Marshalls plc ($MSLH)

Good morning, everybody, and welcome to Marshalls' 2025 Full Year Results Presentation. Thank you to everybody in the room for joining us and of course, to those online, too. I'm joined this morning for the presentation by Justin Lockwood, our Chief Financial Officer. So just a quick rundown of the agenda. Before I get into the presentation itself, I will outline my thoughts as a new CEO to Marshalls. I'm then going to give a brief overview of the full year performance before handing over to Justin, who will take us through the group's full year results in more detail. I'll then return and share an update on the progress we are making with our transform and growth strategy. And then I'll wrap up with a view on the outlook before opening the floor to questions. Just a quick reminder for our online participants. You can submit your questions at any time via the chat and we'll read them out in the room before responding. So as a reminder, I've been in the business for over 10 years. And during that time, I have held a number of roles, including that of Chief Operating Officer and more recently, Chief Commercial Officer. I've also been a member of the Board since 2022. Both myself and Justin are integral in the development of our Transform and Growth strategy. And as you will see from today's presentation, we firmly believe that it remains the right strategy for Marshalls. So if we're not changing strategic direction, what are we doing? Well, the message today is one of strategic continuity, but with much sharper execution that will ensure that we deliver on the commitments and the medium-term targets that we set out in November 2024. So looking at the left-hand side of the slide, where are we now? Well, Marshalls is a great business with a diversified portfolio, and that does give us a good degree of resilience in subdued markets. The proposition that we have is genuinely differentiated with unique capabilities that our competition cannot easily replicate. We still have great products, and those hold enviable #1 or #2 positions in the market. And our national network gives us the service and carbon leadership advantages over our competition. And underpinning all of this, we have really talented colleagues with both the capability and the desire to deliver outstanding outcomes. And this certainly shows through with the unrivaled technical and design expertise that we bring to every project. Now these are advantages, real advantages, and these are advantages that our competitors cannot easily replicate. So what are we doing differently? And looking at the right-hand side of the slide, we've already tightened our focus with fewer higher-value activities, both operationally and strategically. We've intensified the pace in which we operate, and we are improving the commercial performance culture up and down our business. And I'm now going to take you through each of these in detail on the next slide. So we're absolutely committed to the medium-term targets, and we believe in the strategy, but we must sharpen up our execution. And as a result, we've been tightening our focus. We're being much more selective about the activities that we undertake. Strategic investments have now been prioritized, and these are guided by customer insight, financial performance and structural and regulatory tailwinds. The people-related activities in 2026 will be directly linked to value creation in the P&L. And we are now more proactive in the management of our product portfolios and new product development to make sure that we keep things simple. We've intensified the pace by building an organization that is focused on delivery. So we've got a flatter structure that will improve accountability throughout the organization and clearer frames of reference for trading will enable agile, more confident decision-making at every level in the business. And this will mean that we can compete more effectively with our regional competitors. We've already seen examples where we are becoming a seamless extension of our customers' businesses, and we're making it easier to deliver value, drive collaboration and reinforce the long-term partnerships that underpin sustainable growth. And finally, we are embedding a performance culture into the business, strengthening our commercial excellence. We now have far better visibility of the commercial levers that drive financial performance, such as pricing architecture, customer and channel profitability and cost to serve management. We've redesigned our incentive schemes to focus on margin performance, and we're ensuring that our cost base remains aligned to our market opportunities. And all of this has been underpinned by a reinvigorated sales and product awareness training. So as we look into 2026, our focus is simple. It's one of delivery, delivery that is evidenced by improved profitability, not just plans, not just intentions, but results that demonstrate progress. So before I hand over to Justin, I'm just going to run through a very brief summary of our performance for 2025 and the progress that we're making against the Transform and Growth strategy. So despite challenging market conditions, the group delivered revenue growth and landscape has shown a clear improving trend throughout the year. In terms of profitability, we've seen growth in roofing products and a solid performance from building products. Landscaping profitability was in line with our expectations and against our plan. And finally, our disciplined approach to working capital throughout the year has delivered a very robust balance sheet. So overall, these results demonstrate early but clear progress with regards to our Transform and Grow strategy. We're stabilizing the group. We're rebuilding growth, and we're improving our financial resilience. And this is all whilst investing in the capabilities that will strengthen our market positions for the long term. This is a solid foundation to build on, and I'm confident that as we continue to execute the strategy with increased pace and greater discipline, we will unlock further value across the group. And with that, I'm going to hand over to Justin, who will take you through the financial detail.

