Norcros plc (3N1N.F) Q2 FY2026 Earnings Call Transcript & Summary

I think we've got a sensible number on board. So welcome, everybody. We're very pleased to welcome you to today's update webinar from Norcross who have just reported their half year results, which was the period up to the 5th of October. Brief admin from myself. First, the presentation is being recorded. So if you miss anything, you can watch it again and we will publish it in a day or 2. The management are talking to a very full deck of information that is available on the Norcros website. So you can find that there. [Operator Instructions] Right. We're very pleased to be joined again by the CEO, Thomas Willcocks; and the CFO, James Eyre to take you through the results and their outlook. And I am now going to pass over to Thomas.

Good morning, everybody, and especially those who have been following us for a while. It's great to be with you this morning. And on behalf of the Norcros team, a warm welcome to the Norcros Interim Results Presentation. Today, we are presenting a strong set of results with a good first half and continued momentum through the first 2 months of H2. Before I hand over to James, who will take you through the financial highlights, I will give a short overview of our first half. There are really 3 key takeaways. The first is that we have made significant further strategic progress with the closure of our last capital-intensive tile manufacturing business and the acquisition of the materially accretive Fibo business in Norway. Secondly, in the period, we have again grown our market share, our operating profit and our operating margins, and we've generated excellent levels of cash while doing so. In a market that has remained weak, we have again demonstrated our ability to grow and deliver through the economic cycle. And I always encourage you, if you have the deck to have a look at some of the slides in the appendix that show you our 10-year track record. And we do this both organically and inorganically by what -- by following through in a disciplined way what we set out in our strategic plan. And again, you can reference our Capital Markets Day deck for that. Next slide, please, Andy, which should be the highlights slide. So when we have a look at the numbers, just some key takeouts. James will take you through this in more detail. But underlying half year operating profits were up 7.4% to GBP 21.9 million. More encouraging was that our operating margin was up 70 basis points to 11.9%. Revenue growth, particularly in Q2 was stronger. And as I said, this momentum has carried forward into Q3. I've spoken strategically about exiting our tile manufacturing business and the addition of Fibo, which we'll touch on a little later. And James will focus a little bit more on our balance sheet and the excellent cash conversion through the period once again. But for those of you who know us well, it is probably worth pausing at this point and reflecting on the fact that Norcros is now a fundamentally different business, underpinned by high-quality market-leading bathroom product brands, generating consistent market share and margin growth. And we're really pleased with where we've got to and even more excited about the opportunities that sort of lay ahead. And this progress has really been built on outstanding foundations. And I think as we said when we put these results out, it is worth giving you a nod to my 2 predecessors and our older team. So Joe Matthews, who was the first CEO that I worked for and got us off the stock exchange and started this journey. And I think Nick, who was the CEO for a long time, who built an incredibly strong financial and business platform that has allowed us to start accelerating this wonderful business that is Norcros. Next slide please, Andy. Just looking at the U.K. and [ SA ] core regions. Just looking at our 2 core regions. It's worth noting that our U.K. and Irish markets make up around 90% of our group operating profit and our South African region about 10%. In our core U.K. and Irish market, really strong revenue momentum in a weak market. Operating margin up from 13.6% to 14.8% and above our targeted 15% on a trailing 12-month basis. We're particularly pleased with the growth at Grant Westfield on the back of our org growth programs there, i.e., the new products we've developed and launched and also our operational excellence accelerators, which saw the restructuring really of the route to market, simplifying it and also simplifying our plant operations. In South Africa, strong decisive self-help action by the management team there. And you'll remember in South Africa, we have an independent team running that region. We've exited tile manufacturing and are left with a more capital-light business that really is well positioned to move forward as the market does start to recover. Any market recovery in South Africa will be a little more challenging due in the main to high interest rates. Those are taking longer to come down. But again, I will just reference the history of our South African business only 2 or 3 years ago was making GBP 8 million to GBP 9 million. So really encouraged by the work the management team have done in South Africa and well set for the eventual market recovery. Given the strong first half and positive momentum that has carried forward into Q3, we are confident that we will meet our pre-acquisition market expectations and then start materially increasing our earnings on the back of the acquisition of Fibo, which we'll talk to shortly. James will now take you through the financials in a little more detail. Thanks, James.

