Good morning, ladies and gentlemen, and welcome to the Lords Group Trading full-year results 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's 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's appropriate to do so on the Investor Meet Company platform. Before we begin, as usual, we would just like to submit the following poll, and if you'd give that your kind attention, I'm sure the company would be most grateful. I would now like to hand you over to CEO Shanker Patel.
Shanker, good morning, sir.
Good morning. Yeah, good morning. Thank you very much for joining us on our 2024 results presentation. The theme of our results is that we are well positioned for market recovery despite a difficult year in 2024. I'll move over to the agenda. I'll be doing an overview of our results, followed by a financial review by my colleague Stuart Kilpatrick, our CFO, and then I'll come back to a strategy update and finish off with an outlook for 2025 and beyond. We will then have an opportunity for attendees to ask questions. Moving over to the overview, what I'd like to say to attendees is that we've delivered a resilient performance despite the challenging economic backdrop. We all know 2024 was a much more difficult year for a variety of reasons.
The macroeconomic conditions in our economy were tightening, with higher interest rates, inflation being stickier than we expected, the upheaval of an election, and a budget that was highly restrictive for businesses. Despite that, we took strategic actions to protect our profitability and our cash flow, and we'll explain that as we go through this presentation. Overall, our revenues were 5.6% lower at GBP 436 million against GBP 462 million in the previous year. Our merchanting business, however, delivered a good result with a like-for-like of negative 3.6%. What we were really proud of is that recovering very strongly in H2, with 2.3% up in that part of the year. Our P&H revenue was down 10.2%, and that's in line with the market for boilers in the U.K.
Our P&H market is very sensitive to boiler volumes, and as the market contracted for a variety of reasons, again, we'll explain those as we go through this presentation. Naturally, our business incurred that decline. A bright spot in P&H is the fact that our investment in renewables has been rewarded with an increase of 99% in our revenues to GBP 5.5 million and continuing to grow as we invest in that segment of the market. Like all businesses, we took decisive action on costs. We're very proud that our colleagues, without affecting customer service, still saved GBP 3.7 million in overheads and costs on a like-for-like basis. Again, despite a challenging year, we still managed to put through some organic margin-created initiatives. We supported these initiatives with an extended product range, three new branches which opened in 2025 to date, and investment in our digital capabilities.
Finally, as we came into the new year, we completed a sale and lease back of four of our sites in merchanting for the value of GBP 13.1 million. This provides us with the additional liquidity to leverage our business for growth opportunities as the market improves. I'm going to hand over to Stuart on the financial review.
Thank you, Shanker. Good morning, everyone. I'd just like to take you through the financial performance for 2024. As Shanker said, revenue in the year was GBP 436.7 million, 5.6% lower than a record year in 2023 of GBP 462.6 million, which I think is quite a resilient performance in the year. Adjusted EBITDA was just 16.5% down at GBP 22.4 million, which is again fairly resilient in the markets we faced. In the year, we achieved a couple of property gains, so we reported here an adjusted EBITDA, excluding property gains, of GBP 20.6 million. The two property gains, one was in relation to our Park Royal site, where we negotiated a lease credit or a lease premium of GBP 1.7 million. Later in the year, we sold and leased back our George Lyons property in Heathrow, and that gave us a gain of GBP 0.1 million in the year.
Our gross margins, which are not on this slide, were fairly resilient as well. Our gross margin in the year was 19.5%, slightly down on the previous year where it was 20.0%. We will talk about how the margins moved in each division as we go through the slides. As Shanker said, we did quite a good job on operating expenses. You can see there GBP 64.6 million in 2024 compared to GBP 65.8 million in 2023. In 2023, we acquired a few businesses, so we have got a full year effect of those in 2024. If you adjust for those on a like-for-like basis, we were 6.5% lower in 2024, which is a pretty good performance, I think. Adjusted operating profit in the year was GBP 10.4 million compared to GBP 16.5 million in 2023.
The variation or the change in operating profit is greater than that EBITDA level. That is mainly due to the way we account for operating property leases these days. There is a greater amount of depreciation coming through in the operating profit line. Our earnings per share was GBP 0.0185 for the year compared to GBP 0.0435 in the previous year. What we have done with the dividend is we have scaled it in line with the adjusted earnings per share. You can see our dividend for the full year is GBP 0.0084 per share, with GBP 0.0052 being paid as a final compared to GBP 0.02 last year. That is a similar % tag compared to the earnings per share, which leaves our dividend cover unchanged at 2.2 times. There has been no change to our progressive policy.
