Lords Group Trading plc (LORD) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Lords Group Trading plc Full Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen-only mode. [Operator Instructions] Before we begin, as usual, we would just like to submit the following poll. And if you'd give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to CEO, Shanker Patel. Shanker, good morning, sir.

Good morning. Thank you very much for joining us on our '24 results presentation. The theme of our results is that we are well positioned for market recovery despite a difficult year in 2024. I'll move over to the agenda. I'll be doing an overview of our results, followed by a financial review by my colleague, Stuart Kilpatrick, our CFO. And then I'll come back to a strategy updates and finish off with an outlook for 2025 and beyond. We will then have an opportunity for attendees to ask questions. Moving over to the overview. What I'd like to say to attendees is that we've delivered a resilient performance despite challenging economic backdrop. We all know 2024 was a much more difficult year for a variety of reasons. The macroeconomic conditions in our economy were tightening with higher interest rates, inflation being stickier than we expected, the upheaval of an election and a budget that was highly restricted for businesses. Despite that, we took strategic actions to protect our profitability and our cash flow, and we'll explain that as we go through this presentation. Overall, our revenues were 5.6% lower at GBP 436 million against GBP 462 million in the previous year. Our Merchanting business, however, delivered a good result with a like-for-like of negative 3.6%. But what we were really proud of is recovering -- they were recovering very strongly in H2. We're 2.3% up in that year. Our P&H revenue was down 10.2%, and that's in line with the market for boilers in the U.K. Our P&H market is very sensitive to boiler volumes. And as the market contracted for a variety of reasons, we'll explain those as we go through this presentation, naturally, our business incurred that decline. Bright spot in P&H is the fact that our investment in renewables has been rewarded with an increase of 99% in our revenues to GBP 5.5 million and continue to grow as we invest in that segment of the market. Like all businesses, we took decisive action on costs. We're very proud that our colleagues, without affecting customer service, still saved GBP 3.7 million in overheads and costs on a like-for-like basis. Again, despite a challenging year, we still managed to put through some organic margin accretive initiatives. So we supported these initiatives with an extended product range, 3 new branches, which opened in 2025 to date and investment in our digital capabilities. And finally, as we came into the new year, we completed a sale and leaseback of 4 of our sites in Merchanting for the value of GBP 13.1 million, and this provides us with additional liquidity to leverage our business for growth opportunities as the market improves. I'm going to hand over to Stuart on the financial review.

Thank you, Shanker. Good morning, everyone. I'd just like to take you through the financial performance for 2024. As Shanker said, revenue in the year was GBP 436.7 million, 5.6% lower than a record year in 2023 of GBP 462.6 million, which I think is quite a resilient performance in the year. Adjusted EBITDA was just 16.5% down at GBP 22.4 million, which is again fairly resilient in the markets we face. In the year, we achieved a couple of property gains, and we reported an adjusted EBITDA, excluding property gains, of GBP 20.6 million. The 2 property gains, one was in relation to our Park Royal site where we negotiated a lease credit or lease premium of GBP 1.7 million. And then later in the year, we sold and leased back our George Lines property in Heathrow, and that gave us a gain of GBP 0.1 million in the year. Our gross margins, which are not on this slide, were fairly resilient as well. So our gross margin in the year was 19.5%, slightly down on the previous year where it was 20.1%, and we'll talk about how the margin has moved in each division as we go through the slides. As Shanker said, we did quite a good job on operating expenses. You can see there GBP 64.6 million in '24 compared to GBP 65.8 in '23. In '23, we acquired a few businesses. So we've got a full year effect of those in 2024. So if you adjust for those on a like-for-like basis, we were 6.5% lower in 2024, which is a pretty good performance, I think. Adjusted operating profit for the year was GBP 10.4 million compared to GBP 16.5 million in 2023. And the variation or the change in operating profit is greater than EBITDA level. That's mainly due to the way