Good afternoon, ladies and gentlemen. Welcome to the Alumasc Group plc investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the Q&A tab that is just situated on the right-hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and will publish those responses where it is appropriate to do so on the Investor Meet Company platform. Before we begin, I would like to submit the following poll, and as usual, if you could give that your kind attention, I am sure the company would be most grateful.
I would now like to hand you over to CEO, Paul Hooper. Paul, good afternoon, sir.
Good afternoon, Jake, and thank you very much for that introduction, and good afternoon, everybody else who is attending, and thank you for attending today the interim results of the Alumasc Group, running to December 2023. My name is Paul Hooper. I am the CEO, and I am joined by Simon Dray, the Group Finance Director. We have a couple of additional slides on this presentation, which is really for people who do not know us that well, and we want to include those today. We start off with the introduction on Alumasc and its market leadership, and what we have achieved in the last five years. You will see that the revenue CAGR has grown by 6.5%. The underlying operating profit has grown by 17.5%. W e think that is a reasonable performance.
There are, behind this, driving, helping to drive the business forward long-term structural growth drivers. High quality, sustainable building products are used and developed by the company, systems and solutions. 80% of the portfolio is specified to deliver environmental solutions, and these are generally linked to energy and water management. We have a diversified portfolio, which is not only supplying systems, products into new build, refurbishment, public, private, commercial, but also for export. T his spreads the risk fairly evenly, creates resilience and a platform for strategic acceleration at the same time. We have premium products and trusted brands. We are generally number 1- number 3 in the market and number 1 or number 2 in many areas. We have leading niche market positions. We operate in an entrepreneurial, decentralized operating model.
We are agile and we are customer centric, so we do not have a large head office at all.
We like people to get on with running their own businesses. W e do support them. We are in a strong financial position. We have capacity to invest for growth, and you will see examples of that today. We have potential to deliver significant shareholder value. As you will see, we further improved the group's margins and cash generation in H1, and we have a progressive dividend policy, again, demonstrated in H1. Moving on to the operational overview. You will probably be very relieved to know that I am not going to grind through each of these areas, but these do represent our three segments within the group. I will start with water management, which accounts for approximately 45% of our revenue with integrated rain to drain solutions.
We then have building envelope, which accounts for approximately 40% of our revenue, which has premium roof line waterproofing insulation systems and green and landscape garden roofing solutions. Our third area is house building products, which accounts for approximately 15% of our revenue, which supplies premium house building products. They all service diverse range of markets. The growth drivers are aligned to sustainability and environmental demand and all have opportunities to grow volume and value and profit going forward. That's a little snapshot of the group. Then let's see how we did in H1. We believe this is an encouraging performance against a challenging market backdrop. We grew the revenue by 6.4%, and this was against a U.K. market that actually went backwards by 6.4%, according to the Construction Products Association, the CPA.
Within that, we went down, our U.K. side went down approximately 2%. It did outperform the market, and the balance was picked up on our export side, which were very strong in H1, and we'll come on to that. Meanwhile, our underlying PBT, very important factor, grew by 12.4% during H1, which was a record. A record performance in H1, against a challenging U.K. market. We had a strong performance from export sales despite the delay to the quite well heralded GBP 7 million Chek Lap Kok Airport order, which has not come through into sales yet. Margins were strong in a stable cost environment, and we achieved margins of 14.1% versus the prior year of 13.4%, and our target is to get into the 15%-20% level.
Our interim dividend was ticked up to 3.45p, and we made the acquisition of ARP in December. This took quite a long time to achieve, to be honest. In the end, we also voluntarily referred it to the CMA, and I'm very pleased to say that they gave an unconditional clearance for it, and it's now part of the Alumasc Group from January of this year. We are very excited, and I'll come on to the details in a bit. We expect headwinds to continue in H2, and in fact, the CPA has indicated that it expects a 2.1% reduction in construction activity in the U.K. However, despite these headwinds, despite now anticipating any of the GBP 7 million order to come through into sales in H2 from Chek Lap Kok, we still are in a position where the board is confident in achieving full-year expectations.
