Norcros plc (NXR) Earnings Call Transcript & Summary

All right. Welcome, everybody. We're just going to let everybody log on. So bear with us for just 30 seconds that everybody's in position right below. All right, that should be most people now. So a very good morning. We're delighted to welcome back the CEO of Norcros, Thomas Willcocks; and the CFO, James Eyre, and they've got a lot to tell us about since they last presented in November last year. In terms of simple admin and using Zoom, I think most of you will be familiar. Please do submit questions via the Q&A button, and we will try and deal with them all after the formal presentation. This presentation is being recorded, so you don't need to take pictures. And indeed, the slide deck and the full video of the Capital Markets event that happened last week is also available on the Norcros website. So without further ado, I shall pass over to Thomas to start the presentation.

Thanks, Andy, and welcome to everybody, and really appreciate your time. Today, James and I will touch on our most recent trading update, which again came in ahead of the market with really, really strong cash generation. So we continue to take market share while generating strong levels of cash. We'll then take you through our recently released new medium-term targets and also walk you through some key slides from our Capital Markets Day. This is in bridge deck that we'll work through today. The full deck is available on our website. Giving some context at the start of this hour, I think it's worth noting that over the last 10 years, we've made significant progress as a group. And most importantly, our strategy of consolidating the bathroom and kitchen markets in the U.K. and South Africa have led to a position where we are now the #1 bathroom supply products business in the U.K. Not only are we the #1 bathroom product supply business, we're also supplying into a very resilient and a lot more profitable mid-premium market segment than we were 10 years ago. This additional scale that we now have is important to us, it allows us to take advantage of demand and cost synergies that a lot of our smaller competitors can't. And as a result of that, we're able to drive organic growth for us than many of our competitors. By the end of the session, you will hopefully have a better appreciation of what set Norcros apart is we are different from many of our competitors. We are not just a traditional building products company. And those differences help us to outperform the market. James, if you could just touch on the trading update, please?

Yes, sure. Thanks, Thomas. Good morning, everybody. Yes, in April, we had our trading update and revenues were in line with market expectations. And -- sorry, EBIT was in line with market expectations, and we'll be delivering our full year results in June this year.

Thanks, James. And if we just move to the next slide, please. So if we have a look at our updated medium-term targets, and we're able to publish these targets, number one, because we're not coming from a standing start. And number two, the kind of scale and increased collaboration that we're able to leverage across the group allows us to do this. We have and we will continue to grow our organic business 2% to 3% above the market. We have set a new operating margin target of 15% over the medium term. And it's quite interesting that post the disposal of our Norcros Adhesives business last year and more recently, our Johnson Tile business, our U.K. business is now very close to this hurdle already. We've always maintained really good cash conversion, and we hold our target at greater than 90%. We have moved our ROCE to it from 15% to 20% and are comfortable we'll be able to do that. And we've added a target in and around science-based carbon emissions and these have been verified, and our first set of targets sit around 2028. They are ambitious. They are in play, and we are well on track to delivering those. We'll just move to the next slide, please. So if we have a look at the business that we currently are, as I've said, we are the U.K.'s #1 bathroom products group. And in that group, we have market-leading barroom and kitchen product brands. The fact that we're market leading, and we are well positioned in the mid-premium market segments means that we are resilient in terms of pricing, we have very, very strong drivers in terms of demand, and that is supported by the third block, which is on the bottom left, which is our exceptional in-house product design and then our customer service. Now, our customer service piece is hugely important both in the RMI segments and also in housebuilders. We were very well invested there. And if you post this or more interested, you jump on to the full video of the Capital Markets Day, there's a segment by John Adams from Barratt, who talks about why Norcros wins in the housebuilders. So although it's been an RMI market, and that is where we are strong, we're well positioned in housebuilders, and we're really in a good position to take advantage of the expected upturn. Our business remains capital light and cash generative. Just as importantly, we need to talk about what we are not and if we could flick slides there, please. When we're looking at why Norcros is different from many of our building products peers, the first thing to note is we're not a distributor. We design and develop our own products and brands, so we don't buy off the shelf. The fact that we do this means we control quality, we control design, and we are also able to generate better margins. We increasingly have moved away from capital intense manufacturing as seen through the disposal of Norcros Adhesives and more recently, Johnson Tiles. We are very much not a heavy side building product supply. And what do we mean by that? We're not into selling commodities like cements and roof trusses. And because of that and because of the positioning of our business, our business model is less cyclical and more resilient, and by implication, we actively avoid economy or low-margin supply into any kind of customers or channels. So I think that is really, really important. James will now take us through our business portfolio and a little bit around our brand positioning. Thanks, James.