we account the operating property leases these days. There's a greater amount of depreciation coming through in the operating profit line. Our earnings per share was 1.85p for the year compared to 4.35p in the previous year. And what we've done with the dividend is we scaled it in line with the adjusted earnings per share. So you can see our dividend for the full year is 0.84p per share with 0.52p being paid as a final compared to 2p last year, and that's a similar percentage compared to the earnings per share, which leaves our dividend cover unchanged at 2.2x. And there's been no change to our progressive policy. So as we see earnings increase as we come out of this economic period, we hope to improve the dividend in line with those earnings increases. I turn now to the Plumbing & Heating division, had a pretty challenging year. Just to remind you that the Clean Heat Market Mechanisms introduced on the 1st of January 2024, but then later reversed towards the back end of March. That caused significant disruption to volumes and pricing. In addition, we had quite a bit of administrative time refunding some of the impact of that to our customers during quarter 2 and quarter 3. As you can see, there was a significant revenue reduction in Plumbing & Heating in the year, 12.2% lower than the previous year. But this is very much in line with the U.K. boiler market as Shanker mentioned, which was down by 10.3%. And given boiler is a dominant feature of Plumbing & Heating division, that aligns very sensibly. Our market share was maintained at about 11%. So you can see the driving force there. The revenue reduction, which is about GBP 25 million, you can see in the graph to the right there, that causes a reduction in EBITDA of GBP 3.4 million. As I've mentioned, the pricing disruption caused by Clean Heat led to our gross margins being lower, so they were 12.6% this year compared to 13.4% last year, and that had an impact of GBP 1.9 million on our profitability in the year. We made some savings in overheads of GBP 400,000. But overall, those 2 dominant factors meant that our EBITDA was GBP 8 million in 2024 compared to GBP 12.9 million in 2023. So quite a significant reduction. More positive story in Merchanting where you can see our revenue is very similar to previous year, GBP 214.3 million. And if you adjust for those businesses I mentioned that we acquired in 2023, a full year effect in '24. You get a like-for-like decline, as Shanker mentioned, 3.6%. And in the second half, we were positive by 2.3%, and particularly strong in Q4, we were up by 11%. Our gross margins in Merchanting held up fairly well, so 26.7% versus 27.5% last year. Part of that decline was due to the mix. So some of our businesses performed particularly well at the lower margin aspect of our brands and that dragged down the gross margin by about half of that variation. Operating expenses, you can see slightly lower than previous year at GBP 44.7 million. But again, adjusting for a like-for-like basis, there's an 8% reduction, which, again, is pretty encouraging. So if we move across to the EBITDA bridge, GBP 14 million at the start in 2023. The like-for-like decline in revenues caused a GBP 2.2 million drop in profitability. The margin decline of 0.8% cost GBP 2.4 million of reduction in profitability. But this has been offset by the overhead savings we made of GBP 3.3 million on a like-for-like basis. And the property gains we made that I mentioned, we see a delta of GBP 1.5 million on the previous year and lower contribution from the acquisitions made in '23, which meant our adjusted EBITDA was 3% higher in 2024 at GBP 14.4 million, which we think is pretty great result here. Let me turn to our cash flow for the year. Our operating cash conversion, which is the ratio of operating cash to our adjusted operating profit, we delivered 71% conversion compared to 92.9% in the previous year. So pretty presentable result, I think. If we look at the chart, our EBITDA bridges across to our free cash flow, which is essentially the operating cash flow less tax and interest. You can see GBP 22.4 million of EBITDA, an outflow of GBP 3.8 million of working capital, and that's largely due to lower payables in Plumbing & Heating. So as I mentioned, Clean Heat Market Mechanism caused a huge amount of activity at the back end of 2023, which meant we had a higher amount due to our suppliers at the end of '23 and even here in '24. Tax and interest GBP 4.2 million paid out, and net CapEx was GBP 0.1 million. So 2 -- couple of dynamics here. Essentially, we spent GBP 3 million on capital expenditure, GBP 1.2 million on digital and ERP where we put a new ERP system into Plumbing & Heating. We continued our branch refurbishment. So we