Good morning, everyone. Welcome to the SigmaRoc Annual's meeting, where we'll be discussing our 2024 results. Our Chairman, David Barrett, CEO, Maximilian Vermorken, and CFO, Jan van Beek , will shortly take us through the highlights of the 2024 numbers. There'll be a Q&A at the end. If you could say your name and raise your hand, whether that's online or in the room, in order to ask a question. The presentation will be available on our website at the end of this webcast, and I'll hand you over to Maximilian Vermorken to take us through the numbers.
Excellent. Very welcome to everyone. Thank you for joining this presentation of our 2024 results. We are on page four, slide four, for those online. A few highlights first, and then some operational review, and then some finance strategic review afterwards, and then an outlook. When it comes to highlights, first, transformational alignment, limestone acquisition, which we did at the very end of 2023, is now fully integrated into the business. We thank the IT and integration teams in our group much because they have done a fabulous effort to do this so smoothly. It allowed us to launch a synergies program, a very aggressive one at that, already delivering EUR 9 million of the targeted minimum of EUR 30 million already in this calendar year, 2024. The minimum target, therefore, has now been increased for the second time to EUR 40 million to GBP 33 million.
have also continued on our course to divest non-core assets, which we started in 2023 already and have continued in 2024 with some very good valuations on the assets that we have sold. Across the year 2024, the markets were challenging, volumes in particular, but we have managed that very well through those conditions. That led to EBITDA and EPS on slide five ahead of consensus, a 240 basis points increase in EBITDA margin. Very happy with that, including very robust underlying cash flow, free cash flow, as well over 50% conversion. We are gearing, therefore, on track. We are ending the year close to two times, an eighth year of consecutive EPS growth, which we are extremely pleased with.
If we go to a summary of the results, and I won't dwell on these very long because Jan will take you through it in detail, but the highlights here are nearly EUR 1 billion in turnover for the year. That's the actual figure. On a pro forma basis, that's a 2% drop. Volumes and price effect, obviously, as I mentioned, but we've managed to increase EBITDA by 2% on a pro forma basis to EUR 225 million for the year. The margin in EPS highlighted there as well. Free cash flow conversion on the next line, 52.8%. We're very pleased with this. It shows the potential for this group, leading to leverage of just over 2, and a ROIC of 11.5%, nicely on track for the 15% long-term target.
If we look at these various aspects from an operational perspective in a bit more detail on slide seven and on, we present you first on slide eight, a map, a map of Europe. These are the reporting regions as we go forward. There are four in total: U.K. and Ireland with the Channel Islands, West Europe, which includes Benelux, France, and Spain, Central Europe, which is the German, Czech business, the Polish business, the Baltic states, and then last, the Nordic business in the north. We're giving you also some market positions there on the slide as a way of reference. A few slides to give you an idea of how our trading looks by segment and by region. Slide nine is several pie charts. As you can see, Central Europe is there for the largest region, with a pro forma number of EUR 1 billion, 42 million in turnover.
Nordics follow, West Ireland and U.K. next, and then Western Europe last. Western Europe has obviously shrunk a bit with the divestment of some of the assets that came out of that region. By segment, the largest segment remains construction, but now lower than before, 45% only, industry next and environment last. Into those segments, we sell mostly high-end minerals, high-grade minerals, 73% of the group, value-added products next, and then construction last. When we look at it on a regional basis, on slide ten, U.K. and Ireland first, flat revenue year on year, obviously much exposed to residential and generally more generally construction. As a result of that, a slight softening in EBITDA for the region, but the performance of that region was all in all very, very good. We see some nice upshoots and green shoots there for the future. I'll come to that later.