Thanks, Thomas. So just on Slide 5, I think the key message here is that we've accelerated the development of the group through acquiring and growing great brands. As you can see, we operate as a balanced group of autonomous divisions and the split of these as shown in the chart on the left. And I think importantly, each division is driven by product and sector specialists. And this specialism is crucial and in particular, helps us to differentiate. Importantly, as well, we collaborate across all our divisions to drive faster growth and efficiency gains. We have a good track record of cross-selling, albeit we are very excited with the significant opportunity to do lots more together. So the key takeaway here is we've got a diversified portfolio that is a great platform for growth. So if you take us to the next slide, please, Andy. So looking at the Slide 6, we have strategically positioned the group in the areas of the market that we believe are most resilient. And firstly, we are not over-indexed to new build. And so if you look at the chart on the left, we note that about 80% of the bathroom products market is driven by RMI. And RMI is more resilient than the new build housing market, which is more cyclical. And our Norcros revenue mirrors this RMI newbuild split, which is approximately 80-20. Secondly, we have consciously focused the business on the mid-premium segments of the market. And looking at the chart on the right, you can see this is approximately 70% of the total market. And this mid-premium sweet spot, we believe, is more resilient to cost of living pressures as consumers in these segments are prepared to pay more for quality products and great customer service. Next slide, please, Andy. So just turning to Slide #7 here and you can see we have a broad route to market across trade, retail and online channel and a significant export business. We have a strong customer list with over 1,000 blue-chip customers. And importantly, we have a great track record of building long-term relationships with our customers across all of our groups, and you can see in the graphic there such as Barratt, Wickes and Howdens. Importantly, we are increasingly chosen because of that strong product design that Thomas mentioned, stock availability and outstanding customer service. And the key takeaway from this slide is the significant breadth and depth of our customer relationships provides great stability and great opportunities for further growth. Thanks, Thomas.

Thanks, James. So in summary, we've got a successful and scalable platform, and we're really well positioned for our next phase of growth, and it will be growth that is ahead of market. We have a very strong track record of growing market share and growing that share in a balanced manner between organic growth and M&A growth. We have market-leading brands. I think Triton, Merlyn, Grant Westfield, they are all market leaders with very, very strong positions in the mid-premium market segments. As James has pointed out, we have diversified products and channels. This makes us a lot more resilient in a lot of businesses and specifically businesses that sell commodity products, which we do not. And we are differentiated by design and customer service, as I pointed out earlier. I think there's something else that's worth noting. We run a decentralized model. And what that model ensures is that we have the very best talent at the rock phase. So again, if you go into the longer version of our CMD video, there are 4 presentations by 4 of our business leaders. And if you look at the quality of those teams, you will understand why we win against some big corporates who just have corporate managers running their businesses. Given our scale and proven model, we are really well positioned to accelerate the growth of the business and the quality of our returns. Thank you. You can click to the next slide. I think you may have gone one too far, but it's the back, forward. Okay. So as we've mentioned earlier, we operate in large and fragmented markets. And today, we're going to be talking about our core addressable market, principally. If you go to the full deck, you will see how we talk about the wider addressable market, which really talks about, firstly, adjacent categories and then careful geographic opportunities that we would look at. But our clear focus is very, very much on our core addressable market. James, I don't know if you want to add anything on this slide?

Yes. I think this is an important slide. I think firstly, when you take our product categories and geographies, we currently operate with a total core addressable market of some GBP 3.5 billion. I think importantly, in the U.K., as you can see on the left, we are the market leader with a share of approximately 15% in our core categories. And in SA, we're #2 in the market with a share of approximately 7%. And I think they're both particularly attractive markets to be in given the shortage of housing and infrastructure to meet growing populations. In the appendix in this deck, which is also online, I think if you then look at the wider product segments, our addressable market increases to GBP 6 billion, and then if you look at the international piece, that increases to over GBP 10 billion, I think the point being, these are large, attractive, fragmented markets, where the business of scale and we're able to take share. Thomas?