spent about GBP 0.6 million on our Alloway branch, branches we acquired in 2023. And we invested a couple of hundred thousand pound into our Maidstone branch which has been open in George Lines banner as of the 1st of January 2025. We continue to invest as you see. That was offset broadly by the Colnbrook cash flow so we got GBP 3.8 million in Colnbrook sale and leaseback, but we offset that by about GBP 900,000 which is buyout in the first quarter as part of the original transaction. All in all, that left us at GBP 3.1 million of free cash flow, a little bit lower than last year at GBP 8.7 million, and that's mainly driven by the working capital I mentioned and the slightly lower adjusted EBITDA. We've been fairly prudent, as we've mentioned, in terms of managing what we can control. So M&A spend is much reduced to GBP 3.5 million in 2024 compared to GBP 12.3 million last year. And dividend slightly lower at GBP 2.7 million compared to the previous year. All in all, that gives us a net debt increase from GBP 28.5 million to GBP 32.4 million and a reasonable performance given the dynamics of the year. I now turn to the balance sheet. You can see the operating capital employed declined a little bit by GBP 2.4 million. And the effect of the George Lines site leaseback reduced the tangible fixed asset line by about GBP 6 million. And you can see what I've been talking about the payables line there from GBP 95.3 million to GBP 86.6 million, largely driven by the Plumbing & Heating accentuated in December 2023. We made good progress in working capital in Merchanting in the year but slightly offset by that movement there. Working capital to sales ratio was 8.9%, which is up, as you might imagine on 2023 given the working capital outflow. And obviously, we'll be trying to trim that away as we go through 2025 and deliver more of our profitability into cash. On the banking side, as I mentioned, our net debt was GBP 32.4 million. That left us with headroom of GBP 62.6 million at the year-end on the basis of GBP 95 million total facilities. Our leverage, which basically compares the net debt to our U.K. GAAP EBITDA, was 2.73x compared to a covenant of 3.75x. So plenty of headroom compared to the covenants. What we have done since the year-end is obviously, as Shanker mentioned, is the sale and leaseback, we've also trimmed our facilities by GBP 20 million as we can't really use them and it does save us some future commitment fees by having those facilities there, but they can't be used. So hence our target is slightly lower than what we report in December. Turning now to the pro forma impact of sale and leaseback that we've just done. So as Shanker mentioned, we sold leaseback 4 properties in the Merchanting division. Proceeds -- gross proceeds of GBP 13.1 million. This chart -- this slide aims to show what would be the impact of that, have been on the '24 numbers had we done this transaction at the end of December '24. There's a gain from the property disposal of GBP 2.4 million. So that would have increased our adjusted EBITDA by GBP 2 million. It wouldn't have any impact on our adjusted EBITDA, excluding property gains. What we have on the operating profit line there is about GBP 2 million falling through, but that's offset by increased IFRS 16 right-of-use asset depreciation by GBP 0.3 million in the year to GBP 1.7 million improvement. Again, with the net finance expense, we expect about GBP 700,000 of bank interest based on current rates on an annualized basis. Again, that's offset by the IFRS accounting for operating leases or right-of-use assets by GBP 400,000. So net GBP 300,000 benefit from interest or net finance expense line, which means effectively the depreciation and the ROU interest pretty much match the cash interest sale on the bank side. So you end up with a PBT impact of GBP 2.9 million which is the gain on the sale of properties. Looking forward into the net debt number, you can see we reduced our net debt by about 1/3 from GBP 32.4 million at the end of the year. Net proceeds after tax of about GBP 11.6 million. We expect to pay about GBP 1.5 million of tax on the gain, takes down to GBP 20.8 million on a pro forma basis, slightly offset by lease liabilities obviously going up as part of our IFRS 16 accounting GBP 8.4 million. And you can see the impact on leverage. So leverage was 2.73, as I just mentioned, goes down by just under 1.0x to 1.75x. Now that leaves us in a very strong position to go forward, leverage reduced opportunities both organically, as we've touched on already. We opened 3 branches this year, but also strategic and carefully considered M&A opportunities for the brand. So on that note, I'll pass back to Shanker to talk about the strategic updates.