Okay, let's go into water management. This is the first of our three divisions, and the largest one, and it had a good performance. We had a 12% revenue growth, and more importantly, we had a 40% profit growth. We had an excellent export performance, and we have, as you'll probably know, started to invest more into our overseas sales resource into Dubai. We have placed a person there. India, Colombia, the Philippines, and Thailand to follow, and some of these are employed by our distributors, some are employed directly. W e are really very serious about pushing our exports, and we're starting to get some interesting results from this, including some shipments to Lima Airport in Peru. We also had other shipments around the world into Auckland, into Dublin, Ireland, of course, and Saudi Arabia.
We had significant project work at Chek Lap Kok Airport outside of the GBP 7 million project. Even without that, our exports still increased in the order of 20% overall. U.K. market conditions were challenging, and we took the opportunity to restructure our commercial and sales teams. This actually took out GBP 800,000 of costs that will benefit into H2. We expect a better H2 with call-offs on several significant projects. That is water management, had a good H1. Building envelope we will go into now, and it had revenue growth, again, in a challenging marketplace. It made market share gains. It also launched new products, including the Alkaplan by Alumasc Warm Roof, and Olivine continued to do well. The investments that we have made in the team and the improved regional coverage also benefited the company, and we received some larger multi-site refurbishment projects from large organizations.
In some cases, these were 25- 50 sites that we are now in the process of supplying roofing material to. Outstanding customer service is featured, and we have a stronger platform of ongoing work. The underlying profit was marginally down on the comparative period, largely as a result of the full cost coming through of the investments that we have made during the prior year. Nevertheless, although the operating profit was slightly down, this was still a very good performance, and we will be pulling that margin back up again. Then finally, I can say our third division, but it is not really. It is our premier division, as it were, because this was a remarkable performance. You may or may not be aware that construction of houses declined in the U.K. in terms of starts by 23%. Has that affected Timloc, our house building products company?
Yes, of course it has. It still managed to go ahead of the prior year in terms of its revenue by the actions that it has taken, including the launch of a new tile vent for roofs, a roof tile vent, and associated products continued to grow share in really a specialist roofing merchant's area, all assisted. We have taken a significant market share in a year through these roof tile vents. Timloc, incidentally, is the first carbon neutral building products manufacturer in the U.K. That is a huge achievement. It continues to focus on manufacturing efficiencies and cost controls, and it had in H1 a record underlying profit which grew by 6% to GBP 1.7 million, and a record underlying operating margin of 24.5%. It did extremely well in H1, and we are very proud of our house building products division.
If I may now, I will ask Simon to continue with the financial review, please.
Thank you, Paul, and good afternoon. As Paul mentioned, our first half revenues grew by 6%. As we will see on the next slide, price inflation had a negligible overall impact, and virtually all of that growth was organic. Gross margins were very strong at 37.5%, 80 basis points ahead of the prior year, and that is a result of the improved volumes, but also of active management of costs and prices in what was a tough demand environment. Operating margin was 14.1%, which was close to the group's medium-term target range of 15%-20%. That was 70 basis points ahead of the prior period, lower than the gross margin increase, due to some drag from higher overheads, in particular, wages.
Underlying EPS was just under 6% ahead, a factor of the 12.4% increase in underlying profit before tax, less the increase in the effective tax rate from 21%- 25%. Looking at that reconciliation of group revenue and underlying profit before tax from the prior to the current period, as I mentioned, there was little net change in revenues from inflation. Growth margins were strong on material prices, which were largely stable or slightly declining, although there were some exceptions, notably in insulation products within building envelope. Inflation was, however, overall a slight drag on profit in the first half, principally due to higher wage rates and to a lesser extent, higher energy costs. We expect these to be offset in the second half by cost savings. We had strong organic growth net of the inflation effects, sales increasing by GBP 2.7 million and profit by GBP 1.1 million.
We had a good cash flow performance in the first half as well. This was driven by the growth in EBITDA and a cash inflow from working capital of GBP 1.7 million in the six months. Average trade working capital as a percentage of sales has improved to 16.7% from 19.4% in the prior half year, as particularly inventory positions continue to unwind. We are aware of the potential for disruption to supply chains from the Red Sea situation. We are not experiencing any material problems at the minute, but we are monitoring it, and we will add some short-term buffer stocks if necessary. Our strong financial position allowed us to continue to invest in organic growth. Capital expenditure was 115% of depreciation, which is similar to the prior half year.