Thanks, James. We can move to the next slide. So when we look at the Norcros growth story, we have a great business, and I think that's an important point. We are already generating excellent returns of capital employed and also a strong ROCE. And when we look forward at what we want to do, we don't forget what got us to where we are. So if we're looking at this slide, the things that will remain the same is we will build and entrench ourselves in the mid-premium market segment and our focus remains on bathroom and kitchen products. We have a very strong M&A team that resides in Wilmslow. And that engine will help us to continue driving scale. We will remain focused on design, sourcing and customer service. So again, a capital-light model where we focus on the things we're really good at, which are design and customer service. I touched on the entrepreneurial culture and evolved structure, we will protect that and we'll remain capital-light. What will evolve will actively drive scale using our growth accelerators, both organic and M&A, we will become increasingly capital-light and high growth. We will now lead and we are already leading on design, importantly, sustainability and service. And again, we'll talk later to some of our sustainability credential and where those are going. Given our scale, we are increasingly developing our ops platform. And what that really does, it allows our businesses and our devolved businesses to focus on what they're good at, while we support the areas of the business that we don't need to develop 7 times or 8 times and something like our digital platform would be a good example of that. And we will focus and be SD laser-focused on building our scale and improving our operating margins and our shareholder returns. I think it's important on this slide to note we've spoken about M&A, we've spoken about organic growth. James has spoken about our core geographies and categories. We will be careful as we move out of our core U.K. market. And quite often, when we move out, we don't have to invest anything. We follow customers and existing customers like Howdens into France, for instance. We're able to build up demand without investing any additional inventory or any need to put down any real infrastructure. So that growth allows us to build demand and then follow through with our full-service offering later. Thank you. Click to the next slide. If we look at our strategy, we run an annual -- a very detailed annual Norcros strategy session with our divisions, that is looking at each individual division, the performance and then what we do collectively. And that's important because we are more than the sum of the parts because of the kind of collaboration that we pull together. So looking at our strategy, what we are about is we craft design-led sustainable bathroom and kitchen products. That's what we do, nothing more, very, very focused. We are renowned for design and sustainability. We are developing a leading digitally enabled service. We are all about inclusive and growth-focused culture. So if you've got a model like ours, which is entrepreneurial, you have to keep the very best challenge you can. And the best talent wants to be able to make decisions to operate and contribute, and that's what we focus on. And as we said earlier, we're very focused on scaling up. But while we do that, not sacrificing our market-leading returns, in fact, we are looking those further. We're going to touch in a little bit more detail on our key strategic initiatives, which are M&A, organic growth, operational excellence and then the trait that runs through all of that, which is ESG. James? Can you click the next slide.

Thomas, so just picking up on M&A on Slide 13. Going forward, we will continue to take an active approach to managing and developing our portfolio. And in terms of acquisitions, that means we will focus on consolidating those large and fragmented markets that we spoke about earlier. We will continue to back quality cash-generative businesses with low capital intensity and strong management teams. And I think the overall philosophy is, in our ownership, we will grow these acquisitions faster than if they remained independent. In terms of divestments, if divisions no longer fits our strategy, we will make those divestments and focus on where the opportunities are more significant with stronger operating margins. And this started with the closure of our U.K. leases business in 2023. And you may have seen a week or so ago, we agreed to sell our Johnson Tiles U.K. business also. Just looking to the next slide, please, Andy. So just here on Slide 14, you may have seen something similar in the previous slide, but I think the key message here is that you can see the acquisitions we have completed over the last decade and how they've supported our growth. And we believe we succeed in M&A because of our focused due diligence and focus in terms of integrating these businesses and some of those success factors are there at the bottom of the screen. Thomas, back to you.

