Lords Group Trading plc ($LORD)

Good morning, ladies and gentlemen, and welcome to the Lords Group Trading plc Full Year Results Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and will publish our responses where it's appropriate to do so on the Investor Meet Company platform. Before we begin, we would like to submit the following poll. And if you could 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, and thank you, everyone, for joining us today for our 2025 full year results presentation. 2025 is a year where we continued our strategic progress with increased diversification of our business and increasing our operational leverage. The agenda will be -- I will set out the highlights and Stuart, my colleague and CFO, will go through the financial review. And then we have a business review, which I will go through alongside 2 colleagues who joined me today. To my left are Dean Murray, CEO of CMO; and Matthew Webber, who is the COO of our Plumbing & Heating division, and they'll give an update on their respective businesses. I'll conclude with an outlook followed by Q&A. We wanted to reaffirm our investment case, and that is split across 6 major aspects. One is the fact that in our investment case, we believe we're a differentiated investment opportunity. And that's because we're uniquely placed in a large addressable market that has significant opportunities for us, in particular, to grow organically or through acquisition. Many of our larger competitors are unable to do both. And that's why we believe it is uniquely placed in the marketplace for us. We also have a resilient core market, and that is the RMI driven demand that's supported by structural housing need in the U.K., either for new homes or for the refurbishment of the existing housing stock in the U.K., which is continuously in need of updating. Alongside our structural growth drivers, particularly in renewables, where there is a major push through government policy to invest in renewables, and we have an opportunity of improving our margin mix through differentiated and greater products. In terms of digital, we've established our digital platform via CMO, which allows us to accelerate our national scale and drive data-driven growth. All of this leads our business to have greater operating leverage embedded within it. And that -- from that, I mean, an incremental revenue will drive disproportionate profitability and profitability growth. And finally, our balance sheet is robust. It's much stronger after action that we took in 2025, which we will explain in giving us capability to invest and capitalize in this current environment. Highlights of 2025. We've demonstrated a resilient performance in a tough market, and we've demonstrated financial progress. The positives for us is a record revenue of GBP 482 million, up 8.3% year-on-year overall with a like-for-like growth of 0.7%, and that's despite subdued end markets. In particular, Merchanting revenue is up 3.1% on a like-for-like basis, which reflects our market share gains along with a disciplined approach to pricing. Another key positive for us in 2025 is the improvement that we managed to create in our Plumbing & Heating division in margins by 60 basis points. And that was driven primarily by product mix decision as well as strong margin management by the senior leadership team. In our Plumbing & Heating division, our renewable revenues were up 57%, which increases the margin quality of that division. Overall, 2025 resulted in an adjusted EBITDA of GBP 21 million, alongside a net debt reduction of 59% to GBP 13.4 million, which therefore results in a significantly strengthened balance sheet as we progress into 2026. We made strategic progress and strengthened our platform. We are now well positioned for the market recovery when it works. We acquired Smith & Jones in June 2025, and that materially accelerates our digital capability alongside our national reach. a record 3 new branch openings in 2025, expanding our national network, a decision to take action on structural costs in our P&H division following a strategic review that streamlines that business. And again, I reiterate that we increase our operating leverage as volumes come. I'm going to hand over to Stuart, who will run through the financial review.