Thank you, Simon, and good morning, everybody. So I'm going to take you through the key financial highlights for the period. I'll then run through the detail of the results at both group level and by our reporting segments and also our cash flow performance. I'll then give you an update on the strength of our balance sheet before closing with a recap on our capital allocation policy. So this first slide sets out the key financial highlights for the period. We're pleased to be able to report a return to revenue growth of 2% to GBP 632 million, and that's after a couple of years of declining revenues. However, operating profit contracted by 15% to GBP 56.4 million, and that was due to a weaker performance by landscaping. Profit before tax and EPS both declined by 16% year-on-year to GBP 43.7 million and 13.4p per share, respectively. And our proposed full year dividend reduced by the same percentage to 6.7p per share, reflecting the application of our dividend policy. And finally, we continued our disciplined approach to cash management. But despite that, we had a modest increase in net debt due to some normalization of working capital and the payment of adjusting items. So I'll now go on to revenue and operating profit at group level. And the chart on the left-hand side of this slide sets out a year-on-year revenue bridge, showing the component parts of the 2% increase in revenue to GBP 632 million. And you can see from the chart that both Building Products and Roofing Products delivered growth in the period, and they both increased by 4%. However, Landscaping Products contracted by 1%. The slide on the right shows a similar bridge for operating profit, and it's clear from that bridge that the main driver of the reduction in profitability was Landscaping Products with relatively small movements across the other reporting segments. Now as usual, the operating profit numbers are stated after adding back adjusting items. And adjusting items in the year totaled GBP 24.4 million. And they comprise the amortization of intangible assets arising on acquisitions, that's GBP 10.3 million, and that's a recurring feature of our P&L account. But in 2025, we also had restructuring costs of GBP 14.1 million. And they were split broadly 50-50 between cash costs and asset impairments. More details on those are set out in the appendix of the deck, if you have interest in that. So I'll now move on to the performance of each of our reporting segments, starting with Landscaping. So as mentioned on the last slide, Landscaping revenues contracted by 1%, and that's against a challenging market backdrop, where sector-wide volumes are still running below historic norms. And against that backdrop, we were pleased to deliver an increase in volume growth of 4%, and that was delivered through improved customer relationships and new trade agreements. However, the benefit of that volume growth was offset by deliberate and targeted price reductions, which reduced revenues by 1% and a shift in product mix, which had a 4% impact on revenues. And the impact of those 3 factors all moderated in the second half of the year. Operating profit contracted by GBP 10.1 million. And as a result, the reported segment was broadly breakeven in 2025. The reduction in profitability was driven through the price investment that I've talked about and the shift in product mix towards lower-margin categories. In addition, we saw cost pressures in the business with pay awards and higher national insurance contributions, and those weren't offset by customer price increases during the period. In addition to that, we saw a significant deterioration in the financial performance of our natural stone processing business, and that resulted in the closure decision in the second half of the year. Those factors, though, were partially offset by the benefit of improved volumes and the early benefits of our restructuring programs. So we responded decisively to that deterioration in profitability in this business and identified GBP 11 million worth of cost savings, which we expect to be fully delivered by the end of 2026. And indeed, GBP 3 million of those was delivered in 2025. And a little later in the presentation, Simon is going to take you through the component parts of how we expect to rebuild margins in this business. And we believe that the decisions that we've taken in 2025 will result in a more flexible and agile business that will underpin a significant improvement in profitability in 2026. So now moving on to Building Products, where we delivered revenue growth of 4%, and that reflected good growth in both Water Management and our Mortars business units, partially offset by lower revenues in Bricks. In our Water Management business, the growth was driven through both our core residential market and the wider infrastructure markets, supported by improved stock availability and good customer service levels. Our Mortars business benefited from its strong service proposition and relatively modest build rates across housing developments that favors our ready-to-use product. However, in bricks, we chose to focus on pricing rather than volumes. And therefore, we saw a reduction in revenues during the period. And we did that in order to protect our gross margins. And in the second half of the year, we saw increased competitive intensity as the rate of housebuilding slowed. Operating profit was 8% lower year-on-year at GBP 13 million, and