Yes, absolutely. We can move to the next slide, please, Andy. A good example of how we grow businesses that we acquire would be Merlyn and more recently, Grant Westfield. But we'll talk to Merlyn today. We acquired this business in 2017, and we've grown the revenue from GBP 30.7 million to GBP 57.5 million. And the real key thing here is jointly with the management team, we still have the same management team in place. From the center, we've helped them invest in people, new product development and other areas of the business. Very importantly, we've introduced them to a much wider range of customers, both in new build and RMI and good examples of that. A great example of that would be Wickes, which is now a GBP 5 million per annum category, and we've built that up over the last 2.5 to 3 years. We've been able to protect the positioning of the Merlyn brand and sell shower enclosures into Screwfix using the Triton brand, and that's a great example of collaboration. It's not transactional. There's no intercompany charges. We just make sure we understand which brands fit where they are and the teams work together to do that. And of course, the Norcros Group financial strength has been a great enabler for them. If you look at the bottom 2 blocks, in 2017, they were doing around GBP 7 million with the housebuilders. If we look forward to 2023, that's GBP 21.4 million of revenue coming from housebuilders and new channels like Wickes that we've introduced into. This is a great example of the impact of acquiring a business, growing that business and while we're growing it, we've protected the operating margins of that business. So we haven't had to sacrifice anything there as we've grown the business, and you can well imagine the positive impact that, that has on the group numbers and the group operating margins as well. So if we can move to the next slide, then please, Andy. So when we look at our M&A and the key themes in our M&A, we'll continue to fill the gaps in the U.K. with a strong focus on furniture and sanitaryware. And again, that would be in the mid-premium space. I'm really pleased to announce that we have recently launched a furniture range in wardrobe able to lean and leverage off our South African business, which already has a full bathroom offer. And we know that we can make really good returns and gain market share in both of those categories. Looking forward, we believe that the assisted living or care or adaptive segment will become increasingly important. We have aging populations in all of our key markets, and there's a real opportunity to drive organic growth in those segments, and we've started that journey. In terms of new capabilities, and it's not entirely new, we have been focusing hard on sustainable products, specifically through Triton showers who lead the strategy, leads with sustainability. They've just won, I think announced that this morning, the King's award in this area and it's well worth jumping on to their website to have a look at what they're doing in and around sustainability. Our Grant Westfield business that was recently acquired has very, very strong sustainability credentials as well. We'll also be looking at digital kitchens and bathrooms of the future will be increasingly digital, and it's hugely important that we accelerate our progress in that area. And then in terms of new geographies, we're not going to do anything silly. As I said earlier, we will look at our neighboring geographies where the markets remain large and fragmented. And in those geographies, we will also look at complementary products. We expect that M&A will make up over half of our revenue growth over the medium term and play a key role, both in terms of our scale, but also the overall quality of our earnings. We're going to click to the next slide then, please. This is a really important slide. Organic growth remains our key growth driver. And what I really want to take you through here is why we are able to grow organically ahead of the market. The first important point to note is we have an outstanding new product development program in all of our businesses. We have very strong in-house design capabilities, and that is both from a technical and an aesthetic perspective. We focus on on-trend quality and sustainable products. And our product vitality rate, that is products that have been launched in the last 36 months, those account for more than 1/4 of our sales. All of our products work with water and energy or a combination of both. So this is an area, and we are well positioned to drive and grow strongly in these key areas of sustainability and the demand in these areas is growing. The second and that links back to the slide James put up is key account management. We developed long-term partnerships with all of the winners, and we carefully select who we do business with and back those winners. And again, I would really encourage you to have a look at the Barratt's video on the slide. Thirdly, cross-selling. This is where we share leads and customers between our businesses, giving you an example with Merlyn, and we'll talk a little bit more about how we've done this with Grant Westfield as well. The final block is customer service, and we invest heavily in this area. Key reason people do business with us is because we are the trusted partner. If you go back to the Barratt's video or you talk to somebody at Wickes, for instance, what they will tell you is that their customers are our customers. And if there's ever an issue, we're all over it, and we make it our problem and we resolve it. So a lot of smaller people and smaller competitors can come in off a slightly better pricing, slightly lower quality. But I think what we have seen over the last 4 or 5 years is when somebody offers you a warrantee or guarantee, you want to be able to lean on it when you need it and a lot of painful lessons have been learned in that regard. So we invest heavily in customer service and our aftersales service specifically is market-leading. So we will click to the next slide, please. When we look at NPD, as I said earlier, strong in-house design, very, very strong and well-developed NPD pipeline. We have seen the recent launch of NV in Triton. We've also seen nature panel come through from Grant Westfield. And as I've mentioned, the [indiscernible] furniture range from VADO. This is just like a drumbeat. It runs through our business. It contributes significantly in terms of our ability to grow ahead of the market and also to grow our operating margins because most of the products we're launching are in that mid-premium space, a strong sustainability credentials and are just driving a better and higher quality business. We collaborate strongly on group ranges, making sure that we match finishes, which is really important. And as I mentioned earlier, our vitality index is north of 25%. The picture on the left-hand side is quite interesting. This is a Pronteau tap, it is a hot water tap, from our Abode kitchen business. We do just below GBP 5 million worth of turnover a year from this product. But this is a fast-growing category. We would see ourselves as the second player, a strong challenger brand to the #1 player in this market. The #1 player has revenues in the U.K. of north of GBP 50 million. We have a product. We have great design. We are well positioned, and we are able to grow now and take share from the market leader because we've got a better product. Our product is rest approved where there isn't. We have excellent design, excellent customer of the sales service. And this is a great example where our NPD will allow us to grow organically without further heavy CapEx investment. So profitable organic market share growth is an actually key driver in our journey to a 15% operating margin across the group. If we can just move to the next slide, please. When we look at organic growth and specifically the cross-selling part of organic growth, this is just a simple example of where we've taken our U.K. businesses and then looked at our top 20 customers along the bottom. And wherever you don't see a dot, that means there's an opportunity for us. And those are the opportunities that we jointly as a management team across all of the divisions and from Wilmslow target, and we selectively target where we go here. Excellent progress has been made here in terms of cross-selling and growth as shown through Merlyn. And if we click to the next slide, this is a slide that came out of the Grant Westfield at Capital Markets. Since Grant Westfield has joined our business, we have introduced them to top tiles and the Grant Westfield range is now rolling out across all the Top 5. We've got them into Screwfix, and we've got them into Wickes. That would normally take 3 or 4 years of really hard work working your way to get yourself listed, but we are trusted by all of these key accounts. So when we bring them in new products, we are able to get our product in and listed in an accelerated manner. So those are the 3 that have recently gone into Grant Westfield, all 3 would be multimillion pound accounts, and we look forward to seeing the growth that has already started to continue to run through here. So really, really strong ability to grow businesses that we bring in into the Norcros family. Thanks very much. I well click to the next one. We're then looking at operational excellence and operational excellence is a broad term, but for our purpose, it's about using the benefits of our scale to drive improved service, efficiency and operating margins. Our scale enables us to access service and cost synergies that are not easily available to our smaller competitors. And in a fragmented market like ours, that is a key competence to have. The compounding effect of higher service levels and lower costs is an important driver in our program to increase our operating margins. So when you compare Norcros to many of our peers, we have critical mass and scale now. We have an outstanding culture of collaboration and learning. We are increasingly driving costs and service synergies. And while we do this, we maintain the strength of this decentralized model that sees the very best talent that we have and that we can attract operating at the rock phase dealing with our suppliers and our customers. Going forward and leveraging off the scale, we will increasingly drive lean operations, further coordination in warehousing and distribution, further coordination and collaboration in supply chain and also very, very importantly on the data side, we don't want to be doing things 7 or 8 times. We across the businesses are collaborating hard to make sure that we collect the best data we can, the most accurate data we can be that from consumer insights, all the way through to market data and are able to leverage the knowledge that comes from that. Thank you. We could click. What I said earlier was that if you take the first 3, which is M&A, organic growth and then operational efficiencies, we have a common thread that runs through them, and that is our ESG. And ESG is driving a competitive advantage for our group. Again, given our scale and size, we're able to do things from be it on a new product development side, be it from entry markets, there are a lot of other smaller people can't. We have an established ESG framework split between 3 key things, that is our people, and again, I think I've explained how important our talent is to us, our products, which really looks at NPD investments and how we develop products, where we get those products from. So we are able to give customers a very, very strong or powerful choice for better living. We're not forcing customers to buy any specific products, but I think it's hugely important. And we have a responsibility to ensure that customers, number one, understand the difference between products and the sustainability credentials they have; and number two, are able to do and make a considered and important choice. And then on the planet side, which is our world, we firmly believe that we should be putting in more than we take out every business that's out there. If they don't have a strong sustainability agenda, they will become irrelevant going forward. So we do this in our business, and we also do this outside of our business very, very important for us. So if we could move to the next slide, please. So an example of this would be at Triton, where we are the market leaders in electric showers. We have a market share north of 50% in this space, and we are growing that market share because of our strong sustainability credentials. If you look at electric showers, they enable both environmental and cost benefits for our consumers. So typically, an electric shower has a cost about 30% less to operate than a traditional boiler feed mixer shower. It uses about 68% less water than a mixer shower and emits around 70% lower CO2 emissions and a mixer shower connected to an A-rated combi boiler. And with our latest products, not only does it do all of those good things, it does not compromise in terms of design or the shower experience. And if we're able to move on to the next slide, please. On the left-hand slide of Slide 24 is our recently launched ENVi Electric shower. It is a fabulous shower available in many different finishes. You no longer have an electric shower box on the wall. That box can go in your roof. It can go in the wall. It can go in your furniture next to the shower. It is very easy to fit. So there's the first new generation behind the wall electric shower. It has an excellent high-tech touchscreen interface, which you can see there with multiple settings for multiple users. The interface nudges you to improve your showering behavior. If you have teenagers, you can actually set the showering tab or at least explain to them what they're doing and for any of you with the young-grown teenagers or young people in the house, you will note that they are a lot more sensitized to sustainability. It is very easy to install and is our first climate partner certified range. So absolutely fabulous product and a key driver behind our King's award, which was announced today. I think the other important thing to note here is electric showers have strong regulatory tailwinds behind them. We all know about the future home standard that's coming into play. We have had all major house builders in our innovation center in Nuneaton, talking to us about how we can help them meet and meet the new standards, and that's really about moving away from boilers. We have some excellent work going on here, and we're really confident that electric showers are going to be a key part of the future, not only in our existing markets, but also in new markets that have not traditionally looked at this as a key driver for future housebuilding. So very, very excited about what ESG is doing for us as a business. We have clear targets. We are well on our way to implementing our targets for 2028. And as I say, by giving our customers a powerful choice for better living, we continue to differentiate ourselves and drive market share growth at higher margins. Thank you. We could click to the next slide. James, if I could hand over to you.