Tax payments were increased at GBP 1.7 million compared to little in the prior half year, which benefited from the super-deduction capital allowance. We expect that level of cash payment into tax to continue. We also completed the ARP acquisition in December. An initial cash outflow of GBP 6.5 million in December comprised the GBP 8.5 million initial cash and debt-free consideration, plus some working capital adjustments totaling GBP 200,000, but net of GBP 2.2 million of net cash acquired with the business. A further GBP 1.2 million of working capital adjustment and the first GBP 750,000 earn-out was settled in January, and the final GBP 750,000 earn-out is due for payments in January 2025, subject to ARP's performance in the year to November 2024. A couple of points from our balance sheet.
Net debt of GBP 7.4 million represents a gearing of 0.5 times EBITDA, which is well within the bank covenant of less than 2.5 times. That debt is drawn against our GBP 25 million revolving credit facility, which expires in August 2026 and is extendable to August 2027 and has a GBP 20 million accordion facility associated with it. Our gross pension liability of GBP 4.8 million, excluding the tax, is GBP 0.5 million higher than the half year position, a function of the higher deficit driven by lower interest rates, partially offset by an improved asset performance and company contributions. Those contributions remain at the GBP 1.2 million annual payment we agreed with the trustees at the last triennial in April 2022. The next one is due in April 2025.
The board's current intention is to seek to maintain the current level of contributions into the scheme and expecting to get it into a self-sufficient position where it has little likelihood of requiring further support from the company over the medium term. I pass back to Paul now for the strategic highlights.
Thank you very much, Simon. One of the reasons why we have been successful over the last five years in particular, and we have to remind ourselves, we have grown the revenue by 6.5% CAGR, the operating profit by 17.5% CAGR, has been from really focusing on strategic priorities, and we have several of these, and we just wanted to share those with you. The first of which is accelerating our sales growth. During H1, you will see that we grew the sales by 6.4% revenue. The U.K. sales were down by 1.6%, and that is versus the 6.4% decline in the overall U.K. marketplace in our area. We have attractive positions in markets supported by long-term growth drivers, which are 80% of product portfolio is subject to regulations and legislation. We like additional building regulations, they usually assist us.
80% of turnover is derived from environmental solutions, which might be energy or water management solutions in general. Our overseas sales, which we are focusing quite a bit on at the moment, grew by 167% and now represent 12% of group revenues versus the prior year of 5%. Although we did not ship that big project as Chek Lap Kok, we still had significant activity in that area. Even if you take that out, we were still 23% ahead of the prior year. It is moving in the right direction, but we want more. The next strategic priority is driving the margin improvement. You will see that we are up to 14.1% now, a little bit below that entry point of 15%-20% we want to get to. We will continue to focus on costs, margins, and efficiencies in all of our businesses.
This will be supported by new product development. An example really of our focus on costs in H1 is the fact that we did take GBP 800,000 out from our overheads in that area, and we simplified some of the structures in there. We have opportunities to reduce further costs over time, and we will consider whether we take those. Some may be on a contingency plan basis as well. I will now, if I may, hand over back to Simon, who will discuss the championing of sustainable building products. Please.
Thank you. As well as servicing environmental needs, our products are sustainable, both by their nature and by their design. Their high-quality design makes them robust, which reduces ongoing maintenance, and long-lived. This reduces their lifetime cost of ownership in both financial and carbon terms. We also embrace the circular economy, using recycled materials is resource and carbon efficient. Over a quarter of our materials by cost are recycled at the point we use them, and the recycled portion of our metals and polymers is significantly higher. Over 80% of our products are fully recyclable at the end of their life, reducing their cradle to cradle energy cost. Back to you, Paul, for investment.
Yes. Another aspect of the strategic delivery is value-enhancing investments. W here are we going to invest to get the best return? Well, people are a key area for us, and particularly on the sales side of the business, and we will continue to invest in U.K., and particularly the building envelope side and overseas sales resource in water management is very important to us. New product development in house building products. It is remarkable really that 30% of those house building product sales now are approximately 30% are from new products launched in the last two years. We have acquired the ARP Group in December, with a maximum GBP 10 million EV, EBITDA multiple less than seven times, immediately earnings enhancing, and it strengthens the key rainwater management offering.
