Headlam Group plc (HEAD) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Headlam Group plc investor presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However, the company review all questions submitted today and will publish responses where appropriate to do so. Before we begin, we'd like to submit the [ following poll ]. I'd now like to hand over to Chris Payne, CEO. Good afternoon, Chris.

Hi, there. Good afternoon, everybody. I'm Chris Payne, the Chief Executive of the Headlam Group, and welcome to the presentation. Bear with me because I am actually driving these slides myself. So hopefully, it will be seamless, but you never know. So just on the agenda, I haven't done one of these with you guys for a little while. So good year, something like that. So I'm going to try and just do a quick refresh of what Headlam is about, jump straight into trading and the '22 update that we announced this morning. And then moving on to the strategy which we've been talking about for a little while. I'll go into a little bit of detail about the core elements of the strategy and then rounding off the presentation just to give a quick update on ESGs and Board changes that we've recently made and then take questions later. So without further ado, Headlam -- this is Headlam on a page. The group's been around for 30 years. It's got a really great footprint, particularly in the U.K. offering logistics service and distribution service for floorcoverings. We've been doing this for 30 years, as I said. We operate through a number of brands and businesses across the U.K., the Netherlands and in France. We've got 67 businesses. And we operate through distribution centers mainly, and we've got trade counters as well, which I'll come on to. But we've got 22 distribution centers in those countries. And the boxes on this page really show the sort of strength and depth of the business. We've been around, as I said, for a long time, with a really strong balance sheet, very cash generative. We've got a growing customer base and really market-leading in what we do. So something that Headlam has been really proud of for many years, and it does give you a scale of that sort of efficient operating base and a real scale quality business that we've got. So that's Headlam on the page. What I'll do is I'll just sort of jump into the 2022 trading update that we've just given. It was a very short update, but I'll try and add a bit of color to that and just give a quick summary of what we've seen during the year and perhaps a small look forward as well. So some sort of key points coming out of the trading update we've given, the one that we gave in November and also the sort of half year view that we gave earlier in the year. I think we see quite a consistent weakness, if you like, in the residential consumer facing space. And the many reasons for that, of course, cost of living crisis, the energy price that we've seen, some of the problems with price inflation in the marketplace generally. So the residential sector has seen a weakness pretty much all year. Now the good thing for us is that we've got a couple of things which can add as a counterweight to that. So one of the counterweights that we've got is the commercial sector and typically around 2/3, 1/3 to 2/3 residential, 1/3 commercial flooring, which goes into office spaces, hospitality, NHS usage, that kind of thing. So we've got a counterweight and that's done reasonably well this year. So that's been positive aspect of the business, which has offset some of the market weakness in the residential space. Similarly, some of the growth strategy, which I referred to in the trading update has started to deliver some benefits. So some of the contract wins that we announced at the half year, for example, Homebase has generated good revenue in the second half. And that made -- that's a new customer to us, which meant that we've been able to take a little bit of revenue through, which is offset, if you like, the kind of core like-for-like weakness that you might see in the residential sector. So that's good news. I mentioned we've got a couple of businesses in the Netherlands and in France as well. And those markets have been slightly differently affected by the trading challenges we've seen over the last year or so. And we've actually seen some good performances in those European businesses. Some of those down to just market, as I mentioned, and the other really down to execution of the strategy and the turnaround and performance that we've been delivering in France for the last couple of years in particular. And that's provided a good strong positive counterweight to the weakness in the U.K. market. I think the other feature is that with this sort of weakness in volume, if you like, and demand pressures on the residential space, we have seen some supply chain price inflation. Price inflation has affected the whole market, whether it's overheads or cost of goods for us. So the supply challenges that we saw going back at the end of '21 and into '22 have followed through and led to price inflation, and we were able to pass that on largely to our customers, which has meant that we've seen an increase in revenue driven by the inflation to offset the volume the weakness. So there's a number of factors there, and they are all sort of compensating for one another. And it's left our numbers relatively flat actually year-on-year, but you can see there's quite a challenging sort of backdrop that we've navigated through. Now just in terms of what those numbers are, we haven't given specific numbers, but we did give an indication that the performance of the business was marginally ahead of expectations. And we've reproduced the expectations just for convenience on this slide, so you can see the numbers there. We'll actually provide a bit more clarity and the numbers themselves in March when we do the trading update and the year-end announcement in the first week of March. So a bit more details to come there. So just turning the page, I said I'd cover growth in a bit more detail. So rather than spend a lot of time talking about numbers and things, obviously, we'll come up with those in March. But I just want to spend a bit of time here focusing on the key elements of the strategy, summarizing for those who perhaps haven't heard the Headlam story before, what the key features of the strategy are and a brief update on how they're progressing. As I said, there will be more information to come in March, but this is an opportunity for us just to catch everybody up with the strategy as a whole. So really, this is sort of main slide -- this is the main slide that I've talked to consistently over the last few presentations in the last sort of year, 18 months or so. And it's the thing that we use to look