Thanks, Thomas. And just on to the financials. And to note, the current and prior year income statement results are shown excluding Johnson Tiles, South Africa as this is now presented as a discontinued operation in the interim statement financials. So turning to Slide #6 and some of the financial highlights. Some key takeaways. These results demonstrate how we are making further strategic progress towards our medium-term targets. And I think importantly, the group has improved its operating margin to 11.9% with the U.K. and Ireland region up 140 basis points. I think EPS has increased by 11% to 16.2p. And in turn, the interim dividend is up 0.2p to 3.7p per share. We continue to have a strong balance sheet with excellent cash conversion in the period. And overall, we continue to operate with a disciplined capital allocation in terms of our portfolio development. So just turning to Slide #7 in the deck and the income statement, just some highlights here. H1 revenues totaled GBP 184.3 million. That's 0.8% higher on a constant currency like-for-like basis. And after a slower start to the period, group constant currency revenue was up 2.8% in the last 18 weeks of the period. Underlying operating profit was GBP 21.9 million, ahead of prior year by 7%. And as I mentioned, the operating margin for the group was 0.7% higher at 11.9%. The finance charges were GBP 3.2 million in the period. That's in line with the prior year. And then just to note, acquisition and disposal-related costs include amortization of acquired intangibles of GBP 3.2 million. That was in line with last year, with the remaining circa GBP 2 million of costs relating to the costs on the acquisition of Fibo. So if we now look at the revenue and underlying operating profit bridges, this is now on Slide 8. Thanks, Andy. Starting with the top left, first half total revenues increased by GBP 2.4 million to GBP 184.3 million, with U.K. revenue increasing by GBP 5.9 million in the period and constant currency revenue increasing GBP 2.4 million in South Africa, and that partly reflects a stabilizing macro environment, albeit, as Thomas mentioned, consumer confidence remains a little subdued. So now looking at the underlying operating profit charts on the right. Top right, underlying operating profit was GBP 21.9 million, a really good performance, GBP 1.5 million above the prior year with a strong U.K. performance of GBP 1.9 million increase, partially offset by South Africa. And looking at the bottom right chart, the U.K. return on sales increased from 13.6% to 14.8%, benefiting from strategic delivery and operational efficiency. Underlying operating profit in South Africa was GBP 0.4 million lower in the period at GBP 2.2 million with a return on sales at 4.3%. As mentioned, the overall return on sales for the group was 11.9%. So just moving to Slide #9 very briefly. I think just a couple of key takeaways here. The first one being diluted underlying earnings per share was 16.2p, and that's an increase of 11% on the prior year. And just turning to the dividend, I think in light of the robust first half performance and the strong position of the group and the confidence in the group's prospects, the Board has increased the interim dividend by 0.2p to 3.7p per share. Next slide, please, Andy. So just on to Slide 10 and the cash flow. The group generated an underlying operating cash flow of GBP 24.1 million in the period compared to GBP 14.8 million in the prior year. This represented a conversion rate of 107% of underlying EBITDA. And this is another excellent performance. CapEx was GBP 2.7 million in the first half as we continue to invest in new product development and projects focused on delivering further operational excellence. Just a couple of other numbers to call out there. Proceeds from the sale of the property of GBP 4.5 million relate to cash receipts regarding the former Johnson Tiles U.K. site. And the other potential number I'll call out there is the dividend payment of GBP 6.2 million in the period, and that was in line with the prior year. So just turning to Slide #11 and the balance sheet. Net debt at the end of the period was GBP 30.7 million. And I think importantly, the balance sheet remains strong and supports further delivery of strategic objectives. Leverage remains low and was 0.6x underlying EBITDA at the period end and 1.6x taking into account the Fibo acquisition just shortly after the period end. And then on to the pension scheme and probably best turning to Slide #12, please, Andy. Thank you. Following on from the excellent results of the 2024 actuarial valuation. The scheme is now almost fully funded on that actuarial basis at 99% of technical provisions and shows further progress. And just as a reminder, the company deficit repair contributions of circa GBP 4.5 million per annum will end in June 2027. And then finally, on to Slide 13, just a very brief reminder of our capital allocation framework. You can see there on the left from organic investment, ordinary dividends, complementary acquisitions and then supplementary distributions. And that's all within our investment guardrails of maintaining leverage below 2x, dividend cover of approximately 3x, and this will be alongside our strategic targets of cash conversion in excess of 90% and a ROCE target of 20% in the medium term. Okay, Thomas, back to you.