that reflects improved profitability in our Water Management business from higher volumes and an improved product mix. That was offset by lower profitability in bricks with lower volumes and reduced manufacturing efficiency. In addition, the reporting segment benefited from lower levels of property income compared to recent years, and that reduced profits by about GBP 800,000. So now turning to Roofing Products, which delivered revenue growth of 4%, and that growth was driven through Viridian Solar, where revenues increased by about 1/3 as housebuilders continued to select its products as part of their response to changes in building regulations, which require increased energy efficiency. The rate of growth of Viridian moderated in the second half of the year as we expected, and that's as the comparatives became tougher. However, we were pleased to see sequential growth in 2025 with higher revenues in the second half of the year than the first half. Revenue in Marley Roofing, though declined, and that was due to the tough market backdrop and increased competitive intensity as we saw increased market capacity come on stream during the period, which reduced our sales of concrete roof tiles. Operating profit in this segment increased by 2% to GBP 50.2 million, and that reflects improved profitability in Viridian from higher volumes and its disciplined pricing strategy, but that was partially offset by lower profits in Marley due to lower volumes and weaker manufacturing efficiency, which in itself led to product availability issues for certain product profiles. We've instigated a targeted program of capital expenditure aimed at improving the resilience and efficiency of Marley's concrete roof tile lines, and that will remain a key area of focus in 2026. So now moving on. This slide sets out the profit and loss account from operating profit through to earnings. And as mentioned earlier, operating profit reduced by 15% to GBP 56.4 million. Finance costs were GBP 1.8 million lower year-on-year due to lower base rates and the benefit of a pension credit. So as a result of that, profit before tax contracted by 16% to GBP 43.7 million. Our effective tax rate was 22%, and that's unchanged year-on-year, and it's lower than the headline rate of corporation tax in the U.K. because of the patent box arrangement we have in place. So taking all that together, earnings per share reduced by 16% to 13.4p due to the weaker operational performance. Turning now to cash flow and net debt. And the chart on the right-hand side of this slide sets out the component parts of our movement in net debt during the period and starting from the left-hand side with EBITDA at GBP 85 million. We've continued our disciplined approach to working capital management and delivered cash conversion of 88%. However, despite that, we still had a working capital cash outflow of GBP 12.5 million. We consumed around GBP 25 million of cash in interest payments and taxation, and that was higher year-on-year due to normalization of the timing of interest payments and arrangement fees associated with the new syndicated bank facility that was put in place in November 2025. Capital expenditure of GBP 15.7 million remains targeted and tightly controlled, but it did increase year-on-year by about GBP 8.5 million. And that reflects increased CapEx on Marley's concrete tile lines, investment in Viridian's office space and warehousing facility, increased investment to increase capacity in Water Management, and we also benefited from lower levels of proceeds from site disposals than last year. Adjusting items paid was GBP 10.9 million, and the most significant item of that was the final Viridian Solar contingent consideration payment of GBP 6.6 million, and the balance was restructuring cash costs. So overall, net debt increased by GBP 4 million to GBP 137.9 million. So I'll now move on to focus on the balance sheet and our capital discipline. And this slide sets out a range of metrics, which look at working capital management, returns and balance sheet strength. And you can see from the table on the right-hand side that debtor days and creditor days both improved year-on-year by day and that average inventory turn was unchanged at 2.8x. Return on capital employed reduced to 7%, and that reflects the weaker operational performance. However, we continue to target to rebuild that to 15% on the back of delivering our Transform and Grow strategy and seeing a normalization of market volumes. Our balance sheet continues to be robust, although leverage increased a touch to 1.8x. And we've got a lot of headroom against our new syndicated bank facility. And at the year-end, that was GBP 125 million. And that bank facility, along with the cash-generative nature of our business provides the capital that we need in order to execute our growth plan. And finally, moving on to our capital allocation policy, which remains unchanged. Our strategic plan requires us to invest between GBP 20 million and GBP 30 million a year. And in 2026, we expect capital expenditure to be at the lower end of that range. And a couple of slides ago, I talked about the slight increase in net debt during the period, where we do expect in 2026 and beyond to return to annual reductions in net debt, reflecting the cash-generative nature of our business. And we continue to target leverage to be in the range of 0.5 to 1.5x EBITDA. And with that, I'll hand back to Simon.