at the marketplace in the U.K. and to examine what the customer buying profile is like, how they go about buying flooring in the U.K. and what our service proposition and offer could be to that marketplace. And the numbers at the bottom of this page in the boxes, they are deliberately colored. So on the left-hand side of this slide, they're green; on the right-hand side, they're red. And apologies for those who have seen this slide before, but it really is very important to the rest of the strategy. So what we looked at was how much flooring is spent in the U.K. or bought in the U.K. And there's GBP 3 billion of annual spend at distributor prices. And which type of customers carry that spending out? And we've identified 7 boxes here. There are slightly more than that. But for simplicity, we focused on these 7 key customer groups. And the customer groups are color-coded depending on our relative strength in the marketplace. So Headlam, as I mentioned, has been around for 30 years. It's traditionally focused on the independent retail sector. And those are the boxes on the left-hand side or the traditional retailers on the high street and the trades people who carry out fitting. Many of those don't have retail premises or they have 1 store, so quite small businesses. And that's been the sort of bread and butter of Headlam's business model in the past. Now if you look to the right-hand side, those boxes on the right are customer types that Headlam typically hasn't serviced or hasn't focused on. And of the GBP 3 billion market in the U.K., we typically have about GBP 600 million. So around 20% of the market. But a lot of that is focused on those independent retailers and relatively less on the boxes on the right, in particular, the multiple retailers, the housebuilders and the online customers as well. So our strategy became one of growing share and creating more of a growth story for Headlam. So Headlam has all been about service and good quality, a quality balance sheet and that remains. But what we wanted to do is stretch our offer into those other customer types where we had little or no share. And I think we're very well placed to offer good quality service -- good pricing and a competitive offer to those customers. So that's been the focus over the last 18 months. So just turning the page in a little bit more detail. These are the 4 kind of building blocks of how we would deliver a strategy against those customer types. And I've got a slide on each of these boxes in a moment. So I'll just briefly summarize the 4 elements of the strategy, and then we'll go into a little bit more detail about what those strategic measures mean and how we're performing against them. And again, we've talked about this before for those who know the story. So I'll come on to just a brief update on each of those areas. So firstly, trade counters. This is something I mentioned at the start when I was talking about Headlam page. The group is very much dominated by a distribution center model. So it is a sort of hub-and-spoke type delivery distribution business where we deliver to customers -- endpoint customers who are retailers or fitters. However, one of the things which is a feature of the U.K. market in particular, is offering a sort of trade counter network. Many people do this exceptionally well. People like Howden, Screwfix and others. And the reason I mentioned Howdens is they offer a B2B service as we do in sort of local geography in small trade counter footprints. And that's something, I think, that we could and should be doing more of. And there's lots of white space around the country where we have little on that offer from a trade counter perspective. So we had 54 trade counters in the network, but many of those were just parts of the distribution center or stand-alone relatively small and lowly invested assets and trade counters around the country. So again, I'll come on to the detail in a minute, but we felt that, that was an area that we could infill, take more of a customer presence and really offer something to the customer in their own patches, if you like. The next box, multiple retailers. Easy or large, whether they're DIY shades like B&Q, Homebase, I've mentioned already and Wickes and the like, whether they're building materials, merchants, people the like or whether they are high street multiples, people like Jewson and Travis Perkins and the like, or whether they're high-street multiples, people like Tapi is a great example of those multiple flooring companies. So that's a customer group there. We had 1 or 2 customers and only one meaningful relationship really with B&Q, which is a very large customer. And then we had a number of smaller ones, but we're really focused on that area as an area of expansion. Now on the right-hand side, 2 of the key features of us being successful is offering an improvement in our digital and e-commerce space. Now you might imagine when Headlam was largely focused on the independent retail space, many of those customers are not demanding of a large digital offer. They work in a quite traditional way on the telephone. They know their product and they know what they like to order. As you move into different customer groups and as the next generation of customers are coming through, the demands on business to become much more digital savvy much more e-commerce focused as we all are in our home. We're all used to the Amazon experience, and we have that expectation when we deal with retailers. And certainly, our customers are starting to demand that. And we absolutely need that offer in place if we're going to be successful at working with housebuilders and the multiple retailers and certainly for online customers. So to invest and develop our digital and e-commerce footprint has been important, and I'll come on to what we've done there in a moment. And then lastly, on the right-hand side, products and brands. I think Headlam has had a number of brands and got a number of brands in its portfolio. And that's an area for opportunity to develop or come on to what we've been doing in that space. But consumers like brands. Brands tend to win out in the end, and therefore, it is an opportunity for us to do a bit of investment in that and make some of those brands relevant for the customers of today. But that's sort of an outline of the strategy that we've been following in order to deliver sales to those new customer groups. And I'll turn the slides, and I'll just do the sort of 4 pages that illustrate each of those boxes 1 in turn. So trade counters, let's talk about those. So I've covered a brief summary of what they were. And what we've been doing is looking at how do we deploy a consistent footprint, consistent blueprint of what a good quality trade counter looks like. Clearly, there