Okay. Thank you very much, Stuart. In terms of our strategic updates, our strategy is really a combination of margin accretive organic growth and selective carefully chosen M&A. On the left-hand side of this slide, you'll see the 4 key blocks of our strategy. Starting with product range expansion. We've previously always maintained that one of the ways that we can grow our business is to add to our existing product range. We've demonstrated that last year with some exclusive distribution agreements with couple of manufacturers, Clivet, in air source heat pumps, in the renewables, fragment of our market or segment of our market and now getting to the world's largest boiler manufacturer, it's a South Korean business, whose products we will be exclusively distributing in the U.K., helping them to grow their market share in the U.K. They are the largest boiler supplier in the U.S., and they've got a tremendous opportunity to grow in the U.K. market. In addition, we've added distribution agreements, not exclusive ones with Viessman, which is again a very large manufacturer and producer of fantastic products in the Plumbing & Heating world and along with Termoteknik in radiators. On the Merchanting side, we've taken a cladding product called Cedral and PRB render. And these products have associated additional sales for our Merchanting businesses as the customers can then buy a variety of additional products that go with their projects. So product range expansion is a big pillar of ours, and we've demonstrated that we're continuously increasing our range. Then comes digital expansion. One of the things we invested heavily last year is in our customer portal in our P&H business. And the reason for that is to reduce manual processing of orders. We have a lot of repeat orders from 2,000 merchants that deal with us on a next-day basis. Allowing them to do this digitally reduces error rates, increases efficiencies, reduces the need for manual processing. And all from a customer service perspective, it allows them visibility on our stock in each of the locations from which they get served. So that's vital for us. It's a very large investment we've made on behalf of our customers so that their lives are made easier in dealing with us. We've continued our investment in automated proof of delivery. Automated proof of delivery is nothing new. For a lot of us, we see that on a daily basis through businesses like Amazon, DPD, et cetera. But when you're dealing with HGVs and trucks, it's a lot more difficult to provide that. And we've invested heavily in that particular area. And the reason for that is that it allows us logistic efficiencies again. As we mentioned earlier, we are seeing some cost pressures, especially things like NI and national minimum wage. One of the ways we think we can keep our cost down is by becoming more efficient. And expanding and investing in technology allows those efficiencies to come through. We're also making investments in artificial intelligence around chatbots and apps, again, to improve customer service. And we're also working on last minute or last-mile logistics companies such as trade cars to offer our customers products when they want it, how they want it and how quickly they want these products. So lots of investments will continue in our digital initiatives. In terms of new branch openings, we mentioned that we've done 3 in a very short period of time. Highlighting the first one we opened in January in Kent under our George Lines brand, which takes George Lines to 5 branches. When we acquired this business in 2016, it was a single site based in Heathrow. We've now expanded it to 5 sites, all of which are between 1.5 acres to 2.5 acres, and trading very well. Mansfield under AW Lumb has been its latest acquisition. The process took a good part of about 9 months. So a lot of work happened in 2024 for us to be able to open this site on the 1st of May in Mansfield the 2.5-acre site. That AW Lumb goes from 2 branches to 3 branches. It's geographically positioned very well between Dewsbury, which is the northern most part of AW Lumb and Tamworth. So again, we hope to see some great synergies as we expand our geography for that particular brand. Our Condell moved into a new site in Hemel Hempstead to serve the North London and home counties markets and the specialist products that it supplies, lintels and Velux proof windows along with quite a lot of plastic range, et cetera. So again, the business is set up for growth in a nice unit in the north of London. And then our latest opening on Monday will be Bicester and Lords Builders Merchants brand. Bicester is geographically very well placed. It's a growing market with lots of housebuilding in an affluent area. And we managed to take a site that was operated by Builders Merchant for many years. Unfortunately, that merchant fell into administration. And instead of buying the business, we actually took over the site. So we reduced the outlay that we spent in order to acquire that site, but it's been a Builders Merchant for the best part of 8 to 9 years. So we're hoping that will go off to a very good start and shows our differentiated model of being able to acquire sites without having to acquire the businesses. And then we have M&A. We just wanted to reiterate our history of M&A or in this particular space. 