Thank you, Justin. So it's very clear against that tough market backdrop that we've delivered a performance that demonstrates the strength of our broad product portfolio. So I'm now going to turn to the Transform and Growth strategy, where I'm going to give you a brief update on the progress in each of the business units. So as a brief reminder, and many of you will recognize this slide, our Transform and Growth strategy is built around our customers and a common set of capabilities that we absolutely know they value. Our medium-term goals along the bottom are clearly defined and they are built on delivering market outperformance across the business and leveraging the financial strength of the group to deliver sustainable growth. I'm now going to take you through each of the business units in turn. I'll give you a brief overview of the market, the strategic priorities for each and the progress that we are making against those. So first of all, let's have a look at landscaping and a brief market update. In the second half of 2025, we did see a softening in the market. However, overall activities year-on-year were broadly flat. Across the industry, there were no significant changes in overall capacity, although a number of our competitors did scale back their output throughout the year. And just directing you to the top right of the slide and as a reminder of our near-term improvement plan. We've been busy strengthening the leadership team, growing our strategic relationships with customers and simplifying our offer. We've also made significant progress in embedding a commercial excellence program across the business. Now looking at how we're doing against the plan. The team is now rebuilt, and I'm absolutely confident we have that Premier League winning side in place. Multiyear trading agreements are secured and pricing is agreed for 2026. Our customer engagement scores are improving, and they're up by 15 percentage points, and our share of wallet in yard is growing. And in some cases, that is now beyond 85%. And overall, we've gained just over 4% of overall market share during the year. And this progress with our customers has been recognized through multiple supplier awards, most notably Supplier of the Year from 2 of our major partners. The product portfolio has been simplified and our pricing architecture is now aligned to that. And most importantly, we now have a very clear new product development pipeline with launches planned for quarter 2 of this year. And these new products are going to rebalance the good, better and best ranges, and that will help us to defend against the competition where customers have previously been migrating. And all of this is underpinned by an improved commercial capability, driving greater value, and this has certainly been evidenced with an improvement in gross margin in H2 of 2025. And let's not forget, we will deliver GBP 11 million worth of cost savings in 2026, and this will underpin and improve our profitability through '26. So these results demonstrate clear progress and they certainly strengthen our competitive position. And alongside our nationwide network, we firmly believe that we're in a great position to capture value as the demand recovers. So I'm now going to talk you through the building blocks for margin recovery in the Landscape Products business. So I'm absolutely confident we will rebuild the landscape business and deliver operating margins of at least 12%. We've achieved this before, and the foundations are now in place. So I firmly believe we can do it again. Starting on the bottom left of the slide, 2025 has very much been a reset year, one where we focused on rebuilding the foundations needed for sustainable, profitable growth. And the key to this was having that Premier League winning team in place to allow us to reinvigorate our relationships with customers. We've reset the cost base and already unlocked around GBP 11 million worth of cost reduction, and that's been done through network optimization and overhead removal. And this has given us a much simplified footprint and lower complexity to improve our efficiency and control. Our commercial excellence is now starting to show, and we've introduced clear products and pricing architecture, and this is supported by a robust pipeline of new product development. And all of this is going to enable us to improve our margins through specification-led sales. And service and availability has also improved, and that's helping us to protect mix and retain our customer base. And finally, as demand normalizes, we can deliver incremental volume with our existing footprint. And we've seen this historically, and it does result in significant operational leverage. So in summary, we've rebuilt the foundation. We've reset the cost base, and we have strengthened our commercial capabilities. The plan is very clear. The actions are in motion and the impact is beginning to come through. Now turning to Marley Roofing. In terms of a brief market update, underlying demand has remained broadly stable. However, the competitive dynamic in concrete roof tiles has seen a shift. New capacity was introduced across the market in 2024 and 2025. However, some older assets will be retired this year. So we do expect competitor intensity to persist in 2026. So against this backdrop, we've assessed our strategic priorities that we already have in place, and we're confident that we have the right plan. We will, of course, continue to monitor market dynamics very closely. And as a reminder, and directing you to the top right of the slide, repairs, maintenance and improvement in both social and private markets remains a priority for us as does leveraging our full roof system offer to drive share in private new build housing. And of course, we will continue to focus on boosting availability in categories where supply has held the market back. And if we look at the progress and response against those actions, we're absolutely protecting our margins by continuing to invest in the Marley brand and in our specification and full roof system capability. And from this, we've seen specification-led growth. We've secured pilot deals with small and medium housebuilders for full system offers, and this includes solar. To support in that, we've invested in new software to strengthen lead generation and maximize our margin per tile. And to further support, we've got dedicated capital expenditure plans to improve operational efficiency and quality. And this investment will be dedicated specifically towards those concrete tile lines that are subject to increasing competition. Therefore, our plan is very clear. We will continue to strengthen our heartlands through targeted investment, and we will continue to drive share in adjacent markets. So moving now to Viridian Solar. 