are some great reference points in the marketplace. I've mentioned, Howdens and others. But this is about bringing sort of flooring to our customers in their own domain and allowing customers to place orders online or on the telephone and offer a sort of click-and-collect service that customers come to us, collect their product. And whilst they're there, they're able to make additional purchases of things like screeds and adhesives and tools and other matters that they can just do self-pick from the sort of retail like environment they get when they walk in. So there are some images on this slide of 4 sites, and they all look quite consistent, and that's deliberate obviously. So you can see here, Ipswich, Leeds, Coleshill, Swindon, 4 new sites are either in a new location, Swindon, or they are refurbishments of existing premises, Coleshill, Leeds. And Ipswich was a new site that we developed a couple of years ago. But the important point here is that they all look and feel quite similar. The product ranges are all quite similar. And it's important that we have things like tools on the shelf available for customers to order and pick up as they're collecting their orders. And we're seeing things like a tripling of tool sales in those sites because customers are able to see them, and they're a bit of an impulse purchase. So that type of offer has gone down very well with customers. We did customer surveys to assess their desire and need and want for this type of offer, and we've got some pretty strong responses. Relatively modest level of capital investment on each site. So we're looking to -- as it says in the notes here, looking to roll out 90 of these, 50 of which we've already got, but they need to be refurbished and turned into this blueprint. So we're looking at 90 sites across the country over the next couple of years, and we're looking to invest. They absorb something between GBP 200,000 and GBP 300,000 of capital per site, which, again, is relatively modest given the scale of the improve NIM revenue we're expecting to see. We think these sites should generate GBP 2 million worth of revenue once they're fully up to speed. They do take a couple of years to get up to speed. The sites that we have deployed and we've refurbished, we have seen an impact on the numbers. So we're seeing revenue improvements on a like-for-like basis over the ones we haven't invested in, more new customers, better margins. And so all of those sort of KPIs around what makes a good trade counter are going in the right direction. So it's given us confidence to carry on with this and actually go reasonably for us. We're opening a couple of these -- 2 sites every couple of weeks. So this is quite hard for us to do 90 sites over a couple of years, as you might imagine. But it's something that started really well, very positive, and the numbers look good. So just turning the page, multiple retailers and larger customers I talked about. And I categorize these into the different groups of the DIY chain, the builders merchants, the high street sort of business part retail multiples like Tapi and others that I mentioned. And we've had a really good start to the deployment of this strategy, being able to announce new customers like Homebase, and they've moved into meaningful multimillion pounds worth of annualized turnover following their contract with us. So that's really impressive to be able to identify a new customer group, be able to make the pitch into them, secure the sale and deliver happy service to happy customers in a meaningful amount of revenue, which, as I said earlier, is able to offset some of the weakness we've seen in the residential demand. So this is something that we think we can scale. It's an offer that we can offer across the country. We've got consistent product, consistent service across the whole country. And that's the sort of thing that these types of customers are looking for. They do need investment in some of the e-commerce opportunities and some of the service that comes with that, so I'll talk about that in a moment, but it's a really encouraging start. I mentioned Homebase, and we've also referenced on this slide one of the U.K.'s top 10 housebuilders, which we secured under a contract towards the end of 2022. So on Homebase, call out a few examples of the things that we're doing here. So we're offering service across their entire estate. We're offering a limited number of SKUs, which is just expanding actually. So that's expanding in '23. So we're seeing the increase in run rate on revenue going forward, which is good. And then on the U.K. housebuilder side, there's some really good and interesting statistics about house building plots. Now there's been various bits of stats that have come out in the press recently about whether new plots are going up and down and clearly, interest rates having an impact on demand. But the point is here, this is a new customer type for us. Now we happen to do a bit of service for some customers, but that's more on the local contractor. We happen to fit some floors in new homes. But this is a concerted national deal with a major housebuilder for the first time, we've got a little on our share in that space. So any sales that we do take even if it's below what the original assumptions were on the number of plots that would come out is new business for us and therefore, growth. So the plots as they come out are in all of their new sites. So as the plots get released to the market and as homeowners buy properties, we're able to service the flooring and supply flooring to the fitters on-site on adjusted time basis really for homeowners to move in. So sales are coming through. We've taken our first orders, which is great, but that's on a kind of slow burn really as you sell the plot through. So we're expecting a much stronger '23. Digital and e-commerce, I mentioned what we've been having to do here. Now this is an investment for us, and we have been doing this for a little while. Again, not millions of millions of pounds, but good quality investment in websites, improving things like the app, enable our customers to order products online search for availability, check stock holding, check prices, look at room visualization of the flooring in the home for their customers. All those sort of good things we've developed over the last year or so. We've seen a real meaningful level of sales at the end of '22, and I quoted a number here, a GBP 6 million or so. And we've seen an increase in the number of the percentage of our sales being taken digitally. So this is really a customer service proposition. It's enabling our customers to place orders anytime of the day. And as I said, check stock relatively easily without having to make telephone calls to the sales office and