Thanks, Shanker, and good morning, everyone. If I could just turn to the financial summary for 2025. As you can see, we delivered revenue growth of 8.3% to a record level of GBP 472.8 million despite being in a subdued market. And as Shanker mentioned, we've got like-for-like growth of 0.7%, and that was supplemented by new branches and acquisitions in the year. And I'll talk through a little bit more about that in the next slide. Our gross profit was up by 9.2% to GBP 93 million. And our gross margin was pretty stable, slightly ticked up on last year at 19.7% compared to 19.5%. And through the last years, 3 years where it's been quite a challenging external environment, we're demonstrating good gross margin between the 19.5% to 20% range, which emphasizes our pricing discipline and how we managed to control our sales numbers. Adjusted EBITDA slightly lower at GBP 21million, which reflects our deliberate investment in organic opportunities and acquisitions and also our proactive management of external cost inflation. Adjusted operating profit was GBP 1.2 million lower at GBP 9.2 million, and that's partly because of the increased employment costs through employers national insurance, which the whole of the U.K. business has faced in the year, higher national minimum wages and partly our branch investment that we touched on a few seconds ago. Net debt was GBP 19 million lower at GBP 13.4 million, and that was underpinned by our sale and leaseback activity in April 2025, but also strong working capital management as we work through the second half of the year. We've scaled our dividend in line with our earnings per share to 0.52p per share. And we're pleased to be saying that we'll be paying about GBP 900,000 of cash in respect of full year 2025 in dividends to our shareholders. And I now turn to that revenue bridge I mentioned. This takes us from 2024's number of GBP 436.7 million to '25's GBP 472.8 million. You can see that like-for-like growth of 0.7% added GBP 2.1 million. The acquisitions we've done half year effectively from CMO, which joined in June 2025. And the effect of a full year of Ultimate Renewables, which joined the group in October 2024. Those 2 added GBP 26.3 million to our revenue. And the new branches we opened in the Merchanting division added GBP 7.7 million, which bridges our turnover for the year. Worth talking about our operating expenses. As I mentioned, we tightly controlled our costs despite ongoing external inflation. You can see our bridge there from GBP 64.6 million in 2024 to 2025 number of GBP 73.4 million of underlying OpEx. CMO and the new branches added about GBP 7 million. That's the bulk of it as we invested in those 2 areas for future growth. Our employers national insurance and national minimum wage increases added GBP 0.7 million to our costs and that led to inflated supplier costs as our suppliers sought to recover those increased employment costs for their own purposes. So our like-for-like increase was GBP 1.1 million, which we're quite pleased to proactively manage that through cost efficiencies, tight cost control, limiting our like-for-like increase to 1.7% in the year. And you can see there our FTE headcount, full-time employee headcount was 4% lower at the end of December 2025 compared to 2024. And whilst maintaining the key front-end staff who interface with our customers and provide the excellent customer service, we're keen to protect and make sure we protect those colleagues whilst keeping a tight control on our costs. I now turn to the divisional analysis, our Merchanting division, which is very resilient in trading terms. And we -- as I've said, we've invested for the future growth in this division as well. Revenue was up 6% overall. Like-for-like, as we mentioned, was 3.1%, which strips out those new branches. And that indicates that we've made market share gains in 2025. Our gross profit increased by 3.1%. But if you look at our gross margin, that was under pressure in the year and 70 basis points, 1.7% lower as the market was particularly competitive and some of our competitors were seeking market share gains as we were trying to maintain or improve our market. Overheads increased by national insurance, as I've mentioned, and inflation and the new branch home things. And you can see in that graph on the right-hand side, GBP 1.3 million increase in overheads and GBP 200,000 in relation to new branches. And if you look at our revenue benefits, that added GBP 1.3 million to our EBITDA, but that was offset effectively by the decline in margin. So the movement really between the profitability year-on-year is lower property gains of GBP 0.4 million and those overhead challenges we've had in terms of inflation. But it reflects we've got good capacity ahead of the market recovery. Obviously, there's cost inflation we've had to deal with and try to be more efficient. But we're in a great position going forward as we see those new branches maturing, we expect incremental sales to deliver a higher EBITDA conversion. We're well positioned to benefit from a recovery in the RMI sector overall. I'll turn now to Plumbing & Heating, which delivered an increase in EBITDA of 6.3%. You can see here despite revenue being flat and the U.K. boiler market being fairly flat, we've protected our market position and maintained our market share. Our gross margin has increased by 60 basis points from 12.5% to 13.1%, and that reflects a deliberate shift to value over volume. And you can see the benefit of that in our chart there. If you take out the acquisition impact on revenue, our revenue impact on profit is negative 1%, but that was more than compensated for by our profit -- our increased gross margin. And then we've made a small but very positive contribution on the overheads, which are 1.5% lower on a like-for-like basis despite those industry-wide inflation pressures that I mentioned. So that combination gave us GBP 0.5 million increase or 6.3% increase in our adjusted EBITDA. Strategically, as we've mentioned, we had a good year in renewables, and that helps our gross margin as well. Renewables were up 57%. And we've mentioned in the last couple of years an investment in the systems, whether it's ERP or as we talk about a bit later some of our other systems we've implemented and they're beginning to improve our operational efficiency, which you can see from the numbers in FY '25. And then turn to our newest and third division, digital, which is effectively CMO. CMO was acquired in June 2025, and you can see that provides a national scalable digital platform. And you can see from the graph in the bottom right-hand side there, when the group -- when CMO joined the Lords Group in June, like-for-like sales were roughly 40%, 45% down on previous year. And that gap has gradually declined and improved from a sales perspective as we've gone through each month. And you can see when we get to the last part of the year, we reduced that deficit down to below 5%. So a really encouraging trend of month-on-month and week-on-week sales improvement. Full year revenue, you can see GBP 25.8 million the business was EBITDA positive in the second half of 2025, which is good. And part of that was from GBP 1 million of annualized cost savings that the team at CMO took out of the business as they joined the Lords Group. And this gives us a really good medium-term opportunity in terms of increased digital penetration that will help our margin quality. It's a working capital positive business for us and helps our operating leverage. I turn now to the cash flow. As we've touched on already, a big reduction in net debt of GBP 19 million to GBP 13.4 million, and you can see the bridge there on the slide. Operating cash, which is adjusted EBITDA, working capital, lease rentals and CapEx, interest, et cetera, was an impressive GBP 12 million or pleasing GBP 12 million -- we got a net GBP 11.4 million from the sale leaseback that happened in April 2025. And then we spent about GBP 4.4 million on dividends and M&A, the bulk of the M&A bar there being obviously the acquisition of CMO for GBP 1.8 million and some deferred consideration. Operating cash conversion was a staggering 317%. That's the benefit of the sale leaseback and the strong operating cash flow compared to 71% last year. And we have got some adjusting items before tax of about GBP 8 million that you'll see in Appendix 3 in the slide pack. They are mainly noncash branch impairments, noncash of GBP 7.5 million and a small amount of cash from restructuring programs taken through the year of GBP 0.5 million. We then look at the balance sheet and the refinancing, we've substantially strengthened our balance sheet and liquidity in the year. That's the main result of the net debt reduction, as I say, came down from GBP 32 million to GBP 13.4 million. Net debt, as you can see to operating capital employed, which is essentially the tangible fixed assets and working capital has improved from 61.1% to 39.4%. Our net debt compared to our net assets has improved from 68.1% to 31.9%. And the sale leaseback has improved our flexibility whilst we retained operational control of those assets. You may have seen we announced a refinancing on the 2nd of April 2026, where we've secured GBP 65 million of new facilities with 3-year commitments with two,1-year options, and they're underpinned by our strong receivables base going forward. And we think this is a better fix, better alignment with our business model to have a greater invoice financing line of GBP 45 million compared to GBP 25 million before and a slightly lower revolving credit facility of GBP 20 million. That gives us liquidity headroom to invest through the cycle, whether it's organic growth or M&A. And you can see the GBP 65 million of facilities compared to GBP 13.5 million net debt gives us plenty of headroom. Now if I can pass back to you.