As we see earnings increase as we come out of this economic period, we hope to improve the dividend in line with those earnings increases. If I turn now to the plumbing and heating division, it had a pretty challenging year. Just to remind you, the clean heat market mechanisms were introduced on January 1, 2024, but then later reversed towards the back end of March. That caused significant disruption to volumes and to pricing. In addition, we had quite a bit of administrative time refunding some of the impacts of that to our customers during quarter two and quarter three. As you can see, there was a significant revenue reduction in plumbing and heating in the year, 10.2% lower than the previous year. It was very much in line with the U.K. boiler market, as Shanker mentioned, which was down by 10.3%.
Given boilers are a dominant feature of our plumbing and heating division, that aligns fairly sensibly. Our market share was maintained at about 11%. You can see the driving force there. The revenue reduction, which is about GBP 25 million, you can see in the graph to the right there, that causes a reduction in EBITDA of GBP 3.4 million. As I have mentioned, the pricing disruption caused by clean heat led to our gross margins being lower, so they were 12.6% this year compared to 13.4% last year. That had an impact of GBP 1.9 million on our profitability in the year. We made some savings in overheads, GBP 400,000. Overall, those two dominant factors meant that our EBITDA was GBP 8 million in 2024 compared to GBP 12.9 million in 2023. Quite a significant reduction.
A more positive story in merchanting, where you can see our revenue is very similar to previous year, GBP 214.3 million. If you adjust for those businesses I mentioned that we acquired in 2023, which have got a full year effect in 2024, you get a like-for-like decline in the Shanker merchant of 3.6%. In the second half, we were positive by 2.3%. Particularly strong in Q4, we were up by 11%. Our gross margins in merchanting held up fairly well, 26.7% versus 27.5% last year. Part of that decline was due to the mix. Some of our businesses performed particularly well at the lower margin aspect of our brands, and that dragged down the gross margin by about half of that variation. Operating expenses, you can see, are slightly lower than previous year at GBP 44.7 million.
Again, adjusting for a like-for-like basis, it's an 8% reduction, which again is pretty encouraging. If we move across to the EBITDA bridge, GBP 14 million at the start in 2023, the like-for-like decline in revenues caused a GBP 2.2 million drop in profitability. The margin decline of 0.8% caused GBP 2.4 million of reduction in profitability. This has been offset by the overhead savings we made of GBP 3.3 million on a like-for-like basis. The property gains we've made that I've mentioned, which are a delta of GBP 1.5 million on the previous year, and a little contribution from the acquisitions made in 2023, meant our adjusted EBITDA was 3% higher in 2024 at GBP 14.4 million, which we think is a pretty credible result for the year.
If I turn to our cash flow for the year, our operating cash conversion, which is the ratio of operating cash to our adjusted operating profit, we delivered 71% conversion compared to 92.9% in the previous year. A pretty credible result, I think. If we look at the chart, our EBITDA then bridges across to our free cash flow, which is essentially the operating cash flow, that is the tax and interest. You can see GBP 22.4 million of EBITDA, an outflow of GBP 3.8 million of working capital. That is largely due to lower payables in plumbing and heating. As I have mentioned, clean heat market mechanism caused a huge amount of activity at the back end of 2023, which meant we had a higher amount due to our suppliers at the end of 2023 than we did at the end of 2024.
Tax and interest, GBP 4.2 million we paid out, and net capex was GBP 0.1 million. Two couple of dynamics here. Essentially, we spent GBP 3 million on capital expenditure, GBP 1.2 million on digital and ERP, where we put a new ERP system into plumbing and heating. We continued our branch refurbishment, so we spent about GBP 0.6 million on our AW Lund branch acquired in 2023. We've invested a couple of hundred thousand pounds into our Maidstone branch, which has been open under the George Lyons banner as of the 1st of January 2025. Continuing to invest, as you can see, that was offset broadly by the Colnbrook cash flows. We had an inflow of GBP 3.8 million from Colnbrook's sale and lease back, but we'd offset that by about GBP 900,000, which was drawn out in the first quarter as part of the original transaction.