things like that to check availability. So it really does help with small customers and large customers alike. And it's a real key enabler of people like Homebase being able to place their orders electronically, and we received those electronically rather than clearly, it'd be impossible to do that on the telephone. And then just turning to the Page 2, products and brands. This is an area that -- we probably haven't taught a huge amount on in the past, but it's just to note that we've got a number of brands, which are product brands that's servicing the end consumer that our retailers would recognize and buy from. And we try and match price points in the marketplace. Now there's been a lot of inflation in recent periods and the average sort of flooring has become slightly more expensive. And we spotted an opportunity to develop new product ranges and new brands, if you like, at the sort of lower price points. And on this slide, we talk about the various -- sort of 4 price points that we cover with 4 of our key brands, Crucial Trading, Kersaint Cobb, Lifestyle servicing the sort of upper mid and mid to lower price points in the market. And then Everyroom is a product that we launched in 2022 to focus on that sort of lower to mid-price point again and to offer something really affordable, and I've got a slide, which cover this in a little bit more detail. But here, it's about being relevant, having the consumers recognizing these brands and being able to service the whole market. To sort of head up our customer-facing channels, we just appointed a new Chief Customer Officer. So Toni joined us, previously been a Commercial Director at DFS and furnished more recently. So a really exciting appointment and Toni is going to really help us drive this sort of the e-commerce part of our business. And it's -- as I said, it's a real underpin for the future growth of the business. So just turning the page, Everyroom is a product launched that I mentioned. This is something that our branch hold about 12 months ago where we noticed the sort of drift of pricing and a part of the market where we don't have a huge offer actually, that's a lower end of the price point. So we're able to curate a range of really good quality products, well-branded, nice color ranges, reasonably tight number of SKUs and then launched it to the market in the midyear and a couple of more products are coming out at the end of -- right at the end of '22 and early '23. So it's slightly revolving product group, but a really good range as there's offer to the marketplace. Great feedback from customers, again, as you might imagine. We road-tested that with customers before launching it. Customers are very pleased with what they saw. Good demand, and we had a very strong take-up in that final quarter. So to hit sort of GBP 6 million over a little more than a quarter was really positive. And then when we looked at the data, it's not cannibalizing any other revenues. This is new revenue for the group. So fantastic to be able to get that product out from sort of inception to delivery within the year. And the team that responsible have done a great job. Just moving on, I've had a couple of questions on this. This is my answer to some of those questions. It was really great to be able to announce the acquisition of Melrose at the start of the year. And this will probably help put it into context. So Melrose are predominantly a distributor of rugs, some of which they make. And they're able to distribute drugs through a sort of drop ship vending solution for their customers. And that's something that's important to us. So I mentioned B&Q and Homebase and others in the multiple retailer space. They require distributors. They require us to have a drop ship vendor solution for their end consumers. Now we're not selling to their consumers, but it enables us as distributors to be able to ship directly to consumer types. And that's something that Melrose do currently, and that's something they've got great experience of. So Melrose for us -- was an opportunity for us to look at a business that has been doing that for a while. They've got good experience of servicing the end consumer. And the rugs is an area that we're a little underweight in. We do offer rugs in our business, but it's not one of our largest product groups. So it's meant that we've been able to acquire a business in an area that we're underweight in doing some technical stuff that we can really learn from and roll into the rest of the business. And the recycling side of their business is really important. It gives us an outlet for some of our surplus material, some of the end of rolls. And also, they have developed their own range of sustainable flooring using recycled materials. So exciting acquisition, albeit relatively modest. And we indicated in the trading update that their revenue was in the order sort of GBP 8 million annualized. So relatively small in scale, but it's not about the scale. It's about giving us its expertise and access to a new product group. So I briefly mentioned that I'd cover ESG and the sort of board changes. And I've just got a slide here which covers some of these things. So probably the most important thing on this slide actually is at the bottom right-hand side. So we're going to give a full update on our sustainability position and ESG update in our March reporting. So what we try and do is give a kind of biannual update on how we're progressing with our ESG strategy. We do a full sustainability reports coincide with the year-end in March. And then we do an update with that at the half year. So these are just a handful of things that we've been doing around ESG, and I do tend to dwell on those 3 things as separate things. So the environmental side of things and the social side of things and then governance element. So on the E, we've done a number of things where we set out now our net zero ambition targets for 2035. And we've been planning on how we're going to do that and what the key drivers are to get us there. And we've got an interim target that we've announced and we'll work to by 2030. So that's a good piece of work we've done. We've got a bunch of actions off the back of that, which we'll share a bit more on in March. But one of the key ones, of course, is -- sets apart us. Now we do own most of our distribution centers here. And that gives us an opportunity to go more aggressively on sort of panel installation, take advantage of the roof space that we've got, and it really has a strong payback now. We've seen the increase in energy prices. So that's something that we're on with. We've ordered those panels for all of the sites, and that's something that we'll be progressing with through '23. On the social side, so the S of ESG, we've worked really quite hard