Norcros plc ($NXR)

Good morning, and behalf of the Norcros team, a warm welcome to our Norcros Prelim Results Presentation. It'd be fair to say that James and I are really pleased with the set of results. They demonstrate the effectiveness of our strategy and some really great contributions from our colleagues across the business, and I know some of them are probably listening in, and thank you. Before I hand over to James in a couple of minutes' time and the head of his last results presentation with Norcros, I'd like to thank you, James, on behalf of the wider team. The Board and myself personally, for the meaningful and significant role you've played over the last 12 years, have come a long way. And thank you very, very much. When we look back at this set of results, we go back to Capital Markets Day only 2 years ago, I keep thinking it's 3 years ago, but only 2 years ago, we set out a path towards building a capital-light bathroom business and we've made significant progress since then. There really are 3 key takeaways from this presentation. The first is a strong organic performance, especially in the U.K. and Ireland, which going forward will be known as Europe like-for-like and Europe total would include Fibo. We've reached significant milestones in our journey and James will talk to that in terms of this journey of becoming a capital-light cash unit the bathroom business and are ahead of plan in terms of our medium-term financial targets that we set out 2 years ago, having delivered 3 of the 4 financial targets and delivered Scope 1 and 2 of our SPDI carbon reduction targets 2 years early. So we're well positioned to continue growing share and creating value for our customers and shareholders. In a market that has remained weak. We've demonstrated again our ability to grow through the cycle, both organically and inorganically by really being disciplined in and around our strategic plan. Having a look at the execution and numbers, we've grown reported and like-for-like revenue with the reported revenue up strongly following the Fibo acquisition. The important thing is we've done this profitably with operating profit up and including a very strong year in the U.K. and Ireland. And we've made strong strategic progress as we continue to grow, to becoming a more focused portfolio, again, with Fibo being the highlights. And I think another really important thing is we've demonstrated the ability to do acquisitions, using quite a bit of debt and then deleverage really quickly because we have such strong cash generation. And I think James and his team are well done for the exceptional work there. And going back to the targets really nice to deliver now on our ROCE total of 20% for the first time. Importantly, post year-end, we've announced our intention to investigate options to sell our remaining South African operations, and this really signals an inflection point that we'll discuss in the presentation. But first, let's just look at those individual regional performances. The first thing to point out, as I've said, is that we used to talk about the U.K. and Ireland region. Now that is Europe like-for-like. So you'll get used to that. But starting on the right-hand side and talking about the South African business, still tough out there, high interest rates, but again, the team has done well, really executed the closure of the Johnson Tiles business to plan. And as we said when we set out, that, that would not be a cash negative process and it hasn't been -- and in fact, it has reversed a cash outflow and turn it into a cash inflow in the current year and going forward. So really pleased, and I'd like to recognize that South African team for the care and professionalism that have shown closing that business. That has not been easy. European like-for-like previously, U.K. and Ireland performance was really good with operating margins growing to 15.9%. Reported operating margins for total Europe are a little bit lower because, as you know, the Fibo acquisition that came in currently operates a slightly lower operating margins. We've again demonstrated, and this is an important thing about Norcros, the benefits of leveraging our collective scale, especially when it comes to things like resilience of supply chain. And James's favorite topic of a strong balance sheet, being the best thing we have when we sell our business out to customers. And importantly, the results show the benefit of focusing on the brand conscious, more resilient, mid-premium RMI segment that I've been talking about for 3 years now. We don't sell cement. We are not a commoditized business. We are able to recover our pricing, and this is a really important part of what we do as Norcros. Looking forward, it's worth drilling down a little into what will become the foundation of our new European-focused business. And we'll look at the underlying performance, firstly, over the last 10 years that include full year pro forma numbers for Fibo. And when you have a look at this, this really talks to the quality of the Norcros business and it's our ability to perform through the cycle. This period really coincides with when we started making our first acquisitions and James led that. This has been through Brexit covered in all manner of other shocks. And what you can see is consistent through cycle profit growth. Through cycle operating margin growth, although we've just dropped back slightly this year with the acquisition of Fibo, but we'll reverse that as we leverage that business. Our focus on the mid-premium market segment does work and continues to drive value for our shareholders. And that business is now a capital-light bathroom business going forward off the work we've done over the last 2 years. So we have a repeatable, scalable growth model striking the right balance between organic and inorganic growth. Importantly, this model will and continues to be applied as we start addressing what remain large, attractive and fragmented end markets in our now targeted geographies that we set out in Capital Markets Day, which is U.K., the rest of Europe and maybe in time the Gulf. On the next slide, we'll look at the new European group profile, as we discussed. And so looking forward, if you were really trying to understand what Norcros looks like, once we've found some new owners for our South African business, what you can see is a really high-quality business from which to build. The left donut shows the revenue for FY '26 adjusted full year for Fibo. The center shows the revenue split. It's all bathroom and all bathroom products. And you'll note that our biggest product category is now panels, more to prove basement panels, that's a material change over the last 2 to 3 years or just more than 3 years really. We will talk a little bit today about what we're doing to solve what is a broader opportunity in and around making bathrooms simple and easier to do. And that is really around working and getting Vado Merlyn to take what has been some good collaboration and formalizing that -- and then we've got 3 high-growth products or service categories where we have leading positions and the knowledge to grow and win, okay? So we've carefully selected where we want to play. The right-hand donut importantly reminds us that 80% of demand in the U.K. and Ireland, but it's not that different to anywhere else actually comes from RMI, not from new build. We have great positions in new build. But we are not reliant to a new build, and that is why we continue to perform through the cycle. So the snapshot shows the underlying strength of the base from which we will continue to develop and create value driven by a very clear purpose. Our expert teams, we run a decentralized model with people who know how to make money and a balance sheet that offers us a high degree of flexibility. I'll now hand over to you for the last time, James.