West Europe, fully construction exposed, fully a lot of residential exposure too. As a result of that, a slight softening in turnover and EBITDA. I need to highlight here that the EBITDA is softer also because of stock revaluations and stock movements there, which need to be taken into account. If that is taken into account, the EBITDA is normalized to minus 3, which in the context of the residential market is very solid. Central Europe then, nice performance, flat-ish revenue, also some FX effects through there, but EBITDA up 8%, margins up very solidly. This is in particular to do to good economy in Poland, fantastic progress in the Baltic states, and for the rest, good performance out of the FELS and the Vitasoft business, which we acquired at the beginning of the year.
Lastly, the Nordic business, stellar performance in the north, flat revenue, 6% up in EBITDA, margins up. Here, the team has performed very nicely. This is the Nordkalk business. Pulp and paper has done well. Footprint has expanded slightly with the integration of Björka Mineral and all of those performed very much in line and above expectations. We look at this on the next page from an end market perspective. There are three big segments we sell into on page 11. Industry, that is still softer obviously for the year due to macro effects in the automotive industry. Paper, pulp, and board, very solid, particularly the board and cellulose businesses in Finland with no material disruptions from strike action and other things. Chemical in Germany in particular performed well, want to highlight also in Poland.
Mining, again, same sort of effect there, and that's particularly more in Scandinavia. When we look at the environment, the environmental section is food, water treatment, flue gas treatment. Flue gas treatment, softer year. This is weather dependent. The more wind energy we generate, the less gas and coal we burn, and therefore fewer demand for our products. Sugar in particular in the food segment did extremely well, whereas did water treatment, and therefore good performance for the year. Construction last. Infrastructure, the largest section of that, very good and very solid, continues to operate on either stimulus from the COVID era or new infrastructure in relation to the energy side of things. We are particularly pleased.
Residential construction now smaller than the infrastructure side of things, challenging, challenging in certain geographies, but we see this slowly turn around as interest rates are coming down. A last split to give you full context on our various products by end material. High-grade minerals first, that's 73% of the group, which includes lime, hydrated lime powders, flours, high-grade limestone, wollastonite, other minerals. Slight increase in volumes, which we're very pleased with. The effect on revenue there is primarily FX related. From that perspective, a very good and pleasing year. Construction aggregates is the second bucket against some effects in the revenue line. Still good performance for the year, slight volume reduction, and that has to do with obviously the weakness in residential construction. Value-added products last, same effects. This is also mostly related to construction again.
Asphalt, dimensional stone, these sorts of things are in there. Slight reduction in revenue, also effects related to a degree, but also volume related here as well. 200,000-ton volume reduction. Pleasing year anyway, given the backdrop. That is sort of the segmental review. If we then go to slide 13, some ESG statistics, which we've highlighted, and here we're particularly pleased. Progress on all metrics that we track, emissions intensity, and this we track since we got into lime, which is obviously more energy intense. 2021, 46% reduction. Energy intensity, 10% year-on-year reduction. Alternative power use is now 120% increase for the total group, and we have 100% fossil-free electricity right in Belgium, Sweden, Finland, Germany, and the Czech Republic. From that perspective, fantastic progress. Injury frequency, year-on-year reduction of 18% to TIFR, the tracker for safety. We have done 180 site audits on the safety perspective.
That is 180 times that people went to various sites. A small team of three that audited the safety on the various sites is stellar performance there. The net zero roadmap has obviously been updated for the inclusion of the new businesses. There you will find the full roadmap in the appendix of this slide deck. The key highlights there are all kilns CO2 neutral by 2038 and net zero by 2040. Those statistics are the same as before, so before the integration of the CRH lime and limestone assets. That completes an operational review, and I will hand you over to Jan now to my right for the financials.
Thanks, Max. Yeah, on slide 50, you can see all the elements of the journey that we've gone through as a company. Two reverse takeovers behind us and continuous improvement in between years. Revenue, as you can see, up 72% from a 2023 perspective, CAGR versus 2020, 68%. Very nice. Same with EBITDA following that with similar numbers on the growth side. Even though the economic climate is volatile at the moment, EBITDA margins, we were able to steadily improve up to 22.5% in 2024, driven by the lime additions from CRH, as well as tight control on the synergy execution there. If you look at underlying EPS, structurally going up despite all the acquisitions and underlying expenses that comes with that, 8.4 at the moment.