16 businesses have been acquired over the last 10 years, all of them very well integrated into our group. An average ROI of over 25% despite challenging market conditions. And the opportunity to consolidate still remains. It's a highly fragmented market with Lords Group Trading holding less than 1% of this addressable market. We've also invested in our renewables expertise with the purchase of Alternate Renewable supplies in October 2024. And as you've seen, we've seen the market for renewables increase, and we've got a good foothold to be able to serve that market as that growth continues. In terms of our points of difference, 3 key blocks which I can't reiterate enough. Customer service is at the heart of everything we do. It sounds like a very simple point of differentiation. What is very, very clear to us is all the work that our teams do aim in providing our customers with an excellent service. The reason why that matters is our business relies on long-term relationships. And if we focus on customer service above all metric, then we will have long-term sustainable demand. And we can see that and we can see that demonstrated in our numbers. Despite a challenging market backdrop, we've held our numbers quite well, and that is because we continue to focus on customer service excellence. We also think we're different in the sense that 80% of our business is in the RMI space. The RMI market is large, was impacted by high interest rates over the last 18 months. It is still a large market, and it's highly sensitive to interest rates and macroeconomic conditions. As those conditions become favorable, we believe that our focus in RMI will prove to be beneficial to our business. And our strong track record in M&A is again a point of difference as a business that not only grows organically, but also grows through strategic, disciplined M&A in a highly fragmented sector. So what is our track record of strategic execution. You see the graph on the left-hand side shows our revenue, and you can see over a 5-year period, a CAGR of 35%. So strong growth in revenue since 2019, and equally strong growth in profitability and EBITDA of 56% from 2019, albeit, of course, recognizing that the last few years have been quite challenging as the market has seen a massive downturn. But we are resilient despite these downturns. We also believe that the medium-term drivers in our market are very good. Over 60% of the housing stock still remains to be over 50 years old in the U.K. And that, in itself, is pent-up demand that will come back as the economic environment becomes beneficial to our end consumers. Government targets of housebuilding and its supporting infrastructure construction will also help to drive our business and our markets, and we are very well positioned to take advantage of that, not only in the new house build segment, but also in infrastructure through our brands such as George Lines, Hevey and AW Lumb. And we know that we are very closely correlated to lower interest rates and therefore, a lower interest rate environment will benefit our core RMI market. In terms of Merchanting, what we would like to demonstrate here is the resilience of our business by showing you the graph on the right-hand side. This is data that we've collected from the BMBI showing what the market has been doing over the last 10 years. So from May '15, you can see a steady growth of 3.7%, then starting to wane in 2019, which is called the Brexit year, a large downturn in COVID between 2020 up until sort of early 2021 when the markets really took off, culminating in the peak in 2022. But it's what's happened since 2022 to volumes that is really quite stark. And that is the volumes have fallen by 25%. So the business has been operating in volumes, which in May 2024 were 25% lower than the COVID peak and 19% lower than May 2019. What we've, therefore, done in terms of our strategy is ensure that we have the specialist segments in our Merchanting business such as roofing, dry lining, insulation, civils, alongside, of course, investing in our general merchanting to provide our customers with this total building solution. And that's where our strategy will be. We're across general building materials as well as specialists such as roofing and dry lining and civil. We will be expanding our branch network selectively. We've seen that we've opened 3 in 1 year, and we'll continue to upgrade our sites. A big part of our model is to invest in what we call our 3Ps, investing in our people, investing in our plant, and investing in our premises. Most of our premises are large sites between 1.5 acres up to 5.5 acres. So our model is based on continuously investing in these sites to drive organic growth. Organic growth drives free cash flow. We use that free cash flow to either expand our network or to buy businesses. All of this is underpinned by technology investment in back-office processes, and that's what helps us to drive efficiency. We measure efficiency quite closely. You can see that we've demonstrated this through having overhead control in 2024. And then in addition, we leverage our digital offering to offer a best-in-class customer experience. If you use our websites, you not only can buy with ease using our website, but a lot of our web customers, we will follow up with a phone call or an e-mail to really give them that personal service. So an online and offline experience that is not matched by our competitors and differentiate our business. In Plumbing & Heating, what we see on the right-hand side is the fact that boiler volumes