Thank you, Thomas. Good morning, everybody. So throughout the presentation, the current and prior year income statement results are shown excluding Johnson Tiles South Africa, unless otherwise stated, as this is now a discontinued operation and results are also shown on a like-for-like basis where appropriate, adjusting for the 53 to a 52-week period, the impact of excluding Johnson Tiles U.K., which was sold in May '24, and and also the acquisition of Fibo in October '25. So to Slide 8 and the income statement. Revenue was GBP 33.4 million, that's up 0.6% on a like-for-like constant currency basis, and reported revenue was up 10.6%, largely driven by the acquisition of Fibo and also some market share gains. In turn, underlying operating profit was GBP 48 million. That's 7.9% above the prior year. The finance charges were GBP 7.1 million. The increase to prior year, largely due to the additional debt from the acquisition and the IFRS 16 finance charge was GBP 1.8 million, and that was in line with prior year. The underlying PBT at GBP 40.9 million, was 8.2% ahead of prior year. And the exceptional items of GBP 9.9 million comprised mainly the non-cash goodwill impairment of GBP 7.2 million, relating to Tile Africa and House of Plumbing. And there was also a further approximately GBP 2 million of restructuring costs regarding the merging of the VADO and MERLYN business to form a complete bathrooms business and Thomas will talk about that shortly. Pension scheme admin expenses at GBP 2.8 million were higher than the prior year, largely due to external gender equalization project costs. And I'm sure if you know about those, you'll be wanting to chat with me about them later. And acquisition and disposal costs of GBP 13 million -- GBP 13.1 million mainly relate to the GBP 7.8 million of non-cash amortization costs on acquired intangibles and approximately GBP 4 million of fees associated with the Fibo acquisition. Overall, this resulted in a reported PBT of GBP 14.9 million compared to GBP 3.3 million in the prior year. So Slide 9 and some of the key bridges here, starting with the top left, U.K. and Ireland total revenue was GBP 6.8 million higher than the prior year, reflecting market share gains and the additional week of trading. Fibo contributed new revenues of GBP 32.7 million and South Africa saw an increase in reported revenues of GBP 2.2 million. The portfolio reduction there of GBP 4.3 million is the sale of Tiles U.K. And in total, as shown in the bottom left-hand chart, overall group constant currency like-for-like revenue increased by 0.6%, and that was split 0.7% Europe and 0.3% in South Africa. So looking at the underlying operating profit charts on the right and firstly, top right. Underlying operating profit of GBP 48 million was ahead of prior year by GBP 3.5 million, really strong U.K. and Ireland performance, a GBP 3.5 million increase as well as GBP 3.3 million contributed by Fibo. And just to note in that top right chart, we have separated the increase in central costs of GBP 2.8 million as we make further investments to help drive our strategic initiatives going forward. And finally, on the bottom right chart, underlying operating profit in Europe saw a strong result at GBP 44.4 million, whilst the return on sales marginally decreased as expected to 15.2%, largely given the initial margin dilution from Fibo. Underlying operating profit in South Africa was GBP 3.6 million and the return on sales was 3.5%. And overall, the group return on sales was 12.2%. So moving on to Slide 10, earnings, dividend and tax. Regarding tax, the underlying tax charge for the period was GBP 8.6 million, and the effective rate was 21.1% compared to 20.4% in the prior year, largely reflecting the portfolio changes in the year and some small releases in the prior year. Applying the tax charge, the underlying of GBP 40.9 million, resulting in earnings attributable to shareholders of GBP 32.3 million, and diluted underlying earnings per share was 35.8p an increase of 7.2% on the prior year. And just turning to the dividend. The Board is proposing a final dividend of 7.6p per share, bringing the total dividend for the year to 11.3p per share, and that's a significant 0.9p per share increase on 2025, and this reflects the Board's confidence in the business, the future cash flow generation and earnings growth. So just on to the cash flow, a lot of numbers on there, but you can see the underlying operating cash flow of GBP 57.6 million in the period, and this represents an excellent cash conversion rate of 116% of underlying EBITDA. The working capital outflow in the period was modest at GBP 1.1 million versus GBP 14.1 million in the prior year. Net CapEx in the period was GBP 6.8 million and included ongoing investment into systems infrastructure, new product development and projects further driving our operational excellence initiatives. Cash tax paid was GBP 2.9 million. And then just on the exceptional acquisition-related cash costs of GBP 9.4 million, this largely reflects the fees associated with the acquisition of Fibo. And there are also other cash costs associated with restructuring projects, including obviously Johnson Tails South Africa and the merging of the MERLYN and VADO businesses. As part of the acquisition of Fibo, on completion, the group also repaid Fibo's GBP 3.8 million bond loan, which is seen there as a repayment of subsidiary borrowings. Proceeds from the sale of property of GBP 4.6 million related to cash receipts from selling the former Johnson's U.K. site. And overall, the net cash outflow in the period was GBP 29.9 million, post dividend payments of GBP 9.5 million in the year. So just on to the balance sheet on Slide 12. Net debt at the year-end was GBP 65.8 million, excluding finance lease liabilities. The increase is predominantly due to the debt from the Fibo acquisition. But I think importantly, with leverage at 1.2x, that's a reduction from 1.6x leverage at the time of the acquisition. And the balance sheet remains strong and in really good shape and we continue to have significant liquidity and funding headroom to invest in further strategic initiatives. And just to note, in the year, the group banking facility was refinanced in December, with the committed RCF increase to GBP 150 million plus a GBP 75 million uncommitted accordion with the maturity extended to December 2029. The pension scheme remains an accounting surplus and importantly, the scheme remains almost fully funded on an actuarial basis at 98% of technical provisions. Capital allocation framework. I think you've all seen this slide previously, but it's there just to make sure that we state that again, in terms of our capital allocation priorities, organic investment or ordinary dividends, complementary acquisitions. And if we can't do all of those, then supplementary distributions, all done within the investment guardrails of leverage below 2x, dividend cover of approximately 3x, cash conversion in excess of 90% and the ROCE target of 20%. Which takes us to the final finance page, which gives an update on our medium-term targets. And I think here, we can see significant progress across all of our targets over the past 3 years. Organic growth has remained ahead of market. We continually take market share, which Thomas will talk to again shortly. The group operating margin is now 12.2%. And benefiting from the closure of the Tiles businesses, operating efficiencies and partial offset for the time being by Fibo. ROCE has again increased and is now 20%. Cash conversion, excellent this year at 116%, but over 3 years averages 107%, and we are pleased to see continued progress in our Scope 1 and Scope 2 near-term targets with a 65% reduction from our base year. So as it's my last Norcros prelim presentation, huge thank you to Thomas, the Board also, Nick and John and in particular, the first class finance teams across all of our businesses and especially the amazing team back in Wilmslow. Thank you. Thomas, over to you.