Thanks, Thomas. Just very briefly on this slide, you can see our 10-year track record, which is a very strong track record of delivering growth. I think in the top 2 charts, you can see that organic growth, which has been enhanced by successful acquisitions driving both revenue and improving underlying operating profit. In the bottom left chart, we have consistently delivered a strong return on capital in to note, we will look to improve this further as we focus on those businesses that do have a low capital intensity. And then finally, looking at the chart in the bottom right, we've always been highly focused on cash and consistently delivering high cash conversion, and that will continue going forward. Next slide, please, Andy. So on Slide 26, we moved to our new strategic KPIs and targets, which are built on the 4 strategic pillars that Thomas was just talking about, being M&A, driving faster organic growth, continuing to invest in improving our operational excellence and ongoing focus on the ESG part of our products and business to drive initiatives to drive competitive advantage. And as a consequence of delivering on these, we believe our targets are deliverable over the medium term. And those targets are driving organic growth 2% to 3% above the market, improving our operating margin to 15% to be highly cash generative and continue to deliver over 90% cash conversion and to achieve a ROCE in excess of 20% and to deliver on our 2028 SBTI emission targets. Next slide, please. So just here on Slide 27, you can see the potential to drive organic margin enhancements, improving from 11% in FY '24 to 15%. And I think the key buckets there you can see driving that are, firstly, the disposal of adhesives and then similarly the disposal of Johnson Tiles will increase those operating margins going forward. The second is operational excellence. And Thomas talked to a number of projects that are already underway. Thirdly, we've got the investments in NPD marketing and sales that are focused on growing the higher-margin parts of our business. And finally, markets gradually recover, this will drive efficiencies and improve operational leverage. And overall, we believe there's a clear pathway to improve our operating margin to 15%. So on to the next slide, please, Slide 28. We strongly believe that investing in this growth strategy built on those strategic pillars will deliver better shareholder returns. And we recognize it's important to carefully assess where that capital is deployed. So on this slide, you can see we talk about 3 core areas of capital allocation. Firstly, investments in innovative products, outstanding customer service, efficiency and sustainability projects will drive organic growth and margin progression. Secondly, in M&A and acquisitions will accelerate growth, delivering EPS accretion. And thirdly, for shareholder returns. And as a result, the outcomes can be seen on the right in terms of ROCE, leverage and a progressive dividend policy. Thanks, Thomas. Back to you.