All in all, that left us at GBP 3.1 million of free cash flow, a little bit lower than last year, GBP 8.7 million, and that's mainly driven by the working capital outflow I've mentioned and the slightly lower adjusted EBITDA. We've been fairly prudent, as we've mentioned, in terms of managing what we can control. M&A spend is much reduced, so GBP 3.5 million in 2024 compared to GBP 12.3 million last year. Dividends, slightly lower at GBP 2.7 million compared to the previous year. All in all, that gives us a net debt increase from GBP 28.5 million to GBP 32.4 million and a reasonable performance given the dynamics of the year. If I now turn to the balance sheet, you can see the operating capital in both there has declined a little bit by GBP 2.4 million.
Effectively, the George Lyons site sale and lease back has reduced the tangible fixed asset line significantly by about GBP 6 million. You can see what I've been talking about with the payables line there, declined from GBP 95.3 million to GBP 86.6 million, largely driven by this plumbing and heating accentuation in December 2023. We've made good progress in working capital in merchanting in the year, but slightly offset by that movement there. Working capital to sales ratio was 8.9%, which is up, as you might imagine, on 2023 given the working capital outflow. Obviously, we'll be trying to trim that away as we go through 2025 and deliver more of our profitability into cash. On the banking side, as I've mentioned, our net debt was GBP 32.4 million.
That left us with headroom of GBP 62.6 million at the year end on the basis of GBP 95 million of total facilities. Our leverage, which basically compares the net debt to our UK GAAP EBITDA, was 2.73 times compared to a covenant of 3.75 times. Plenty of headroom compared to the covenant. What we have done since the year end is, obviously, as Shanker mentioned, the sale and lease back, but we have also trimmed our facilities by GBP 20 million as we cannot really use them. It does save us some future commitment fees by having those facilities there, but that cannot be used. Hence, our headroom is slightly lower than we reported December. Turning now to the pro forma impact sale and lease back that we have just done. As Shanker mentioned, we sold and leased back four properties in the merchanting division.
Gross proceeds of GBP 13.1 million. This slide aims to show what would the impact of that have been on the 2024 numbers had we done this transaction at the end of December 2024. There is a gain from the property disposal of GBP 2.0 million. That would have increased our adjusted EBITDA by GBP 2 million. Clearly, it would not have had any impact on our adjusted EBITDA, excluding property gains. What we have on the operating profit line now is that GBP 2 million falling through. That is offset by increased IFRS 16 right of use asset depreciation by GBP 0.3 million per year to GBP 1.7 million of improvement. If we then look at the net finance expense, we expect that we will save about GBP 700,000 of bank interest based on current rates on an annualized basis.
Again, that's offset by the IFRS 16 accounting for operating leases or right of use assets by GBP 400,000. There is a net GBP 300,000 benefit on the interest or net finance expense line, which means effectively the depreciation and the ROU interest pretty much match the cash interest we save on the bank side. You end up with a PBT impact of GBP 2.0 million, which is the gain on the sale of properties. Looking forward into the net debt number, you can see we've reduced our net debt by about a third, GBP 32.4 million at the end of the year. Net proceeds after tax were about GBP 11.6 million. We're expected to pay about GBP 1.5 million of tax on the gain, takes us down to GBP 20.8 million on the pro forma basis. Slightly offset by lease liabilities, obviously going up as part of our IFRS 16 accounting.
They go up by GBP 8.4 million. You can see the impact on leverage. Leverage was 2.73, as I just mentioned. It goes down by just under 1.0 times to 1.75 times. That leaves us in a very strong position to go forward with leverage reduced opportunities, both organically, as we have touched on, and already opened three branches this year, but also strategic and carefully considered M&A opportunities that are around. On that note, I will pass back to Shanker to talk about the strategic update.
Okay. Thank you very much, Stuart. In terms of our strategic updates, our strategy is really a combination of margin accretive organic growth and selective, carefully chosen M&A. On the left-hand side of this slide, you will see the four key blocks of our strategy, starting with product range expansion.