Thanks, James. I think a really strong set of results and a lot of progress over the last year since the Capital Markets Day. And I'm now just going to touch on a couple of the key strategic initiatives and also start talking about some of the things that we have started working on that will drive additional value out of our existing business. You all know this slide really well, the Capital Markets Day slide, 4 pillars. This is what underpins what we do. The key takeaway is we've stuck to plan, and we continue to do what we said we would do. I'm not going to spend a lot of time on the inorganic growth. We've spoken about this already. What I will say, it's been a busy year. We do have an attractive pipeline. And I think I said at the last presentation, we will look at bolt-ons as well as the typical size transactions that we've always done. It was really good to do an all debt materially accretive acquisition and then drive the debt down again really quickly. So I think that was positive. I think the key takeaways on the organic growth and operations drivers here are really to -- it's more than self-help initiatives, but initiatives to grow our business for us to grow, address it well market faster and do it more efficiently. And really the first one that we're talking about is the process of creating a complete bathroom offer. You'll know that we tested this out at VADO, working closely with MERLYN to firstly launch Cameo and then launch Safari. We started the relaunch of Booth & Co, which we picked up at KBB. And really, we've tested the concept. We're not first to market with this by any stretch. It is really important to be able to compete that you have a full bathroom offer, which is what we are doing here. This will take around 12 months to do the initial prep on really in around systems data and basic integration, but the business is already being run by a single management team. And we're really excited about this project, and we'll keep talking to you about it. So we're telling you early, this is where we are, this is what we're doing, and we will report back on it. While we do this, we are also taking the next step in terms of our scale and our ability to provide really great products. And looking at how we do that better and more efficiently. You've seen the work we've done on freight. You saw the initial work that we did on the consolidation of our footprint in the U.K. And we're working with a really strong project team looking at how we take this forward over the next 3 to 5 years. And I'm really excited about this and think that we will generate ongoing value from this project. And then finally, on the ESG side, that we really committed to this and it's not only driving share gains, but resilience as well, and I'll talk to that when we get to freight. This is fundamental to our business. And I think I always remind everybody, if you look at the top rated businesses in our sector, they all have a strong sustainability underpinned as they understand it's not about [indiscernible] Quick feedback on Fibo. The post-acquisition integration process is largely complete. We have brought an exceptional business with strong operational leverage upside. And what do I mean by that? We have a really good light assembly plant, very well invested with lots of spare capacity. So as we grow and grow in this fastest-growing part of the bathroom market, the drop-through will be significant. We have made some early investments into their growth initiatives coming out of private equity. We knew we'd need to put some people in. So we started to put some people in specialty to help grow into new territories. And Anders and his team are on with that, and we're pleased. They've been in for almost a year. We always say we leave businesses alone for a year so that they can get through the initial integration, and starting to then focus on driving the group benefits that we've done with Grant Westfield and MERLYN before that. Pleased to report the business is trading in line with the expectations. And then the second really key thing in and around our portfolio development is South Africa. This one is a tough one for me personally, having been with the business as long as we have, but we've got a fabulous team out there, and we've got to do what's right for our shareholders here. But I think importantly, also for the South African business and what we've spoken in the South African business about is, having the right shareholder. I think we've been a good one, but they need one that is absolutely focused on that market and has a longer-term view on that market, and we'll be working really closely with Kevin and his teams to realize that. I remind you that any process will take some time. There is a 4- to 6-month competition commission process that adds 4 to 6 months to any transaction, okay? We don't see any issues there, but just putting that out there. But the successful conclusion of this process will see Norcros complete our transformation into a focused harder in bathroom business with significant strategic flexibility. Moving on to our organic growth drivers and projects. Again, I don't want to go into all of the detail, but our vitality remains at 23%, really, really strong. I'll remind you that our in-house design is very strong technically as well as from a fashion perspective, we've launched heat repeat, which basically warms the water coming into an electric shower. So you use less energy to fire up and then electric showers already the most efficient way to heat water. So we twin really strong technical expertise and IP with good fashion and help create beautiful bathrooms that have a