Thanks. We'll get to the next slide. And maybe just going back and reiterating what James just covered in terms of our targets and our capital allocation. We are really focused on delivering leading shareholder returns. At our Capital Markets Day in May 2024, we set out our strategy and our medium-term targets, the ones that James just spoken to. We've remained really disciplined in our approach and delivered consistent progress against these targets, growing shareholder returns through material appreciation in our share price, which is up from circa 1.85p at the time and a consistent and an increase in dividend flow. Going forward, we'll continue to remain focused and disciplined in terms of our allocation of capital, and we remain confident that we will deliver against our stated medium-term targets. I think this is a really important point around Norcros. We are disciplined. We've got a clear plan and the levels of execution have been really high, and it's a great testament to the quality of our team. If we could then move to Slide 16, please. So on Slide 16, we have a summary of our 4 key strategic drivers. And the key point to take here is that they are all in play and proven. These growth accelerators of the business are not dependent on doing anything other than what we already do well and improving on that. If we look at our portfolio development over the period and since Capital Markets Day, I think we have dealt with and made the tough decisions that we need to and demonstrate that we're not shy to do what's right for our shareholders. On the organic growth side, I will speak through 1 or 2 specific examples, but we talk about growing our organic growth 2% to 3% ahead of the market. I'll show examples of how we do this through our very strong new product development program and also cross-selling, including an update on our entry into complete bathrooms at VADO. On the operational excellence side, we made excellent progress on the projects at Grant Westfield and VADO that we presented last time out, which has really been about leveraging our scale to drive our growth more efficiently and really pleased with the results there. And you can see that in the underlying margins in the U.K. and Ireland. On the ESG side, we will deliver on our verified 2028 SBTi carbon reduction targets ahead of plan. And just to make it absolutely clear, we see this as a really strategically compelling part of what we do. It is winning our share both in RMI and new build, and we'll continue to grow share on the back of what we are doing there. And then really pleasingly was that every one of our business units achieved Great Place to Work accreditation, which just talks to the cohesive and joined up thinking and culture at Norcros. So really pleased with that. We can click to the next slide, and we'll start having a look at an example of each. On the portfolio development side, we've spoken about closing the Johnson tiles operation in South Africa, and that's been expertly managed and handled by our team in South Africa, and that follows the exit of tile manufacturing and the sale of tile manufacturing in the U.K. and Ireland. We're really excited now as we increasingly move on to the front foot in terms of driving growth and the quality of our portfolio. And the acquisition of Fibo just after the period end is a meaningful next step. Change to the next slide, please. So Slide 18 really takes us back to our Capital Markets Day in May 2024, where we set out our target themes for M&A growth. And you'll see a consistent theme. We will always go back to our plan and report back on how we're doing. Fibo is the leading panel business in Scandinavia and ticks our 3 key themes at the top of this slide and especially boxes 2 and 3. But let's start with the first one. I didn't pop out and turn that green, and that's the filling gaps in the U.K. What is important to note is we have a Grant Westfield panel business in the U.K., and we bought a Fibo business that has around 30% of its revenue in the U.K. What we see with the 2 businesses is that we have really good channel overlap, very little cannibalization. And we believe that the strength that these 2 brands give us in the fastest growing part of the bathroom is really, really good in terms of our long-term prospects, both in the U.K. and just across the channel in Northern Europe. In terms of sustainable products, panels are the future, both in terms of being easy to use and their very strong sustainability credentials, and they are rapidly taking share from traditional wall coverings like tiles. And then the third part, in terms of driving growth into adjacent geographic markets, you could see that we highlighted back then that Europe and the Gulf were key focus areas for us and Fibo really ticks that box neatly. And the nuance in terms of having Fibo ticking that box is they have a presence in the U.K. and a presence in Europe, and it's really helpful for us as a wider business to have a management team of the gravitas with the understanding on both sides of the channel. The next slide, please. Looking at Fibo itself, which is based in Norway. Key takeaways include that Fibo is the regional market leader in this fast-growing modern and sustainable product segment. Looking at the graphs as well, Fibo really gives a strong geographic balance between the U.K. and Europe. Around 46% of their revenue comes from Norway, around 30% from the U.K. and the rest being in Europe and wider exports, including as far away as New Zealand. Fibo has also helped establish a beachhead for Norcros in terms of being able to, in time, start to consolidate the Northern European bathroom market in the same way as we have in the U.K. and Ireland, and we have the team and the channels to do that. We would do that really sensibly. I think you know us well when we bring an acquisition in, we spent a good amount of time settling that acquisition down, settling the team down after what has been a protected process, including working our way through the CMA. So where we are at Norcros now, we've got a strong presence in Northern Europe, strong presence in the U.K., and we've certainly got a market-leading position in panels across both geographies. So in summary, this is a really strategically compelling acquisition. It creates a position of scale in an attractive high-growth panel segment that we understand. You can see looking at the 2 maps, the clear overlap in the core and secondary markets. And the exciting thing is there's a whole lot more to go, and we'll do this in a targeted and deliberate manner. As I referenced earlier, the acquisition creates a Scandinavian and Central European platform with the same consolidation road map as we followed in the U.K. and Ireland. And those Northern European markets remain large and fragmented with lots of privately owned businesses. So really well positioned for Norcros to move forward. James, do you want to just take us through the next slide?