2025, industry demand increased significantly, and that was due to the Part L regulations. Alongside this, there were no changes in competitor dynamics, and we maintained our market share throughout the year. The demand for our ArcBox fire protection product continued to grow strongly, and the introduction of the future home standard remains a long-term growth driver for us. In terms of our strategic priorities on the top right, they remain unchanged. We will continue to leverage regulatory tailwinds that drive solar into new build housing. And alongside that, we will continue with new product development and innovation. We'll continue to increase the attachment rate of our ancillary products, and we're going to accelerate the growth of ArcBox in European markets. So we look at the progress against the plan. In 2025, we delivered an outstanding performance and protected our market share, and this is reflected through very, very strong customer service metrics. New product development has been a continued focus for us, and this has resulted in the launch of our most powerful panel to date. We've strengthened our supply chain due diligence, and this is increasingly becoming a deciding factor with regard to contract award. And finally, we've expanded our international sales team with a specific focus on the potential for ArcBox across several European markets. This product has seen significant volume growth over the year and has resulted in over GBP 2 million worth of revenue in 2025. So this year, we will continue to innovate. We're going to launch the Viridian Solar mobile app, and this will give our customers greater control across the installation journey and will further enhance the ease of doing business with Marshalls. So whilst growth in 2026 is expected to moderate, the future remains highly attractive in this area. Regulatory tailwinds will provide leverage and new product development will accelerate growth. So now let's look at Water Management. In 2025, again, demand remained broadly flat, and there was limited growth revenue in regards to AMP8. However, design activity in this area is increasing, and I'll come to that shortly. Finally, we did not see any significant change in competitor dynamics. The priorities on the top right of the slide are unchanged. We will continue to strengthen our position in new build housing, and we will look to access new markets in commercial and infrastructure. And to underpin this, we're going to invest in new capability and capacity. So how are we doing against this? Well, our actions in 2025 delivered really strong results. We scaled up our production on existing assets, and that improved our stock position and indeed our responsiveness. And the result of that was 15% revenue growth. And that was in new housebuilding, and we improved our customer service scores despite overall market flatness. In readiness for major commercial infrastructure growth across water, energy and transport, we've strengthened our engineering and design capability. Now this is going to ensure that we can engage earlier with customers. We can shape project specifications and secure higher value work. And it's already paying off. We've seen design activity in this space increase by around 25%. And finally, to further support, we're evaluating capital investment options at the moment that would enable us to scale up our existing network. The aim is to finalize the business case and indeed the capital expenditure case in the first half of 2026. And this investment will be within the existing capital expenditure numbers that Justin reported on earlier. So in summary, we'll continue to compete in new build housing and surface water markets, and we will reposition to access growth in commercial and infrastructure. And so finally, let's look at our Bricks business. In terms of the market update, 2025 industry demand again remained broadly flat with no recovery in new build housing. At the same time, several of our clay brick manufacturing competitors brought back capacity online, and this was in anticipation of a market upturn that did not materialize. And what this did do was create oversupply in the market and indeed put pressure on pricing. So although activity in this business unit remains subdued, our strategic priorities remain unchanged. That said, our responses in a subdued market have been very selective. We prioritize value over volume, and we focused on price realization, protecting our unit margins rather than cutting prices to chase volume. Now this approach has cost us a little bit of market share, but it has limited the negative impact on the P&L. We reduced marketing activity, and we slowed down new product development to avoid incremental pressure, and we reallocated those resources to areas of the group with stronger near-term returns. We've also paused capital expenditure programs that were allocated to converting lines to brick manufacturer. We will restart those programs once volumes recover to a level that will support the investment case. Now pausing these activities shows real focus on the P&L and cash performances. So in summary, we'll continue to drive market share in new regions and accelerate concrete adoption. New product development will be accelerated as the market picks up and not before, and we will still have the opportunity to increase our capacities to meet demand in the future. So I'm now going to turn to the outlook before opening up for Q&A. So demand has remained consistent with that of quarter 4 of 2025, and the weather is certainly not helping us. And although we don't know the full impact of the Middle East conflict, we are mindful there could be an effect in the future on energy prices in the wider economy. But all of that supports my view that we need sharper execution of our strategy. And as I've outlined before, that means tightening focus, intensifying the pace and improving our performance. And with that, therefore, the outlook for this year has not changed. The fundamentals of the business are solid. Our proposition is unique, and this certainly gives us a competitive advantage. And because of this, we also remain confident in delivering a material uplift in profitability and returns over the medium term. We now have the foundations in place, and we are committed to unlocking the full value and potential in this business. This year will be a year of delivery. And with that, I'll ask Justin to join me for the Q&A.