The debt perspective has gone up quite a bit, but I'm very pleased to say that we were able to manage the risk levels there in a very consistent way through the year with cash generation from the ongoing operations at high level, as well as the first execution item of the divestment program. It moves very nicely around two, despite the debt increase. I'm very pleased with that at the end of the year. If we move to slide 16, we see here the bridges for revenue and EBITDA. I already mentioned the growth sectors there. Max alluded to Nordics.
It's in a nice trajectory, but clearly the transformational nature of the lime acquisitions is obvious from this, with the Buxton and Clogrennane added to U.K. and Ireland, and the big German and Czech business in Poland in the central region. If we move to the next slide, slide 17, the income statement, you can see here the numbers in more detail. Underlying profit from operations increased by GBP 111 million, up 80%, in line with EBITDA, slightly higher even in an individual line item. Net finance expenses went up to 31 following the debt increase, of course. With the increased EBITDA levels, tax expense is coming up in line with that. It currently reflects about 80% of profit before tax, a little lower this year. That is helping also the bottom line EPS there.
On the right side, you see the composition of the cost of sales changing a bit with the lime acquisitions, more on energy and the CO2 side, obviously, and then down on the materials production. The good thing is it continues to be very variable. We had a 70% marker without the acquisitions, and it is still in place, which is helpful for us operationally. When tough times occur, we can take appropriate actions along with the synergy programs to right-size cost levels where we need to. If we move on to slide 18, you see the guest side of things, the walk from EBITDA to underlying free cash flow to underlying free cash flow post-growth CapEx. As you can see, we had a very tight management of working capital despite all the acquisitions. It was a help this year. That was nice.
We paid some income taxes a little more as we closed out all the years, which is good to be in. We have maintenance CapEx of about EUR 47 million, and that reflects still about 75-80% of DNA, which is very much in line with expectations. Net finance costs about EUR 40 million, and that leads to the 53% free cash flow generation on the paying business. We have expensed EUR 21 million for growth items in Belgium, where we have the big crusher that's coming online late next or mid next year. It's a growth item, and then various other items in the different geographies, about EUR 20 million in total. A healthy EUR 98 million cash generation for everything included. A good position to be in.
It definitely helped us getting the gearing down through the year, and that is a good position to be in heading into 2025. It started out as a tough year, but this cash generation element helps coming through that. We move on to the next one, slide 19, the leverage. You see there the big increase during acquisitions early in the year, but it's been well down with the divestment there, and we're currently at 5 and 9 on the net basis at the end of 2024, moving around 2, 2.1 at the moment. We expect to come down with a half a turn during this year, which brings us close to one and a half at the end of 2025. If we move on to the next one, slide 20, you can see here the benefits of the increased scale that we have.
Operational improvements were achieved both by the execution of the synergy programs as well as the high-margin business of the high-margin element of the business we acquired. That's helpful. EPS will further increase this year when we get the full year effect of the acquisitions in the U.K. and in Poland. That's helpful. We further execute on the synergy program, so there's room for improvement there as well. ROIC is currently 11.5%, targeting still at 15%, so we'll go through that journey over the coming years. I already talked about leverage, currently at 2.1x, which will continue to deliver through the year through the cash generation that we have from our operations. We're basically positioned for the next phase of the company. If we move to the next one, I think this is a familiar one, capital allocation content.
The leveraging, of course, on track, capital investments in growth surgically where we think it's helpful and being fit. That's good. Then we're also spending surgical cash on efficiency gains where it needs, for instance, transload systems for trail racks because of internal network movements. That's all pending and in execution. That operates pretty well, actually. Bolt-on acquisition transactions where we can. We said that we'll return cash to shareholders when we're close to one and a half. We hope to be there at the end of the year. We'll have their options, which is good to be in. All driven by strong cash flows and hopefully another execution of some divestment program items. I think that concludes financials.