Thanks, Thomas. I guess the point to take away from the Fibo acquisition, it was done on an all-debt basis. It's a meaningful transaction size for us, but it did mean we didn't have to raise equity. And therefore, in terms of earnings enhancement, it moved the needle in terms of first full year EPS accretion. So overall, very pleased with the structure of the transaction. And we completed on the 13th of October and early integration is going well and lots of opportunity.

Thanks, James. So moving on to organic growth on Slide 22. This is actually a key part of our strategy. And I think I said this most times, I talked to you guys is that if you really want to check on the health of a business, look at the core like-for-like and organic business. We've got 2 key drivers in Norcros for organic growth, and that's new product developments and our ability to cross-sell. Having a look at our product vitality, it sits anywhere between 22% and 27%, which means that of our sales in terms of products launched in the last 3 years, they make up around 25% of our total revenue. We have a strong pipeline. And what I'm going to talk about today in a little bit more detail is the work that's been done at VADO. The last time we spoke to the market, we launched a product range called Cameo, which covered the full bathroom. That product range has done extremely well. We've launched a further 3 ranges. So we now have 4 ranges out there. These new ranges are helping us take share with key new account wins in businesses and partners like Wickes and C.P. Hart. We have another 4 ranges in development and that we will be able to launch over the next 6 to 12 months. And I think what's key here is that our really strong in-house design capabilities help us to get to market quickly to test things properly, and they really drive what has been a long and proud history in new product development. Just a reminder that this launch into sanitaryware and bathrooms, full bathroom furniture opens up a segment worth around GBP 800 million in the U.K. alone, and we'll update you on further progress in the year ahead. If we go to operational excellence. I think the key thing across our 4 strategic pillars is they are all joined up. They are not separate. And the work that we did in our operational excellence side, especially at VADO, where we consolidated our warehouses into a single modern warehouse was not only did we gain service and efficiency advantages, but it provided the platform for this complete bathroom project and then as VADO transforms from being a tap to a bathroom business. So really excited that the teams and departments work in a joined up way. And that's why we're able to, in a fairly predictable and steady way, make the progress we do regardless of the market. At Grant Westfield, the consolidation of that network did 3 things. It improved our health and safety, it created space in the plant, allowing for better flow of people and equipment and stock. The space also created space for new product capabilities, the launch of really, really strong ranges like Naturepanel, which are driving growth and taking our range further up the mid-premium scale. So better products, higher prices and just helping our operating margins that way and a significantly improved service offer. So instead of taking 7 to 10 days to move what is a fragile product around, we can now do that in 48 hours when we need to from a single point. So really pleased that what we're doing on the operational side is, in fact, not just delivering efficiencies, but driving organic growth in the business. So I'm really pleased with what the team have done there. On the ESG side, for all the politics around ESG and specifically things like sustainability, for Norcros doing the right common sense things is driving share and margin gains. And as a common denominator, if you think about it, you look at all the best-performing businesses in the building products sector, and I'm thinking of companies like Volution and Genuit, there's a common underpin. And it's a recognition that sustainable products are not only strategically compelling, but actually move the business forward ahead of a lot of other businesses. So we will continue to do this. As mentioned earlier, we will deliver on our 2028 SBTi targets well ahead of plan. We've already secured 22% of the 33% reduction in our Scope 1 and 2 emissions. Our sustainable products are driving really strong share growth in RMI and increasingly in new build. And it's important to note there that given our scale and our size, we are the largest branded bathrooms business in the U.K. We are able to not only provide a powerful choice in terms of our sustainable product range, but also the data that sits behind that. So we're able to partner both with our retail and RMI customers, but also on the new build side, and we have leading positions in both. So that is important to note. We also launched this year our first separate sustainability report covering in plain speak, our authentic and sensible approach to giving our customers and consumers a powerful choice to really put in more than they take out. And if you think about it, if you can do something that works better and has less impact, forget the politics, it's just common and commercial sense to do so. So this will continue to underpin how we grow our business organically. The key to our business is our people. We run a decentralized model where we sometimes work together and sometimes we don't. And it's really made up of really strong and brilliant people at the rock face with every one of our businesses having their own design teams with very strong customer service centers. And these are the people that have not only participated in but inspired the vision of the business that we are increasingly becoming and help make Norcros a really great place to work while doing this. So looking ahead, if we can get to Slide 26. We are on track as we continue to develop the scale based on the plan that we published at Capital Markets Day. This has been done with discipline and significant strategic implementation. And Norcros is now, as I said earlier, a fundamentally different business. Our focus on becoming a capital-light design-led bathroom products business, which has included taking some tough decisions, has seen Norcros evolve into the high-quality businesses today with market-leading branded products and positioned in the core and more resilient mid-premium noncommoditized part of the market, we are generating strong and growing shareholder returns. Looking ahead, we're not reliant on the market to grow and progress, although this will clearly help. If you look at our H1, H2 split, it's 49-51. And then as we said, trading in H1 and particularly Q2 was strong and the last 3 months, the end of October has seen this trend continue. So we continue to make really positive and sustained progress in markets that remain large and fragmented, and we have a proven, differentiated winning model. And as stated in our trading update, we are confident about the outlook in the year ahead. So thank you very much for dialing in, and we are open for questions.