in the U.K. have been down by 10.4% since their peak in 2021. At the same time, the heat pump market has been showing really good signs of growth, albeit from a small base and the growth is 24.7% in compounded terms. Our research indicates that some of the reasons why boiler market has seen this decline since 2021 is that the average life of the boiler has been extended from 10 to 12 years. So that has an impact until we see a massive pull-through in future years and the normalization. But we've also been impacted not only by the Clean Heat Market Mechanism, but also by the cost of living, and the fact that annual repair contracts have resulted in people repairing their boilers rather than replacing them for the time being. The impact of the energy transition is that 75% of air source heat pumps are likely to go to new build, which means that there will be stability in the gas boiler market because unfortunately, the technology does not exist at this moment in time for a large-scale retrofit market where the boilers has been taken out and replaced exclusively by air source heat pumps. Our research also suggests that there isn't a clear cost advantage in this retrospective replacement market, and therefore, government subsidies will be absolutely necessary to drive growth, but they are, at this moment, unlikely to be increased. So what have we done and what is our strategy? Our strategy is to flex our business model to meet the resilience so that as the boiler market reduces because there's likelihood that new build will be mandated to be exclusively renewables, we are well placed in that segment as that market grows. You can see on the right-hand side in this graph that heat pumps are supposed to grow by 26.6% between 2024 and 2030, whilst boilers will grow at a benign 1.3% and the total units will be 3.9% growth over that period. The 3.9% growth matches the sort of growth that we saw in emerging between 2015 and 2019. So it gives us the confidence that we have a market that will stabilize and will grow. There's 2 different aspects of that market, and we need to be flexible to meet that market. And in addition, our flexibility will also lead to driving non-boiler products, which is -- which will be higher margin and driving that through our Mr Central Heating branches. In terms of strategic summary, we reiterate the fact that we have an opportunity for volume recovery in Merchanting. We will be driving operational gearing whilst tightly controlling costs, which demonstrates the fact that we are a lean business. Our belief has always been to be lean all throughout the cycle, the up cycle and the down cycle so that we don't have to take drastic action in a down cycle and action that would lead to customer service issues. I think consistently, we focus on customer service, and we will continue to invest in right throughout the up and down cycle in customer service, and that's shown in our results. In the P&H side, we will be increasing our -- or improving our profitability through margin mix, wider product range, investing in renewable growth, especially since the acquisitions of Ultimate Renewables. And we'll be looking at our operating model to drive further efficiencies. We have 7 depots. We're looking to see how we can serve our markets better and reduce cost potentially. We'll be leveraging our digital team across both of our divisions to offer this best-in-class customer experience and good healthy businesses. We will be driving working capital reduction to deliver higher cash conversion. And ultimately, all of that feeds through into selective M&A of profitable cash positive outcomes. An update on our ESG strategy. We've been busy implementing our strategy, so we have a clear stance on how to address our most significant environmental impact. What we've done is reduced our Scope 3 emissions from waste diverted from landfill by 51%. Our total emissions in 2024 are down 12.5% from 2023. And we have a clear target for our net zero in Scope 1 and 2 by 2035 and Scope 3 by 2050. Our strategy has been made out and internally communicated. One of the things that we're quite proud of is the fact that our vehicle fleet, which comprises 95% of our Scope 1 emissions, has trialed HVO in 3 branches. And as that particular alternative fuel is more widely available, we'll be looking to roll that out into 2 other branches across our network and thereby reducing our Scope 1 emissions drastically. We've also invested in a telematics software system for Samsara across our P&H fleet last year and now into our Merchanting fleet, and that allows us to improve driver efficiency and through better fuel efficiency for our business. And you can see that through our numbers. We revised our supply code of conduct as we do import products and deal with products from countries where there are potential issues. So we have a very strong mandated compliance policy that we managed to implement last year in conjunction with our buying group HMB and our industry Federation, the builders merchant federation. We're very proud of what our foundation has done, which has distributed GBP 70,000 grant in 2024 and also match funded many colleagues, supporting projects that benefit over 1,800 people in just one single year right across our branch network. So in terms of the outlook, I'm reiterating our investment case first. The fact that we believe we are still a leading high-growth distributor of building materials in the U.K. The reason why we think that is we've got 6 key areas of our investment case. Firstly, we have a tremendous track record. We have been a top 10 U.K. merchant now for many years and continue to hold within the top 10. We recently hired a new COO in our Merchanting division from the industry. That shows that our business is all about making sure we have the management strength to be able to deliver growth. We have a good and strong financial profile with high cash conversion. Our M&A is value-added and accretive. 