Thank you very much. My two final sections of this presentation. First and foremost, strategic delivery. This is very much the next chapter of our business. We have grown rapidly over the last eight years to gain scale. We are now Europe's leading lime and minerals business with number one or number two position in 10 countries, 2.7 billion ton of mineral reserve and resources, and a fantastic footprint and teams across those sites. The products that we make are essential in dozens of industries in modern life, which makes the sector very attractive. The diversity of the market is such that this allows us to have very resilient performance across cycle. We have consistently delivered on every deal we have done, 33% EBITDA improvement on average to date for all businesses bought, with a 15% ROI on an EBIT basis.
We are very pleased with this. It shows that teams are able to find and execute synergy and improvement programs. We are clearly moving into the next stage here from a roll-up business to a bolt-on business as we go forward. That 33% improvement, if you translate that into acquisition multiples, we have acquired everything to date less than seven times EBITDA. If you increase that by the additional EBITDA, that brings the average multiple down to 5.2. Where does that come from? It comes obviously from top-line improvement as we look to increase the sales we have, but most of that comes from energy reduction initiatives, operational improvements, optimization cost programs, SG&A restructuring, and so forth. In particular, this year, the focus was on how to improve the business we have, and that is the synergies program we launched in January on slide 25.
We've given you two graphs here to give you optimal context. On the left, the staircase, which tells you how we've evolved over time. So EUR 9 million delivered in 2024, and then the expectations for 2025, 2026, and 2027 when the program completes. As you can see, every single bar in 2025 onwards has been increased, increased by our gain in confidence that this program is deliverable to more than we initially set as a minimum. The minimum target, which was EUR 30 million, has now been increased to EUR 40 million with the upside upper limit of EUR 60 million. If we break that down for the year 2024, we give you a pro forma number first. That is the starting point of our existing business, both the CRH lime and limestone assets at the end of 2023, so the starting point for our journey.
We obviously have a price volume effect of GBP 4 million negative for the year 2024, as per the trading conditions that I mentioned. We have then increased that back to GBP 242 million with GBP 8 million of delivery in that synergy program. This graph is in pounds, of course. The graph on the left is in euros, just to make sure that people have seen that. Where do these synergies come from on slide 26? They are primarily cost initiatives, and a few are top line. We are integrating a vast network of kilns, about 70 across Europe. We are taking action where needed, where there are overlaps. We are right-sizing some businesses to ensure that they are fit for the future and fit for the markets that we trade in. Obviously, we try to seek out any and all commercial excellence opportunities that we can find.
That has led to GBP 8 million delivery already for the year 2024. Of course, we are looking at the portfolio more generally. What is required? What is core? What is not? That exercise started already in 2023, and we sold for GBP 11 million worth of assets, four assets in total, grinding plants, and so on, at very good valuations. We have continued it this year, 2024, with the disposal of our concrete plants in the Benelux area. We paid four and a half times EBITDA for those businesses, sold them for seven and a half, if you include the full delivery of the earnout, and just above seven, excluding that earnout. There is still an ongoing program as we speak. It is about GBP 20-25 million in EBITDA that we consider still non-core. None of that is distressed.
If anybody thinks that we sell it on the cheap, that's obviously a mistake. They're high-quality businesses, as demonstrated by the one we sold last year, concrete plants for 7.5 times. That brings us to the outlook for the future and for this year. We believe that we are at the starting point of a cyclical and structural recovery. Interest rates are coming down. It helps residential construction right across Europe. We see little effects of that already in various places. That's very helpful. There's loosening fiscal policy in Germany. There's EUR 500 billion committed to be spent over the next 10 years if it gets through parliament on infrastructure and defense spending and energy infrastructure in particular. That's going to be a fantastic driver for the German and European economies.