Great. Thank you, gentlemen. A very thorough run through what has been a very busy but successful period. So lots of questions already in. I would encourage people who want to add any more to put that through the button now. Let's start with Fibo, which quoting the question looks a fantastic deal for you. I'm sure you're not going to argue with that. But could you go into a little more detail about what the next steps you are going to make as regards launching other Norcros products into their markets and their client base outside the U.K. and whether that would involve significant additional investment by yourselves in sales teams or new operating bases. And also give a little bit of insight as what the time scale might be for that to start paying back that investment?

Yes. I think as I said earlier in the presentation, the first thing we do when we bring a business in, and you can look at MERLYN, you can look at Grant Westfield to settle the teams down, make sure that they sort of recover from the sales process, get back to the day jobs per se. And that's what we're doing. [ Anders ] and his team have been traveling around some of our businesses. I have personally been across and spoken to their full team in Norway and as well as in the U.K. So we're getting to know each other. You kind of live in the house for a little bit before you start knocking walls out. But strategically, for us, looking at the Fibo acquisition, providing a platform for further growth, the first way to drive that growth is the same way as we do here, and that is organically. The Fibo team understand the routes to market, have very strong positions in those routes to market across a number of countries in Northern Europe. What we would need to do is make sure that our products are right and correct for those markets. You have different standards. We would do that with our really strong design and sourcing capabilities and then slowly start to introduce them. And by way of example, with Grant Westfield, we didn't do any cross-selling for close to a year. And once they were settled, we got them into Wickes, we got them into Topps. We've got them into Screwfix and a number of others since then. And we will follow exactly the same way with this. So I wouldn't expect any material cross-selling in the next 6 to 12 months. And when we do on an organic basis, we would not need a whole lot of extra resourcing, and that's the beauty of the Norcros model. What I would just also add, though, is we would certainly be looking in time if it made sense to make the right acquisitions to speed up the consolidation and the roll-up of that market exactly as we've done in the U.K. We can do it organically or inorganically. So -- but first 6 months settle down and make sure we continue the momentum that we see in Fibo.