We've previously always maintained that one of the ways that we can grow our business is to add to our existing product range. We've demonstrated that last year with some exclusive distribution agreements with a couple of manufacturers, Clivet in air source heat pumps and the renewables fragment of our market or segment of our market. Navien, which is the world's largest boiler manufacturer, is a South Korean business whose products we will be exclusively distributing in the UK, helping them to grow their market share in the UK. They are the largest boiler supplier in the US, and they've got a tremendous opportunity to grow in the UK market. In addition, we've added distribution agreements, not exclusive ones, with Viessmann, which is again a very large manufacturer and producer of fantastic products in the plumbing and heating world, and Longwood Thermotechnik in radiators.
On the merchanting side, we've taken a cladding product on called Cedral and PRB Render. These products have associated additional sales for our merchanting businesses, as the customers can then buy a variety of additional products that go with their projects. Product range expansion is a big pillar of ours, and we've demonstrated that we're continuously increasing our range. Digital expansion comes next. One of the things we invested heavily last year is in a customer portal in our P&H business. The reason for that is to reduce manual processing of orders. We have a lot of repeat orders from the 2,000 merchants that deal with us on a next-day basis. Allowing them to do this digitally reduces error rates, increases efficiencies, and reduces the need for manual processing.
Above all, from a customer service perspective, it allows them visibility on our stock in each of the locations from which they get served. That is vital for us. It is a very large investment that we have made on behalf of our customers so that their lives are made easier in dealing with us. We have continued our investment in automated proof of delivery. Automated proof of delivery is not anything new. For a lot of us, we see that on a daily basis through businesses like Amazon, DPD, etc. When you are dealing with HGVs and trucks, it is a lot more difficult to provide that. We have invested heavily in that particular area. The reason for that is that it allows us logistic efficiencies. Again, as we mentioned earlier, we are seeing some cost pressures, especially things like NI and national minimum wage.
One of the ways we think we can keep our costs down is by becoming more efficient. Expanding and investing in technology allows those efficiencies to come through. We're also making investments in artificial intelligence and around chatbots and apps, again, to improve customer service. We're also working on last-minute or last-mile logistic companies such as TradeCart to offer our customers products when they want it, how they want it, and how quickly they want these products. Lots of investments will continue in our digital initiatives. In terms of new branch openings, we mentioned that we've done three in a very short period of time. Highlighting these is the first one we opened in January in Kent under our George Lyons brand, which takes George Lyons to five branches. When we acquired this business in 2016, it was a single site based in Heathrow.
We've now expanded it to five sites, all of which are between one and a half acres to two and a half acres and trading very well. Mansfield under AW Lund has been its latest acquisition. The process took a good part of about nine months. A lot of work happened in 2024 for us to be able to open this site on the 1st of May in Mansfield in a two and a half acre site. That AW Lund goes from two branches to three branches. It is geographically positioned very well between Dewsbury, which is the northernmost part of AW Lund, and Tamworth. We hope to see some great synergies as we expand our geography for that particular brand.
Our Condell brand moved into a new site in Hemel Hempstead to serve the North London and Home Counties markets and the specialist products that it supplies of lintels and Velux roof windows along with quite a lot of plastic drainage. The business is set up for growth in a nice unit in the north of London. Our latest opening on Monday will be Bicester under the Lords Builders Merchants brand. Bicester is geographically very well placed. It is a growing market with lots of house building and an affluent area. We managed to take a site that was operated by a builders merchant for many years. Unfortunately, that merchant fell into administration. Instead of buying the business, we actually took over the site. We have reduced the outlay that we have spent in order to acquire that site.
It's been a Builders Merchants for the best part of eight to nine years. We are hoping that it'll go off to a very good start and shows our differentiated models of being able to acquire sites without having to acquire the businesses. We have M&A. We just wanted to reiterate our history of M&A in this particular space. Sixteen businesses have been acquired over the last 10 years, all of them very well integrated into our group, an average ROI of over 25% despite challenging market conditions. The opportunity to consolidate still remains. It's a highly fragmented market with Lords Group Trading holding less than 1% of this addressable market. We have also invested in our renewables expertise with the purchase of Ultimate Renewables Supplies in October 2024. As you have seen, we have seen the market for renewables increase.