There are significant consolidation synergies here, particularly in two areas, which are purchasing, where each company has obviously been doing its own thing over the years, and we will choose the lowest cost element there. This is a good quality manufacturer, and their quality of product is very high, so we have no concerns about sharing some of their sourcing or the materials from their own sourcing and vice versa. T he higher volumes will get further discounts. At the same time, we will be using each other's routes to market. For instance, ARP is strong with contractors but does not have any drainage products. W e have drainage products, those will immediately start going through their distribution chains, and it has some entry point aluminum rainwater products that we will start putting through our own distribution channels at AWMS.
A lot of opportunities here that we are looking forward to exploiting.
A little bit more detail on ARP. It is a well-regarded manufacturer, supplier of rainwater goods, architectural aluminum products. It has a 47,000 sq ft facility in Leicester, employs 70 staff. Leicester is only 40 minutes away from our AWMS plant, and that is pretty useful. For FY23, it made GBP 1.3 million adjusted EBITDA on GBP 10.8 million sales. It is also a good generator of cash, which we like. There is a good cultural fit. Product quality is high and customer service is high. The strategic rationale is strong. I have touched on most of these. I did not touch on the operational efficiencies, but both sites are good in different areas, and we will consider whether we need to use each other's ideas, et cetera, or whether there are some consolidation opportunities. We are not rushing any of this at the moment.
We want to understand this business absolutely fully.
In terms of EBITDA consideration versus adjusted EBITDA, less than seven on initial consideration, we believe that will come down to less than five on the total consideration when the synergies are delivered. If anything, we feel we have probably been conservative, as you have to be on such matters as synergies. In terms of strategic delivery on the ARP strategic fit, really interesting, this chart, because it shows that it ticks all the boxes. On the right-hand side, exactly the areas that we have been looking for, and on the left-hand side as well, the immediate earnings accretion. I t is a perfect fit. We found no skeletons in the cupboard either, which is always a bonus. We have had the business for about a month now, and we are very excited about the future opportunities for the combined business with our own. Now, moving into the-
We have two sides left.
The penultimate one is looking at the outlook, the medium, long-term structural growth drivers. I am not going to grind through all of this, but there are quite a few of them. We tick several or all of these boxes from one to three ticks, actually. As you can see, our age division is somewhat different. T here is quite a bit here driving the medium and long-term growth and including, obviously, energy efficient buildings, fire regulations from the very sad Grenfell event. There are increased fire regs as there have to be, and this will mean that there will be requirements to refurbish some buildings with a higher standard of finish. L et us move into our final slide. We have had an excellent first half. We do expect headwinds to continue into H2. We can see that from the CPA forecast, - 2.1%.
Not huge, but a bit of decline there. We expect our export growth to slow a little bit in H2 with the delay also of that Chek Lap Kok order. W e have a proven resilience in our business model, diverse end markets, good export potential, which will continue. We have strong environmental solutions, product innovation, very key to keep those new products coming in. Experienced management team, best-in-class service, operational excellence. The board remains confident in the group achieving its full year forecast. When the markets recover, we feel that we will do well then, and we are looking forward to the synergies from the ARP acquisition. There is a significant opportunity to deliver long-term shareholder value coming out of this developing business. Thank you very much for your attention today. I will ask now if there are any questions, please.
Perfect. Paul, Simon, thank you very much indeed for your presentation this afternoon. If I may just jump back in there before we move to questions. Ladies and gentlemen, please do continue to submit your questions just by using the Q&A tab that is situated on the right-hand corner of your screen. Just while the team take a few moments to review those questions that were submitted already, I would like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, can be accessed via your investor dashboard. Simon, Paul, as you can see there in the Q&A tab, we have received a number of questions from investors that were both pre-submitted ahead of today's event, as well as those that have come in throughout the presentation this afternoon as well.
Firstly, thank you to all of those on the call for taking the time to submit their questions. Paul, Simon, if I may just hand back to you just to read out those questions and give your responses where it is appropriate to do so, and then I will pick up from you at the end. Thank you.
Thank you very much.
That is great.