Great. Very thorough. And another follow-up on Fibo. Norcros has done very well out of its acquisitions by making sure that there's a strong cultural fit. The question is, historically or currently, how much has Fibo's management embraced sustainability? And is that a shared ambition with yourself?

It really is. So overall, culturally, we talk about our values or we call them keys here, and you have a look at this. The language is sometimes different, but the alignment is strong. And it's a key part of our due diligence process. We have a very small center, 16 people, 2 people working full time on acquisitions. And one of the key things we look for is cultural alignment and then obviously, the strategic alignment in terms of sustainable products. So I'm really pleased with that in both instances. And I just think, as usual, when we put these kind of businesses together as part of wider Norcros, we can just do more. But Fibo underlying the product is a sustainable product and is the future of bathroom coverings, especially on the wall. So we're really pleased. And I think we've ticked off on the cultural piece and the sustainability piece.

Good to hear. And following on from the greater Norcros. You have mentioned VADO's successful pivot into full range and new product categories. Can you give us an indication what proportion of those sales now comes from products other than Topps?

Yes. It's around 5%. So it's obviously very early days. We launched a single range called Cameo, ran that for a full year. That did north of GBP 1 million in its first year. We then launched Safari in a subsequent 2. In terms of that maturing, I would say it will take around, as I say, another 6 to 12 months to get a minimum critical mass in terms of covering all of the styles of the bathroom. And then we should see good steady progress on from there. But I think the confidence you've seen from people like Wickes and C.P. Hart are taking this range in shows you that we've done a good job. We continue to do a good job. And I think this will be a key driver, a key organic growth driver for the years to come. So definitely, at year-end, we will report back on our progress in full bathrooms. But early doors, we've launched one full range, and we've just added 3 more.

Great. Very impressive. James, maybe one for you. Across the group, cost control has been effective. Do you think that most of the heavy lifting has already been done there and therefore, material gains are unlikely to be recurring? And specifically looking at South Africa, where there seems to be more dependence on the macro factors of consumer demand and economic recovery. Are there any further cost actions that you might be able to take there?

I'll probably take the first part and then maybe Thomas could take the second part. I think firstly, we probably wouldn't necessarily call them cost controls. What we look at them as in terms of operational efficiencies, where can we invest and drive the customer service part of our business and do things more efficiently. As a consequence of that, hopefully, yes, the numbers should improve. But we start from a point of how can we make the customer service part better and improved. Now in terms of the heavy lifting, yes, we've done some heavy lift in terms of the depot consolidation and maybe looking at working together with Maersk, consolidating freight in some ways. But I think, yes, there's more to do. Is it going to be one big bang and then we're completely done everything we can. I don't think so. It's going to be incremental. It's going to be sensible as and when leases come up, for example. But is there more to go? Yes, absolutely.

Just the second part, Andy, sorry, I just -- I lost the second half of that question.

Yes. Second half, I think it was more looking at South Africa and whether the profit recovery is more down to macro factors, consumer demand and economic recovery, and therefore, there's not much you can do internally to drive that.

No, I think it's a good point. I think with the closure of Johnson Tiles, we have our 3 businesses at TAL, which is the market leading adhesive business. But the rest of our business is really a big tile and bathroom retailer and a small merchanting business. And there are 2 key costs, obviously, lease costs and people. They're not that people intensive. So the business gearing is really important. And I think if you go back and look at when Norcros was making GBP 8 million to GBP 9 million versus where it is now. The biggest difference would be on that retail side. So as the market does recover, it is really responsive in terms of the profitability and the operating margins. The team have done a cracking job managing their way through what has been, as you know, a hugely challenging time with the energy crisis specifically. But the businesses have spent time tidying up their retail disciplines, tidying up their working capital controls. And also, we've just this morning done a soft launch of our first new generation lifestyle store down in Cape Town, which I'm sure we might post some pictures of on LinkedIn if anybody wants to have a look. But the business is really well positioned, really well managed. I would just again say interest rates remain high and our South African business is a little bit more new build heavy than the U.K. business. So we need that momentum to kick off. And as I said last year, the best time to measure that is around March. After our [ building ] holiday, we would start getting a feel for how housebuilding is going. Some early encouraging signs, but there's not going to be a V recovery here. It will be slow and steady.