Generally speaking, higher spend on defense will help us as well because it improves the outlook for steel and also for concrete. There is obviously the Ukraine settlement we hope soon, which means that that area and around the Ukraine area will start to demand quite a bit of material for its construction. Beyond that, there are megatrends in the economies. We are looking at electrification and greenification of the European economy more generally. All of that goes through infrastructure investment and energy infrastructure investment, which means further demand for our products. If these trends come through, it will mean volume expansion for our business. Closer to today, year 2025 started well. The integration, as I said, of all the businesses acquired has gone very well. Again, thanks to the synergies, IT, and integration teams who have done a stellar job across the year 2024.
The synergy program, which we announced, is on track. The minimum delivery is now 40 rather than 30, which we're very pleased with. The regional diversification of our markets and also the product diversification is excellent, and that's just part of the industry we're in. It allows us to trade smoothly through sometimes challenging times. De-gearing is on track. The portfolio refocusing is on track as well with some divestments. We remain mindful of the macroeconomic and geopolitical environment. There are obviously tariffs out of the U.S., which could cause some disruption. We still need to see how that will pan out. Absent of that, we are very positive and optimistic about the future of both our business and our sector. With that, we've concluded a fairly rapid run-through of these 30-odd slides. I will gladly take any questions.
Adrian Gavin here, Simeon.
On slide 13, you make a reference to all kilns to be carbon neutral by 2038. Can you perhaps give some indication about how do you get that journey? What does that entail?
Yeah. The lime sector has particular characteristics, which is sometimes unknown to the sector and is different from, for instance, cement. You take a lime kiln, and these are rough numbers. About a third of the emissions are fuel-based. A third of the emissions are hard-to-abate process emissions. And a further third, again, it's rough numbers, gets reabsorbed by the product as it gets used. So limestone becomes lime, gets used, re-becomes limestone, calcium carbonate. If you take these three effects, we are working hard on fuel conversions, which takes the first third into account, or 25-30% into account. This next leg will be carbon capture infrastructure. We've already got a working carbon capture facility in Sweden with the Aqualung program. We'll continue that. We're participating in pipeline projects. That will take the next third.
The last third is the reabsorption of the CO2 into the material as it gets used. As a result of that, you can get to net zero in a more easy way than some of the harder industries.
Thanks. I'm Aynsley Lammin from Investec. I think I've got three, actually. Just the first one, obviously already delivering a very good EBITDA margin, even in weak markets. When you think about the kind of synergies, the price impact drop, have you improved your expectation of what you think kind of EBITDA margins could be over the medium term? Second question is just on capital allocation. You've mentioned a couple of times the leverage moving quickly in that range. I just wondered this year, is there any possibility of M&A bolt-ons, or is it still focused around deleveraging and maybe introducing a dividend? Thirdly, if you could just remind us the deferred consideration when you originally did the deal, how much that was. Is there any change to that? I think it was 2027, wasn't it?
29.
29. Okay.
Yeah, let me start with the first one on the margin side. Yeah, we're in a tough market with volumes being depressed. When those come back, we do have operating leverage, and we expect that to turn into incremental EBITDA, boosting the EBITDA margin as a whole as we have the cost base in place. Secondly, with the synergy program running, there's more and more cost or top-line benefits that will come through versus today. That all will boost EBITDA margins. We target 25%+, hopefully closer to 30, and we're on track to start to deliver on that. Yeah, the deferred into 2020.
29.
29. With the studios, Poland and the first two.
That is M&A work.
Yes, M&A work.
Yeah, of course.
Yeah.
not forget also that the tough market is also a good market to buy assets. As soon as we can, we will.