Thank you for the introduction. I will run through our business review, starting with the reiteration that our strategy is consistent, and we are continuing to be positioned for growth. We have a strategy that is a combination of margin accretive organic growth and selective M&A. In terms of organic growth, we demonstrated that in 2025 by opening 3 new branches, delivering GBP 8 million of additional revenue. And in terms of selective M&A, we acquired CMO in June 2025. And what you can see in the 4 icons below are the strategic elements of our business, new branch openings, product range expansion, digital expansion and acquisitions. We will go through our 3 divisions. I'll present Merchanting and then my 2 colleagues will present their divisional strategies. In terms of Merchanting, we had new branch openings, as I mentioned. One of them was in George Lines, our Civils & Landscaping division, which had revenues in 2025 of GBP 39 million. We opened its fifth branch in Aylesford near Maidstone in a 1.5-acre site. So it's a large concrete well completed site. And to give you an idea, revenues of GBP 39 million in 2025. When we acquired this business, the revenues were just under GBP 12 million back in 2016. So we have a strategy where we take acquisitions and we grow them by adding organic branches, more branches to them or by enhancing those businesses. Next one is an acquisition we made in 2022, AW Lumb, which is part of our distribution and dry lining division, with records in 20 -- revenues in 2025, a record of 51 million. After 40 years, it opened its newest branch, which is the third branch in Mansfield, a 2.5-acre site that sits ideally between its locations of Tamworth, a 3.5-acre site and Dewsbury, which is just under 5 acres. So an excellent addition to that network. Under the larger Lords Builders Merchants and Advanced Roofing division, which covers our General Merchanting and specialist roofing site, revenues reached 97 million. And again, we've created a unique model of dual branding sites. We dual branded a site in Bicester, which opened in April 2025. It's a smaller 1-acre site. But what's unique about this was a site that was operated as a builders merchant by another family for many, many years, which unfortunately closed, but we took that over and resurrected. And that's a big part of our merchanting organic growth, taking over good locations in decent sites that need investment. We repeated the same in Bury St Edmunds by opening a second site in Suffolk for us in March 2026. That's a much larger 2-acre site that again houses an advanced roofing as well as a Lords Builders Merchants. And that was a former builders merchants for over 40 years, unfortunately closed we went in and took a lease -- a favorable lease of that premises and look forward to now re-establishing that locality under Lords Builders Merchants and Advance Roofing. All of this comes with continued investment in our existing branch network of a total of GBP 2.4 million with fit-outs being GBP 800,000. So we're continuously ensuring that we invest in what we call our 3Ps. We invest in our people, we invest in our plant and we invest in our premises. We've done all of this despite inflationary headwinds by ensuring we have tight cost control. National minimum wage added GBP 400,000 to our cost base. However, through strong action taken by the team, we've restructured the central team in merchanting to save GBP 800,000 annually. What we've been doing in terms of our strategy is, as I said, selectively developing the geography of the business. In the last 15 months, 4 new branches being opened. That's a record for our business. And we continue to see more opportunities in taking over sites at reasonable cost. We've been continuously enhancing our product and service offering. The dual-branded sites are unique to Lords, where we are offering specialist products alongside the general merchanting range. And then we continue to ensure that our branch have autonomy, which facilitates localized product ranges as well as a superior customer service. Overall, in merchanting, the priorities will be to continuously maintain cost control and increase efficiency, thereby positioning the division for market upturn. We want to drive gross margin increases through supplier support and competitive pricing. And we continue to look out for selective M&A of specialist brands or geographies that are supplementary to our existing geographies. I'm going to hand over to our COO of Plumbing & Heating, Matthew Webber to go through an update on his division.