16 acquisitions in 10 years is a record that we're proud of with a very good return on investment. Our markets are huge. There is a substantial RMI market. And within that, we produced a CAGR of 35%. So as we see that market recover, we're certainly well placed to take advantage of that. We're also able to demonstrate organic margin accretive growth through branch openings, 3 branches being opened in a short period of time. Again, it's a testament to the wonderful colleagues that we have in our business who are agile, nimble and able to deliver on opportunities as it arise. And all of this is encapsulated by a key differentiation of ours, which is we have a unique customer-first proposition. You can see that through highly consistent high scores in Feefo and other rankings. So I'll summarize with the outlook. Firstly, we believe we've navigated extremely challenging conditions in 2024 and delivered a resilient performance. We appreciate and recognize that consumer confidence still remains weak in the U.K., but there is a possibility of a gradual recovery expected in the RMI demand section, that will be largely dependent on government policy and more on interest rate environment, which we see to be slightly loosening from a restrictive 18-month period in the last 2 years. There are headwinds in increased payroll and taxes and minimum wage, which mean that we will need to ensure strict discipline on maintaining our overhead control. However, all said and done, the medium-term outlook is positive. That's driven by the prospect of lower interest rates over the next 5 years and by supportive government policy. In terms of our ability to grow our business, the sale and leaseback of our 4 properties, which was completed in the last few months -- last few weeks, sorry, provided us with additional liquidity to leverage growth opportunities as the market recovers and as these opportunities present themselves to us. I'd like to end by stating the last bullet point is our Q1 revenues have been very strong for 2025. P&H business is up 22%, albeit against a weak comparison due to pull forward boiler volumes ahead of price increases, but we still think that, that business will start to recover. And our Merchanting business is up 11% as we continue to deliver on the momentum that we gained in Q4 of 2024. Thank you very much, and we'll move forward to take any questions.

[Operator Instructions] And while just the team takes a few moments to review those questions that have been submitted already, I'd just like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A can all be accessed via your investor dashboards. Shanker, Stuart, as you see that we have received a number of questions throughout your presentation this morning, and thank you to all of those on the call for taking the time to submit their questions. But guys, at this point, if I may just hand back to you just to read out those questions and give your responses where it's appropriate to do so. And if I pick up from you at the end, that would be great. Thank you.

Okay. So we'll take them in order received. First question, what are the institutional concerns themes of the earlier quarter?

I think the institutional concerns historically have been the level of leverage that we've had in the balance sheet and the level of debt given the relatively high interest rate environment we've had for the last 18 months. And we believe we've solved that with the sale leaseback that we just announced a couple of weeks ago and moved our leverage down significantly and in a good position to take the business forward, as Shanker mentioned. So I think it was mainly debt. We're obviously performing slightly better than our competitors in the Merchanting sector. Our like-for-likes in the first quarter, Shanker mentioned, is plus 11% in Merchanting. That's slightly better than the published results of our competitors. So we hope that will continue throughout the year. Second question from Daniel. Has the headcount being reduced, what's the cost saving initiative? I think in September '23, our headcount is about 960, 970, current headcount is about 912 despite adding on the 3 branches that Shanker mentioned. So we've produced roughly around 50 or 60 heads. But it's a very fast-moving statistic. But obviously, as Shanker is keen to point out in his presentation, we're very focused on customer service and availability. We cannot end -- we can't ruin that by taking up too many heads, we're quite conservative. We don't run the heavy cost anyway, we like to be lean on the upswing as well as lean on the down swing, so that's where we are on headcounts. Toby T, how much of the 3.7 you identified cost saving was realized in 2024? The answer to that is, all of it. That's a historical number of 3.7 which is the like-for-like once you adjust for businesses that have been bought in 2023, but yes -- and therefore, we didn't have a full year in 2024.