lower impact on the world around us and so people money, by the way. Secondly, our proven ability to grow business that we acquire or own. You'll recall the work that we spoke about with Grant Westfield, where we introduced them to Topps, Screwfix and Wickes. I won't tell you which a number of those are already north of GBP 1 million accounts. We've added B&Q and a couple of others, and Grant Westfield has grown really well over the last year. So we did a restructure of their footprint last year. We introduced them to new businesses and the performance of the business has accelerated significantly. And I think well done to the Grant Westfield team have gone through a lot there. Although early days, we are flagging to this process of starting to bring VADO and MERLYN together. And the way we normally do, we don't crash stuff together. We do it sensibly. We work with our people. We preannounced it to our team. We didn't do it to them. They're part of that process. But I know that, that will drive incremental value creation as we go forward. What this really looks like is really all about making bathrooms easy. And the picture you see there is MERLYN and VADO at the KBB show, you were there. So we have to look at the new ranges that the teams are working on. As I've said, -- they're reporting into a single MD and FD already. Initial folks for the next 12 months is integration and preparation projects, but this grows our addressable market in this area by north of GBP 1 billion in the U.K. and Ireland alone. So again, we're able to address and tap pools of value without spending heaps of money when we don't need to. This is a medium-term target that will drive incremental organic share and margin growth. So the markets are tough, but we have clear pools of value that we can and continue to tap organically and inorganically, and we'll continue to leverage our scale to do this more efficiently, which leads to the next slide. And I'm really just going to start with a target quickly. Last year, we spoke to you about shipping 20% of our freight from China predominantly using eco-fuel. We, in fact, shipped 37%. The best part of that is not only reduce our carbon footprint and embedded good business practice into our business. It improved our resilience. With all the problems you've got with fuel at the moment, there's only so many ships that ship with eco-fuel because of our partnership with Maersk and having been -- we were on the first eco-fuel ship coming to the U.K. We've got full access to that. And we have really great resilience from it. So again, the common sense of doing things in and around sustainability, if you embed them into your business early, it's not just about a carbon footprint. It's about a more resilient business as well. Following on from that, we've negotiated a scale-enabled group energy deal in the U.K. that does the same thing, 100% clean energy with long-term price stability. So that resilience that we're able to build into our model, given our scale really does count. Looking forward, the big project for us, as I touched on, is really to further consolidate and simplify our warehousing footprint in the U.K., in Ireland and Europe. And we've launched a project at the start of this year, working with external partners and our teams. And really, this is about initially investing in and simplifying our widest systems infrastructure, driving improved service levels. The reason we're doing it is not to save money, we will, but is to be better at servicing our customers, and we'll do the sensibly like we do all of our other projects, and we'll see incremental gains starting to come through in 12 months from now. The underlying message is that we are not sitting back and hoping for a market recovery, and we can do this because we have a clear plan. We have an excellent team and a strong track record. Part of the plan has been to apply common and commercial sense and get ahead of the pack when it comes to modern and sustainable business practices, and we continue to do this even when it doesn't always look like it may sense initially. On the ESG piece, I've shared some examples with you about how it's helping our business, and we will continue to drive value using this lever. And I think I just want to say something here, really one thing is sustainability done properly is not about ideology, okay? It is simply good business practice where we are making practical choices that strengthen our business today and ensure that we remain relevant tomorrow. We've had a strong year with current trading remaining on track with revenue over the last 2 months up 3.1% on a like-for-like basis. The team have delivered operationally. They've delivered strategically, and I think ahead of plan strategically. We are now a fundamentally different business -- our focus on becoming a capital-light design-led bathroom product business, which has included taking a number of tough decisions has seen Norcros evolve into the high-quality businesses today. We acknowledge it's tough out there. But looking forward, unless there is a material further change to underlying conditions, the Board's expectations remain unchanged. We have a clear strategy, a strong and proven business model. And really to finish off and probably in honor of James, when you have a look at the things that drive value in our business, scale is really important. We have a repeatable model. And right at the top, we have an exceptional balance sheet that gives us the flexibility that we're going to need to go forward. And with that, again, James, thank you. Thank you to everybody for your time, and we are happy to take questions.