Adrian Kearsey, Panmure Liberum. Two questions, if I may. On bricks, we've seen in recent years, sort of fairly elevated levels of imports. Are you continuing to see that in terms of a headwind? And then in terms of Building Products, within water, you talked about investing in the business there in regards to infrastructure type projects. Is that about capacity or capability or a bit of both?

Okay. I'll take the brick ones, Adrian. So yes, imports continue. That doesn't change our kind of focus on the plan and our view in terms of what we're facing into. Nothing changes as far as we're concerned with regards to the imports market. In terms of water in terms of investment, it's both capability and capacity. We will need both moving forward. And as I've already said, we're evaluating the proposal at the moment to be able to deliver that. And that investment is both in people and indeed equipment.

Aynsley Lammin from Investec. Just two for me, please. First on Roofing, if you could just provide maybe a bit more color of who's increasing capacity and who intends to increase capacity going forward as well? And are you losing share there? Does it impact the clay roofing products? And I guess on that margin of 26%, what would that kind of be as a normalized margin in the context of what's happening in the wider market? And then just on landscaping and obviously invested in price last year, interested to hear where you are in terms of price increases this year. Do you think you can capture that and still hold the market share? Any thoughts there would be interesting.

Okay. So in terms of roofing, increased capacity, FP McCann have entered into the market, and that's where we're seeing capacity increase in Wienerberger. In terms of what that means, well, clearly, there may well be some pricing pressure in the market, and we need to monitor that closely. As I said in the presentation, it doesn't change our plan and the strategic focus that we've had. We can't control the capacity coming into the marketplace. We're very mindful of protecting our margins. And overall, we're still expecting the Roofing division to be delivering margins of between 20% and 24% in the medium term. So the plan hasn't changed, Aynsley. We reviewed the strategic priorities, and we believe they're the right actions for that area of our business. Landscaping. Remind me what was the second part of the question? Pricing. So pricing has gone into the market. I mean that comes in 2 parts. There's pricing into yards and merchants, and then we've obviously got spot pricing in terms of commercial infrastructure projects. As far as we're concerned, we're on plan with our pricing plans at the moment. Those have gone in. They've been accepted for 2026. We'll clearly monitor market dynamics when it comes to spot pricing.

And the price increase just to cover cost inflation? Or do you want to get a bit more that you lost maybe the last year?

No, this is about inflation.

Chris Millington, Deutsche. First one just about energy. You mentioned Middle East, it's difficult to ignore. Can you just talk about exposure and hedging in that regard? I'll do one at a time actually.

Okay. So across our utilities, we are hedged for the rest of the year at a little over 80% on both electricity and gas. So we're pretty well protected there. The other energy-related cost that we're mindful of is oil prices. And every $10 per barrel increase in oil prices beyond about $80, which is our central planning assumption, costs about GBP 1.2 million. Now clearly, if this becomes a prolonged issue, then we have to look at how we recovered that. But the increase isn't enormous based on the kind of oil prices that we're seeing at the moment.

That's very helpful. Next one is really about the 12% margin in Landscape. And I appreciate it's some way off from where we are at the moment, but would you need to see a full volume recovery back to the levels we saw back in 2019 to attain that? Or can it be attained a little bit lower given the cost savings you've done?

I think in terms of volume recovery, Chris, it's probably around 15% to 20% volume recovery to get that additional operational leverage. Obviously, the 3 building blocks below that are all within our control, and that's what we aim to deliver first and foremost, and then it will be about 15% to 20%.

And then just one on Viridian and kind of the process it goes through with regulation changes and the future home standard coming in. And one, can you just give us a feel of kind of that near-term movement in revenue but also what potential uplift could the future home standard do for the division?