We have got a good foothold to be able to serve that market as that growth continues. In terms of our points of difference, three key blocks which I cannot reiterate enough. Customer service is at the heart of everything we do. It sounds like a very simple point of differentiation. What is very clear to us is all the work that our teams do in providing our customers with an excellent service. The reason why that matters is our business relies on long-term relationships. If we focus on customer service above all metrics, then we will have long-term sustainable demand. We can see that. We can see that demonstrated in our numbers. Despite a challenging market backdrop, we have held our numbers quite well. That is because we continuously focus on customer service excellence.
We also think we're different in the sense that 80% of our business is in the RMI space. The RMI market is large, whilst impacted by high interest rates over the last 18 months. It is still a large market, and it's highly sensitive to interest rates and macroeconomic conditions. As those conditions become favorable, we believe that our focus in RMI will prove to be beneficial to our business. Our strong track record in M&A is, again, a point of difference as a business that not only grows organically, but also grows through strategic, disciplined M&A in a highly fragmented sector. What is our track record of strategic execution? You see the graph on the left-hand side shows our revenue. You can see over a five-year period, a CAGR of 35%.
It's a strong growth in revenue since 2019 and equally a strong growth in profitability and EBITDA of 56% from 2019, albeit, of course, recognizing that the last few years have been quite challenging as a market has seen a massive downturn. We are resilient despite these downturns. We also believe that the medium-term drivers in our market are very good. Over 60% of the housing stock still remains to be over 50 years old in the UK. That in itself is pent-up demand that will come back as the economic environment becomes beneficial to our end consumers. Government targets of house building and its supporting infrastructure construction will also help to drive our business and our markets.
We are very well positioned to take advantage of that, not only in the new house build segment, but also in infrastructure through our brands such as George Lyons, Heavy, and AW Lund. We know that we are very closely correlated to lower interest rates. Therefore, a lower interest rate environment will benefit our core RMI market. In terms of merchanting, what we would like to demonstrate here is the resilience of our business by showing you the graph on the right-hand side. This is data that we have collected from the BNBI showing what the market has been doing over the last 10 years.
From May 15, you can see a steady growth of 3.7%, then starting to wane in 2019, which is called the Brexit year, a large downturn in COVID between 2020 up until sort of early 2021 when the markets really took off, culminating in the peak in 2022. What has happened since 2022 to volumes is really quite stark. That is that volumes have fallen by 25%. The business has been operating in volumes which in May 2024 were 25% lower than the COVID peak and 19% lower than May 2019. What we have therefore done in terms of our strategy is ensure that we have the specialist segments in our merchanting business, such as roofing, dry lining, insulation, civils, alongside, of course, investing in our general merchanting to provide our customers with this total building solution. That is where our strategy will be.
We're across general building materials as well as specialists such as roofing and dry lining and civils. We will be expanding our branch network selectively, which has seen that we've opened three in one year, and we'll continue to upgrade our sites. A big part of our model is to invest in what we call our three Ps, investing in our people, investing in our plant, and investing in our premises. Most of our premises are large sites between one and a half acres to up to five and a half acres. Our model is based on continuously investing in these sites to drive organic growth. Organic growth drives free cash flow. We use that free cash flow to either expand our network or to buy businesses. All of this is underpinned by technology investment and back-office processes. That is what helps us to drive efficiency.
We measure efficiency quite closely. You can see that we've demonstrated this through having overhead control in 2024. In addition, we leverage our digital offering to offer a best-in-class customer experience. If you use our websites, you not only can buy with ease using our website, but a lot of our web customers, we will follow up with a phone call or an email to really give them that personal service. An online and offline experience that is not matched by our competitors and differentiates our business. In plumbing and heating, what we see on the right-hand side is the fact that boiler volumes in the UK. have been down by 10.4% since their peak in 2021. At the same time, the heat pump market has been showing really good signs of growth, albeit from a small base. The growth is about 24.7% in compounded terms.
Our research indicates that some of the reasons why the boiler market has seen this decline since 2021 is that the average life of a boiler has been extended from 10 to 12 years. That has an impact until you see a massive pull-through in future years and the new normalization. We have also been impacted not only by the clean heat market mechanism, but also by the cost of living and the fact that annual repair contracts have resulted in people repairing their boilers rather than replacing for the time being.