Rob Chantry from Berenberg. Just 3 questions from me. Firstly, obviously, first move into Europe this year. What have you learned about the European market, the Nordic market that you didn't know 12, 18 months ago prepurchase? Secondly, can you talk about the competitive environment in the U.K., changing tactics, changing larger players? You're looking to combine Merlin andvado. Is there anyone else looking to do the same type of activity? And then thirdly, I think decent like-for-like growth at the start of the full year '27. Can you just talk about the timing and scale of any price rises this year in relation to cost moves, et cetera? What's driving that kind of decent like-for-like?

Yes. I think on the Nordic piece, before I joined the business, James was looking there. It's exactly what we thought in terms of being a market that values brands, value sustainability, really high-quality teams -- so it's a market that suits us well. Every country is also different. So we say Nordics, but Norway and Sweden are very different in terms of routes to market. But not all of this was a surprise because it's something we've looked at a long time. So we like it, it will be the bottom line. The competitive environment, I think the biggest thing that -- and I think we spoke this last time is this channel shift, okay, that we've been seeing across our sector. And when you really look at it, we've seen older models struggling to compete with newer models that have made it easier, especially in trade. And it doesn't matter where and how you sell and buy your product, convenience and ease is hugely important. So the businesses that have tapped into making it easier, for instance, to a trade person or to an end consumer are the businesses that are winning. And I think that it doesn't matter whether you're in retail, trade, direct, you've got to make it easy. You've got to be tech-enabled and that experience has got account. So we have seen a shift to ease of doing business would be the underlying piece there. And on the like-for-like growth piece, we've got a long history of getting our price increases and because we sell brands, we don't sell cement. So when the market is under pressure with cement, my old story, volumes are down, you have to discount. We don't. So we work very carefully, very responsibly with our pricing, but we do make sure that we recover our costs and we motivate that well. James, I don't know if you want to add anything.