Okay. So yes, clearly, Viridian had a very, very strong performance in 2025. But we think that as we got to the closing months of 2025, pretty much all new homes, we believe, have been built out under the Part L regulations, which means that in 2026, we should see some growth in the first part of the year until you sort of catch up on a monthly basis. And then really, the business becomes more cyclical on the basis of housebuilding rates. The future home standard still hasn't been published. But interestingly, the Welch version of the future home standard was published a few weeks ago. That makes solar a functional requirement as part of new builds in that country. And that would result in a substantial increase in the amount of solar that goes on each home as well as an increase in the number of homes that have solar. So it's difficult to be precise about what that would look like, but it could be up to a doubling of the market. And we don't know what the implementation time lines will look like around it. But hopefully, the future home standard will be published in the coming weeks, and we'll get some clarity around that. And certainly, the noises from the government in last year indicated that we would see solar becoming a functional requirement. So we're optimistic, but until it's published, we can't be definitive.

Ben Varrow, RBC. I'll do two as well. I'll do them one by one, both on landscaping. Just on the competitive landscape there. Last year, there was some talk of overcapacity in some segments. Could you chat through the dynamics there and how you see that evolving?

Yes. I think in terms of the competitor landscape, there was overcapacity. We did see some of our competitors scaling back and indeed switching assets into other areas, predominantly bricks. That still remains. But again, I'll go back to what we've presented. It doesn't change the plan. We're confident in the plan. We're delivering against the plan. The metrics are showing that and we'll continue as is. So there's no change to that competitor dynamic and no change to the plan there.

And also, we're not seeing any incremental capacity being installed across that market, which is perhaps not surprising given the degree of surplus capacity in it.

And next one on landscaping as well. Just on the -- obviously, the price premium versus competition narrowed last year. In your 12% margin assumption, do you need to get back to that level of premium to get to that margin? Or what's your thinking on how that evolves?

The price premium that we've now got is back inside the range that we talked about previously, and that will be maintained as we move forward. So it's about being inside that range while still keeping that premium against the competition. And the reason we command that premium is for the proposition, the service, the offer and everything that goes with it. So we're comfortable with the premium. That premium will be maintained. What we will make sure is that we don't drift away from the pack like we did before.

Clyde Lewis at Peel Hunt. I think I've got three, maybe four. In terms of the Mali CapEx, could you say a little bit more about what you're planning to do there on the concrete lines? That would be sort of helpful to understand whether you're adding capacity or whether it's very much aimed at improving the cost performance of what you're producing.

It's the latter, Clyde. So it's making sure that we are improving existing assets. We need to make sure that we maintain the quality and the efficiencies, both from a customer perspective and margin performance perspective. So it will be on existing lines. And it will be on specific lines that are subject to increasing competition in the marketplace. So that's where we're going to concentrate our efforts.

Sticking with Mary, in terms of the -- I think you said the overall market is sort of flat for roof tiles. And obviously, you've got new build, you've got private RMI and you've got public RMI in there. Was there much difference in terms of those end categories in terms of how they performed? Because obviously, your market share is probably stronger in certain categories and probably new build is probably the most competitive certainly as far as the concrete tile side are concerned.

Yes. We're seeing the most activity is in that new build area. So the new capacity coming on stream is targeting that area, and that is the area that we're monitoring very closely. You're completely right with that, Clyde.

Last one was on Viridian, just in terms of the sort of route to market or routes to market sort of either direct or via the sort of Mali sort of full offering, any real change sort of with regards to sort of that shift in the still very much sort of 2 streams.

Yes. So yes, the growth that we've delivered has come through new housing, and that's principally a direct sell from Viridian, either directly to housebuilders or through electrical wholesalers or through installers. The growth rates of solar in Mali have been more modest than the new build because it doesn't have quite the same regulatory driver behind it.

Last one, I promise. Any change in the competitive environment in those in-roof solar systems? Is it still very much just the 2 of you that are dominating that market?

So there is a new entrant into the market. So if you recall, there are 2 basic products, which is ours, which is an aluminum flashing system, which fits around the panels and the panels and the flashing go together. And then the competitor product is a plastic tray and the roof tiles are attached to the plastic tray. There is a new competitor, which has introduced another plastic tray product, which is, I guess, probably more in direct competition with the other player. And I think it's been launched by a group of ex employees from that -- from the company, which is called GSE. So at this stage, yes, I mean, it's out there in the market, but it's too early to say what impact it may have.

Toby Thorrington from Equity Development. A couple really, I think. First of all, on debt, I think you managed to refi last year on the same terms. Just remind us what your average cost of debt is. Also, if you could clarify within that, I think you mentioned that working capital metrics normalized over the course of the year, but the metrics presented in terms of days appear to be pretty stable. Can you just explain that? That's the first question, please.

Okay. So in terms of the -- just remind me the first question on the terms.

Cost of debt.