with some of our people issues and giving some improvements in salary for some of those who really need it. So moving on to the real living wage, for example, is something that I was keen to do and I was pleased to be able to announce in the year. And also some, I suppose, nonfinancial measures as well for our people. We've increased pension and mental health awareness and we have mental health service, this is across the business now. And also introduced a recognition program in the year. I think it's important that sometimes when people have done a great job, you can say well done. It doesn't have to be financial. It's just that recognition of been able to congratulate people on doing a great job. The other thing that we've been doing is that we're a business that works quite closely with its communities. Our people that work in the business live and work close to home and therefore, having a sole community focus is important. A number of our businesses support local charities, whether it's with volunteering for food banks or whether it's some financial support, and we were keen to support that as a group. So we've got to -- had look community approach and we sponsor and support businesses community projects across the country. And that's something that was great to be able to announce and people are participating across the country. So it's something that's really important to us. And then on the G side, I think governance is something you might expect we would be great at as being with -- as being a plc, and that's, of course, the case. And we've really focused on strengthening the Board, I'll comment to the Board changes in a minute to help us with that oversight and doing things in the supply chain, and there's increasing focus on what's happening with slavery and various other things and where products are coming from. The Ukraine war, for example, has had a pressure on supply chain. Many of our manufacturers have switched products out that we're using wood from that part of the world and gone into other territories. So it's important that we're on top of that, and that's something that we've been working hard on in '22. I mentioned Board appointments. So we've got a pretty new Board actually. So we've made a number of changes, some of which were in the second half. So I mentioned on here, Karen joining. Robin and Jemima are nonexecs. And Adam Phillips, who we announced as our next CFO, who will join us towards the end of Q1 next year. Just in time for me to finish the road show for the year-end results, but it would be great to welcome and onboard, and I look forward to working with them. All of those individuals have got some great experience that will help us with, as I said, governance oversight, but importantly, helping me with the strategy in implementing this sort of go forward and really growing the top line that we're focusing on. And so just sort of coming towards the end of the slides. In summary, we've seen an effective deployment of our strategy. And I think it's starting to gain some traction now. We've seen this residential weakness that I talked to earlier, and that's affected the whole market. But it's pleasing to be able to announce these sort of counter measures and see contributions from other parts of the business, which has really helped us out. I'll go back to that first slide, Headlam has been around a long time. It's got that market-leading position. It's got a strong balance sheet. It's here to stay, a really robust offer, and customers are enjoying that quality of service. So a solid base, solid business and the strategy is starting to pay dividends. So we're well positioned for the future. I think that pretty much brings me to the end of this slide. So I'm turning towards Q&A.

Fantastic, because you've got quite a few questions that have come in there as well. So thank you very much indeed for going through those. [Operator Instructions]. So if I could ask you just to read out the question where appropriate to so, Chris, and give your response.

[indiscernible] quite a few. The first one, I think we've answered. So there's a question about what revenue does the new acquisition add? As I said, the acquisition turned over around about GBP 8 million in the previous year. So relatively modest level of revenue, but the strategic benefit is strong. Another question from Clive as well. We talked about improvements in the quality of the business to generate a 7.5% operating margin. Look, we talked about that and also the needing to have a reasonably positive level of demand. So our business is an operationally geared one. We've got a relatively comprehensive nationwide network. So the more volume you put in, the stronger the returns are. So there is a need for us to have a bit of volume growth for us to get to that 7.5%. But the distribution cost, that we've taken out, and we talked about this in the previous years, we took between GBP 6 million and GBP 8 million out. So that's a reasonable chunk of savings, which was enabling us to move most of the way towards that sort of 7.5% operating margin. And the final bits really needed to come from sort of volume growth. So the volume is, due to the market reason, as I said earlier, is pretty much been held back. So those savings that we banked earlier are still giving us some protection. But I think we'll need a bit more volume growth to come back to hit those operating margin targets that we've talked to. So there's a question here saying, can I touch on the impacts on the balance sheet post Melrose acquisition? So the Melrose business was relatively small, as I said earlier. We'll announce a bit more detail around the scale and size of the acquisition, but relatively modest in terms of cash out, a little bit of deferred earn-out as well. So I think it's GBP 4.5 million of investment on that business. So relatively modest. All of that will be disclosed in the March results. So not material really to the group as an overall on the balance sheet. So a question here says, is the group's obsession with larger customers, multiples and digital channels coming -- a neglect a lack of focus on the important independent, flooring and retailer segment? So that's a question that -- it's a good question, and I spend much of my time in the business with our regional businesses. So I have done a complete U.K. and overseas tour in the last 9 months, I've visited all of our businesses and discussed face-to-face with many of our colleagues, our strategy. And one of the key things which perhaps hasn't come out so strongly on this presentation is, independent retailer space remains our most important and highly contributing part of our business. Because we've been doing this for 30 years, and it's great that we can focus growth on new areas of the