Just to add one more point on the competitive profile. Yes, channel shift is a key part of that. But I'd also say that increasing failures in our competitors and stress in their balance sheets, we monitor them very closely. Clearly, it's a point of differentiation that we have a strong balance sheet. And I suspect there'll be more failures as we go into later this year and into next. And I think that's a source of opportunity for us. It's unfortunate when smaller businesses go under, but it's an opportunity for our guys to take even more market share. And I think increasingly, key customers, they're looking at credit ratings. They're looking at inventory levels. And it's a very, very important piece of the competitive advantage in terms of the scale that we have.

Tom Frame from Shore Capital. Just following on from the question on price increases. Would it be a sensible assumption to assume low to mid-single-digit average price increases for 2027 and therefore, that being the main driver of the organic growth this year rather than volume? And secondly, a point on the M&A following the deleveraging, it looks like you've now got scope for a similar sized deal to FBO, possibly as soon as within the next year or 2. What exactly are you looking for? Is it something similar to FBO, different product areas, somewhere you can cross-sell a bit more? And how is the pipeline progressing?

I'm going to let James answer the second one because he started our M&A strategy all those years back, and I'll add in. But I think looking forward, it's quite unpredictable. We don't see material volume growth anyway other than through market share growth. So I think growth is predominantly going to be price increases. For our business at the moment, we probably haven't been impacted as much as others, given that through our scale, we have fairly solid freight arrangements, for instance. Our raw materials and input costs although are impacted by moving them around other than the plastic at Triton are not quite in the same league as some of the other people who have raw materials and input costs that are massively out there. So as I said at the beginning, where things stand now, if we don't see any other crazy movements, and we don't run out of diesel in the country one of these days, we think we can manage it. So in short, Tom, the answer is, yes, we don't see big volume growth. We haven't built that into our model going forward, and we are comfortable we can recover the price increases. James, do you want to handle that?

Yes. Just on the M&A front, yes, you're absolutely right, the deleveraging of the balance sheet down to 1.2x. That does give us scope and capacity for GBP 50 million, GBP 60 million of debt to deploy in M&A, maybe a little bit more. What are we looking for? We're looking for those businesses that we can grow faster under our ownership, and that might be a complementary product or a complementary geography. We certainly have a very full pipeline across the U.K., Ireland and again, into Scandinavia, Sweden, Denmark would be looking at as well. But we're not going to go and buy something for the sake of it. We're not going to go into the U.S. We're not going to go into Asia. We're going to be sensible with that approach. And we're very aware that in terms of FBO to do sensible, strategically compelling transactions on all debt is that are materially earnings accretive makes a lot of sense for a business of our size.

Christen Hjorth from Deutsche Bank. I just have 2, please. So the first one, obviously, great performance on leverage, as you've touched on. As we look forward to FY '27, how should we think about ongoing deleveraging outside of any M&A? Are there any cash exceptionals or working capital movements that we need to be aware of? And second, on FBO, but maybe sort of looking at it the other way around, do you -- are you increasingly confident of opportunity for some of your U.K. and Irish products in the Nordic market now that you sort of understand route to markets there? And how could that potentially look over the medium term?

Yes. Just on the deleveraging, I think the way we would look at it is I think we've guided to low to mid-50s on debt for the end of this year, and that takes you to leverage 0.9x broadly. Clearly, there's scope to go further than that if we felt we had to or wanted to. But I think it comes back to that balance sheet strength. We do have the capacity to invest in inventory. That's a source of advantage and we'll play to those strengths in times of uncertainty.

Yes. And I think on the second question, Kristen, I think you know us well, year 1, integrate, get to know. We are getting to understand those markets better. I think importantly, we have a management team there that operate in the U.K. and in those markets. So they know both. Definitely opportunities there. But again, we will do them at the right pace at the right time. But yes, there's there is something to go, and it's one of the reasons we bought that business. Yes.