Paul, I think this one is one for you. You state that you continue to look for bolt-on acquisitions. Now that you have added in the water management segment, and as a result of this, have a large market share, does that mean you are now focusing on additions in the other two segments?
Good question. No, I would say our eyes are open in all the segments still. It will take a period of time to integrate ARP, so we are probably not rushing to immediately find another one in water management. It would have to be an outstanding one, really, in one of the other two divisions were we to acquire one, let us say, in the next six months. I think we are focused on integrating ARP at the moment, but we would be open to other areas within water management, so I would not exclude it now that we, excuse me. It is correct that we will have quite strong market shares in some areas.
Yeah, I think there are areas where there is opportunity to grow market share still, and there is also opportunities to add technology into the-
Exactly.
portfolio, which complement what we already have. We are agnostic on sector, I think.
Yeah.
Division. In the past presentation, you mentioned increased sales presence across new geographies to accelerate export sales growth. You referenced newly won projects in New Zealand, Saudi Arabia, Ireland, and Peru. Can you give us an outlook on the value and timing of these new projects? I think maybe it is just a question on opportunity and where we see geographical sales opportunity.
Yes, we put somebody into South America, for instance, and we have had work coming through at Jorge Chávez Airport. Whether that would have been won anyway, I couldn't say hand on heart, but I believe it was by having our sales representative in that part of the world that assisted in winning that order. We are looking to develop into the Middle East, hence we have got somebody we have put into Dubai, and further into the Far East, into the Philippines, et cetera. Those orders that I referred to were not huge deliveries. They were mainly Sotrain, and they were in the hundreds of thousand level value. They weren't the GBP 7 million size, of course, that was the big Chek Lap Kok order that we won. T hey are good size. We still quite like those sizes.
The more of those that we can win, the better.
We are also pushing hard in the covers area, as we call it. W e did have a pretty busy H1 on Sotrain, it is true to say. Some of this will take several years because these projects can take several years to be developed into a sales situation for us. I t is a case of getting specified early on and making sure that we follow those through to conclusion. That will be more readily available for us when we have got feet on the ground. That is why we are doing this, because we feel that we have got a very good product range and that we have got that opportunity of opening up opportunities in further afield into geographical areas that we haven't been before. I think that is all I can comment on at the moment.
Yeah. Thank you. One for me, I think. Since interest rates rose materially, have you looked again at transferring your pension liabilities? You are right, interest rates have risen materially. E qually, asset values also took a hit. Share prices took a hit in the same period. I n general, yes, deficits have been decreasing and opportunities for buyouts are there. As I said in the presentation, plan A is to maintain an affordable level of contributions and to get the scheme into a self-sufficient position in the medium term. We will be looking again in the next month or two at board level about the insurance buyout position of the scheme. If it offers shareholders good value for investing their funds, then it will be something we investigate further. I t is not something that we are committed to doing at this stage.
Could you provide more details on the investments plan for the coming periods, especially in relation to the new product development capability in house building products?
I don't think we can go into much detail, I'm afraid, because those are all quite secret until we launch them, for obvious reasons.
All I can say is that we have increased the R&D facility there. We've put additional resource in. We've got a dedicated area for it now. We've got a 3D printer in there. We are very serious about expanding our new product launches. I n terms of any areas, I'm afraid that's commercially sensitive, and I can't go into that, I'm afraid.
Thank you. Are you considering to do more M&A this year? If so, how would you go about funding it? Are you willing, for instance, to take on more debt, which might be GBP 10 million or more depending on what you buy? Would that not be very prudent in today's economic landscape?
Do you want to answer that?
Yes. I think it is unlikely that we will be doing another similar size deal to ARP in the next six months. We do continue to look, but I agree, loading too much debt on the balance sheet, in a time where we are still facing economic headwinds might not be the most prudent thing to do. Gearing, which is the most sensitive of the covenants is at 0.5 times our maximum, and the facility is 2.5 times, so there is a good degree of headroom there, and that is comfortable. I am sure the board wouldn't want to see that creeping far above one in the current environment. I think, as I say, in the next six months, I don't think we will be doing much. We will be concentrating on integrating ARP and delivering organic growth. Longer term, then that might change.
Short term, I think we have got plenty on our plate at the minute.