Yes. Good morning, everyone. Thank you, Shanker. The first aspect, to which happened roughly a year ago was really decisive action to improve our gross margin. And we did manage to increase that by 60 basis points in the year to 13.1%. So some really strong actions taken in a really tough market, but have been fairly transformative for the business, which is something we've clearly continued on with this year. The U.K. boiler market being flat at 1.35 million units was disappointing, even more so when you think that the norm used to be around 1.6 million units a year. So in that context, we did well still to -- despite our strong margin decisions to maintain our market share there about sort of 10%. And as mentioned, we strategically chose to improve the product mix at the expense of volume. So really going after the more profitable categories, namely plumbing and solar heating categories outside of boilers. In terms of digitalization of the division, a couple of big moves within the year. Firstly, a customer portal for our APP customers, which has made their life significantly easier in terms of being able to check prices and livestock information, et cetera, and indeed place orders. And I'm pleased to say that we're now up to between 10% and 15% on the normal month of all of our orders are going through the portal and that increases at pace. The second element that we managed to implement in 2025 was the addition of Podfather, so the electronic proof of delivery, which was established across the wholesale distribution business. fantastic from our perspective. And from the customer's perspective, it simplifies everything and digitalizes everything. So really good news there, well executed by the teams. And then finally, just to reiterate, I guess, the revenue increase within renewables and namely Ultimate Renewables as well as sales through APP. As per the normal approach in Lords Group, we are investing in the 3 P's. And in this sense, we've relocated to a significantly larger site -- we actually had the official opening of that recently with circa 200 customers in attendance, which is fantastic to see. And we've also taken the opportunity to upgrade what was Ultimate Renewables ERP system in line with the system we use across the rest of the division, which, of course, like with all these things was not straightforward, but we're now feeling the benefits of that having gone through the initial pain, which is fantastic for the business. And then more laterally, I joined the business at the start of September 2025, started a strategic review with the senior team. And there are various aspects that came out of that, and that's come to fruition in 6 core projects. We're honing in on, sort of, one of them right now, which is where we wanted to maximize our efficiency of the wholesale business model. So post strategic review and following consultation, we've proceeded with our plans to reduce from what was 7 distribution centers with APP to 4. You can see on this lovely map here, what we end up with is 2 super DCs, namely in Erith for the South and Tamworth for the North. And each of those has a satellite branch working in tandem as well to cover the geography. We think that this delivers much stronger customer service and stock availability than we previously had. And of course, it has the upside of reducing our cost to serve, allowing us to be more competitive as well and increase margins. Within the mix of that, sadly, the 3 sites that needed to go from the network were Park Royal, Dagenham and Portsmouth. All 3 of those have Mr Central Heating trade counters attached. In 2 of those, we are going to move sites, so Park Royal and Dagenham, very strong footfall areas for us. So we invested in new sites there. Portsmouth, however, we've decided to close. But part of the bigger sort of drive of our trade counter business as well in a slightly different format. And the key here is sort of driving non-boiler products. So in other words, more profitable areas and also the higher-margin Mr Centrall Heating brands. Overall, as I mentioned, the cost to serve does reduce and there are sort of net annualized savings of GBP 1.4 million. we overachieve on that too. So it's a huge amount of work from the team, but much needed and enables us to now keep on with growth. At this point, I'll hand over to Dean Murray, the CEO of CMO.