market. But that is not coming at the expense of our long served respected customers and all of those regional brands that we've got around the country. We talk to our customers every 6 months and our customer surveys have remained really positive. And our customers like working with our regional brands, they like that local service and that's something that we need to maintain and remain good at. So that is a key message I give when I'm out with the businesses. So this isn't about a shiny new toy of growing into new customers, it's about being excellent at what we do today and adding the strategy of new customer focus as well. There's a question here around welcoming buybacks at low prices, but whether we are sort of inadvertently supporting the price? I think one of the features that we noticed when we announced the buyback was just around the lack of liquidity and lack of movement. And it was just taking an awful long time to buy the shares. And I think looking at the strategy, looking at the value that we're creating, share prices are on a relatively low footing on a historic basis and certainly around the multiples. So given that we're not buying all of the shares in that marketplace, there is still trading happening. We felt it was the right thing to do to increase the run rate. So we're still not through it. We've still got an element of the buyback to come, and we've been doing this for 9 months. So I don't think it's -- I don't think we could really extend this and be more patient. We've been doing this for 9 months, as I said. That's quite a long period, particularly when we've got a relatively low share base to work from. So I think it's the right thing for us to do. Yes, a question on the Melrose deal, what sort of multiples have we paid? What synergies are there and things like that? So the vendor is very much staying with the group, really delighted to be part of the business. And it's really important that we can work with the vendor to help us grow our business, and very much locked in and part of the fabric of the business already. We've had a couple of the other businesses that we work with on-site in their premises, working together, working how we can drive those synergies. So we're looking at how we can, as I mentioned, become an outlet for use of some of our remnants, how we can start to harness the new product development that is using recycled materials, great customer list that we can offer service into as well. But I think the biggest one is the sort of drop-ship vendor experience that Melrose has for many years, and working that into our digital and e-commerce development so that we can learn and accelerate that program. So yes, staying with the group and yes, delighted to work with them. So another question around the focus on the traditional flooring retailer. So the question is, with your trade counter roll-out expanding, will this mean you're accelerating away from traditional floor retailers and [indiscernible] contractors? As I go back to the previous question -- the previous answer I gave, really. Look, this is all about us remaining excellent and offering a great service to that customer group. We're not stepping away from them. We're not reducing our service quality to them. What we are trying to do is address parts of the market where we've got a little or no offer. And in some respects, some of these independent fitters who are our traditional customers are seeing an improvement in service because they are able to become -- come and click-and-collect product, they're able to be closer to new sites, and they are able to come and self-pick additional flooring products that they may need in the short term. So what we have seen is our customers seem to be pleased with that, and it isn't about reducing the focus on independent retailers or the fitters, it's about offering something new to the marketplace. One of the questions here from Andrew. So have you noticed any standout trends within residential over the last 6 months, whether it product choice or the size, et cetera? One of the features we have seen is a -- which again is probably not surprising, a more resilient medium and upper price point demand. So the residential demand, I've described all of the price points that we have. The ones that have probably been more negatively affected are the ones in the mid and lower price points as you might imagine, because I think the disposable income will be slightly tighter there given the cost pressures that we've seen in the marketplace. And therefore, the more resilient products have been the ones that are medium and upper price points. So that is a trend that we've seen. I think Q2 was particularly difficult and we've talked about that at the half year. But I think more generally, I think that has now sort of worked its way through. So we'll see what happens in '23 against the comps. But as I said, I think it was resilient really in the price points rather than product groups, in particular. A question about housebuilders, a tougher market for them right now. Any strategic progress to highlight either with that particular individual or prospects? I think as I mentioned in the slides, one of the key things for me to do was to get a customer onboard and then make sure that we deliver the service that we have offered and promised to that customer systematically. And that's something that we're doing. So we've now taken orders and that was -- the challenge was to convert the opportunity into a contract -- a contract into a proposition and sampling in the sites for consumers to look at. But obviously, that is on a long lead time because the sites need to be developed, orders placed by customers. And remember, flooring is pretty much the last thing that goes in. So we only really get the order just as the consumer is about to move into the house. And we only picked up these sites from September. So the progress is really one of taking orders and seeing consumers actually move into the properties. As you might imagine, given this long lead time, I think it's important that we do develop those prospects because they take quite a long time to land. So there is a pipeline of activity that we're looking on for '23. Just moving down the questions list. A good question here. In looking at 2023, do we -- what do we think is happening with product price inflation? Do we think that's going to weaken? Or do we expect this trend to continue? I think it's -- who knows is the short answer to that. Crystal ball on price inflation seems to be a bit challenging given what's happened over the last 18 months. What does appear to be the case is that the really strong sort of almost double-digit price inflation that we saw early in '22 affects some product groups, doesn't seem to be there at the