probably closer to 1%. Ireland on the distribution side was more like 1.5% to 2%. I think we're still in that sort of zone, certainly talking to manufacturers and suppliers. It felt at the start of the year that we were in that sort of zone. Of course, we're slightly in the lap of the gods in terms of exactly what happens to the evolution of inflation in the year. But yes, we started thinking 1%, 1.5%.

Christen Hjorth from Deutsche Bank. Just 2 for me. First of all, on the GB like-for-like at the start of the year, just trying to unpick some of the one-offs in there and I suppose the extent to which the first 2 months is a read for the first half and maybe how you exited those first 2 months because obviously, the number was a bit standout on GB. And the second one, sort of maybe a bit similar to Sam's question, but looking at Europe, I mean, there's a few players out there looking to consolidate European distribution. So in the context of that, what really sets Grafton apart, particularly, I'd say, in terms of being the acquirer of choice for some of the businesses that you're looking for?

Do you want to pick Europe and I'll come back to GB?

Look, many of the consolidator -- not all of them, but many of the consolidators are across Europe are private equity backed, right? So if you look at what we bring to the table is we -- if you think about the family-owned business, we will be a home for the family-owned business and not a transitionary home for family-owned business. And I think that's a major competitive advantage we have. We can have owners talk to people who work for Grafton, who sold their business to Grafton and they can talk about how that experience was for them. And by the way, we do this frequently, right? We have people coming and visit Sitetech or other businesses and which are part of the Chadwicks Group now, and they can really talk about that firsthand experience. We also have that experience with Salvador Escoda, right? How was it for them. And I think that's a major, major benefit. What was the second part of the question?

GB like-for-like.

Yes, GB like-for-like. I mean, look, the year has started off weakly. There's no doubt in GB. To some extent, it was -- has been influenced by the wet weather. But I think that's an element of it. I think market is -- remains tough at the moment. The good news is that the year is not won or lost in the months of January and February. So there's a lot to play for in the year ahead. There's some really great stuff that we're doing in the GB businesses. So I think confident about that. The underlying market, there's a lot of really good fundamentals that should start to see -- we should start to see some volume growth coming through during the course of this year. The biggest point is really around confidence. That's the thing. And over the last 5 days, that confidence has probably taken a bit of a not more generally. We just need to see how the next sort of few weeks pan out really. But I think if confidence can come back, there's a whole bunch of reasons to feel optimistic about volume growth, I think, in GB. Okay. So I think that looks like it from the room. We haven't got any questions online. Thank you very much, everybody. Enjoy the sunny day.

Thank you all.

Thanks.