The impact of the energy transition is that 75% of air source heat pumps are likely to go to new build, which means that there will be stability in the gas boiler market because, unfortunately, the technology does not exist at this moment in time for a large-scale retrospect market where the boilers have been taken out and replaced exclusively by air source heat pumps. Our research also suggests that there is not a clear cost advantage in this retrospect or replacement market. Therefore, government subsidies will be absolutely necessary to drive growth, but they are at this moment unlikely to be increased. What have we done and what is our strategy?
Our strategy is to flex our business model to meet the resilience so that as the boiler market reduces, because there is a likelihood that new build will be mandated to be exclusively renewables, we are well placed in that segment as that market grows. You can see on the right-hand side in this graph that heat pumps are supposed to grow by 26.6% between 2024 and 2030, whilst boilers will grow at a benign 1.3%. The total units will be 3.9% growth over that period. The 3.9% growth matches the sort of growth that we saw in merchanting between 2015 and 2019. It gives us the confidence that we have a market that will stabilize and will grow. There are two different aspects of that market, and we need to be flexible to meet that market.
In addition, our flexibility will also lead to driving non-boiler products, which will be higher margin and driving that through our Mistral Central Heating brand. In terms of strategic summary, we reiterate the fact that we have an opportunity for volume recovery in merchanting. We will be driving operational gearing whilst tightly controlling costs. We have demonstrated the fact that we are a lean business. Our belief has always been to be lean all throughout the cycle, the upcycle and the downcycle, so that we do not have to take drastic action in a downcycle, an action that would lead to customer service issues. I think consistently we focus on customer service, so we will continue to invest right throughout the up and down cycle in customer service. That is shown in our results.
In the P&H side, we will be increasing or improving our profitability through margin mix and wider product range, investing in renewable growth, especially since the acquisitions of Ultimate Renewables. We will be looking at our operating model to drive further efficiencies. We have seven depots. We are looking to see how we can serve our markets better and reduce cost potentially. We will be leveraging our digital team across both of our divisions to offer this best-in-class customer experience. Like good, healthy businesses, we will be driving working capital reduction to deliver higher cash conversion. Ultimately, all of that feeds through into selective M&A or profitable cash-positive bottoms. An update on our ESG strategy. We have been busy implementing our strategy, so we have a clear stance on how to address our most significant environmental impacts.
What we've done is reduced our scope three emissions from waste diverted from landfill by 51%. Our total emissions in 2024 are down 12.5% from 2023. We have a clear target for our net zero in scope one and two by 2035 and scope three by 2050. The strategy has been laid out and in turn been communicated. One of the things that we're quite proud of is the fact that our vehicle fleet, which comprises 95% of our scope one emissions, has trialed HVO in three branches. As that particular alternative fuel is more widely available, we'll be looking to roll that out into other branches across our network and thereby reducing our scope one emissions drastically. We've also invested in a telematics software system called Samsara across our P&H fleet last year and now into our merchanting fleet.
That allows us to improve driver efficiency and through better fuel efficiency for our businesses. You can see that through our numbers. We have revised our supply code of conduct as we do import products and deal with products from countries where there are potential issues. We have a very strong mandated compliance policy that we managed to implement last year in conjunction with our buying group, HMB, and our industry federation, the Builders Merchants Federation. We are very proud of what our foundation has done, which has distributed GBP 70,000 of the grants in 2024 and also match funded many colleagues supporting projects that have benefited over 1,800 people in just one single year right across our branch network. In terms of the outlook, reiterating our investment case first, the fact that we believe we are still a leading high-growth distributor of building materials in the UK.
The reason why we think that is we've got six key areas of our investment case. Firstly, we have a tremendous track record. We have been a top 10 UK. merchant now for many years and continue to hold within the top 10. We've recently hired a new COO in our merchanting division from the industry. That shows that our business is all about making sure we have the management strength to be able to deliver growth. We have a good and strong financial profile with a high cash conversion. Our M&A is value-added and accretive. Sixteen acquisitions in 10 years is a record that we're proud of with a very good return on investment. Our markets are huge. There is a substantial RMI market. Within that, we've produced a KGAR of 35%. As we see that market recover, we're certainly well placed to take advantage of that.