moment. So we have seen some price inflation coming through, but it's sort of more in that 3% to 5% rather than 8% to 10% that perhaps we saw earlier on. And that's the sort of thing we've assumed will happen for this year. So we think that there will be price inflation. And clearly, I think we would expect that because of the cost inflation and overheads and various sort of things. So I think we would expect there to be price inflation, but we have assumed it will be slightly more modest than perhaps we saw in '22. There's a whole bunch of questions, I think, which I've already answered about inflation here. A question about the future on the buyback program. So price increases I've covered, but then what's next for the buyback program after Q1? I think it's one of those that when we announced the buyback program, we took a number of questions at the time about is this an ongoing feature of the business. And just as a reminder, we ran through our capital allocation priorities and what do we do with capital. And clearly, we invest in the business first. We look at M&A. We look at the ordinary dividends we'll be paying out to shareholders and then there may well be surplus capital at the end of that process. And then that's something that we've looked at and whether we return the special dividends or buybacks can be determined at the time. And I think that's a feature we expect to continue. But as we sit here right now and we look forward, I think we just have to see how '23 plays out. We've announced and delivered on the buyback program and the special dividend that we announced last year. So that's largely now complete. And as we look forward, I think we need to see how the business performs. We've got an increased level of investment in the business that I've talked about in the past on things like trade counters and replacement of some of the equipment in the business. So it's likely that should we do something like this again, it will be a bit later in the cycle. I've got a question here. What is the impact, if any, the Likewise Group is having on Headlam in terms of competition and talent hiring [ of moving ]? We've spoken about this in the past and Likewise and other competitors are competitive in the marketplace. We typically see them in all channels and all sectors, but predominantly in the independent retailer space and regional space. So I think it's good and healthy to have good competition. And we've been able to announce in the recent times that we've taken some market share, so that's good news. So Likewise are also reporting sort of taking market share. So I think others perhaps are suffering a little bit, but it keeps us fit, it keeps us sharp, and so I welcome that. So yes, I think that's good, and I'm sure that will continue as well. In the current -- is the current economic climate providing an opportunity for further acquisitions? And if so, is the preference to the U.K. or Continental Europe? I think M&A might be a feature of our business. But I think our focus is very much, as we've seen by the Melrose acquisition, it's really focused on helping us deliver strategy. So there are elements of our strategy that we can speed up, we can accelerate, we can learn from and maybe some product groups where we're a bit underweight in and I've mentioned that in the past. So it's not really about trying to sort of opportunistically find distributors that are in trouble. It's much more about helping us deliver the strategy. We've got a great strategy that's already been outlined, and we're making some good traction. And that is pretty much in the U.K. The businesses in Continental Europe that I've mentioned have been doing well. They've got their own challenges, which they've been resolving and improving the quality of their return. So there may be some things that we did do overseas as well. But I think it's very much aimed at delivering on our strategy first and foremost. Okay. There's a long question here? Thanks for the update. You mentioned an additional GBP 120 million of new revenue coming from trade counter roll-out. And assuming GBP 100 million of revenue coming from the multi-retailers or large customers, can you give any guidance to when you are likely to pass the GBP 800 million revenue mark? Is this an ambition for the next 5 years? Well, you might not expect me to give sort of forecast like that. But interestingly, Peel Hunt did actually produced a note a little while ago where they did do that kind of exercise, sort of blue-sky thinking of, well, if we deliver GBP 120 million, which is in the public domain, which I've said about trade counters, there might be, as you say, GBP 50 million to GBP 100 million coming from the multiples. You can see how we can grow our current revenue from that sort of GBP 650 million or so mark up to GBP 800 million in the next sort of 2 or 3 years. And that is a logical kind of conclusion. And that was where Peel Hunt got to in there note. So I'm not going to necessarily comment on that, but that's what Peel Hunt did in their notes. So that's a good question, I think. Is it now the intention to maintain the French and Dutch operations? If so, how do they fit in the current strategic direction? So again, we've spoken about this in the past and the predominant focus of our strategy is in demand acceleration in the U.K. So we're not addressing all of the U.K. market. In the other territories that we look at, the French business is going through a recovery phase, and I've worked quite hard with the French leadership team there to really drive improvements in the quality of that business, and that's the focus for that business. There is a little bit of synergy between working together, certainly on product purchases and things like that with the French, but the French business is very much aimed at improving the quality of that business in its own territory. And we've got some great benefits and look-through and we work together in some of the health and safety oversight and things like that, but it's very much about improving quality of that business. And then the Netherlands, [ perhaps ] I was there this morning with the MDs in the Netherlands. Again, that business has got a great footprint in its own market, relatively small geography, which helps distribution. So again, that's a business that can benefit and learn from the best practice that we're deploying in the U.K. And again, there are some good product look-throughs that both businesses can benefit from. So it's very much benefiting from our strategic direction, how we're focusing on transport integration, how we're delivering improvements in systems, and that's something that we're deploying in the overseas businesses as well. A question here, can I please comment on the competitive environment for