Charlie Campbell at Stifel. A couple of questions. Thank you, Rush, for slide 12, showing that revenue split. Do you have an idea of what you do? Could you share with us how the profit splits between those three markets? I guess sort of roughly speaking, just to get an idea of the EBITDA split of those three categories. Secondly, just to get an idea of what the German stimulus package might do for the group. Do you have a feel for where German steel is in terms of capacity, where capacity utilization for German steel, to get an idea of how much steel volumes could pick up over the next few years?
Yeah. Okay. Do you want to take the first one?
Yeah, I'll take the first one. It's a mix, of course, but if you look at the three product groups just starting with the volumes, the value-add products are relatively small. Construction is the biggest, but there's a serious margin differential between the high-grade line. So I would say high-level, 45, 45, 10-ish.
The German steel market. What does the German stimulus do? We've asked our teams. The first thing that the team said is it would return optimism to the German economy, because a lot of people are a bit depressed there, is what the guys on the ground said. Secondly, Germany is the largest steel producer in Europe, 60-odd million ton, maybe half the production volume across the European continent. That is first. There is quite a bit of restructuring and change in the steel sector in Germany happening currently. We need to see how their conversions to EAFs and DRI works and what that does to the final steel output. Generally speaking, though, if you look at the steel works that we supply, and that is obviously more important than the general steel sector, we think that there is a nice bounce back to be had.
That is from the work we supply, mostly in North Germany. We will come out with some more clarity on this as we get more clarity from the German government itself, what they are actually going to do with the stimulus in detail.
Steel from Deutsche Numis . Just a couple of ones for me. First of all, just maybe to follow up on the sort of bolt-on M&A piece. Are we thinking lime assets? What sort of size would a bolt-on be for you guys? Just trying to get a little bit more context on that. The second one is just on EBITDA margins. Obviously, a big gap between Nordic and Central Europe. Just sort of trying to understand that differential and whether there's scope to close it, close Nordic to the upside.
Maybe the second one first. What you shouldn't forget is in the Nordics, we supply two cement works at essentially historic deals at cost. That's the large volume of stone that we sell in the Nordics goes through these cement works. It's a single customer. That's a historic deal where the Nordkraft, the Partek business, was split up, and the cement works went to one, and the stone of the cement works went to someone else. That obviously skews volume margins there. That's the first point to make. Secondly, we have or we had kilns running in the north, which are highly inefficient in terms of fuel, and we've started to make changes to that. That also obviously eats up margins. These are the two effects there. As that gets improved, we'll see the margins go up.
M&A and bolt-on deals, where will they be? What will they be? Limestone, lime for sure. Europe, more generally, we can densify, if that's a word, our network of limestone quarries in the north, because that's clearly where we still have opportunity. There's also other minerals that look fairly similar, that have a similar extractive method or customer base, and they can be added. That is where the bolt-on territory will be. Obviously, lime and limestone in other parts of Europe is also of interest. How big are these deals? If you look at the track record we have, we've bought companies that add several hundred thousand of EBITDA to fairly large businesses. If it doesn't require equity and isn't an RTO, I think we'll call it a bolt-on.
Quite loose. A couple, maybe three, actually. Disposals in terms of sort of market. You mentioned tech markets are good for buying things, but maybe obviously the reverse is true for selling things. You said you're not a distressed seller. What do you think is the likelihood of sort of selling anything this year? I mean, have you got active discussions underway? Should we expect to see something drop into that disposal line? The second one was around, I suppose, major CapEx plans that are underway and maybe an update on Dunkirk. Be useful to get an update there. Finally on Ukraine, I mean, you mentioned Ukraine. If there is a settlement there, how material could that be for the group on a three to five-year view from where you sit currently?
Yeah. Disposals active, yes. Yes, it's a tough market. Therefore, it's good for buying. We've demonstrated, I think, with the sale of the concrete businesses that we're able to sell at good values. None of the things, none of the businesses we own, and we said this while we bought them, are just additions, just to let's buy that concrete plant. Why not? Nobody else wants to buy it. The assets we have for sale are stunning in terms of their positioning, market share in terms of the quality of the assets. We invested in them, obviously, and we made them better. We don't want to let them go for a cheap price. It's just what it is. They continue to generate good cash flow. The margins are good. Concrete businesses had 20% margins, pretty much.