We're also able to demonstrate organic margin accretive growth through branch openings, three branches being opened in a short period of time. Again, it's a testament to the wonderful colleagues that we have in our business who are agile, nimble, and able to deliver on opportunities as it arises. All of this is encapsulated by the key differentiation of ours, which is we have a unique customer-first proposition. We can see that through highly consistent high scores in FIFO and other rankings. Summarized with the outlook, firstly, we believe we've navigated extremely challenging conditions in 2024 and delivered a resilient performance. We appreciate and recognize that consumer confidence still remains weak in the UK, but there is a possibility of a gradual recovery expected in the RMI demand section.
That will be largely dependent on government policy and more on the interest rate environment, which we see to be slightly loosening from its restrictive 18-month period of the last two years. There are headwinds in increased payroll and taxes and minimum wage, which will mean that we will need to ensure strict discipline on maintaining our overhead control. However, all said and done, the medium-term outlook is positive. That is driven by the prospect of lower interest rates over the next five years and by supportive government policy. In terms of our ability to grow our business, the sale and leaseback of our four properties, which has completed in the last few months, has provided us with additional liquidity to leverage growth opportunities as the market recovers and as these opportunities present themselves to us.
I'd like to end by the statement that's in the last bullet point is our Q1 revenues have been very strong for 2025. The P&H business is up 22%, albeit against a weak comparator due to bill forward of boiler volumes ahead of price increases, but we still think that that business will start to recover. Our merchanting business is up 11% as we continue to deliver on the momentum that we gained in Q4 of 2024. Thank you very much, and we'll move forward to taking questions.
Perfect. Shanker Patel, if I may just jump back in there, and thank you very much indeed for your presentation this morning. Ladies and gentlemen, please do continue to submit your questions just by using the Q&A tab that's situated on the right-hand corner of your screen. While the team take a few moments to review those questions that have been submitted already, I'd just like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, can all be accessed via your investor dashboards. Shanker Patel, as you can see there, we have received a number of questions throughout your presentation this morning, and thank you to all of those on the call for taking the time to submit their questions.
At this point, if I may just hand back to you just to read out those questions and give your responses where it's appropriate to do so. If I pick up from you at the end, that would be great. Thank you.
Okay. We'll take them in order. First question from Kamil. What are the institutional concerns themes of the earlier call?
I think the institutional concerns historically have been the level of leverage that we've had in the balance sheet and the level of debt given the relatively high interest rate environment we've had the last 18 months. We believe we've solved that with the sale and lease back we've just announced a couple of weeks ago. It's moved our leverage down significantly and puts us in a good position to take the business forward, as Shanker mentioned. I think it was mainly debt. We're obviously performing slightly better than our competitors in the merchanting sector. Like for likes in the first quarter, Shanker mentioned, we're plus 11% in merchanting. That's slightly better than the published results of our competitors. Hopefully, that will continue throughout the year.
Second question from Gavin L. Has the headcount been reduced from what as part of the cost-saving initiative?
I think in September 2023, our headcount was about 960, 970. Our current headcount is about 912, despite adding on the three branches that Shanker mentioned. We have reduced roughly around 50 or 60 heads. Obviously, it is a very fast-moving statistic. Obviously, as Shanker was keen to point out on his presentation, we are very focused on customer service and availability. We cannot ruin that by taking out too many heads. We are quite conservative. We do not run with heavy costs anyway. We like to be lean on the upswing as well as lean on the downswing. That is where we are on headcount. Toby Thorrington, Toby T, sorry. How much of the GBP 3.7 million identified cost saving was realized in 2024? The answer to that was all of it.
That's a historical number of 3.7, which is the like for like once we adjust for businesses that have been bought in 2023 and therefore did not have a full year in 2023.
Okay. We've got Gavin L. again, plans for more branches, GBP 500 million revenue target still valid.
Yes, very much so. We were reviewing the target just the other day. When we set that target, what we did not know was that the market was going to drop by 20% in merchanting and 10.4% in P&H. When we look at our performance, we have not dropped our revenue by that sort of level compared to the GBP 500 million target. Certainly, with the initiatives that we have planned for more branches, as well as just general initiatives branch by branch and business by business, we certainly feel that GBP 500 million is a credible target for us to achieve. I would like to say in 2025, but it is still a target that we are very confident that we will be able to achieve in the medium term.
All right. Next question. John Yale, congratulations for great expansion steps. Any new registration boosting?