Got any plans for more branches, GBP 500 million revenue target still valid? Yes, very much so. We were reviewing the target just the other day. When we set that target, what we didn't know that the market was going to drop by 20% in Merchanting and 10.4% in P&H. So when we look at our performance, we've not dropped our revenue by that sort of level compared to the GBP 500 million target and certainly with the initiatives that we've got planned for more branches as well as just general initiatives branch by branch and business by business, we certainly feel that GBP 500 million is a credible target for us to achieve. I would like to say in 2025, that it's still a target that we are very confident that we will be able to achieve in the medium term. Next question. John Young. Congratulations for great expansion services. Any new registration boost? I'm not sure what is meant by new registration, but what is really boosting us is the fact that we're starting to see housing transactions move in the right direction. We're starting to see mortgage approvals moving in the right direction. We're starting to see capacity being taken out of the market as businesses, if I take the example, businesses that were underinvested by their owner managers failed. And our model, which is slightly differentiated, which is investing in our business, we have tremendous opportunity to expand. And that's what we're doing. We're taking advantage of the conditions for us to be favorable for organic expansion. We are also continuously looking at M&A opportunities. We have a very disciplined approach to M&A. And therefore, we will only carry out M&A at the right time under the right conditions with the right particular deal. So I hope I've managed to answer that question correctly. What proportion of sales are being closed online? So as a general rule of thumb, we operate between sort of 6% and 10% of all of our sales being online. But what we really are more focused on in what we call an online in-store approach. So we know that a lot of our customers' journey starts online or it starts in store. And our differentiated customer service model is that we will trade with you whichever way you want to trade with us. So if you want to trade exclusively online, then we have facility for you to do that. If you want to start your journey online but place the order on a telephone, then of course, we've got fantastic internal sales team who will pick up your phone call, recognize that you started your journey online, close it offline, or actually provide the advice that you might need, a conversation offline only for you to go back and transact online. We've got branch network so you can physically turn up, have a conversation with our customers, with our internal sales team, branch team and then transact online if you want. And then, of course, there is the fact that at any point, if you want to deal with any of our colleagues facility to do so via e-mail, via our portal, by calling us, visiting us and us visiting you as a customer. All of that is there. So it's a business that takes digital initiatives and say that we exclusively want to be digital because we don't think that, that is good customer service. That is an efficient manner in which you can transact and may be more efficient for the business than necessarily for the customer, especially when you're dealing with thousands of thousands of products, a lot of which the customer doesn't know how they fit with one another or what actually they want. So we try to make the best of both worlds, the offline world and the online world. And that's really our differentiated proposition. We're not going to be going to our businesses and saying we are all digital. But we do like digital businesses as long as they're supplemented by physical locations and customers being able to visit us physically or to be fulfilled locally. And that's the key differentiator for us. Any more questions? So Johnny's come back and said, okay, Legislation. So legislation for us is 2 sided. There's a lot of legislation which is a regulatory burden on businesses, and we all know that, that comes thick and fast. But there are aspects of legislation which are very helpful for us. If we look at the government's stance on Clean Heat. Firstly, as and when they mandate new builds to move to exclusively renewable products, so like ban use of gas boilers in new build, that will be helpful to us. We don't sell boilers into new build currently. But when they move to renewables, we will certainly be selling renewables into new build because renewables largely goes into new build. Within that, we don't sell renewables currently to the large house builders. We sell them to small to medium-sized house builders. So if the government pushes along with allowing planning permission to be much more efficient and speedy for the small to regional house builders to build, that will help our markets massively. Overall planning permission constraints that exist, those are removed or even amended the time it takes to get planning permission, the type of planning permission that you get is favorable, that will naturally feed into our end markets, naturally feed into our business. On fire, there is a big push post-Grenfell for there to be a much more strict fire strategy for new builds and in fact, for many buildings, including high-rise buildings. And whilst we're not currently in that market space, we think that, that's a growing market for us to potentially enter into. We have the merchant network. We know how to sell products. We know how to bring products into the market. So with our infrastructure, that's an area that's driven, growth is driven by regulation, and it's only a matter of time before we start to find our position in such markets. Hope I've answered that question.

Shanker, Stuart, if I may just jump back in there. Thank you very much indeed for being so generous of your time and addressing all of those questions that have come in. And of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended. But Shanker, perhaps before now just really looking to redirect those on the call to provide you their feedback, which I know is particularly important to yourself and the company, if I could please just ask you for a few closing comments just to wrap up with, that would be great.

Thank you very much for attending our results presentation. As I reiterate, our business is well set to take the opportunity that is well positioned for market recovery. We believe we have delivered a sustainable and resilient result in 2024. And we would like to end by thanking all our colleagues in our business, all 912 of them for the great efforts that they have made in making sure that our business has all the opportunities to grow that it currently has.

Perfect. Shanker, Stuart, thank you once again for updating investors this morning. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can really better understand your views and expectations. This will only take a few moments to complete, but I'm sure it will be greatly valued by the company. On behalf of the management team of Lords Group Trading plc, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.