So when we look at Norcros, we have a really compelling investment case. We have clear alignments and goals and really haven't come into our Capital Markets Day or in fact today from a standing start. Our organic growth drivers are all already in play, and we will continue to be supported by a well-developed M&A pipeline that will further accelerate our growth and our drive to increase and improve operating margins. If you could click to the next slide, is Andy. So when you look at our investment case, we really have clear strengths that we play to. As we've pointed out, we've got the scale piece. We are the #1 bathroom supplier in the U.K and #2 in South Africa. We have market-leading brands that are supported by design, lead and sustainable product development strategies. We have the benefits of scale that we've spoken to that drive organic growth ahead of the market and also enable operational excellence opportunities not available to some of our smaller competitors. We have a very resilient model driven through our diversified portfolio and our mid-premium positioning, and we're hugely proud of our proven track record, both from organic growth perspective, our M&A, our financial performance and our disciplined capital allocation. And I think what's hugely important and when you look at why we are different, we've been able to navigate through COVID and through crisis with no issues whatsoever in terms of our operational service levels or our ability to continue taking share in the market. And the fact is that these challenges have in fact been an opportunity for us. So we see a significant opportunity given all of these things to continue accelerating our growth, both organically and through M&A. And also, as James pointed out, there's a clear path to driving our operating margins up to 15%. We can move on to the next slide, please. So as the market leader in design-led sustainable bathroom and kitchen products, we have a successful and scalable platform. We have a significant opportunity to develop and grow. And we have a clear strategy, and it's no different from what we spoke about in November or in fact, that when we set them out in June 2023. Our plan is already in play, it is not coming from a standing start and we believe that our new medium-term target of growing organic growth ahead of 2% to 3%, which we've been doing anyway, getting our operating margins up to 15% and our return on capital employed up to 20% sets us apart from many of our building products, peers and competitors. If you actually look at our financial metrics against many of our published peers and competitors, you will see and understand the quality of the business that Norcros has and has developed. I really trust that you've enjoyed the session today, and I'm going to go to questions shortly, but I hope you have a better understanding and deep understanding of what sets Norcros apart, especially in terms of the quality and passion of our people. That is the differentiator. Our decentralized model drives our growth ahead of many of our let's call it, more rebound peers and competitors. We have fantastic market-leading brands and our scale and collaboration does make us more than the sum of our parts. We will deliver on the targets we have set up, and we look forward to doing it and delivering great returns to our shareholders. With that, I'd like to open-up for questions. Thank you.