Thank you, Matt, and good morning, everyone. For those of you who are not aware who CMO is, CMO is the U.K.'s largest pure-play retailer of building materials with a digital model that's been developed over the last 15 years. We joined the group back in June of 2025 after a period of supply chain challenges caused by restricted supplier credit. And so since joining the group in the second half of last year, it was all about a rapid turnaround after those challenges. The key progresses in that period are we effectively on the 6th of June when we joined the group, really had no supply base at that point because of the what happened within those challenges. Fortunately, historically, our supply base has a large overlap in so were able to help us restore that bright supply base from effectively 0 to by the end of the second half, over 95% of those suppliers were back servicing the company. One of the effects as well of those challenges was our refund rate for a delivery had risen to about 21%. So over 20% of our orders we were having to refund to the customers. During that second half period with the suppliers coming back on board and that support, we managed to reduce that back to historical norms of around 5% -- we also, I think, as Stuart touched on earlier, implemented a rationalization program and efficiency program that resulted in excess of GBP 1 million of cost savings versus the cost base pre-acquisition. I think as you saw on the graph earlier as well during the second half, we rebuilt sales like-for-like from minus 48.3% when we joined the group to close to 0 by the end of the second half period on a strong growth trajectory. Important to us as a division is we're investing in customer acquisitions our repeat rates. And again, we recovered those repeat rates back to 63% of our sales coming from repeat customers in the second half of last year. All of that together meant that we recovered our Trustpilot ratings, all of them to excellent or good. But I suppose more importantly as well we restored the business back to profitability. moving into the strategy going forward and in particular this coming year. This year is about growth, how we grow the business and also importantly, what we can bring to the group and how we can extend customer access beyond the branch footprint. In excess of 70% of customers in this market, the buildings market start their purchase journey online. They may go on to buy from a physical location ultimately, but they start that journey and that research online. And CMO has national reach to those people. We have over 10 million customer visits to our sites, online sites during the course of the year in excess of 150,000 of those find they can purchase with us ultimately. But within that, 30,000 of those orders are delivered to within 5 miles of an existing Lords branch and a high proportion of those customers are not existing Lords customers. So we have a massive opportunity to extend that penetration of customer base within the overall Lords Group. We've got a number of projects underway now to deliver that. So effectively, we can be a very significant customer acquisition engine. And the key to this is how we use technology both within CMO, but also within group customer data and group exercises to drive new and repeat customers across the group. It's also a 2-way benefit. I mean very quickly, we've been able to launch 15,000 new products to our customers. There are Lords Group products that we don't currently give access to. And all of this ultimately is about creating strategic value. It positions the group now to benefit from structural shift to online purchasing. I think it creates a unique hybrid model within this market, combining both local service and national digital scale and it provides the platform for future digital expansion and category growth for the group.