Yeah.
Can you give a bit more detail on the synergies expected from the ARP acquisition? What are the long-term strategic benefits of this acquisition, and how does it fit into the company's overall growth strategy? Sir, do you want to?
Can you repeat the final part of the question?
Yeah. Synergies expected from ARP.
Yeah.
What are the long-term benefits of the acquisition, and how does it fit into our growth strategy?
Well, yes. It fits into our growth strategy very well. You will have seen in the presentation that we discussed that. It is under the section page 20, value enhancing investment, and part of that is inorganic acquisition investment, so it fits perfectly in there. In terms of the reasons for the fit, page 22 show the M&A target characteristics that we have been looking for that this company brings to us. In terms of synergies, really purchasing of materials principally, and there are some significant opportunities there. As I said during the presentation, actually combining the purchases and also going for the company that has got the lowest costs anyway, should see some further reductions. W e are quite excited about the opportunity of that.
Then, actually within this presentation on page, well, actually it says 05 outlook, is the ARP Mustang seamless guttering and Colonnade swaged aluminum rainwater pipes.
We don't have a system like this at AWMS. These are low-cost entry points for gutters made out of aluminum. This will be a distribution through our own channels at AWMS, and at the same time, I touched on earlier that they do not have at ARP any drainage products. This is immediately that we'll be putting those through their distribution channels, which are strong going through to contractors. Therefore, there are a lot of synergies here, and we're actually very excited about being able to achieve them all.
Thank you, Paul. As the Hong Kong revenue that you expected to book in FY24 has moved into FY25, should we expect earnings in FY25 to be higher than those forecast by Cavendish? Cavendish left FY24 and FY25 forecasts unchanged this morning. First point is, Cavendish's forecast is Cavendish's forecast, not our forecast, so they own it. I think we were comfortable with where the forecast sits because we don't know the timing of any recovery in underlying markets which are really going to push our growth forward. We said we expect to be resilient while the headwinds are in place, but to benefit from the medium and long-term growth drivers that Paul mentioned in the outlook slide. Yeah, I think watch this space.
I don't think we're going to be. We're not calling when things will recover, but we are confident that they will, and we're confident that when they do, we will benefit.
Yeah.
When acquiring ARP, the company said the acquisition multiple is 6.8 times, expected to reduce below five times. This is higher rating than Alumasc itself trades at without the risk of uncertain synergies. What makes ARP a better business compared to the rest of Alumasc?
Could turn that around.
Well, I don't think ARP is a better business than Alumasc. I think it's a very good business joining a very good group. I think I'd argue that Alumasc looks to be undervalued rather than ARP overvalued.
Yeah. That's how I would answer that, too.
Quick one for you, Paul. Despite a very weak market, housebuilding products remain the best underlying operating margin at 24.5%. What competitive advantages does the group have in this area that don't exist in the other two? Is there scope to build similar competitive advantages in the other parts of the business, and hence grow operating margin more?
That's a very good question. We do see Timloc housebuilding products as leading the way in many areas, and they are highly efficient. They've got a highly automated plant. They're giving a fantastic 100% on time and full performance, and they're a beacon to be followed. They are, though, 95% of their sales are going only through merchants, and that does allow them to have set up, although it takes a lot of skill and effort to be able to deliver the next day for orders received by 2:00 in the afternoon. They have developed this niche, which has been very successful, and also in delivering lower quantities direct to site for merchants, which appears to be delivering a great service for them. In many cases, they won't see the product at all. It's just delivered to their customers. The product's good, quality is high.
Yeah, it's a great leading example for all of us, and particularly the fact it's been bringing out so many new products. I touched on before, 30% of its sales revenue are from product launch in the last two years. There are some great examples from it, which we will be looking to follow throughout the group. Yeah, good question, and we think about it all the time. Why is it doing so well? How is it able to maintain this margin? We think for many of the reasons we've outlined today, but it is also, we feel, the lowest cost manufacturer, which you have to be in any organization, really. It's giving a fantastic service.
All of those elements come together, and we are looking to see how we can launch more products throughout the group, because it is a very good example to us all.
Thank you. Do you currently expect the Chek Lap Kok contract to ship fully in FY 25? Have you hedged commodity or FX risk for this?