Excellent. Very, very thorough. Thank you. We've received a lot of questions, mostly relating to the strategy. So let's dive straight in. Does the current management team have sufficient bandwidth to pursue M&A with the extreme care and attention that James already alluded to that has led to successful integrations, whilst moving forward on the other 3 strategic pillars at the same time.

Yes, I'll jump in there. So I think we've got an in-house M&A team that's driven our M&A over the years. In fact, James used to head up that team. So it's probably stronger than it's ever been because we've got that team plus James sitting in the CFO role. And on the organic side, and looking at the other 3, we brought in Helene Roberts, who heads up the U.K. businesses, very, very strong strong track record in all of the areas that we're really focusing on. So that decentralized model with the additional help from Helene and also Helene on the people side, being Helen Gopsill and we've invested a little bit extra. But our decentralized model and the kind of skills we have, we're absolutely confident that we can deliver on those as we already are. So yes, the bandwidth is there.

Just to add to that, Andy, I think we do have the bandwidth in terms of the team and the resources. But equally, we're not going to be doing a deal every 3 months. We just don't want to be down that route. Our focus is on really detailed due diligence, doing the right deals that are right for us and being measured and being quite selective.

And I'm sure there's not a specific answer to this, but at the moment, group revenues are roughly 2/3 U.K., 1/3 South Africa. You've mentioned the opportunities lying in both areas, Europe and the Rest of Africa. What proportion would be happy to see revenues coming from new areas, say, in 5 years' time?

Well, I think there's 2 pieces to that. So our growth into new areas will probably be closer to our core U.K. market at the moment. And as I've probably said a little bit earlier, that can come from organic growth, following our customers into those areas or through M&A, where we are already in those areas like a business, Grant Westfield, for instance, is strong in the DACH region. So I wouldn't like to put a number on it. We won't charge as James said, into making acquisitions in markets we don't know. So we would probably look to go into market with our existing customers build up some kind of a presence and then get into M&A. So I wouldn't want to split it out because we also just wouldn't do it for the sake of doing it. But it would be -- it's a key driver in our growth strategy.

Okay. Let's talk Tiles. A couple of questions. What is different about the South African tile market, as the U.K. given your exit recently from Johnson.