Thank you, Matthew and Dean. I'll finish off with our outlook for 2026. We have clear priorities for 2026, and those are to drive like-for-like sales growth in Merchanting. Merchanting is a town-by-town business, and we know that in each of our towns, we have an opportunity to continue to grow our local businesses in those towns. We will continue to enhance the P&H margins through mix and efficiency. We're taking some dramatic action in terms of efficiency, and we look forward to seeing that come through, take the benefit of those efficiencies with the rationalization of our depots. CMO is a great addition to our business, and we'll concentrate on scaling CMO alongside embedding its digital capability across the group. All the while, we'll continue to maintain disciplined capital allocation, cost control, price discipline and working capital efficiency. In terms of the outlook and the medium-term potential, the outlook is that our market conditions remain subdued due to geopolitical and government actions, and that is resulting in continued macro uncertainty alongside inflationary pressures and interest rate dynamics that are not favorable, but we were expecting them to be. That said, we believe we're materially better positioned than we have been in the past. And that's because we strengthened our balance sheet. We've expanded our digital capability. At the time of our IPO, we said our aim was to have 25% of our revenues from digital means. We're well on our way to achieving that. And this is our fifth year of being a listed business. So we're proud that we've managed to go a long way towards achieving our stated objectives. We're accelerating our renewables growth, you've heard from Matt in terms of what we're doing with ultimate renewables. And we've rationalized our cost base, which is something that you've seen us demonstrate in our numbers. So overall, before I close out and take questions, I'd like to state that as a business, as volumes recover, this group expects to benefit from strategically increased operating leverage. And that will come through incremental revenue, which in itself will drive a disproportionate increase in our profitability over the medium term. Thank you very much, and we move over to Q&A.

Perfect. If I may just jump back in there. [Operator Instructions] Just like to remind you that a recording of this presentation along with a copy of the slides and the published Q&A can be accessed via your investor dashboards. Guys, 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 if I may just hand back to you 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.

We have a number of questions. Thank you very much. Stuart, would you mind doing the honors and running through those.

Certainly. So James has asked, have you plans to open any more sites this year ? As you just open one in March, could you let investors know by RNS on this? I think we did actually for various reasons.

I think we put out as a news item, but necessarily.

May not be an RNS.

But do check our website. We will be publishing more news on our corporate website just as for information rather than necessarily being an RNS due to the fact that RNSs are a bit more tightly controlled. But your point is taken, we will make sure that we let investors know all the things that we're doing in our business. Followed up by a question: will I buy some more shares in the future? Well, I've always bought lots of lots of shares, and we bought some shares towards the end of last year. So we will continue as myself as an individual and as our family to back our business. Thank you.

Okay. So next question is, the share price is really struggling right now. What can we expect in terms of the current year trading in terms of net profits and the share price earnings? To be fair, the share price is disappointing for all of us at the moment. But I think there's a challenge that the market is not particularly up in construction at the moment. There's a lot of negative updates from the large construction companies, house builders and so on. We're more in the RMI market, obviously, obviously, our share price is disappointing. We can't talk too much about why our profits are going to be our earnings this year because that would be a forecast. But as we said in the presentation, we're doing the right things we feel in terms of new branches. We're doing the right things in terms of our M&A strategy where we're very pragmatic, but very cautious in terms of what we invest in. And also we're doing the right things in terms of the business. We're trying to make ourselves more efficient in terms of tight cost control, doing things more efficiently in terms of systems and IT. So we're doing all the things that we can control in our opinion. Question from [indiscernible] . How you decide where to make new branch openings, how quickly do they become cash flow positive? Are any established sites cash flow negative? Those are good questions.

So how do we decide to make new branch openings is very much around expanding our geographical footprint on a strategic basis. So we have been a business that's predominantly come out of London and the home counties. And we then strategically expand that network. Network expansion is a result of us having a list of towns where we would like to be alongside knowing where there are opportunities. So if you take Bicester, Bicester is very close to our Eylesford site. And complements the Eylesford site alongside our Beccles site. So it gives us a natural extension in the Oxfordshire area. If you look at Bury St Edmunds, we already had a site in Sudbury. Bury St Edmund is about 15 miles away from Sudbury. So now those 2 create -- it's a starting point of creating a network in East Anglia and so on and so forth. In terms of the cash flow positive, our breakeven point and then contribution would be anywhere between 18 and 24 months depending on the cost structure of that site. And to answer your question, are there sites that are cash flow negative? There will always be sites where for a variety of reasons, the performance has been impacted. Lately, what we're seeing more of is either rent increases or a combination of rent and rates -- and when we have an opportunity to exit those sites or to renegotiate, we will naturally take that opportunity to do so to make sure that the impact is limited to our overall results.