Yes. So I think you've just answered the affiliated question, which is where Norcros has a long record of making successful investments. But would it be fair to say the primary focus at the moment is on increasing products and penetration of European and Gulf markets, which I think you covered in that answer and also during the presentation. That's where the opportunity lies at the moment. Right. A question on M&A, which is given that a number of your markets are displaying quite soft underlying conditions. Do you think that potential M&A prices or vendor expectations have adjusted accordingly over the last 6 months?

I let James pick that up. He used to head up our M&A team. So he's going to give you a much better answer than me.

Yes, it's a really good question. I think potentially, yes, they have softened somewhat. I think maybe some entrepreneurs and owners out there are a little tired post anything from Brexit, pandemic, Ukraine, supply chain crises, all the rest of it. I think maybe there's a few potential sellers out there who would potentially accept a lower multiple. Having said that, I think from our perspective, we continue to talk to owners and entrepreneurs with a view to buying in 1 years' time, 2 years' time, 3 years' time, cultivating those relationships to make sure that we will continue to have a full and well-developed M&A pipeline. I think we're seen as a good home for businesses. I think we've proven that over the years. We're not here to take advantage of certain market conditions or anything like that. We want to work with those businesses and vendors and bring them in to the Norcros portfolio. So hopefully, that gives you a little bit of a flavor of how we think about things from an M&A point of view.

Yes, makes considerable sense. Also, whilst you're onto it, we have a question about pensions. Congratulations on diminishing the perceived pension problem, which has been associated with Norcros for many years. The question is, what is the end game for this super mature pension fund? Can it be just outsourced and taken off the plc books at some point in the future?

Yes, really good question. So what we continue to do in the background is make sure we do all the admin exercises on the pension book to ensure that when we do go and get a quote from an insurance company about a potential buyout, that is the most competitive quote we can get, having taken away as much uncertainty as possible. It will -- hopefully, that will happen during the back end of 2026. And then it'll be a call on capital for the Board and the company. Would it be an appropriate use of capital to go down a buyout route should the company no longer be funding deficit recovery contributions and should the asset base be largely risk-free. Well, we'll have to wait and see and depend what that capital call is. If it was GBP 20 million, it might not be an appropriate use of capital. If it was GBP 5 million or around GBP 5 million, it might be something worth considering. But the key part in the next 12 months is to finish what we're calling the admin clear-up exercises, particularly GMP and equalization is a big one that's going to round out in the next 6 to 9 months, and that will enable us to take the next stage, which is a competitive insurance market quote.

Again, very sensible. And another question relating to good in-house management. Can you elaborate how the group protects itself against bad debt risk. Does each individual group company manage its own risk profile? Or is there an additional group risk overlay?

We manage this via a captive insurer. So U.K. bad debt risk is extremely low as long as we keep within the credit insurer limits, which we do. So a very low risk.

Great. I think we're on to the final question, a timely one. Do you -- this is about the U.K. budget, by the way. So to you, inevitable question, but at this early stage, did you perceive any damage or indeed benefit from the changes that were announced last week?

I think if you have a look at our -- first have a look at our Norcros business and look at our 10-year record, I think we've shown that we operate through the cycle through different budget announcements and different market shocks and continue to make progress. Nothing has jumped out at us in terms of the budget for us. I think what business really needs and wants is a clear joined-up plan, joined up thinking from the government and take all their best intentions and just make sure they tie up and then just deliver on 1 or 2 at a time, like any good business might need to. We need less noise and a little bit more doing without getting into a big political piece. But do I think that we're going to build more houses going forward? I do. I think the housebuilders are prime. It's been difficult for them. But we just need to stop talking ourselves into a hole. There's a lot of good things happening in the U.K. And I think a bit of a change in sentiment and looking a bit more forward at what's right than continually looking at our feet is going to be hugely helpful.

Well, that's great. So just to round up, remind viewers that the deck and a lot of background material associated with it is available on the Norcros website. If you think that there's been a lot of progress made in this period and indeed in the last 3 years and want to know what it means to the shares, there is a new equity development research note where we have raised our calculation of financial value by about 1/3 to 3.97p per share. So you might find that interesting. Thank you to the audience for all their questions. You will get a feedback form that the company are very keen to read if you can manage to fill that out. And last, but by no means least, thank you very much, Thomas and James for a very detailed presentation. And we wish you best of luck for further execution of your strategic plans.

Thanks, everybody. Much appreciated. Thank you.

Thanks, Andy.