I'm coming from Peel Hunt. I've got a couple. On the whole bathroom offer, when you're going to market, is the idea that you're going to be selling this offer to the consumer or to the trade predominantly? And what's going to drive that? And then secondly, do you need to acquire anything in furniture and sanitaryware to complete that offer? Or will you kind of look to assemble and build your own brand?

Yes. Okay. So -- we're a B2B business, but we've -- when you ask us how we spend our CapEx, we really invest in our service offer. So where we currently are as we build these ranges, we've really got a range in Wickes, for instance, we've got some in the independents is we're helping create demand through our B2B customers, i.e., through a where to buy. So if you went to CX and you clicked on the toilet seat finder, if you have a break your toilet seat, best way to find one click on there. It will tell you, this is the toilet seat you need. This is where you can get it from. And in so doing, we help create demand for our existing customer base. Who knows where the routes to go to long term and how we do that. But what we see ourselves doing is really supporting our existing customer base, look after their end consumers really well. And as you know, we own the end consumers aftersales service. It's one of the things that differentiates us. Acquisitions for sure, smaller bolt-ons, definitely that because it's quite a big project on its own and developing certainly of these product categories if we can buy some of these categories, we will. And we've certainly been looking at some of those.

I think just on that as well, and there's even the furniture piece that we have such a small share that we would -- and we have looked at good furniture businesses. And should the right one come along, there's the potential to add a further brand or furniture part of the existing portfolio to make a step change and grow even faster. So if it makes sense, we'll definitely be looking at it.

Toby Thorrington from Equity Development. I've got a few kind of company-level questions. I think. Can you just be a bit more specific on what you've done with VADO and MERLYN so far in terms of where the HQ is and how you pulled it together and integrating sales teams?

Yes. So Vado Merlin at the moment, the single at the top of that pyramid is the Merlin team in terms of Charlie and Michael. So they oversee the 2 exec teams. We have started one department at a time, putting those together. So the sales force has come together and so is the customer service piece, typical Norcros looking after customers. But we're doing this slowly and sensibly. It is a complex project. And ultimately, the key focus is in getting ready for doing more is really about making sure we have consistent data at a minimum. We're not going to crash ERPs and things together. You don't need to in the modern world. We will continue through the team at Vado, who started the actual work around product to drive that through. But I would hope sort of 12 months from now, we'd have the critical mass and the sort of data and stuff we need to be able to put it together in a coherent way and then start the next steps of that process.

Does that mean sort of more collaborative launches in the second half of this year?

Yes, definitely. Yes, definitely.

Interested to know on that and with MetalX actually with the sort of new launches, what the customer reception has been for those in terms of new listing and those kind of things?

So Metlix very early, but very positive. Again, excellent in-house design capabilities you're at KBB, -- you saw us next to a whole lot of other people who do those things. And I think you spent time with one of our designers and the way we go around that design and speaks to the quality of what we're doing. So really good reception, very early days, just launched. In terms of the bathrooms, we obviously, the test was Camo, which is a pretty generic looking range. That -- the launch of that led to Safari. You've seen the work on Booth & Co, which is a big category and traditional, but the work there got us into Wickes with a range. So again, careful narrow testing and now foot on the ball, set it out properly, make sure we've got everything behind it that we need, get the teams aligned, do the hard work upfront and go from there. Okay.

More ticks in the grid coming then by the sounds of things.

And interestingly, with them working together, and I can't talk about who, but Vado have gained 2 major housebuild accounts through the association with Merlin in the last 3 months.

On Grant Westfield, I think you previously said that it's a potential beneficiary of not having to put in a membrane on the new housing regs behind because of the waterproofing properties. Have the housebuilders taken a greater interest because of that?

They're important customers of ours and some are more progressive than others. I would say they've probably had some bigger issues to deal with over the last year in the nicest way. But in saying that, we have a proactive group team working on group projects around ease of installation and sustainable product solutions that are working very, very closely with some of the biggest and most progressive housebuilders in and around ease of installation, sustainable products. And what I will tell you is we have just won a major account in the States through Grant Westfield, and we won it by showing them how we could install the wall coverings for a bathroom in I think, 16 minutes and maybe we'll show you the video next time. Okay. So there's real stuff behind what we're doing.

Final question. FBO. I think the contribution or the margin contributed under reported numbers is low 10s in the period, the full year annualized is 11-point something. You've obviously taken some cost on the chin by putting sales guys in and those kind of things, amongst other things. Can you give us a sort of a pathway where you expect FVO margins to get to?