They're not margin dilutive to the group per se, not much. We'll sit there until we find the right buyer that pays the price. That said, discussions are active, and we'll hope to have some more news there this year. CapEx, major programs. There are two major programs currently running. There's the plant in Belgium, new crushing and screening installation in Belgium, fairly major setup, nearly 2 million ton production capacity, nearly EUR 25 million-EUR 30 million total investment. It's a JV, so we have a 25% partner there. That's going well. The first parts have been installed. The civils work is being installed currently. The washing installations have already been installed. The rest is coming through this year. That program is on track. Dunkirk, similar progress there. All the planning permissions have been filed. We're waiting for that final decision to come back.
It all looks good. All the plant and machinery supply has been identified. The delay in planning of a few months was because of frogs. Toes. Sorry, I have to say it. No, but they have a habitat in one part of the marshland there, and they had to be moved to another. That has all been dealt with. That is all on track, and delivery of that project is early 2027. Ukraine, lastly. Ukraine, there are a couple of things there. First effect is machinery and plant that is producing our product that now comes over the border into Poland, Czech Republic, and others. Producers in Ukraine will refocus on going into Ukraine. That is number one. Secondly, producers of materials on the border in our geographies will start to sell into Ukraine. That is number two.
Because obviously, the use of materials in Ukraine itself is less because of the war that's ongoing. Thirdly, obviously, it will put a pressure upwards on pricing. I think that all of those effects will help. We're not active in Ukraine itself currently. We have a small quarry license there, quarry that can be opened. We're looking at what to do with that in this context.
Cheers. Yeah, I'm Harry at Redburn Atlantic. I think I've got three possible. Especially on the right target, obviously targeted at 11.5. I guess I don't know if the pro forma numbers that will mechanically rise. Again, one of the shares you've kind of phased the deal through again. I wonder if you could give a bit of a call on what the sort of phasing of the deal will mean to right this in 2025. How do we get to the 15%? I suppose is that a volume growth story and margin story? I suspect it's a bit of both. Maybe just some thoughts on how we get to the 15% plus on the return on capital. Secondly, on stock revaluation in Western Europe, is there a one-off that will reverse in essence? This year, actually, we should see quite good profit growth, I suppose.
That just falls out of the impact on profits. Thirdly, on CapEx, specifically the growth, because I think you've given sort of longer-term guidance on where maintenance should be relative to DNA. On the growth CapEx, what should we think about that in pound terms? 25.
Okay. Let's start with the right then. Yeah, if we execute on the synergy programs, we see the volumes return to healthier levels. And we're getting close. In 2025, we should pass the 12% marker and then steadily grow into the neighborhood of 15 over the years. On the stock side in Belgium, that's actually behind us already. There was a sudden unexpected drop in demand in 2023 with production continuing, which shouldn't have happened at the time with hindsight, but that's always easy. We took action the year after to deplete these inventory levels with the absorption issues that it brings. It's done now, more or less. That's not a one-off. It can recur again, but that's a management difficulty. If you do that, then we were not planning to. CapEx on the growth side, you mean? It's focused on Belgium.
For 2025, it's about a little over the EUR 20 million that we had in 2024, with the majority going to the crusher in Belgium.
Guidance-wise on that, there is a free cash flow number that we've got. Obviously, as soon as we've got our leverage in a sort of one-and-a-half to two territory, essentially that number is there to utilize if we wanted to for M&A or organic CapEx. We'll see which one's most effective and what project we've got at that point in time. The guidance is a bit sort of vague because it depends on a little bit opportunistic.
Yeah, and then we'll continue to scrub the synergy opportunities. If something comes out of that and needs some CapEx, we'll do it.