Average cost of debt. So the facility at current leverage levels is priced at 180 basis points over SONIA. It does ratchet down when leverage is below 1.5x by 15 basis points. And in terms of the working capital, you may recall last year that we talked about -- actually the -- sorry, when I say last year, back in 2024 that we closed the year with a stronger cash flow performance than we expected. And it's because we've received a gift from one of our customers that paid us twice, and that's reversed in this year. In addition, there was also some timing of interest payments, which were accrued last year and not this year. So the underlying payables position on the credit is unchanged, but it's just some specifics around the year-end numbers.

And just on the medium term, I guess we're a year on from the -- I'm getting on for a year on from the Capital Markets Day, when does the medium term become the point. So 15% margin target, I guess most of the writing analysts in the room have rolled forward to 2028. Are you expecting to hit 15% by 2028?

I think it depends on underlying market.

It's the market tailwind. We need the market to recover. We do need that. But that said, we're confident in the plan that we can control, and we will see incremental improvement as we travel, but we need the market to recover.

It's just we've talked a lot about kind of commercial end markets. We've not really talked about RM&I. I know it's not as big a part for you anymore. But look, just recent trends, any regional stuff, any kind of commentary around price point, whether the premium or more value end of the product range is doing better there? Just a quick overview.

Well, I think things are still subdued as we know. I think interestingly, we did get a number of installers together last week. Over 200 attended an event to look at the new product development pipeline that we've got going. Look, it's subdued, Chris. And again, it's another market backdrop point. But again, premium, we're happy with the premium. We're not looking to kind of squeeze margins or move that price point because we believe we've got the best products. We've got the best offer. We've got the right installer base to be able to deliver that certainly in the domestic end consumer space. So we're happy with the plan. It's just the market backdrop is tough at the moment.

Just one for me. It's Flory O'Donoghue from Davy. Just going back to your comments on the flatter structure. We know what you mean by it, but how does it work in practice?

But look, I've got much more direct line of sight in terms of what's happening on the ground, both commercially and operationally. So I'm heavily invested in that. As I said from the outset, I've been in that space as Chief Operating Officer and Chief Commercial Officer. And I believe that if we're going to continue to get traction and indeed continuing to improve and be all over that transmission into the P&L, I need to be closer to the commercial and operational side of the business. So that's how it translates is that I'm not completely hands-on, but certainly very, very close to what's happening on the ground. Do we have any online questions?

Yes, we do. The first one is from Vishal from Jo Hambro. Given the intensified competitive landscape, economies of scale become more important, would you ever look to release capital from asset sales, reinvest in areas of structural strength?

Well, yes, I think, is the answer to that. We've been doing a little bit of that over the period that Justin can elaborate on.

Yes. So we've been looking at our portfolio of surplus assets and turning them into cash where we can. As I mentioned in my presentation, there was a smaller cash generation in 2025. We continue to focus and look at how we can realize those assets going forward. In terms of the broader portfolio of businesses, we're broadly happy with the portfolio that we have. If there are opportunities to do something which will result in improved shareholder value, we would certainly look at that.

This next one is from Jesper from bank. How do you assess FP McCann's long-term strategic commitment to concrete tiles? Is this a permanent structure shift in competitive intensity? Or do you expect rationalization as older assets are retired elsewhere in the market?

I think from an FP McCann perspective, I would expect -- and I can't comment in terms of what their business plan is, but I would expect that they're in it for the long term. In terms of assets in the roofing channel itself, there's a lot of old equipment out there and some assets through 2025 were retired. We expect more to be retired in 2026. So we think overall, the net effect of that will still be increased capacity in the market by low single-digit percentages. And that's our view at the moment. And as I said in the presentation, we need to continue to monitor what that means for Marley, but our plan doesn't change.

Brilliant. And then last question, has FP McCann's entry cause you to lose any specific customer relationships or contracts? Or is this the impact permanently on pricing rather than volume?

No, we haven't lost any customer relationships. The impact, again, we need to monitor what the overall impact is. It's a competitive market out there and the dynamics are tough in terms of market backdrop. But no relationships have been lost with FP McCann coming into the market, absolutely not.

Brilliant. Thank you. We have no further questions. I'll hand back for some closing remarks.

Okay. I think my closing remarks will be we have a plan. We're confident in the plan, and we're confident in the delivery for 2026. We've got the right team in place to be able to deliver that, and that's what we will do. So thank you for your time. I appreciate all the questions. Thank you.

Thank you.