There's no reason the Fibo margins shouldn't get to where the Grant Westfield wants to get to. And I've spoken about the leverage piece there. So that team came through a really long sales process, a horrible CMA process. We've started bedding them in and introducing them to the rest of our team, started, for instance, helping them, they are a sustainable business, but plugging them into our group sustainability around data and how to do things like that. I would always say, always be cautious, but it's not going to take 3 or 4 years. There are very obvious pools of opportunity and value that we'll talk to you a lot more about next time we see you.

Okay. Great. And you don't disclose Grant Westfield margins for obvious reasons, but I assume that they're above the U.K., Ireland average, are they?

Andy Edmond, Equity Development as well. You've handled or to us, it seems, handled the South African disposal very carefully, looking at employees and, of course, customers and business there. Can you give us an update on how it's been received over there by your employees and whether it's had any positive or indeed negative impact on the perception?

It's an interesting one. And I think it's, again, a different way of doing it and an all cross way of doing it, and I'm really pleased the Board supported this is quite often you do a deal and then announce it to the team. And I think the fact that we went out, I personally spoke to the top 200 people face-to-face with Kevin, who's a really strong MD in South Africa, explained the rationale behind it, explained how with a focused shareholder in that area, they would probably be able to accelerate what they want to do with the business that landed. So there was some sadness, a little bit of anger from some people who're just saying, geez, we are Norcross, how can you sell us? It's like offloading a member of the family. The low or down, you went. Obviously, people saying, how does this impact my job. But I've got to say, Kevin and his team there, and we've got a really strong people function there, Mary Ma heads that up, have been doing some great work and just talking to Kevin and the team. They're starting to transition to -- well, this isn't us again chucked in the bin. We are being supported. We've committed to finding the right home and the future might be -- well be brighter with someone who's absolutely committed to that market. So we spent a huge amount of time working with the team, but so is the management team in South Africa. So I think really pleased with the aligned approach from the Board down to do this the right way. So do it with you rather than to you is the motto we've used on this and on the Vado Merlin project, just different. but good, yes.

Very good. And then you made a very brief mention of the Gulf as a market down the road, huge focus on Europe and the opportunity quite rightly at the moment. But you don't tend to drop little clues like that without.

No, that is only because it's really on talking -- if you look at our CMD, we do business in the Gulf. We've got an office in the Gulf. Our priority at the moment will be closer to home. If I was -- if we were looking at acquisitions, som something really compelling out there for us to distract us. So I think if you think about our geographic growth, just think about it as a slow spread and keeping it close. So most likely, if we were doing an acquisition outside the U.K. and Ireland, it's going to be quite close to the Nordics or somewhere. And we're certainly not going into the core center of Europe. We're more the territories in markets where we know that we can consolidate.

Low-hanging fruit first.

Sensible common sense. There we go.

It's Charlie Campbell at Stifel. Just one really for me. In a kind of an inflationary environment, I guess, the cost of a bathroom project goes up and lots of those costs are kind of outside your control. Do you worry that people might kind of spend a bit less on your products because they've got to spend a bit more on plastic pipes, et cetera? Does that come into it?

Bathrooms are -- So the first thing to say that if you look at bathroom sales, and I don't have an exact stat, most bathroom business is individual pieces, people replacing a mirror, people replacing furniture, a shower door mirrors. So it stays really resilient. The number of complete bathrooms sold is probably more a new build piece than a renovation piece. People do their complete bathrooms, but they also upgrade their bathrooms. I mean -- and the team we have working on this bathroom project is sort of bathroom for a lifetime. So you put one of our bathrooms in 5 years from now, change the handles on your furniture, change the mirrors. It's all going to be designed so that you can keep refreshing that bathroom. So we're not too concerned about it. There are a couple of business that talk in their results and rightfully so about people shopping down in tough times. Well, not all customers are the same, okay? And we shop mid-premium and our mid-premium customers haven't started shopping down.

Can I just add to that maybe as well that also with the kind of the installers, we pick up market share because the installers recognize the benefits of quality, easy to fit. They want to go and do a job, get paid and never return to that property again. So in terms of actually the way we operate and making sure our customer service and those installers are looked after with quality product, that's, I think, is another key driver of why we pick up market share.

Again, thank you very much for your time. I know it's a hell of a day out there in terms of reporting. So we really appreciate you all coming out. Thank you very much.

Thank you, everybody.