I'm not sure what is meant by new registration, but what is really boosting us is the fact that we're starting to see housing transactions move in the right direction. We're starting to see mortgage approvals moving in the right direction. We're starting to see capacity being taken out of the market as businesses, if I take the Bicester example, businesses that were underinvested by their owner-managers failed. Our model, which is slightly differentiated, which is investing in our business, we have tremendous opportunity to expand. That's what we're doing. We're taking advantage of the conditions for us to be favorable for organic expansion. We are also continuously looking at M&A opportunities, but we have a very disciplined approach to M&A. Therefore, we will only carry out M&A at the right time under the right conditions with the right particular deal.
I hope I've managed to answer that question correctly.
What proportion of sales are being closed online?
As a general rule of thumb, we operate between 6%-10% of all of our sales being online. What we really are more focused on is what we call an online in-store approach. We know that a lot of our customers' journey starts online or it starts in store. Our differentiated customer service model is that we will trade with you whichever way you want to trade with us. If you want to trade exclusively online, then we have facility for you to do that.
If you want to start your journey online but place the order on a telephone, then of course, we've got a fantastic internal sales team who will pick up your phone call, recognize that you started your journey online, close it offline, or actually provide the advice that you might need and the conversation offline only for you to go back and transact online. We've got branch networks so you can physically turn up, have a conversation with our customer, with our internal sales team, branch team, and then transact online if you want. There is the fact that at any point, if you want to deal with any of our colleagues, the facility to do so via email, via our portal, via calling us, visiting us, and us visiting you as a customer, all of that exists. It is a business that takes digital initiatives.
This does not say that we exclusively want to be digital because we do not think that that is good customer service. That is an efficient manner in which you can transact and maybe more efficient for the business than necessarily for the customer, especially when you are dealing with thousands and thousands of products, a lot of which the customer does not know how they fit with one another or what actually they want. We try to mix the best of both worlds, the offline world and the online world. That is really our differentiated proposition. We are not going to be going to our businesses and saying, "We are all digital." We do like digital businesses as long as they are supplemented by physical locations and customers being able to visit us physically or to be fulfilled locally. That is the key differentiator for us.
Any more questions? Right. Johnny's come back and said, "Okay. Legislation.
Legislation for us is two-sided. There's a lot of legislation which is a regulatory burden on businesses, and we all know that that comes thick and fast. There are aspects of legislation which are very helpful for us. If we look at the government's stance on clean heat, firstly, as and when they mandate new builds to move to exclusively renewable products, so if they ban the use of gas boilers in new builds, that will be helpful to us. We don't sell boilers into new builds currently. When they move to renewables, we will certainly be selling renewables into new builds because renewables largely goes into new builds. Within that, we don't sell renewables currently to the large house builders. We sell them to small to medium-sized house builders.
If the government pushes along with allowing planning permission to be much more efficient and speedy for the small to regional house builders to build, that will help our markets massively. Overall planning permission constraints that exist, if those are removed or even amended so that the time it takes to get planning permission, the type of planning permission that you get is favorable, that would naturally feed into our end markets and naturally feed into our business. On fire, there is a big push post-Grenfell for there to be a much more stricter fire strategy for new builds and, in fact, for many buildings, including high-rise buildings. Whilst we're not currently in that market space, we think that that's a growing market for us to potentially enter into. We have the merchant network. We know how to sell products.
We know how to bring products into the market. With our infrastructure, that's an area that's driven growth, is driven by regulation, and it's only a matter of time before we start to find our position in such markets. I hope I've answered that question second time around.
Shanker, if I may just jump back in there, and thank you very much indeed for being so generous of your time and then addressing all of those questions that have come in. 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. Shanker, perhaps before now, just really 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.
Thank you very much for attending our results presentation. As I reiterate, our business is well set to take the opportunities and is well positioned for market recovery. We believe we have delivered a sustainable and resilient result in 2024. We would like to end by thanking all our colleagues in our business, all 912 of them, for the great efforts that they have made in making sure that our business has all the opportunities to grow that it currently has.
Perfect. Shanker Patel, thank you once again for updating investors this morning. Could I please ask investors not to close this session as you'll 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'm sure it will be greatly valued by the company. On behalf of the management team of Lords Group Trading, we would like to thank you for attending today's presentation. That now concludes today's session. Good afternoon to you all.