the core business? And I mentioned the sort of Likewise, any other competitors in that space? It remains competitive, and it always has been. The businesses that Likewise have bought recently, for example, have existed in the marketplace for some time. And then there are other competitors in that space as well. It remains a competitive market. And as I said in the November update, we've continued to take share in that space. So that's good news for us. But it does show that we're able to compete in there. And I think that will continue. The residential market, who knows what that demand will look like this year, but the competition element needed to be great at service, offer good pricing, is not going to change. And that's, as I said, I think that's something that I've reassured our business is about. I mentioned it just now to some of the questions that have come through. We are predominantly still an independent retail servicing business, and that's likely to remains so. Another question on the operating profit target of 7.5%. Are you able to give any guidance on the level of volume uplift that needs to return and expect the time for this KPI to be met? We really don't know what the volume is going to be over the next couple of years. It's -- no one could really predict what happened with COVID. Demand curve is uncertain as we look forward. The analysts have taken a stab at where we might get to in terms of revenue or profitability. What we articulated at that time, volumes were a fair degree higher than they are right now. So clearly, we need to get back to the volumes that we saw pre-pandemic and then have some growth on that. So again, I don't know when that might happen. All we can do is deliver on the strategy and focus on being as efficient on cost as we can. There's a question about -- another question about the commercial market. So what do we think the prospects for the commercial markets are going forward? I think the commercial market has had a strong bounce back, but really, it's only covering lost ground that it saw in the COVID period. So COVID period saw quite difficult investment priorities for the commercial space. And we've seen a stronger '22, which has largely covered some of that back, but the volumes themselves haven't been that strong. There's been price inflation, which has helped, if you like, that. So the volumes themselves have only been modestly increased. So the prospects going forward, it's difficult to say. I think it's probably a little tighter than it was given the investment uncertainty. But as I said, the volumes themselves are not significantly higher or lower than they were pre-COVID. So I expect that they will normalize, which given some of the price inflation we've seen helping revenue, that might mean that there is still an ongoing sort of strength to revenue in the medium term. A question on, can I give more color on the European operations? Well, the European operations, we've got, as I said, in two territories, they're very much similar sort of model to the U.K. So they are distributors. They service manufactured product for Mainland Europe and some Asia products. And we offer a nationwide coverage in both France and the Netherlands. We've got a couple of brands, and we have some of our own label products in there as well. So very similar operations to the U.K. However, the only slight difference is that some of the transport network is sort of -- is a mix and match of some self-delivery and some third-party logistics. So very similar distribution hub and spoke type network. Hence, it's sort of similar to the U.K. A question about market share. With respect to our overall 20% market share, how variable is that share at individual client level? Why might it vary? Is it possible to gradually nudge up the market share or is that a cap? Coming back to the fundamental of that strategy slide, the 20% market share that I referred to is for the whole U.K. market. Now clearly, our focus is on developing and growing market share by offering service to those new customer groups. So I would expect our share to increase as a result. So the more that we can sell into the multiple retailers, whether it's a DIY share or it's all the other multiples, clearly, there is going to be growth and is going to be sort of share growth. We are looking to maintain the independent retail space. So it does vary, of course, from customer to customer. At customer, we'd have zero. Some customers, we have a reasonably large proportion. So it does vary depending on the individual customer needs and wants, and the type of products that they can get access to the geography. So our proposition is about offering good quality service at the right price in the right place. And the more we can do for that in the customer, is the more chance we've got growing our share. But our -- sort of core part of our strategy is very much about taking share and growing our share of that GBP 3 billion market in the U.K. I think that might be it guys.

Thank you very much indeed, Chris. Thanks for covering up for those questions you can from investors. Of course, you will have the ability to review any further questions that do come through, and we can publish responses to all of those on the Investor Meet Company platform. Chris, just before redirecting investors to provide you with their feedback, which I do know is important too, if I could just ask you just for a few closing comments, please.

Yes. Coming back to the sort of Q&A, really was good Q&A. I mean market demand and how the next sort of year or 18 months are going to pan out, we don't know. And market demand might be a bit patchy. But it's great to see our strategy start to deliver and start to see some traction on some of those new customers that we talked about, some of the investments that we're making in the business. So it's good to see that having an impact. And also, I'm delighted to welcome the Melrose team to the business. And that just shows that we're able to do these things and invest in the future. So as I said, market demand maybe a bit uncertain, but it is great to be able to see us sort of well placed, if you like, delivering our strategy and taking advantage of the opportunities as they arise.

That's fantastic. Chris, thanks indeed for updating investors today. Can I please ask investors not to close this session. You should be automatically redirected to provide your feedback in order that Chris and the team can better understand your views and expectations. This will only take a few moments to complete and is greatly valued by the company. On behalf of Chris and the team at Headlam Group plc, we'd like to thank you very much for attending today's presentation. That concludes today's session. Thank you, and good afternoon to you all.