Do you want me to try?
I will do the second part.
Okay.
Yes, when we quote for projects like this, we have a strict time limit on acceptance of that quote, and it is done on the base of the knowledge that we have the supply secured at the price to service the contract. T hose numbers are locked in, and at the point we get the order, we will look to hedge out the FX risk as well.
The question as to whether it will all ship next year, I do not know. I am hoping that it will, but for two years running, we have said we have had this order and expect to ship at least some of it during that year. I would hope we will, but I cannot guarantee it.
Yep. When adjusting for the ARP acquisition, Cavendish has revenue for FY 25 increasing by GBP 3.5 million, which appear to be a decrease in revenue excluding the delayed Chek Lap Kok contract. How does it align to the positive medium-term structural growth drivers? Again, it is Cavendish's forecast, but personally, I am comfortable with modest expectations for FY 25 being in the market. If things improve, if we get a tailwind instead of a headwind, then we might expect to review those and possibly move them up. I would rather see definite signs of that happening. Medium-term, we do expect to benefit and grow. Short-term fluctuations due to market conditions will happen, and we have proved we can be resilient, and I think that is all I can say on that. Is there any risk of further level up within the group?
No.
No.
We do not install in any of our rest of the group.
That sort of contracting installation business is very difficult to forecast and very difficult to manage, and we now have a very simple supply-only business model. W e do not believe so.
Okay.
There was some excitement about the Middle East a few years ago. How is that area now?
Well, I think it is fair to say, as we commented on at our H2, our full-year results in September, from year to end of June last year, that there did appear to have been a bit of a slowdown in activity related to the football World Cup. We are gradually seeing it picking up again. That is how we would expect it to continue. There is certainly a lot of opportunities in places like Saudi Arabia, which we are following very closely as we are the rest of that part of the world, and hence why we have put somebody dedicated into Dubai, which I think demonstrates that we believe in the future of that part of the world.
Do you see the bulk of manufacturing remaining in the U.K.?
Yes. Yes, I do. If anything, it may increase, as we look at our political uncertainties around the world, without going into a lot of detail, but I think it is fairly obvious, in some of those areas where there may be a concern. I think if anything, that will bring more manufacturing back to the U.K. and Europe. We love our manufacturing companies. It is interesting, two out of the three of our divisions manufacture, the third does not. T here is less levers, that is in the roofing area, to push and pull to get to that 15%+ . W e are keen manufacturing people.
Has there been a recovery in the EU sales since Brexit?
I wouldn't say so, no. No, there hasn't been really.
Whether it's linked to Brexit, I couldn't really say. N o, I don't think there has in that sense.
No. I joined post-Brexit, but certainly the bulk of the opportunities I see in overseas sales are outside the EU.
Yes.
That resonates. U.K. market down 6% in H1. What was the consensus outlook for H2 in the U.K. market? I think you touched on that one already at the CPA forecast.
Yeah, the CPA forecast we quote, which is a reduction of 2.3%. If you can just bear with me as I go into the appendix. Yes. Sorry, 2.1% for the total construction market, per CPA of only a few days ago.
Thank you. I think that's about all the time for questions that we have, Jake.
Perfect.
Back over to you.
Paul, Simon, thank you very much indeed for being so generous with your time there and addressing all of those questions that came in from investors. Of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended, just for you to review to then add any additional responses, of course, where it's appropriate to do so. We'll publish all those responses out on the platform. Paul, perhaps before really just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company, if I could please just ask you for a few closing comments just to wrap up with, that would be great.
Well, first of all, a very big thank you for attending today. We do appreciate it very much. Against a difficult background, we grew our revenue and profit in H1. We anticipate H2 will remain challenging, but against that, we expect to be able to deliver in line with our full year forecast. I would put that as the board remains confident in the group achieving its full year forecast. Thank you very much.
Perfect, Paul. That is great. Thank you once again for updating investors this afternoon. Could I please ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback in order that the management team can really better understand your views and expectations. This will only take a few moments to complete, but I am sure will be greatly valued by the company. On behalf of the management team of Alumasc Group plc, we would like to thank you for attending today's presentation. That now concludes today's session, so good afternoon to you all.
Thank you.