Thank you. The next question next question from is [indiscernible] when your revenue growth is not leading to profit, with another statutory loss reported. At what revenue level do you start to generate statutory profit? I think the answer to that one is more in line with difference between our adjusted results and our statutory numbers, largely due to impairments of our branch network. So this is a consequence of IFRS 16 where a lot of businesses, particularly in the retail sector or the customer-facing sector suffering from the way the accounting profession has moved over the last 10 years. So we've taken branch impairments of about GBP 2.7 million in 2025. Our larger competitor, Travis Perkins took branch of GBP 64 million. So it's an issue across the sector really. In terms of what revenue level do we start to generate statutory profits, we've said for quite some time that we think volumes are more than 20% down from where they were in May 2019. 20% of our current revenue is nearly GBP 100 million. So you can see how much our underlying has come off based on volumes. And so we think there's a huge amount of operational leverage as we said in the presentation, once that RMI market starts to improve and once those volumes start to return. Michael J asks that, there's a disparity between the market capitalization and the net assets. Why does the market seem to dislike the numbers? This is a 50% discount to net assets. I'm hoping to see a recovery, but comment welcome.

I can't speak for the market. The only thing I can say is when you look at the peer group, the peer group is marked down equally. So if you were the CEO of some of our peer group competitors or businesses, they would equally be disappointed with where their share price is trading against their either net asset value or their embedded valuation. We believe it is a market sentiment aspect. Stuart has clearly mentioned that. We also believe, in particular, in our case, the fact that there is a majority control may have something to do with how the market sees. But our job is to see through the near term or the short term. We didn't list our business for a short-term gain. We listed our business because it is a long-term investment. It is of course, linked to the U.K. economy and to the housing sector in the U.K. economy, which in the long run will always come through or medium to long run will always. I don't think any of us have anticipated the level of geopolitical impact that has had on the U.K. and in particular, in our sector. So we do expect a recovery in due course.

And then next question is, is there a potential for further acquisitions and expansion plans for Scotland or Wales?

There's always potential for further acquisitions, and we are inundated with opportunities on a constant basis. But at the moment, a lot of these opportunities because the market is tough and those businesses are finding it very tough. So what we've decided to do is to be extremely selective in doing so because right now, whilst the market is tough and we expect there to be a recovery, we would be forgiven for overpaying. And in an uncertain market, it's also difficult, as you can see from our share price, to find what is the real true value of a business. But that doesn't stop us from evaluating multiple opportunities on a daily basis. In terms of Wales and Scotland, these are geographies that are strong. I'd say Wales is very well served. Scotland, there is possibly an opportunity for us, but we haven't really exhausted it in terms of geographical expansion in merchanting in particular, the adjacencies to where we currently trade. Now that said, we do have representation in our Plumbing and Heating business in Scotland, where we had traditionally only one outlet in Glasgow, and we opened another one in Edinburgh. And when the time is right, we'd certainly look to expand in Scotland for sure. So it's definitely an area on our radar.

Okay, it's just a follow-up question. [indiscernible] asking why we can't give profit guidance. I think I can refer you to our brokers' reports. And certainly, you'll see their forecast for the next 2 or 3 years. Our house brokers of Berenberg and Cavendish and Stifel also Cenkos us as well. So they've put out notes this morning that you may want to be referred to. And James has asked are we looking to reduce net debt more this year from GBP 13.4 million, -- not particularly. We -- I think we probably surprised ourselves by how well it went into the last quarter of last year. We're obviously looking to get the right balance between leverage and investing for the future in terms of organic growth initiatives. and future M&A. So we'll be looking to keep our leverage in the right ballpark. We're obviously very reasonably conservative and quite pragmatic about making sure the debt is well controlled and not giving any rise to any risk.

I think the last comment was CMO was a great acquisition. You must be excited what this will bring to the company. But yes, we are. We are very excited. And we're really pleased that we have the opportunity to take over CMO and have those wonderful colleagues join our group. And to your point, yes, we are looking forward to a great year. It is going to be challenging, but we've seen through a number of challenging years. So there's no reason why we can't get through and continue to grow in 2026.

Perfect, guys. If I may just jump back in there. Thank you very much indeed for taking the time to address all of those questions that came in from investors this morning. 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 really now just looking to redirect those on the call to provide you their feedback, which I know is particularly important to yourself and to 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 again for joining us today. As we said 2025, we demonstrated resilience in our performance. And in 2026, we have a clear focus on where our priorities are, and we look forward to being able to deliver on our commitments. Thank you.

Perfect, Shanker. That's great. And thank you all 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 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.