I think when you first bought the business, you were talking 30-60 as a synergy range. You obviously moved to 39-40. Is it still 40-60, or nothing's changed at that top end? I suppose what's stopping you? I suppose saying, "Look, it is going to be 60," or you think it's going to be 60, is obviously you've had a best.
It's what we said that the delta between the minimum and the 60 is market-based because it's some of the innovation and innovative products that we have, finding new markets for that, all the rest of it. As long as the market is sitting there with volume reductions, we've just not touched the top end. We've touched the bottom end, so.
Still potentially.
Still potentially can go further, yeah.
Yeah, but we're not sitting on our hands to see cost improvements there, and we'll execute those.
Hold on. Some of the disposals that you made, ready-m ix concrete, does that sort of mean that you're less wedded towards vertical integration than you were, or is it just an asset-by-asset discussion?
This will David should answer.
We're absolutely less wedded to vertical integration. We didn't get married in the first place, Joe. I think vertical integration is the biggest destroyer of value in the construction industry over the last 25 years building materials.
It sounds like vertical. The plants that we sold never bought anything, never bought any aggregates out of our quarries in Belgium. They were completely independent. There was no vertical. There is also no vertical loss in terms of aggregate sales that we would have otherwise had. We never had any cement production. They were standalone. It was a business that was created in the northeast corner of Belgium by bolting together three different concrete operators into one entity. One of those three had already a good operating model, which we then replicated into the two others. That became one of the most powerful concrete setups for sure in Flanders and northeast Belgium. For the buyer that bought this business, it was the logical step into Belgium as a business from outside of Belgium.
These companies ran at near enough 20% margin with no internalization of aggregates or cement. I do not think there are many vertically integrated concrete plants that have that sort of a margin. That tells you something about how we want to run things. We have Precast in the U.K., which is a similar sector. There is hardly any stone that goes from our quarries into that either. There as well, we have 15-20% margins in Precast, which is not necessarily an obvious one. No vertical integration. Just look at the business and make it work on its own.
The approach to that is that you must have quite a lot of confidence and visibility in demand to be pushing on with the capacity expansion in Belgium, the aggregate side.
Yeah, the capacity in Belgium is a capacity replacement. There was a plant that we took over in 2021 from Holcim, which was not the same capacity, but not far off. It was 30 years old, and it falls apart constantly. We've just kept it alive. The primary shakes itself loosely and then just starts to walk around the quarry and exaggerate. It just needs to go. That's the new plant that comes in.
Yeah, it's had to put a new plant to release the new reserves.
We do have a capacity increase in the sense that we have now a washing installation where we wash fines into washed sands because there's hardly any sand left in Belgium. That would be new. It is not capacity expansion per se, not a huge amount.
Costs and pricing obviously vary across the group of products, but as a rough rule of thumb this year, what should we think about in terms of pricing? Presumably positive. Also key moving parts around costs. What are the sort of major pressures for you this year?
If you look at the cost base, how it's built up, we have the materials, so that's steady. On the pricing side, it'll differ per region. If you look at the Nordics, where we have executed firm pricing in 2024, we can expect that will continue in 2025. The stimulus programs in Germany will come into play. It'll create serious demand. Automatically, you create pricing power in different regions. On the U.K. here, the government programs come to the market. Same thing. Typically, you have a volume and pricing, what I call a double whammy. If there's volume demand, you have pricing power. Even if the volumes are at risk, which we've seen the last two years, we're able to stick to pricing that we had without going down. I'm fairly optimistic about pricing.
We're on top of it in all the regions we do. It's all a matter of the volumes coming back and work the cost base on the synergy program and wherever we can to make the position tomorrow better than today. That's an ongoing program.
Perhaps any questions online?
Oh, we're okay.
Questions.
No question.
Thank you very much, everyone.
Thank you all for the.
For presenting.